California Alcohol Law Withstands Attack

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By Melissa Heelan Stanzione

A California statute that forbids alcohol makers and sellers from paying alcohol retailers to advertise their products is constitutional, an en banc Ninth Circuit held June 14 ( Retail Dig. Network, LLC v. Prieto , 9th Cir., No. 13-56069, 6/14/17 ).

It reversed its 2016 holding that a 2011 Supreme Court case required a more demanding standard for evaluating restrictions on commercial speech such as the California law.

That case didn’t “fundamentally” alter the intermediate scrutiny required by longstanding precedent, Judge Richard A. Paez wrote for the U.S. Court of Appeals for the Ninth Circuit.

LCD Installer Sues ABC

Here, Retail Digital Network, a company that installs liquid crystal displays in retail stores and then contracts with parties to advertise their products on the displays, sued the California Department of Alcohol Beverage Control.

It claimed manufacturers have refused to work with it out of fear of violating the law, which it alleged is unconstitutional under the First Amendment.

But the en banc court disagreed.

The law withstood intermediate First Amendment scrutiny because “it directly and materially advances the State’s interest in maintaining a triple-tiered distribution scheme,” the Ninth Circuit said.

The law was passed to combat relationships manufacturers and wholesalers cultivated with retailers post-Prohibition by providing them with perks and tying them to the manufacturers, it said.

The Second, Fourth, Sixth, and Eighth circuits also continue to apply intermediate scrutiny to commercial speech cases, the court said.

Chief Judge Sidney R. Thomas dissented, saying that the 2011 case requires heightened scrutiny for commercial speech advertising goods and services.

The Taillieu Law Firm represented RDN.

The California Department of Justice and the attorney general’s office represented the ABC.

To contact the reporter on this story: Melissa Heelan Stanzione in Washington at mstanzione@bna.com

To contact the editor responsible for this story: Jessie Kokrda Kamens at jkamens@bna.com

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