Antitrust Law Daily Wrap Up, ADVERTISING—8th Cir.: Constitutional challenge to Missouri alcohol advertising restrictions proceeds, (Jan 20, 2017)

By Jody Coultas, J.D.

Missouri Broadcasters Association (MBA) and other plaintiffs plausibly demonstrated three Missouri statutes related to alcohol advertising did not directly advance the state’s asserted substantial interest, were more extensive than necessary, and unconstitutionally compelled speech and association, according to the U.S. Court of Appeals in St. Louis (Missouri Broadcasters Association v. Lacy, January 19, 2017, Riley, W.).

Missouri’s Discount Advertising Prohibition Regulation prohibits alcohol retailers from advertising discounted prices outside their establishment. The Below Cost Advertising Prohibition Regulation prohibits alcohol retailers from advertising prices below the retailers’ actual cost. The Single Retailer Advertising Prohibition Statute specifies how distillers and wholesalers may advertise retailers selling their products, and requires producers and wholesalers, if they choose to list any retailer in an advertisement, to exclude the retail price of the product from the advertisements, list multiple retail businesses not affiliated with one another, and make the listing inconspicuous.

A non-profit corporation promoting the interests and welfare of the broadcasting industry (MBA), a corporation operating radio stations (Zimmer Radio of Mid-MO, Inc.), a winery (Meyer Farms, Inc.), and a commercial food and drink establishment licensed to sell alcohol (Uncle D’s Sports Bar & Grill, LLC) filed suit against Missouri’s state supervisor of liquor control and state attorney general challenging the three statutes as unconstitutional under the First Amendment.

A district court sua sponte granted Defendants’ motion to dismiss without providing a discussion of why the plaintiffs failed to state a claim. On appeal, Defendants accept that the provisions prohibit truthful and non-misleading speech, and plaintiffs conceded the asserted state interest of promoting responsible drinking is substantial.

The Supreme Court has identified four considerations to determine the constitutionality of laws burdening commercial speech: "(1) whether the commercial speech at issue concerns unlawful activity or is misleading; (2) whether the governmental interest is substantial; (3) whether the challenged regulation directly advances the government’s asserted interest; and (4) whether the regulation is no more extensive than necessary to further the government’s interest."

The court determined that the amended complaint included sufficient allegations that the challenged provisions did not directly advance the substantial interest of promoting responsible drinking. Defendants argued there was a "commonsense link" between advertising and increasing demand for a product, and that the State was interested in preventing retailers from luring vulnerable consumers to a bar. Clearly, a restriction on the advertising of a product characteristic will decrease the extent to which consumers select a product on the basis of that trait. However, a link between advertising promotions and increasing demand for alcohol does not demonstrate the challenged restrictions directly advance the interest in promoting responsible drinking. A theoretical increase in demand for alcohol based on a lower price does not necessarily mean any consumption of that alcohol is irresponsible. The Discount Advertising Prohibition Regulation and the Below Cost Advertising Prohibition Regulation did not prohibit retailers from offering discounted prices or advertising those discounts within the retail establishment, and the Discount Advertising Prohibition Regulation did not prohibit generic descriptions of specials from advertisements.

The court noted that the most glaring inconsistency was the provision that exempted manufacturers of intoxicating liquor other than beer and wine from its ban on advertising rebate coupons. Thus, the messages defendants seek to prohibit are allowed in certain advertisements, yet only for a select group of alcoholic beverages. Consumers will still be exposed to advertisements of sales, discounts, and promotions of the selected alcohol products, and, thus, the regulations do not uniformly promote the asserted state interest. The inconsistencies "make no rational sense."

Plaintiffs also pleaded sufficient facts to suggest the Single Retailer Advertising Prohibition Statute did not directly advance the asserted interests of promoting responsible drinking and maintaining an orderly marketplace, according to the court.

There was sufficient facts to show that the challenged restrictions were more extensive than necessary, according to the court. If the government could achieve its interest in a manner that does not restrict speech, or that restricts less speech, the government must do so. The court found there were are reasonable alternatives to the challenged restrictions Missouri could have enacted that are less intrusive to plaintiffs’ First Amendment rights.

Finally, the court agreed that the Single Retailer Advertising Statute conceivably compelled speech and association in violation of the First Amendment. The plaintiffs argued that under the statute, producers and wholesalers must list more than one retailer on an advertisement if they choose to list any. The statute is conditional in that it only impacts speech if producers and wholesalers choose to include the name and address of a retailer in an advertisement. But if a producer or wholesaler does choose to include such information, it was compelled to associate with multiple retailers, and include multiple retailers’ information on the advertisement.

The case is No. 16-2006.

Attorneys: Michael Lee Nepple (Thompson & Coburn LLP) for Missouri Broadcasters Association, Meyer Farms, Inc. and Uncle D's Sports Bar & Grill, LLC. Emily Ann Dodge, Attorney General's Office, for Lafayette E. Lacy.

Companies: Missouri Broadcasters Association; Meyer Farms, Inc.; Uncle D’s Sports Bar & Grill, LLC; Zimmer Radio of Mid-MO, Inc.

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