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: