Supplier Promotional Appearances at California Retail Stores
Promotional appearances by celebrity and non-celebrity brand owners and winemakers in California retail establishments (on and off premises) have been a sore subject in California for many years, with the ABC insisting that supplier promotional appearances are “things of value” and that autographing bottles and other items constitutes a “premium, gift or free goods” in violation of Business & Professions Code § 25600. The ABC has sent out warning letters and filed accusations seeking license suspension or revocation against both suppliers and retailers, and distilled spirits suppliers have proposed legislation to permit limited rights to autograph products.
However one major California retailer who was accused by the ABC of participating in an unlawful promotional appearance involving autographs decided to fight back. After an extensive hearing on June 14, 2012 the ABC (less than a week later) dismissed the accusation seeking suspension of the retailers’ license for hosting a bottle-signing event. The retailer, which defended the case by relying on its First Amendment commercial free speech right to host promotional appearances, clearly demonstrated that its constitutional rights had been violated.
The law is clear. Both the supplier’s appearance to communicate with customers and his or her signature on the product constitute commercial speech, which the Supreme Court defined as “expression related solely to the economic interests of the speaker and its audience.” Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 561 (1980). Commercial speech includes a supplier’s ability to “propose a commercial transaction and the . . . listener’s opportunity to obtain information about products.” Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 565 (2001). In fact, in-person interactions with the public are considered especially deserving of protection under the First Amendment, as they make possible “direct and spontaneous communication between buyer and seller.” Edenfield v. Fane, 507 U.S. 761, 766 (1993). A supplier’s signature on a bottle or other item is also commercial speech. As the Second Circuit explained, bottle elements such as a logo or slogan may function like a trademark in serving to identify the source of the product, and this information alone proposes a commercial transaction and thus “suffices to invoke the protections for commercial speech.” Bad Frog Brewery, Inc. v. New York State Liquor Authority, 134 F.3d 87, 96-97 (2d Cir. 1998).
As the Supreme Court stated in Central Hudson, commercial speech is entitled to First Amendment protection unless the government can identify a substantial interest that is directly advanced by its speech restriction, and show that this restriction is not more extensive than necessary to serve that government interest. Central Hudson at 566. The government bears the burden of justifying its restriction, and that burden is not satisfied by “mere speculation or conjecture.” Instead, the government must demonstrate that the “harms it recites are real and that its restriction will in fact alleviate them to a material degree.” Edenfield at 770-771. Within this context, the First Amendment trumps any Twenty-first Amendment power to regulate alcoholic beverages that the government might try to claim. 44 Liquormart, Inc. v. State of Rhode Island, 517 U.S. 484 (1996). The Twenty-first Amendment, the Supreme Court explains, “does not license the States to ignore their obligations under other provisions of the Constitution” and does not “qualify the constitutional prohibition against laws abridging the freedom of speech embodied in the First Amendment.” Id. at 516.
In the case that was tried on June 14, the ABC did not in fact provide any meaningful justification for the restrictions on promotional appearances and autograph sessions that it attempted to impose through its interpretation of the “thing of value” and “premium, gift or free goods” statutes. That was because there was no justification for the interpretive restrictions advanced by the ABC other than the “whatever is not expressly permitted is prohibited” theory, a position that is at odds with the constitutional rights of licensees to promote their products.
The testimony presented in the case showed that promotional appearances and product endorsements via autographing bottles and other items are one of the most effective methods of communicating with customers available to the industry. Promotional events involving appearances and autographs freely occur throughout the US with no interference by the alcoholic beverage authorities. The proper question to ask is whether the promotion at issue was managed responsibly, not whether the right to promote exists at all.
Promotional appearances, as well as autographing bottles and other items, are protected First Amendment activity, and responsible promotions require careful structuring. For example, the decision on what is or is not signed should be at the discretion of the supplier; a purchase should not be required for a customer to meet the supplier and obtain an autograph; there should be no extra charge assessed to the customer for access to the event; nothing should be given away at the event that is not otherwise authorized by the regulations; any services necessary in relation to the promotion itself at the retail premises (such as crowd control) should be the responsibility of the retailer; and, if the promotion is on-premise, basic tenets of temperate behavior should be observed, such as responsible consumption, no drinking games and the like.