Liquormart v. Rhode Island

The U.S. Supreme Court has stringently limited government regulation of noncommercial expression, citing the First Amendment's guarantee of freedom of expression. Before the mid-1970s, however, the Court regarded the regulation of commercial speech as simply an aspect of economic regulation, entitled to no special FIRST AMENDMENT protection. After that time the Court made it more difficult for government to restrict advertising. In 44 Liquormart v. Rhode Island, 517 U.S. 484, 116 S. Ct. 1495, 134 L. Ed. 2d 711 (1996), the Court ruled that the state of Rhode Island could not prohibit the public advertising of liquor prices, as doing so would abridge the liquor retailer's right to FREEDOM OF SPEECH. After Liquormart the ability of the government to restrict truthful, nondeceptive advertising was extremely limited.

Commercial speech is a broad category including but not limited to the advertising of services and products. The constitutional protection of commercial expression emerged in the 1970s, when the Supreme Court struck down state laws that banned the advertising of ABORTION services, prescription drug prices, and attorneys' fees. Constitutional expression was not considered absolute, and the Court allowed reasonable regulation to prevent FRAUD and deception.

A standard was first set in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557, 100 S. Ct. 2343, 65 L. Ed. 2d 341 (1980). In Central Hudson the Court noted that commercial speech serves the economic interests of the speaker but also helps consumers and society overall. It outlined a four-part test for judicial evaluation of the regulation of commercial speech. First, if the commercial speech is to receive First Amendment protection, the Court must determine that it concerns a lawful activity and is not misleading. Second, the Court must determine whether the asserted government interest is substantial. Third, if the answer to the second part of the test is yes, the Court must determine if the regulation directly advances the asserted government interest. Fourth, the Court must decide if the regulation is more extensive than is necessary to serve that purpose.

Central Hudson represented a compromise between one approach that emphasized CONSUMER PROTECTION and another that stressed a free marketplace of ideas. Only five justices fully joined in the majority opinion, and the viability of the test has been called into question. In Posadas de Puerto Rico Associates v. Tourism Co. of Puerto Rico, 478 U.S. 328, 106 S. Ct. 2698, 92 L. Ed. 2d 266 (1986), the Court upheld a law prohibiting advertisements inviting residents of Puerto Rico to gamble legally in local casinos. Justice WILLIAM H. REHNQUIST emphasized Puerto Rico's substantial interest in reducing the demand for casino gambling among its citizens and noted that the regulation at issue directly advanced this objective. In addition, he maintained that because the legislature could have banned all gambling by local residents, this legislative power included the lesser power to ban advertising of casino gambling. Justice JOHN PAUL STEVENS dissented, arguing that Puerto Rico had blatantly discriminated in punishing speech "depending on the publication, audience, and words employed."

The Liquormart case raised issues regarding the viability of both the Central Hudson test and the Posadas reasoning. In 1956 the Rhode Island legislature enacted laws that prohibited the public advertising of alcoholic beverages. Prices could be advertised only inside a licensed liquor retail establishment (R.I. Gen. Laws §§ 3–8–7, 3–8–8.1). 44 Liquormart, a Rhode Island retailer of alcoholic beverages, and the Rhode Island Liquor Stores Association challenged the law in 1993, alleging that the ban violated the First Amendment.

The state of Rhode Island argued that competitive pricing would lower prices and that lower prices would produce more sales, thus encouraging alcohol consumption. It claimed that under Central Hudson it had a substantial government interest in controlling the consumption of alcohol and in the laws that directly advance that interest. Apart from Central Hudson, the state asserted that under the TWENTY-FIRST AMENDMENT, which repealed the Eighteenth Amendment's PROHIBITION on the sale of alcoholic beverages, the states were given the power to regulate the sale of alcohol, including the power to prohibit sales altogether. Citing Posadas, Rhode Island said it was in the same position as the Puerto Rican legislature. Because the state could prohibit the sale of alcohol, it could restrict liquor advertising.

Though the Supreme Court unanimously agreed that Rhode Island's laws on liquor advertising were an unconstitutional restraint on protected First Amendment expression, the Court split in its reasoning for the decision. Justice Stevens, with a shifting coalition of three to four justices in various sections of the opinion, moved away from the Central Hudson test, indicating concern about any test that might permit a total ban on truthful, noncoercive advertising. Stevens reasoned that such a ban "usually rest[s] solely on the offensive assumption that the public will respond 'irrationally' to the truth. The First Amendment directs us to be especially skeptical of regulations that seek to keep people in the dark for what the government perceives to be their own good."

Though skeptical about Central Hudson, Stevens applied its four-part test and found the state's position deficient. Stevens concluded that Rhode Island had failed to provide any evidence that its advertising restrictions significantly reduced the consumption of alcohol. The state could not prove that the ban "advanced the substantial state interest," and the ban was "more extensive than necessary" to address the issue of alcohol consumption. Stevens pointed out that the state's goal of promoting temperance could be achieved through "higher prices maintained either by direct regulation or by increased taxation." Educational campaigns against excessive use might produce better results. Any of these approaches would not infringe on First Amendment expression.

Stevens also dismissed Rhode Island's use of the Posadas case—a move that was not surprising in light of his vigorous dissent in that case. He stated that "Posadas clearly erred in concluding that it was 'up to the legislature' to choose suppression over a less speech-restrictive policy." Therefore, the Court declined to give force to its "highly deferential approach."

In addition, a unanimous Court rejected the state's argument that the Twenty-first Amendment tilted the First Amendment analysis in its favor. It ruled that the Twenty-first Amendment "does not qualify the constitutional prohibition against laws abridging the freedom of speech embodied in the First Amendment."

Justice CLARENCE THOMAS, in a concurring opinion, went further than the rest of the Court, advocating that Central Hudson be discarded. In Thomas's view, the four-part BALANCING test had no role to play when "the government's asserted interest is to keep legal users of a product or service ignorant in order to manipulate their choices in the marketplace." According to Thomas such an interest is "per se illegitimate and can no more justify regulation of 'commercial' speech than it can justify regulation of 'noncommercial' speech."

On the other hand, Justice SANDRA DAY O'CONNOR, in a concurring opinion joined by three other justices, argued that the case could be resolved more narrowly by applying only the Central Hudson test. Applying the test O'Connor concluded that the law failed because it was more extensive than necessary to serve Rhode Island's interest.

The Liquormart decision revealed that the Court was divided over the question of whether Central Hudson is the right test to apply to commercial expression cases. It also demonstrated that the Court was fully committed to First Amendment protection of commercial expression. The practical result was that Rhode Island and other states with similar laws could not prohibit liquor advertising. The decision put in doubt whether existing and proposed prohibitions on tobacco advertising were constitutional.