J. Alcohol Advertising, Labeling Score Victories in Utah, Colorado

     Disputes over the regulation of alcohol advertising have accounted for a significant portion of commercial speech case law in the U.S. Supreme Court and lower federal courts.  In 2001, speech related to alcoholic beverages prevailed -- for very different reasons -- in Utah and Colorado.

     A three-judge panel of the U.S. Court of Appeals for the Tenth Circuit continued the recent trend of heightened constitutional protection for alcohol ads, ruling in July that Utah’s restrictions on liquor advertising violated the First Amendment.  Utah Licensed Beverage Association v. Leavitt, 256 F.3d 1061 (10th Cir. 2001). 

     Utah had imposed a host of restrictions on liquor advertising, including Utah Code Ann. Sec. 32A-12-401(2), which provided in pertinent part:

The advertising or use of any means or media to induce persons to buy liquor is prohibited, except: a restaurant licensee, an airport licensee, a manufacturing licensee, or a private club licensee may display a sign on the front of, in the window of, and inside its premises stating “Department of Alcoholic Beverage Control Licensee,” “DABC Licensee,” or “State Liquor Licensee” in a form approved by the department.

     The Utah Licensed Beverage Association sued the state, contending that several of the state’s restrictions on the advertising of wine and liquor violated the First Amendment.  In February 2000, a federal district court denied the beverage association’s request for a preliminary injunction, stopping enforcement of the restrictions.

     On appeal, the Tenth Circuit panel reversed, finding that the Utah restrictions could not withstand scrutiny under the Supreme Court’s four-part Central Hudson test.  First, the speech in question must concern lawful activity and not be misleading.  Second, the government must have a substantial interest in regulating the speech.  Third, the regulation must directly and materially advance the government’s substantial interest.  Fourth, the regulation must be narrowly drawn.  Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980).

     State officials argued that they had several substantial interests in prohibiting liquor advertising, including temperance and the protection of nondrinkers.  The Tenth Circuit acknowledged that these were sufficient to “potentially justify” the speech restraints.

     However, the Tenth Circuit ruled that the restrictions on liquor advertising did not directly and materially advance the state’s interests.  The appeals court determined that the regulations failed this part of the Central Hudson test because of the “overall irrationality” of the state’s treatment of alcohol advertising.

     According to the court, Utah’s restrictions on liquor advertising could not be squared with the fact that the state allowed similar advertising for beer.  Such inconsistent treatment showed an irrational purpose similar to that found in Rubin v. Coors Brewing Co., 514 U.S. 476 (1995).  In that case the Supreme Court struck down a restriction on the disclosure of alcohol content on beer containers.  The Tenth Circuit concluded that Utah’s scheme for regulating alcoholic beverages drew irrational distinctions among different types of alcohol.

     The appeals court also determined that Utah’s scheme violated the fourth part of the Central Hudson test because the regulations were too broad.  The court noted that there were several alternative ways to reduce alcohol consumption that did not regulate speech.  These included charging higher prices, limiting per capita purchases, and instituting educational campaigns on alcohol abuse.  “Utah has not shown that nonspeech regulations would be an ineffective means to accomplish the ends it desires, or that its speech regulations are no more extensive than necessary,” the panel wrote.

     The appeals court ended its opinion with a long quotation from the Supreme Court’s seminal decision in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976), in which the Court explicitly held that commercial speech is entitled to First Amendment protection.  (“So long as we preserve a predominantly free enterprise economy ... the free flow of commercial information is indispensable....”) 

     In Colorado, meanwhile, a brewery managed to obtain federal approval for a beer label rejected by state officials after a years-long battle.  Flying Dog Brewery, formerly Broadway Brewing, finally received the necessary permission to use the label “Good Beer, No S___” on its Road Dog Ale.  The brewing company launched Road Dog Ale in 1995 as a product to be distributed in Colorado only.  It sought prior approval from state authorities for a label designed by renowned British artist Ralph Steadman.

     The Colorado Liquor Enforcement Division of the state’s Department of Revenue rejected the label, citing its rule against obscene and indecent messages.  To protest the censorship of its label, Broadway substituted the words “No Censorship.”  That wording was eventually approved.

     Broadway Brewing challenged the denial of the original wording in state court, contending that it violated the brewery’s First Amendment rights.  In March 1999, trial Judge John W. Coughlin rejected Broadway Brewing’s constitutional challenges, finding that the state’s policy against obscenity and indecency passed the Central Hudson test for commercial speech regulations. 

     “This Court feels that the government has every right to protect against vulgarity and to protect against what is unfit to be seen in public,” Judge Coughlin wrote.  He also reasoned that the ban on obscene and indecent expression directly advanced the government’s interest in shielding the public from vulgar material.  Finally, the judge determined that the regulation was not too extensive but “absolutely essential to serve the interest of preventing vulgarity in a public arena.”

     Judge Coughlin also rejected the brewing company’s contention that the policy was too vague.  “While the regulation could have been expressed in better terms, when you apply the standards to the facts of this case, it cannot be said to be unconstitutional.”

     Colorado later revised its regulation to provide that intrastate-only beers obtain label approval from the federal Bureau of Alcohol, Tobacco and Firearms.  In July 2000, the Colorado Court of Appeals, without a written opinion, dismissed Broadway’s appeal as moot in part because state authorities no longer claimed the right to approve or not approve the brewery’s labels.

     On Oct. 31, 2000, Broadway Brewing petitioned the Colorado Supreme Court to review the decision.  Broadway argued in its petition that the case was not moot because “the new regulation merely changes the identity of the censor.”  On Jan. 16, 2001, the state high court refused to hear the brewing company’s appeal.  Broadway Brewing, LLC v. Reitz, No. 00SC735, 2001 Colo. LEXIS 40 (Jan. 16, 2001).

     However, all’s well that ends well for the brewery.  Even though it did not prevail in its state court lawsuit, the company submitted its label for approval to the federal Bureau of Alcohol, Tobacco and Firearms.  The brewery says it received the approval in early 2001.  The label went back on Road Dog Ale in July 2001.