Last week, the US Court of Appeals for the Eighth Circuit weighed in on the legality of restrictions on alcohol advertising under the First Amendment, issuing an opinion in Missouri Broadcasters Association v. Lacy that could eventually broaden free speech protections for alcohol beverage advertisements. After the lower court granted defendants’ motion to dismiss and plaintiffs appealed, the Eighth Circuit reversed the district court’s dismissal, finding that plaintiffs’ claim alleging the unconstitutionality of a Missouri statute and two regulations should be heard.

The case concerned three Missouri provisions – two regulations and a statute – that restrict the advertising of alcohol beverages:

1. a regulation prohibiting retailers from advertising price discounts outside of the licensed premises (but allowing the advertising of discounts by using generic descriptions (e.g., “Happy Hour”), as well as the advertising of specific discounts within the licensed premises);

2. a regulation prohibiting retailers from advertising prices below cost; and

3. a statute requiring manufacturers and wholesalers choosing to a list a retailer in an advertisement to exclude the retail price of the product from the advertisement, list multiple unaffiliated retailers and make the listing relatively inconspicuous.

Plaintiffs – a broadcasting industry group, radio station operator, winery and retailer – sued Missouri’s supervisor of liquor control and attorney general, alleging that the three provisions are facially invalid under the First Amendment in that they prohibit truthful, non-misleading commercial speech, are inconsistently enforced by the state and the challenged statute unconstitutionally compels speech.

To state a claim that a statute is facially unconstitutional under the First Amendment, Supreme Court precedent instructs that plaintiffs must show that there are no set of circumstances under which the challenged provision would be valid, or that a substantial number of the provision’s applications are unconstitutional. Alcohol beverage advertisements involve commercial speech, which receives less protection under the First Amendment than other constitutionally protected forms of expression. In Central Hudson Gas & Electric Corp. v. Public Service Comm’n of New York (1980), the Supreme Court articulated a four-part test for determining the constitutionality of laws restricting commercial speech:  whether (1) the speech concerns lawful activity and is not misleading; (2) the governmental interest justifying the regulation is substantial; (3) the regulation directly advances the governmental interest; and (4) the regulation is no broader than necessary to further the governmental interest.

Applying the third and fourth factors of the Central Hudson test (plaintiffs and defendants agreed on the first two factors of the test), the court found that the facts plaintiffs alleged were “more than sufficient” to state a plausible claim. First, the court opined, plaintiffs made sufficient allegations that the challenged provisions do not directly advance Missouri’s substantial interest in promoting responsible drinking. Although defendants argued that a link exists between advertising promotions and increased demand for alcohol beverages, the court noted that “multiple” inconsistencies in the regulations demonstrate that the regulations do not advance Missouri’s interest in promoting responsible drinking. Likewise, the court determined, plaintiffs pled sufficient facts to support a finding that the statute does not directly advance Missouri’s asserted interests: the court noted that because the statute is an exception to Missouri’s general tied-house law, it “actually weakens,” rather than furthers, “the impact of the overall statutory scheme.”

Second, the Eighth Circuit found that plaintiffs alleged “more than sufficient information” to show that the challenged provisions are more extensive than necessary to further the state’s interests, noting that there are alternatives to the provisions that would be less intrusive to plaintiffs’ rights under the First Amendment. Finally, the court determined that the challenged statute compels speech and association in that it requires manufacturers and wholesalers to both associate with more than one retailer and to list more than one retailer, if they choose to list any in advertisements.

The Eighth Circuit’s decision is timely: last week the Ninth Circuit Court of Appeals held an en banc hearing in Retail Digital Network, LLC v. Appelsmith, a case involving a First Amendment challenge to California’s restrictions on alcohol advertising, which we discussed in more detail last year.  One key issue in Retail Digital Network – but only glossed over in a footnote in the Missouri Broadcasters case – involves the impact of the Supreme Court’s 2011 decision in Sorrell v. IMS Health, Inc., which called for a “heightened” level of judicial scrutiny when determining the constitutionality of restrictions on commercial speech.