You have asked whether Rule 436.1313(1) of the Liquor Control Commission, to the extent it prohibits illuminated advertising of alcoholic beverages by certain retail licensees inside their retail establishments, violates the First Amendment to the United States Constitution and article 1, section 5 of the Michigan Constitution.

            The Liquor Control Commission (Commission) was created by 1933 (Ex Sess) PA 8, section 5[1] upon the ratification of the Twenty-First Amendment to the United States Constitution.  The Commission's duties include regulation and control of the manufacture, importation, possession, transportation, and sale of alcoholic liquors within the state.  MCL 436.1201(2).  The Commission is authorized to adopt rules governing the conduct of liquor-related licensees.  MCL 436.1215(1).  In accordance with this authority, the Commission has adopted administrative rules regulating the advertising of beer, wine, and distilled spirits. 

Commission Rule 13, 2000 MR 3 and 2003 MR 11, pp 51-52, R 436.1313(1), prohibits certain retail liquor licensees from utilizing illuminated advertising signs inside licensed premises:

(1)  Except as provided for in this rule, a retail licensee shall ensure that an advertising sign for alcoholic liquor that is used inside the licensee�s premises is an unilluminated sign that does not have a total area of more than 3,500 square inches.[2]

(2)  The total area of any other sign that is attached to, or a necessary part of, a sign is included in the 3,500 square inches limitation.

(3)  A sports/entertainment venue may utilize illuminated advertising signs and advertising signs that have a total area of more than 3,500 square inches in the arena area, concourse area, or private suite areas.

(4)  Any of the following entities may provide and install illuminated advertising signs and advertising signs that have a total area of more than 3,500 square inches per sign inside the arena area, concourse area, or private suite areas of a sports/entertainment venue as defined by

R 436.1001(u):

(a)  A brewer.

(b)  A micro brewer.

(c)  A wine maker.

(d)  A small wine maker.

(e)  An outstate seller of beer.

(f)  An outstate seller of wine.

(g)  An outstate seller of mixed spirit drink.

(h)  A manufacturer of spirits.

(i)  A manufacturer of mixed spirit drink.

(j)  A vendor of spirits.  [Emphasis added.]

The First Amendment, which is made applicable to the states by the Fourteenth Amendment,[3] provides in pertinent part that:  "Congress shall make no law . . . abridging the freedom of speech . . . ."  US Const, Am I.  A similar guarantee is embodied in the Michigan Constitution:

Every person may freely speak, write, express and publish his views on all subjects, being responsible for the abuse of such right; and no law shall be enacted to restrain or abridge the liberty of speech or of the press.  [Const 1963, art 1, � 5.]

Michigan's Constitution has been interpreted as affording protections in the free expression context similar to those guaranteed under the federal constitution.  Woodland v Michigan Citizens Lobby, 423 Mich 188, 202; 378 NW2d 337 (1985); Michigan Up and Out of Poverty Now Coalition v Michigan, 210 Mich App 162, 168-169; 533 NW2d 339 (1995).  Thus, it is appropriate to look at both state and federal authorities in analyzing your question.

Illuminated advertising of the type prohibited by the Commission falls within a category of speech known as "commercial speech."  Commercial speech is defined as speech that proposes a commercial transaction.  United States v United Foods, Inc, 533 US 405, 409; 121 S Ct 2334; 150 L Ed 2d 438 (2001).  This form of speech, while entitled to somewhat lesser protection than political or expressive speech, is nevertheless constitutionally protected from unwarranted governmental regulation.  Michigan Beer & Wine Wholesalers Ass'n v Attorney General, 142 Mich App 294, 302-303; 370 NW2d 328 (1985), lv den 424 Mich 878 (1986), cert den, 479 US 939; 107 S Ct 420; 93 L Ed 2d 371 (1986), citing Virginia State Bd of Pharmacy v Virginia Citizens Consumer Council, Inc, 425 US 748, 761-762; 96 S Ct 1817; 48 L Ed 2d 346 (1976).

In Central Hudson Gas & Electric Corp v New York Public Service Comm, 447 US 557, 566; 100 S Ct 2343; 65 L Ed 2d 341 (1980), the United States Supreme Court established a four-step analysis for evaluating whether state action unconstitutionally infringes upon commercial speech:

In commercial speech cases, then, a four-part analysis has developed.  At the outset, we must determine whether the expression is protected by the First Amendment.  For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading.  Next, we ask whether the asserted governmental interest is substantial.  If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.

The Supreme Court later clarified the fourth prong of Central Hudson in a case involving a restriction on promotional advertising in dormitories at the State University of New York.  In Bd of Trustees v Fox, 492 US 469; 109 S Ct 3028; 106 L Ed 2d 388 (1989), the Court found that the fourth prong assures that regulations affecting commercial speech employ a "means narrowly tailored to achieve the desired objective."  Id., at 480.  While the Court refused to require regulators to adopt the least drastic means of achieving the government's interest, the Court cautioned that the means may not "'burden substantially more speech than is necessary to further the government's legitimate interests.'"  Id., at 478, citing Ward v Rock Against Racism, 491 US 781, 799; 109 S Ct 2746; 105 L Ed 2d 661 (1989).

The Supreme Court applied the Central Hudson test when invalidating prohibitions against advertising alcoholic beverage prices adopted by the State of Rhode Island.  In 44 Liquormart v Rhode Island, 517 US 484, 490; 116 S Ct 1495; 134 L Ed 2d 711 (1996), the Court, applying the third prong of the Central Hudson test, rejected arguments that the restrictions significantly furthered the state�s goal of limiting alcohol consumption.  The Court observed that other measures, such as licensee-funded alcohol education programs, might be more effective and intrude less on First Amendment rights.  Id., at 490-491.

Michigan courts have adopted the Central Hudson test when evaluating Michigan Liquor Control Commission rules that affect commercial speech.[4]  In Michigan Beer & Wine Wholesalers Ass'n v Attorney General, 142 Mich App at 303, 313, the Court of Appeals concluded that a Commission rule restricting the advertisement of prices or brands of liquor, wine, and beer violated personal freedoms protected by both the state and federal constitutions.  Focusing on the third part of the Central Hudson test, the Court determined that the rules did not directly advance the state's interest in discouraging the artificial stimulation of alcohol consumption.  The Court observed that the regulations affected both licensed retailers, who have an interest in promoting lawful products, as well as consumers, who have a protected interest in receiving information on available beverages.  Id., at 303, citing Virginia State Bd of Pharmacy, supra, 425 US at 757.  See also Eller Media Co v Cleveland, 161 F Supp 2d 796, 812 (ND Ohio, 2001), aff�d 2003 US App LEXIS 7425 (CA 6, 2003).

The Commission rules struck down in Michigan Beer & Wine Wholesalers Ass'n had been the subject of two Attorney General opinions concluding the rules were unconstitutional, OAG, 1981-1982, No 6051, p 607 (April 6, 1982), and OAG, 1981-1982, No 6033, p 561 (February 4, 1982), both of which were directly challenged and upheld in that case.  Included among the rules determined to be invalid in OAG No 6051 was Commission Rule R 436.1515(2), which provided that:  "'Alcoholic liquor shall not be advertised on the licensed premises by placing the alcoholic liquor or an advertisement of alcoholic liquor in a window facing outside the licensed premises.'"  142 Mich App at 299.  (Emphasis added.)  Agreeing with OAG No 6051, the Court determined that Rule 436.1515(2) did not satisfy the requirement of the Central Hudson test that it directly advance the governmental interest asserted and that those seeking to have the rule upheld failed to "carry the heavy burden of justifying these restrictions on commercial speech."  142 Mich App at 309, citing Bolger v Youngs Drug Products Corp, 463 US 60, 91 n 20; 103 S Ct 2875; 77 L Ed 2d 469 (1983).[5]

Turning to the application of these principles to Rule 436.1313(1), it is clear that the advertisement of alcoholic liquor is, under Central Hudson and Michigan Beer & Wine Wholesalers, commercial speech protected by the First Amendment.  In fact, there is no suggestion that the illuminated advertising in question is misleading or relates to unlawful activity.

Under the next step of the Central Hudson analysis, it must be determined whether "the asserted governmental interest is substantial."  Representatives of the Liquor Control Commission have advised my staff that Rule 432.1313(1) is intended to encourage temperance and control of alcoholic beverage traffic by restricting the promotion of alcoholic liquors within licensed retail establishments.  These interests are consistent with the mission of the Michigan Liquor Control Commission[6] and have been recognized by the Supreme Court as "substantial state interests" in the context of the Central Hudson commercial speech analysis.  See 44 Liquor Mart, supra, 517 US at 490, n 4.

Assuming that the asserted governmental interest is substantial, that may not be sufficient to justify a restriction on commercial speech.  The third step of the Central Hudson analysis requires that the challenged regulations directly advance the stated interest.  447 US at 566.  A regulation "may not be sustained if it provides only ineffective or remote support for the government's purpose."  Id., at 564.  In 44 Liquor Mart, the Court held that the state bears the burden of showing not merely that its regulation will advance its interest, but also that it will do so "'to a material degree.'"  517 US at 505, citing Edenfield v Fane, 507 US 761, 767, 771; 113 S Ct 1792; 123 L Ed 2d 543 (1993).

Several factors militate against the conclusion that Rule 436.1313(1) materially advances the state's interest in promoting temperance and controlling alcoholic beverage traffic in retail establishments.  Except for size restrictions imposed only on certain licensees,[7] the rule does not limit the use of non-illuminated advertisement to promote alcoholic liquors inside a retail establishment or the use of illuminated advertisement to promote alcoholic liquors on the outside of licensed premises.  Thus, truthful, non-misleading commercial speech presented by way of an illuminated sign visible to the general public and intended to attract customers to a bar or tavern is allowed on the exterior of a retail licensee's premises; it is only when the customer crosses the threshold of the establishment that such speech is forbidden.  Michigan Beer & Wine Wholesalers held that a rule banning advertisement of alcoholic liquors in a window facing the outside of licensed premises did not directly advance the state's interest in discouraging alcohol consumption.  142 Mich App at 309.  In that Rule 432.1313(1) is an attempt to further a similar interest after the patron has entered the establishment, the effectiveness of this rule on liquor consumption is even more remote than the rule struck down in Michigan Beer & Wine Wholesalers, and therefore, less supportable.

Further, while Rule 432.1313(1) prohibits illuminated advertisement visible to the patrons inside certain licensed retail premises, subsections (2), (3), and (4) of the rule allow retail licensees at sports entertainment venues to erect large illuminated advertising signs that are visible to thousands of prospective consumers, including minors.  Unrestricted illuminated advertisement to retailers serving large populations attending sporting events is inconsistent with the state's interest in encouraging temperance and control of alcoholic beverage traffic at retail establishments and evidences the rule�s marginal support for the stated interest.

The Liquor Control Commission cannot demonstrate that Rule 432.1313(1) directly advances the state�s interest and, under the analysis set forth in Central Hudson and its progeny, the rule is an impermissible restriction on commercial speech.

It is my opinion, therefore, that Rule 436.1313(1) of the Liquor Control Commission, to the extent it prohibits illuminated advertising of alcoholic liquors inside certain licensed retail establishments, violates the First Amendment to the United States Constitution and article 1, section 5 of the Michigan Constitution.
 

MIKE COX
Attorney General