Could state regulators face another constitutional steamroller?

 

For years state regulations and statutes have been under constant and sometimes successful attacks from Commerce Clause challenges. Now another line of constitutional attacks is coming on the horizon and could weaken state regulatory authority.

Recently, plaintiffs have become more embolden to utilize 1st Amendment attacks on a state’s legal authority to regulate liquor matters.

What is being challenged?

A good number of state regulations and laws contain restrictions on what a manufacturer, wholesaler, or retailer may advertise. These restrictions usually regulate happy hours concerns or are included in “tied house” regulations or statutes.

1st Amendment challenges to state legal authority are become more commonplace and will occur more often in the future.

In this post we will focus on a specific recently filed challenge to Virginia’s Happy Hour laws.

Virginia Happy Hour attacks

Many states have restrictions on “Happy Hour” advertising. Recently, Virginia was challenged on the restrictive practices in its state regulations. Chef Geoff’s and Geoff Tracy v. Virginia ABC, 1:18-cv-00360-AJT-IDD, Eastern District of Virginia (Filed March 28, 2018). The complaint filed, claimed that Virginia’s happy hour advertising law, that prohibited the use of certain terminology and prohibited certain advertising deals, is unconstitutional.

The plaintiff Geoff Tracy, an owner of a Virginia restaurant, claimed certain advertising prohibitions such as not being able to advertise two-for-one drink specials and instead needing to call it half-price drinks, hurt his business.

Also, being forced to utilize terms such as “Happy Hour” instead of “Wine Down Wednesday”, did not allow him to convey the most attractive message to customers.

Mr. Tracy’s claims are based on the issue that generic advertising does not allow him to gain an advantage in a competitive business environment. And that the state’s happy hour regulations are hurting his business.

What are a state’s best defenses in 1st Amendment cases?

A State’s best defense against a 1st amendment challenge is that the 1st Amendment does not except unlawful activity. A state will often times employ this argument in a tied-house situation.

For instance, a state will enact a law that makes it illegal for a manufacturer to make direct payments to a retailer for advertising the manufacturer’s product, or the state will require that any advertisement must include more than one retailer.  Laws of this nature are made to prevent a retailer’s independence from being put at risk. The reasoning is if a retailer is accepting payment from a manufacturer, then based on the financial incentives provided by the manufacturer, it may predominantly feature the manufacturer’s product. Further, by featuring only one retailer in a manufacturer’s advertisement, the manufacturer is favoring and potentially creating a special relationship with that retailer.

An industry member can claim that the state laws interfere with its 1st Amendment rights on what it can say and who it wants to associate with. However, when the state makes a plausible tied-house argument, it throws up a solid defense that the industry member is engaging in unlawful activity. The legal principle that unlawful activity is not protected by the 1st Amendment buttresses the state’s position.

Can Virginia make a plausible defense for its happy hour law?

Because this is not a tied house situation, one of a state’s best defenses is not available to Virginia. So how does Virginia defend its law?

According to published reports, Virginia is defending its restrictions by stating that ridding the law of these specific advertising restrictions would lead to over consumption. https://www.washingtonpost.com/opinions/its-last-call-for-virginias-unconstitutional-happy-hour-advertising-laws/2018/11/30/9be8676e-f278-11e8-aeea-b85fd44449f5_story.html?noredirect=on&utm_term=.1c02359b7838

Problematically for the state, this argument is not as cut and dry as the “tied house” arguments.

If the state wants to restrict free speech on these grounds, (curtailing these restrictions leads to overconsumption), then it must prove its case. For example, the state will probably need to provide empirical evidence backing up its assertions. Specifically, if the state is going to usurp the 1st Amendment, it must provide a direct causation between loosening restrictions on advertising and overconsumption of liquor. Often times that evidence may not exist or is hard to prove.

Second, Virginia may need to reach into the temperance bag to prove that the advertising restrictions are necessary to promote temperance. Problematically, temperance is not a strong argument and may be dead as it applies to state laws. I have not seen a case of importance recently that affirms temperance as a plausible defense for a state law. Further, the weak temperance argument would come face to face with a 1st Amendment challenge. Without going into specifics on the Central Hudson 1st Amendment test, any law curtailing free speech requires proving a tough burden. A weak temperance justification would be nearly impossible to justify curtailing 1st Amendment rights.

Temperance is effective really at the local level, where the localities can make the argument to restrict the number and types of licenses and also who gets licensed.

Third, the state would probably need to prove that there weren’t less restrictive measures available to curb overconsumption. This argument would be very hard to prove. In fact, if the state wanted to curb overconsumption it could take measures such as limiting hours of operation or limiting the discounting of drinks. Curbing overconsumption by curbing 1st Amendment rights is a very hard argument to defend.

Conclusion

The Commerce Clause challenges to state liquor laws are a popular method to attacking state liquor laws. However, 1st Amendment challenges are on their heels. We witnessed in Missouri Broadcasters Association case that even the strong “tied-house” justifications are being challenged successfully (so far). http://irishliquorlawyer.com/federal-court-rules-against-state-liquor-statutes-and-regulations-without-a-21st-amendment-analysis/

As is illustrated in this Virginia case, laws prone to 1st Amendment challenges are being moved against. What we can expect in the future is that any state law restricting 1st Amendment rights without a plausible justification, will be challenged. There are many questionable state laws restricting advertising, including those laws that restrict information on where the manufacturer’s product could be found, to the laws that restrict listing the specific price of the product in an advertisement.

If challenged, we will see the end of these laws, their justifications seem unsound and their harms are too burdensome to justify.

The 1st Amendment challenges are coming down the chute, beware state regulators another constitutional steamroller is coming!

 

 

 

 

 

2 thoughts on “Could state regulators face another constitutional steamroller?”

  1. I wonder if commerce clause case could be against a state that has extra licensing to distribute for an instate winery that an out of state winery would not have to have? Say the state has extra food facility licensing and attendant regulation for the same wholesale activity as the liquor department. In essence duplicate licensing for the same (wholesaling) activity. Seems like a de facto liquor regulation and distribution permit? My understanding is in and out of state wineries according to the language in the Granholm case need to be treated on equal basis without discrimination (other than something like the size of the winery which is permissible at this time)?

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