Commercial Speech And Alcoholic Beverages - Part III

Unconstitutionality - Per Se vs. As Applied

We have explored the concept of commercial speech under the First Amendment and the fact that those in the alcoholic beverage industry have the same rights as everyone else.  Today’s post focuses on the possible effects of asserting those First Amendment rights, particularly in the context of regulation of the industry.

Courts can find a statute to be unconstitutional per se, meaning that the statute itself violates the Constitution and could not ever be lawfully applied.  In that case, the law itself is void and of no further effect, and no one can be punished for having violated that statute.  Let’s take an easy hypothetical: a statute prohibiting anyone in the electronic or print media from mentioning or commenting on any candidate for elective office within seven days of an election.  As long as there is a First Amendment, that statute is unconstitutional per se. 

Courts can also find that an otherwise valid statute is unconstitutional as applied in a particular case, meaning that the defendant in that case cannot be punished for having violated the statute, but the statute itself remains valid and can be enforced in other circumstances.   One of many examples is Edwards v. South Carolina, in which participants in a peaceful protest against segregationist policies of the state were convicted of “breach of the peace.”  The Supreme Court did not invalidate South Carolina’s “breach of the peace” law, but it did hold that that law could not constitutionally be applied to the defendants, who were exercising their First Amendment rights peacefully.  South Carolina could continue to apply that law to, for example, people shooting firecrackers in a public space.  It could not, however, apply the law as a means to suppress the exercise of First Amendment rights.

So, what does this have to do with the alcoholic beverage industry?   Many of the regulatory restraints on commercial speech stem from the laws passed after the repeal of Prohibition and are based on the exercise of powers under the Twenty-First Amendment.  The most common example are the “tied-house” laws, intended to achieve a separation of the production, distribution and retail tiers of the industry. 

It is highly unlikely that a court will find that the tied-house laws are unconstitutional per se, just because they can be used to suppress commercial speech.  The tied-house laws have repeatedly been recognized as advancing legitimate governmental interests, the most common being to prevent the domination of local markets by large producers and to promote temperance or, at least, moderation.  Moreover, those laws are supported by their historical role in the passage of the Twenty-First Amendment.

As we learned last time, however, the fact that the tied-house laws are not unconstitutional per se does not mean that they can be applied indiscriminately to suppress the exercise of First Amendment freedoms, including the utterance of commercial speech.  If the government fails to meet its burden of proving that its suppression of commercial speech meets the Central Hudson test, the tied-house laws would be unconstitutional as applied in that case. 

Let’s take two examples.  A large winery enters into an agreement with a local chain in State X, which has a three-tier tied-house law.  The agreement provides that, if the chain buys 75% of its wine inventory from the large winery, the winery will run a large volume of ads urging consumers to buy its wines from the chain’s stores.  The ABC in State X seeks to invalidate the agreement and to penalize the winery and the retail chain under the tied-house laws.  The producer asserts a First Amendment defense—it is running truthful ads.  Who wins?

With apologies to those rooting for the defendants, the ABC will likely prevail under the Central Hudson test.  Preventing the domination of local markets by a large producer has repeatedly been recognized to be a legitimate state interest.  Invalidating the agreement and penalizing the participants’ flagrant violation of the tied-house laws advances that interest, and it is hard to argue that a statute could be applied more narrowly. 

Example 2:  ShopStop, a grocery chain headquartered in Mudville buys the naming rights for the local baseball field, where the Mudville Nine play.  A small local winery, which does not sell its wine to ShopStop, holds an outing for some customers and staff members at one of the games.  The winery then posts on its website: “We had a great time last Saturday at ShopStop Field watching the Mudville Nine!  For once, Mighty Casey did not strike out, and the Nine beat the Mudhens 5-3!  Great game!”  The ABC cites the winery for violating the tied-house laws by providing free advertising to ShopStop.  The winery asserts a First Amendment defense—its posting was truthful commercial speech (if not fully protected speech).  Who wins this one?

If you guessed the winery, you, like Mighty Casey, did not strike out!  While preventing domination of local markets may be a legitimate governmental interest, the ABC would be hard-pressed to prove how applying the tied-house laws to suppress the winery’s speech advances that (or any other) legitimate governmental interest.   The winery truthful statement of where it held its outing, using the proper name of the field, cannot plausibly be linked to any potential domination of the Mudville wine market by the winery. The court should find that the ABC’s application of the law in this case is unconstitutional.

Most of the laws historically applied to the alcoholic beverage industry are unlikely to be held to be unconstitutional per se.  However, where those laws are used to suppress commercial speech in a manner that cannot be justified under Central Hudson, the courts should find them to be unconstitutional as applied.