No. 93-1631 In the Supreme Court of the United States OCTOBER TERM, 1994 LLOYD BENTSEN, SECRETARY OF THE TREASURY, PETITIONER v. COORS BREWING COMPANY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT BRIEF FOR THE PETITIONER DREW S. DAYS, III Solicitor General FRANK W. HUNGER Assistant Attorney General EDWIN S. KNEEDLER Deputy Solicitor General RICHARD H. SEAMON Assistant to the solicitor General MICHAEL JAY SINGER JOHN S. KOPPEL Attorneys Department of Justice Washington, D.C. 20530 (202)514-2217 ---------------------------------------- Page Break ---------------------------------------- QUESTION PRESENTED Section 5(e) (2) of the Federal Alcohol Administration Act, 27 U.S.C. 205(e) (2), prohibits statements of alcohol content on the labels of malt-beverage containers unless such statements are required by state law. The question presented is whether that labeling restriction comports with the First Amendment. (I) ---------------------------------------- Page Break ---------------------------------------- II PARTIES TO THE PROCEEDING Petitioner, the defendant below, is the Secretary of the Treasury. The other defendant below was the Director of the Bureau of Alcohol, Tobacco and Firearms within the Department of the Treasury. Respondent is the Coors Brewing Company, which was substituted for the Adolph Coors Company, the plaintiff below, pursuant to this Court's order of August 2, 1994, granting respondent's motion for substitution. Also participating in the pro- ceedings below were the Speaker and Bipartisan Leader- ship Group of the United States House of Representa- tives, which initially participated as defendants-intervenors but later withdrew from the case in order to allow de fendants to be represented exclusively by the Department of Justice. ---------------------------------------- Page Break ---------------------------------------- TABLE OF CONTENTS Opinions below . . . . 1 Jurisdiction . . . .2 Constitutional, statutory, and regulatory provisions involved . . . . 2 Statement . . . . 2 A. The statutory and regulatory background . . . .3 B. The proceedings in this case . . . . 12 Summary of argument . . . . 16 Argument: The statutory prohibition of alcohol-content state- ments on malt-beverage labels in 27 U.S.C. 205 (e) (2) comports with the First Amendment . . . . 18 I. The labeling restriction satisfies the Central Hudson test for measuring the validity of gov- ernment regulation of commercial speech . . . . 18 A. The labeling restriction advances a substan- tial governmental interest . . . . 20 R The labeling restriction materially advances the asserted governmental interest . . . . 25 1. The evidence establishes a continuing threat of strength wars among malt- beverage brewers . . . . 25 2. The labeling restriction combats the risk of strength wars in a direct and material way . . . . 26 C. The labeling restriction is narrowly tailored to advance the government's substantial interest . . . . 34 II. The labeling restriction is entitled to an added presumption of validity . . . . 37 (III) ---------------------------------------- Page Break ---------------------------------------- IV Argument & Continued: Page A. The labeling restriction is entitled to an added presumption of validity because it regulates speech promoting a socially harm- ful activity . . . . 38 B. The labeling restriction is entitled to an added presumption of validity because it facilitates the enforcement of state laws within the ambit of the Twenty-first Amend- ment . . . . 41 Conclusion . . . . 47 TABLE OF AUTHORITIES Cases: A.L.A. Schechter Poultry Corp. V. United States, 295 U.S. 495 (1935) . . . . 9 Arrow Distilleries, Inc. V. Alexander, 109 lF.2d 397 (7th Cir.), cert. denied, 310 U.S. 646 (1940) ..21, 22, 45 Bacchus Imports, Ltd. V, Dias, 468 U.S. 263 (1984) . . . . 24, 40 Board of Trustees v. Fox, 492 U.S. 469 (1989) . . . . 19, 31, 32, 34, 39, 43 Bolger v. Youngs Drug Products Corp., 463 U.S. 60 (1983) . . . . 29 Bose Corp. V. Consumers Union of United States, Inc., 466 U.S. 485 (1984) . . . . 19 Burson V. Freeman, 112 S. Ct. 1846 (1992) . . . . 28 California V. LaRue, 409 U.S. 109 (1972) l7, 38, 41, 42, 43, 44, 46, 47 California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980) 4, 24, 40 Capital Broadcasting Co. V. Mitchell, 333 F'. Supp. 582 (D.D.C. 1971), aff'd mem., 405 U.S. 1000 (1972) . . . . 28, 39 Capital Cities Cable, Inc. V. Crisp, 467 U.S. 691 (1984) . . . . 24, 40, 44 Central Hudson Gas & Elec. Corp. V. Public Serv. Comm'n, 447 U.S. 557 (1980) . . . .13, 18, 27, 34, 36, 39 City of Cincinnati V. Discovery Network, Inc., 113 s. ct. 1505 (1993) . . . . 19 ---------------------------------------- Page Break ---------------------------------------- V Cases-Continued: Page City of Newport V. Iacobucci, 479 U.S. 92 (1986 ).. 43 Continental Distilling Corp. v. Shultz, 472 F.2d 1367 (D.C. Cir. 1972) . . . . 3 Craig V. Boren, 429 U.S. 190 (1976) . . . . 4, 40, 43 Doran V. Salem Inn, Inc., 422 U.S. 922 (1975) . . . . 43 Dunagin V. City of Oxford, 718 F.2d 738 (5th Cir. 1983), cert. denied, 467 U.S. 1259 (1984) . . . 19, 28, 37, 39, 43 Eden field v. Fane, 113 S. Ct. 1792 (1993) . . . .15, 19, 20, 25, 26, 40, 41 Edge Broadcasting Co. V. United States, 5 F.3d 59 (4th Cir. 1992), rev'd, 113 S. Ct. 2696 (1993 ) . . . . 23 Falls City Indus., Inc. V. Vanco Beverage, Inc., 460 U.S. 428 (1983) . . . . 27 44 Liquor Mart, Inc. v. Racine, 829 F. Supp. 543 (D.R.I. 1993), aff'd in part, rev'd in part sub nom. 44 Liquormart, Inc. V. Rhode Island, Nos. 93-1893 & 93-1927 (May 2, 1994), opinion with- drawn and judgment vacated, aff'd in part, rev'd in part mem. (lst Cir. July 8, 1994) . . . . 27 Friedman V. Rogers, 440 U.S. 1 (1979) . . . . 40 Hatter v. Nebraska, 205 U.S. 34 (1907) . . . . 32 Hanf v. (United States, 235 F.2d 710 (8th Cir.), cert. denied, 352 U.S. 880 (1956) . . . .22, 45 Harris v. State, 122 F.2d 401 (Okla. Crim. App. 1942) . . . . 45 Hayes v. United States, 112 F.2d 417 (lOth Cir. 1940) . . . . 22, 45 Healy V. The Beer Inst., 491 U.S. 324 (1989) . . . . 27 Hostetter V. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324 (1964) . . . . 24, 41 Ibanez V. Florida Department of Business & Pro- fessional Regulation, 114 S. Ct. 2084 (1994) . . . .19, 21, 25,43 Kordel v. United States, 335 U.S. 345 (1948 ) . . . . 32 Larkin V. Grendel's Den, Inc., 459 U.S. 116 (1982) . . . . 43 Lockhart v, McCree, 476 U.S. 162 (1986) . . . . 19 Metromedia, "Inc. V. City of San Diego, 453 U.S. 490 (1981) . . . . 32 ---------------------------------------- Page Break ---------------------------------------- VI Cases-Continued: National Distributing Co. V. United States Treas ury Dep't, 626 F.2d 997 (D.C. Cir. 1980) . . . .3, 9 New York State Liquor Authority V. Bellanca, 452 U.S. 714 (1981 ) . . . . 43 Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447 (1978) . . . . 19, 29-30, 34, 39, 40 Oklahoma Telecasters Ass'n V. Crisp, 699 F.2d 490 (lOth Cir. 1983), rev'd sub nom. Capital Cities Cable, Inc. V. Crisp, 467 U.S. 691 (1984) . . . .19, 28, 39 Old Monastery Co. V. United States, 147 F.2d 905 (4th Cir.), cert. denied, 326 U.S. 734 (1945) . . . . 22, 45 Posadas de Puerto Rico Associates v. Tourism Co., 478 U.S. 328 (1986) . . . . 17, 27, 28, 32, 36, 37, 38, 39, 40, 41 Princess Sea Indus., Inc. V. State, 635 F.2d 281 (Nev. 1981), cert. denied, 456 U.S. 926 (1982 ).. 28, 39 Queensgate Investment Co. V. Liquor Control Comm'n, 433 N.E.2d 138 (Ohio), appeal dis- missed, 459 U.S. 807 (1982) . . . . 27, 39 R.M.J., In re, 455 U.S. 191 (1982) . . . .20, 34 Rankin v. McPherson,, 483 U.S. 378 (1987) . . . .19 Rhode Island Liquor Stores Ass'n v. Evening Call Pub. Co., 497 A.2d 331 (R.I. 1985) . . . . 27, 39 S & S Liquor Mart, Inc. V. Pa-stove, 497 A.2d 729 (R.I. 1985) . . . . 27, 39 San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522 (1987) . . . . 32 Stone v. Mississippi, 101 U.S. 814 (1880) . . . . 40 South Dakota v Dole, 483 U.S. 203 (1987) . . . .23 324 Liquor Corp. v. Duffy, 479 U.S. 335 ( 1987) . . . .21, 24, 40, 45 Turner Broadcasting System, Inc. v. FCC, No. 93- 44 (June 27, 1994) . . . . 19, 28, 30 United States V. Edge Broadcasting Co., 113 S. Ct. 2696 (1993) . . . . 19, 20, 23, 24, 27, 29, 32, 34, 39, 40 United States v. Obrien , 391 U.S. 367 (1968) . . . . 42 United States v. Williams, 112 S. Ct. 1735 (1992 ).. 35 Walters V. National Ass'n of Radiation Survivors, 473 U.S. 305 (1985) . . . . 19 ---------------------------------------- Page Break ---------------------------------------- VII Cases-Continued: Page William Jameson & Co. V. Morgenthau: 25 F. Supp. 771 (D.D.C. 1938), vacated, 307 Us. 171 (1939) . . . . 3 307 US. 171 (1939) . . . . 46 Williamson V. Lee Optical Co., 348 U.S. 483 (1955) . . . . 43 Constitution, statutes, and regulations: U.S. Const.: Art. I, 8, Cl. 3 (Commerce Clause) . . . . 40, 46 Art. IV, 3 . . . . 44 Amend. I . . . . passim Amend. XVIII . . . . 38 Amend. XXI . . . . passim Section 2 . . . . 2, 46 Alcoholic Beverage Labeling Act of 1988, Pub. L. No. 100-690, Tit. VIII, 8001 (a) (3), 102 Stat. 4517-4521: 102 Stat. 4518 (27 U.S.C. 213) . . . . 40 102 Stat. 4518-4521 (27 U.S.C. 213 et seq.) . . . .37 102 Stat. 4519 (27 U.S.C. 215) . . . . 40 Federal Alcohol Administration Act, ch. 814, 49 stat. 977 (1935) : 2(a), 49 Stat. 977 . . . . 3 3,49 Stat. 978 . . . . 3 4,49 Stat. 978-981 . . . . 3 4 (d), 49 Stat. 979 . . . . 3-4 4 (e), 49 Stat. '379 . . . . 3-4 5,49 Stat. 981-985 . . . . 3 7,49 Stat. 985-986 . . . . 3 Federal Alcohol Administration Act, 27 U.S.C. 201 et seq. . . . 2, 3 2(a), 27 U.S.C. 202 (a) (repealed) . . . . 3 3,27 U.S.C. 203 . . . . 3, 20, 21, 44 4,27 U.S.C. 204 . . . . 3, 21 4(a) (2) (C),27 U.S.C. 204 (a) (2) (C) . . . . 21 4, 21 4 (d), 27 U.S.C. 204(d) . . . . 4, 21 4(e), 27 U.S.C. 204 (e) . . . . 4 ---------------------------------------- Page Break ---------------------------------------- VIII Statutes and regulations-Continued: Page 5,27 U.S.C. 205 . . . . 2, 3 5 (e), 27 U.S.C. 205 (e) . . . .5, 6 5 (e) (2),27 U.S.C. 205 (e) (2) . . . . passim 5 (f), 27 U.S.C. 205 (f ) . . . . 5 5(f) (2),27 U.S.C. 205 (f) (2) . . . .4, 5, 12, 13, 14, 17, 21, 22, 32 7,27 U.S.C. 207 . . . .2, 3 17(a) (7),27 U.S.C. 211 (a) (7) . . . . 4 Liquor Tax Administration Act, ch. 830, 510(a), 49 Stat. 1964 (1936) . . . . 3 Reed Amendment, ch. 162, 5, 39 Stat. 1069 (1917) . . . . 44 Webb-Kenyon Act, ch. 90, 37 Stat. 699 (1913 ) . . . . 44 18 U.S.C. 1262 . . . . 44 18 U.S.C. 1304 . . . . 23 18 U.S.C. 1307 . . . .23 27 U.S.C. 122 . . . . 44 Ala. Code 28-3 A-6 (c) (1986) . . . . 10 Ky. Rev. Stat. Ann. $244.520 (Bobbs-Merrill 1981) . . . . 10, 11 Me. Rev. Stat. Ann. tit. 28-A, 711 (1) (A) (West 1988) . . . . 10 Mass. Ann. Laws ch. 138, 15 (Law. Co-op. 1981)..12 Mo. Rev. Stat. 312.310 (Supp. 1993) . . . .12 N.Y. Alto. Bev. Cont. Law App. 84.6(a) (McKinney 1987) . . . . 10 Ohio Rev. Code Ann. $4301.03 (D) (Supp. 1993) . . . .10 Okla. Stat. Ann. tit. 37, $163.19 (b) (West 1985).. 12 Pa. Stat. Ann. tit. 47, 4-493(7) (1969) . . . . 10 S.C. Code Ann. $61-13-800 (Law. Co-op. 1990) . . . . 10 S.D. Codified Laws Ann. $39-13-11 (1987) . . . . 10 Va. Code Ann. $4.1 -103.8 (Michie 1993) . . . . 10 27 C.F.R.: Section 7.10 . . . . 4 Section 7.26 . . . . 2 Section 7.26 (a) . . . .6 Section 7.26 (b)-(d) . . . .6, 37 Section 7.29 . . . . 2 ---------------------------------------- Page Break ---------------------------------------- IX Regulations-Continued: Page Section 7.29 (f) . . . .6 Section 7.29 (g) . . . . 6 Sections 7.40-7.42 . . . .6 Section 7.50 . . . . 6 Section 7.54 . . . . 2 Section 7.54 (c) . . . . 6 Ale. Bev. Comm'n of Ind. Bull. 23 (Aug. 4, 1938). . . .10 Ariz. Comp. Admin. R. & Regs. R4-15-220 (6) (1990) . . . . 10 Ark. Ale. Bev. Cont. Div. Regs. 2.17 (1991 ) . . . . 11 Cal. Code Regs. tit. 4, 130 (1990) . . . . 11 Colo. Code Regs. 46-112.3.C (1993) . . . . 11 Corm. Agencies Regs. 30-6-A35 (m) (1976 ) . . . .10 Del. Ale. Bev. Cont. Comm. Regs. R. 13 (b) (1991) . . . . 10 D.C. Mun. Regs. tit. 23, 910 (1988) . . . . 10 Ill. Admin. Code tit. 11, 100,70(b) (9) (1991 )....10 Kan. Admin. Regs. (1985): 14-7-2(c) . . . . 11 92-8-9a . . . .11 Mich. Admin. Code r. 436.1611 (1989) . . . .10 Minn. R. 7515.1110, subp. 2 (1985) . . . . 12 Mont. Admin. R. 42.13-201 (2) (1993) . . . . 12 N.J. Admin. Code tit. 13, 2-27.1 (1990) . . . .10 or. Admin. R. (1992): 845-10-205 (2) . . . . 12 845-10-205 (4) . . . . 12 R.I. Liq. Cont. Admin. Regs. No. 17 (1992) . . . .10 Tex. Admin. Code tit. 16, $45.79 (1991) . . . . 10 Utah Admin. R. 96-l-3(3) (1991) . . . .10 Va. Ale. Bev. Cont. Bd. Regs. 5 (A) (3) (1991 )..10 W. Va. Non-Intox. Beer Comm'n Regs. 176-1-3.1 (1990) . . . . 11 Wis. Admin. Code 7.21 (Dep't of Revenue) (1991) . . . . 11 ---------------------------------------- Page Break ---------------------------------------- X Miscellaneous: 76 Cong. Rec. (1932): p. 8 . . . . 38 p. 16 . . . . 38 p. 26 . . . . 45 p. 27 . . . . 38 p. 791 . . . . 45 76 Cong. Rec. (1933): p. 2776 . . . . 45 p. 4138 . . . . 45 p. 4143 . . . . 45 p. 4144 . . . . 45 p. 4146 . . . . 45 p. 4147 . . . . 45 p. 4148 . . . . 45 p. 4155 . . . . 45 p. 4156 . . . . 45 p. 4168 . . . . 45 p. 4172 . . . . 45 p. 4173 . . . . 45 p. 4177 . . . . 45 p. 4221 . . . . 45 p. 4226 . . . . 38 p. 4565 . . . . 7 79 Cong. Rec. (1935): pp. 11,713-11,714 . . . . 44 p. 11,714. . . . 21 p. 11,723 . . . . 22 pp. 11,729-11,730 . . . . 21 p. 11,788 . . . . 21 p. 12,936 . . . . 21, 38 p. 12,943 . . . . 38 de Ganahl, The Scope of Federal Power Over Alco- holic Beverages Since the Twenty-first Amend- ment, 8 Geo. Wash. L. Rev. 819 (1940 ) . . . . 44, 45 Dep't of Treasury Order No. 120-01 (June 6, 1972) . . . . 12 Exec. Order No. 6474 (Dee. 4, 1933) . . . . 7 37 Fed. Reg. 11,696 (1972) . . . . 12 ---------------------------------------- Page Break ---------------------------------------- XI Miscellaneous-Continued: Page 54 Fed. Reg. (1989): p. 3591 . . . . 37 p. 3594 . . . . 37 58 Fed. Reg. 21,228 (1993) . . . . 15 H.R. 1420, 103d Cong., 1st Sess. (1993) . . . . 30 H.R. Rep. No. 1542, 74th Cong., 1st Sess. (1935) ..7, 9, 21, 27, 38, 46 Hearing Before the FACA With Reference to Pro- posed Regulations Relative to the Labeling of Products of the Brewing Industry (Nov. 1, 1934) . . . . 7, 8, 22 Lydick, State Control of Liquor Advertising Under the United States Constitution, 12 Baylor L. L. Rev. 43 (1960) . . . . 45 Modern Brewery Age (Blue Book) (53d ed. 1993) . . . . l0, 11, 12 Note, Federal Alcohol Administration Act, 24 Gee. L.J. 433 (1936) . . . . 45 Regulations Relating to the Labeling of Domestic Products of the Brewing Industry (Mar. 1, 1935) . . . . 8-9 Rev. Rul. 62-95, 1962-1 C.B. 362 . . . . 6 S. 2595, 99th Cong., 2d Sess. (1986) . . . .30 S. Rep. No. 1215, 74th Cong., 1st Sess. (1935) . . . .7, 9, 21, 38 Spaeth, The Twenty-First Amendment and State Control Over Intoxicating Liquor: Accommodat- ing the Federal Interest, 79 Calif. L. Rev. 161 (1991) . . . . 38, 45 ---------------------------------------- Page Break ---------------------------------------- IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1994 No. 93-1631 LLOYD BENTSEN, SECRETARY OF THE TREASURY, PETITIONER v. COORS BREWING COMPANY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT BRIEF FOR THE PETITIONER OPINIONS BELOW The opinion of the court of appeals (Pet. App. la-9a) is reported at 2 F.3d 355. The prior opinion of the court of appeals (Pet. App. 10a-31a) is reported at 944 F.2d 1543. JURISDICTION The judgment of the court of appeals was entered on August 23, 1993. A petition for rehearing was denied on December 1, 1993. Pet. App. 55a-56a. On February 22, 1994, Justice Ginsburg extended the time for filing a peti- tion for a writ of certiorari to and including March 31, 1994. On March 22, 1994, Justice Ginsburg further ex- tended the time for filing a petition for a writ of certiorari to and including April 15, 1994, and the petition was filed on that date. The petition for a writ of certiorari was granted on June 13, 1994. Joint Appendix ( J.A. ) (1) ---------------------------------------- Page Break ---------------------------------------- 2 363. The jurisdiction of this Court rests upon 28 U.S.C. 1254(1). CONSTITUTIONAL STATUTORY, AND REGULATORY PROVISIONS INVOLVED The First Amendment to the United States Constitu- tion provides in pertinent part: "Congress shall make no law * * * abridging the freedom of speech." The Twenty-first Amendment to the United States Con- stitution provides in pertinent part: Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited. Section 5 of the Federal Alcohol Administration Act (FAAA), 27 U.S.C. 205, is reproduced at Pet. App. 57a-65a. Section 7 of the FAAA, 27 U.S.C. 207, provides in pertinent part: Any person violating any of the provisions of section * * * 205 of this title shall be guilty of a misde- meanor and upon conviction thereof be fined not more than $1,000 for each offense. The relevant portions of 27 C.F.R. 7.26, 7.29, and 7.54 are reproduced at Pet. App. 66a-72a. STATEMENT This case concerns the constitutionality of a portion of 27 U.S.C. 205(e)(2), a provision in the Federal Alcohol administration Act (FAAA or Act), 27 U.S,C. 201 et seq. Section 205(e)(2) in relevant part prohibits state- ments of alcohol content on the labels of malt beverages, unless such statements are required by state law. Congress matted the labeling restriction in Section 205(e)(2) to Curb "strength wars" among brewers of malt beverages ---------------------------------------- Page Break ---------------------------------------- 3 such as the one that arose after Prohibition was repealed. The Tenth Circuit held that the labeling restriction vio- lates the First Amendment. This Court granted certiorari to review that holding. A. The Statutory And Regulatory Background 1. The FAAA, 27 U.S.C. 201 et seq., was enacted "[i]n order effectively to regulate interstate and foreign commerce in distilled spirits, wine, and malt beverages, to enforce the twenty-first amendment, and to protect the revenue and enforce the postal laws with respect to dis- tilled spirits, wine, and malt beverages." 27 U.S.C. 203.1 To carry out those purposes, Section 2(a) of the Act created the Federal Alcohol Administration (FAA) as a division within the Department of the Treasury. FAAA, ch. 814, 49 Stat. 977 ( 1935), repealed by the Liquor Tax Administration Act, ch. 830, 501 (a), 49 Stat. 1964 ( 1936) (making FAA an independent establish- ment of the government). Sections 3 and 4 of the Act required certain participants in the alcoholic beverage in- dustry (other than brewers) to obtain a permit from the Secretary of the Treasury. 49 Stat. 978-981 (current versions at 27 U.S.C. 203, 204). Section 5 of the Act proscribed certain types of "[u]nfair competition" and "unlawful practices. " 49 Stat. 981-985 (current version at 27 U.S.C. 205). Violations of Section 5 were punish- able as misdemeanors under Section 7, 49 Stat. 985-986 (current version at 27 U.S.C. 207), and by suspension or revocation of a permit under Section 4(d) and (e), ____________________(footnotes) 1 See also National Distributing Co. V. United States Treasury Dep't, 626 F.2d 997, 1004 (D.C. Cir. 1980) (discussing history and purpose of FAAA) ; Continental Distilling Corp. V. Shultz, 472 F.2d 1367, 1369-1370 (D.C. Cir. 1972) (same) ; William Jameson & Co. v. Morgenthau, 25 F. Supp. 771, 774 (D.D.C. 1938) (three-judge court) (rejecting constitutional challenge to FAAA), vacated for lack of substantial federal question, 307 U.S. 171 (1939) (per curiam). ---------------------------------------- Page Break ---------------------------------------- 4 49 Stat. 979 (current versions at 27 U.S.C. 204(d) and (e)).2 This case involves a challenge to the portions of the Act codified as Section 205(e) (2) and Section 205(f ) (2) of Title 27. Those provisions prohibit numerical and descriptive statements of alcohol content on the labels of malt-beverage containers and in advertisements for malt beverages. Section 205 (e) (2) requires the con- tainers of all alcoholic beverages to be labeled in conformity with such regulations * * * [of the Secretary] (2) as will provide the consumer with adequate information as to the identity and quality of the products [and] the alcoholic content thereof ___________________(footnotes) 2 Neither the FAAA nor any other federal statute restricts the amount of alcohoI that malt beverages may contain. That matter has been left to the States, consistent with the long "history of state regulation of alcoholic beverages" and Congress's solicitude for the States' broad discretion in this area. See Craig V. Boren, 429 U.S. 190, 205-206 (1976) ; see also California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 107 n.10 (1980). In turn, many States restrict the alcohol content of malt beverages. See J.A. 357-360 (survey of state laws). 3 The term "malt beverage" is defined by statute (27 U.S.C. 211 (a) (7) ) and regulation (27 C.F.R. 7.10) as: A beverage made by the alcoholic fermentation of an infu- sion or decoction, or combination of both, in potable brewing water, or malted barley with hops, or their parts, or their products, and with or without other malted cereals, and with or without the addition of unmalted or prepared cereals, other carbohydrates or products prepared therefrom, and with or without the addition of carbon dioxide, and with or without other wholesome products suitable for human food consumption. Thus, the term "malt beverage" encompasses all types of what is commonly referred to as "beer," and hereafter we use the two terms interchangeably. For purposes of this case, however, it is impor- tant to distinguish the terms "malt beverage" and "malt liquor." While the term "malt beverage" includes "malt liquor," the latter term is not defined by the FAAA or regulations; rather, it is a term that has come to be used in the industry to refer to the type of beer with the highest alcohol content. See Pet. App. 7a n.4; J.A. 208. ---------------------------------------- Page Break ---------------------------------------- 5 (except that statements of, or statements likely to be considered as statements of, alcoholic content of malt beverages are prohibited unless required by State law * * *). 27 U.S.C. 205(e) (2) (emphasis added). Section 205 (f) (2) requires print and broadcast advertisements for all alcoholic beverages to be in conformity with such regulations * * * [of the Sec- retary] (2) as will provide the consumer with ade- quate information as to the identity and quality of the products advertised [and] the alcoholic content thereof (except the [sic] statements of, or statements likely to be considered as statements of, alcoholic content of malt beverages and wines are prohibited). 27 U.S.C. 205(f) (2) (emphasis added). Both Sections 205 (e) (2) and 205 (f) (2) are designed to operate in a manner that is consistent with state law. The labeling restriction in Section 205(e)(2), by its terms, applies unless state law requires disclosure of al- cohol content on malt-beverage labels. The advertising restriction in Section 205(f)(2) applies, by virtue of the penultimate paragraph of Section 205(f), only in States that adopt similar restrictions for beer that is wholly in intrastate commerce: Thus, a State may choose whether ___________________(footnotes) 4 The penultimate paragraph of Section 205 (f) provides in per- tinent part: In the case of malt beverages, the provisions of this subsec- tion and subsection (e) of this section shall apply to the labeling of malt beverages sold or shipped or delivered for shipment or otherwise introduced into or received in any State from any place outside thereof, or the advertising of malt bev- erages intended to be sold or shipped or delivered for ship- ment or otherwise introduced into or received in any State from any place outside thereof, only to the extent that the law of such State imposes similar requirements with respect to the labeling or advertising, as the case may be, of malt beverages not sold or shipped or delivered for shipment or otherwise introduced into or received in such State from any place outside thereof. Although the penultimate paragraph of Section 205(f) refers to Section 205 (e), ATF and its predecessors have long interpreted it ---------------------------------------- Page Break ---------------------------------------- 6 the federal labeling or advertising restriction will apply within its borders. Implementing regulations prohibit the disclosure of al- cohol content on malt-beverage labels, except where dis- closure is required by state law (27 C.F.R. 7.26(a), 7.29 (g) ), and they prohibit the disclosure of alcohol con- tent in print and broadcast beer advertising, to the extent that the State imposes similar advertising restrictions on beer that remains in the State (27 C.F.R. 7.50, 7.54(c)). The labeling restriction covers both numerical designa- tions of alcohol content and descriptive terms suggestive of high alcohol content, such as " `strong,' `full strength,' `extra strength,' `high test, ` `high proof,' [and] `full alco- hol strength.' " 27 C.F.R. 7.54(c); 27 C.F.R. 7.29(f). The labeling restriction does not, however, preclude beer labels or advertising that identifies a beer as "low" or "reduced" alcohol, "non-alcoholic," or "alcohol-free," in accordance with the Secretary's definition of those terms. 27 C.F.R. 7.26(b)-(d); see also 27 C.F.R. 7.29(f), 7.54 (c). The labeling restriction is enforced by regula- tions requiring the bottlers of malt beverages to obtain certificates of label approval from the Secretary (or to obtain exemptions from that requirement ). 27 C.F.R. 7.40-7.42; see also 27 U.S.C. 205(e). 2. In enacting the FAAA, Congress prohibited state- ments of alcohol content in malt-beverage labeling and advertising in order to curb "strength wars" among brew- ers of the sort that arose in the wake of the repeal of Prohibition by the Twenty-first Amendment. As discussed in the legislative history of the FAAA, the adoption of the Twenty-first Amendment "took place ___________________(footnotes) not to require a State to enact its own malt-beverage labeling re- striction in order for the federal malt-beverage labeling restriction to apply in that State. Instead, under the plain terms of section 205 (e) (2), the federal labeling restriction applies unless a State affirmatively requires disclosure of alcohol content on malt-beverage labels. See, e.g., Rev. Rul. 62-95, 1962-1 C.B, 362. Coors has noted that interpretation without challenging it. See 89-1203 Resp. C.A. Br. 16 n.16. ---------------------------------------- Page Break ---------------------------------------- 7 with unexpected speed." H.R. Rep. No. 1542, 74th Cong., 1st Sess. 3 ( 1935). The Amendment was pro- posed to the legislatures of the States by the Seventy- second Congress on February 20, 1933, and was ratified by the requisite number of States less than ten months later, on December 5, 1933. See ibid.; 76 Cong. Rec. 4565 ( 1933). Because Congress was not in session at that time, the President signed an executive order to fill the perceived regulatory vacuum by approving continued regulation of the alcoholic beverage industry under the voluntary code system that had been developed pursuant to the National Industrial Recovery Act (NIRA). Exec. Order No. 6474 (Dec. 4, 1933); see H.R. Rep. No. 1542, supra, at 3-4. According to the committee reports on the bill that became the FAAA, the Act "[i]n gen- eral * * * incorporates the greater part of the system * * * enforced by the Government under the codes. " H.R. Rep. No. 1542, supra, at 4; S. Rep. No. 1215, 74th Cong., 1st Sess. 3 (1935). The Tenth Circuit accord- ingly recognized in its first decision in this case that the history of regulations adopted under the code system is relevant to interpretation of the Act. Pet. App. 17a n.4. The regulations initially proposed by the Federal Al- cohol Control Administration ( FACA ) pursuant to the executive order did not prohibit numerical statements of alcohol content in beer labeling or advertising. Hearing Before the FA CA With Reference to Proposed Regula- tion. Relative to the Labeling of Products of the Brewing Industry (Nov. 1, 1934) (FACA Hearing), Clerk's Rec- ord (CR ) 15, at 3-4. Instead, the proposed regulations prohibited only descriptive statements such as " `full strength', `extra strength', `high test', `high proof', [and] `prewar proof'." ld. at 3. At the hearing on the proposed regulations, however, witnesses unanimously supported a broader prohibition that would bar even seemingly ob- jective numerical designations of alcohol content. For example, the first witness at the hearing, George McCabe, counsel to the Brewers Code Authority, stated (id. at 7): ---------------------------------------- Page Break ---------------------------------------- 8 We would like a regulation of the F. A.C.A. which would outlaw any declaration of alcoholic content on labels for fermented malt liquors except in States where such a requirement is made by the State law. * * * [T]he alcoholic declaration has been produc- tive of more deception than any one part of the label, Some brewers went haywire * * * and were trying to sell their beer on an alcohol basis, and they resorted, as you all know, to the use of all sorts of numbers and figures, numerals, to convey the impression that the beer contained an excessive amount of alcohol, which it did not contain. Mr. McCabe then read a letter from a major brewer, which he described as "fairly expressive of the general sentiment of the industry," recommending that "all refer- ence to alcoholic content * * * be eliminated from label- ing [and] advertising," in light of the "trouble with this sort of thing during the past 18 months." Id. at 8. Other witnesses explained that, although "the legitimate brewer does not desire to sell his beer on the basis of alcohol," but rather "as a food product" (id. at 25), some brewers "seem[ed] to be of the opinion that to sell beer they should sell the public alcohol" (id. at 29). The latter brewers' practice of disclosing alcohol content led "legiti- mate" brewers to conclude that "in order to meet com- petition it was necessary to increase the alcoholic content of the[ir] beer." Id. at 59. The witnesses predicted that a prohibition on statements of alcohol content would "get * * * beer back to a low alcoholic content." Id. at 73; see also id. at 33 ("if you just write the alcoholic content off the label, you are going to have a lower alcoholic con- tent beer than you are if you require the alcoholic con- tent to be stated on the label"). The resulting regulation provided in relevant part that "[t]he alcoholic content and/or the percentage and quantity of the original ex- tract shall not be stated unless required by State or Fed- eral laws or regulations." Regulations Relating to the ---------------------------------------- Page Break ---------------------------------------- 9 Labeling of Domestic Products of the Brewing Industry 9(a), at 4 (Mar. 1, 1935) (attached as appendix to FA CA Hearing ).5 The House committee report on the bill that became the FAAA expressed the judgment that "[m]alt beverages should not be sold on the basis of alcohol content." H.R. Rep. No. 1542, supra, at 12. It explained that "attempts to sell beer and other malt beverages on the basis of alco- holic content are attempts to take advantage of the ignor- ance of the consumer and of the psychology created by prohibition experiences." Ibid. The report found that "[legitimate members of the industry have suffered seri- ously from unfair competition resulting from labeling and advertising" that stated alcoholic content. Ibid. The report also found that "irrespective of th[e] falsity" of such state- ments, "their abuse has grown to such an extent since repeal that the prohibition of all such statements is in the interest of the consumer and the promotion of fair competition ." Id. at 12-13. More broadly, the report concluded, based on "[experience prior to prohibition," that the States "could not alone" protect their citizens from "unscrupulous advertising" and "deceptive labeling practices," due to "the diversity of their laws and the fact that practically all alcoholic beverage producers and large- scale distributors did an interstate business." Id. at 2-3 ." 3. Labeling restrictions on malt beverages are cur- rently in effect in all 50 States by virtue of either posi- tive state law or acquiescence in the federal labeling re- striction in Section 205(e)(2). ___________________(footnotes) Regulation of the alcoholic-beverage industry continued under the code system until this Court struck down the NIRA in .A.L.A. Schechter Poultry Corp. V. United States, 295 U.S. 495 (1935). See National Distributing Co., 626 F.2d at 1005; H.R. Rep. No. 1542, supra, at 3. The Senate report similarly found that abusive "labeling or advertising was one of the "serious social and political evils" that "were in large measure responsible for bringing on prohibi- tion" and that "cannot be reached by the States." S. Rep. No. 215, supra, at 6-7. ---------------------------------------- Page Break ---------------------------------------- 10 Twenty-one States and the District of Columbia pro- hibit statements of alcohol content on the labels of some or all types of malt beverages.7 Several States in this ___________________(footnotes) 7 Ala. Code 28-3A-6(c) (1986) (requiring brewers to file fed- eral certificates of label approval with the State) ; Ariz. Comp. Admin. R. & Regs. R4-15-220 (6) (1990) (requiring compliance with federal labeling requirements); Corm. Agencies Regs. $30-6- A35 (m) (1976) (expressly incorporating federal labeling require- ments as state law) ; Del. Ale. Bev. Cont. Comm. Regs. R. 13 (b) (1991) (requiring compliance with federal labeling requirements) ; D.C. Mun. Regs. tit. 23, 910 (1988) (incorporating federal label- ing provisions in part) ; Modern Brewery Age (Blue Book) 267 (53d ed. 1993) ('digest of alcohol labeling requirements for D. C.) ; Ill. Admin. Code tit. 11, 100.70(b) (9) (1991) (no beer containers "shall have affixed thereto any label or statement showing the alco- holic content thereof") ; Ale. Bev. Comm'n of Ind. Bull. 23 (Aug. 4, 1938) (malt-beverage labels may not indicate alcohol content by numerals or descriptive terms) ; Ky. Rev. Stat. Ann. 244.520 (Bobbs-Merrill 1981) (malt-beverage labels may not "refer[] in any manner to the alcoholic strength") ; Me. Rev. Stat. Ann. tit. 28-A, 711(1) (A) (West 1988) (malt-beverage label may not "refer [ ] in any manner to the alcohol content"); Mich. Admin. Code r. 436.1611 (1989) (requiring compliance with federal label- ing requirements) ; N.J. Admin. Code tit. 13, 2-27.1 (1990) (requiring compliance with federal labeling requirements); N.Y. Alto. Bev. Cont. Law App. 84.6 (a) (McKinney 1987) (prohibiting disclosure of alcohol content on malt-beverage labels) ; Ohio Rev. Code Ann. 4301.03(D) (SUPP. 1993) ; Pa. Stat. Ann. tit. 47, 4-493(7) (1969) (malt-beverage labels may not "in any manner refer [] to the alcoholic contents") ; R.I. Liq. Cont. Admin. Regs. No. 17 (1992) (federal labeling requirements "will be enforced" by State) ; S.C. Code Ann. 61-13-800 (Law. Co-op. 1990) (requiring compliance with federal labeling requirements) ; S.D. Codified Laws Ann. $39-13-11 (1987) (compliance with federal labeling requirements deemed compliance with state law) ; Modern Brewery Age, supra, at 271 (indicating that South Dakota requires malt- beverage labels to state "Not over 3.2$% alcohol by weight," appar- ently precluding other statements of alcohol content) ; Tex. Admin. Code tit. 16, 345.79 (1991) (" [the alcoholic content * * * shall not be stated" on malt-beverage labels) ; Utah Admin. R. 96-1-3 (3) (1991) (requiring compliance with federal labeling requirements) ; Va. Ale. Bev. Cont. Bd. Regs. 5(A) (3) (1991) (requiring com- pliance with federal labeling requirements) ; cf. Va. Code Ann. $4.1 -103.8 (Michie 1993) (Virginia Board may by regulation ---------------------------------------- Page Break ---------------------------------------- 11 category expressly incorporate Section 205 (e) (2) of the FAAA or its implementing regulations.8 In addition, 20 States have effectively adopted Section 205 (e) (2 )`s prohibition on alcohol content labeling by acquiescence i.e., by not invoking their authority under Section 205 (e) (2) to require such statements on labels. See Re. Rul. 62-95, 1962-1 C.B. 362. Finally, 10 States require an alcohol-content statement on labels of malt-beverage containers, but only with re- spect to malt beverages above or below a certain alcohol percentage.10 ___________________(footnotes) establish labeling requirements) ; W. Va. Non-Intox. Beer Comm'n Regs. 176-1-3.1 (1990) ("[t]here shall not be any statement as to alcoholic content on the bottle and can label" of malt beverages) ; Wis. Admin. Code 7.21 (Dep't of Revenue) (1991) (requiring compliance with federal labeling requirements). 8 See statutes and regulations cited in note 7, supra, for Ala- bama, Arizona, Connecticut, Delaware, Michigan, New Jersey, South Carolina, Utah, Virginia, and Wisconsin. 9 See Modern Brewery Age, supra, at 266-272, which indicates that the federal prohibition of malt-beverage alcohol content state- ments on labels is in effect, by virtue of the State's not requiring such statements, in 19 States: Alaska , Florida, Georgia, Hawaii, Iowa , Kentucky", Louisiana, Maryland, Massachusetts (with re- spect to malt beverages containing more than 3.2%. alcohol by weight), Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Tennessee, Vermont, and Wyoming. Our research indicates that there are two additional States, Idaho and Washington, that have acquiesced in the fed- eral prohibition, but that Kentucky has enacted its own statute prohibiting statements of alcohol content on malt-beverage con- tainer, rather than simply acquiescing in the federal prohibi- tion. See Ky. Rev. Stat. Ann. $244.520 (Bobbs-Merrill 1981), cited in note 7, supra. 10 Ark. Alc. Bev. Cont. Div. Regs. 2.17 (1991) (requiring malt beverages containing mm-e than 5% alcohol by weight to be labeled as such) ; Cal. Code Regs. tit. 4, 130 (1990) (prohibiting alcohol-content statements on labels of malt beverages containing more than 4 , alcohol by weight) ; Colo. Code Regs. 46-112.3.C (1993) (malt-beverage labels must indicate that alcohol content is not. more than 3.2 by weight) ; Kan. Admin. Regs. 14-7- 2(c), 92-8-9a (1985) (malt-beverage labels must state "does ---------------------------------------- Page Break ---------------------------------------- 12 B. The Proceedings In This Case 1. In April 1987, the Adolph Coors Company ap- plied to the Bureau of Alcohol, Tobacco and Firearms (ATF) within the Treasury Department for approval of proposed labels and advertisements that included state- ments of the alcohol content of Coors' beer. J.A. 60- 65.11. ATF denied the application based on Sections 205(e) (2) and 205(f) (2). Pet. App. 73a-74a. 2. a. In July 1987, Coors filed this action against the Secretary and the Director of ATF in the United States District Court for the District of Colorado. Coors sought a declaratory judgment that the labeling and advertising restrictions in Sections 205(e) (2) and 205(f)(2) and their implementing regulations violate the First Amend- ment; Coors also sought an injunction barring enforc ment of those provisions. J.A. 54-59. On cross-motions for summary judgment, the district court held that both Section 205 (e) (2) and Section 205 (f) (2) violate the First Amendment, and it enjoined their enforcement. Pet. App. 43a-54a. b. The Tenth Circuit reversed and remanded. Pet. App. 10a-31a. It applied the four-part test articulated in ___________________(footnotes) not contain more than 3.2% alcohol by weight") ; Mass. Ann. Laws ch. 138, 115 ( Law. Co-op. 1981) (malt beverages contain- ing 3.2% alcohol by weight or less "shall be so labelled") ; Minn,. R. $7515.1110, subp. 2 (1985) (malt-beverage labels must state "contains not more than 3.2 percent of alcohol by weight") ; Mo. Rev. Stat. 312.310 (Supp. 1993) (malt-beverage labels must state "alcoholic content not in excess of 3.2% by weight or 4% by volume]") ; Mont. Admin. R. $42-13-201 (2) (1993) (" [a]l- cohol content by weight must be noted on the labels of all malt beverages" containing more than 7% alcohol by weight) ; Okla. Stat. Ann. tit. 37, 163.19 (b) (West 1985) (malt-beverage label may not indicate that alcohol content exceeds 3.2% by weight) ; Or. Admin. R. 845-10-205(2), (4) (1992 j ; Modern Brewery Age, supra, at 270-271 (Oregon requires disclosure of alcohol con- tent on labels of malt beverages containing more than 4% al- cohol by weight). 11 ATF is currently responsible for administering the FAAA. See Dep't of Treasury Order No. 120-01 (June 6, 1972) (formerly No. 221), reproduced at 37 Fed. Reg. 11,696 (1972). ---------------------------------------- Page Break ---------------------------------------- 13 Central Hudson Gas & Elec. Corp. V. Public Serv. Comm'n, 447 U.S. 557 (1980), for analyzing restric- tions on commercial speech. Applying the first part of the Central Hudson test, the Tenth Circuit determined that Sections 205 (e) (2) and 205 (f) (2) regulate non- misleading commercial speech regarding a lawful activ- ity. Pet. App. 15a. Applying the second part of the test, the Tenth Cir- cuit held that the labeling and advertising restrictions are intended to further the federal government's "substan- tial" interest in "maintain[ing] moderate levels of alcohol in beer in order to protect the consumer." Pet. App. 19a. In that connection, the Tenth Circuit criticized the dis- trict court for "focus[ing] primarily on the validity of the asserted ends given the passage of time and changed cir- cumstances." Ibid. The Tenth Circuit found it "irrele- vant that the circumstances giving rise to a particular piece of legislation have changed so long as the legisla- tion continues to serve some valid and substantial gov- ernment interest." ld. at 20a. The Tenth Circuit con- cluded that the government had advanced "a legitimate and substantial interest" in this case by identifying "a continuing danger of strength wars similar to those that existed in 1935." Ibid. The Tenth Circuit held, however, that there were dis- puted issues of fact with regard to the third and fourth parts of the Central Hudson test. Pet. App. 21a-3 la. It determined that "the record here does not unambigu- ously reflect a correct legislative judgment that the enacted means directly advance the intended ends." ld. at 21a. In the court's view, "the link between advertising and strength wars is not self-evident," ibid., and there were "genuine issues of material fact underlying the ques- tion of whether * * * the complete prohibition of [state- ments of alcohol content] results in a `reasonable fit' be- tween the legislature's goal and the means chosen to reach it," id. at 31a. The court of appeals accordingly reversed the order granting summary judgment in favor ---------------------------------------- Page Break ---------------------------------------- 14 of Coors and remanded the case to the district court for further proceedings. Ibid. 3. a. On remand, the government introduced exten- sive evidence concerning current conditions in the malt- beverage industry. Much of that evidence related to the malt-liquor segment of the industry. See, e.g., J.A. 207- 214, 217-222; see also J.A. 92-93, 108-109. The govern- ment's evidence demonstrated that a primary reason why people choose malt liquor instead of other types of beer is because of its high alcohol content (J.A. 127, 344, 348, 350, 352-353, 356 ), and that malt-liquor producers mar- ket their product by emphasizing its high alcohol content (J.A. 127-128, 341, 343, 345-347, 350-351, 355-356; see also Defendants' Trial Exh. (DX ) CS (at 11.)). The evidence included numerous recent instances of efforts to market malt beverages on the basis of high alcohol content, in violation of the FAAA's labeling and ad- vertising restrictions. See, e.g., J.A. 309-340; see also DXS R, S, and LJ through X. That evidence was not limited to the malt-liquor segment of the market. It showed, for example, that Coors had distributed wallet cards listing the alcohol content of its beers and those of its competitors. J.A. 206-207, 335-336, 342; see also J.A. 209-210 (Olympia beer), 216-217, 337-338 (Lowenbrau beer). The district court upheld the advertising restriction in Section 205 (f) (2), but it struck down the labeling re- striction in Section 205(e) (2). J.A. 361-362; Pet. App. 32a-42a. The court found that there is a continuing threat of strength wars that justifies a prohibition on statements of alcohol content in advertising, id. at 34a, but it regarded labeling as different because it believed statements of alcohol content on labels would be used by consumers primarily to limit their intake of alcohol, id. at 37a. b. Coors did not challenge the district court's ruling upholding the advertising restriction in Section 205 (f) (2). The government, by contrast, did appeal from ---------------------------------------- Page Break ---------------------------------------- 15 the district court's ruling striking down the labeling re- striction in Section 205(e)(2).12 c. A different panel of the Tenth Circuit affirmed. Pet. App. 1a-9a. The panel began by rejecting the gov- ernment's contention that it was required, under the third part of the Central Hudson test, to show only that Con- gress "reasonably believed" that the labeling restriction would further the goal of preventing strength wars. The court expressed the view that this Court, in Edenfield v. Fane, 113 S. Ct. 1792 ( 1993), had adopted a "much stricter" standard for applying the third part of the Cen- tral Hudson test. Pet. App. 5a. The Tenth Circuit then held that, under the stricter test, the government had failed to show that the labeling restriction furthers the goal of preventing strength wars "in a direct and material way." Pet. App. 7a.13 The court recognized that the legislative history supported Congress's judgment that the labeling restriction would "result [] over the long term in beers with a lower alcohol content ." /d. at 6a, quoting id. at 17a. But focusing on what it perceived to be "changes in the malt beverage industry," the court determined that the government's evi- dence of a continuing threat of strength wars was insuffi- cient in three ways. Id. at 6a-9a. First, the court dis- counted the evidence on the ground that it primarily con- cerned the malt-liquor segment of the market. Id. at 7a. Second, the court believed that there was an "absence of any record evidence indicating that there are strength wars in states or other countries where alcohol content labeling is already required." Id. at 8a. Finally, the court was unable to discern any evidence that "Coors ___________________(footnotes) 12 After the district court's ruling, ATF published an interim rule suspending enforcement of the regulatory provisions that implement the statutory labeling restriction in Section 205 (e) (2). 58 Fed. Reg. 21,228 (1993). 13 The Tenth Circuit accordingly found it unnecessary to decide whether the labeling restriction satisfies the "reasonable fit" requirement of the fourth part of the Central Hudson test. Pet. App. 9a n.6. ---------------------------------------- Page Break ---------------------------------------- 16 would engage in a strength war if it were able to disclose the alcohol content of its malt beverages." ld. at 8a-9a.14 SUMMARY OF ARGUMENT I. The labeling restriction in Section 205(e)(2) satis- fies the Central Hudson test for determining whether a regulation of commercial speech comports with the First Amendment. First, Section 205 (e) (2) advances the sub- stantial federal interest of preventing strength wars among malt-beverage brewers, in a manner that facilitates state regulation of alcoholic beverages. Moreover, the con- tinuing risk of strength wars is real, and Section 205 (e) (2) combats that risk in a direct and material way. Finally, Section 205 (e) (2) is narrowly tailored to achieve that purpose. The Tenth Circuit misapplied the Central Hudson test in declaring Section 205(e) (2) unconstitutional. In ap- plying the second part of the test, the Tenth Circuit failed to identify fully the federal interest that Section 205 (e) (2) was designed to serve. Specifically, the court ignored clear evidence that Congress intended Section 205 (e) (2) to operate in tandem with, and facilitate the enforcement of, state laws regulating alcoholic beverages. In applying the third part of the Central Hudson test, the Tenth Circuit made several errors. The court failed to recognize the self-evident proposition that, if the ad- vertising of a product characteristic is prohibited, con- sumers are unlikely to select a product on the basis of that characteristic. Furthermore, the court gave no weight to historical evidence that a strength war existed at the time Section 205(e) (2) was enacted, focusing in- stead on perceived "changes in the malt beverage indus- try." Pet. App. 6a. Finally, the court misunderstood the significance of the evidence in the record concerning recent violations of the federal advertising and labeling restrictions in the malt-beverage industry. ___________________(footnotes) 14 The Tenth Circuit subsequently rejected the government's petition for rehearing and suggestion of rehearing en banc. Pet. App. 55a-56a. ---------------------------------------- Page Break ---------------------------------------- 17 Although the Tenth Circuit did not address whether Section 205 (e) (2) satisfies the fourth part of the Cen- tral Hudson test, which inquires whether there is a "rea- sonable fit" between the legislative means and the legis- lative ends, the court expressed the belief that a reason- able fit is lacking because the labeling restriction in Sec- tion 205 (e) (2) covers all types of malt beverages, whereas the threat of a strength war, in the court's view, exists only in the malt-liquor segment of the malt- beverage industry. That view cannot be reconciled with the district court's unchallenged holding that the evidence in the record supported the advertising restriction in Sec- tion 205 (f) (2), which applies to all types of malt bev- erages, Nor can it be squared with evidence in the record that brewers of other types of beer, including Coors, have sought to compete on the basis of high alcohol content. More fundamentally, Congress could reasonably believe that a labeling restriction applicable to all types of malt beverages would be more effective in preventing strength wars than one applicable only to malt liquor. 11. Any doubt as to whether the labeling restriction in Section 205(e) (2) comports with the First Amend- ment should be resolved in favor of the statute's validity. The labeling restriction is entitled to an added presump- tion of validity, over and above the presumption of con- stitutionality normally accorded an Act of Congress, under two lines of cases. One line of cases recognizes that legislatures have broader latitude to regulate speech that promotes a socially harmful activity, such as al- cohol consumption, which could be banned altogether, than they have to regulate other types of speech. See, e.g., Posadas de Puerto Rico Associates v. Tourism Co., 478 U.S. 328 ( 1986). The other line of cases holds that state laws regulating alcohol are entitled to an added presumption of validity when challenged on free speech grounds. See, e.g., California v. LaRue, 409 U.S. 109 (1972). The labeling restriction in Section 205 (e) (2) is entitled to the same presumption, because it was en- acted to enforce the Twenty-first Amendment by facili- tating the enforcement of state laws regulating alcohol. ---------------------------------------- Page Break ---------------------------------------- 18 When accorded that presumption, the labeling restriction plainly comports with the First Amendment. ARGUMENT THE STATUTORY PROHIBITION OF ALCOHOL- CONTENT STATEMENTS ON MALT-BEVERAGE LABELS IN 27 U.S.C. 205(e) (2) COMPORTS WITH THE FIRST AMENDMENT The Tenth Circuit held that the portion of 27 U.S.C. 205 (e) (2) that prohibits statements of alcohol content on the labels of malt-beverage containers violates the First Amendment. In so holding, the Tenth Circuit relied on this Court's Central Hudson test for reviewing regula- tions of commercial speech. As discussed in Point I below, the Tenth Circuit misapplied the Central Hudson test, and for that reason alone the judgment below should be reversed. Moreover, as discussed in Point II below, Section 205 (e) (2) should be reviewed under a less stringent standard than is applied under the Central Hudson test. A less stringent standard of review is re- quired under this Court's decisions concerning the regula- , tion of speech that promotes socially harmful activities, such as alcohol consumption, and this Court's decisions concerning free speech challenges to state alcohol regula- tions. Those two lines of decisions require courts to ac- cord greater deference than is accorded under th and fourth parts of the Central Hudson test to legislative judgments regarding the existence of a harm for which a legislative remedy is required, the extent to which the ; challenged regulation alleviates that harm, and the fit between the legislative means chosen and the legislative objective to be achieved. I. THE LABELING RESTRICTION SATISFIES THE CENTRAL HUDSON TEST FOR MEASURING THE VALIDITY OF GOVERNMENT REGULATION OF COMMERCIAL SPEECH This Court in Central Hudson articulated a four-part test for reviewing `First Amendment challenges to govern- ment regulation of commercial speech (447 U.S. at 566): ---------------------------------------- Page Break ---------------------------------------- 19 At the outset, we must determine whether the expres- sion is protected by the First Amendment. For com- mercial speech to come within that provision, it at least must concern lawful activity and not be mis- leading. Next, we ask whether the asserted govern- mental interest is substantial. If both inquiries yield positive answers, we must determine whether the reg- ulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest. See Ibanez v. Florida Department of Business & Profes- sional Regulation, 114 S. Ct. 2084, 2088-2089 ( 1994); United States v. Edge Broadcasting Co., 113 S. Ct. 2696, 2703 ( 1993); Edenfield v. Fane, 113 S. Ct. 1792, 1798 ( 1993); City of Cincinnati V. Discovery Network, Inc., 113 S. Ct. 1505, 1510 (1993); Board of Trustees v. Fox, 492 U.S. 469, 475 (1989). The labeling restric- tion in Section 205(e)(2) satisfies the Central Hudson test. The Tenth Circuit's contrary holding rests on several legal errors.15 ___________________(footnotes) 15 To the extent that the Tenth Circuit's holding rests on findings of fact, those findings are not entitled to deference in this Court. In a First Amendment challenge, an appellate court must "independently decide" whether the record supports the judg- ment below. See Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 463 (1978) ; see also, e.g., Rankin V. McPherson, 483 U.S. 378, 385 n.8 (1987) ; Bose Corp. V. Consumers Union of United States, Inc., 466 U.S. 485, 499-511 (1984) ; Dunagin V. City of Oxford, 718 F.2d 738, 748 n.8 (5th Cir. 1983) (en bane) (plurality opinion of Reavley, J.), cert. denied, 467 U.S. 1259 (1984) ; Oklahoma Telecasters Ass'n V. Crisp, 699 F.2d 490, 497 (lOth Cir. 1983), rev'd on other grounds sub nom. Capital Cities Cable, Inc. V. Crisp, 467 U.S. 691 (1984). Furthermore, to the extent that the Tenth Circuit disagreed with the congressional findings underlying Section 205 (e) (2), Congress's findings, rather than the court's, are entitled to deference. See Turner Broadcasting System, Inc. v. FCC, No. 93-44 (June 27, 1994), slip op. 43; Lockhart V. McCree, 476 U.S. 162, 168 n.3 (1986) ; Walters V. National Ass'n of Radia- tion Survivors, 473 U.S. 305, 331 n.12 (1985). ---------------------------------------- Page Break ---------------------------------------- 20 A. The Labeling Restriction Advances A Substantial Governmental Interest The first step in the Central Hudson inquiry relevant here 16 requires a court to "identify with care" the inter- ests asserted by the government. Edenfield, 113 S. Ct. at 1798. The Tenth Circuit failed to use the requisite care in identifying the governmental interest underlying the labeling restriction in Section 205(e) (2). 1. The Tenth Circuit recognized that Congress's cen- tral goal in enacting the labeling restriction in Section 205 (e) (2) was to curb strength wars among malt- beverage brewers. Pet. App. 4a. The court ignored, how- ever, the further purpose of Congress to pursue that goal in a manner that would respect and facilitate, and not supplant, state regulation of alcohol pursuant to the Twenty-first Amendment. It is clear from the text of the FAAA that Congress intended to facilitate state regulation of alcohol. One of the express purposes of the FAAA is "to enforce the twenty-first amendment," 27 U.S.C. 203; that Amend- ___________________(footnotes) 16 As the first part of the Central Hudson test reflects, commer- cial speech must be truthful to qualify for even the "lesser pro- tection" afforded to commercial speech by the First Amendment. Edge Broadcasting, 113 S. Ct. at 2703. Thus, "false, misleading, or deceptive commercial speech may be banned" without implicat- ing the First Amendment. See, e.g., Ibanez, 114 S. Ct. at 2088; In re R.M.J., 455 U.S. 191, 202-203 (1982). The brief of amicus curiae Center for Science in the Public Interest (at 4-6) argues that the statements of alcohol content for which Coors sought certificates of label approval are inherently misleading, because they can mislead consumers into incorrectly believing that a serving of beer has less alcohol than a serving of other types of alcoholic beverages. That argument was not advanced by the government in the courts below. See 89-1203 Opening Br. for Defendants-Appellants 15; cf. 89-1203 C.A. Br. of Appellants, the Speaker and Bipartisan Leadership Group of the U.S. House of Representatives 26 n. 16. ---------------------------------------- Page Break ---------------------------------------- 21 ment, in turn, "directly qualities the federal commerce power," thereby enhancing state power over alcohol. 324 Liquor Corp. v. Duffy, 479 U.S. 335, 346 (1987). Other provisions of the FAAA reflect a similar intent to enhance state authority over alcohol. Section 203, for example, provides that the requirement to obtain a federal permit to produce and distribute most types of alcoholic bever- ages (see p. 3, supra) "shall not apply to any agency of a State or political subdivision thereof." 27 U.S.C. 203. In addition, Section 204 requires the Secretary to deny a permit to any person whose "operations i[are] pro- posed to be conducted * * * in violation of the law of the State in which they are to be conducted." 27 U.S.C. 204 (a) (2) (C). Furthermore, Section 204 conditions all permits "upon compliance * * * with the twenty-first amendment and laws relating to the enforcement thereof." 27 U.S.C. 204(d). Finally, and most relevant here, both the labeling provisions in Section 205(e)(2) and the advertising provisions in Section 205(f) (2) are expressly designed to operate in tandem with state laws on the same subject. See pp. 5-6, supra.17 Congress's purpose in the FAAA to facilitate the en- forcement of state laws was the basis for one of the earliest decisions upholding the statute against a constitu- tional challenge. In Arrow Distilleries, Inc. v. Alexander, 109 F.2d 397, cert. denied, 310 U.S. 646 ( 1940), the Seventh Circuit upheld an order of the FAA suspending a liquor producer's permit because of its failure to obtain ___________________(footnotes) 17 The legislative history of the FAAA confirms that Congress intended to enhance the ability of the States to enforce their own laws regulating alcohol. See 79 Cong. Rec. 11,714 (1935) (bill that became FAAA reflected Congress's belief that it "must do something to supplement legislation by the States to carry out their own policies" ) (remarks of Rep. Cullen) ; S. Rep. No. 1215, 74th Cong., 1st Sess. 3 (1935) ; H.R. Rep. No. 1542, 74th Cong., 1st Sess. 4 (1935) ; see also 79 Cong. Rec. 11,729-11,730 (remarks of Rep. Tarver), 11,788 (remarks of Rep. McCormack), 12,936 (1935 ) (remarks of Sen. George). ---------------------------------------- Page Break ---------------------------------------- 22 certificates of label approval and its misbranding of alco- holic beverages. The court rejected the contention that the Twenty-first Amendment deprived Congress of the au- thority to enact the FAAA. The court found nothing in the Amendment "to deny to Congress the power to legis- late in aid of the state prohibitions [governing alcohol]." ld. at 400. On the contrary, the court determined that "[t]he twenty-first amendment authorizes Congress to take affirmative action to make effective the prohibition of the amendment against the importation or transportation of alcoholic beverages into states in violation of the laws thereof." Id. at 401. The court concluded that the FAAA is a valid exercise of that authority, because it "make[s] effective the protection which the twenty-first amendment gives to the states." Ibid. See also Hanf v. United States, 235 F.2d 710, 717 (8th Cir. ) (Twenty-first Amendment imposed "an additional burden of enforcement" on the federal government, which FAAA was designed to shoul- der), cert. denied, 352 U.S. 880 (1956); Old Monastery Co. v. United States, 147 F.2d 905, 907 (4th Cir.), cert. denied, 326 U.S. 734 ( 1945);" Hayes' v. United States, 112 F.2d 417,422 ( 10th Cir. 1940). The conclusion in Arrow Distilleries fully applies to the labeling restriction in Section 205(e)(2). As wit- nesses at the FACA Hearing in 1934 explained, state alcohol regulations at that time (as now) often included regulations that restrict the alcohol content of malt bever- ages. FACA Hearing 10-11, 38-39, 60, 62, 75-76; see also 79 Cong. Rec. 11,723 ( 1935) (remarks of Rep. 85Celler) (describing state laws limiting alcohol content of malt beverages). Those restrictions differed from State to State (and continue to do so, see J.A. 357-360). If a State imposes a restriction on alcohol content, the restric- tion reflects a judgment by that State regarding the maxi- mum alcohol content appropriate for the health and wel- fare of its citizens. The labeling restriction in Section 205 (e) (2), along with the advertising restriction in Sec- tion 205 (f) (2), gives effect to such a judgment by an ---------------------------------------- Page Break ---------------------------------------- 23 individual State by making it less likely that a citizen from that State will travel to another State to purchase beer with a higher alcohol content. Cf. South Dakota V. Dole, 483 U.S. 203,205-208 ( 1987). 2. In Edge Broadcasting, this Court reviewed a First Amendment challenge to a federal statute that, like the FAAA, was designed to complement state laws. Edge Broadcasting makes it clear that the Tenth Circuit mis- applied the second part of the Central Hudson test and that that error undermined the Tenth Circuit's entire analysis. At issue in Edge Broadcasting were the federal stat- utes (18 U.S.C. 1304 and 1307) that prohibit lottery advertising in States that do not operate lotteries, but permit lottery advertising in States that do operate lot- teries. 113 S. Ct. at 2700-2701. The Fourth Circuit held that the statutes violated the First Amendment because, as applied to Edge Broadcasting, they "d[id] not directly advance the governmental interest asserted." Edge Broad- casting Co. v. United States, 5 F.3d 59, 62 ( 1992) (per curiam ), rev'd, United States v. Edge Broadcasting Co., supra. The Fourth Circuit based its holding on the fact that Edge Broadcasting's listeners in North Carolina, a State that does not operate a lottery, were "inundated" with lottery advertisements from neighboring Virginia, which does operate a lottery. ibid. The Fourth Circuit de- cided that, with respect to that audience, the federal re- striction provided only "ineffective or remote" support for "North Carolina's desire to discourage gambling." Ibid. This Court reversed the Fourth Circuit's decision. Edge Broadcasting, 113 S. Ct. at 2704. The Court explained that the Fourth Circuit erred when it relied on the fact that the federal prohibition of lottery advertising operates only in nonlottery States to conclude that the prohibition provided only "remote" support for the goal of protecting the interests of nonlottery States, such as North Carolina. That fact, instead, reflected Congress's intent to further ---------------------------------------- Page Break ---------------------------------------- 24 the additional goal of protecting the interests of States, such as Virginia, that operate lotteries (ibid.): In response to the appearance of state-sponsored lotteries, Congress might have continued to ban all radio or television lottery advertisements, even by stations in States that have legalized lotteries. This it did not do. * * * Instead of favoring either the lottery or the nonlottery State, Congress opted to support the antigambling policy of a State like North Carolina * * *. At the same time it sought not to unduly interfere with the policy of a lottery sponsor- ing State such as Virginia. * * * This congressional policy of balancing the interests of lottery and non- lottery States is the substantial governmental interest that satisfies Central Hudson, the interest which the courts below did not fully appreciate. Like the Fourth Circuit in Edge Broadcasting, the Tenth Circuit in this case did not fully appreciate Con- gress's goal of accommodating a matrix of state laws. Appreciation of that goal is essential to a proper analysis of the labeling restriction under Central Hudson. If Congress's sole purpose had been to curb strength wars among malt-beverage brewers, it might well have enacted a different statute. For example, Congress might have chosen to limit the alcohol content of malt beverages.18 That limitation would have directly furthered the goal of preventing strength wars. But it would also have inter- fered with the State's authority to regulate alcoholic bever- ages (by devising their own limits on alcohol content or ___________________(footnotes) 18 Congress might reasonably have concluded that it had au- thority to. impose federal limits on alcohol content pursuant to its power to regulate interstate commerce. See 324 Liquor Corp. v. Duffy, 479 U.S. 335, 346-347 (1987) ; Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 274-276 (1984) ; Capital Cities Cable Inc. V. Crisp, 467 U.S. 691, 714 (1984) ; California Retail Liquor Dealers Ass'n V. Midcal Aluminum, Inc., 445 U.S. 97, 110 (1980) ; Hos- tetter V. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 331- 332 (1964) . ---------------------------------------- Page Break ---------------------------------------- 25 choosing to impose no such limits) to a greater extent than does the labeling restriction. In sum, Edge Broadcasting makes clear that a court must accurately identify the governmental interest under- lying a restriction on commercial speech, as required under the second part of the Central Hudson test, before it can accurately determine whether the restriction directly advances the governmental interest, as required under the third part of the Central Hudson test. The Tenth Circuit's failure at the outset fully to identify the interests under- lying the labeling restriction in Section 205(e)(2) under- mined its subsequent analysis. B. The Labeling Restriction Materially Advances The Asserted Governmental Interest The third part of the Central Hudson test requires the government to show "that the harms it recites are real and that its restriction will in fact alleviate them to a material degree." Ibanez, 114 S. Ct. at 2089, quoting Edenfield, 113 S. Ct. at 1800. The government made that showing here. It established that there is a continuing threat of strength wars among malt-beverage brewers and that the labeling restriction materially combats that threat. I. The Evidence Establishes A Continuing Threat Of Strength Wars Among Malt-Beverage Brewers The Tenth Circuit did not question the adequacy of the government's showing that there were strength wars among malt-beverage brewers when Section 205 (e) (2) was enacted. Indeed, the court recognized that "the Act's legislative history * * * contains testimony `that labels displaying alcohol content resulted in a strength war wherein producers competed for market share by putting increasing amounts of alcohol in their beer.' " Pet. App. 6a, quoting id. at 18a (first court of appeals opinion). Coors did not present any evidence rebutting the evidence ---------------------------------------- Page Break ---------------------------------------- 26 before Congress proving the existence of a strength war. Thus, it is undisputed that the harm at which the labeling restriction in Section 205(e) (2) is aimed was "real" Edenfield, 113 S. Ct. at 1800) at the time of its enact- ment. It is also undisputed that there continues to be a threat of strength wars in the malt-beverage industry. As the court of appeals observed, the government presented evi- dence ( 1 ) "that malt beverage manufacturers already are competing and advertising on the basis of alcohol strength in the malt-liquor segment of the market"; (2) "that con- sumers who prefer malt liquor do so primarily because of its higher alcohol content"; and ( 3 ) "that a number of manufacturers have tried to advertise malt liquor * * * to tout its alcohol strength." Pet. App. 7a. The court noted, moreover, that "Coors does not contest * * * the existence of such a threat." ibid.19 2. The Labeling Restriction Combats The Risk Of Strength Wars In A Direct And Material Way Although the Tenth Circuit did not doubt that there is a continuing threat of strength wars, it determined that "the Government has offered no evidence to indicate that the appearance of factual statements of alcohol content on malt-beverage labels would lead to strength wars or that their continued prohibition helps to prevent strength wars." Pet. App. 9a. That determination is flawed in three respects. a. First, the Tenth Circuit erred by failing to discern any link between the advertising of a product charac- ___________________(footnotes) 19 The parties disagree over the scope of the current threat of strength wars in the malt-beverage industry. Coors has contended that the threat exists only in the malt-liquor segment of the industry. The government has contended that the threat is not so limited. Because this issue implicates the question whether Sec- tion 205 (e) (2) is overly broad insofar as it applies to all malt- beverage labeling, we address it in our discussion of the fourth part of the Central Hudson test. See pp. 34-37, infra. ---------------------------------------- Page Break ---------------------------------------- 27 teristic (in this case, high alcohol content) and the extent to which consumers choose the product on the basis of that characteristic. Pet. App. 21a. This Court has rec- ognized as a matter of common sense that a restriction on the advertising of a product decreases demand for the product. See Edge Broadcasting, 113 S. Ct. at 2707; Posadas de Puerto Rico Associates V. Tourism Co., 478 U.S. 328, 342 ( 1986); Central Hudson, 447 U.S. at 569. It follows that a restriction on the advertising of a product characteristic will decrease the extent to which consumers select the product on the basis of that characteristic. The Tenth Circuit accordingly erred in failing to hold that the labeling restriction directly advances Congress's goal of ensuring that "[m]alt beverages should not be sold on the basis of alcoholic content." H.R. Rep. No. 1542, 74th Cong., 1st Sess, 12 (1935).20 ___________________(footnotes) 20 In a related context, this Court has recognized that people cross state lines to purchase beer at lower prices. See Healy v. The Beer Inst., 491 U.S. 324, 326 (1989) ; Falls City Indus., Inc. V. Vanco Beverage, Inc.. 460 U.S. 428, 437 & n.8 (1983). It is just such behavior, which reflects the close connection between consumer purchasing decisions and product information, that has led the lower federal courts and the state courts to uphold, against First Amendment challenges, state restrictions on price advertis. ing: of alcoholic beverages. See Queensgate Investment Co. V. Liquor Control Comm'n, 433 N.E.2d 138 (Ohio) (per curiam), appeal dismissed for want of a substantial federal question, 459 U.S. 807 ( 1982),cited with approval in Edge Broadcasting, 113 S. Ct. at 2707; S & S Liquor Mart, Inc. v. Pastore, 497 A.2d 729 (R.L 1985) Rhode Island Liquor Stores Ass'n V. Evening Call Pub. Co., 497 A.2d 331 (R.I. 1985). "Common sense tells us that a lifting of the ban on price advertising will lead to a more com- petitive market. " 44 Liquor Mart, Inc. V. Racine, 829 F. Supp. 543, 554 (D.R.I. 1993), aff'd in part, rev'd in part sub nom, 44 Liquormart, Inc. V. Rhode Island, Nos. 93-1893 & 93-1927 (May 2, 1994), opinion withdrawn and judgment vacated, aff'd in part, rev'd in part mem. (lst Cir. July 8, 1994) ; see S & S Liquor Mart, 497 A.2d at 735. Part of the reason such restrictions reduce the con- sumption of alcohol, of course, is that they prevent alcohol vendors from engaging in price competition. Just as alcohol price adver- ---------------------------------------- Page Break ---------------------------------------- 28 b. Second, the court ignored the historical evidence upon which the labeling restriction in Section 205(e) (2) was based. Cf., e.g., Burson v. Freeman, 112 S. Ct. 1846, 1856 (1992) (plurality opinion) (examining history of statute challenged on First Amendment grounds). The court recognized that the evidence before Congress when it enacted Section 205(e)(2) showed ( 1 ) "that labels displaying alcohol content resulted in a strength war"; and (2) "that not disclosing the alcohol content on malt beverages would relieve marketplace pressures to produce beer on the basis of alcohol content," and would thereby "result[] over the long term in beers with a lower alcohol content." Pet. App. 6a. Thus, the evidence clearly sup- ported Congress's determination, at the time of Section 205 (e) (2)'s enactment, that the disclosure of alcohol content had led to strength wars and that the prohibition of alcohol-content statements would prevent them. Those determinations by Congress are entitled to "substantial deference." Turner Broadcasting System, Inc. V. FCC, No. 93-44 (June 27, 1994), slip op. 42.21 ___________________(footnotes) tising restrictions prevent "price wars," so too do alcohol-content advertising restrictions prevent "strength wars." Cf. Capital Broadcasting Co. V. Mitchell, 333 F. Supp. 582 (D.D.C. 1971) (upholding against First Amendment challenge ban on broadcast of cigarette advertising), aff'd mem., 405 U.S. 1000 (1972) ; Dunagin v. City of Oxford, supra (upholding against First Amend- ment challenge prohibition of most forms of alcohol sign adver- tising), cited with approval in Posadas, 478 U.S. at 347 n.10; Oklahoma Telecasters Ass'n V. Crisp, supra (rejecting First Amendment challenge to prohibition of all alcohol advertising except for one storefront sign) ; Princess Sea Indus., Inc. V. State, 635 P.2d 281 (Nev. 1981) (upholding against First Amendment challenge restrictions on brothel advertising), cert. denied, 456 U.S. 926 (1982) . 21 The court of appeals appeared to believe that its disregard of the historical evidence was justified by Eden field, which it read as adopting a "much stricter" standard for applying the third part of the Central Hudson test than this Court had applied in earlier ---------------------------------------- Page Break ---------------------------------------- 29 The Tenth Circuit ignored the historical evidence underlying the labeling restriction because of what it per- ceived to be "changes in the malt beverage industry and market since 1935." Pet. App. 6a; see also id. at 48a- 50a (first district court opinion). In particular, the court believed that the evidence showed that "the vast majority of consumers in the United States value taste and lower calories-both of which are adversely affected by in- creased alcohol strength." Id. at 8a. Based on that evi- dence, the Tenth Circuit found it unlikely that permitting statements of alcohol content on labels would lead to strength wars. Id. at 9a. The Tenth Circuit erred in relying on evidence that most beer consumers currently value taste and lower calories, qualities that, Coors asserted, would be adversely affected by increased alcohol strength. The history of the FAAA shows that at the time the labeling restriction was enacted, many consumers preferred high alcohol beer. Even if we assume that the majority preference has changed since that time, it can change again in the fu- ture.22 The validity of an Act of Congress should not depend upon such cyclical shifts in consumption patterns. Cf. Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 71 ( 1983) (insufficiency of original motivation for re- striction on commercial speech does not invalidate restric- tion if it continues to advance other legitimate purposes); Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 460 ___________________(footnotes) decisions. Pet. App. 5a. Edenfield, however, did not purport to heighten the showing required under the third part of the Central Hudson test, and the subsequent decision in Edge Broadcasting confirms that the third part of the Central Hudson test remains the same. 113 S. Ct. at 2704. 22 See J.A. 256 (testimony of Coors official, stating: " our rea- son for being in business * * * is to meet consumer demand for a particular product. And right now, the consumer demand is for lighter and lower alcohol beer.") (emphasis added). ---------------------------------------- Page Break ---------------------------------------- 30 (1978) (same)23. Moreover, the Tenth Circuit's reliance on the current preference of consumers for taste and lower calories ignores the role that the advertising and labeling restrictions have played in promoting those pref- erences, as distinguished from a preference based on al- cohol content. There accordingly is every reason to ex- pect that consumer preferences might change if respond- ent and other brewers were free to market malt beverages on the basis of their alcohol content. See Center for Science in the Public Interest Amicus Br. 15-17 (dis- cussing current popularity of "ice" beer because of labels displaying its enhanced alcohol content). In any event, the government showed that the current demand for high alcohol beer is large enough to pose a threat of strength wars. It showed that people who drink malt liquor choose it because of its high alcohol content, and that malt liquor is marketed on the basis of its high alcohol content. See p. 14, supra. Although the evidence indicated that malt liquor presently accounts for only 3% of the malt-beverage market, the evidence of the strong competition in that segment of the market also estab- lished that brewers consider it sufficiently large to war- rant efforts to dominate it. See, e.g., J.A. 213, 244, 347; Deposition of Lutz E. Issleib 54-55, 58, 64-65; see also J.A. 157-158 (describing market in U.K. for high alcohol content beer). The evidence also showed that brewers would increase the alcohol content of their malt liquors if their competitors did so. See, e.g., Deposition of Lutz E. Issleib 66 (statement of chairman and chief executive of Pabst Brewing Company that "I play follow the leader," ___________________(footnotes) 23 Congress is in a better position than the Courts to determine whether changed conditions warrant amendment or repeal of legis. lation. Turner, supra, slip op. 42. Significantly, Congress has on several occasions declined to enact bills to repeal the labeling restriction in Section 205 (e) (2). See S. 2595, 99th Cong., 2d Sess. (1986) ; H.R. 1420, 103d Cong., 1st Sess. (1993). ---------------------------------------- Page Break ---------------------------------------- 31 and that his company would keep up with the competi- tion in the area of alcohol content).24 c. Finally, the Tenth Circuit improperly analyzed the evidence concerning recent violations of the labeling and advertising restrictions. That evidence showed, among other things, that malt-liquor manufacturers have violated the labeling and advertising restrictions of the FAAA by using "descriptive terms such as `power,' `strong char- acter,' [and] `dynamite[]' * * * to tout * * * alcohol strength." Pet. App. 7a. The Tenth Circuit thought it significant that the evidence primarily concerned the malt- liquor segment of the malt-beverage industry, and that violations in that segment of the market have primarily involved "descriptive," as distinguished from numerical, statements of alcohol content. Id. at 7a-8a & n.5. The court thus suggested that the government's interest in pre- venting strength wars could be adequately served by a labeling restriction that applies only to malt liquor, and not other types of malt beverages, and that prohibits only descriptive, and not numerical, statements of alcohol content. i. The Tenth Circuit erred, in striking down the re- striction under the third part of the Central Hudson test, by relying on its view that the labeling restriction could be more narrowly tailored. The question whether a stat- ute is "more extensive than necessary" is relevant to the fourth, not the third, part of the test. Fox, 492 U.S. at 475-481. The court of appeals' error is significant be- cause under the fourth part of the Central/ Hudson test, courts are required to accord substantial deference to Congress's judgment regarding the "fit" between the legis- ___________________(footnotes) 24 The evidence of continuing marketplace pressure upon brewers to compete on the basis of high alcohol content was not limited to the malt-liquor segment of the industry. As discussed above, the evidence showed that Coors distributed wallet cards disclosing the alcohol content of its beer and that of its competitors. See p. 14, supra. ---------------------------------------- Page Break ---------------------------------------- 32 lative means and the legislative ends. Id. at 479-481; see Edge Broadcasting, 113 S. Ct. at 2707; San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522, 539 (1987); Posadas, 478 U.S. at 341- 342; Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 509 ( 1981). The Tenth Circuit, however, accorded no deference to Congress's judgment regarding the proper scope of the labeling restriction. ii. Furthermore, the Tenth Circuit failed to explain why the government's evidence was not sufficient to sus- tain the labeling restriction in Section 205(e)(2), while the same evidence was held sufficient, in a ruling by the district court that respondent did not challenge on appeal, to sustain the advertising restriction in Section 205 (f) (2). There is nothing in law or logic to support the conclusion that the same evidence that sustained the ad- vertising restriction in Section 205(f) (2) does not also sustain the labeling restriction in Section 205(e)(2). See Kordel v. United States, 335 U.S. 345, 351 ( 1948) ("Every labeling is in a sense an advertisement."); see also Halter v. Nebraska, 205 U.S. 34 (1907). The district court attempted to justify upholding the advertising restriction while striking down the labeling restriction on the ground that the labeling restriction does not add much to what is accomplished by the advertis- ing restriction. Pet. App. 37a-38a. In Edge Broadcast- ing, however, this Court condemned similar reasoning as "represent[ing] too limited a view of what amounts to direct advancement of the governmental interest," 113 S. Ct. at 2706, and failing to allow adequate "room for legislative judgments," id. at 2707.25 The advertising and ___________________(footnotes) 25 The Court in Edge Broadcasting rejected a radio station's contention that the federal statutes that prohibit lottery advertis- ing do not directly advance the government's goal of decreasing gambling in States that do not operate lotteries, because the stat- utes only modestly decreased the amount of lottery advertising to which people who listened to the radio station were exposed. Edge Broadcasting, 113 S. Ct. at 2706-2707. Coors advanced a similar ---------------------------------------- Page Break ---------------------------------------- 33 labeling restrictions at issue here operate in tandem and are mutually reinforcing. The court of appeals therefore erred in excising the labeling component of the inte grated regulatory scheme. iii. Finally, the Tenth Circuit misunderstood the sig- nificance of the fact that most recent violations of the advertising and labeling restrictions have involved de scriptive, rather than numerical, statements of alcohol content. See Pet. App. 7a-8a. That fact signifies only that malt-beverage brewers cannot circumvent the restric- tions on numerical statements as easily as they can the restrictions on descriptive statements. By the same token, it is easier to ascertain a violation of the numerical- statement restriction than to ascertain a violation of the descriptive-statement restriction, because the latter deter- mination may require consideration of the connotations of a descriptive term and the context in which the term is used. See J.A. 102. Thus, the fact that the restriction on numerical statements is easier to enforce (and, from all that appears in the record, more consistently complied with ) supports, rather than undermines, the validity of the restriction.26 ___________________(footnotes) contention here: namely, that Section 205 (e) (2) does not directly advance the government's goal of preventing strength wars, be- cause it only modestly decreases the extent to which beer can be marketed based on its high alcohol content, in light of the other labeling and advertising restrictions on statements of alcohol con- tent that Coors does not challenge. Under Edge Broadcasting, Coors' contention should be rejected. 26 The Tenth circuit also erred in stating that there is no evi- dence from other countries to support the effectiveness of the labeling restriction in preventing strength wars. Pet. App. 8a. In fact, there is evidence in the record concerning Canada and Britain, where disclosure of alcohol content is permitted, suggest- ing that the labeling ban has the effect of preventing strength wars. The record establishes that: (1) there has been a trend toward consumption of higher alcohol content beverages in the United Kingdom since the advent of alcohol-content labeling (J.A. 180-181, 189 ) ; (2) respondent's own beer has a higher alcohol level ---------------------------------------- Page Break ---------------------------------------- 34 C. The Labeling Restriction Is Narrowly Tailored To Advance The Government's Substantial Interest The fourth part of the Central Hudson test asks whether the government's restriction is narrowly tailored to advance the government's asserted interest. Fox, 492 U.S. at 480; Central Hudson, 447 U.S. at 565. It "re- quires] a fit between the restriction and the government interest that is not necessarily perfect, but reasonable." Edge Broadcasting, 113 S. Ct. at 2705. There is a rea- sonable fit between the labeling restriction in Section 205 (e) (2) and Congress's goal of combatting strength wars in a manner consistent with state alcohol regulation. The labeling restriction does not prohibit the advertising of malt beverages; rather, it prohibits only the advertis- ing of a single product characteristic. Moreover, the labeling restriction does not altogether prohibit the dis- closure of the alcohol content of malt beverages; it pro- hibits only the use of that information in labeling and other forms of advertising, and thus allows brewers or the media to supply alcohol-content information outside of the advertising context. J.A. 214-215, 260; cf. Ohralik, 436 U.S. at 458 (attorney disciplinary rule before the Court "does not prohibit a lawyer from giving unsolicited legal advice; it proscribes the acceptance of employment resulting from such advice" ). Thus, the scope of the labeling restriction "is `in proportion to the interest served.' " Fox, 492 U.S. at 480, quoting In re R. M. J., 455 U.S. at 203. 1. Although the Tenth Circuit did not consider the labeling restriction in Section 205(e)(2) under the fourth part of the Central Hudson test, it suggested that a "reasonable fit" is lacking because the labeling restric- tion applies to all types of malt beverages, whereas the evidence of a continuing threat of strength wars primarily ___________________(footnotes) in Canada, where the alcohol content of malt beverages is shown on the label (J.A. 278-279) : and (3) the light beer market is smaller in Canada than in the United States (J.A. 279-280). ---------------------------------------- Page Break ---------------------------------------- 35 concerned one type of malt beverage: malt liquor. Pet. App. 7a, 9a n.6. 27 Congress could reasonably have believed that a label- ing restriction applicable to all types of malt beverages would be more effective than one applicable only to malt liquor. Congress's concern was not about a particular type of beer; its concern was about a particular type of beer-drinker: a person who, in the absence of a prohibi- tion on the disclosure of alcohol content, would choose a beer based on its high alcohol strength. A labeling restric- tion applicable to all types of malt beverages more effec- tively prevents those people from choosing a malt bever- age based on high alcohol content than would a restriction applicable only to malt liquor. First, a labeling restric- tion applicable to all malt beverages would generally prevent consumers from knowing with certainty even that malt liquors, as a category, have higher alcohol content than other types of malt beverages. J.A. 267 (testimony of Coors official that "there are a percent of consumers who do not currently know that certain categories of beer have more or less alcohol"). In addition, such a labeling restriction would prevent consumers from choos- ing among brands of any type of malt beverage (not just among brands of malt liquor) on the basis of their high alcohol content.28 ___________________(footnotes) Although the Tenth Circuit found it unnecessary to decide whether the labeling restriction satisfies the fourth part of the Central Hudson test, the issue was fully briefed and argued in both courts below and was raised in the government's certiorari petition. Defendants' Tr. Br. (CR 46), at 69-76; II Trial Tr. 287- 293; Pet. 21-23. It is therefore properly before this Court. See, e.g., United States V. Williams, 112 S. Ct. 1735, 1738-1739 (1992). 28 The same reasoning justifies Congress's enactment of an ad- vertising restriction that, like the labeling restriction, applies to all types of malt beverages. As discussed above, however, neither court below explained why the labeling restriction should be struck down, even though the advertising restriction was upheld. See Pp. 32-33, supra. ---------------------------------------- Page Break ---------------------------------------- 36 The differing effects of a labeling restriction applicable to all types of malt beverages and one applicable only to malt liquor can be illustrated by considering people who have just reached legal drinking age. Those young people, like many alcohol consumers at the end of Prohibition, may wish to choose a beer based on its high alcohol con- tent. The young drinkers may not know that malt liquor is the type of beer with the highest alcohol content. They would readily be able to figure that out, however, if the disclosure of alcohol content were prohibited only with respect to beers the alcohol content of which exceeded a certain level.29 Furthermore, the government presented evidence at trial showing that the problem of strength wars is not limited to the malt-liquor segment of the market. For example, the government showed that Coors produced Coors Extra Gold, a higher alcohol beer, to increase its share of the market, and that Coors' goal in bringing this litigation is to correct the "consumer misperception" that its beer has less alcohol than the competing brands. J.A. 251-253, 275-277, 342. That is precisely the type of behavior-i.e., increasing the alcohol content of beer in order to increase one's share of the market, or emphasiz- ing that one's product has as much alcohol as the com- petition-that Section 205 (e) (2) is designed to discour- age. The court of appeals itself acknowledged the force of this point on the prior appeal, observing that "Coors' admission at oral argument that it desires to publish the alcohol content of its products to dispel Coors' image of being a `weak' beer testifies to the viability of the govern- ment's interest." Pet. App. 20a. 30 ___________________(footnotes) 29 For example, if the disclosure of alcohol content were pro- hibited with respect to beer that contained more than 5% alcohol by volume but were required for beer that contained 5% or less alcohol, a consumer could safely conclude that beer that was not labeled according to its alcohol content contained more than 5% alcohol. 30 Cf. Posadas, 478 U.S. at 341-342 ("The Puerto Rico Legisla- ture obviously believed * * * that advertising of casino gambling ---------------------------------------- Page Break ---------------------------------------- 37 2. The fit between the labeling restriction and the goal of preventing strength wars cannot be challenged on the ground that the restriction prevents people from choosing beer on the basis of its low alcohol content. ATF has construed Section 205 (e) (2) to permit brewers to label and advertise their beers as "reduced alcohol" and "low alcohol." 54 Fed. Reg. 3591, 3594 (1989) (adding 27 C.F.R. 7.26(b)-(d)). That construction of Section 205 (e) (2) permits consumers who wish to limit their alcohol content to do so effectively, without providing particularly useful information to consumers who wish to select a beer based on its high alcohol content. 3. Nor can the labeling restriction be challenged on the ground that strength wars could be combated just as effectively by requiring labeling that discloses the risks of alcohol abuse. As this Court explained in a similar context, "it is up to the legislature to decide whether or not such a `counterspeech' policy would be as effective" as the labeling restriction. Posadas, 478 U.S. at 344. Congress has in fact required health warnings on the labels of most alcoholic-beverage containers. 27 U.S.C. 213 et seq. The fourth part of the Central Hudson test does not force Congress to choose between the two methods of regulation. See Dunagin, 718 F.2d at 751 & n.9. II. THE LABELING RESTRICTION IS ENTITLED TO AN ADDED PRESUMPTION OF VALIDITY Any doubt as to whether the labeling restriction com- ports with the First Amendment should be resolved in favor of its validity. A presumption of validity, over and above the presumption of constitutionality normally ac- ___________________(footnotes) would serve to increase the demand for the product adver- tised * * * and the fact that appellant has chosen to litigate this case all the way to this Court indicates that appellant shares the legislature's view.") ; Central Hudson, 447 U.S. at 569 ("There is an immediate connection between advertising and demand for elec- tricity. Central Hudson would not contest the advertising ban unless it believed that promotion would increase its sales."). ---------------------------------------- Page Break ---------------------------------------- 38 corded an Act of Congress, is warranted here for two reasons. First, this Court and other courts have recog- nized that legislatures have broader latitude to regulate speech that promotes socially harmful activities, such as alcohol consumption, than they have to regulate other types of speech. See, e.g., Posadas, supra. Moreover, this Court has consistently held that state laws regulating alcohol are entitled, by virtue of the Twenty-first Amend- ment, to an "added presumption" of validity when chal- lenged on free speech grounds. California v. LaRue, 409 U.S. 109, 118 ( 1972). The federal labeling restriction is also entitled to that presumption, because it was enacted to enforce the Twenty-first Amendment by facilitating the enforcement of state laws regulating alcohol. A. The Labeling Restriction Is Entitled To An Added Presumption Of Validity Because It Regulates Speech Promoting A Socially Harmful Activity "Legislative regulation of products or activities deemed harmful, such as cigarettes, alcoholic beverages, and prostitution, has varied from outright prohibition on the one hand, to legalization of the product or activity with restrictions on stimulation of its demand on the other hand." Posadas, 478 U.S. at 346 (citation omitted). The Nation's experience with Prohibition, mandated by the Eighteenth Amendment, demonstrated that an out- right ban on alcohoI consumption led to harms, such as the growth of organized crime and widespread disregard of the law, that were equal to or greater than the harms caused by the banned activity.31 That experience was fresh in Congress's mind when it enacted the labeling re- striction in Section 205(e) (2), See S. Rep. No. 1215, ___________________(footnotes) 31 See 76 Cong. Rec. 8 (remarks of Rep. Sabath), 16 (remarks of Rep. McKeown j, 27 (1932) (remarks of Rep. Horr) ; 76 Cong. Rec. 4148 (remarks of Sen. Wagner), 4226 (1933) (remarks of Sen. Tydings). See generally Spaeth, The Twenty-First Amend- ment and State Control Over Intoxicating Liquor: Accommodating the Federal Interest, 79 Calif. L. Rev. 161, 162, 176-180 (1991). ---------------------------------------- Page Break ---------------------------------------- 39 supra, at 3; H.R. Rep. No. 1542, supra, at 2; see also, e.g., 79 Cong. Rec. 12,936 (remarks of Sen. George), 12,943 ( 1935) (remarks of Sen. Copeland). Especially in light of the Prohibition experience, the labeling restric- tion represents a reasonable restriction on the promotion of an activity that Congress has reasonably deemed harmful. This Court and other courts have repeatedly upheld reasonable restrictions on the advertising of activities that society deems harmful but has chosen for various reasons to tolerate. See Edge Broadcasting, 113 S. Ct. at 2700 (lotteries); Posadas, 478 U.S. at 344-347 (casino gam- bling); Queensgate Investment Co. V. Liquor Control Comm'n, 433 N.E.2d 138 (Ohio) (per curiam) (liquor price advertising), appeal dismissed for want of a sub- stantial federal question, 459 U.S. 807 (1982 ); Capital Broadcasting Co. v. Mitchell, 333 F. Supp. 582 (D.D.C. 1971 ) (broadcast cigarette advertising), aff'd mem., 405 U.S. 1000 (1972); Dunagin v. City of Oxford, 718 F.2d 738 (5th Cir. 1983) (en bane) (signs advertising liquor), cert. denied, 467 U.S. 1259 (1984); Oklahoma Tele- casters Ass'n v. Crisp, 699 F.2d 490 ( 10th Cir. 1983) (prohibition of all alcohol advertising except for one storefront sign), rev'd on other grounds sub nom. Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984); S & S Liquor Mart Inc. v. Pastore, 497 A.2d 729 (R.I. 1985) (alcohol price advertising); Rhode Island Liquor Stores Ass'n v. Evening Call Pub. Co., 497 A.2d 331 (R.L 1985 ) (same); Princess Sea Indus., Inc. v. State, 635 P.2d 281 (Nev. 1981) (brothel advertising), cert. denied, 456 U.S. 926 (1982). These decisions indicate that legislatures are entitled to especially broad latitude in regulating speech that promotes activities that the legisla- tures reasonably determine give rise to especially great social harms. Greater deference to legislative judgment with regard to socially harmful activities is justified by the rationale underlying this Court's commercial speech doctrine. As ---------------------------------------- Page Break ---------------------------------------- 40 a general matter, commercial speech enjoys only "a limited measure of protection, commensurate with its subordinate position in the scale of First Amendment values." Fox, 492 U.S. at 477 (quoting Ohralik, 436 U.S. at 456); see Edge Broadcasting, 113 S. Ct. at 2703; Central Hudson, 447 U.S. at 563. That is because com- mercial speech "is `linked inextricably' with the commer- cial arrangement that it proposes," Edenfield, 113 S. Ct. at 1798 (quoting Friedman v. Rogers, 440 U.S. 1, 10 n.9 ( 1979) ), and commercial activity is "an area tradi- tionally subject to government regulation," Edge Broad- casting, 113 S. Ct. at 2703 (quoting Ohralik, 436 U.S. at 456). The government's greater interest in, and au- thority over, regulation of commercial activity gives it greater interest in, and authority over, regulation of "the expression itself," Edenfield, 113 S. Ct. at 1798, than it has with respect to other forms of expression. Certain commercial activities, such as gambling and the sale of alcoholic beverages, have traditionally been con- sidered to pose particularly great risks of social harm. See, e.g., Posadas, 478 U.S. at 341 (casino gambling); Stone v. Mississippi, 101 U.S. 814, 818 (1880) (lot- teries); Alcoholic Beverage Labeling Act of 1988, Pub. L. No. 100-690, Tit. VIII, 8001 (a) (3), 102 Stat. 4518, 4519 (codified at 27 U.S.C. 213, 215) (congressional findings regarding harms of alcohol consumption and abuse). Such activities accordingly have long been sub- ject to particularly close regulation by the States and the federal government. See Edge Broadcasting, 113 S. Ct. at 2700-2701 (history of lottery regulation); Craig v. Boren, 429 U.S. 190, 205-206 & nn. 18-19 ( 1976) (his- tory of alcohol regulation). Indeed, the States plainly have authority under the Twenty-first Amendment to im- pose an outright ban on alcohol sales and consumption within their borders. See, e.g., California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 110 (1980 ). Similarly, the federal government's author- ity to regulate alcohol under the Commerce Clause is ---------------------------------------- Page Break ---------------------------------------- 41 broad. See, e.g., 324 Liquor Corp. v. Duffy, 479 U.S. 335, 346-347 (1987 ); Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 274-276 (1984); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 712-713 (1984); California Retail Liquor Dealers Ass'n, 445 U.S. at 108-110; Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 331-332 (1964). The particularly strong governmental interest in regulat- ing activities such as alcohol consumption gives rise to a concomitantly strong interest in regulating speech promot- ing those activities. Cf. Edenfield, 113 S. Ct. at 1798; Posadas, 478 U.S. at 345-347. By the same token, be- cause such speech is "linked inextricably" (Edenfield, 113 S. Ct. at 1798) to a socially harmful activity, it warrants even less protection under the First Amendment than other forms of commercial speech. Thus, the balance of interests tips more sharply in favor of upholding a regula- tion of speech in this area than in other areas of com- mercial activity. For that reason alone, any doubt as to whether the labeling restriction in Section 205(e)(2) satisfies the Central Hudson test for regulations of com- mercial speech must be resolved in favor of upholding the restriction. B. The Labeling Restriction Is Entitled To An Added Presumption Of Validity Because It Facilitates The Enforcement Of State Laws Within The Ambit Of The Twenty-first Amendment The labeling restriction respondent challenges is, how- ever, supported by more than general principles of First Amendment law concerning prohibitions against the pro- motion of socially harmful conduct. Here, there is af- firmative support elsewhere in the Constitution itself-in the subsequently ratified Twenty-first Amendment-for the labeling restriction. In light of the Twenty-first Amendment, this Court held in California v. LaRue, 409 U.S. 109 ( 1972), that state laws regulating alcohol are entitled to an "added presumption in favor of * * * valid- ---------------------------------------- Page Break ---------------------------------------- 42 ity" when challenged under the Speech Clause of the First Amendment. Id. at 118. The federal labeling restriction is also entitled to such an added presumption; and, when accorded that presumption, it plainly comports with the First Amendment. 1. The Court in LaRue rejected a free speech chal- lenge to state regulations that banned nude dancing and similar conduct in bars and nightclubs. See 409 U.S. at 111-112. The Court "d[id] not disagree" with the lower court's determination that the regulations, on their face, proscribed speech entitled to First Amendment protection. ld. at 116. But the Court "d[id] not believe," as the lower court had, that the regulations should be reviewed under the standard announced in United States v. O'Brien, 391 U.S. 367 ( 1968). LaRue, 409 U.S. at 116. In- stead, the Court adopted a less stringent standard of review. The Court in LaRue adopted a less stringent standard of First Amendment review because the regulations before it were within the ambit of the Twenty-first Amendment. The Court determined that "the broad sweep" of the latter Amendment "requires" that state laws regulating alcohol be accorded an "added presumption in favor of * * * validity." 409 U.S. at 114, 118-119. The Court explained that, while the States "require no specific grant of au- thority in the Federal Constitution" to regulate alcohol (since such regulation falls within their police power), "the case for upholding state regulation in the area cov- ered by the Twenty-first Amendment is undoubtedly strengthened by that enactment." Id. at 114-115. The LaRue Court upheld the challenged regulations under the standard of review required in light of the Twenty-first Amendment. The Court observed that the regulations were based on the State's conclusion that "the sale of liquor by the drink and lewd or naked dancing and entertainment should not take place in bars and cock- tail lounges." 409 U.S. at 115. In the Court's view, that conclusion was "not * * * an irrational one." Id. at 116. ---------------------------------------- Page Break ---------------------------------------- 43 The Court also rejected the argument that the regulations were over-inclusive. It determined that "[n]othing in the record * * * or in common experience compel[led] the conclusion" that more narrowly tailored regulations would have been equally effective. Ibid. The Court accordingly held that the State's "choice" of legislative means "cannot * * * be deemed an unreasonable one under the holdings of our prior cases." Ibid., citing Williamson v. Lee Optical Co., 348 U.S. 483,487-488 (1955). LaRue makes it clear that this Court reviews free speech challenges to state alcohol regulations under a less stringent standard than applied under Central Hudson. Dunagin, 718 F.2d at 745 ("The test applied in LaRue * * * is less strict than that applied in Central Hudson Gas.")32. The third part of the Central Hudson test re- quires a State to show "that the harms it recites are real and that its restriction will in fact alleviate them to a material degree." Ibanez, 114 S. Ct. at 2089. By con- trast, LaRue requires only that the State's judgment as to the existence of a harm and the effectiveness of the chal- lenged regulation in preventing that harm be "not * * * irrational." 409 U.S. at 116. The fourth part of the Central Hudson test requires a court to determine whether the State has chosen "means narrowly tailored to achieve the desired objective." Fox, 492 U.S. at 480, By comparison, LaRue requires the court to uphold the legis- lative means as not "unreasonable" unless the record or common experience "compels" a contrary conclusion. ___________________(footnotes) 32 Although the Court has declined to extend LaRue beyond the free speech context, see Larkin V. Grendel's Den, Inc., 459 U.S. 116, 122 n.5 (1982) (dictum) ; Craig V. Boren, 429 U.S. 190, 207-208 (1976), it has repeatedly applied LaRue in that context, including in decisions subsequent to Central Hudson. See City of Newport V. Iacobucci, 479 U.S. 92, 95 (1986) (per curiam); New York State Liquor Authority V. Bellanca, 452 U.S. 714 (1981) (per curiam) ; Doran V. Salem Inn, Inc., 422 U.S. 922, 932-933 (1975) ; see also Dunagin, 718 F.2d at 745 (finding it " [n]otabl[e]" that Bellanca was decided after Central Hudson Gas and Craig V. Boren" ). ---------------------------------------- Page Break ---------------------------------------- 44 409 U.S. at 116 (citing Williamson v. Lee Optical Co., supra). 2. Section 205(e)(2) should be reviewed under the LaRue standard, even though it is a federal, rather than a state, provision. As explained above (pp. 3, 20-23, supra), Congress enacted the FAAA, of which Section 205 (e) (2) is a part, expressly for the purpose of enforc- ing the Twenty-first Amendment. 27 U.S.C. 203; see also 79 Cong. Rec. 11,713-11,714 (1935) (remarks of Rep. Cullen). Moreover, Congress designed Section 205 (e) (2) to operate in tandem with state laws regulat- ing alcohol and facilitate their enforcement, Accordingly, the principles of LaRue are fully applicable here. To con- clude otherwise would mean that a state law could be upheld while a federal law necessary to the effective en- forcement of the state law could be invalidated.33 There is no basis in the text or history of the Twenty- first Amendment for such a dual standard. On the contrary, the significant authority over alcohol conferred by "the broad sweep of the Twenty-first Amendment" ( LaRue, 409 U.S. at 114) is not limited to the States. The Amendment also applies to "Territories]" and "pos- sessions]" of the United States, which are governed by federal law. See U.S. Const. Art. IV, 3. Moreover, the Twenty-first Amendment was based on earlier pre- Prohibition federal statutes that were designed to assist state regulation of alcohol.34 Finally, in proposing the ___________________(footnotes) 33 Because the labeling restriction in Section 205(e) (2) may be overridden by a State, this Court need not decide whether LaRue would apply to a federal provision in a case involving "conflicting state and federal efforts to regulate * * * liquor." Capital City, 467 U.S. at 713. 34 The Webb-Kenyon Act, ch. 90, 37 Stat. 699 (1913) (codified at 27 U.S.C. 122), prohibited the shipment in interstate commerce of liquor intended to be received, possessed, sold, or in any manner used in violation of the law of the State into which it was shipped. The Reed Amendment, ch. 162, 5, 39 Stat. 1069 (1917), made violations of the Webb-Kenyon Act a federal crime. See also 18 U.S.C. 1262 (making it a federal crime to transport any intoxicat- ---------------------------------------- Page Break ---------------------------------------- 45 Twenty-first Amendment to the States, Congress under- stood that such federal legislation would be necessary to make the authority conferred on the States by the Amend- ment fully effective. See, e.g., 76 Cong. Rec. 26 (remarks of Rep. Horr), 791 ( 1932) (remarks of Rep. Blanton); 76 Cong. Rec. 2776 (remarks of Rep. Lea), 4168 (re- marks of Sen. Fess), 4172 (remarks of Sen. Borah), 4221 ( 1933) (remarks of Sen. Barkley).35 The long history ___________________(footnotes) ing liquor into a State that prohibits sale of beverages containing more than 4% alcohol by volume). See generally de Ganahl, The Scope of Federal Power Over Alcoholic Beverages Since the Twenty-first Amendment, 8 Gee. Wash. L. Rev. 819, 822-823 (1940) ; Lydick, State Control of Liquor Advertising Under the United States Constitution, 12 Baylor L. Rev. 43, 47-48 (1960) ; Spaeth, supra, 79 Calif. L. Rev. at 181-182. 35 Courts and commentators writing shortly after the ratification of the Twenty-first Amendment expressed the view that the Amend- ment itself provides Congress with authority to enact legislation that facilitates the enforcement of state laws regulating alcohol, Arrow Distilleries, 109 F.2d at 401; Old Monastery, 147 F.2d at 906-907; Hayes v. United States, 112 F.2d at 422; Hanf V. United States, 235 F.2d at 717-718; Harris V. State, 122 P.2d 401, 405 (Okla. Crim. App. 1942) ; see also de Ganahl, supra, 8 Gee. Wash. L. Rev. at 830; Note, Federal Alcohol Administration Act, 24 Gee. L.J. 433, 435 (1936). The conclusion that the Twenty-first Amendment is an independent source of congressional authority is not undermined by Congress's removal from the proposed Amend- ment of a provision (proposed Section 3) that would have given Congress "concurrent power to regulate or prohibit the sale of intoxicating liquors to be drunk on the premises where sold." 76 Cong. Rec. 4138 (1933) ; see also 324 Liquor Corp., 479 U.S. at 353-356 (O'Connor, J., dissenting). The omission of proposed Section 3 appears to have been prompted by concern that it would enable the federal government to regulate at the local level in : manner that was inconsistent with state regulation of alcohol 76 Cong, Rec. 2776 (remarks of Rep. Lea), 4143 (remarks of Sen Blaine), 4144 (remarks of Sen. Wagner), 4146 (remarks of Sen. Borah), 4147 (remarks of Sen. Wagner), 4155 (remarks of Ser Brookhart), 4156 (remarks of Sen. Hebert), 4173 (remarks o Sen. Borah), 4173, 4177 (1933) (remarks of Sen. Black). Th labeling and advertising restrictions in the FAAA do not implicat that concern, because they govern only alcoholic beverages that ---------------------------------------- Page Break ---------------------------------------- 46 of federal assistance to support the States' efforts to reg- ulate alcohol requires that the federal labeling restriction be reviewed under the same standard that applies to the state laws that it was enacted to support.36 3. The federal labeling restriction is plainly constitu- tional under the LaRue standard. First, the labeling restriction is reasonably related to preventing a harm that Congress rationally sought to avoid. It is based on Congress's judgment that "[m]alt beverages should not be sold on the basis of alcoholic con- tent." H.R. Rep. No. 1542, supra, at 12. Here, as in LaRue, that legislative judgment was justified by "evi- dence from the [legislative] hearings" of particular abuses and by "the principle that [a legislature] may reason from the particular to the general." 409 U.S. at 115. Thus, Congress's conclusion that competition among brewers on the basis of high alcohol content should be prohibited was ___________________(footnotes) move or are intended for movement in interstate, commerce, and they apply in a manner that is consistent with state regulation. In any event, this Court need not resolve the issue of whether the Twenty-first Amendment is an independent source of congressional authority in deciding whether to apply the principle of LaRue in this case. In our view, LaRue governs here because the FAAA is within Congress's authority under the Commerce Clause, see Wil- liam Jameson & Co. V. Morgenthau, 307 U.S. 171, 173 (1939) (per curiam) (challenge to FAAA raised "no substantial question of constitutional validity") ; see also Appellant's Statement as to Jurisdiction at 8-10, William Jameson & Co. V. Morgenthau, No. 717 (0.T. 1938) (arguing, inter alia, that FAAA exceeded con- gressional authority under Commerce Clause) ; Brief for Appel- lant at 22-23, William Jameson & Co. V, Morgenthau, No. 717 (0.T. 1938) (same), and because Section 205 (e) (2) is designed to enhance the enforcement of state alcohol laws. 36 In States that have expressly adopted the federal labeling re- striction as state law or otherwise adopted the same substantive restriction, see pp. 10-11 & nn.8, 10, supra, the validity of the fed- eral restriction appears to be compelled by the text of the Twenty- first Amendment, which states in relevant part: "The transporta- tion or importation into any State * * * for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." U.S. Const. Amend. XXI, 2. ---------------------------------------- Page Break ---------------------------------------- 47 "not * * * an irrational one." Id. at 116. It accordingly must be sustained under LaRue. Moreover, the means chosen by Congress to prevent such competition likewise must be sustained under LaRue. LaRue gives a legislature "wide latitude as to choice of means." 409 U.S. at 116. Congress acted within that broad latitude in prohibiting statements of alcohol con- tent on malt-beverage labels. Here, as in LaRue, "[n]oth- ing in the record * * * or in common experience compels the conclusion" that other means-such as a labeling re- striction applicable only to malt liquor or a requirement that alcoholic-beverage labels include warnings of the health dangers of alcohol-would have been equally effec- tive in achieving the legislative goal. Ibid. Thus, the fit between the legislative means and the legislative ends "cannot * * * be deemed an unreasonable one," ibid., and it therefore satisfies the LaRue standard. Section 205 (e) (2) thus comports with the First Amendment. CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted. DREW S. DAYS, 111 Solicitor General FRANK W. HUNGER Assistant Attorney General EDWIN S. KNEEDLER Deputy Solicitor General RICHARD H. SEAMON Assistant to the Solicitor General MICHAEL JAY SINGER JOHN S. KOPPEL Attorneys AUGUST 1994 * U.S. GOVERNMENT PRINTING OFFICE; 1994 301157 86185 ---------------------------------------- Page Break ---------------------------------------- No. 93-1631 In the Supreme Court of the United States OCTOBER TERM, 1993 LLOYD BENTSEN, SECRETARY OF THE TREASURY, ET AL., PETITIONERS v. ADOLPH COORS COMPANY PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT DREW S. DAYS, III Solicitor General FRANK W. HUNGER Assistant Attorney General EDWIN S. KNEEDLER Deputy Solicitor General RICHARD H. SEAMON Assistant to the Solicitor General Department of Justice Washington, D.C. 20530 (202)514-2217 ---------------------------------------- Page Break ---------------------------------------- QUESTION PRESENTED Section 5(e)(2) of the Federal Alcohol Administration Act, 27 U.S.C. 205(e)(2), prohibits statements of alcohol content on the labels of malt-beverage containers unless such statements are required by state law. The question presented is whether that prohibition violates the First Amendment. (1) ---------------------------------------- Page Break ---------------------------------------- 11 PARTIES TO THE PROCEEDING Petitioners, the defendants below, are the Secretary of the Treasury and the Director of the Bureau of Alcohol, Tobacco and Firearms within the Department of the Treasury. Respondent, the plaintiff below, is the Adolph Coors Company. Also participating in the proceedings below were the Speaker and Bipartisan Leadership Group of the United States House of Representatives, which initially participated as defendants-intervenors but later withdrew from the case. TABLE OF CONTENTS Opinions below . . . . 1 Jurisdiction . . . . 1 Constitutional, statutory, and regulatory provisions involved . . . . 2 Statement . . . . 2 Reasons for granting the petition . . . .13 Conclusion . . . . 27 Appendix A . . . . 1a Appendix B . . . . 10a Appendix C . . . . 32a Appendix D . . . . 43a Appendix E . . . . 55a Appendix F . . . . 57a Appendix G . . . . 66a Appendix H . . . . 73a TABLE OF AUTHORITIES Cases: Arrow Distilleries, Inc. v. Alexander, 109 F.2d 397 (7th Cir.), cert. denied, 310 U.S. 646 (1940) . .15 Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984) . . . . 15 Board of Trustees v. Fox, 492 U.S. 469(1989) . . . . 21 Burson v. Freeman, 112 S. Ct. 1846 (1992) . . . . 19 California v. LaRue, 409 U.S. 109 (1972)'. . . . . . . . 19, 25 California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97(1980) . . . . 3, 15 (111) ---------------------------------------- Page Break ---------------------------------------- Iv Cases - Continued: Page Capital Broadcasting Co. v. Mitchell, 333 f. Supp. 582 (D. D.C. 1971), aff'd mem., 405 U.S. 1000 (1972) . . . . 17 Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984) . . . . 15 Central Hudson Gas & Elec. Corp. v. Public Serv. Common, 447 U. S. 557(1980) . . . . 9, 16 City of Newport v. Iacobucci, 479 U.S. 92 (1986) . . 20 Continental Distilling Corp. v. Shultz, 472 F.2d 1367 (D. C. Cir. 1972) . . . . 3 Craigv. Boren, 429 U.S. 190(1976) . . . . 3 Doran v. Salem Inn, inc., 422 U.S. 922 (1975) . . . . 20 Dunagin v. City of Oxford, 718 F.2d 738 (5th Cir. 1983), cert. denied, 467 U.S. 1259(1984) . . . .17 Edenfield v. Fane, 113 S. Ct. 1792 (1993) . . . .12, 19 Edge Broadcasting Co. v. United States, 5 F. 3d 59 (4th Cir. 1992), rev'd, 113 S. Ct. 2696 (1993) . . 13, 14 Falls City Indus., Inc. v. Vanco Beverage, Inc., 460 U. S. 428(1983) . . . . 17 44 Liquor Mart, Inc. v. Racine, 829 F. Supp. 543 (D. R. I. 1993) . . . . 17 Halter. Nebraska, 205 U.S. 34 (1907) . . . . 21 Healy v. The Beer Inst., 491 U.S. 324 (1989) . . . . 17 Hornell Brewing Co. v. Brady, 819 F. Supp. 1227 (E. D. N. Y. 1993) . . . . 21 Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U. S. 324(1964) . . . . 15 Kordel v. United States, 335 U.S. 345 (1948) . . . . 21 Metromedia, Inc. v. City of San Diego, 453 U.S. 490(1981 ) . . . . 22 New York State Liquor Authority v. Bellanca, 452 U. S. 714 (1981 ) . . . . 20 Oklahoma Telecasters Ass'n v. Crisp, 699 F.2d 490 (lOth Cir. 1983), rev'd sub nom. Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984) . . . .17 Posadas de Puerto Rico Assocs. v. Tourism Co., 478 U. S. 328 (1986 ) . . . . 16.18.22 ---------------------------------------- Page Break ---------------------------------------- v Cases - Continued: Page Princess Sea Indus., Inc. v. State, 635 P.2d 281 (Nev. 1981), cert. denied, 456 U.S. 926 (1982) . . 17 Queensgate Investment Co. v. Liquor Control Comm'n, 433 N.E.2d 138 (Ohio), appeal dis- missed, 459 U. S. 807 (1982) . . . .17 Rhode Island Liquor Stores Ass'n v. Evening Call Pub. Co., 497 A.2d 331 (R.I. 1985) . . . . 17 S & S Liquor Mart, Inc. v. Pastore, 497 A.2d 729 (R. L 1985) . . . . 17 San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522 (1987) . . . . 22 South Dakota. Dole, 483 U.S. 203 (1987) . . . .17 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987) . . . 15 United States v. Edge Broadcasting Co., 113 S. Ct. 2696 (1993 ) . . . . 13.14.15. 16,19,21-22 William Jameson & Co. v. Morgenthau, 25 F. Supp. 771 (D.D.C. 1938), vacated, 307 U.S. 171 (1939) . . . . 3 Constitution, statutes and regulations: U.S. Const.: Amend. I . . . . 2, 9, 13, 17, 19, 20, 27 Amend. XXI . . . . 6, 15 Federal Alcohol Administration Act, 27 U.S.C. 201 et seq . . . . 3 3,27 U. S. C. 203 . . . .3, 15 4,27 U. S. C. 204 . . . . 3 5,27 U. S. C. 205 . . . . 2, 3 5(e), 27 U. S. C. 205(e) . . . . 3, 4, 6 5(e)(2), 27 U.S.C. 205(e)(2) . . . . . passim 5(f), 27 U. S. C. 205(f) . . . . 3, 4, 5 5(f)(2), 27 U.S.C. 205(f)(2) . . . . 9, ll, l6, 2O, 2l 7,27 U. S. C. 207 . . . . 2 17(a)(7), 27 U. S. C. 211(a)(7) . . . .3 National Industrial Recovery Act, 15 U.S.C. 701 et seq . . . . 6 18 U. S. C. 1304 . . . . 13 18 U. S. C. 1307 . . . . 13 ---------------------------------------- Page Break ---------------------------------------- VI Statutes and regulations - Continued: Page Ala. Code28-3A-6(c) (1986) . . . . 24 Ky. Rev. Stat. Ann. $244.520 (Bobbs-Merrill 1981) . . . . 24, 25 Me. Rev. Stat. Ann. tit. 28-A, 71 l(l)(A) (West 1988) . . . . 24 Mass. Ann. Laws ch. 138, 15 (Law. Co-op. 1981) . . . . 26 Mo. Rev. Stat. 312.310 (SUPP. 1993) . . . .26 N.Y. Alto. Bev. Cent. Law App. 84.6(a) (McKinley 1987) . . . . 24 Ohio Rev. Code Ann. 4301.03(D) (SUPP. 1993) . . 24 Okla. Stat. Ann. tit. 37, 163.19(b) (West 1985) . . 26 Pa. Stat. Ann. tit. 47 (1969): 4-493 (7).... 24 4-493(8).... 21 C. Code Ann.61-13-800 (Law. Co-op. 1990) . . 24 S.D. Codified Laws Ann. 39-13-11 (1987) . . . . 24 Va. Code Ann. 4.1-103.8 (Michie 1993) . . . . 25 27 C. F. R.: Section 7.10 . . . . 3 Section 7.20(a) . . . .5 Section 7.26 . . . . 2 Section 7.26(a) . . . . 5 Section 7.26(b)-(d) . . . . 5, 23 Section 7.29 . . . . 2 Section 7.29(f) . . . .5 Section 7.29(g) . . . . 5 Sections 7.40-7.42 . . . .6 Section 7.50 . . . . 5 Section 7.54 . . . . 2 Section 7.54(c) . . . .5 Ale. Bev. Comm'n of Ind. Bull. 23 (Aug. 4, 1938) . .24 Ariz. Comp. Admin. R. & Regs. R4-1 5-220(6) (1990) . . . . 24 ---------------------------------------- Page Break ---------------------------------------- VII Regulations - Continued: Ark. Ale. Bev. Cont. Div. Regs. 2.17 (1991) . . . .26 Cal. Code Regs. tit. 4, 130(1990) . . . . 26 Colo. Code Regs. 46-112.3.C (1993) . . . .24 Corm. Agencies Regs. 30-6-A35(m) ( 1976) . . . .24 Del. Ale. Bev. Cent. Comm. Regs. Rule 13(b) (1991) . . . . 24 D.C. Mun. Regs. tit. 23, 910(1988) . . . .24 111. Admin. Code tit. 11, 100.70(b)(9) (1991) . . . .24 Kan. Admin. Regs. (1985): 14-7-2(c) . . . . 26 92-8-9a . . . . 26 Mich. Admin. Code r. 436.1611 (1989) . . . .24 Minn. R.7515.1110, subp. 2(1985 ) . . . .26 Mont. Admin. R. 42.13-201(2) (1993) . . . .26 N.J. Admin. Code tit. 13, $2-27.1 (1990) . . . . 24 Or. Admin. R. (1992): 845-10-205(2) . . . . 26 845-10-205(4) . . . . 26 R.1. Liq. Cont. Admin. Regs. No. 17 (1992) . . . .24 Tex. Admin. Code tit. 16, $ 45.79(1991) . . . . 24 Utah Admin. R. 96-1-3(3) (1991) . . . . 25 Va. Ale. Bev. Cont. Bd. Regs. 5(A)(3) (1991) . . . .25 W. Va. Non-Intox. Beer Comm'n Regs. 176-1-3.1 (1990) . . . . 25 Wis. Admin. Code 7.21 (Dep't of Revenue) (1991) . . . . 25 Miscellaneous: 76 Cong. Rec. 4565 (1933 ) . . . .6 54 Fed. Reg. (1989): p. 3591 . . . . 23 p. 3594 . . . . 23 ---------------------------------------- Page Break ---------------------------------------- VIII Miscellaneous - Continued: 58 Fed. Reg. 21,228 (1993 ) . . . .11 H.R. Rep. No. 1542, 74th Cong., 1st Sess. (1935) . . 6, 8 15, 18 Hearing Before the FA CA With Reference to Proposed Regulations Relative to the Labeling of Products of the Brewing Industry (Nov. 1, 1934) . . . . 7, 8, 16 Modern Brewery Age (Blue Book) (53rd ed. 1993) . . . . 24, 25, 26 S. Rep. No. 1215, 74th Cong., 1st Sess. (1935) . . . . 6, 8, 15 ---------------------------------------- Page Break ---------------------------------------- In the Supreme Court of the United States OCTOBER TERM, 1993 No. LLOYD BENTSEN, SECRETARY OF THE TREASURY, ET AL., PETITIONERS v. ADOLPH COORS COMPANY PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT The Solicitor General, on behalf of the Secretary of the Treasury, et al., respectfully petitions for a writ of cer- tiorari to review the judgment of the United States Court of Appeals for the Tenth Circuit in this case. OPINIONS BELOW The opinion of the court of appeals (App., infra, la-9a) is reported at 2 F. 3d 355. The prior opinion of the court of appeals (App., infra, 10a-31a) is reported at 944 F.2d 1543. JURISDICTION The judgment of the court of appeals was entered on August 23, 1993. A petition for rehearing was denied on December 1, 1993. App., infra, 55a-56a. On February 22, (1) ---------------------------------------- Page Break ---------------------------------------- 2 1994, Justice Ginsburg extended the time for filing a peti- tion for a writ of certiorari to and including March 31, 1994. On March 22, 1994, Justice Ginsburg further ex- tended the time for filing a certiorari petition to and in- cluding April 15, 1994. The jurisdiction of this Court is in- voked under 28 U.S.C. 1254(1). CONSTITUTIONAL, STATUTORY, AND REGULATORY PROVISIONS INVOLVED The First Amendment to the United States Constitution provides in pertinent part: "Congress shall make no law * * * abridging the freedom of speech." Section 5 of the Federal Alcohol Administration Act (FAAA), 27 U.S.C. 205, is reproduced at App., infra, 57a-65a. Section 7 of the FAAA, 27 U.S.C. 207, provides in per- tinent part: Any person violating any of the provisions of section * * * 205 of this title shall be guilty of a misdemeanor and upon conviction thereof be fined not more than $1,000 for each offense. The relevant portions of 27 C.F.R. 7.26, 7.29, and 7.54 are reproduced at App., infra, 66a-72a. STATEMENT This case concerns the constitutionality of Section 5(e)(2) of the Federal Alcohol Administration Act (FAAA or Act), which prohibits the disclosure of statements of alcohol content on the labels of malt beverages. 27 U.S.C. 205(e)(2). Congress enacted the labeling prohibition to curb "strength wars" among brewers of malt beverages that arose in the wake of the repeal of Prohibition. The Tenth Circuit held that the labeling restriction in Section 205(e)(2) violates the First Amendment. We seek review of ---------------------------------------- Page Break ---------------------------------------- 3 that holding, which not only strikes down an Act of Con- gress the validity of which has been assumed for almost 60 years, but also casts serious doubt on the constitutionality of similar labeling restrictions that have been adopted by the majority of the States. 1. a. The FAAA, 27 U.S.C. 201 et seq., was enacted "[i]n order effectively to regulate interstate and foreign commerce in distilled spirits, wine, and malt beverages, to enforce the twenty-first amendment, and to protect the revenue and enforce the postal laws with respect to dis- tilled spirits, wine, and malt beverages." 27 U.S.C. 203; see also Continental Distilling Corp. v. Shultz, 472 F.2d 1367, 1369-1370 (D.C. Cir. 1972); William Jameson & CO. v. Morgenthau, 25 F. Supp. 771, 774 (D.D.C. 1938) (three-judge court), vacated for lack of substantial federal question, 307 U.S. 171 (1939) (per curiam). To carry out those purposes, Sections 3 and 4 of the Act require certain participants in the alcoholic beverage industry (not in- cluding brewers) to obtain a permit from the Secretary of the Treasury. 27 U.S.C. 203,204. In addition, Section 5 of the Act, 27 U.S.C. 205, proscribes certain types of "[u]nfair competition" and "unlawful practices." 1 This case involves a challenge to the portions of Section 205(e) and Section 205(f) that prohibit statements of the alcohol content of malt beverages. 2 Section 205(e) requires ___________________(footnotes) 1 Neither the FAAA nor any other federal statute regulates the amount of alcohol that malt beverages may contain. That matter has been left to the States, consistent with the long "history of state regula- tion of alcoholic beverages" and Congress's solicitude for the States' broad discretion in this area. See Craig v. Boren, 429 U.S. 190, 205-206 (1976); see also California Retail Liquor Dealers Ass'n v. Midcal Aluminum, inc., 445 U.S. 97, 107 n. 10 (1980). In turn, many States restrict the alcohol content of malt beverages. See Defendants' Exhibit (DX) DA (at 272-273 (survey of state laws)). 2 The term "malt beverage" is defined by statute (27 U .S. C. 211 (a)(7)) and regulation (27 C.F. R. 7.10) as ---------------------------------------- Page Break ---------------------------------------- 4 the containers of alcoholic beverages to be labeled in conformity with such regulations * * * [of the Sec- retary] (2) as will provide the consumer with adequate information as to the identity and quality of the prod- ucts [and] the alcoholic content thereof (except that statements of, or statements likely to be considered as statements of, alcoholic content of malt beverages are prohibited unless required by State law * * *). Section 205(f) requires print and broadcast advertisements for alcoholic beverages to be in conformity with such regulations * * * [of the Secretary] (2) as will provide the consumer with ade- quate information as to the identity and quality of the products advertised [and] the alcoholic content there- of (except the [sic] statements of, or statements likely to be considered as statements of, alcoholic content of malt beverages and wines are prohibited). Both Sections 205(e) and 205(f), however, are designed to operate in a manner consistent with state laws governing ---------------------------------------- Page Break ----------------------------------------. [a] beverage made by the alcoholic fermentation of an infusion or decoction, or combination of both, in potable brewing water, or malted barley with hops, or their parts, or their products, and with or without other malted cereals, and with or without the ad- dition of unmalted or prepared cereals, other carbohydrates or products prepared therefrom, and with or without the addition of carbon dioxide, and with or without other wholesome products suitable for human food consumption. Thus, "malt beverage" encompasses all types of beer. For purposes of this case, it is important to distinguish the terms "malt beverage" and "malt liquor." While the term "malt beverage" includes "malt liquor," the latter term is not defined by the FAAA or regulations; rather, it is used in the industry to refer to the type of beer with the highest alcohol content. See App., infra, 7a n.4; C.A. App. 172. ---------------------------------------- Page Break ---------------------------------------- 5 wholly intrastate commerce in malt beverages. 3 Implementing regulations prohibit the disclosure of alcohol content on beer labels, except where disclosure is required by state law (27 C.F. R. 7.26(a), 7.29(g)), and they similarly prohibit the disclosure of alcohol content in print and broadcast beer advertising (27 C.F.R. 7.54(c)). The prohibitions cover both numerical designations of alcohol content and descriptive terms suggestive of high alcohol content, such as " `strong, ` `full strength,' `extra strength,' `high test,' `high proof,' [and] `full alcohol strength.' " 27 C.F.R. 7.54(c); see also 27 C.F.R. 7.29(f), (g). The pro- hibitions do not, however, preclude beer labels or other advertisements that identify a beer as "low" or "reduced" alcohol, "non-alcoholic," or "alcohol-f ree," in accordance with the Secretary's definition of those terms. 27 C. F. R. 7.26(b)-(d); see also 27 C.F.R. 7.29(f), 7.54(c). See p. 23, infra. The labeling prohibition is enforced by regulations requiring the bottlers of malt beverages to obtain certifi- ___________________(footnotes) 3 The penultimate paragraph of Section 205(f) provides in pertinent part: In the case of malt beverages, the provisions of this subsection and subsection (e) of this section shall apply to the labeling of malt beverages sold or shipped or delivered for shipment or otherwise introduced into or received in any State from any place outside thereof, or the advertising of malt beverages intended to be sold or shipped or delivered for shipment or otherwise in- troduced into or received in any State from any place outside thereof, only to the extent that the law of such State imposes similar requirements with respect to the labeling or advertising, as the case may be, of malt beverages not sold or shipped or de- livered for shipment or otherwise introduced into or received in such State from any place outside thereof. See also 27 C.F.R. 7.20(a), 7.50. ---------------------------------------- Page Break ---------------------------------------- 6 cates of label approval from the Secretary. 27 C.F. R. 7.40-7.42; see also 27 U.S.C. 205(e). b. Congress included restrictions in the FAAA on the disclosure of alcohol content in beer labeling and other advertising in order to curb "strength wars" among brewers that arose in the wake of the repeal of Prohibition by the Twenty-first Amendment. The FAAA replaced in- terim regulations under a voluntary code system that had been developed under the National Industrial Recovery Act and approved by the President for use after the repeal of Prohibition, pending the enactment of federal legisla- tion addressing problems in the alcoholic beverage in- dustry that could not adequately be addressed by the States.4 According to the committee reports on the bills that became the FAAA, the statute "[i]n general * * * in- corporates the greater part of the system * * * enforced by the Government under the codes." H.R. Rep. No. 1542, 74th Cong., 1st Sess. 4 (1935); S. Rep. No. 1215, 74th Cong., 1st Sess. 3 (1935). The Tenth Circuit accordingly recognized in its first decision in this case that the history of the regulations adopted under the code system is rele- vant to interpretation of the Act. App., infra, 17a n.4. The regulations initially proposed by the Federal Alcohol Control Administration (FACA) did not prohibit statements of alcohol content in beer labeling or advertis- ___________________(footnotes) 4 As discussed in the legislative history of the FAAA, the adoption of the Twenty-first Amendment "took place with unexpected speed." H. R. Rep, No. 1542, 74th Cong., 1st Sess. 3 (1935). The Amendment was proposed to the legislatures of the States by the Seventy-second Con- gress on February 20, 1933, and was ratified by the requisite number of States less than ten months later, on December 5, 1933. See ibid.; 76 Cong. Rec. 4565 (1933). Because Congress was not in session at that time, the President approved temporary regulation of the alcoholic beverage industry under the voluntary code system in order to fill the perceived regulatory vacuum. H .R. Rep. No. 1542, supra, at 3-4. ---------------------------------------- Page Break ---------------------------------------- 7 ing. Hearing Before the FACA With Reference to Pro- posed Regulations Relative to the Labeling of Products of the Brewing Industry (Nov. 1, 1934) (FACA Hearing), Clerk's Record (CR) 15, at 3-4. Instead, the proposed regulations prohibited only descriptive statements such as " `full strength', `extra strength', `high test', `high proof', [and] `prewar proof' ." Id. at 3. At the hearing on the pro- posed regulations, however, witnesses unanimously sup- ported a broader prohibition that would bar even seemingly objective numerical designations of alcohol content. For example, the first witness at the hearing, George McCabe, counsel to the Brewers Code Authority, stated (id. at 7): We would like a regulation of the F.A.C.A. which would outlaw any declaration of alcoholic content on labels for fermented malt liquors except in States where such a requirement is made by the State law. * * * [T]he alcoholic declaration has been productive of more deception than any one part of the label. Some brewers went haywire * * * and were trying to sell their beer on an alcohol basis, and they resorted, as you all know, to the use of all sorts of numbers and figures, numerals, to convey the impression that the beer contained an excessive amount of alcohol, which it did not contain. Mr. McCabe then read a letter from a major brewer, which he described as "fairly expressive of the general sen- timent of the industry," recommending that "all reference to alcoholic content * * * be eliminated from labeling [and] advertising," in light of the "trouble with this sort of thing during the past 18 months." Id. at 8. Other witnesses explained that, although "the legitimate brewer does not desire to sell his beer on the basis of alcohol," but rather "as a food product" (id. at 25), some brewers "seem[ed] to be of the opinion that to sell beer they should sell the ---------------------------------------- Page Break ---------------------------------------- 8 public alcohol" (id. at 29). The latter brewers' practice of disclosing alcohol content led "legitimate" brewers to con- clude that "in order to meet competition it was necessary to increase the alcoholic content of the[ir] beer." Id. at 59. The witnesses predicted that a prohibition on statements of alcohol content would "get * * * beer back to a low alcoholic content ." Id. at 73; see also id. at 33 ("if you just write the alcoholic content off the label, you are going to have a lower alcoholic content beer than you are if you re- quire the alcoholic content to be stated on the label"). The House committee report on the bill that became the FAAA expressed the judgment that "[m]alt beverages should not be sold on the basis of alcohol content ." H.R. Rep. No. 1542, supra, at 12. The report explained that "at- tempts to sell beer and other malt beverages on the basis of alcoholic content are attempts to take advantage of the ig- norance of the consumer and of the psychology created by prohibition experiences." Ibid. The report found that "[legitimate members of the industry have suffered seri- ously from unfair competition resulting from labeling and advertising" that states alcohol content. Ibid. The report also found that "irrespective of th[e] falsity" of such state- ments, "their abuse has grown to such an extent since repeal that the prohibition of all such statements is in the interest of the consumer and the promotion of fair com- petition." Id. at 12-13. More broadly, the report found, based on "[experience prior to prohibition," that the States "could not alone" protect their citizens from "unscrupulous advertising" and "deceptive labeling prac- tices," due to "the diversity of their laws and the fact that practically all alcoholic beverage producers and large-scale distributors did an interstate business." Id. at 2-3.5 ___________________(footnotes) 5 The Senate report similarly found that abusive "labeling or adver- ising" was one of the "serious social and political evils" that "were in large measure responsible for bringing on prohibition" and "that can- not be reached by the States." S. Rep. No. 1215, supra, at 6-7. ---------------------------------------- Page Break ---------------------------------------- 9 2. a. In April 1987, respondent, the Adolph Coors Company, applied to the Bureau of Alcohol, Tobacco and Firearms (ATF) within the Treasury Department for ap- proval of labels and advertisements that included state- ments of the alcohol content of Coors' beer. C.A. App. 6-10. ATF denied the application based on Sections 205(e)(2) and 205(f)(2). App., infra, 73a-74a. b. In July 1987, Coors filed this action against the Secretary and the Director of ATF in the United States District Court for the District of Colorado. Coors sought a declaratory judgment that the prohibition of alcohol content statements in Sections 205(e)(2) and 205(f)(2) and their implementing regulations violates the First Amend- ment; Coors also sought an injunction barring enforce- ment of those provisions. C.A. App. 5. On cross-motions for summary judgment, the district court held that the provisions violate the First Amendment, and it enjoined their enforcement. App., infra, 43a-54a. c. The Tenth Circuit reversed. App., infra, 10a-31a. It applied the four-part test articulated in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n, 447 U.S. 557 (1980), for analyzing restrictions on commercial speech.' The Tenth Circuit first determined that Sections 205(e)(2) and 205(f)(2) regulate lawful activity that is not mislead- ing. App., infra, 15a. The Tenth Circuit next held that those provisions are intended to further the federal ___________________(footnotes) 6 App., infra, 14a, quoting Central Hudson, 447 U.S. at 566: At the outset, we must determine whether the expression is pro- tected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted govern- mental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly ad- vances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest. ---------------------------------------- Page Break ---------------------------------------- 10 government's "substantial" interest in "maintain[ing] moderate levels of alcohol in beer in order to protect the consumer. " Id. at 19a.7 But the court held that there were disputed issues of fact with regard to the third and fourth parts of the Central Hudson test. Id. at 21a-31a.8 It ac- cordingly reversed the order granting summary judgment in favor of Coors and remanded to the district court for further proceedings. Id. at 3 la. 3. a. On remand, the government introduced exten- sive evidence concerning current conditions in the malt beverage industry. Much of that evidence related to the malt liquor segment of the industry. See, e.g., C.A. App. 171-193. The government's evidence demonstrated that a primary reason why people drink malt liquor instead of other types of beer is to get drunk, C.A. App. 80, 88. 9 and that malt liquor producers market their product by em- ___________________(footnotes) 7 The Tenth Circuit criticized the district court for "focus[ing] primarily on the validity of the asserted ends given the passage of time and changed circumstances." App., infra, 19a. The court of appeals found it "irrelevant that the circumstances giving rise to a particular piece of legislation have changed so long as the legislation continues to serve some valid and substantial government interest ." Id. at 20a. The court of appeals concluded that the government had advanced "a legitimate and substantial interest" here by identifying "a continuing danger of strength wars similar to those that existed in 1935." Ibid. 8 The court of appeals determined that "the record here does not unambiguously reflect a correct legislative judgment that the enacted means directly advance the intended ends. " App., infra, 21a. In the court's view, "the link between advertising and strength wars is not self-evident ," ibid., and there were "genuine issues of material fact underlying the question of whether * * * the complete prohibition of [statements of alcohol content] results in a `reasonable fit' between the legislature's goal and the means chosen to reach it," id. at 3 la. 9 See also, e.g., DXS AW (at 10), BZ (at 2), CD (at 9), CE (at 5), CI (at 19), CL (at II, 17); Deposition of Hubert Nelson (Nelson Dep.) 10. ---------------------------------------- Page Break ---------------------------------------- 11 phasizing its potency, C.A. App. 201.10 The evidence in- cluded numerous recent cases of marketing efforts that violated the regulations prohibiting statements of alcohol content. See, e.g., C.A. App. 171-193; DXS C, D, and O through X. That evidence was not limited to the malt li- quor segment of the market. C.A. App. 171, 174, 181, 187; DX AJ. It showed, for example, that Coors had dis- tributed wallet cards listing the alcohol content of its own beers and those of its competitors. C.A. App. 171, 197-198; DXS AZ, BA, BB. The district court upheld the advertising restriction in Section 205( f,)(2), but it struck down the labeling restric- tion in Section 205(e)(2). App., infra, 32a-42a. The court found that there was a continuing threat of strength wars that justified a prohibition on statements of alcohol con- tent in advertising, id. at 34a, but it regarded labeling as different because it believed that statements of alcohol content on labels would be used by consumers primarily to limit their intake of alcohol, id. at 37a. b. Coors did not challenge the district court's ruling upholding Section 205( f)(2)'s prohibition of alcohol con- tent statements in advertising. The government, by con- trast, did appeal from the district court's ruling striking down the labeling restriction in Section 205(e)(2). 11 c. A different panel of the Tenth Circuit affirmed. App., infra, 1a-9a. The panel began by rejecting the government's contention that it was required, under the ___________________(footnotes) 10 See also, e.g., DXS B, C, D, BT, CA, CD (at 4), CE (at 5), CL (at 17), CS (at 11); Nelson Dep. 15, 25, 33, 123. 11 ATF published an interim rule suspending enforcement of the regulatory provisions that implement the statutory labeling restric- tion. 58 Fed. Reg. 21,228 (1993). At the same time, ATF stated: "The Government continues to believe the [labeling] prohibition to be Con- stitutional. " Ibid. ---------------------------------------- Page Break ---------------------------------------- 12 third part of the Central Hudson test, to show only that Congress "reasonably believed" that the labeling restric- tion would further the goal of preventing strength wars. The court expressed the view that this Court, in Edenfield v. Fane, 113 S. Ct. 1792 (1993), had adopted a "much stricter" standard for applying the third part of the Central Hudson test. App., infra, 5a. The Tenth Circuit then held that, under the stricter test, the government had failed to show that the labeling re- striction furthers the goal of preventing strength wars "in a direct and material way. " App., infra, 7a.12 The court recognized that the legislative history supported Congress's judgment that the labeling restriction would "result[ ] over the long term in beers with a lower alcohol content. " Id. at 6a, quoting id. at 17a (first court of ap- peals decision). But focusing on perceived "changes in the malt beverage industry," the court determined that the government's evidence of a continuing threat of strength wars was insufficient in three ways. Id. at 6a-9a. First, the court discounted the evidence on the ground that it pri- marily concerned the malt liquor segment of the market. Id. at 7a. Second, the court believed that there was an "absence of any record evidence indicating that there are strength wars in states or other countries where alcohol content labeling is already required. " Id. at 8a. Finally, the court was unable to discern any evidence that "Coors would engage in a strength war if it were able to disclose the alcohol content of its malt beverages. " Id. at 8a-9a. 13 ___________________(footnotes) 12 The court accordingly found it unnecessary to decide whether Section 205(e)(2) satisfies the "reasonable fit" requirement of the fourth part of the Central Hudson test. App., infra, 9a n.6. 13 The Tenth Circuit rejected the government's petition for rehear- ing and suggestion of rehearing en bane. App., infra, 55a-56a. ---------------------------------------- Page Break ---------------------------------------- 13 REASONS FOR GRANTING THE PETITION The Tenth Circuit has declared unconstitutional a long- standing Act of Congress that prohibits the disclosure of alcohol content on the labels of malt-beverage containers. The Tenth Circuit's decision rests in part on an error similar to the one that this Court granted certiorari to cor- rect last term in United States v. Edge Broadcasting Co., 113 S. Ct, 2696, 2703 (1993). The Tenth Circuit here, like the Fourth Circuit in Edge Broadcasting, ignored that one of the goals underlying the challenged federal statute is to integrate its operation with a variety of state laws. The Tenth Circuit also erred by adopting a "much stricter" standard of review under the third part of the Central Hudson test than this Court has applied, and by ignoring historical and record evidence supporting the labeling restriction in Section 205(e)(2). The Tenth Circuit's errors warrant review by this Court, not only because the deci- sion below invalidates an Act of Congress that directly ad- vances the legitimate governmental interest in preventing strength wars, but also because it casts serious doubt on the validity of comparable labeling restrictions that have been adopted in the majority of the States. 1. a. In Edge Broadcasting, this Court granted certio- rari "[b]ecause the court below declared a federal statute unconstitutional and applied reasoning that was question- able under [the Court's] cases relating to the regulation of commercial speech. " 113 S. Ct. at 2703. The same is true here. At issue in Edge Broadcasting were the federal statutes (18 U.S.C. 1304 and 1307) that prohibit lottery advertising in States that do not operate lotteries but permit lottery advertising in States that do operate lotteries. 113 S. Ct. at 2700-2701. The Fourth Circuit held that the statutes vio- lated the First Amendment because, as applied to Edge Broadcasting, they "d[id] not directly advance the govern- mental interest asserted. " Edge Broadcasting Co. v. ---------------------------------------- Page Break ---------------------------------------- 14 United States, 5 F.3d 59, 62 (1992) (per curiam), rev'd, United States v. Edge Broadcasting Co., supra. The Fourth Circuit based its holding on the fact that Edge Broadcasting's listeners in North Carolina, a State that does not operate a lottery, were "inundated" with lottery advertisements from neighboring Virginia, which operates a lottery. Ibid. The Fourth Circuit decided that, with respect to that audience, the federal restriction provided only "ineffective or remote" support for "North Carolina's desire to discourage gambling." Ibid. This Court reversed the Fourth Circuit's holding. Edge Broadcasting, 113 S. Ct. at 2704. The Court emphasized that the fact upon which the Fourth Circuit had relied did not mean that the federal statutes provided only "remote" support for the goal of protecting the interests of non- lottery States like North Carolina; it meant, instead, that the statutes supported the additional goal of protecting the interests of States, like Virginia, that have state-sponsored lotteries (ibid. ): In response to the appearance of state-sponsored lot- teries, Congress might have continued to ban all radio or television lottery advertisements, even by stations in States that have legalized lotteries. This it did not do. * * * Instead of favoring either the lottery or the nonlottery State, Congress opted to support the anti- gambling policy of a State like North Carolina * * *. At the same time it sought not to unduly interfere with the policy of a lottery sponsoring State such as Virginia. * * * This congressional policy of balancing the interests of lottery and nonlottery States is the substantial governmental interest that satisfies Cen- tral Hudson, the interest which the courts below did not fully appreciate. Like the Fourth Circuit in Edge Broadcasting, the Tenth Circuit in this case did not fully appreciate the federal in- terests underlying Section 205(e)(2)'s prohibition of state- ---------------------------------------- Page Break ---------------------------------------- 15 ments of alcohol content on malt-beverage containers. The Tenth Circuit recognized that Congress's central goal was to prevent "strength wars" among the brewers of malt beverages. App., infra, 4a. The Tenth Circuit ignored, however, the clear evidence of congressional intent to pur- sue that goal in a manner that would respect and facilitate, and not supplant, state regulation of alcohol pursuant to the Twenty-first Amendment.14 Congress might have chosen to prevent strength wars by enacting federal restric- tions on the alcohol content of malt beverages, rather than restrictions on statements of their alcohol content. "This it did not do. " Edge Broadcasting, 113 S. Ct. at 2704.15 In- stead, Congress adopted a measure that reflects not only the goal of preventing strength wars but also the goal of respecting state authority over alcoholic beverages. The Tenth Circuit's first error was in failing to discern any "link between advertising and strength wars. " App., infra, 21a. There is a clear link, however, between dis- ___________________(footnotes) 14 One of the stated purposes of the FAAA is "to enforce the twenty-first amendment. " 27 U .S.C. 203; see also Arrow Distilleries, Inc. v. Alexander, 109 F.2d 397,401 (7th Cir.), cert. denied, 310 U.S. 646 (1940). The legislative history confirms that Congress was careful to adopt measures that were "appropriate and within the constitu- tional power of Congress, " in light of the Twenty-first Amendment's recognition of each State's authority over "[t]he transportation or im- portation * * * of intoxicating liquors" across its border "for delivery or use therein." S. Rep. No. 1215, 74th Cong., 1st Sess. 3 (1935); H.R. Rep. No. 1542, 74th Cong., 1st Sess. 4 (1935); see also Arrow Distilleries, 109 F.2d at 400-401. 15 Congress could reasonably have concluded that it had authority to impose federal limits on alcohol content pursuant to its power to regulate interstate commerce. See 324 Liquor Corp. v. Duffy, 479 U.S. 335, 346-347 (1987); Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 274-276 (1984); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714 (1984); California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 110 (1980); Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 331-332 (1964). ---------------------------------------- Page Break ---------------------------------------- 16 couraging the purchase of beer on the basis of its high alcohol content and prohibiting statements of alcohol con- tent in beer labeling and advertising. This Court has recog- nized as a matter of common sense that advertising stimu- lates consumer demand for the product being advertised. See Edge Broadcasting, 113 S. Ct. at 2707; Posadas de Puerto Rico Assocs. v. Tourism Co., 478 U.S. 328, 342 (1986); Central Hudson, 447 U.S. at 569. It should be equally self-evident that manufacturers are unlikely to compete with each other on the basis of a product char- acteristic that they cannot advertise. And if consumers cannot readily obtain information about a product's char- acteristic, they are unlikely to make purchases based on that characteristic. The Tenth Circuit also failed to consider the matrix of state laws that Congress intended to respect in enacting the FAAA. As an initial matter, Sections 205(e)(2) and 205(f)(2) operate in tandem with state labeling and adver- tising laws applicable to wholly intrastate commerce in malt beverages. See pp. 4-5 & note 3, supra, and pp. 23-27, infra. In addition, as witnesses at the FACA Hearing in 1934 explained, state alcohol regulations at that time (as now) often included restrictions on the alcohol content of malt beverages. FACA Hearing 10-11, 38-39, 60, 62, 75-76. Those restrictions differed from State to State (and con- tinue to do so, see DX DA (at 272-273)). If a State imposes a restriction on alcohol content, the restriction reflects a judgment by that State regarding the maximum alcohol content appropriate for the health and welfare of its citizens. The FAAA's restrictions on the disclosure of alcohol content give effect to such a judgment by an in- dividual State by making it less likely that a citizen of that State will travel to another State to purchase beer with a ---------------------------------------- Page Break ---------------------------------------- 17 higher alcohol content. 16. In this respect, the FAAA provi- sions operate like the federal statute at issue in South Dakota v. Dole, 483 U.S. 203, 205 (1987), which condi- tioned federal highway funds on a State's enactment of ___________________(footnotes) 16 In a related context, this Court has recognized that People cross state lines to purchase beer at lower prices. See Healy v. The Beer Inst., 491 U.S. 324, 326 (1989); Falls City Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 437 & n.8 (1983). lt. is just such be- havior, which reflects the close connection between consumer pur- chasing decisions and product information, that has led the lower federal courts and the state courts to uphold, against First Amend- ment challenges, state restrictions on price advertising of alcoholic beverages. See Queensgate Investment Co. v. Liquor Control Comm'n, 433 N.E.2d 138 (Ohio) (per curiam), appeal dismissed for want of a substantial federal question, 459 U.S. 807 (1982); S & S Liquor Mart, Inc. v. Pastore, 497 A.2d 729 (R. 1. 1985); Rhode Island Liquor Stores Ass'n v. Evening Call Pub. Co., 497 A.2d 331 (R. 1. 1985). "Common sense tells us that a lifting of the ban on price adver- tising will lead to a more competitive market ." 44 Liquor Mart, Inc. V. Racine, 829 F. Supp. 543, 554 (D.R.I. 1993); accord S & S Liquor Mart, 497 A.2d at 735. Part of the reason such restrictions reduce the consumption of alcohol, of course, is that they prevent alcohol ven- dors from engaging in price competition. Just as alcohol price adver- tising restrictions prevent "price wars," so too do alcohol content re- strictions prevent "strength wars. " The Tenth Circuit's contrary con- clusion therefore cannot be squared with the case law concerning re- strictions on price advertising. Cf. Capital Broadcasting Co. v. Mitchell, 333 F. Supp. 582 (D.D.C. 1971) (upholding against First Amendment challenge ban on broadcast of cigarette advertising), aff'd mem., 405 U.S. 1000 (1972); Dunagin v. City of Oxford, 718 F.2d 738 (5th Cir. 1983) (upholding against First Amendment challenge prohibition of most forms of alcohol sign advertising), cert. denied, 467 U.S. 1259 (1984); Oklahoma Telecasters Ass'n v. Crisp, 699 F.2d 490 (lOth Cir. 1983) (rejecting First Amendment challenge to prohibition of all alcohol advertising except for one storefront sign), rev'd on other grounds sub nom. Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984); Princess Sea Indus., Inc. v. State, 635 P.2d 28 I (Nev. 1981) (upholding against First Amendment challenge re- strictions on brothel advertising), cert. denied, 456 U.S. 926 (1982). ---------------------------------------- Page Break ---------------------------------------- 18 laws prohibiting people under 21 years of age from possessing alcoholic beverages. This Court upheld that ex- ercise of Congress's spending power, holding that the con- dition was "directly related to one of the main purposes for which highway funds are expended - safe interstate travel. " Id. at 208. In sum, the Tenth Circuit failed to identify the full governmental interests underlying the challenged federal statute, as did the Fourth Circuit in Edge Broadcasting. The federal restrictions on statements of alcohol content directly advance Congress's goals of ensuring that "[m]alt beverages should not be sold on the basis of alcohol con- tent ," H.R. Rep. No. 1542, 74th Cong., 1st Sess. 12 (1935), and supplementing state restrictions on labeling, advertising, and alcohol content. b. Furthermore, the Tenth Circuit applied the wrong standard in analyzing Section 205(e)(2) under the third part of the Central Hudson test. The government ac- knowledged below that, under that part of the test, it was required to show that Section 205(e)(2) "directly advances" the interest in preventing strength wars among malt beverage producers. 92-1348 Gov't C.A. Br. 23. The government emphasized, however, that such a showing is not limited to evidence regarding current conditions in the beer industry; the court also had to consider whether "Congress `reasonably]' believed, `when it enacted the [labeling] restrictions at issue here,' that the statutory pro- hibition would further its objective." Ibid., quoting Posadas, 478 U.S. at 341-342. The government ac- cordingly argued that both the legislative history of the labeling restriction and the evidence in the record regard- ing current conditions support the conclusion that the restriction directly advances the asserted governmental in- terest. ---------------------------------------- Page Break ---------------------------------------- 19 The Tenth Circuit rejected that position. It read this Court's decision in Edenfield v. Fane, 113 S. Ct. 1792 (1993), as adopting a "much stricter" standard for apply- ing the third part oft he Central Hudson test. App., infra, 5a. Applying a heightened standard, the court accorded no weight to the historical evidence, even though the court recognized that it supports Congress's judgment that the labeling restriction in Section 205(e)(2) would "result[ J over the long term in beers with a lower alcohol content ." Id. at 6a, quoting id. at 17a. Instead, based on perceived "changes in the malt beverage industry" (id. at 6a), the court required the government to demonstrate the "con- tinuing validity" of that judgment (id. at 7a). The Tenth Circuit misread Edenfield. Edenfield did not purport to heighten the showing required under the third part of the Central Hudson test, and the subsequent deci- sion in Edge Broadcasting confirms that the third part of the Central Hudson test remains the same. 113 S. Ct. at 2704. Nor does Edenfield sanction the Tenth Circuit's disregard (App., infra, 6a-9a) of the historical evidence supporting Section 205(e)(2) in its second decision. See Burson v. Freeman, 112 S. Ct. 1846, 1856 (1992) (plurali- ty); cf. id. at 19a (first court of appeals decision). Indeed, the Tenth Circuit would have been justified in analyzing Section 205(e)(2) under a less stringent standard than this Court has required in Central Hudson and its progeny. Unlike the provisions at issue in those decisions, Section 205(e)(2) was intended to facilitate the enforce- ment of state laws regulating alcoholic beverages. In Cali- fornia v. LaRue, 409 U.S. 109 (1972), this Court held that, in a First Amendment challenge, such state laws are en- titled to an "added presumption in favor of * * * validity." Id, at 118; see id. at 114 ("the broad sweep of the Twenty- first Amendment has been recognized as conferring some- thing more than the normal state authority over public ---------------------------------------- Page Break ---------------------------------------- 20 health, welfare, and morals"); see also, e.g., City of Newport v. Iacobucci, 479 U.S. 92,95 (1986) (per curiam); New York State Liquor Authority v. Bellanca, 452 U.S. 714 (198 1) (per curiam); Doran v. Sa/em Inn, Inc., 422 U.S. 922, 932-933 (1975). The same should hold true in a First Amendment challenge to federal laws, such as Sec- tion 205(e)(2), that complement state alcohol laws. To conclude otherwise would mean that a state law could be upheld while a federal law necessary to effective enforce- ment of the state law could be invalidated. Such a result would be particularly anomalous where, as here, the operation of the federal law and numerous state laws is closely integrated. See pp. 24-27, infra. c. The Tenth Circuit's primary criticism of the govern- ment's showing under the third part of the Central Hudson test was that it "relie[d] primarily" on evidence regarding the malt liquor segment of the malt beverage industry. App., infra, 7a. 17 The Tenth Circuit believed that evidence of a risk of strength wars among malt liquor producers did not justify a labeling restriction covering the entire in- dustry. Ibid, The Tenth Circuit's analysis was flawed. In the first place, the Tenth Circuit's analysis is at odds with the district court's unchallenged holding that the advertising restriction in Section 205(f)(2), which applies to all malt beverages, satisfies the third part of the Central Hudson test. App., infra, 34a. There is nothing in law or logic to support the conclusion that the same evidence that sustained the advertising restriction in Section 205(f)(2) does not also sustain the labeling restriction in Section ___________________(footnotes) 17 The government also presented evidence Of unlawful statements of alcohol content outside the malt liquor segment of the market, in- cluding evidence concerning Coors' use of "wallet cards" comparing the alcohol content of its beers to those of its competitors. See C.A. App. 171, 174, 181-182, 186-187. The Tenth Circuit ignored that evi- dence. ---------------------------------------- Page Break ---------------------------------------- 21 205(e)(2). See Kordel v. United States, 335 U.S. 345, 351 (1948) ("Every labeling is in a sense an advertisement."); Halter v. Nebraska, 205 U.S. 34 (1907); see also Hornell Brewing Co. v. Brady, 819 F. Supp. 1227, 1237 (E. D.N. Y. 1993); Pa. Stat. Ann. tit. 47, 4-493(8) (1969) (making it unlawful to publish or post "any advertisement of any malt or brewed beverage including a label" referring to alcoholic strength) (emphasis added). The Tenth Circuit also erred by considering the labeling restriction in Section 205(e)(2) in isolation, without regard to the advertising restriction in Section 205(f)(2). The Tenth Circuit found the evidence insufficient to show that, in the absence of Section 205(e)(2), there would be strength wars. Even assuming that Section 205(e)(2) were insufficient by itself to prevent strength wars, however, that would not condemn the provision. Congress did not intend Section 205(e)(2) to bear that burden on its own. Section 205(e)(2) was intended to act in concert with Sec- tion 205( f)(2)'s restriction upon advertising. d. In any event, the Tenth Circuit should have anal- yzed the question of whether Section 205(e) (2)'s prohibi- tion of malt beverage alcohol content statements was over- ly broad (insofar as it applies to all types of beer and not just malt liquor) under the fourth (not the third) part of the Central Hudson test. The fourth part examines whether the challenged provision is "more extensive than is necessary" to achieve its asserted purpose. Board of Trustees v. Fox, 492 U.S. 469,475-481 (1989). If the Tenth Circuit had properly examined the matter under the fourth part of the Central Hudson test, it would have been obli- gated to accord substantial deference to Congress's judg- ment on the "fit" between the legislative means and the legislative ends. Id. at 479-481; see Edge Broad- ---------------------------------------- Page Break ---------------------------------------- 22 casting, 113 S. Ct. at 2707; San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522, 539 (1987); Posadas, 478 U.S. at 341-342; Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 509 (198 1). There plainly is a reasonable fit between the pro- hibition of statements of alcohol content on beer labels and Congress's goal of preventing strength wars. The Tenth Circuit thought that Congress could prevent strength wars equally effectively by prohibiting statements of alcohol content only with respect to malt liquor, and not with respect to other types of beer. See App., infra, 7a-8a. Congress, however, could reasonably have conclud- ed otherwise. Congress's concern was not about a par- ticular type of beer; its concern was about a particular type of beer-drinker: people who, in the absence of a prohibi- tion on the disclosure of alcohol content, would choose a beer based on its alcohol strength. A universal labeling ban - i. e., one applicable to all types of malt beverages - would more effectively prevent those people from choosing a malt beverage based on its high alcohol content than would a ban applicable only to malt liquor. First, a universal labeling ban would generally prevent consumers from knowing with certainty even that malt li- quors, as a category, have higher alcohol content than other types of beer. 11 Tr. 194 (testimony of Coors official that "there are a percent of consumers who do not current- ly know that certain categories of beer have more or less alcohol"). In addition, a universal labeling ban would generally prevent consumers from choosing among brands of any type of malt beverage on the basis of their high alcohol content. The differing operation of the universal labeling ban and a ban applicable only to malt liquor can be illustrated ---------------------------------------- Page Break ---------------------------------------- 23 by considering people who have just reached legal drink- ing age. Those young people, like many alcohol consumers at the end of Prohibition, may have a pent-up desire for intoxicating beverages. The young drinkers may not know that malt liquor is the type of beer with the highest alcohol content. They would readily be able to figure that out, however, if the disclosure of alcohol content was pro- hibited only with respect to beers the alcohol content of which exceeded a certain number. 18 The fit between the labeling restriction in Section 205(e)(2) and the goal of preventing strength wars cannot be challenged on the ground that the restriction prevents persons from choosing beer on the basis of its low alcohol content. ATF has construed Section 205(e)(2) to permit brewers to label and advertise their beers as "reduced alcohol" and "low alcohol." 54 Fed. Reg. 3591, 3594 (1989) (adding 27 C.F.R. 7.26(b)-(d)). Thus, Section 205(e)(2) only prevents people from selecting any type of beer because of its high alcohol content.19 2. Review of the Tenth Circuit's decision is warranted because it invalidates an Act of Congress that has gov- erned the labeling of malt beverages for almost sixty years. Review is warranted for the additional reason that the decision below casts serious doubt on the constitutionality ___________________(footnotes) 18 For example, if the disclosure of alcohol content was prohibited with respect to beer that contained more than 5% alcohol, and was re- quired for beer that contained 5% or less alcohol, a consumer could safely conclude that beer that did not disclose its alcohol content con- tained more than 5% alcohol. 19 The court of appeals also erred in believing that there was no evi- dence from other countries to support the effectiveness of the labeling restriction in preventing strength wars. App., infra, 8a. In fact, there was evidence in the record concerning Canada and Britain, where dis- closure of alcohol content is permitted, suggesting that the labeling ban has the effect of preventing strength wars. C.A. App. 156, 220. ---------------------------------------- Page Break ---------------------------------------- 24 of numerous state laws that prohibit statements of alcohol content on malt-beverage containers. Twenty-one States and the District of Columbia pro- hibit statements of alcohol content on the labels of some or all types of beer. 20 Included in this category is Utah, ___________________(footnotes) 20 Ala. Code 28-3A-6(c) (1986) (requiring brewers to file federal certificates of label approval with the State); Ariz. Comp. Admin. R. & Regs. R4-1 5-220(6)(1990) (requiring compliance with federal label- ing requirements); Corm. Agencies Regs. 30-6-A35(m) (1976) (ex- pressly incorporating federal labeling requirements as state law); Del. Ale. Bev. Cent. Comm. Regs. Rule 13(b) ( 1991) (requiring compliance with federal labeling requirements); D.C. Mun. Regs. tit. 23, 910 (1988) (incorporating federal labeling provisions in part); Modern Brewery Age (Blue Book) 267 (53rd ed. 1993) (digest of alcohol label- ing requirements for D.C. ); Ill. Admin. Code tit. 11, 100.70(b)(9) (1991) (no beer containers "shall have affixed thereto any label or statement showing the alcoholic content thereof"); Ale. Bev. Comm'n of Ind. Bull. 23 (Aug. 4, 1938) (malt beverage labels may not indicate alcohol content by numerals or descriptive terms); Ky. Rev. Stat. Ann. $244.520 (Bobbs-Merrill 1981) (malt beverage labels may not "refer[ ] in any manner to the alcoholic strength"); Me. Rev. Stat. Ann. tit. 28-A, 711(l)(A) (West 1988) (malt beverage labels may not "refer[ ] in any manner to the alcohol content"); Mich. Admin. Code r. 436.1611 (1989) (requiring compliance with federal labeling re- quirements); N.J. Admin. Code tit. 13, $2-27.1 (1990) (requiring compliance with federal labeling requirements); N.Y. Alto. Bev. Cent. Law App. 84.6(a) (McKinney 1987) (prohibiting disclosure of alcohol content on malt beverage labels); Ohio Rev. Code Ann. 4301.03(D) (Supp. 1993); Pa. Stat. Ann. tit. 47, 4-493(7) (1969) (malt beverage labels may not "in any manner refer[ ] to the alcoholic contents"); R. 1. Liq. Cent. Admin. Regs. No. 17(1992) (federal label- ing requirements "will be enforced" by State); S.C. Code Ann. $61-13-800 (Law. Co-op. 1990) (requiring compliance with federal labeling requirements); S.D. Codified Laws Ann. $39-13-11 (1987) (compliance with federal labeling requirements deemed compliance with state law); Modern Brewery Age, supra, at 271 (indicating that South Dakota requires malt beverage labels to state "[n]ot over 3.2070 alcohol by weight, " apparently precluding other statements of alcohol content); Tex. Admin. Code tit. 16, 45.79 (1991) ("[t]he alcoholic ---------------------------------------- Page Break ---------------------------------------- 25 which is located in the Tenth Circuit. Several States in this category, including Utah, expressly incorporate Section 205(e)(2) of the FAAA or its implementing regulations. 21 It is far from clear that any of the laws in this category would be upheld under the Tenth Circuit's analysis, even if they were accorded the "added presumption * * * of * * * validity" articulated in California v. LaRue, 409 U.S. at 118. In addition, 20 States have adopted Section 205(e) (2)'s prohibition on alcohol content labeling by acquiescence - i.e., by not requiring such statements on labels as a matter of state law.22 Two of those States, Wyoming and New ___________________(footnotes) content * * * shall not be stated" on malt beverage labels); Utah Admin. R. %-1-3(3) (1991) (requiring compliance with federal label- ing requirements); Va. Ale. Bev. Cent. Bd. Regs. 5(A)(3) (1991) (re- quiring compliance with federal labeling requirements); cf. Va. Code Ann. $ 4.1-103.8 (Michie 1993) (Board may by regulation establish labeling requirements); W. Va. Non-Intox. Beer Comm'n Regs. 176-1-3.1 (1990) ("[t]here shall not be any statement as to alcoholic content on the bottle and can label" of malt beverages); Wis. Admin. Code 7.21 (Dep't of Revenue) (1991) (requiring compliance with federal labeling requirements). 21 See statutes and regulations cited in note 20, supra, for Alabama, Arizona, Connecticut, Delaware, Michigan, New Jersey, South Carolina, Utah, Virginia, and Wisconsin. 22 See Modern Brewery Age, supra, at 266-272, which indicates that the federal prohibition of malt beverage alcohol content statements on labels has been adopted, by virtue of the State's not requiring such statements, in 19 States: Alaska, Florida, Georgia, Hawaii, Iowa, Kentucky, Louisiana, Maryland, Massachusetts (with respect to malt beverages containing more than 3.2% alcohol by weight), Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Tennessee, Vermont, and Wyoming. Our research in- dicates that there are two additional States, Idaho and Washington, that adopt the federal prohibition by acquiescence, but that Kentucky has enacted its own statute prohibiting statements of alcohol content on malt-beverage containers, rather that simply acquiescing in the federal prohibition. See Ky. Rev. Stat. Ann. $244.520 (Bobbs-Merrill 1981). ---------------------------------------- Page Break ---------------------------------------- 26 Mexico, are in the Tenth Circuit. The effect of the Tenth Circuit's decision is to invalidate a prohibition that has previously been in effect in those two States and to create uncertainty regarding the regulatory framework in the other 18 States as well. See note 20, supra. Finally, 10 States require an alcohol content statement on labels of malt-beverage containers, but in most cases only with respect to beer above or below a certain alcohol percentage. 23 Included in this category are the two remain- ing Tenth Circuit States: Kansas and Oklahoma. The deci- sion below casts doubt on the validity of those laws insofar as they prohibit alcohol content statements on the labels of some beer. In sum, the vast majority of the States prohibit state- ments of alcohol content on malt beverage labels at least ___________________(footnotes) 23 Ark. Ale. Bev. Cont. Div. Regs. 2.17 (1991) (requiring malt beverages containing more than 5% alcohol by weight to be labeled as such); Cal. Code Regs. tit. 4, 130 (1990) (prohibiting alcohol content statements on labels of malt beverages containing more than 4% alcohol by weight); Colo. Code Regs. 46- 112.3 .C (1993) (malt beverage labels must indicate that alcohol content is not more than 3.2% by weight); Kan. Admin. Regs. 14-7-2(c), 92-8-9a (1985) (malt beverage labels must state "does not contain more than 3.2% alcohol by weight"); Mass. Ann. Laws ch. 138, 15 (Law. Co-op. 198 1) (malt beverages containing 3.2070 alcohol by weight or less "shall be so labeled"); Minn. R. $7515.1110, subp. 2 (1985) (malt beverage labels must state "contains not more than 3.2 percent of alcohol by weight"); Mo. Rev. Stat. { 312.310 (Supp. 1993) (malt beverage labels must state "alcoholic content not in excess of [3 .2 by weight or 4V'O by volume]"); Mont. Admin. R. 42. 13-201(2) (1993) ("[alcohol con- tent by weight must be noted on the labels of all malt beverages" con- taining more than 7% alcohol by weight); Okla. Stat. Ann. tit. 37, 163. 19(b) (West 1985) (malt beverage labels may not indicate that alcohol content exceeds 3.2% by weight); Or. Admin. R. 845-10-205(2), (4) (1992); Modern Brewery Age, supra, at 270-271 (Oregon requires disclosure of alcohol content on labels of malt beverages containing more than 4% alcohol by weight). ---------------------------------------- Page Break ---------------------------------------- 27 under certain circumstances, either by positive law or by acquiescing in Section 205(e) (2)'s prohibition. As a result, the First Amendment issue raised by this case is of signifi- cant and far-reaching importance for numerous States as well as the United States. Review by this Court therefore is warranted. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. DREW S. DAYS, Solicitor General FRANK W. HUNGER Assistant Attorney General EDWIN S. KNEEDLER Deputy Solicitor General RICHARD H. SEAMON Assistant to the Solicitor General APRIL 1994 ---------------------------------------- Page Break ---------------------------------------- APPENDIX A UNITED STATES COURT OF APPEALS TENTH CIRCUIT No. 92-1348 ADOLPH COORS COMPANY, PLAINTIFF-APPELLEE v. LLOYD BENTSEN, * IN HIS OFFICIAL CAPACITY AS SECRETARY OF THE UNITED STATES DEPARTMENT OF TREASURY; AND STEVE HIGGINS. IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE BUREAU OF ALCOHOL, TOBACCO AND FIREARMS, DEFENDANTS-APPELLANTS AND SPEAKER AND BIPARTISAN LEADERSHIP OF THE U.S. HOUSE REPRESENTATIVES. INTERVENOR-DEFENDANT Aug. 23, 1993 Before TACHA and BARRETT, Circuit Judges, and BROWN, District Judge.** ___________________(footnotes) * Lloyd Bentsen is substituted for Nicholas Brady pursuant to Fed. R. App.P 43(c)(l). ** Honorable Wesley E. Brown, Senior District Judge, United States District Court for the District of Kansas, sitting by designation. (la) ---------------------------------------- Page Break ---------------------------------------- 2a TACHA, Circuit Judge. Appellants (collectively referred to as the "Govern- ment") appeal a district order declaring the portion of 27 U.S.C. 205(e)(2) which prohibits statements of alcohol content on malt beverage labels to be an unconstitutional restraint on commercial speech in violation of the First Amendment. The Government also appeals the court's order enjoining the Government from enforcing that pro- vision. We exercise jurisdiction under 28 U.S.C. 1291 and affirm. I. Background Congress enacted the Federal Alcohol Administration Act ("Act"), 27 U.S.C. 201-211, in 1935 after the repeal of Prohibition. The Act contains comprehensive regula- tions of the alcoholic beverage industry, including provi- sions that were intended to remedy industry practices which Congress had determined were unfair, deceptive, and harmful to both competitors and consumers. Two such provisions prohibit statements of alcohol content on malt beverage. 1 labels and advertisements unless such dis- closures are required by state law. 27 U.S.C. 205(e)(2), (0(2).2 ___________________(footnotes) 1 "Malt beverage" is defined at 27 C.F.R. 7.10. 2 Section 205 provides in relevant part: It shall be unlawful for any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer or wholesaler, of distilled spirits, wine, or malt beverages . . . directly or indirectly or through an affiliate: ***** (e) Labeling To sell or ship or deliver for sale or shipment, or otherwise in- troduce in interstate or foreign commerce, or to receive therein, ---------------------------------------- Page Break ---------------------------------------- 3a In 1987, Adolph Coors Co. ("Coors") sought the Bureau of Alcohol, Tobacco and Firearm's approval for proposed labels and advertisements that disclosed the alcohol content of its malt beverages. The bureau denied the request pursuant to 205(e)(2) and (f)(2). Coors then brought this action to challenge the decision, arguing that the provisions impose an unconstitutional restraint on commercial speech in violation of the First Amendment. The district court granted summary judgment for Coors and the Government appealed. On appeal, we evaluated ___________________(footnotes) or to remove from customs custody for consumption, any dis- tilled spirits, wine, or malt beverages in bottles unless such pro- ducts are bottled, packaged, and labeled in conformity with such regulations, to be prescribed by the Secretary of the Treasury, with respect to packing, marking, branding, and labeling and size and fill of container . . . (2) as will provide the consumer with adequate information as to the identity and quality of the prod- ucts, the alcoholic content thereof (except that statements of, or statements likely to be considered as statements of, alcoholic con- tent of malt beverages are prohibited unless required by State law . . . . ). ***** (f) Advertising To publish or disseminate or cause to be published or dissemi- nated by radio broadcast, or in any newspaper, periodical or other publication or by any sign or outdoor advertisement or any other printed or graphic matter, any advertisement of distilled spirits, wine, or malt beverages, if such advertisement is in, or is calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail, unless such advertisement is in conformity with such regulations, to be prescribed by the Secretary of the Treasury, . . . (2) as will provide the consumer with adequate in- formation as to the identity and quality of the products adver- tised, the alcoholic content thereof (except the statements of, or statements likely to be considered as statements of, alcoholic con- tent of malt beverages and wines are prohibited) . . . . 27 U.S.C. 205 (emphasis added). ---------------------------------------- Page Break ---------------------------------------- 4a the provisions under the four-part test for restrictions on commercial speech set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 100 S. Ct. 2343, 65 L. Ed.2d 341 (1980): At the outset, we must determine whether the expres- sion is protected by the First Amendment. For com- mercial speech to come within that provision, it at least must concern lawful activity and not be mislead- ing. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest. Id. at 566, 100 S. Ct. at 2351. Applying the first two parts of the test, we concluded that the proposed labels and advertisements were commercial speech protected by the First Amendment and that the Government had asserted a legitimate and substantial interest in preventing strength wars among malt beverage brewers. See Adolph Coors Co. v. Brady, 944 F.2d 1543, 1547-49 (lOth Cir. 1991) ("Coors l"). We reversed and remanded, however, holding that there were genuine issues of material fact as to whether the statutory prohibitions directly advance the Government's interest in preventing strength wars and whether there is a reasonable fit between the Government's asserted interest and the complete prohibitions imposed by the statute. See id. at 1554. After conducting a trial on remand, the district court held that the relevant portion of 205(f)(2) is constitu- tional, but that the portion of 205(e)(2) which prohibits statements of alcohol content on malt beverage labels im- poses an unconstitutional restraint on commercial speech ---------------------------------------- Page Break ---------------------------------------- 5a in violation of the First Amendment because it neither directly advances nor reasonably fits the goal of pre- venting strength wars. The Government now appeals the district court's judgment with respect to 205(e)(2) and we limit our review to that provision. 11. Discussion The Government has the burden of proving that the labeling prohibition of 205(e)(2) directly advances its in- terest in preventing strength wars. 3 We stated in Coors I that the Central/ Hudson test requires "an immediate con- nection between the prohibition and the government's asserted end. If the means-end connection is tenuous or highly speculative, the regulation cannot survive constitu- tional scrutiny. " 944 F.2d at 1549 (internal quotations omitted). The Government challenges this standard on ap- peal and, relying on Posadas de Puerto Rico Association v. Tourism Co., 478 U.S. 328, 106 S. Ct. 2968, 92 L. Ed.2d 266 (1986), argues that the Government need only demon- strate that Congress reasonably believed that the statutory prohibition would further its objective when it enacted the labeling restriction. See id. at 341-42, 106 S. Ct. at 2976-77. Since the Government filed its appellate brief, however, the Supreme Court has decided Edenfield v. Fan, _ Us. 13 S. Ct. 1792, 123 L. Ed.2d 543 (1993), in which articulates a standard that is consistent with our pronouncements in Coors I and much stricter than the "reasonably believed" standard the Government would have us adopt. In Edenfield, the Court stated that, under this third prong of the Central Hudson test, courts must ___________________(footnotes) 3 The parties do not dispute that the labeling of malt beverages' alcohol content is protected commercial speech under the first part of the Central Hudson test or that the Government has a substantial in- terest in preventing strength wars under the second part. ---------------------------------------- Page Break ---------------------------------------- 6a determine "whether the challenged regulation advances [the government's] interests in a direct and material way." Id., at _ 113 S. Ct. at 1798. It went on to say that the party restricting commercial speech carries the burden of justifying the restriction and that "[t]his burden is not satisfied by mere speculation or conjecture; rather, a governmental body seeking to sustain a restriction on commercial speech must demonstrate that the harms it recites are real and that its restriction will in fact alleviate them to a material degree." Id., at , 113 S. Ct. at 1800. This burden also applies to prophylactic regulations like the challenged prohibition in 205(e)(2) where the Government prohibits conduct at the outset rather than waiting until harm has occurred. Id., at _, 113 S. Ct. at 1803 (prophylactic ban "in no way relieves the State of the obligation to demonstrate that it is regulating speech in order to address what is in fact a serious problem and that the preventative measure it proposes will contribute in a material way to solving that problem"). The Government asserts that the prohibition on speech contained in 205(e)(2) was imposed to prevent strength wars among malt beverage manufacturers. This assertion is supported by the Act's legislative history which contains testimony "that labels displaying alcohol content resulted in a strength war wherein producers competed for market share by putting increasing amounts of alcohol in their beer." Coors I, 944 F.2d at 1548. There was also hearing testimony "that not disclosing the alcohol content on malt beverages would relieve marketplace pressures to produce beer on the basis of alcohol content, resulting over the long term in beers with a lower alcohol content." Id. The Government argues that, despite changes in the malt beverage industry and market since 1935, 205(e)(2) directly advances its crusade against the continuing danger of strength wars. After reviewing the record, we conclude ---------------------------------------- Page Break ---------------------------------------- 7a that, although the Government's interest in preventing strength wars is legitimate and is within its regulatory authority, the prohibition in 205(e)(2) does not advance this interest in a direct and material way. The Government relies primarily on anecdotal evidence that malt beverage manufacturers already are competing and advertising on the basis of alcohol strength in the malt liquor sector of the market. 4 The record contains evidence that consumers who prefer malt liquor do so primarily be- cause of its higher alcohol content and that a number of manufacturers have tried to advertise malt liquor - in violation of the regulations - by using descriptive terms such as "power, " "strong character," "dynamite," and "bull" to tout its alcohol strength. On the basis of this evidence, the Government makes an inferential and con- clusory argument that the "experience of the malt liquor industry establishes the continuing validity of the statutory scheme" as applied to all malt beverages as well as "the very real danger of strength wars if the labeling ban is struck down ." This argument is unavailing. Although the evidence may support the Government's assertion that there is a continu- ing threat of strength wars which it aims to prevent, Coors does not contest either the existence of such a threat or the Government's interest in preventing strength wars. The critical question is whether the evidence shows the re- quired relationship between the labeling prohibition that Coors is challenging and the threat of strength wars. Coors is challenging the prohibition on factual statements ___________________(footnotes) 4 "Malt liquor" is the term used to designate those malt beverages with the highest alcohol content, whereas light beer and non-alcoholic beer are malt beverages containing reduced alcohol content. Malt li- quors represent approximately three percent of the malt beverage market. ---------------------------------------- Page Break ---------------------------------------- 8a regarding the percentage of alcohol by volume rather than the prohibition on the sort of descriptive terms that have been used in the malt liquor sectors The Government simply has not shown a relationship between the publica- tion of such factual information and strength wars. The Government's argument is further undermined by the absence of any record evidence indicating that there are strength wars in states or other countries where alcohol content labeling is already required. See Edenfield, _ U.S. at _ 113 S. Ct. at 1800 (noting lack of anecdotal evidence from states that do not impose similar restric- tions). In fact, there is uncontroverted evidence that brewers in the United States have no intention of increas- ing alcohol strength, regardless of labeling regulations, be- cause the vast majority of consumers in the United States value taste and lower calories - both of which are ad- versely affected by increased alcohol strength. Finally, the Government asserts that Coors is challeng- ing the labeling restrictions because of its desire to counter a consumer perception that its malt beverages contain less alcohol than competing brands, This assertion, however, does not show directly, or even imply, that Coors would engage in a strength war if it were able to disclose the ___________________(footnotes) 5 The Act's implementing regulations distinguish these two types of statements. Coors is challenging the type of restriction contained in 27 C.F. R. 7.26(a) which provides that "[t]he alcoholic content and the percentage and quantity of the original extract shall not be stated unless required by State law." Coors is not challenging 7.29(f), which provides that "[l]abels shall not contain the words `strong', `full strength', `extra strength' . . . or similar words or statements, likely to be considered as statements of alcoholic content ." Nor does it challenge 7.29(g), which provides that "[l]abels shall not contain any statements, designs, or devices whether in the form of numerals, let- ters, characters, figures, or otherwise, which are likely to be con- sidered as statements of alcoholic content." ---------------------------------------- Page Break ---------------------------------------- 9a alcohol content of its malt beverages on their labels. In fact, the opposite inference is more plausible - if Coors could overcome the misperception by simply publishing the percentage of alcohol content on the label, it would have no incentive to produce stronger beverages. We find that the Government has offered no evidence to indicate that the appearance of factual statements of alcohol content on malt beverage labels would lead to strength wars or that their continued prohibition helps to prevent strength wars. Instead, it has offered only inferen- tial arguments that are based on mere speculation and con- jecture and fails to show that the prohibition advances the Government's interest in a direct and material way.6 We therefore hold that the portion of 27 U.S.C. 205(e)(2) which prohibits statements of alcohol content on malt beverage labels imposes an unconstitutional restraint on commercial speech in violation of the First Amendment. AFFIRMED. ___________________(footnotes) 6 Because we conclude that the Government has failed to satisfy its burden under the third part of the Central Hudson test, we need not proceed to the fourth part to determine whether there is a reasonable fit between the prohibition and the Government's interest. ---------------------------------------- Page Break ---------------------------------------- 10a APPENDIX B UNITED STATES COURT OF APPEALS TENTH CIRCUIT NOS. 89-1203, 89-1239 ADOLPH COORS COMPANY, PLAINTIFF-APPELLEE v. NICHOLAS BRADY, IN HIS OFFICIAL CAPACITY AS SECRETARY OF' THE UNITED STATES DEPARTMENT OF TREASURY; STEVE HIGGINS, IN HIS OFFICIAL CAPACITY AS DIRECTOR BUREAU OF ALCOHOL, TOBACCO AND FIREARMS, DEFENDANTS-APPELLANTS AND SPEAKER AND BIPARTISAN LEADERSHIP GROUP OF THE UNITED STATES HOUSE OF REPRESENTATIVES, lNTERVENOR-DEFENDANT-APPELLANT CENTER FOR SCIENCE IN THE PUBLIC INTEREST; G. HEILEMAN BREWING COMPANY, AMICUS CURIAE Sept. 23, 1991 Before MCKAY, MCWILLIAMS and SEYMOUR, Circuit Judges. ---------------------------------------- Page Break ---------------------------------------- 11a SEYMOUR, Circuit Judge. Nicholas Brady, Secretary of the Treasury, et al. (the Treasury), and interveners Speaker and Bipartisan Leader- ship Group of the United States House of Representatives (the House), appeal the district court's grant of summary judgment in favor of Adolph Coors Co. (Coors). The district court ruled that 27 U.S.C. 205(e) and 205(f) (1988), which prohibit the disclosure of alcohol content in- formation in advertising or labeling malt liquor, constitute an illegal restraint on free speech in violation of the First Amendment, and enjoined the government's enforcement of the statute's restrictions. We reverse and remand. I. In 1987, Coors submitted an application to the Bureau of Alcohol, Tobacco and Firearms (BATF) requesting ap- proval for labels and advertisements for its Coors and Coors Light beer that would disclose the alcohol content of these products. The BATF denied Coors' application stating that sections 205(e)(2) and 205(f)(2) prohibit labels or advertisements disclosing the alcohol content of malt beverages unless such disclosure is required by state law. 1 ___________________(footnotes) 1 27 U.S. C. 205(e)(2) and 205(f)(2) (1988) provide in relevant part: 205. Unfair competition and unlawful practices It shall be unlawful for any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer or wholesaler, of distilled spirits, wine, or malt beverages, or as a bottler, or warehouseman and bottler, of dis- tilled spirits, directly or indirectly or through an affiliate: " . . . . "(e) Labeling "To sell or ship or deliver for sale or shipment, or otherwise in- troduce in interstate or foreign commerce, or to receive therein, ---------------------------------------- Page Break ---------------------------------------- 12a I On July 2, 1987, Coors filed a complaint against the Secretary of the Treasury, and the Director of the BA alleging that sections 205(e) and 205(f) violate Cod rights under the Free Speech Clause of the First Amend- ment because they prohibit Coors from disclosing truth information as to the alcohol content of its malt bever- ages. Coors asked the district court to set aside the BATF's denial Of Coors labeling and advertisement application 1 and to declare the statutory sections invalid. ___________________(footnotes) or to remove from customs custody for consumption, any dis- tilled spirits, wine, or malt beverage in bottles, unless such prod- ucts are bottled, packaged, and labeled in conformity with such , regulations, be prescribed by the Secretary of the Treasury with respect to packaging, marking, branding, and labeling and size and fill of container . . . (2) as will provide the consumer with adequate information as to the identity and quality of the prod- ucts, the alcoholic content thereof (except that statements of, or statements likely to be considered as statements of, alcoholic con- tent of malt beverages are prohibited unless required by State law and except that, in case of wines, statements of alcoholic content shall be required only for wines containing more than 14 per cen- turn of alcohol by volume) . . . . " . . . . (f) Advertising To publish or disseminate or cause to be published or dissem- nated by radio broadcast, or in any newspaper, periodical o other publication or by any sign or outdoor advertisement or and other printed or graphic matter, any advertisement of distilled spirits, wine, or malt beverages, if such advertisement is in, or is calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail, unless such advertisement is in conformity with such regulations, to be prescribed by the Secretary of the Treasury . . . (2) as will provide the consumer with adequate in formation as to the identity and quality of the products adver- tised, the alcoholic content thereof (except the statements of, or statements likely to be considered as statements of, alcoholic con- , tent of malt beverages and wines are prohibited) . . . . " ---------------------------------------- Page Break ---------------------------------------- 13a The Treasury admitted in its answer that sections 205(e)(2) and 205(f)(2) are unconstitutional under the First Amendment. The Justice Department, acting on behalf of the Treasury and BATF, also asserted that the Executive Branch believed restricting the labeling and advertising of the alcoholic content of malt beverages to be unconstitu- tional. The House, however, moved to intervene in order to defend the constitutionality of the statute. The House and Coors filed cross-motions for summary judgment. Following a hearing, the district court issued an order holding that sections 205(e)(2) and 205(f)(2) con- stitute an illegal restraint on speech under the First Amendment, and enjoining the BATF from enforcing those provisions. The Treasury, which now defends the constitutionality of the statutory sections, and the House seek a reversal of the district court's order. The relevant facts and legal arguments presented to the district court and the legal conclusions drawn therefrom are summar- ized below. II. To review a summary judgment order, we apply the same standard used by the trial court under Fed. R.Civ. P. 56. Osgood v. State Farm Mut. Auto Ins. Co., 848 F.2d 141, 143 (lOth Cir. 1988). Rule 56 directs that summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to a judg- ment as a matter of law. This court determines whether, under the correct interpretation of the substantive law, there exist material factual disputes which preclude sum- mary judgment. See id.; see also Anderson v. Liberty Lob- by, Inc., 477 U.S. 242,247-48, 106 S. Ct. 2505,2509-10,91 L. Ed.2d 202 (1986). In determining whether a material issue of fact exists, we review the record in the light most ---------------------------------------- Page Break ---------------------------------------- 14a favorable to the party opposing summary judgment. McKenzie v. Mercy Hosp., 854 F.2d 365, 367 (lOth Cir. 1988). The district court's conclusions of law are reviewed de novo. Id. Commercial speech is that which does " `no more than propose a commercial transaction.' " Virginia Pharmacy Bd. v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 762, 96 S. Ct. 1817, 1825-26, 48 L. Ed.2d 346 (1976) (quoting Pittsburgh Press Co. v. Human Relations Comm'n, 413 U.S. 376, 385, 93 S. Ct. 2553, 2558-59, 37 L. Ed.2d 669 (1973)). Advertising has been recognized as commercial speech. Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 637, 105 S. Ct. 2265, 2274, 85 L. Ed .2d 652 (1985). Product labels, which are part of a firm's marketing plan to provide certain information to the consumer, also constitute commercial speech. See id.; Central Hudson Gas v. Public Serv. Comm'n, 447 U.S. 557, 563, 100 S. Ct. 2343, 2350, 65 L. Ed.2d 341 (1980) (noting that "[t]he First Amendment's concern for com- metrical speech is based on the information function of advertising"). Regulations limiting commercial speech that are chal- lenged on First Amendment grounds are subject to a four- part analysis described by the Supreme Court as follows: "At the outset, we must determine whether the express- sion is protected by the First Amendment. For com- metrical speech to come within that provision, it at least must concern lawful activity and not be mislead- ing. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest. " Central Hudson, 447 U.S. at 566, 100 S. Ct. at 2351. ---------------------------------------- Page Break ---------------------------------------- 15a A. In order for commercial speech to come within the pro- tection of the First Amendment under the first prong of the Central Hudson test, it must concern a lawful activity and not be misleading. Id. The labeling and advertising of malt beverages relate to an activity lawful under federal law. U.S. Const. amend. XXI, 1 (repeal of Prohibition); see also Dungeon v. City of Oxford, 718 F.2d 738 (5th Cir. 1983) (although alcohol sales and consumption may be il- legal in some state counties, such activity is nonetheless considered lawful for First Amendment purposes). More- over, as the district court correctly noted, consumers have a substantial interest in knowing the alcohol content of beer. For example, many state statutes prohibit certain activities (such as driving) at or past a specific level of in- toxication. Rec., vol. II, at 53. Consequently, restrictions on alcohol content disclosure are within the ambit of First Amendment protection. 2 B. Under the second prong of the Central Hudson test, we must assess the strength of the government's interest in regulating the disclosure of alcohol content. The legisla- tive history introduced in evidence below reveals the Con- ___________________(footnotes) 2 The House argued below that alcohol content disclosure is in- herently misleading. The district court rejected this contention. On ap- peal, the Justice Department, on behalf of defendants, has taken the position that "accurate and specific statements of alcohol content by Coors of its malt beverages" would not be misleading. Opening Brief of Defendants-Appellants at 15. The House has apparently aban- doned its position that disclosure of malt beverage alcohol content a/one is misleading and does not urge the position as a basis for rever- sal. See Opening Brief of Intervenor-Defendant-Appellant at 26-27 n. 16. ---------------------------------------- Page Break ---------------------------------------- 16a gressional interests underlying sections 205(e) and 205(f). The Federal Alcohol Administration Act (FAAA), which became law in 1935 shortly after the repeal of Prohibition, was designed as a comprehensive statute to deal with prac- tices 3. within the alcohol beverage industry that Congress had judged to be unfair and deceptive, resulting in harm to both competitors and consumers. When reporting favor- ably to Congress on the FAAA, the House Ways and Means Committee summarized its conclusions with respect to alcohol content disclosure as follows: "The variation of alcoholic content has little con- sumer importance and the industry recognizes that at- tempts to sell beer and other malt beverages on the basis of alcoholic content are attempts to take ad- vantage of the ignorance of the consumer and the psychology created by prohibition experiences. "Legitimate members of the industry have suffered seriously from unfair competition resulting from labeling and advertising that uses such terms as `strong', `extra strength', ` high test', `high proof', `pre- war strength', ` 14 percent original extract', and from brand names or other statements or references which include conspicuous numerals or symbols intending to suggest that the numerals or symbols represent the alcoholic content. Usually such representations of ex- cess alcoholic content are false, but irrespective of their falsity, their abuse has grown to such an extent since repeal that the prohibition of all such statements is in the interest of the consumer and the promotion of fair competition." ___________________(footnotes) 3 In addition to the prohibitions at issue in this case, Congress enacted regulations restricting the use of exclusive outlets, 27 U.S. C. Q 205(a), tied houses, 205(b), and commercial bribery, 205(c). ---------------------------------------- Page Break ---------------------------------------- 17a Federal Alcohol Administration Act: Hearings Before the Ways and Means Committee, HR8539, 74th Cong., 1st Sess. (1935). The legislation thus stemmed from the belief that withholding alcohol content information would bene- fit the consumer and promote fair competition within the industry. Testimony given during Federal Alcohol Control Ad- ministration (FACA) hearings 4. confirms that one of the concerns underlying the movement to prohibit the disclosure of the alcohol content of malt beverages was that such disclosures tended to be misleading and were therefore subject to misuse. Testimony showed that ac- curate readings of alcohol content were difficult to obtain due to the "very peculiar" conditions of the brewing in- dustry, namely that the malt crops and the atmospheric pressures and temperatures of fermenting cellars varied. Rec., vol. I, dot. 15, at 36-37. Given these problems, the alcohol content of beer could not be accurately measured and disclosed without allowing for a .4-.5 percent error of margin. ld. at 38-39. Testimony also suggested that not disclosing the alcohol content of malt beverages would relieve marketplace pressures to produce beer on the basis of alcohol content, resulting over the long term in beers with a lower alcohol content. Id. at 33. ___________________(footnotes) 4 FACA hearings were held just prior to the drafting and adoption of the FAAA on November 1, 1934. Federal Alcohol Regulations were a precursor to the FAAA. The FAAA Senate Report states: "The bill embodies in statutory form so much of the former code system as the committee now deems appropriate and within the constitutional power of Congress to enact. " S. Rep. No. 1215, 7th Cong., 17 [sic] Sess. 2 (1935). Because the drafters of the FAAA intended to adopt many FACA regulations, these hearings are relevant to congressional intent with respect to the FAAA. The hearings were introduced into evidence in the district court by Coors. See rec., vol. I, dot. 17, at 9 n. 5 (Plaintiff's Response to Motion for Summary Judgment), and rec., vol. I, dots. 15 and 16. ---------------------------------------- Page Break ---------------------------------------- 18a The legislative history reveals congressional concern re- garding the effect of "strength wars" on brewers and the consuming public. In the FACA hearings, witnesses testi- fied that statements of alcohol content on malt beverages should be prohibited to avoid this evil. Ralph W. Jackman of the Wisconsin State Brewers Association testified that labels displaying alcohol content resulted in a strength war wherein producers competed for market share by putting increasing amounts of alcohol in their beer. See id. at 34-38. Jack man testified that "the legitimate brewer does not desire to sell his beer on the basis of alcohol." Id. at 34. He said that brewers were unable to market beer on the basis of taste and flavor, however, because the practice of disclosing the alcohol content of malt beverages generally exerted market pressure on brewers to increase the alcohol content of their own products. See id. at 40. Alexander H. Bell, another representative of the brewing industry, echoed Mr. Jackman's testimony: "I have steadfastly urged that beer be sold as a beverage, with limited alcohol content, not as an in- toxicant. That was followed for some little time by one of the local brewers here, till they found that in order to meet the competition it was necessary to in- crease the alcohol content of the beer to some extent. " Id. at 68. Jackman further testified that competitors in the marketplace would benefit because producing beer with a greater amount of alcohol was more costly. See id. at 35. Finally, industry witnesses testified that beer with a lower alcohol content would appease the "drys, " who opposed drinking, and thus nondisclosure of alcohol content would benefit the industry as a whole. The asserted government interest central to this case is the prevention of strength wars among the brewers. Con- gress believed that, in the long run, the market as regu- ---------------------------------------- Page Break ---------------------------------------- 19a lated by section 205(e) and (f) would produce a lower alcohol beer for the benefit of the industry and the con- suming public. The interests outlined above, as asserted, are substantial. It is a reasonable, legitimate legislative in- terest within Congress' commerce power to regulate the marketing of beer in interstate commerce to ensure fair competition, and to maintain moderate levels of alcohol in beer in order to protect the consumer from the otherwise unchecked "mistakes and excesses" of the brewing in- dustry. See Opening Brief for the Defendants-Appellants at 4.5 In assessing the strength of the government's interests in withholding the alcohol content of the beers, the district court focused primarily on the validity of the asserted ends given the passage of time and changed circumstances. The court concluded that the factual circumstances that had given rise to the statute in 1935 no longer exist, and conse- quently, the statute no longer serves a substantial interest. The court first noted that because there are fewer brewers producing a large percentage of the market share, "it's very difficult for the court to see how there is any unfair competition or antitrust aspect to this. " Rec., vol. II, at 52. ___________________(footnotes) 5 Contrary to Coors' contentions, the fact that Congress pursued non-commercial as well as commercial aims in enacting 205(e) and 205(f) does not detract from either the legitimacy or substantiality of Congress' aims. See infra at 27. The noncommercial protective aims of this legislation are consistent with the Commerce Clause. "One permissible and particularly potent form of federal com- merce regulation is the imposition of protective conditions on the privilege of engaging in activity that affects interstate commerce. . . . [T]he Supreme Court has consistently upheld congressional use of protective conditions to combat activities largely disfavored for largely noncommercial reasons." Laurence Tribe, Constitutions Law 5-6 at 311-12 (2d ed. 1988). ---------------------------------------- Page Break ---------------------------------------- 20a It is irrelevant that the circumstances giving rise to a particular piece of legislation `have changed so long as the legislation continues to serve some valid and substantial government interest. See Boiger v. Young Drug Prods., 463 U.S. 60, 71, 103 S. Ct. 2875, 2883, 77 L. Ed.2d 469 (1983); Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 460, 98 S. Ct. 1912, 1920-12, 56 L. Ed.2d 444 (1978). The fact that the malt beverage industry and market have changed does not compel the conclusion that strength wars are no longer a real danger to the consuming public as well as to the brewers. The government argues that, in spite of changed circumstances, there is a continuing danger of strength wars similar to those that existed in 1935, as evi- denced by Coors' advertising campaign, current market conditions, and consumer demand. See Opening Brief of Defendants-Appellants at 17-18. Coors' admission at oral argument that it desires to publish the alcohol content of its products to dispel Coors' image of being a "weak" beer testifies to the viability of the government's interest. See Testimony of Oral Argument. Nov. 6, 1990 (on file with Clerk of Court for Tenth Circuit). The House argues that the statute has continuing validity given that the emerging trend in the beer industry toward many small breweries may precipitate the strength war problems associated with the marketplace of 1935. Opening Brief of Intervenors- Defendants at 24 n. 51. Similarly, the government still asserts its interest in protecting the public against the "ex- cesses" of the brewing industry. Opening Brief for Defend- ants-Appellants at 4, 22. Given all of these circumstances, it is apparent that the government has asserted a legitimate and substantial interest supporting the continuing validity of the legislation at issue. ---------------------------------------- Page Break ---------------------------------------- 21a C. We next assess whether the regulation at issue "directly advances" the government's asserted interest. See Central Hudson, 447 U.S. at 566, 100 S. Ct. at 2351. Whether legislation "direct}y advances" the government's end re- quires us to focus on the relationship between the govern- ment's interest and the prohibition on speech. Id. at 569, 100 S. Ct. at 2353. There must be an "immediate connec- tion" between the prohibition and the government's asserted end. Id. If the means-end connection is "tenuous" or "highly speculative", the regulation cannot survive con- stitutional scrutiny. Id. We begin our analysis by noting that the record here does not unambiguously reflect a correct legislative judg- ment that the enacted means directly advance the intended ends. Unlike a number of cases in the commercial speech area, the link between advertising and strength wars is not self-evident. See, e.g., Posadas de Puerto Rico Assocs. v. Tourism Co., 478 U.S. 328, 341-42, 106 S. Ct. 2968, 2976-77, 92 L. Ed.2d 266 (1986) (link between ban on gambling advertising and level of gambling self-evident); Central Hudson, 447 U.S. at 566, 100 S. Ct. at 2353 (link between advertising ban and sales self-evident); Dunagin v. City of Oxjord, 718 F.2d 738, 747-49 & n. 8 (5th Cir. 1983) (link between advertising and increased alcohol use deemed self-evident; separate analysis of means-end con- nection therefore not conducted), cert. denied, 467 U.S. 1259, 104 S. Ct. 3553, 82 L. Ed.2d 855 (1984). In addition, this is not a case where we can defer to the legislature on the basis of precedent which already has established that the legislature's chosen means directly advances the asserted ends. See, e.g., Metromedia v. City of San Diego, 453 U.S. 490, 509 n. 14, 101 S. Ct. 2882, 2893 n. 14, 69 L. Ed.2d 800 (1981) (plurality relied on established line ---------------------------------------- Page Break ---------------------------------------- 22a of cases to ratify legislature's judgment that banning com- mercial billboards would improve traffic safety). On the other hand, we cannot agree with the district court that, as a matter of law, the government's asserted end is not directly advanced by the promotion on advertising the alcohol content of beer. The party urging the prohibition on speech has the burden of justifying such a restriction. See Board of Trustees v. Fox, 492 U.S. 469, 109 S. Ct. 3028, 106 L. Ed.2d 388 (1989) (FOX 111). In FOX v. Board of Trustees, 841 F.2d 1207, 1213 (2d Cir. 1988) (Fox II), the Second Circuit considered whether a prohibition placed on cor- porations conducting product demonstrations in campus dormitories directly advanced the University's interest in prevention of crime, protection against consumer ex- ploitation, preservation of residential tranquility, and the promotion of education. The court of appeals concluded that the district court erred in assessing whether the legisla- tion directly advanced the asserted governmental interests because it had only considered whether the legislative means were reasonably related to the legislative ends. Id. The appellate court rejected the district court's deferential review, stating: "The burden . . . shifts to the state not merely to assert that it has a substantial interest but to demon- strate that interest by real evidence . . . . "It is less clear, however, that the Regulation direct- ly advances the State's interests; the Regulation can- not be sustained if it only provides `ineffective or remote support for the government's purpose.' Cen- tral Hudson, 447 U.S. at 564, 100 S. Ct. at 2350 . . . . Whether SUNY offered sufficient evidence to meet its burden is not evident as the district court considered only whether the Regulation was reasonably related to the asserted governmental interests, not whether it directly advanced them." ---------------------------------------- Page Break ---------------------------------------- 23a Id. (emphasis added). In reviewing the Second Circuit's decision in Fox 11, the Supreme Court held: "The Court of Appeals did not decide, however, whether Resolution 66-156 directly advances these in- terests, and whether the regulation it imposes is more extensive than is necessary for that purpose. . . . We think that remand was correct, since further factual findings had to be made. " FOX III, 492 U.S. at 475-76, 109 S. Ct. at 3032-33 (empha- sis added). The Supreme Court reversed the Second Cir- cuit's decision with respect to the terms of the appellate court's remand order detailing how the "more extensive than necessary prong" of the analysis should be applied, but the Court did not further comment on the terms of the remand with respect to the "directly advance" prong. This tacit approval of the Second Circuit's approach to whether the legislative means "direct advance" the legislative ends comports with the Supreme Court's statement in Fox 111 that "the State bears the burden of justifying its restric- tions." Id. at 480, 109 S. Ct. at 3034-35; see also Linmark Assocs. v. Township of Willingboro, 431 U.S. 85, 95-96, 97 S. Ct. 1614, 1619-20, 52 L. Ed.2d 155 (1977) (record evi- dence required to establish nexus between legislative ends and means); cf. Dunagin, 718 F.2d at 748 n. 8 (noting that particularized findings of fact should play a limited role in determining the constitutionality of any given statute). Requiring the government to affirmatively demonstrate a nexus between its legislative means and ends may appear an undue judicial intrusion on the legislative function. Fox 111, 492 U.S. at 478-81, 109 S. Ct. at 3033-35 (deference should be accorded governmental decision-makers). Nonetheless, the "directly advance" prong of the Central Hudson analysis compels a reviewing court to assess ---------------------------------------- Page Break ---------------------------------------- 24a whether the legislative ends are served by the legislative means: a determination that the legislature presumably made in enacting the legislation at issue. Therefore, we cannot simply assume that particular means will ac- complish certain ends because the legislature presumed they would and enacted them into law. In this case, Congress chose to regulate alcohol content disclosure in order to remove the pressure to produce malt beverages with ever-increasing alcohol content. Coors in- troduced, and the district court considered, evidence that the legislation as enacted now provides only "ineffective or remote support for the government's purpose." Central Hudson, 447 U.S. at 564, 100 S. Ct. at 2350; see, e.g., rec., vol. II, at 22-24 and 29. In assessing whether the prohibi- tion at issue directly advanced the government's ends, the district court did not have the benefit of FOX 111. The court first looked at the issue in conjunction with whether Con- gress was pursuing a substantial end. See rec., vol. II, at 51-52. It then indicated it would merge its consideration of "directly advance" with its "less restrictive means" analysis: "Whether the governmental interest is directly ad- vanced by the statute is an interesting question, be- cause we still have the ability of the Bureau, BATF, to regulate, if this statute is declared unconstitutional, in violation of the First Amendment. We still have the opportunity for regulation to make sure that there is no misleading type of information given. " Id. at 53-54. As a consequence, the district court did not separately consider whether the facts presented by both sides presented a genuine issue of material fact on whether the legislative means directly advanced the legislative ends. The record before us demonstrates that there is a question of material fact. Summary judgment in favor of Coors was thus inappropriate. ---------------------------------------- Page Break ---------------------------------------- 25a D. If the district court determines on remand that Con- gress' substantial interest in controlling strength wars among breweries is directly advanced by the regulation of alcohol-content advertising, it must then assess whether the absolute prohibition of such advertising is more exten- sive than necessary to serve the government's interest. Subsequent to the district court's decision in this case, the Supreme Court formulated a standard for the "no more extensive than necessary" element of the Central Hudson analysis: "What our decisions require is a "it" between the legislature? ends and the means chosen to accomplish those ends,' - a fit that is not necessarily perfect, but reasonable; that represents not necessarily the single best disposition but one whose scope is `in proportion to the interest served,' that employs not necessarily the least restrictive means but, as we have put it in the other contexts discussed above, a means narrowly tailored to achieve the desired objective . . . . "We reject the contention that the test we have de- scribed is overly permissive. It is far different, of course, from the `rational basis' test used for Four- teenth Amendment equal protection analysis. There it suffices if the law could be thought to further a legitimate governmental goal, without reference to whether it does so at inordinate cost. Here we require the government goal to be substantial, and the cost to be carefully calculated." Fox III, 492 U.S. at 480, 109 S. Ct. at 3034-35 (citations omitted) (emphasis added). The Court placed the burden firmly on the government to demonstrate that restrictions were in proportion to the interest served: "Moreover, since the State bears the burden of justifying its restrictions, it ---------------------------------------- Page Break ---------------------------------------- 26a must affirmatively establish the reasonable fit we require. " Id. (citation omitted). The district court here concluded that the absolute pro- hibition of alcohol content advertising does not satisfy the fourth prong of the Central Hudson test because "there [could] be a much less extensive regulation carefully drawn to achieve the objectives that are argued for by the defend- ant intervener in this case other than the flat prohibition ." Rec., vol. II, at 54. Rendering its decision without the benefit of the precedent established by FOX 111, the district court misperceived the nature of the "no more extensive than necessary" analysis. For a regulation of speech to pass constitutional muster, it need not be demonstrated that the government chose the least restrictive means; rather, the governmental goal must be "substantial" and the cost "carefully calculated." Fox 111, 492 U.S. at 480, 109 S. Ct. at 3034-35. The Court in Fox 111 emphasized the limits of judicial review in this respect and the necessity of deferring to the legislature's judgment as to what "reason- able" means best effectuate the governmental end: "[W]e leave it to governmental decisionmakers to judge what manner of regulation may best be employed. " Id. In addi- tion, the Court stated that it chose not to adopt a least- restrictive-means requirement in order to "provide the Legislative and Executive Branches needed leeway in a field (commercial speech) `traditionally subject to govern- mental regulation.' " Id. at 481, 109 S. Ct. at 3035 (quoting Ohralik, 436 U.S. at 455-56, 98 S. Ct. at 1918-19). As discussed above, the government has asserted a substantial interest in preventing strength wars for the benefit of both consumers and producers. The possibility of less extensive means of regulation does not require the conclusion that the chosen means are impermissible. The legislative history here demonstrates that the legislature reasonably could have concluded that strength wars and ---------------------------------------- Page Break ---------------------------------------- 27a their attendant dangers could be eliminated by prohibiting alcohol content disclosure. See Fox 111, 492 U.S. at 480, 109 S. Ct. at 3034-35; San Francisco Arts & Athletics Inc. v. United States Olympic Comm., 483 U.S. 522, 539, 107 S. Ct. 2971,2982, 97 L. Ed.2d 427 (1987); Posadas de Puer- to Rico Assocs., 478 U.S. at 344, 106 S. Ct. at 2978; cf. Capital Broadcasting Co. v. Mitchell, 333 F. Supp. 582, 585 (D. C.Cir. 1971) (three-judge court) ("Congress had convincing evidence that the Labeling Act of 1965 had not materially reduced the incidence of smoking"), aff'd sub nom. Capital Broadcasting Co. v. Acting Attorney General, 405 U.S. 1000, 92 S. Ct. 1289, 31 L. Ed.2d 472 (1972); Dunagin, 718F.2dat751 ("We do not believe that a less restrictive time, place and manner restriction, such as a disclaimer warning of the dangers of alcohol, would be effective. The state's concern is not that the public is unaware of the dangers of alcohol. . . . The concern in- stead is that advertising will unduly promote alcohol con- sumption despite known dangers"). The district court apparently concluded that the legisla- tion currently fails the more-restrictive-than-necessary analysis because it represents an incorrect balance between the consumers' interest in having complete disclosure and the government's interest in preventing strength wars. See rec., vol. 11, at 52-53. The court reasoned that because the government has a relatively insubstantial interest in pre- venting strength wars when compared to the consumers' countervailing interest in disclosure, the statute is uncon- stitutional. Id. Relevant case law suggests that a court may evaluate the competing interests in this manner to con- clude that, as a constitutional matter, the ends cannot justify the scope of the regulation at issue. Thus, in Fox 111, the Court stated that the scope of a regulation must be " `in proportion to the interest served.' " 492 U.S. at 480, 109 S. Ct. at 3034-35 (citation omitted). In Bolger, 463 ---------------------------------------- Page Break ---------------------------------------- 28a U.S. at 75, 103 S. Ct. at 2885, the court struck down a statute prohibiting the mailing of condom advertisements because the asserted interest of shielding recipients from offensive materials was insufficient to justify the suppres- sion of speech. With respect to the governmental interest articulated in Bolger, the Court concluded: "Because the proscribed information `may bear on one of the most important decisions' parents have a right to make, the restriction of `the free flow of truthful information' constitutes a `basic' constitu- tional defect regardless of the strength of the govern- ment's interest. " Id. at 75, 103 S. Ct. at 2885 (citation omitted). Similarly, in Linmark Associates, the Court concluded that the interest in ensuring racial integration could not, as a constitutional matter, justify the suppression of "for sale" signs on homes because the suppression weighed unfavorably against "one of the most important decisions [people] have a right to make: where to live and raise their families. " 431 U.S. at 96, 97 S. Ct. at 1620. However, neither relevant precedent nor the record in this case require the conclusion that the public's interest in information relating to alcohol content so outweighs the government's interest in nondisclosure as to render the statute unconstitutional. We have held that legislation prohibiting alcohol advertisements promotes a substantial interest in health and welfare, which otherwise would be adversely affected by alcohol consumption. Oklahoma Telecasters Ass'n v. Crisp, 699 F.2d 490, 498 (10th Cir. 1983), rev'd on other grounds sub nom. Capital Cities Cables, Inc. v. Crisp, 467 U.S. 691, 104 S. Ct. 2694, 81 L. Ed .2d 580 (1984). Similarly, in Dunagin, 718 F.2d at 747, the Fifth Circuit upheld a statute that significantly restricted liquor advertising by local media as a legitimate ---------------------------------------- Page Break ---------------------------------------- 29a way to avoid the undue promotion of alcohol consump- tion, in the interest of the public welfare. Coors notes that the balance struck in favor of non- disclosure in Oklahoma Telecasters and Dunagin was altered by the fact the state legislatures had promulgated the statutes at issue pursuant to the authority granted them under the Twenty-first Amendment. Coors argues that be- cause the regulation in this case was promulgated by Con- gress, the balance of interests weigh in favor of disclosure. Thus, in Oklahoma Telecasters, we stated that "when the Twenty-first Amendment is considered in addition to Oklahoma's substantial interest under its police power, the balance shifts in the state's favor, permitting regulation of commercial speech that might otherwise not be permissi- ble. " 699 F.2d at 502 (emphasis added). In Dunagin, the Fifth Circuit upheld the validity of the advertising regula- tion noting that precedent establishing the state's special interest in regulating alcohol "help[ed] establish the balance in favor of the state," 718 F.2d at 750. Oklahoma Telecasters does not require us to conclude that the federal government has no constitutional basis to substantiate its interest, or that the federal government's interest in regulating alcohol content disclosure is insuffi- cient to justify a restraint on speech. 6 The Twenty-first Amendment did not completely abrogate Congressional power to regulate under the Commerce Clause. See Arrow ___________________(footnotes) 6 As demonstrated by the regulation itself, which is effective only if not contradicted by state law, Congress may have a less compelling in- terest than state legislatures in the labeling and advertising of the alcohol content of malt beverages. See 27 U.S.C. 205(e) and 205(f). Because the statute at issue expressly states that alcohol content may not be disclosed unless required by state law, we need not address " whether the holdings in Oklahoma Telecasters and Dunagin demon- strate that Congress has attempted to trump those powers expressly granted to the states by the Twenty-first Amendment. ---------------------------------------- Page Break ---------------------------------------- 30a Distilleries, Inc. v. Alexander, 109 F.2d 397 (7th Cir.) (FAAA not unconstitutional on ground that Twenty-first Amendment deprived Congress of power to enact inter- state alcohol regulation), cert. denied, 310 U.S. 646, 60 S. Ct. 1095,84 L. Ed. 1412 (1940); see also South Dakota v. Dole, 483 U.S. 203,209, 107 S. Ct. 2793,2797,97 L. Ed.2d 171 (1987) (Twenty-first Amendment does not preclude Congress from indirectly establishing minimum drinking age by exercising its spending power); Craig v. Boren, 429 U.S. 190, 97 S. Ct. 451, 50 L. Ed.2d 397 (1976) (Twenty- first Amendment not pro tanto repeal of Commerce Clause, but merely requires that each provision "be con- sidered in the light of the other, and in the context of the issues at stake in any concrete case"); United States v. Frankfort Distilleries, Inc., 324 U.S. 293, 297-99,65 S. Ct. 661, 663-65, 89 L. Ed. 951 (1945) (federal anti-trust prose- cution of alcohol producers and distributors consistent wit h Twenty-first Amendment). We conclude that Con- gress has sufficient residual authority to regulate the marketplace for the benefit of consumers and producers under the Commerce Clause even though it may result in indirect regulation of alcohol. See id. Like the state legislatures in Oklahoma Telecasters and Dunagin, there- fore, Congress may constitutionally regulate alcohol advertisements, Coors makes a similar argument with respect to the decision rendered in Posadas. There, the Supreme Court stated that the advertising ban was permissible as "the greater power [of the state] to completely ban casino gambling necessarily includes the lesser power to ban advertising of casino gambling. " 478 U.S. at 345-46, 106 S. Ct. at 2979. The Court did not state that the greater power to ban gambling was necessary to ban gambling advertising. The Court relied on the fact that Puerto Rico had the greater power to ban gambling to distinguish ---------------------------------------- Page Break ---------------------------------------- 31a Posadas from those cases that struck down regulations restricting information pertaining to constitutionally pro- tected conduct. 7 Id. The Court also stated that finding Puerto Rico possessed the power to ban gambling adver- tisements was necessary to avoid the anomalous result of concluding that Puerto Rico had the police power to make gambling illegal but not to prohibit the advertising of gam- bling. Id. Consequently, Congress need not possess the greater power to completely regulate alcohol sales, a power expressly reserved to the states under the Twenty- first Amendment, in order to reconcile Posadas with the holding in this case that Congress can regulate alcohol advertisements consistent with the First Amendment. III. In sum, we hold that Coors' proposal to advertise the alcohol content of beer is commercial speech protected by the First Amendment, and that the public's interests in disclosure are significant. We also hold that the interests asserted by Congress and demonstrated in the legislative history are legitimate and substantial. We conclude that there are genuine issues of material fact underlying the question of whether the federal regulation of alcohol con- tent advertising directly advances the government's assert- ed interest in preventing strength wars, and whether the complete prohibition of such advertising results in a "rea- sonable fit" between the legislature's goal and the means chosen to reach it, within the meaning of Fox 111. The district court judgment in favor of Coors is RE- VERSED and the case is REMANDED for further pro- ceedings consistent with this opinion. ___________________(footnotes) 7 We note that the sale and consumption of alcohol stitutionally protected activities and can be prohibited. ---------------------------------------- Page Break ---------------------------------------- 32a APPENDIX C [1] IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 87-Z-977 ADOLPH COORS COMPANY, PLAINTIFF vs. NICHOLAS BRADY, ET AL., DEFENDANTS REPORTER'S TRANSCRIPT (Trial to Court: Bench Ruling) Proceedings before the HONORABLE ZITZ L. WEIN- SHIENK, Judge, United States District Court for the District of Colorado, commencing at 11:00 a.m., on the 28th day of October, 1992, in Courtroom C-502, United States Courthouse, Denver, Colorado. APPEARANCES BRADLEY, CAMPBELL, CARNEY & MADSEN, by K. PRESTON OADE, JR., 1717 Washington Avenue, Golden, Colorado, 80401, appearing for the plaintiff. PATRICtA M. RUSSOTTO and ROBIN S. ROSENBAUM, At- torneys at Law, U.S. Department of Justice, Civil Divi- sion, 901 E Street, N. W., Room 912, Washington, D. C., 20530, appearing for the defendants. ---------------------------------------- Page Break ---------------------------------------- 33a [2] (The following proceedings were had and entered of record after the presentation of evidence and the argu- ments of counsel:) THE COURTROOM DEPUTY: The matter now before the Court is Adolph Coors Company vs. Nicholas Brady, et al., Civil Action No. 87-Z-977. THE COURT: Good afternoon. Well, the first thing 1 would like to do is to thank the at- torneys for a very well presented case, for your coopera- tion. There have been a few little glitches in that; but basically there has been good cooperation, and I ap- preciate it. It's been most interesting. My conclusions today - my findings and conclusions, I propose to read into the record. I have taken to heart what you said about actually doing a written opinion and publishing, and I probably will do that within the next few weeks. But the opinion to- day will be in effect. And the published opinion will pretty much follow along what I am saying. It may expand a little bit and cite a few more cases. We start with the Tenth Circuit opinion and in reversing the last decision that this court made, pointing the error of my ways to me, although I believe that Fox 111 had not been decided at the time that I made the last decision; but we do have the law clearly presented through the case Fox 111 that [3] has been referred to at length and the Tenth Circuit opinion. The Tenth Circuit has told us that Coors' proposal to advertise alcoholic content is commercial speech and is protected by the First Amendment. They have also told us that the public interest in disclosure of alcoholic content is significant. Now, in addition, the Tenth Circuit has concluded that there is some significant and legitimate and substantial in- terest by Congress in preventing strength wars; and this ---------------------------------------- Page Break ---------------------------------------- 34a has been demonstrated, they indicate, by the legislative history of Congress. So those are givens. The issues that the circuit court has asked us to consider at this hearing are the following; and I'm reading now from page 1554 of the Tenth Circuit opinion. It's 944 F.2d 1543, Adolph Coors Company v. Brady, at page 1554: "The question is whether the federal regulation of alcohol content directly advances the Government's asserted interest in preventing strength wars. A second question is whether the complete prohibition of such advertising results in a `reasonable fit' between the legisla- ture's goal and the means chosen to reach it within the meaning of Fox III. " Perhaps I should put on the record the cite of Fox 111; Board of Trustees v. Fox, 492 United States 469, 1989 case. Defendant's attorney argues that Congress makes the law. I couldn't agree more. Congress makes the law. But we [4] know from Fox 111 that a party who is urging pro- hibited - urging that commercial speech be prohibited has a burden of justifying it. Now, the evidence in this case concerning strength wars relating to malt liquor is substantial and convinces this court that as to 27 United States Code 205 paragraph (f), which relates to advertising and which indicates that the prohibition is in the form of an exception which says that "except statements of or statements likely to be considered as statements of alcoholic content of malt beverages and wines are prohibited in advertising" - as to that statute, I am satisfied and convinced that the defendant has met its burden. The prohibition of advertising does advance the Government's legitimate interest in - as to strength wars and as to preventing strength wars. And I don't think that the plaintiff is in real dispute with this position. ---------------------------------------- Page Break ---------------------------------------- 35a Plaintiff agrees that ATF must regulate statements of alcoholic content in connection with advertising. Plaintiff also tells us in argument that Coors has no intention of marketing products based on alcoholic strength and is not asking for this. And I agree after hearing the evidence in this case that attempts to market alcoholic content as a product attribute are not legitimate attempts. They are contrary to substantial congressional policy. Therefore, the Court determines after listening to the [5] evidence and the arguments of counsel that the statement in 27 United States Code section 205(0(2) meets the test set forth in Fox III and in the Tenth Circuit opinion. And this brings us to the more difficult question of whether the exception in the preceding subparagraph, 27 United States Code 205(e)(2), meets the test. The conclu- sion that 1 reach after carefully considering the testimony I've heard and the depositions that I've read is that it does not for this reason: No evidence that I have heard has con- vinced me that placing the alcoholic content on the can or other container will directly advance the Government's in- terest in preventing strength wars. Now, the Tenth Circuit in their opinion spoke in terms of advertising; but it is important to note that subsection (e) refers to labeling. The content of alcohol on the can is not really advertising as we generally think of it, although in closing argument yesterday, Mr. Oade talked about whether a picture of a can, for example, of Coors beer with an alcoholic content listed on it could be advertised in the media, or would it have to sit down on a bed of flowers with the flowers or the decoration covering the alcoholic content. I don't think I really have to decide that specific issue. 1 prefer to think of the issue that has been presented, and that appears to me to be clearly an issue for decision as a difference between the labeling of the alcoholic content on ---------------------------------------- Page Break ---------------------------------------- 36a the [6] container and the advertising of alcoholic content as an attribute of the beer and marketing it in that way. So the two statutes that are before us actually spell out - one says "labeling" as a heading, the other says "advertising." The advertising one, as we've just discussed, stands. The labeling statute, from the evidence I've heard, does not meet the test. So even though the Tenth Circuit is talking in terms of advertising or uses the word "advertis- ing," I'm going to consider that as meaning advertising and labeling. Prohibiting the alcoholic content disclosure of malt beverages on labels has little, if anything, to do with the type of advertising that promotes strength wars. That is the conclusion I reach from listening to the testimony and reading the depositions. In Canada, where alcoholic content is listed on the cans, there is no evidence of price (sic) wars; and although Defendant urges that because the beer in Canada may be slightly stronger in alcoholic content than the average beer in the United States that some inference should be drawn from this or raised, I disagree. First of all, it's a very small percentage; and there may be many other factors to ac- count for why Canadians like their beer slightly stronger than Americans like their beer. The question raised by the Tenth Circuit again is whether the regulation of speech passes constitutional muster, [7] or to use their language on page 1552 of their decision, "For regulation of speech to pass constitutional muster, it need not be demonstrated that the Government chose the least restrictive means; rather, the government goal must be substantial and the cost carefully calculated." Now, the goal may be substantial in this case; but whether the means to that goal prohibiting the listing of the alcoholic content on a can or a bottle is necessary for the goal, whether the cost has been sufficiently calculated ---------------------------------------- Page Break ---------------------------------------- 37a in that prohibition, is what concerns the Court. The evidence that I have heard in this case does not show me that there is any real connection with this. The testimony of Mr. Gundee, for example, in talking about the survey in Canada, indicates that Canadians - more Canadians know the alcoholic content of the beer that they're drinking than American citizens, or the American beer drinkers. Canada of course, does allow content on labels. The result of the goal - of the poll is that citizens, both in Canada and in the United States, drinkers, want to know the alcoholic content. They want the information; and the indication is they want it not to drink higher- alcohol beer but to be more responsible and for many to reduce the alcoholic content of what they're drinking. The testimony that I have heard has indicated to me that there is a trend, not a trend towards the malt liquors, which are the high end of the alcohol, but a trend towards the light beers, which are the low end. [8] And there are significant reasons why beer drinkers are interested in light beers, low calories, moderation, so that they can have perhaps a cou- ple beers before they - with dinner, perhaps, before they step into a car and subject themselves to the laws of the various states relating to driving under the influence or driving while ability impaired. It's extremely important that they be able to know the content of what they're drinking. People do want this information. They want it to be responsible people, drinkers, the evidence has shown. They do not just want it to try to drink stronger beers. The evidence shows that the high-strength brews do not have the same popular appeal as the low-strength and the light beers, either abroad or in the United States; and I refer to the depositions both of Mr. Ambler and Mr. Nelson. ---------------------------------------- Page Break ---------------------------------------- 38a In the deposition of Mr. Black, who has been with ATF many years, he indicates that he supports disclosure of alcoholic content. He would not be opposed to a change in the statute as long as ATF could regulate the advertising. And I think that's really the key. As long as the advertising does not promote "Buy a beer because it's stronger," quote/unquote, as long as ATF has a hand in the advertis- ing, there is little danger of strength wars. Basically, I could go through the testimony of all the witnesses I've heard, from Mr. Cates all the way through to Mr. Rechholtz, and none of the witnesses, none of the depositions [9] that I have read, no credible evidence that I have heard, lead me to believe that giving alcoholic con- tent on labels will in any way promote strength - alcoholic strength wars, as long as ATF has the authority to regulate the use of this content in advertising. And therefore, the Court concludes that subparagraph (e) - and we're again for the record talking about 27 U .S.C. section 205(e)(2) and the exception therein - does not make a reasonable fit, does not advance the govern- ment interest, and is an unconstitutional restraint on com- mercial speech. Those regulations which pertain to (e) fall with the statute. Plaintiff has mentioned some of them, and I don't intend to, because I think by indicating that section (e) does not meet constitutional muster, the regulations that pertain to (e) fall by the way, although I strongly urge ATF - and I'm sure that Counsel will communicate this - to draft new regulations as soon as possible and as neces- sary to make sure that advertising is controlled, if this case is not going to be appealed, in any case. If it's not going to be appealed, I think we need the new regs right away. I would also hope that Counsel could urge ATF to con- sider some uniform way of considering alcoholic content. I know we have heard testimony of percentage by weight, ---------------------------------------- Page Break ---------------------------------------- 39a percentage by volume; and it is confusing. It may be that because Canada and the other countries measure percent- age by [10] volume, it may make sense for that to be a uni- form way of measuring the alcoholic content of malt beverages in this country. The Court intends to reduce these short remarks on the record to an opinion. We will publish it. It's going to be up to the defendant and perhaps in consultation not only with ATF but with Congress to decide whether in view of this decision, which is much more limited than my previous decision - whether there will or will not be an appeal. If there will bean appeal, I strongly urge cooperation on the appeal wit h both counsel, with all counsel. And we are going to be turning back to both sides all ex- hibits that have been admitted, because we have no room to store them. And each attorney is going to have to keep in his or her possession the exhibits for the Tenth Circuit, especially if you are going to have an appeal. And the ex- hibits, for example, which were not admitted, although I think we ended up admitting almost all exhibits. And the depositions, as soon as I take all my sticky - stickies off of them - we'll give those back to you, too. Now, any questions? Anything that you feel should be on the record as proposed findings or decisions? MR. OADE: Your Honor, we would simply ask that the Court enter a permanent injunction against the defendants from enforcing these statutory provisions and the imple- menting [11 ] regulations and that that injunction be entered forthwith. THE COURT: You're probably going to want some sort of a stay on that so that you can at least consider with your clients whether you need to appeal or not. MS. RUSSOTTO: I believe there is an automatic ten- day stay in any event; but yes, we will certainly be consid- ering whether or not we will be seeking a stay. I obviously ---------------------------------------- Page Break ---------------------------------------- 40a can't make any commitment in that regard at this point, but we will certainly be considering that over the next ten days. THE COURT: How many days? MS. RUSSOTTO: The next ten days. I believe the rule - the rule of civil procedure - I don't recall exactly which one it is now - mentions - THE COURT: Well, you have 30 days to appeal. MS. RUSSOTTO: I realize that, your Honor. I think we have 60 days actually to appeal. THE COURT: Pardon? MS. RUSSOTTO: 1 think we have 60 days actually to appeal. THE COURT: Oh, you're the Government. That's right. MS. RUSSOTTO: In any event, we will be making a decision rather quickly whether or not to seek a stay. THE COURT: All right. Today is the 28th of October and the Government - the defendant is asking for ten days to [12] consider this before any injunction go into effect. And I think that's reasonable, Mr. Oade. Your clients have waited a while; they can wait just a little longer. How about the 9th? The Court will order that a perma- nent injunction against enforcing subsection (e) of 27 U.S.C. 205, or the exception therein - now, I'm not de- claring the whole - Everyone understands that we're not talking about section (e) being unconstitutional. We're simply talking about the specific language, which is "ex- cept that statements of or statements likely to be con- sidered as statements of alcoholic content of malt bever- ages are prohibited unless required by state law ." And that's the end of it. I think that's the only language - that's the only language that I'm prohibiting. MR. OADE: We understand that, you Honor; and I think the record is also clear that the implementing regu- ---------------------------------------- Page Break ---------------------------------------- 41a lations that use words like "strong" or "extra strength" - we don't challenge those, either. THE COURT: That's my understanding. MR. OADE: The record is very clear on the scope of the relief sought in this case. THE COURT: Those implementing regulations that you're mentioning are actually implementing regulations to the exception in (f), the advertising side, which I am not touching. MR. OADE: We understand that, your Honor. THE COURT: All right. The permanent injunction, then, [13] will go into effect on November 9, unless I hear something more by stipulation of the parties or unless there is something that is ordered in this case. MS. RUSSOTTO: Very well. THE COURT: Anything else that we need to put on the record? MS. RUSSOTTO: We have no further remarks to make on the record, your Honor. MR. OADE: We have nothing further, your Honor, ex- cept to thank the Court for your hard work and for reading all of those depositions. THE COURT: There were a lot; and I didn't know I was going to be in trial as much, so it took a while. Let me also indicate, I think there is room here for some real discus- sion on whether this truly makes sense, because I sincerely feel that this is a solution that makes sense to everybody, including ATF. And rather than just appeal it for the pur- pose of appealing it, please talk together, think long and hard about it, because the First Amendment is important. And I think this perhaps takes care of the real problem which you sincerely have presented to the Court. Okay. Thank you, and the Court is in recess. ---------------------------------------- Page Break ---------------------------------------- 42a (Thereupon , the trial was concluded and the Court re- cessed at 11: 30 am.) ***** REPORTER'S CERTIFICATE I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter. Dated at Denver, Colorado, this 28th day of October, 1992. _____________________ Paul A. Zuckerman ---------------------------------------- Page Break ---------------------------------------- 43a APPENDIX D [1] IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 87-Z-977 ADOLPH COORS COMPANY, PLAINTIFF vs. JAMES BAKER, ET AL., DEFENDANTS AND SPEAKER AND BIPARTISAN LEADERSHIP GROUP OF THE UNITED STATES HOUSE OF REPRESENTATIVES, lNTERVENOR-DEFENDANTS REPORTER'S TRANSCRIPT (Hearing on Cross-Motions for Summary Judgment) Proceedings before the HONORABLE ZITZ L. WEIN- SHIENK, Judge, United States District Court for the District of Colorado, commencing at 8:50 a.m., on the 31st day of May, 1989, in Courtroom C-204, United States Courthouse, Denver, Colorado. APPEARANCES BRADLEY, CAMPBELL, CARNEY & MADSEN, by K. PRESTON OADE, Attorney at Law, 171 Washington Avenue, Golden, Colorado, 80401-1994, appearing for the plaintiff. MICHAEL J. NORTON, Acting United States Attorney, by ---------------------------------------- Page Break ---------------------------------------- 44a ***** RULING THE COURT: The briefing and the arguments today have pinpointed what is a very interesting issue, and that is the constitutionality based on a First Amendment challenge to two [47] small parts of a statute, very specifically the exception clauses within the parentheses of 27 United States Code 205(e)(2) and 205(f)(2). And we're not talking, as I understand, about the whole of (e) and (f) or even (e)(2) or (f)(2), but rather just the parenthetical clause within those two subsections, which state, reading from the one in (e)(2), ". . . except that statements of or ---------------------------------------- Page Break ---------------------------------------- 45a statements likely to be considered as statements of alcoholic content of malt beverages are prohibited unless required by state law and except that -" whoops. We're talking about wines. So we're not even talking about the whole exception clause. We're only talking about that part of the exception clause that refers to malt beverages, not the part that refers to wines. And let me just take a look at - Under (f)(2), the excep- tion clause ". . . except the statements of or statements likely to be considered of alcoholic content of malt beverages and wines"; and in this case, we're concerned only with malt beverages. So what we're talking about is whether that prohibition on limiting alcoholic content of malt beverages contained within those two parenthetical exceptions to 27 U.S. C. 205(e)(2) and (f)(2) can stand con- stitutional muster. This case arose because Plaintiff, Adolph Coors Com- pany, desired certain advertising or packaging on their product and went to the Bureau of Alcohol, Tobacco, and Firearms, BATF, for approval. BATF refused approval because of [48] the statute in question, however agreed with the plaintiff that the statutory prohibition against listing any alcoholic content of beer was unconstitutional. We then had the intervener defendant step into the case to create a case or controversy. The intervener defendant is the Speaker and Bipartisan Leadership Group of the U.S. House of Representatives, representing the leader- ship of the House and I presume the House of Represen- tatives - MS. JARUZELSKI: Yes, that's our institutional mechanism. THE COURT: - through the leadership. This intervener defendant has made a very forceful argument that the Court should not interfere with a statute, even a statute passed by Congress 50-odd years ---------------------------------------- Page Break ---------------------------------------- 46a ago, and declare it unconstitutional unless the ruling was compelling. And basically, the argument has been made very forcefully by Defendant that the Court should not in- terfere with the legislative decisions made by Congress. However, if a statute is in violation of the First Amend- ment, whether it be a Federal statute or state statute, the only way that that ruling can be made is by the judicial branch, by the court, unless Congress itself chooses to amend or to repeal the statute, which Congress has not done in this case. The pivotal case, the important case for decision of whether a statute violates the First Amendment protec- tions [49] concerning commercial speech is Central Hud- son Gas & Electric v. Public Service Commission, which is 447 U.S. 557, a 1980 Supreme Court decision. In that deci- sion, the Supreme Court said the following, and I'm reading now from page 566 of the decision: "In commercial speech cases, then, a four-part analysis has developed. At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted and whether it is not more extensive than is necessary to serve that interest. " And thus, in 1980, the Supreme Court set forth the landmark case in the commercial speech area which establishes this four-part test and requires a court to do a balancing test, to consider the factors that are set forth by the Supreme Court. First factor: Does the commercial message accurately inform the public about lawful activity in a manner that is ---------------------------------------- Page Break ---------------------------------------- 47a not misleading, or as stated by the Supreme Court, does it concern lawful activity and is not misleading? I've listened carefully to the arguments of Counsel; and it appears to the Court that the argument stated by the - or [50] stated in the amicus brief has some merit. What is misleading, it appears to the Court, is the status quo, rather than a truthful statement about alcoholic content. It is very difficult for this court to see how a truthful state- ment can be misleading. Mere disclosure of the alcoholic content cannot be deceptive almost by definition. I think what is being argued by Intervener Defendant is that the manner of the disclosure can be deceptive, but the manner of disclosure of the alcoholic content certainly is subject to appropriate regulations which can prevent misleading information or prevent false impressions that people can drink more or that insignificant percentages are significant. The legislative hearings that have been discussed in argument were hearings that took place in the 30's, ap- proximately a year after Prohibition was ended; and the conditions in the 1930's, a short period after prohibition, is certainly not the condition of the present time, the 1980's: We have - we have modern brewing technologies - This has been pointed out, and I think there is no dispute over this - in the present day, where the percentage can be very clearly pinpointed. In the 1930's, there were 680-some brewers. Today, 90 percent of the malt liquor is made by 5 breweries; and we have other very substantial differences between the 30's and the 80's, the late 80's, because today with the importance of automobiles and the desire of drivers to be responsible [51] drinkers and to know how much alcohol they are drinking, there is certainly a very strong reason for making information available so that ---------------------------------------- Page Break ---------------------------------------- 48a citizens will be able to judge how much alcoholic intake they have, if they're going to be driving a car. 1 would note that the point made in the amicus brief is compelling that the differences between having some light beer, for example, with little alcoholic content, and malt liquor, with heavy alcoholic content, might make all the difference between a driver being not at all affected by a social drink and a driver being unable to operate a vehicle, And this is a very powerful and persuasive reason why the status quo of not allowing consumers to know the alcoholic content is what is misleading, rather than a truthful statement. In looking at the first prong, then, of the Hudson test, there certainly would be - it certainly would be lawful ac- tivity to advise the consumer about alcoholic content in beverages, malt beverages; and it certainly would not be misleading simply to list the alcoholic content. I would just simply note that alcoholic content is listed as far as wines are concerned and at least by proof in hard liquor. We then go to the second test of Central Hudson, and that is whether the asserted government interest is substan- tial. And perhaps that should be considered with the third test, [52] which is whether the regulation or in this case, the statute, directly advances the governmental interest. Do we have a substantial governmental interest in preventing consumers from knowing the alcoholic con- tent? And it appears to the court that the answer has to be no. It's very difficult for the Court to see how there is any unfair competition or antitrust aspect to this. We do not have the same fair competition problems that existed in the 30's; and of course, this court must look to the present time and the present situation in looking at these tests in Hudson. ---------------------------------------- Page Break ---------------------------------------- 49a Under the present situation, with fewer brewers produc- ing a large percentage of the market, we certainly don't have the same situation as the 1930 situation of 680-Plus brewers brewing beers in small factories, and so forth. Fair competition, I have to agree with the plaintiff, is real- ly not an interest. Consumer deception? I've already mentioned this on the first prong; and it appears to me that in the 80's, we have knowledgeable consumers, we have consumers who have an interest in knowing alcoholic content, not just because of mere curiosity but because of the very important advent of the automobile and other forms of transportation. I might mention that we have skiing statutes which indicate that skiers, for example, should ski safely; and that means without having an over amount of alcohol in their bodies when they are skiing, so [53] they don't ski recklessly. Alcohol content is important for consumers to know in many different respects; and this is something, even though I will agree that the plaintiff cannot assert the posi- tions of the consumer because they're not representing the consumer, the Court can simply - can certainly consider the present state of affairs as far as what consumers need to know. The status quo, which does not let a consumer know the difference between alcoholic content of light beers and very strong malt liquor, for example, has to be more deceiving than letting this information be available to the public. I realize that state statutes do control in many, if not most states, concerning the light beers. But we do have states such as Washington, who are not asserting that right to' control under the general welfare; and in the State of Washington and other states, certainly this problem lloms [sic]. But in this present day of the automobile, where it is important for the consumer to understand what they are drinking and where indeed the driver's tests in many states ---------------------------------------- Page Break ---------------------------------------- 50a check new drivers to make sure they understand the laws and understand how much alcohol is usually contained in beer, wine, and more potent drinks, it is important for consumers to be able to see what alcoholic content is. Whether the governmental interest is directly advanced by the statute is an interesting question, because we still [54] have the ability of the Bureau, BATF, to regulate, if this statute is declared unconstitutional, in violation of the First Amendment. We still have the opportunity for regulation to make sure that there is no misleading type of information given. I understand the argument that this could be misleading, but the point is I think that it isn't the disclosure of the alcoholic content which is misleading but the manner in which it is disclosed; and that certainly can be regulated by much less extensive prohibition. And that takes us to the fourth point of Hudson, which is that as stated by the Supreme Court: whether it is not more extensive than is necessary to serve that interest. The statutory prohibition says no listing unless by state law. It says alcoholic content of malt beverages is prohibited unless required by state law. Certainly there can be a much less extensive regulation carefully drawn to achieve the ob- jectives that are argued by the defendant intervener in this case other than the flat prohibition. I see none of the cases that have been cited by In- tervener Defendant which convinces this court that the decision should go otherwise. There have been cases cited, a Fifth Circuit case I had a chance to look at. It concerns the use of the term "realtor" and whether that term can be used and limited to members of the board of the national association of realtors. That really is a case which is far different, and [55] regulation by the state there is far dif- ferent than what we're talking about here. ---------------------------------------- Page Break ---------------------------------------- 51a Experience in Canada, which is a neighboring country, which has a lot of similarities - it's not identical, of course, to the United States but has a lot of similarities - is impor- tant. And the plaintiff has pointed out that Canada has not regulated alcoholic content by prohibiting it and that indeed the - I think it appears to be unrebutted that the trend in Canada is towards lower alcoholic content of beer and not greater. And it is urged that consumers knowing the alcoholic content of beer may tend to drink the lower alcoholic content: the whole trend toward light beers, for example. So even though the Canadian experience is not determinative, nevertheless I think it may be shown that the great specters of all the bad things that can happen if this small exception in the statute is stricken are merely specters and will not necessarily come to be; and Canada and other countries are pointed to as examples that this is not the case in countries which do not have this prohibi- tion. The Court is satisfied that the - in examining the test in Central Hudson that this very small part of the statute, the exception clause within the parentheses referring to malt liquors in these two subsections stands as an unconstitu- tional restraint on commercial speech under the test in Hudson and shall not be enforced. [56] The case came to be because Coors asked BATF to approve certain labeling; and at this time, the parties are just Coors for the plaintiff, BATF as the defendant, and of course, the defendant intervenor, who is asserting the interest of the House of Representatives. But I have no problem in declaring today that the statute constitutes an unconstitutional restraint on commercial speech and that it may not be enforced, it shall not be enforced. And again, I want to make very clear that when we're talking about the statute, we're talking about the excep- ---------------------------------------- Page Break ---------------------------------------- 52a tional - the exception within the parentheses referring to malt beverages contained in 27 U.S.C. 205(e)(2) and (f)(2). And it's only that limited amount of wording within the exception clause referring to malt beverages. May I inquire, because we only have parties at this time of Coors, BATF, and of course the House of Represen- tatives - may 1 inquire whether there - are you asking that this order be - I'm not sure what the - how broadly this order should be stated. I have no problem in saying that it shall not be in force as to Coors and BATF can go ahead and consider whether their label is proper. But we certain- ly don't have other breweries included with the plaintiff. MR. OADE: Your Honor, I believe if it's unconstitu- tional, the BATF cannot enforce it against anybody; and that's the relief that we asked for in our complaint, and [57] we just ask that they consider our application on the merits and anybody else's as well, your Honor. THE COURT: Well, they obviously have to consider your application on the merits. It's very difficult to see how the statute can be an unconstitutional restraint on commercial speech and not be enforced against you but can be enforced against others. MR. OADE: That's what we asked for in our com- plaint: that it be declared unconstitutional and the BATF be enjoined from enforcing 205(e)(2) and 205(f)(2). THE COURT: I think you have to be again careful, because 205(e)(2) and 205(f)(2) are broader than what I am declaring as an unconstitutional restraint. MR. OADE: Insofar as it prohibits the advertisement of percentage alcohol content of malt beverages and state- ments on the label. THE COURT: That is correct. MR. OADE: Yes. THE COURT: Did you want to respond in any way? ---------------------------------------- Page Break ---------------------------------------- 53a MS. JARUZELSKI: Our only response would be to call to the Court's attention that it is clear that to the extent this is enjoined, it's enjoined in this jurisdiction; and while that would be the law of this jurisdiction, this court does not have power to enforce a nationwide ban. And that's clear from, for example, the Amaron case, which came up through the District [58] Court in New Jersey to the Third Circuit and ultimately to the Supremes. THE COURT: I'm not sure I agree with you. This is a Federal Court. Coors is a Federal brewer selling throughout all 50 states and perhaps - and I'm sure abroad, although we're not talking about international sales. But my decision applies as far as Coors is concerned, as far as BATF is concerned, nationwide. MS. JARUZELSKI: I would respectfully disagree, your Honor, but - THE COURT: I don't see how you can possibly argue that it's limited only to Colorado, when the sales of Coors are nationwide and this is a national statute or a Federal statute, not a state statute. MS. JARUZELSKI: I can only say that that has been the position that has been taken in other cases where district courts have tried to enjoin Federal agencies nation- wide. THE COURT: Well, we have the attorney sitting in court representing - the local attorney representing BATF; and my order will be that BATF shall not enforce this un- constitutional restraint concerning Coors; and as far as I'm concerned, that's - that has to be nationwide. I frankly feel that it should not be enforced, since I'm declaring it unconstitutional. Assuming this is going to be appealed and there is [59] going to be a circuit decision that's going to look at it and assuming that the circuit agrees with me, it would be an absolutely impossible situation for BATF to enforce this as to one brewer and not as to others. ---------------------------------------- Page Break ---------------------------------------- 54a Mr. Pharo, I don't know if you have a position on this or not. MR. PHARO: Well, your Honor, I think courts throughout the country that have jurisdiction over the government enjoin action, and it's normally nationwide; so that would be my guess, would be that your order would be enforceable or declare it unconstitutional as to all brewers and it would be nationwide. THE COURT: Well, maybe I should make a decision on this. 1 was going to hear the comments of the parties, but it seems to me that it's an absolutely impossible situa- tion to declare something unconstitutional just as to a cer- tain area or as to a certain brewer; and the Court therefore will order that this statute is unconstitutional as a restraint on commercial speech, the limited part of the statute that I've previously described, and that it shall not be enforced by BATF. And we'll certainly allow the intervener defen- dant to appeal this decision, and I welcome Tenth Circuit inquiry into it. I may very well reduce this verbal decision to writing within the next week or two, and I will send copies of it to all concerned. But the decision will be effective as of to- day, [60] and what I've said on the record will be incor- porated by reference as if fully set forth and stands as the declaratory judgement of the Court. I want to thank the attorneys. It's been very interesting, and I appreciate the briefs and the very excellent argu- ment. 1 don't know if we have anyone present from Heileman Brewery, but the amicus brief that Heileman did was also very helpful. MR. OADE: Thank you, your Honor; and I'll thank Heileman on behalf of the Court. THE COURT: Okay. If there is nothing further, we'll take a short recess and then come back and call up the next case. (Thereupon, the hearing was concluded and the Court recessed at 10:50 a.m.) ---------------------------------------- Page Break ---------------------------------------- 55a APPENDIX E UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT ADOLPH COORS COMPANY, PLAINTIFF-APPELLE v. NICHOLAS BRADY, IN HIS OFFICIAL CAPACITY AS SECRETARY OF THE UNITED STATES DEPARTMENT OF TREASURY; STEVE HIGGINS, IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE BUREAU OF ALCOHOL, TOBACCO AND FIREARMS, DEFENDANT-APPELLANTS AND SPEAKER AND BIPARTISAN LEADERSHIP GROUP OF THE U.S. HOUSE OF REPRESENTATIVES, INTERVENOR-DEFENDANT-APPELLANT Entered December 1, 1993 ORDER Before MCKAY, Chief Judge, BARRETT, LOGAN, SEYMOUR, MOORE, ANDERSON, TACHA, BALDOCK, BRORBY, EBEL and KELLY, Circuit Judges, and BROWN* District Judge. ___________________(footnotes) * Honorable Wesley E. Brown, Senior District Judge, United States District Court for the District of Kansas, sitting by designation. ---------------------------------------- Page Break ---------------------------------------- 56a This matter comes on for consideration of appellants' petition for rehearing and suggestion for rehearing in banc. Upon consideration whereof, the petition for rehearing is denied by the panel that rendered the decision. In accordance with Rule 35(b), Federal Rules of Ap- pellate Procedure, the suggestion for rehearing in bane was transmitted to all of the judges of the court who are in regular active service. No member of the panel and no judge in regular active service on the court having re- quested that the court be polled on rehearing in bane, Rule 35, Federal Rules of Appellate Procedure, the suggestion for rehearing in bane is denied. Entered for the Court ROBERT L. HOECKER, Clerk By /s/ Patrick Fisher PATRICK FISHER Chief Deputy Clerk ---------------------------------------- Page Break ---------------------------------------- 57a APPENDIX F STATUTORY PROVISIONS Title 27: 205. Unfair competition and unlawful practices It shall be unlawful for any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer or wholesaler, of distilled spirits, wine, or malt beverages, or as a bottler, or warehouseman and bottler, of distilled spirits, directly or indirectly or through an affiliate: (a) Exclusive outlet To require, by agreement or otherwise, that any re engaged in the sale of distilled spirits, wine, -or malt beverages, purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such require- ment is made in the course of interstate or foreign com- merce, or if such person engages in such practice to such an extent as substantially to restrain or prevent transac- tions in interstate or foreign commerce in any such prod- ucts, or if the direct effect of such requirement is to pre- vent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer in in- terstate or foreign commerce; or (b) "Tied house" To induce through any of the following means, any retailer, engaged in the sale of distilled spirits, wine, or malt beverages, to purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such ---------------------------------------- Page Break ---------------------------------------- 58a inducement is made in the course of interstate or foreign commerce, or if such person engages in the practice of using such means, or any of them, to such an extent as substantially to restrain or prevent transactions in in- terstate or foreign commerce in any such products, or if the direct effect of such inducement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer in interstate or foreign commerce: (1) By acquiring or holding (after the expiration of any existing license) any interest in any license with respect to the premises of the retailer; or (2) by acquiring any interest in real or personal property owned, occupied, or used by the retailer in the conduct of his business; or (3) by furnishing, giving, renting, lending, or selling to the retailer, any equipment, fixtures, signs, sup- plies, money, services, or other thing of value, subject to such exceptions as the Secretary of the Treasury shall by regulation prescribe, having due regard for public health, the quantity and value of articles involved, established trade customs not contrary to the public interest and the purposes of this subsection: or (4) by paying or crediting the retailer for any advertising, display, or distribution service; or (5) by guaranteeing any loan or the repayment of any financial obligation of the retailer; or (6) by extend- ing to the retailer credit for a period in excess of the credit period usual and customary to the industry for the par- ticular class of transactions, as ascertained by the Secretary of the Treasury and prescribed by regulations by him; or (7) by requiring the retailer to take and dispose of a certain quota of any of such products; or (c) Commercial bribery To induce through any of the following means, any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, to purchase any such products from such person to the exclusion in whole or in part of distilled ---------------------------------------- Page Break ---------------------------------------- 59a spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such in- ducement is made in the course of interstate or foreign commerce, or if such person engages in the practice of us- ing such means, or any of them, to such an extent as substantially to restrain or prevent transactions in in- terstate or foreign commerce in any such products, or if the direct effect of such inducement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such trade buyer in interstate or foreign commerce: (1) By commercial bribery; or (2) by offering or giving any bonus, premium, or compensation to any officer, or employee, or representative of the trade buyer; or (d) Consignment sales To sell, offer for sale, or contract to sell to any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, or for any such trade buyer to purchase, offer to purchase, or contract to purchase, any such products on consignment or under conditional sale or with the privilege of return or on any basis otherwise than a bona fide sale, or where any part of such transaction involves, directly or indirectly, the acquisition by such person from the trade buyer or his agreement to acquire from the trade buyer other distilled spirits, wine, or malt beverages - if such sale, purchase, offer, or contract is made in the course of interstate or foreign commerce, or if such person or trade buyer engages in such practice to such an extent as sub- stantially to restrain or prevent transactions in interstate or foreign commerce in any such products of if the direct effect of such sale, purchase, offer, or contract is to pre- vent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such trade buyer in interstate or foreign commerce: Provided, That this ---------------------------------------- Page Break ---------------------------------------- 60a subsection shall not apply to transactions involving solely the bona fide return of merchandise for ordinary and usual commercial reasons arising after the merchandise has been sold; or (e) Labeling To sell or ship or deliver for sale or shipment, or other- wise introduce in interstate or foreign commerce, or to receive therein, or to remove from customs custody for consumption, any distilled spirits, wine, or malt beverages in bottles, unless such products are bottled, packaged and labeled in conformity with such regulations, to be prescribed by the Secretary of the Treasury, with respect to packaging, marking, branding, and labeling and size and fill of container (1) as will prohibit deception of the consumer with respect to such products or the quantity thereof and as will prohibit, irrespective of falsity, such statements relating to age, manufacturing processes, i !' analyses, guarantees, and scientific or irrelevant matters as the Secretary of the Treasury finds to be likely to mislead the consumer; (2) as will provide the consumer with ade- quate information as to the identity and quality of the products, the alcoholic content thereof (except that statements of, or statements likely to be considered as statements of alcoholic content of malt beverages are pro- hibited unless required by State law and except that, in case of wines, statements of alcoholic content shall be re- quired only for wines containing more than 14 per centum of alcohol by volume), the net contents of the package, and the manufacturer or bottler or importer of the pro- duce; (3) as will require an accurate statement, in the case of distilled spirits (other than cordials, liqueurs, and specialties) produced by blending or rectification, if neutral spirits have been used in the production thereof, informing the consumer of the percentage of neutral ---------------------------------------- Page Break ---------------------------------------- 61a spirits so used and of the name of the commodity from which such neutral spirits have been distilled, or in case of neutral spirits or of gin produced by a process of con- tinuous distillation, the name of the commodity from which distilled; (4) as will prohibit statements on the label that are disparaging of a competitor's products or are false, misleading, obscene, or indecent; and (5) as will prevent deception of the consumer by use of a trade or brand name that is the name of any living individual of public prom- inence, or existing private or public organization, or is a name that is in simulation or is an abbreviation thereof, and as will prevent the use of a graphic, pictorial, or emblematic representation of any such individual or organization, if the use of such name or representation is likely falsely to lead the consumer to believe that the pro- duct has been indorsed, made, or used by, or produced for, or under the supervision of, or in accordance with the specifications of, such individual or organization: Provid- ed, That this clause shall not apply to the use of the name of any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer, wholesaler, retailer, bottler, or warehouseman, of distilled spirits, wine, or malt beverages, nor to the use by any per- son of a trade or brand name used by him or his predecessor in interest prior to August 29, 1935; including regulations requiring, at time of release from customs custody, certificates issued by foreign governments cover- ing origin, age, and identity of imported products: Provid- ed further, That nothing herein nor any decision, ruling, or regulation of any Department of the Government shall deny the right of any person to use any trade name or brand of foreign origin not presently effectively registered in the United States Patent and Trademark Office which has been used by such person or predecessors in the United ---------------------------------------- Page Break ---------------------------------------- 62a States for a period of at least five years last past, if the use of such name or brand is qualified by the name of the locality in the United States in which the product is pro- duced, and, in the case of the use of such name or brand on any label or in any advertisement, if such qualification is as conspicuous as such name or brand. It shall be unlawful for any person to alter, mutilate, destroy, obliterate, or remove any mark, brand, or label upon distilled spirits, wine, or malt beverages held for sale in interstate or foreign commerce or after shipment therein, except as authorized by Federal law or except pur- suant to regulations of the Secretary of the Treasury authorizing relabeling for purposes of compliance with the requirements of this subsection or of State law. In order to prevent the sale or shipment or other in- troduction of distilled spirits, wine, or malt beverages in interstate or foreign commerce, if bottled, packaged, or labeled in violation of the requirements of this subsection, (1) no bottler of distilled spirits, no producer, blender, or wholesaler of wine, or proprietor of a bonded wine storeroom, and no brewer or wholesaler of malt beverages shall bottle, and (2) no person shall remove from customs custody, in bottles, for sale or any other commercial pur- pose, distilled spirits, wine, or malt beverages, respective- ly, after such date as the Secretary of the Treasury fixes as the earliest practicable date for the application of the pro- visions of this subsection to any class of such persons (but not later than August 15, 1936, in the case of distilled spirits, and December 15, 1936, in the case of wine and malt beverages, and only after thirty days' public notice), unless, upon application to the Secretary of the Treasury, he has obtained and has in his possession a certificate of label approval covering the distilled spirits, wine, or malt beverages, issued by the Secretary in such manner and ---------------------------------------- Page Break ---------------------------------------- 63a form as he shall by regulations prescribe: Provided, That any such bottler of distilled spirits, or producer, blender, or wholesaler of wine, or proprietor of a bonded wine storeroom, or brewer or wholesaler of malt beverages shall be exempt from the requirements of this subsection if, upon application to the Secretary, he shows to the satisfac- tion of the Secretary that the distilled spirits, wine, or malt beverages to be bottled by the applicant are not to be sold, or offered for sale, or shipped or delivered for shipment, or otherwise introduced, in interstate or foreign com- merce. Officers of internal revenue are authorized and directed to withhold the release of distilled spirits from the bottling plant unless such certificates have been obtained, or unless the application of the bottler for exemption has been granted by the Secretary; and customs officers are authorized and directed to withhold the release from customs custody of distilled spirits, wine, and malt beverages, unless such certificates have been obtained. The District Courts of the United States, and the United States court for any Territory shall have jurisdiction of suits to enjoin, annul, or suspend in whole or in part any final action by the Secretary upon any application under this subsection; or (f) Advertising To publish or disseminate or cause to be published or disseminated by radio broadcast, or in any newspaper, periodical or other publication or by any sign or outdoor advertisement or any other printed or graphic matter, any advertisement of distilled spirits, wine, or malt beverages, if such advertisement is in, or is calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail, unless such advertisement is in conformity with such regulations, to be prescribed by the Secretary of the Treasury, (1) as will prevent deception of the consumer ---------------------------------------- Page Break ---------------------------------------- 64a with respect to the products advertised and as will pro- hibit, irrespective of falsity, such statements relating to age, manufacturing processes, analyses, guaranties, and scientific or irrelevant matters as the Secretary of the Treasury finds to be likely to mislead the consumer; (2) as will provide the consumer with adequate information as to the identity and quality of the products advertised, the alcoholic content thereof (except the [sic] statements of, or statements likely to be considered as statements of, alcoholic content of malt beverages and wines are pro- hibited), and the person responsible for the advertisement; (3) as will require an accurate statement, in the case of distilled spirits (other than cordials, liqueurs, and specialties) produced by blending or rectification, if neutral spirits have been used in the production thereof, informing the consumer of the percentage of neutral spirits so used and of the name of the commodity from which such neutral spirits have been distilled, or in case of neutral spirits or of gin produced by a process of con- tinuous distillation, the name of the commodity from which distilled; (4) as will prohibit statements that are disparaging of a competitor's products or are false, misleading, obscene, or indecent; (5) as will prevent statements inconsistent with any statement on the labeling of the products advertised. This subsection shall not apply to outdoor advertising in place on June 18, 1935, but shall apply upon replacement, restoration, or renovation of any such advertising. The prohibitions of this subsection and regulations thereunder shall not apply to the publisher of any newspaper, periodical, or other publication, or radio broadcaster, unless such publisher or radio broadcaster is engaged in business as a distiller, brewer, rectifier, or other producer, or as an importer or wholesaler, of dis- tilled spirits, wine, or malt beverages, or as a bottler, or ---------------------------------------- Page Break ---------------------------------------- 65a warehouseman and bottler, of distilled spirits, directly or indirectly or through an affilite. The provisions of subsections (a), (b), and (c) of this section shall not apply to any act done by an agency of a State or political subdivision thereof, or by any officer or employee of such agency. In the case of malt beverages, the provisions of subsec- tions (a), (b), (c), and (d) of this section shall apply to tran- sactions between a retailer or trade buyer in any State and a brewer, importer, or wholesaler of malt beverages out- side such State only to the extent that the law of such State imposes similar requirements with respect to similar tran- sactions between a retailer or trade buyer in such State and a brewer, importer, or wholesaler of malt beverages in such State, as the case may be. In the case of malt beverages, the provisions of this subsection and subsection (e) of this section shall apply to the labeling of malt beverages sold or shipped or delivered for shipment or otherwise introduced into or received in any State from any place outside thereof, or the advertising of malt beverages intended to be sold or shipped or delivered for shipment or otherwise introduced into or received in any State from any place outside thereof, only to the extent that the law of such State imposes similar requirements with respect to the labeling or advertising, as the case may be, of malt beverages not sold or shipped or delivered for shipment or otherwise introduced into or received in such State from any place outside thereof. The Secretary of the Treasury shall give reasonable public notice, and afford to interested parties opportunity for hearing, prior to prescribing regulations to carry out the provisions of this section. ---------------------------------------- Page Break ---------------------------------------- 66a APPENDIX G REGULATORY PROVISIONS 27 C. F. R.: 7.26. Alcoholic content. (a) The alcoholic content and the percentage and quantity of the original extract shall not be stated unless required by State law. When alcoholic content is required to be stated, but the manner of statement is not specified in the State law, it shall be stated in percentage of alcohol by weight or by volume, and not by proof or by max- imums or minimums. Otherwise the manner of statement shall be as specified in the State law. (b) The terms `low alcohol" or "reduced alcohol" may be used only on malt beverage products containing less than 2.5 percent alcohol by volume. (c) The term "non-alcoholic" may be used on malt beverage products, provided the statement "contains less than 0.5 percent (or .5070) alcohol by volume" appears in direct conjunction with it, in readily legible printing and on a completely contrasting background. (d) The term "alcohol-free" may be used only on malt beverage products containing no alcohol. 7.29 Prohibited practices. (a) Statements on labels. Containers of malt beverages, or any labels on such containers, or any carton, case, or individual covering of such containers, used for sale at retail or any written, printed, graphic, or other mat- ter accompanying such containers to the consumer shall not contain: (1) Any statement that is false or untrue in any par- ticular, or that, irrespective of falsity, directly, or by am- ---------------------------------------- Page Break ---------------------------------------- 67a biguity, omission, or inference, or by the addition of ir- relevant, scientific or technical matter, tends to create a misleading impression. (2) Any statement that is disparaging of a competitor's products. (3) Any statement, design, device, or representation which is obscene or indecent. (4) Any statement, design, device, or representation of or relating to analyses, standards, or tests, irrespective of falsity, which the Director finds to be likely to mislead the consumer. (5) Any statement, design, device, or representation of or relating to any guarantee, irrespective of falsity, which the Director finds to be likely to mislead the consumer. Money-back guarantees are not prohibited. (6) A trade or brand name that is the name of any liv- ing individual of public prominence, or existing private or public organization, or is a name that is in simulation or is an abbreviation thereof, or any graphic, pictorial, or emblematic representation of any such individual or organization, if the use of such name or representation is likely falsely to lead the consumer to believe that the pro- duct has been endorsed, made, or used by, or produced for, or under the supervision of, or in accordance with the specifications of, such individual or organization: Provid- ed, That this paragraph shall not apply to the use of the name of any person engaged in business as a producer, im- porter, bottler, packer, wholesaler, retailer, or ware- houseman, of malt beverages, nor to the use by any person of a trade or brand name that is the name of any living in- dividual of public prominence, or existing private or public organization, provided such trade or brand name was used by him or his predecessors in interest prior to August 29, 1935. ---------------------------------------- Page Break ---------------------------------------- 68a (b) Simulation of Government stamps. No label shall be of such design as to resemble or simulate a stamp of the United States Government or of any State or foreign government. No label, other than stamps authorized or re- quired by the United States Government or any State or foreign government, shall state or indicate that the malt beverage contained in the labeled container is brewed, made, bottled, packed, labeled, or sold under, or in accor- dance with, any municipal, State, Federal, or foreign government authorization, law, or regulation, unless such statement is required or specifically authorized by Federal, State, or municipal, law. or regulation, or is required or specifically authorized by the laws or regulations of the foreign country in which such malt beverages were pro- duced. If the municipal or State government permit number is stated upon a label, it shall not be accompanied by an additional statement relating thereto, unless re- quired by State law. (c) Use of word "bonded'; etc. The words "bonded", "bottled in bond", "aged in bond", "bonded age", "bottled under customs supervision", or phrases containing these or synonymous terms which imply governmental supervi- sion over production, bottling, or packing, shall not be used on any label for malt beverages. (d) Flags, seals, coats of arms, crests, and other in- signia. Labels shall not contain, in the brand name or otherwise, any statement, design, device, or pictorial representation which the Director finds relates to, or is capable of being construed as relating to, the armed forces of the United States, or the American flag, or any emblem, seal, insignia, or decoration associated with such flag or armed forces; nor shall any label contain any state- ment, design, device, or pictorial representation of or con- cerning any flag, seal, coat of arms, crest or other insignia, ---------------------------------------- Page Break ---------------------------------------- 69a likely to mislead the consumer to believe that the product has been endorsed, made, or used by, or produced for, or under the supervision of, or in accordance with the specifications of the government, organization, family, or individual with whom such flag, seal, coat of arms, crest, or insignia is associated. (e) Curative and therapeutic claims. Labels shall not contain any statement, design, representation, pictorial representation, or device representing that the use of malt beverage has curative or therapeutic effects if such state- ment is untrue in any particular or tends to create a misleading impression. (f) Use of words Wrong' 'full' strength': and similar words. Labels shall not contain the words "strong", "full strength", "extra strength", "high test", "high proof", "pre-war strength", "full oldtime alcoholic strength", or similar words or statements, likely to be considered as statements of alcoholic content, except where required by State law. This does not preclude use of the terms "low alcohol, " *'reduced alcohol," "non-alcoholic, " and "alcohol-free," in accordance with 7.26 (b), (c), and (d). (g) Use of numerals. Labels shall not contain any statements, designs, or devices whether in the form of numerals, letters, characters, figures, or otherwise, which are likely to be considered as statements of alcoholic con- tent, unless required by State law. (h) Coverings, cartons, or cases. Individual coverings, cartons, cases, or other wrappers of containers of malt beverages, used for sale at retail, or any written, printed, graphic, or other matter accompanying the container shall not contain any statement or any graphic pictorial, or emblematic representation, or other matter, which is pro- hibited from appearing on any label or container of malt beverages. ---------------------------------------- Page Break ---------------------------------------- 70a 7.54 Prohibited statements. (a) General prohibition. An advertisement of malt beverages shall not contain: (1) Any statement that is false or untrue in any material particular, or that, irrespective of falsity, direct- ly, or by ambiguity, omission, or inference, or by the addi- tion of irrelevant, scientific or technical matter, tends to create a misleading impression. (2) Any statement that is disparaging of a competitor's products. (3) Any statement, design, device, or representation which is obscene or indecent. (4) Any statement, design, device, or representation of or relating to analyses, standards, or tests, irrespective of falsity, which the Director finds to be likely to mislead the ` consumer. (5) Any statement, design, device, or representation of or relating to any guarantee, irrespective of falsity, which the Director finds to be likely to mislead the consumer. Money-back guarantees are not prohibited. (6) Any statement that the malt beverages are brewed, made, bottled, packed, labeled, or sold under, or in accor- dance with, any municipal, State, or Federal authoriza- tion, law, or regulation; and if a municipal or State permit number is stated, the permit number shall not be accom- panied by any additional statement relating thereto. (7) The words "bonded", "bottled in bond", "aged in bond", "bonded age", "bottled under customs supervision", or phrases containing these or synonymous terms which imply governmental supervision over produc- tion, bottling, or packing. (b) Statements inconsistent with labeling. (1) Adver- tisements shall not contain any statement concerning a brand or lot of malt beverages that is inconsistent with any ---------------------------------------- Page Break ---------------------------------------- 71a statement on the labeling thereof. (2) Any label depicted on a bottle in an advertisement shall be a reproduction of an approved label. (c) Alcohol content. Advertisements shall not contain the words "strong," "full strength," "extra strength," "high test, " `high proof, " "full alcohol strength," or any other statement of alcohol content, or any statement of the percentage and quantity of the original extract, or any numerals, letters, characters, or figures, or similar words or statements, likely to be considered as statements of alcohol content, except where required by State law. This does not preclude use of the terms "low alcohol," "reduced alcohol," " non-alcoholic ," and "alcohol-free," as used on labels, in accordance with 7.26 (b), (c), and (d). (d) C/ass. (1) No product containing less than one-half of 1 per centum of alcohol by volume shall be designated in any advertisement as "beer", "lager beer", "lager", "ale", "porter", or "stout", or by any other class or type designation commonly applied to fermented malt beverages containing one-half of 1 per centum or more of alcohol by volume. (2) No product other than a malt beverage fermented at a comparatively high temperature, possessing the characteristics generally attributed to "ale," "porter," or "stout" and produced without the use of coloring or flavoring materials (other than those recognized in stan- dard brewing practices) shall be designated in any adver- tisement by any of these class designations. (e) Curative and therapeutic claims. Advertisements shall not contain any statement, design, representation, pictorial representation, or device representing that the use of malt beverages has curative or therapeutic effects if such statement is untrue in any particular or tends to create a misleading impression. ---------------------------------------- Page Break ---------------------------------------- 72a (f) Confusion of brands. Two or more different brands or lots of malt beverages shall not be advertised in one advertisement (or in two or more advertisements in one issue of a periodical or a newspaper or in one piece of other written, printed, or graphic matter) if the advertise- ment tends to create the impression that representations made as to one brand or lot apply to the other or others, and if as to such latter the representations contravene any provision of $$7.50 through 7.54 or are in any respect un- true. (g) F1ags, seals, coats Of arms, crests, and other in- signia. No advertisement shall contain any statement, design, device, or pictorial representation of or relating to, or capable of being construed as relating to the armed forces of the United States, or of the American flag, or of any emblem, seal, insignia, or decoration associated with such flag or armed forces; nor shall any advertisement contain any statement, device, design, or pictorial representation of or concerning any flag, seal, coat of arms, crest, or other insignia, likely to mislead the con- sumer to believe that the product has been endorsed, made, or used by, or produced for, or under the supervi- sion of, or in accordance with the specifications of the government, organization, family, or individual with whom such flag, seal, coat of arms, crest, or insignia is associated. (h) Deceptive advertising techniques. Subliminal or similar techniques are prohibited. "Subliminal or similar techniques," as used in this part, refers to any device or technique that is used to convey, or attempts to convey, a message to a person by means of images or sounds of a very brief nature that cannot be perceived at a normal level of awareness. ---------------------------------------- Page Break ---------------------------------------- 73a APPENDIX H [SEAL] DEPARTMENT OF THE TREASURY BUREAU OF ALCOHOL, TOBACCO AND FIREARMS WASHINGTON, D.C. 20226 [MAY 04, 1987] Adolph Coors Company Golden, CO 80401 Gentlemen: We have reviewed your letter dated April 15, 1987, sub- mitting two applications for label approval, as well as print and broadcast advertisements. All of these items contain reference to the alcohol content of the beer and you asked that we approve them unconditionally for use in all market areas. Pursuant to existing law, 27 U.S.C. 205(e)(2) prohibits statements of alcoholic content on labels of malt beverages unless required by state law. Further, section 205(f)(2) prohibits statements in advertising of alcoholic content of malt beverages in states which prohibit such statements by similar law. We have reviewed your proposed labels and advertising copy, all of which contain statements of specific alcoholic content, e.g., your proposed Coors beer label which states "contains 4.6V0 alcohol by volume. " In view of the specific wording of the statute, we are unable to approve your Ap- plications for Certificates of Label Approval unless such labels are used in states where statements of specific alco- holic content are required. Furthermore, in view of the ---------------------------------------- Page Break ---------------------------------------- 74a specific wording of section 205(f)(2), we are unable to ap- prove the statements of specific alcoholic content in your advertising copy for states which have laws similar to sec- tion 205(f)(2). You may consider our letter to be ATF's final agency ac- tion on this issue. We understand your desire to utilize the unqualified reference to alcohol content on malt beverage labels and advertising material, but ATF is charged with the responsibility for administering the statutory provi- sions of the Federal Alcohol Administration Act as they are written. /s/ B. Weininger BRUCE L. WEININGER Chief, Industry Compliance Division Enclosures ---------------------------------------- Page Break ---------------------------------------- No. 93-1631 In the Supreme Court of the United States OCTOBER TERM, 1993 LLOYD BENTSEN, SECRETARY OF THE TREASURY, ET AL., PETITIONERS v. COORS BREWING COMPANY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT REPLY BRIEF FOR THE PETITIONER DREW S. DAYS, III Solicitor General Department of Justice Washington, D.C. 20530 (202)514-2217 ---------------------------------------- Page Break ---------------------------------------- TABLE OF AUTHORITIES Cases: Page Bell v. Wolfish, 441 U.S. 520 (1979) . . . .11 Bigelow v. Virginia, 421 U.S. 809 (1975) . . . .14 Board of Trustees v. Fox, 492 U.S. 469 (1989) . . . .18, 20 California v. LaRue, 409 U.S. 109 (1972) . . . . 19, 20 Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984) . . . .15 Central Hudson Gas & Elec. Corp. v. Public Serv. Comm., 447 U.S. 557 (1980) . . . . 4 Dunagin v. City of Oxford, 718 F.2d 738 (5th Cir. 1983), cert. denied, 467 U.S. 1259 (1984) . . . .4 Edenfield v. Falls, 113 S. Ct. 1792 (1993) . . . .19 FEC v. National Conservative Political Action Comm., 470 U.S. 480 (1985) . . . . 18 Fedway Assoc., Inc. v. United States Treasury, Bureau of Alcohol, Tobacco, & Firearms, 976 F.2d 1416 (D.C. Cir. 1992) . . . . 2 Friedman v. Rogers, 440 U.S. 1 (1979) . . . .19 Kordel v. United States, 335 U.S. 345 (1948) . . . .16 Lockhart v. McCree, 476 U.S. 162 (1986) . . . . 4 Metromedia, Inc. v. City of San Diego, 453 U.S. 490 (1981) . . . . 14 Meyer v. Grant, 486 U.S. 414 (1988) . . . .18 North Dakota v. United States, 495 U.S. 423 (1990) . . . .15 Posadas de Puerto Rico Associates v. Tourism Co., 478 U.S. 328 (1986) . . . . 10, 16, 17, 18 San Francisco Arts & Athletics, Inc. v. United States Olympic Comm.,,, 483 U.S. 522 (1987) . . . . 20 South Dakota v. Dole, 483 U.S. 203 (1987) . . . . 15 Turner Broadcasting Sys., Inc. v. FCC, 114 S. Ct. 2445 (1994) . . . . 4 United Parcel Service Inc. v. Mitchell, 451 U.S. 56 (1981) . . . . 11 (III) ---------------------------------------- Page Break ---------------------------------------- IV Cases-Continued: Page United States v. Edge Broadcasting Co., 113 S. Ct. 2696 (1993) . . . . 7, 13, 14 United States v. 0'Brien, 391 U.S. 367 (1968) . . . . 19 Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976) . . . . 14 Williamson v. Lee optical Co, 348 U.S. 438 (1955) . . . . 20 Constitution, statutes, regulations and rule: U.S. Const.: Amend. I . . . . 14, 18, 19 Amend. XXI . . . . 4,5, 15, 19 Act of Jan. 2, 1975, Pub. L. No. 93-583, 1, 88 Stat. 1916 . . . . 14 Federal Alcohol Administration Act, ch. 814, 49 Stat. 977 . . . . 1 5, 49 Stat. 981 (27 U.S.C. 205) . . . .2 5(e), 49 Stat. 982 (27 U.S.C. 205(e)) . . . . 1 5(e)(l), 49 Stat. 982 (27 U.S.C. 205(e)(l)) . . . . 2 5(e)(2), 49 Stat 982 (27 U.S.C. 205(e)(2)) . . . . . 1, 2, 4, 9, 16 5(f)(2), 49 Stat. 984 (27 U.S.C. 205(f)(2)) . . . . 4 Cal. Code Regs. tit. 4, 130 (1994) . . . . 8 Ky. Rev. Stat. Ann. $244.520 (Michie/Bobbs-Merrill 1994) . . . . 8 Ky. Off. of the Atty Gen., OAG 94-50 (July 18, 1994), 1994 WL 400864 . . . . 8 Me. Act of Apr. 20, 1994, ch. 730, 711, 1994 Me. Legis. Serv. CH. 730 (S.P. 614) (L.D. 1712) (West) . . . .8 Pa. Act. No. 80(Oct. 5, 1994) . . . . 8 Tex. Alto. Bev. Code Ann. $101.41 (West 1994) . . . .8 27 C.F.R. 7.26(b)-(d) . . . . 17 Fed. R. App. P. 28(j) . . . . 12 Miscellaneous: 79 Cong. Rec. (1935): P. 11,714 . . . .13 11,723 . . . . 12 54 Fed. Reg. 3591 (1989) . . . . 17 58 Fed. Reg. 21,228 (1992) . . . . 9 H.R. Rep. No. 1542, 74th Cong., 1st Sess. (1935) . . . . 2, 3 ---------------------------------------- Page Break ---------------------------------------- v Miscellaneous-Continued: Page Hearing Before the FACA With Reference to Proposed Regulations Relative to the Labeling of Products of the Brewing Industry (Nov. 1, 1934) . . . . 3 Hearings on H.R. 8870 Before the Senate Comm. on Finance, 74th Cong., 1st Sess. (1935) . . . . 3 S. Rep. No. 1215, 74th Cong., 1st Sess. (1935) . . . . 3 Suein L. Hwang, Miller Brewing Gets Heat for New Ice Beer Ads, Wall St. J., Oct. 12, 1994 . . . . 6 Eben Shapiro, Molson Ice Ads Raise Hackles of Regu- lators, Wall St. J., Feb. 25, 1994 . . . . 16 ---------------------------------------- Page Break ---------------------------------------- OCTOBER TERM, 1994 No. 93-1631 LLOYD BENTSEN, SECRETARY OF THE TREASURY, PETITIONER v. COORS BREWING COMPANY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT REPLY BRIEF FOR THE PETITIONER 1. Coors asserts (Resp. Br. 11) that there is "nothing" in the text or history of the Federal Alcohol Administration Act (FAAA), ch. 814, 49 Stat. 977, to show that Congress enacted the labeling restriction in 27 U.S.C. 205(e)(2) to curb strength wars among malt beverage producers. According to Coors, "[t]he only basis for the labeling provision that can be gleaned from the legislative history is a concern that alcohol content labels on malt beverages might be misleading." Resp. Br. 15; see also Amicus Br. of Beer Inst. 15 & n.8. That is incorrect. The text and history of the FAAA make clear that the labeling restriction was enacted to prevent malt beverage producers from competing on the basis of high alcohol content. The text of Section 205(e) shows that Congress's purpose was not limited to preventing malt beverage alcohol content (1) ---------------------------------------- Page Break ---------------------------------------- 2 statements that are misleading. Subsection (e)(1) of Section 205 authorizes the Secretary of the Treasury to promulgate regulations prohibiting "such statements [on labels] * * * as the Secretary * * * finds to be likely to mislead the consumer. " 27 U.S.C 205(e)(l). The prohibition against alcohol content statements on malt beverage labels, however, is not left as a subject for regulation under subsection (e)(1). It is specifically dealt with in a separate provision: subsection (e) (2). Subsection (e)(2), moreover, prohibits all alcohol content statements on malt beverage labels, not just those "likely to mislead the consumer." The legislative history of the FAAA shows that Congress prohibited all malt beverage alcohol statements, regardless of their accuracy, in order to prevent competition among malt beverage producers on the basis of high alcohol strength-i. e., to prevent strength wars. The House committee report on the bill that became the FAAA expressed the judgment that "[m]alt beverages should not be sold on the basis of alcohol content." H.R. Rep. No. 1542, 74th Cong., 1st Sess. 12 (1935). The report explained that the sale of malt beverages on the basis of high alcohol content had resulted in "unfair competition" that had caused "[l]egitimate members of the industry * * * [to] suffer[]." ibid. The report accordingly concluded that "the prohibition of all such statements" was necessary, irrespective of their falsity," to protect "the in- terest of the consumer and the promotion of fair competition." Id. at 12-13 (emphasis added). The prohibition of malt beverage alcohol content statements was accordingly included in Section 205 as one form of "unfair competition" that, as the title of Section 205 indicates, is proscribed by that provision. See FAAA 5, 49 Stat. 981; see also Fedway Assocs., Inc. v. United States Treasury, Bureau of Alcohol, Tobacco & Firearms, 976 F.2d 1416, 1420 (D.C. Cir. 1992) (interpreting FAAA provision in light of its title). ---------------------------------------- Page Break ---------------------------------------- 3 As we explain in our opening brief, extensive evidence of the "unfair competition" described in the House report was presented at the hearing on the labeling regulations proposed by the Federal Alcohol Control Administration (FACA) pursuant to the Executive Order that, in the wake of the repeal of Prohibition, had extended the code system governing the alcoholic beverage industry under the National Industrial Recovery Act. See U.S. Br. 7-9. Although Coors criticizes the government's reliance on the FACA hearing on the ground that the FACA regulations "were replaced by the FAAA" (Resp. Br. 12), that criticism is unfounded. The House and Senate committee reports stated that, with specified exceptions (none of which included the labeling and advertising restrictions), the bill that became the FAAA "incorporate[d] the greater part of the system * * * enforced by the Government under the codes." H.R. Rep. No. 1542, supra, at 4; S. Rep. No. 1215, 74th Cong., 1st Sess. 3 (1935); see also Hearings on H.R. 8870 Before the Senate Comm. on Finance, 74th Cong., 1st Sess. 9 (1935) (statement by FACA Chairman that "advertising control" of alcoholic beverage industry was "highly successful" under the code system and that "the same result would follow from this bill.) 1 In sum, the text and history of the FAAA reflect Congress's determination that beer companies were competing on the basis of high alcohol content, that such competition was "unfair" and adverse to "the interest of the ___________________(footnotes) 1 Coors also errs in asserting (Resp. Br. 14) that the testimony at the FACA hearing regarding strength wars was limited to "isolated remarks by one witness," Ralph W. Jackman. See U.S. Br. 7-8 (discussing testimony of George McCabe, counsel to Brewers Code Authority, presenting views that were "fairly representative of the general sentiment of the industry"); see also, e.g., Hearing Before the FACA With Reference to Proposed Regulations Relative to the Labeling of Products of the Brewing Industry 59 (Nov. 1, 1934) (testimony of Alexander H. Bell about a brewer who found that "in order to meet competition it was necessary to increase the alcoholic content of the beer to some extent"). ---------------------------------------- Page Break ---------------------------------------- 4 consumer," and that a prohibition on alcohol content statements in malt beverage labeling and advertising would prevent such unfair competition. Although Congress did not set forth those determinations in separate statutory findings, it was not required to do so. Turner Broadcasting Sys., Inc. v. FCC, 114 S. Ct. 2445, 2471 (1994) ("Congress is not obligated, when enacting its statutes, to make a record of the type that an administrative agency or court does to accommodate judicial review."). Moreover, because the congressional determinations underlying the labeling and advertising restrictions on malt beverage alcohol statements concern "legislative," as distinguished from "adjudicative," facts, they are entitled to substantial deference. See, e.g., Lockhart v. McCree, 476 U.S. 162, 168 n.3 (1986) (citing Dunagin v. City of Oxford, 718 F.2d 738 (5th Cir. 1983) (plurality opinion of Reavley., J.) (upholding against First Amendment challenge prohibition of most forms of signs advertising alcohol), cert. denied, 467 U.S. 1259 (1984)). 2. In this Court, as in the court of appeals, Coors does not squarely challenge our submission that, at the time of its enactment, the labeling restriction in Section 205(e)(2) (as well as the advertising restriction in Section 205( f )(2)) directly advanced the government's substantial interest in preventing strength wars among beer companies-and therefore satisfied the third part of the Central Hudson test. See Central Hudson Gas & Elec. Corp. v. Public Serv. Comm `n, 447 J.S. 567, 566 (1980); U.S. Br. 25-26. Instead, Coors, like the court of appeals, relies on supposed changes in the malt beverage market since Section 205(e)(2) was enacted. Resp. Br. 17-19. Especially in light of the distinct consti- tutional foundation that the Twenty-first Amendment continues to furnish for regulation of the sale of alcoholic beverages, the burden properly lies with Coors to show that labeling restrictions that were valid at the time they (and the Twenty-first Amendment) were adopted can no longer ---------------------------------------- Page Break ---------------------------------------- 5 reasonably be regarded as furthering a substantial govern- mental interest. This Coors has failed to do. In any event, Coors' reliance on asserted changes in the malt beverage market is misplaced.2 a. Coors' primary argument is that there is "no evidence" that alcohol content statements in malt beverage labeling and advertising would lead to strength wars, because "the high- strength brews do not have the same popular appeal as the low-strength and the light beers." Resp. Br. 17. That argument is flawed. The flaw in Coors' argument is most apparent when viewed against Coors' own efforts to dispel the consumer perception that its beer contains less alcohol than other brands. The record shows that Coors distributed wallet cards to show that Coors beer contains as much, if not more, alcohol than competing brands. See U.S. Br. 14. The record also shows that Coors produced Coors Extra Gold, a higher alcohol beer, to increase its share of the market. See id. at 36. Finally, Coors sought approval from the Bureau of Alcohol, Tobacco and Firearms ( ATF) to put alcohol content statements on its labels and in its advertising, and brought this action when approval was denied, in order to dispel the consumer perception that Coors beer is weak. Ibid.; see also Pet. App. 20a. Thus, Coors' own conduct refutes its contention that ___________________(footnotes) 2 Contrary to the contention of Coors and two of its amici, however, the government is not taking the position in this Court that changes in the malt beverage industry since 1935 are altogether irrelevant to the consti- tutionality of the labeling restriction. See Resp. Br. 10; Amicus Br. of Beer Inst. 15-17; Amicus Br. of U.S. Tel. Ass'n, et al. 4. For example, changes in brewing technology plainly may be relevant to the continued force of the concern expressed in the legislative history of the FAAA that the alcohol content of malt beverages was, at that time, difficult to measure. As we explain in our opening brief, our challenge to the judgment below is based, among other things, on the fact that the Tenth Circuit ignored the historical evidence underlying the labeling restriction and focused exclusively on perceived changes in the industry. U.S. Br. 29. ---------------------------------------- Page Break ---------------------------------------- 6 beer companies would not compete on the basis of high alcohol content if the advertising and labeling restrictions were struck down.3 Coors' reliance on the current consumer preference for low-alcohol beers is flawed at a more fundamental level as well. It assumes that the current preference has nothing to do with the advertising and labeling restrictions. Common sense, however, points to a contrary conclusion. As we discuss in our opening brief, it is obvious that the restrictions effectively prevent consumers from selecting beer on the basis of high alcohol content. U.S. Br. 26-27. At the same time, ATF's regulations permit consumers to choose a beer on the basis of its low alcohol content. See id. at 6. It is logical to conclude that this state of affairs has encouraged the ___________________(footnotes) 3 Coors argues that "[t]he net effect of the federal prohibition, with respect to Coors, is that consumers are drinking stronger beers than they think." Resp. Br. 19 n.19. That argument attempts to divert attention from Coors' own conduct, which demonstrates Coors' belief that it will sell more of its beer if it can persuade people that its beer is as strong as other brands. This Court has relied on similar conduct by litigants in finding that a commercial speech restriction satisfies the "directly advances" part of the Central Hudson test. See U.S. Br. 36 n.30. Moreover, the evidence in the record shows that other beer companies share Coors' belief that they will suffer in the marketplace if consumers believe that their brand has less alcohol than the competition. See, e.g., Deposition of Lutz E. Issleib 66 (statement of chairman and chief executive of Pabst Brewing Company that "I play follow the leader" with respect to alcohol content of its products); J.A. 127, 267, 352; see also Amicus Br. of Center for Science in the Public Interest 16 (quoting statement by Issleib, upon learning that competitor's brand of "ice" beer was selling because of its high alcohol content: "So I immediately called Milwaukee and said, Add the alcohol! Let's beef it up. They got 5.65 [% alcohol by volume], so mine is 5.7."); see also Suein L. Hwang, Miller Brewing Gets Heat for New Ice Beer Ads, Wall St. J., Oct. 12, 1994, at B11 (reporting statement by Anheuser-Busch official that "some brewers appear to be marketing ["ice" beers] on the basis of their allegedly higher strength."). ---------------------------------------- Page Break ---------------------------------------- 7 consumption of low-alcohol beer compared to that of high- alcohol beer. Furthermore, Coors' reliance on the current consumer preference for low-alcohol beer misapprehends the "directly advances'' part of the Central Hudson test. Coors erroneously assumes that, under the "directly advances" inquiry, the government must show that, in the absence of the re- strictions, most people would select beer on the basis of high alcohol content. See Resp. Br. 23-24.4 It is sufficient, how- ever, that enough people would do so to cause beer companies to compete on the basis of high alcohol content. See United States v. Edge Broadcasting Co., 113 S. Ct. 2696 (1993), dis- cussed in U.S. Br. 32-33 & n.25. The government made such a showing here. As discussed in the government's opening brief, the evidence shows that Coors and other companies have promoted their beer on the ground that it contains as much or more alcohol than competing brands. U.S. Br. 14. The evidence also shows that competition in the malt liquor segment of the market is intense and has been marked by violations of the labeling and advertising restrictions. Ibid.; see also id. at 36.5 Finally, Coors' own expert admitted that, if the restrictions are struck ___________________(footnotes) 4 To argue otherwise would trap Coors in an obvious contradiction. Coors repeatedly asserts that, in the absence of the restrictions, some people would select a beer based on its low alcohol Content. See, e.g., Resp. Br. 4, 7, 17-19,33. Coors thus cannot reasonably dispute that, in the absence of the restrictions, other people would select a beer based on its high alcohol content. 5 Coors errs in suggesting (Resp. Br. 5, 18) that the violations in the malt liquor segment of the market all concerned "descriptive," as opposed to numerical, statements of high alcohol content. See, e.g., J.A. 207-208,325. Moreover, as explained in our opening brief, the fact that most such violations have involved descriptive statements signifies only that beer companies cannot circumvent the prohibition of numerical alcohol content statements as easily as the prohibition of descriptive alcohol content statements. See U.S. Br. 33; see also J.A. 102. ---------------------------------------- Page Break ---------------------------------------- 8 down, beer companies will probably produce more high-alcohol beers. J. A. 136-149. b. Coors' challenge is not supported by "[empirical evidence from the many states and countries that permit or "require alcohol content labeling on malt beverages." Resp. 3r. 20 (italics omitted). As we explain in our opening brief, alcohol content statements are prohibited on malt beverage labels, at least under certain circumstances, in every State and the District of Columbia; no State has an across-the-board rule that permits, much less requires, all malt beverage labels to include alcohol content statements. U.S. Br. 9-11. Thus, the absence of strength wars in the States suggests that the federal labeling restrictions, in tandem with state laws, have been effective. 6 The evidence concerning other countries, construed most favorably to Coors, is inconclusive. Although Coors argues that only the evidence that favors its position should be accorded significance, it recognizes that there is evidence to ___________________(footnotes) 6 Coors correctly notes (Resp. Br. 31 n.31, 2a, 5a, lOa) that, as a result of recent legislative or regulatory changes, four States listed in our opening brief (U.S. Br. 10 n.7, 11 n.10) as having state-imposed prohibitions against alcohol content statements on malt beverage labels-California, Texas, Maine, and Kentucky-have eliminated those prohibitions. Cal. Code Regs. tit. 4, 130 (1994); Tex. Alto. Bev. Code Ann. 101.41 (West 1994); Me. Act of Apr. 20, 1994, ch. 730, 5711, 1994 Me. Legis. Serv. CH. 730 (S.P. 614) (L.D. 1712) (West); Ky. Rev. Stat. Ann. 244.520 (Michie/Bobbs-Merrill 1994). In addition, one State listed in both Coors' brief and our brief (Resp. Br. 9a; U.S. Br. 10 n.7) as prohibiting such statements, Pennsylvania, has recently repealed that prohibition. Pa. Act No. 80 (Oct. 5, 1994). It appears that the elimination of state restrictions in at least two of those States was prompted in part by the district court's decision in this case striking down the federal labeling restriction. See Statement of Cal. Dep't of Alto. Bev. Contr. (copies lodged with the Clerk of this Court); Ky. Off. of the Att'y Gen., OAG 94-50 (July 18, 1994), 1994 WL 400864 (KY-AG database). In any event, because none of those five States requires alcohol content statements on malt beverage labels, such statements are prohibited by the federal labeling restriction. ---------------------------------------- Page Break ---------------------------------------- 9 the contrary. Compare Resp. Br. 20 & nn.21-22 (citing evidence about Canada and the United Kingdom to support its position) with id. at 21 n.22 ("no relevant conclusion can be drawn" from the evidence regarding those countries that favors government's position). Indeed, Coors' expert cast doubt on the relevance of all such evidence when he admitted that "beer, more than most categories, is very national." J.A. 172. c. Coors asserts that ATF "does not believe [the federal labeling restriction] serves the asserted interest." Resp. Br. 21 (italics omitted). ATF has made clear, however, that it believes that the labeling restriction is constitutional. See 58 Fed. Reg. 21,228 (1992). Moreover, although ATF has recom- mended to Congress that it change the restriction, that recommendation reflects the agency's view that the recom- mended changes involve policy (not constitutional) issues that are for Congress (not the courts) to resolve.7 As we explain in our opening brief, however, Congress has revisited this issue on several occasions and has declined to enact bills that would repeal the labeling restriction in Section 205(e)(2). See U.S. Br. 30 n.23. At the same time, it has enacted legislation requiring health warnings in alcoholic beverage labeling and advertising. Id. at 37, 40; see also Amicus Br. of Wine Inst. 8 (citing legislative material as evidence that Congress has "encouraged" a "[r]ethinking [ofl the government's policy in this area"). Under those circumstances, ATF's views plainly do not support the conclusion that Congress no longer believes that the labeling restriction serves a substantial governmental purpose. d. Coors argues that the labeling restriction in Section 205(e)(2) is irrational in light of other provisions that require statements of alcohol content on the labels of distilled spirits ___________________(footnotes) 7 One of respondent's amici likewise believes that "the question of alcohol labeling" is one that "Congress should revisit." Amicus Br. of Public Citizen 6 n.1. ---------------------------------------- Page Break ---------------------------------------- 10 and of wine that contains more than 1490 alcohol by volume. Resp. Br. 25. That argument is without merit. This Court rejected a similar argument in Posadas de Puerto Rico Associates v. Tourism Co., 478 U.S. 328 (1986). There, a tourism company argued that it was irrational for Puerto Rico to ban casino-gambling advertising directed at residents of Puerto Rico "because other kinds of gambling * * * may be advertised to the residents of Puerto Rico." Id. at 342. The Court rejected that argument in light of the history of other kinds of gambling, which, the Court ex- plained, justified the legislature's conclusion that "the risks associated with casino gambling were significantly greater than those associated with the more traditional kinds of gambling."Id. at 343. Historical considerations similarly justify Congress's distinctive treatment of alcohol content statements in the labeling and advertising of malt beverages. At the time of the FAAA's enactment, the evidence of unfair competition on the basis of high alcohol content concerned only the malt beverage industry. See U.S. Br. 6-9, 28; see also pp. 2-4, supra. That evidence justified Congress's conclusion that the risk of strength wars among malt beverage brewers was more significant than the risk of such wars among producers of other alcoholic beverages. That conclusion continues to be justified by, inter alia, evidence that beer is the drink of choice among underage drinkers and young adults, for whom alcohol abuse poses a particularly grave risk. See Amicus Br. of Center for Science in the Public Interest 9-10; Amicus Br. of Council of State Gov'ts, et at. 17 n6.8 ___________________(footnotes) 8 There is no merit to Coors' other arguments in support of its challenge to the rationality of the labeling restriction. Coors argues (Resp. Br. 26) that the restriction is irrational in light of ATF's failure to prohibit use of the term "malt liquor, " which connotes high alcohol content. ATF advises us, however, that it has not adopted such a prohibition because it would be difficult to enforce, given the longstanding and widespread use of the term ---------------------------------------- Page Break ---------------------------------------- 11 3. Coors does not dispute our submission that Congress intended the FAAA's labeling and advertising restrictions to operate in tandem with and facilitate the regulation of alcohol by the States. See U.S. Br. 5-6, 21-22 & n.17. Instead, Coors asserts that the government is barred from making that submission because it was not raised below. Resp. Br. 28. That assertion is incorrect, as the government explained when Coors made the same assertion in opposing the govern- ment's petition for a writ of certiorari in this case. See Br. in Opp. 15 n.7; Reply 3 n.1.9 Coors also contends (Resp. Br. 31) ___________________(footnotes) "malt liquor," and would probably only lead beer companies to devise new terms for high-strength beers. Coors next argues (id. at 26-27) that it makes no sense for the labeling restriction to apply unless a State requires the disclosure of alcohol content on malt-beverage labels, while the advertising restriction does not apply unless a State imposes similar restrictions on intrastate beer. For one thing, it is too late for Coors to challenge the government's longstanding view that the labeling restriction applies in States that have not enacted similar restrictions as a matter of state law, see e.g., Rev. Rul. 62-1962-1 C.B. 362; Coors admits that it did not advance such a challenge below. Resp. Br. 2 n.3. Nor is the issue properly before the Court merely because it is addressed in two of the amicus briefs. Amicus 13r. of Beer Inst. 9 n. Amicus Br. of Ass'n of Nat'] Advertisers, Inc. (ANA) 6-10; see, e.g., United Parcel Semite, Inc. v. Mitchell, 451 U.S. 56,60 n.2 (1981); Bell v. Wolfish, 441 U.S. 520, 531 n.13 (1979). The government's view has never been challenged in any prior case by any beer company or beer advertiser. In any event, it was not irrational for Congress to regulate labeling more stringently than advertising by having the federal labeling restriction apply in the absence of a State law to the contrary. Congress could reasonably determine that alcohol-content comparisons at the point of sale pose a greater threat than alcohol content disclosure in advertising. Although Coors disputes the reasonableness of such a determination by asserting that a beer company could put alcohol content statements on in- store advertising even if it could not put such statements on the labels of the beer itself (Resp. Br. 27), Coors does not suggest that such a practice is occurring, or permitted, anywhere in the country. 9 Coors and one of its amici also criticize the government's "eleventh hour" reliance on Edge Broadcasting. Resp. Br. 30; Amicus Br. of Beer Inst. 11. The criticism is unfounded. This Court's decision in Edge Broadcasting ---------------------------------------- Page Break ---------------------------------------- 12 that the federal restrictions do not facilitate the enforcement of state laws regulating alcoholic beverages. That contention does not withstand scrutiny. Coors first argues that, because (in its view) the federal labeling and advertising restrictions do not advance Con- gress's purpose of preventing strength wars among malt beverage producers, they do not facilitate state laws having a similar purpose. Resp. Br. 28. We have shown above and in our opening brief that the premise of that argument is incorrect. See U.S. Br. 25-33; pp. 4-10, supra. Coors next claims (Resp. Br. 29) to have difficulty under- standing our " `border crossing' argument." It is simple. As Coors recognizes (id. at 19 n.18, 35 n.37), many States limit the alcohol content of malt beverages sold within the State. See also J.A. 357-360. A resident of such a State must travel to a different State if he or she wants to buy higher-alcohol beer. Before doing so, however, the resident must determine which other State permits the sale of higher-alcohol beer. The federal labeling and advertising restrictions generally prevent the resident from making that determination. They accordingly give effect to the State's judgment regarding the maximum alcohol content appropriate for its citizens. 10 ___________________(footnotes) was not issued until after the government had filed its opening and reply briefs in the Tenth Circuit and that court had heard oral argument in this case. On the same day that this Court issued its decision in Edge Broadcasting, the government advised the Tenth Circuit of that decision in a letter submitted pursuant to Fed. R. App. P. 28(j) and thereafter cited the decision in its rehearing petition (at 11) to the Tenth Circuit in this case. 10 Coors dwells at some length on the wide variety of state laws regarding the labeling and advertising of malt beverages to show that some States have taken approaches to the disclosure of malt beverage alcohol content that reflect a policy of disclosure in certain circumstances. See Resp. Br. 30-31 & n.31, 34 n.35, 35 n.37. That showing confirms that the federal labeling and advertising restrictions have permitted state experimentation and diversity in this area, and is thus consistent with Congress's intention in enacting the FAAA "to supplement legislation by ---------------------------------------- Page Break ---------------------------------------- 13 Coors also argues (Resp. Br. 29) that the federal restrictions will not prevent citizens of one State from finding out the alcohol content of the beer sold in another State if the latter State has overridden the federal restrictions. That does not mean, however, that the restrictions fail directly to advance Congress's goal of preventing strength wars. Rather, it shows that the restrictions were also designed to accommodate the matrix of state laws that existed both when the FAAA was enacted and now. Coors, like the party challenging the federal restriction on commercial speech in Edge Broadcasting, ignores the "congressional policy of balancing the [differing] interests" of the States. 113 S. Ct. at 2704; see also Amicus Br. of Council of State Gov'ts 19.11 4. Coors contends (Resp. Br. 31-37) that the federal labeling restriction is not narrowly enough tailored to achieve its purpose. At the outset, Coors argues (id. at 31) that, in reviewing the fit between the labeling restriction and the purposes underlying it, the Court should apply a stricter standard than the "reasonable fit" standard required under ___________________(footnotes) the States to carry out their own policies." 79 Cong. Rec. 11,714 (1935) (remarks of Rep. Cullen); see also id. at 11,723 (remarks of Rep. Celler) (describing variety of state laws on alcoholic beverages); see also U.S. Br. 21 n.17 (citing other portions of debate reflecting intention to enhance ability of States to regulate alcoholic beverages). 11 Coors points out (Resp. Br. 30) that whereas the federal ban on lottery advertising at issue in Edge Broadcasting applied only in States that themselves banned lotteries, the federal labeling restriction at issue here applies unless a State enacts a law requiring alcohol content statements on malt beverage labels. That difference does not make Edge Broadcasting inapposite. It merely reflects that Congress structured the two statutes differently, taking account of the nature of the commercial activity to be regulated. Thus, the FAAA was shaped, as the congressional debate reveals, by Congress's judgment that "[t]he liquor industry is too big and the constitutional and practical limitations on the States are so considerable that they alone cannot do the whole job." 79 Cong. Rec. 11,714 (1935) (remarks of Rep. Cullen). ---------------------------------------- Page Break ---------------------------------------- 14 the fourth part of the Central Hudson test. See also Amicus Br. of Public Citizen 12.12 Coors' argument rests on the erroneous assertion that the labeling restriction is "a categorical prohibition" against the disclosure of the alcohol content of malt beverages. Resp. Br. 31. Elsewhere Coors recognizes that it and other beer companies may disclose the alcohol content of their beer "as long as that information is not on a label or in an advertisement," id. at 22, and in States that require such disclosure. 13 Because this case does not involve "the government's power to compel total silence" (id. at 9 n.5), Coors' strict scrutiny argument is without merit.14 ___________________(footnotes) 12 One of Coors' amici, the Washington Legal Foundation (WLF), similarly argues that the Court has applied strict scrutiny to laws that "suppress[] * * * accurate, factual information on the ground that its dissemination will allegedly impair the achievement of governmental objectives." Amicus Br. of WLF 3; see also id. at 4. That argument cannot be reconciled with this Court's application of the Central Hudson test, rather than a strict scrutiny standard, in Posadas and Edge Broadcasting. 13 Moreover, factual news reporting about the alcohol content of malt beverages is not prohibited under ATF regulations (J.A. 215), contrary to the suggestion of amicus WLF (see Amicus Br. of WLF 13, 15). Nor are "statements on the health benefits of moderate drinking" (Amicus Br. of Wine Inst. 2), unless they are made in connection with advertising and promotion (see id. at 6-7). 14 Coors also argues that strict scrutiny is appropriate because the FAAA was enacted before commercial speech was accorded First Amendment protection. Resp. Br. 32. That argument cannot be reconciled with Edge Broadcasting, in which this Court applied the Central Hudson test, to uphold a federal statute enacted prior to this Court's modern commercial speech jurisprudence. See Edge Broadcasting, 113 S. Ct. at 2701 (reviewing lottery statute as amended in January 1975, see Act of Jan. 2, 1975, Pub. L. No. 93-583, 31, 88 Stat. 1916, prior to Bigelow v. Virginia, 421 U.S. 809 (1975), which was identified in Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 505 (1981), as the earliest decision of this Court foreshadowing modern commercial speech doctrine); see also Virginia State Bd. of Pharmacy v, Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 759-760 (1976). ---------------------------------------- Page Break ---------------------------------------- 15 Likewise without merit is Coors' argument that Congress could have achieved its goals by limiting the alcohol content of malt beverages instead of restricting alcohol content state- ments in the labeling and advertising of such beverages. Resp. Br. 35-36. As we explain in our opening brief, Congress reasonably could have concluded that a federal limit on alcohol content would have interfered with the States' authority to regulate alcoholic beverages to a greater extent than do the federal labeling and advertising restrictions. U.S. Br. 24-25. Coors acknowledges as much when it asserts that authority over the labeling of alcoholic beverages does not "implicate the `core 32 power' conferred [upon States] by the Twenty- first Amendment." Resp. Br. 44 (quoting Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 713 (1984)). 15 Moreover, contrary to Coors' assertion, labeling restrictions do occupy an important place in the regulation of alcoholic beverages under the Twenty-first Amendment. See North Dakota v. United States, 495 U.S. 423, 432 (1990) (plurality opinion). ___________________(footnotes) 15 Coors therefore errs when it attempts to distinguish this case from Posadas on the ground that "in Posadas, it was undisputed that there was no direct regulation of conduct that could have effectively accomplished the government's purposes," because "[p]rohibiting casino gambling altogether would have frustrated the government's pursuit of tourist income." Resp. Br. 36 n.39. So too here, a federal limit on the alcohol content of malt beverages would have frustrated Congress's purpose of facilitating, rather than displacing, state laws regulating alcohol. Coors argues, however, that Congress could have enacted a federal limit on the alcohol content of malt beverages that could be overridden by state laws adopting higher or lower limits. Id. at 35. Coors does not explain why its proposal is not subject to the same criticism that Coors elsewhere levels against the federal labeling restriction: i.e., that it "does not respect state authority" because it "affirmatively imposes a federal [restriction] unless the state enacts contrary legislation." Id. at 30. In any event, in the absence of labeling and advertising restrictions, Coors' proposal would likely encourage the sort of hazardous behavior addressed by the federal statute upheld in South Dakota v. Dole, 483 U.S. 203, 208-209 (1987) (interstate travel by young people to buy beer in states with lower legal drinking age). ---------------------------------------- Page Break ---------------------------------------- 16 Congress therefore cannot be faulted for pursuing an approach toward labeling in Section 205(e)(2) that respects State regulatory authority. Coors also proposes several labeling and advertising restrictions that it claims are more narrowly tailored than the existing federal restrictions. Resp. Br. 36-37. As discussed in our opening brief, however, Congress reasonably could have concluded that those proposals would be less effective. See U.S. Br. 34-37. In particular, restrictions applicable only to malt beverages with the highest alcohol content, such as malt liquor, would not prevent the competition on the basis of high alcohol content that was shown to exist in other segments of the market. A restriction applicable only to descriptive statements of alcohol content, but not numerical statements, would not prevent violations of the sort that have already occurred. See p. 9 n.5, wpra (violations have included numerical statements). Finally, a restriction applicable to forms of advertising other than labeling ignores that "[ e]very labeling is in a sense an advertisement." Kordel v. United States, 335 U.S. 345, 351 (1948)." There is no support for Coors' claim that the labeling and advertising restrictions prevent people from choosing a beer ___________________(footnotes) 16 Thus, Amicus WLF is misguided in its attempt to draw a sharp "contrast" between "advertising and promotion" and the "straightforward furnishing of an unvarnished fact" on a label. Amicus Br. of WLF 6 n.2; cf. Eben Shapiro, Molson Ice Ads Raise Hackles of Regulators, Wall St. J., Feb. 25, 1994, at B1 (describing television advertisements depicting malt beverage label with alcohol content statement). Another Coors' amicus, Public Citizen, proposes, as a more "narrowly tailored" alternative to the federal labeling restriction, a new tax on malt beverages tied to their alcohol content (a proposal to which Coors does not subscribe). See Amicus Br. of Public Citizen 13. The existence of such additional means of preventing strength wars, however, does not demonstrate that the means chosen are invalid. See Posadas, 478 U.S. at 344. ---------------------------------------- Page Break ---------------------------------------- 17 based on its low alcohol content. Resp. Br. 33.17. ATF regulations permit beers having the lowest alcohol content to be labeled as such. 27 C.F.R. 7.26(b)-(d).18 Moreover, con- sumers who want to find out the alcohol content of a beer may get that information from its producer. J.A. 214-215,260.19 5. In Posadas, this Court distinguished between commercial speech concerning activity that "could have been] prohibited * * * altogether" and commercial speech con- cerning activity that "was constitutionally protected and could not have been prohibited." 478 U.S. at 345. The Court indicated that restrictions on the first category should be reviewed under a less stringent standard than restrictions on the second. Id. at 345-346. The Court reasoned that "because the government could have enacted a wholesale prohibition of ___________________(footnotes) 17 As an initial matter, the assertions by Coors and its amici regarding the "danger[ ]" that a consumer who wants a low-alcohol beer will unwittingly choose a high-alcohol beer (see Resp. Br. 33-34; Amicus Br. of Public Citizen 6-7) are at odds with Coors' position elsewhere in its submission. Thus, Coors goes to great lengths to dismiss high-alcohol malt beverages as a "fringe product" that are readily identifiable by their "rougher and harsher" taste. Resp. Br. 18-19. Moreover, according to Coors, the alcohol content of "mainstream" malt beverages is kept low because the effect of alcohol upon taste "ensure[s] that any increases in alcohol content would be very slight." Id. at 19; see also J.A. 145 (testimony of Coors' expert that "mainstream" beer in U.S. is in "3.5 to 5.5[% alcohol content] bracket"). 18 Although Coors suggests that the regulations may conflict with the FAAA (Resp. Br. 2 n.2), ATF reasonably construes the statute to prohibit only competition on the basis of high alcohol content. See 54 Fed. Reg. 3591 (1989). 19 Amicus WLF asserts that the "regulatory scheme seems well calculated to chill the speech" of producers asked to provide alcohol content information. Amicus Br. of WLF 7. To the contrary, ATF has and exercises the authority to provide guidance in this area. See Amicus Br. of Wine Inst. 7 (discussing ATF proposal to promulgate rules to provide guidance on health claims in advertising and labeling of alcoholic beverages). ---------------------------------------- Page Break ---------------------------------------- 18 the underlying conduct * * * it is permissible for the government to take the less intrusive step of allowing the conduct, but reducing the demand." Id. at 346; see also Meyer v. Grant, 486 U.S. 414, 424 (1988). Coors simply ignores that reasoning in contending that Posadas does not support a less stringent standard of review for commercial speech promoting an activity that could be prohibited altogether. Resp. Br. 38- 39.20 Coors errs in asserting that the application in this case of the less strict standard of review contemplated by Posadas would invite "judicial policy judgments about the social value of particular commercial activities." Resp. Br. 40. As this Court has recognized, the sale of alcohol has traditionally been subject to stringent regulation at both the state and federal level. See Posadas, 478 U.S. at 346; see also U.S. Br. 40-41 (citing cases). This case thus falls squarely within the reasoning of Posadas.21 ___________________(footnotes) 20 Nor can the reasoning of Posadas concerning the two types of commercial speech be dismissed as "dicta," as amici Beer Institute (at 19) and ANA (at 19) contend. 21 The standard of review under Posadas does not "count[] the government's interest in inhibiting socially harmful activity twice," as amicus Wine Institute claims (at 10). Instead, the Posadas standard recognizes that, with respect to commercial speech about certain activities, such as gambling and the sale of alcoholic beverages, the government has a particularly strong regulatory interest, commensurate with the partic- ularly serious social harms those activities have traditionally been understood to cause. That recognition accords with other decisions of this Court that relate the appropriate standard of review to the nature of the speech at issue. Compare, e.g., FE C v. National Conservative Political Action Comm., 470 U.S. 480, 493 (1985) (applying strict scrutiny to restrictions on political speech by private persons, because such speech is at the "core" of the First Amendment), with Board of Trustees v. Fox, 492 U.S. 469, 478 (1989) (less stringent standard of review applies to commercial speech because it occupies a "subordinate position in the scale of First Amendment values"). ---------------------------------------- Page Break ---------------------------------------- 19 6. The Constitution itself establishes the strength of legislative policy judgments regarding the sale and use of alcoholic beverages, for the Twenty-first Amendment "confer[s] something more than the normal state authority over public health, welfare, and morals." California v. LaRue, 409 U.S. 109, 114 (1972). It therefore is appropriate in this case to apply a less stringent standard of review than is normally applied to restrictions on commercial speech, based on LaRue and subsequent cases holding that laws within the ambit of the Twenty-first Amendment are entitled to an "added presumption in favor of the[ir] validity" when challenged under the Speech Clause of the First Amendment. Id. at 118. Because the federal labeling restriction facilitates the enforcement of such state laws, it is entitled to the added presumption of validity applied in LaRue. See U.S. Br. 44-45 & n.35. Coors ignores the reasoning of LaRue by asserting that the regulation challenged there "was valid under the First Amendment, without regard to the Twenty-first Amendment." Resp. Br. 43; see also Amicus Br. of Wine Inst. 11-12.22 The Court in LaRue held that because the regulation was within the ambit of the Twenty-first Amendment, that Amendment "require[d]" (409 U.S. at 119) the application of a less strin- gent standard of review than would otherwise apply under United States v. 0'Brien, 391 U.S. 367 (1968), to a restriction on expressive activity. The Court in La Rue accordingly ___________________(footnotes) 22 Coors attempts to distinguish LaRue on the ground that the regulation at issue in LaRue applied only to unprotected "conduct," whereas the legislation at issue here applies to pure "speech." Resp. Br. 43; see also Amicus Br. of WLF 17. That attempt is unavailing. The Court in LaRue determined that "at least some of the performances to which these regulations address themselves are within the limits of the constitutional protection of freedom of expression." 409 U.S. at 118. By the same token, the Court has recognized that commercial speech is "linked inextricably" with the commercial conduct it concerns. Edenfield v. Fane, 113 S. Ct. 1792, 1798 (1993) (quoting Friedman v. Rogers, 440 U.S. 1,10 n.9 (1979)). ---------------------------------------- Page Break ---------------------------------------- 20 upheld the regulation under a standard that was plainly less stringent than the 0'Brien test. 409 U.S. at 116 (citing Williamson v. Lee Optical Co., 348 U.S. 483,487-488 (1955)). Just as the O`Brien test was inappropriate in LaRue, the Central Hudson test is inappropriate here. See San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522, 537 n.16 (1987) (O'Brien and Central Hudson test were "substantially similar" as applied to chal- lenged legislation); see also Fox, 492 U.S. at 478. To conclude otherwise would justify the invalidation of federal legislation that is necessary to, and designed to ensure, the effective enforcement of state laws regulating alcohol. * * * * * For the foregoing reasons, as well as those set forth in our opening brief, the judgment of the court of appeals should be reversed. Respectfully submitted. DREW S. DAYS, III Solicitor General OCTOBER 1994