By Erik Jaffe *

The final month of the recent Supreme Court term brought the latest installment in a series of cases incrementally advancing First Amendment protection for commercial speech. In Greater New Orleans Broadcasting Association, Inc. v. United States, — U.S. —, 119 S. Ct. 1923 (1999), The Supreme Court struck down a federal prohibition on broadcast advertising of casino gambling as applied to broadcasters in states where such gambling is legal. Justice Stevens wrote the opinion for the Court joined by all but Justice Thomas (who concurred in the judgment). Chief Justice Rehnquist wrote a concurring opinion and Justice Thomas wrote an opinion reaching the same result for a very different reason.

Greater New Orleans involved a challenge to 18 U.S.C. §1304, which prohibits radio and television broadcasting of "any advertisement of or information concerning any lottery, gift enterprise, or similar scheme, offering prizes dependent in whole or in part upon lot or chance." Regulations by the FCC have interpreted this prohibition to cover advertising for gambling at privately-owned casinos. The Court had previously upheld this prohibition as applied to advertisements for the Virginia lottery broadcast by a radio station located in North Carolina, which had no authorized lottery. See United States v. Edge Broadcasting Co., 509 U.S. 418 (1993). The petitioners in Greater New Orleans, however, sought to broadcast advertisements only in Louisiana, for casino gambling that is lawful in Louisiana and Mississippi.

After losing their challenge in both the Eastern District of Louisiana and twice in the U.S. Court of Appeals for the Fifth Circuit (the second time after a Supreme Court vacatur and remand for reconsideration in light of the new decision in 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996)), petitioners were granted full review by the Supreme Court.

The Supreme Court reversed the Fifth Circuit and held that petitioners' advertisements were protected by the First Amendment. The Court applied the much-maligned Central Hudson test for commercial speech restrictions, which asks: (1) whether the speech concerns lawful activity and is not misleading; (2) whether the asserted government interest is substantial; (3) whether the regulation directly advances the government interest asserted; and (4) whether the regulation is not more extensive than necessary to serve that interest. New Orleans Broadcasting, — U.S. at —, 119 S. Ct. at 1930 (citing Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y., 447 U.S. 557, 566 (1980)). The advertising restrictions at issue failed the third and fourth parts of the test, according to the Court, because the "operation of §1304 and its attendant regulatory regime is so pierced by exemptions and inconsistencies that the Government cannot hope to exonerate it." — U.S. at —, 119 S. Ct. at 1933.

Accepting as substantial the claimed government interests of (1) reducing the social costs of casino gambling and (2) assisting states that restrict or prohibit gambling within their own borders, the Court examined the whole of the federal regulatory scheme and found ambivalence and contradictions that undermined any claim that the speech restriction at issue materially advanced the two government interests. The exemptions and loop-holes seized upon by the Court included the exemption for advertising casino gambling run by Native American tribes, and the allowance of ads promising "Vegas_style excitement" so long as gambling-specific information is not mentioned. — U.S. at , 119 S. Ct. at 1933. The Court then concluded that "[f]rom what we can gather, the Government is committed to prohibiting accurate product information, not commercial enticements of all kinds, and then only when conveyed over certain forms of media and for certain types of gambling _ indeed, for only certain brands of casino gambling _ and despite the fact that messages about the availability of such gambling are being conveyed over the airwaves by other speakers." Id., 119 S. Ct. at 1933.

Addressing the government's argument that tribal casino gambling was more heavily regulated, and therefore less of a threat, the Court observed:

"If such direct regulation provides a basis for believing that the social costs of gambling in tribal casinos are sufficiently mitigated to make their advertising tolerable, one would have thought that Congress might have at least experimented with comparable regulation before abridging the speech rights of federally unregulated casinos. While Congress' failure to institute such direct regulation of private casino gambling does not necessarily compromise the constitutionality of §1304, it does undermine the asserted justifications for the restriction before us."

Id. at —, 119 S. Ct. at 1934.

This argument is all the more interesting for its widespread potential application in the commercial speech context, and the Court's long failure to give such an argument much weight in that context.

As for the interest in helping states that wish to suppress gambling, the Court suggested that §1304 would serve that interest no better than it served the comparable federal interest. The Court also stated that regardless of whether state anti-gambling policies made more sense than the patchwork federal policy, "§1304 sacrifices an intolerable amount of truthful speech about lawful conduct when compared to all of the policies at stake and the social ills that one could reasonably hope such a ban to eliminate." — U.S. at —, 119 S. Ct. at 1935.

The Court concluded that the government "cannot overcome the presumption that the speaker and the audience, not the Government, should be left to assess the value of accurate and non-misleading information about lawful conduct. Edenfield, 507 U. S., at 767. Had the Federal Government adopted a more coherent policy, or accommodated the rights of speakers in States that have legalized the underlying conduct, see Edge, 509 U.S., at 428, this might be a different case. But under current federal law, as applied to petitioners and the messages that they wish to convey, the broadcast prohibition … violates the First Amendment."— U.S. at —, 119 S. Ct. at 1935-36.

Chief Justice Rehnquist joined the opinion of the Court, but wrote a concurrence highlighting the availability of various non-speech forms of regulation of the gambling industry. He then added the ambiguous sentence that "[w]ere Congress to undertake substantive regulation of the gambling industry, rather than simply the manner in which it may broadcast advertisements, `exemptions and inconsistencies' such as those in §1304 might well prove constitutionally tolerable." — U.S. at —, 119 S. Ct. at 1936. Whether this statement simply reaffirms the leniency of the rational basis test as applied to non-speech regulations, or is suggesting that there would be greater leeway on speech regulations done in combination with substantive regulations remains to be seen.

Justice Thomas did not join the opinion of the Court, but reached the same result for different reasons. Rejecting application of the Central Hudson test, Justice Thomas reaffirmed his views from 44 Liquormart that where the "`government's asserted interest is to keep legal users of a product or service ignorant in order to manipulate their choices in the marketplace,' … `such an "interest" is per se illegitimate and can no more justify regulation of "commercial speech" than it can justify regulation of "noncommercial" speech.'" — U.S. at —, 119 S. Ct. at 1936 (quoting 44 Liquormart, 517 U. S. at 518 (Thomas, J., concurring in part and concurring in the judgment)).

Viewing this case alongside 44 Liquormart and Rubin v. Coors Brewing Co., 514 U.S. 476 (1995) _ striking down various restrictions on alcohol advertising _ the Court's latest commercial speech decision is a small step simply confirming and applying the currently stricter view of the Central Hudson test. While various statements in this latest case titillate with the possibility of a still more speech-protective outlook in the future, there are ample statements elsewhere that portend more ad hoc decisions under the indeterminate Central Hudson test.

For example, while the Court was more vigorous in its application of the Central Hudson test than it has been in the past, it expressly declined to abandon that test despite quaintly recognizing the "intricacies" _ read incoherence _ of that test, and the widespread calls for its rejection. — U.S. at —, 119 S. Ct. at 1930. A cynic might imagine that the Court is unwilling to abandon the test for something akin to Justice Thomas's stricter approach because the current incoherence provides few limits on the Court's future discretion and ability to distinguish cases that are in principle no different. Indeed, the Court's closing suggestion that a more coherent federal policy toward gambling in general might have altered the result in this case suggests that even the restriction in §1304 might find new life in the future.

Similarly, while the Court recognized that 44 Liquormart rejected one of the central premises of the earlier decision in Posadas de Puerto Rico Associates v. Tourism Company of Puerto Rico, 478 U.S. 328 (1986), the Court mentions that case only in discussing the first of the two Fifth Circuit decisions below. — U.S. at —, 119 S. Ct. at 1929. And the Court failed to expressly overrule Posadas _ indeed, never mentions it again _ despite that Posadas upheld restrictions on gambling advertisements seemingly indistinguishable from those struck down in New Orleans Broadcasting. See Posadas, 478 U.S. at 340-41 (upholding a ban on "advertising of casino gambling aimed at the residents of Puerto Rico, [which] concerns a lawful activity and is not misleading or fraudulent"). Indeed, when criticizing the notion that speech regarding "vices" may be regulated as much as the vices themselves, the Court does not even refer to the source of that notion _ Posadas itself. See — U.S. at —, 119 S. Ct. at 1934-35 ("the power to prohibit or to regulate particular conduct does not necessarily include the power to prohibit or regulate speech about that conduct. 44 Liquormart, 517 U. S., at 509511 (opinion of STEVENS, J.); see id., at 531532 (O'CONNOR, J., concurring in judgment); Rubin, 514 U. S., at 483, n. 2. It is well settled that the First Amendment mandates closer scrutiny of government restrictions on speech than of its regulation of commerce alone. Fox, 492 U. S., at 408.").

On two other points, the Court raises interesting and potentially promising arguments. When the Court discussed the first part of the Central Hudson test, it made the approving observation that the advertising at issue "would convey information _ whether taken favorably or unfavorably by the audience _ about an activity that is the subject of intense public debate in many communities." — U.S. at —, 119 S. Ct. at 1930. The Court also noted the messages would "benefit listeners by informing their consumption choices and fostering price competition." Id., 119 S. Ct. at 1930. And when discussing whether the speech restriction materially advanced the government's interests, the Court argued that "[w]hile it is no doubt fair to assume that more advertising would have some impact on overall demand for gambling, it is also reasonable to assume that much of that advertising would merely channel gamblers to one casino rather than another." Id. at —, 119 S. Ct. at 1932-33. Arguments such as these have long been made in connection with cigarette advertising, and it will be interesting to see if the Court's seeming approval of these arguments will ever be tested in the context of tobacco products.

On another point of central importance to First Amendment reasoning, however, the Court offered only a thin response that arguably does as much harm as good. In reply to a government argument that broadcasts originating in a pro-casino state might spill over into an anti-casino state whose citizens would "hear it and make rash or costly decisions," the Court said equivocally that "[t]o be sure, in order to achieve a broader objective such regulations may incidentally, even deliberately, restrict a certain amount of speech not thought to contribute significantly to the dangers with which the Government is concerned. … But Congress' choice here was neither a rough approximation of efficacy, nor a reasonable accommodation of competing State and private interests." — U.S. at —, 119 S. Ct. at 1935. By seemingly accepting the underlying "objective" of preventing citizens from hearing information that might lead them to make decisions the government believes to be unwise, the Court appears to sanction an argument that would normally fly in the face of the First Amendment. This basic First Amendment point was made in Justice Thomas's opinion, but Justice Stevens failed to join issue on the matter.

Overall, for those favoring greater protection of commercial speech, the New Orleans Broadcasting decision produced a positive result that at least incrementally advanced the ball of constitutional protections. But despite some promising sentences here and there, the Court's failure to reject Posadas outright and by name, coupled with the Chief Justice's concurrence and the malleability of the Central Hudson test, provides ample caution against premature celebration of any expected First Amendment renaissance for commercial speech. It is simply too soon for anything more than guarded optimism and continued wariness regarding the ad hoc nature of the Central Hudson test.

* Erik Jaffe is a sole practitioner concentrating in appellate litigation. He serves as Chairman of the Advertising Law & Regulation Subcommittee of the Free Speech & Election Law Practice Group.