Daniel E. Troy*

The Supreme Court’s current approach to commercial speech exemplifies the perils of balancing tests, particularly when the right to communicate is at stake. The Court’s balancing test has produced inconsistent results and sowed confusion in the lower courts. The lack of clarity about the rights of advertisers has also encouraged bureaucrats and politicians to attack the commercial speech of politically unpopular interests – most dramatically tobacco.

In assessing restrictions on communications that propose a commercial transaction, the Court applies a balancing test that weighs the competing interests of commercial speakers and government regulators. Central Hudson Gas & Electric Co. v. Public Service Commission of New York, 447 U.S. 557 (1980). Specifically, under the Central Hudson test, a court must determine:

1. Whether the commercial speech concerns a lawful activity and is not misleading;
   
   
2. Whether the government interest asserted to justify the regulation is "substantial";
   
   
3. Whether the regulation "directly advances" that government interest; and
   
   
4. Whether the regulation is no more extensive than necessary to serve that interest. (In a later case, this prong of the test was redefined as requiring only that the "fit" between the state's goal and the challenged regulation be "reasonable.")

Central Hudson, 447 U.S. at 566.

Applying this test, the Supreme Court has often arrived at decisions that are extremely protective of commercial speech. Most notably, in 44 Liquormart, Inc. v. Rhode Island, 116 S.Ct. 1495 (1996), the Supreme Court unanimously invalidated Rhode Island’s restrictions on advertising the price of alcohol. The Court’s primary rationale for doing so was that the state could have accomplished its asserted objective of reducing temperance by restricting less speech or, indeed, without restricting speech at all. But, despite the speech-protective outcome of the decision, the Court continued to adhere to its Central Hudson mode of analysis.

Two recent Fourth Circuit decisions demonstrate the perils of such analysis, notwithstanding the outcome of 44 Liquormart and most of the Supreme Court’s decisions, which are generally protective of commercial speech. In Penn Advertising, of Baltimore Inc. v. Mayor and City Council of Baltimore, 63 F.3d 1305 (4th Cir. 1995), vacated and remanded, 116 S.Ct. 1821 (1996), reaff’d, 101 F.3d 325 (4th Cir. 1996), cert. denied, 1997 U.S. Lexis _____ (April 28, 1997) and in Anheuser-Busch v. Mayor and City Council of Baltimore City, 63 F.3d 1318 (4th Cir. 1995), vacated and remanded, 116 S.Ct. 2575 (1996), reaff’d, 101 F.3d 332 (4th Cir. 1996), cert. denied, 1997 U.S. Lexis 2792 (April 28, 1997), the Fourth Circuit upheld a Baltimore ordinance banning certain advertising of tobacco and alcohol products. The Fourth Circuit stated that Baltimore’s interest in "protecting children who are not yet independently able to assess the value of the message presented" was sufficiently related to a ban on billboard advertising of tobacco products (except in business and industrial areas) to meet the Central Hudson standard.

In contrast, similar ordinances have been stricken in other circuits. See, e.g., National Advertising Co. v. Town of Babylon, 900 F.2d 551 (2d Cir. 1990) (ordinances prohibiting off-premises signs); Ackerly Communications of Massachusetts v. City of Somerville, 878 F.2d 513 (1st Cir. 1989) (ordinance prohibiting off-premises sign boards).

The Fourth Circuit decisions are plainly inconsistent with the Supreme Court’s commercial speech analysis following Central Hudson. Nonetheless, the Court denied certiorari in both cases. Thus, the subjectivity inherent in the Central Hudson balancing test has been perpetuated and exacerbated by the Court’s own reluctance to clarify its analysis.

The Wages of Confusion

The lack of clarity that besets commercial speech jurisprudence encourages politicians to take the chance that the courts will uphold restrictions on advertising that appear to be politically popular. Most notably, at the national level, the Food and Drug Administration (FDA) (discussed below) and Federal Communications Commission (FCC) have encroached upon commercial speech that should be protected. Former FCC Chairman Reed Hundt seized on the Fourth Circuit’s decisions, stating: "[s]urely [Anheuser-Busch] means that the First Amendment is in no way violated by a prohibition on advertising hard liquor on shows and in time slots when kids are likely to be in the audience in large numbers – that applies like it or not to very late hours."

State and local lawmakers also are attempting to restrict commercial speech about allegedly "socially harmful" products. After the Supreme Court denied certiorari in Penn Advertising and Anheuser-Busch, lawmakers across the country introduced similar ordinances restricting outdoor advertising of tobacco. At least sixteen states or localities are or have been considering bills and ordinances restricting advertising of alcohol and/or tobacco. In many cities, lawmakers cited the Baltimore ordinance as the impetus for bans on tobacco billboard advertising.

The FDA’s Assault on Tobacco Ads

On August 28, 1996, FDA issued broad regulations to restrict the advertising and promotion of tobacco, ostensibly to protect children under 18. 61 Fed. Reg. 44,396, 44,615-18 (Aug. 28, 1996). Specifically, these regulations:

• prohibit any use of images or colors in most tobacco advertising (outdoor, print, direct-mail, point of sale), limiting such advertising to black text on a white background;
  
  
• prohibit any outdoor advertising for tobacco within 1000 feet of a public playground or an elementary or secondary school, including signs on stores stating that they sell tobacco. (In places such as Manhattan, this is tantamount to a ban on all outdoor tobacco ads);
  
  
• prohibit any sponsorship of any athletic, social, or cultural event under the name brand of a tobacco product (e.g., Winston Cup, Virginia Slims Tennis tournament);
  
  
• prohibit the sale or distribution of non-tobacco merchandise bearing any tobacco brand name or logo;
  
  
• prohibit tobacco advertising in any medium not approved by FDA, unless 30 days advance notice is provided to the agency; and
  
  
• prohibit tobacco companies from using color or images to advertise in any mass circulation magazine if more than 15% of the readers, or if 2 million of the readers, were minors. This would preclude tobacco advertising in Time, Newsweek, People, Sports Illustrated, Better Homes and Gardens, and Ebony, for example.

If the Central Hudson test were properly applied, a court should strike down FDA’s advertising restrictions as unconstitutional. Under the third prong of the Central Hudson analysis, the government is required to prove that an advertising restriction "directly advances" the government’s interests. It would be hard for FDA to show that tobacco advertising in fact encourages young people to use tobacco, and would be even harder for the government to prove that its proposed advertising restrictions "will in fact" reduce underage tobacco use "to a material degree." SeeEdenfield v. Fane, 507 U.S. 761, 771 (1993).

In addition, the Supreme Court has made emphatically clear that limits cannot be "more extensive than necessary" to serve the government’s asserted goals. Again, a court should find FDA’s rules unconstitutional under Central Hudson’s fourth prong. As 44 Liquormart makes clear, restrictions on commercial speech are not permissible if the government could advance its goal by means that do not involve restricting speech. Yet the government has available to it alternatives to reduce underage tobacco use that would not restrict speech, such as through stricter enforcement, rules banning the possession of tobacco by those under 18, anti-smoking educational campaigns, or licensing of tobacco retailers.

Also, the FDA has restricted more speech than is necessary to accomplish its goals. It would be hard for FDA to demonstrate that only a ban on images and colors in tobacco advertising (except in publications which FDA labels ‘adult’ and in ‘adult-only venues,’ as defined by FDA’s rule) meets the agency’s concerns about the influence of advertising on young people; that its 1000-foot ban on outdoor tobacco advertising is necessary; or that its total ban on brand-name event sponsorship is essential.

Yet, because of the subjective character of the Central Hudson test, it is not inconceivable that a court – even the Supreme Court – could, notwithstanding precedent, apply the Central Hudson test and declare that these restrictions were narrowly tailored.(1) The point is not just that courts can be influenced by popular will pressure to render wrong decisions. The Central Hudson experience demonstrates that the more barriers case law provides to political pressure, particularly by articulating clearly stated rules, the less likely the Court will capitulate to such pressure. Clear rules also reduce the likelihood that politicians will seek to adopt regulations that are likely to be held unlawful. The "mushiness" of the Court’s Central Hudson analysis has galvanized the bureaucrats and politicians, and has burdened First Amendment protected speech.

Thus, as Justice Scalia has noted, although "we will have ... balancing modes of analysis with us forever[,] ... those modes of analysis should be avoided where possible." Scalia has correctly observed that "balancing" tests such as the Central Hudson analysis too easily permit judges to "mistake their own predilections for the law." When dealing with First Amendment freedoms, "the use of ... traditional legal categories is preferable to the sort of ad hoc balancing that the Court" performs under the Central Hudson analysis. See Simon and Schuster, Inc. v. New York State Victims Crime Board, 112 S. Ct. 501, 514 (1991) (Kennedy, J., concurring). The Supreme Court should therefore adopt a rule-based approach to commercial speech; preferably, one that extends a full measure of protection to commercial communications.

*Daniel E. Troy is a partner at Wiley, Rein & Fielding in Washington, D.C. and an associate scholar at the American Enterprise Institute. He has represented both advertising trade associations and tobacco companies in connection with commercial speech issues.

1. In April of 1997, a district court judge in North Carolina held that, although the FDA had the power to regulate the manufacture, sale, and distribution of tobacco products generally, it lacked the statutory authority to restrict advertising. The court therefore did not address the First Amendment issues. That decision is now on appeal.