44 Liquor Mart, Inc. v. Racine

829 F. Supp. 543

44 LIQUOR MART, INC. and People's Super Liquor Stores, Inc., Plaintiffs, v. Kate F. RACINE, in her capacity as Rhode Island Liquor Control Administrator, Defendant and Rhode Island Liquor Stores Association, Intervenor-Defendant.

Civ. A. No. 92-0115 P.

United States District Court, D. Rhode Island.

August 10, 1993.

Barry J. Kusinitz, Corrente, Brill & Kusinitz, Providence, RI, Evan T. Lawson, Lawson & Weitzen, Boston, MA, for plaintiffs.

Rebecca Tedford Partington, RI Atty. General's Office, Providence, RI, for defendant Racine.

William Gasbarro, Robert M. Brady, E. Providence, RI, for intervenor-defendant RI Liquor Stores.

MEMORANDUM AND ORDER

PETTINE, Senior District Judge.

The case presents the question whether R.I.G.L. §§ 3-8-7¹ and 3-8-8.1,² and Regulation 32 of the Rhode Island Liquor Control Administration,³ which collectively prohibit off-premises advertising of the prices at which liquor stores sell alcoholic beverages, violate the First Amendment to the United States Constitution. Jurisdiction is premised on 28 U.S.C. § 1331 and 42 U.S.C. § 1983.

For the reasons stated below, I hold these provisions invalid as an unconstitutional burden upon protected commercial speech.

I. BACKGROUND

Plaintiff 44 Liquor Mart, Inc. ("44 Liquor Mart"), a Rhode Island corporation located in Johnston, Rhode Island, is a licensed retail alcohol dealer. Plaintiff People's Super Liquor Stores, Inc. ("People's"), a Massachusetts corporation, is a retail dealer of alcoholic beverages operating retail stores in New Bedford and Fairhaven, Massachusetts.

Defendant Kate F. Racine held the position of Liquor Control Administrator for the State of Rhode Island at the time this action was commenced. Anthony Arico currently holds the title of Acting Liquor Control Administrator. Intervenor-Defendant Rhode Island Liquor Stores Association is a trade group of small retail liquor stores in Rhode Island.

On December 17, 1991, Racine held a hearing to determine whether 44 Liquor Mart had violated R.I.G.L. § 3-8-7 and Liquor Control Administration Regulation 32, which prohibit off-premises advertising of alcohol beverage prices, by placing an advertisement headed "Thanksgiving Harvest" (Plaintiffs' Ex. 4) in a December 1991 edition of the Providence Journal-Bulletin, a daily newspaper in Rhode Island. The advertisement displayed bottles of named brand liquors. It also advertised: "State Line Chips" at $1.79, with the price highlighted in a burst form; "Peanuts" at 89 cents a pound with the exclamation "WOW" highlighted in a burst form; "Cigarettes: Cartons and Packs" at various prices for different sizes; and "Schweppes Mixers" at $1.29 a bottle. None of the alcoholic beverages showed any prices, but several of the "WOW" exclamations — highlighted in burst form — appeared next to the displayed bottles.

At the conclusion of the hearing, Racine determined that a violation had occurred. She fined 44 Liquor Mart $400.00, and ordered that the advertisement, as printed, cease to run. 44 Liquor Mart paid the fine on December 17, 1991. No appeal was taken to the Liquor Control Hearing Board as provided by R.I.G.L. § 3-3-5.

People's, which extensively uses price advertising in Massachusetts, where it is permitted, attempted on several occasions in 1991 and 1992 to place its advertisements, which include price information, in Rhode Island newspapers and other media outlets. It has been refused because of R.I.G.L. § 3-8-8.1, which expressly prohibits the Rhode Island media from advertising retail alcoholic beverage price information.

In addition to the above stated facts, the parties have stipulated to the following:

(1) other liquor licensees, as well as newspapers within the State, have been warned or fined for violations of the Rhode Island regulations;

(2) plaintiffs believe they will each realize an economic benefit of more than $100,000 per year if the price advertising ban is lifted;

(3) defendant Racine vigorously enforces the price advertising ban;

(4) Rhode Island permits all advertising of alcoholic beverages excepting references to price outside the licensed premises;

(5) the State prohibits communications media from accepting any advertisements that refer to prices at which alcoholic beverages are being sold in other states;

(6) Rhode Island communications media reach both Rhode Island and Massachusetts citizens;

(7) the proposed speech does not concern an illegal activity and presumably would not be false or misleading; and

(8) the state of Rhode Island has a substantial interest in regulating the sale of alcoholic beverages.

Defendant Racine defends the constitutionality of the State's ban on price advertising as a measure designed to promote temperance by directly reducing the consumption of alcohol by the citizens of Rhode Island.

II. FINDINGS OF FACT

The following findings of fact are drawn from the transcript of the March 11, 1993 hearing in this case and from my evaluation of two video-taped depositions submitted by agreement of the parties.

At the outset, I note a pronounced lack of unanimity among researchers who have studied the effects of alcohol advertising. No less than twelve different conclusions have been reached regarding the impact of advertising on the general consumption of alcoholic beverages. (Tr., 3/11/93, at 50-51). Numerous studies have attempted to correlate the consumption of alcohol by the general public and certain discreet groups to permitted or proscribed advertising of various alcoholic beverages. Only three that were called to the Court's attention, however, directly deal with price advertising: Jon P. Nelson, State Monopolies and Alcoholic Beverage Consumption, 2 J.Reg. Econ. 83 (1990); Gary P. Wilcox, The Effect of Price Advertising on Alcoholic Beverage Sales, 25 J. Advertising Res. 33 (1985); and Stanley I. Ornstein and Dominique M. Hanssens, Alcohol Control Laws and the Consumption of Distilled Spirits and Beer, 12 J. Consumer Res. 200 (September 1985). In this setting, experts for the respective parties testified.

Plaintiffs presented two expert witnesses: Dr. Reginald Smart, a Ph.D. in psychology and scientist with the Addiction Research Foundation in Toronto, Canada, and Dr. David J. Pittman, a Ph.D. in human development and professor of psychology at the Washington University in St. Louis. Both experts agreed that some studies have shown that overall alcohol advertising has a slight effect on alcohol consumption. (Tr., 3/11/93, at 50-51, 72; Pittman Dep., 11/10/92, at 12). They each maintained, however, that there is no empirical evidence that the presence or absence of alcohol price advertising significantly affects levels of alcohol consumption.

Dr. Smart focused his opinion on price advertising. He agreed with the three studies by Nelson, Wilson, and Ornstein and Hanssens, supra, which concluded that bans on price advertising have no effect on alcohol consumption. Dr. Smart used Rhode Island as a classic example of the fallacy of conclusions to the contrary. Rhode Island, a license state, which has a ban on alcohol price advertising, has "a fairly high level of alcohol consumption, about 2.86 gallons of absolute alcohol per person." (Tr. at 27). It ranks in the upper 30 percent of the states in per capita consumption. (Tr. at 64). In other license states that allow price advertising, alcohol consumption is lower. (Tr. at 65-66).

Dr. Smart also noted that on a national scale, over the past fifteen years, consumption levels generally have decreased even though overall advertising levels have increased. (Tr. at 64). True, the decline has been fairly small. Nevertheless, it has been consistent year after year. (Tr. at 64). According to Dr. Smart, the mere fact that price advertising may lower sales prices does not mean that per capita consumption will be influenced. It is his conclusion that consumption is influenced by the disposable income available to the individual buyer; that is, the available money remaining after payment of living expenses. (Tr. at 45, 73).

As noted above, Dr. Smart conceded that some researchers have concluded that overall alcohol advertising may have some effect on levels of consumption. (Tr. at 50-51, 72). He based his own opinion, however, on research that shows that overall alcohol advertising does not appear to have much effect on alcohol consumption or problems. (Tr. at 24, 72). In addition, he explained, because price advertising is only one part of the total advertising phenomenon, there is no reason to believe that a change in that factor alone would have much of an impact on levels of consumption. (Tr. at 24).

Dr. Smart bolstered his opinion by referring to a 1985 Federal Trade Commission study that found, after reviewing various research, no evidence to believe alcohol advertising significantly affects alcohol abuse. (Tr. at 28). In addition, Dr. Smart supported his testimony with a critique of studies on general alcohol advertising that he believed were inapposite and, at any rate, flawed. (Tr. at 69-71).

In concluding this recitation of the pertinent aspects of Dr. Smart's testimony, I record verbatim particularly persuasive passages:

A. Well, that study by Dr. Nelson was important, I think, in that it established quite clearly that for all states there was no relationship between a price ad ban and no price ad ban when it came to alcohol consumption. States with price ad bans didn't have lower consumption than those who had no such ban and with regard to prices, it's also interesting that Nelson has shown that overall prices are the same in control and license states and here I think we have to remember that license states, almost all license states in the U.S. except for three have no ban on — on prices.⁴ Now, one might expect that the prices in license states should be higher than in control states or lower but what we see is essentially no difference. That too suggests to me that probably the price ad ban

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