Can Tennessee legally ban billboard advertising of alcohol in counties that vote dry, and what happens if a city inside a dry county votes wet?

Subject

Opinion No. 13-46, Constitutionality of Rule Limiting Advertising of Alcoholic Beverages, June 17, 2013

Plain-English summary

Tennessee decides whether to allow alcohol sales at the county and municipal level. In counties where voters have not approved alcohol sales (commonly called "dry" counties), the Tennessee Alcoholic Beverage Commission rule Tenn. Comp. R. & Regs. 0100-03-.05(1) provides that "[a]lcoholic beverages may be advertised on signs and billboards only in those counties which have legalized the sale of such beverages under the provisions of T.C.A. § 57-3-106." That means no billboard or sign advertising of alcohol in a dry county.

Rep. Ryan Haynes asked four questions about this rule.

Is it constitutional under the First Amendment? Yes. The First Amendment protects commercial speech about lawful products and services, but not commercial speech about unlawful activity. 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 497 n.7 (1996). In a dry county, the sale of alcohol is itself unlawful, so the rule doesn't ban speech about a lawful activity. Even running the four-part Central Hudson test, the rule advances Tennessee's substantial interest in supporting dry-county policy and is no more extensive than necessary. The closest U.S. Supreme Court analog is United States v. Edge Broadcasting Co., 509 U.S. 418 (1993), which upheld a federal ban on radio advertising of state-run lotteries by broadcasters in non-lottery states; the AG read 0100-03-.05(1) as the same kind of geographically limited rule.

Is it constitutional under the Tennessee Constitution? Yes. Article I, Section 19 protects free speech, but Tennessee courts apply the same framework as the First Amendment for commercial speech. H & L Messengers, Inc. v. City of Brentwood, 577 S.W.2d 444 (Tenn. 1979).

Does it stop retail package stores from advertising in dry counties even if the sign doesn't mention alcohol? Yes. Package stores are licensed to sell alcohol and nothing else, so any advertising by them is in substance an advertisement for alcohol. The rule reaches them.

What if a city inside a dry county votes wet? Outdoor advertising of alcohol is allowed throughout the county. The Commission interprets its own rule that way (because Tenn. Code Ann. § 57-3-106 authorizes legalization at either the county or the municipal level), and the AG concluded the interpretation is reasonable and constitutionally required. Under the First Amendment, banning outdoor advertising inside the wet city itself would violate the rule against suppressing speech about lawful activity, and confining advertising only within the city limits of a small municipality would be more extensive than necessary.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Tennessee's local-option alcohol framework in Title 57 has been amended repeatedly since 2013, including changes to wine-in-grocery-stores rules and various municipality-specific legalization thresholds. The advertising rule's text in Tenn. Comp. R. & Regs. 0100-03-.05(1) was the version analyzed here; verify the current version of the rule and the underlying statutory authority before relying on the opinion's specific holding.

Background and statutory framework

Local option. Tenn. Code Ann. § 57-3-106(a) lets county voters, by majority, permit or forbid the manufacture, sale, storage, and possession of alcoholic beverages within the county. § 57-3-106(b) gives qualifying municipalities the same power within their corporate limits. A municipality inside a dry county can vote wet, regardless of the surrounding county's status.

Rulemaking authority. The Tennessee Alcoholic Beverage Commission has rulemaking authority under Tenn. Code Ann. §§ 57-1-101 to -2-211, with the express grant in § 57-1-209.

The advertising rule. Tenn. Comp. R. & Regs. 0100-03-.05(1) provides: "Alcoholic beverages may be advertised on signs and billboards only in those counties which have legalized the sale of such beverages under the provisions of T.C.A. § 57-3-106."

First Amendment framework. Commercial speech analysis follows the four-part Central Hudson test: (1) whether the speech concerns lawful activity and is not misleading; (2) whether the asserted government interest is substantial; (3) whether the restriction directly advances that interest; and (4) whether the restriction is no more extensive than necessary. Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of New York, 447 U.S. 557, 566 (1980). The Supreme Court applied this test in 44 Liquormart (struck down a Rhode Island ban on alcohol price advertising) and Rubin v. Coors Brewing Co., 514 U.S. 476 (1995) (struck down a federal ban on disclosure of beer alcohol content on labels). It also applied the test to uphold a geographically limited advertising restriction in Edge Broadcasting.

Tennessee precedent on alcohol advertising. The AG had previously concluded in Opinion 05-040 that Commission rules banning statewide radio and television advertising of alcohol were unlikely to survive a First Amendment challenge. The AG distinguished the 2013 rule because 0100-03-.05(1) is a localized restriction tied to where alcohol sales are unlawful, not a statewide ban on truthful speech about a lawful product.

Twenty-first Amendment context. Section 2 of the Twenty-first Amendment leaves states free to prohibit the transportation or importation of intoxicating liquors into territory where their sale or use violates state law. Tennessee, through local option, has chosen a county-and-municipality model.

Common questions

Why can Tennessee ban alcohol billboards in dry counties when the First Amendment usually protects commercial speech?

Because in a dry county, the sale of alcohol is illegal. The First Amendment doesn't protect commercial speech about unlawful activity. 44 Liquormart, 517 U.S. at 497 n.7. The rule is more like a restriction on advertising contraband than a restriction on truthful speech about a lawful product.

Doesn't this just punish the speaker rather than the activity?

The AG's analysis followed Edge Broadcasting, where the Supreme Court upheld a federal law barring broadcasters in non-lottery states from advertising the lotteries of neighboring states. The Court treated that restriction as a permissible way for the federal government to respect the policy choices of non-lottery states while preserving the policy choices of lottery states. The Commission rule does the same for Tennessee's wet/dry counties.

My package store is in a dry county and the sign just says "John's Liquors, Open 9 to 9." Can I post that?

The opinion concluded no. The rule reaches advertising by retail package stores even if the sign doesn't reference alcohol, because the primary purpose of advertising is to promote what the business sells, and a package store sells only alcohol. Steppach v. Thomas and the underlying statutory construction principle support reading the rule that way.

My city voted wet, but the rest of the county is dry. Can I put a billboard for my bar on a highway in the dry part of the county?

The Commission interprets the rule to allow outdoor advertising of alcohol throughout the entire county once any municipality inside it legalizes alcohol. The AG concluded that interpretation is reasonable and constitutionally required. So yes, under the Commission's interpretation, billboards advertising alcohol can appear on county roads outside the wet city limits, once the city has voted wet.

What about my county itself voting wet later? Does the rule update automatically?

Yes. The rule keys to the current legal status of alcohol sales. If a county or qualifying municipality legalizes alcohol sales under § 57-3-106, sign and billboard advertising becomes permitted in that jurisdiction (and, per the Commission's interpretation in question 4, in the surrounding county).

Could this rule still be challenged today on free-speech grounds?

The AG concluded it would survive. Litigation strategy is beyond the scope of an AG opinion. Plaintiffs in the alcohol-advertising space have had mixed success: 44 Liquormart and Rubin struck down broad bans; Edge Broadcasting upheld a narrower geographic limit. The 2013 opinion treated 0100-03-.05(1) as squarely within the Edge Broadcasting template, so a challenger would need to distinguish Edge.

Citations

Tenn. Code Ann. § 57-3-106(a), (b) (local-option authority). Tenn. Code Ann. §§ 57-1-101 to -2-211 (Alcoholic Beverage Commission). Tenn. Code Ann. § 57-1-209 (rulemaking). Tenn. Comp. R. & Regs. 0100-03-.05(1) (advertising restriction). U.S. Const. amend. I; amend. XXI, § 2. Tenn. Const. art. I, § 19. Cases: 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996); Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of New York, 447 U.S. 557 (1980); Posadas de Puerto Rico Assocs. v. Tourism Co. of Puerto Rico, 478 U.S. 328 (1986); Rubin v. Coors Brewing Co., 514 U.S. 476 (1995); United States v. Edge Broadcasting Co., 509 U.S. 418 (1993); H & L Messengers, Inc. v. City of Brentwood, 577 S.W.2d 444 (Tenn. 1979); Steppach v. Thomas, 346 S.W.3d 488 (Tenn. Ct. App. 2011); State v. Edmondson, 231 S.W.3d 925 (Tenn. 2007); Byrd v. Tennessee Bd. of Chiropractic Examiners, 2011 WL 3558166 (Tenn. Ct. App. Aug. 11, 2011). Prior AG opinion: Op. 05-040 (Apr. 5, 2005).

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-046.pdf

Original opinion text

S T A T E O F T E N N E S S E E
OFFICE OF THE
ATTORNEY GENERAL
PO BOX 20207
NASHVILLE, TENNESSEE 37202

June 17, 2013

Opinion No. 13-46

Constitutionality of Rule Limiting Advertising of Alcoholic Beverages

QUESTIONS

1. Is Tenn. Comp. R. & Regs. 0100-03-.05(1), which limits outdoor advertising of distilled spirits and wine in certain counties, constitutional and enforceable under the First Amendment or any other provisions of the United States Constitution?

2. Is Tenn. Comp. R. & Regs. 0100-03-.05(1), which limits outdoor advertising of distilled spirits and wine in certain counties, constitutional and enforceable under the Tennessee Constitution?

3. If Tenn. Comp. R. & Regs. 0100-03-.05(1) is constitutional, does it prohibit retail package stores from advertising in counties that have not legalized the sale of alcoholic beverages, where there is no reference to, mention of, or depiction of alcoholic beverages on the sign?

4. If Tenn. Comp. R. & Regs. 0100-03-.05(1) is constitutional, where a municipality within a county has legalized the sale of alcoholic beverages, is outdoor advertising of alcoholic beverages allowed in the county, outside of the municipality in which legalization has occurred?

OPINIONS

1 & 2. Tenn. Comp. R. & Regs. 0100-03-.05(1) is constitutional. The rule is not an impermissible restriction on speech in violation of the First Amendment to the United States Constitution because the rule prohibits sign and billboard advertising of alcoholic beverages only in counties in which the sale of alcoholic beverages has not been legalized. For the same reason, Tenn. Comp. R. & Regs. 0100-03-.05(1) is not an impermissible restriction on speech in violation of the Tennessee Constitution.

3. Tenn. Comp. R. & Regs. 0100-03-.05(1) prohibits sign and billboard advertisements of alcoholic beverages in counties in which the sale of alcoholic beverages has not been legalized. The rule would include any advertisements by retail package stores even if such advertisements do not reference, mention, or depict alcoholic beverages, given such retail package stores are primarily in the business of offering alcoholic beverages for sale.

4. Tenn. Comp. R. & Regs. 0100-03-.05(1) prohibits advertisements of alcoholic beverages on signs and billboards in counties in which the sale of alcoholic beverages has not been legalized. Under the rule, if a municipality elects to permit the sale of alcoholic beverages, sign and billboard advertisements of alcoholic beverages are permitted within the municipality and within the county in which the municipality is located.

ANALYSIS

1 & 2. The First Amendment to the United States Constitution provides that "Congress shall make no law . . . abridging the freedom of speech." U.S. Const. amend. I. The First Amendment applies to the states under the Due Process Clause of the Fourteenth Amendment. See 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 489 n.1 (1996).

The Twenty-first Amendment to the United States Constitution ended the federal government's attempt to prohibit sales of alcoholic beverages by repealing the Eighteenth Amendment and leaving the question whether to prohibit alcoholic beverages to each individual state. Section 2 of the Twenty-first Amendment provides that "[t]he 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." U.S. Const. amend. XXI, § 2.

In Tennessee, the decision whether to prohibit alcoholic beverages is made at the county and municipal level. Tenn. Code Ann. § 57-3-106(a) provides that the voters of any county may, by local option election, permit or forbid "the manufacture, receipt, sale, storage, transportation, distribution and/or possession of alcoholic or intoxicating beverages, within the territorial limits of such county, by a majority vote." Tenn. Code Ann. § 57-3-106(a). Tenn. Code Ann. § 57-3-106(b) similarly provides that municipalities meeting certain criteria may, by local option election, permit or forbid "the manufacture, receipt, sale, storage, transportation, distribution, and/or possession of alcoholic or intoxicating beverages, within the territorial limits of such municipality, by a majority vote." Tenn. Code Ann. § 57-3-106(b).

The Tennessee Alcoholic Beverage Commission was created by statute to regulate the sale and manufacture of intoxicating liquors, Tenn. Code Ann. §§ 57-1-101 to -2-211, and given the authority to promulgate rules and regulations pertaining to alcoholic beverages, Tenn. Code Ann. § 57-1-209. Pursuant to its rulemaking authority, the Alcoholic Beverage Commission promulgated Tenn. Comp. R. & Regs. 0100-03-.05. Section 1 of Tenn. Comp. R. & Regs. 0100-03-.05 provides that "[a]lcoholic beverages may be advertised on signs and billboards only in those counties which have legalized the sale of such beverages under the provisions of T.C.A. § 57-3-106." Tenn. Comp. R. & Regs. 0100-03-.05(1).

The United States Supreme Court has long held that "the First Amendment protect[s] the dissemination of truthful and nonmisleading commercial messages about lawful products and services." 44 Liquormart, 517 U.S. at 496. "By contrast, the First Amendment does not protect commercial speech about unlawful activities." Id. at 497 n.7. The Court has adopted a four-part analysis for determining whether restrictions on commercial speech violate the First Amendment:

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.

Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of New York, 447 U.S. 557, 566 (1980). "The last two steps of the Central Hudson analysis basically involve a consideration of the 'fit' between the legislature's ends and the means chosen to accomplish those ends." Posadas de Puerto Rico Assocs. v. Tourism Co. of Puerto Rico, 478 U.S. 328, 341 (1986).

The United States Supreme Court has applied the Central Hudson analysis to strike down restrictions on alcoholic beverage labeling and advertising. In Rubin v. Coors Brewing Co., 514 U.S. 476 (1995), the Court struck down a federal law which prohibited brewers from disclosing the alcohol content of their beers on package labeling. The Court held that the law did not significantly advance the governmental interest in suppressing "strength wars" because it was inconsistent with other provisions of federal law which allowed the identification of certain beers with high alcohol content as "malt liquors" and required disclosure of alcohol content on the labels of wines and spirits. 514 U.S. at 488-89. The Court also held that the law was more extensive than necessary because available alternatives to the labeling ban would prove less intrusive to the First Amendment's protections for commercial speech. Id. at 490-91.

In 44 Liquormart, the Court struck down a Rhode Island law banning advertising of the prices of alcoholic beverages. 517 U.S. at 489. The Court held that the prohibition did not significantly advance Rhode Island's interest in promoting temperance. Id. at 505-06. The Court likewise held that the law failed to satisfy the requirement that the restriction on speech be no more extensive than necessary because less restrictive means of promoting temperance were readily available. Id. at 507-08.

In a prior opinion, this Office concluded that, under the analysis of Central Hudson and its progeny, certain rules of the Alcoholic Beverage Commission that banned radio and television advertising of alcoholic beverages were unlikely to withstand a First Amendment challenge. See Tenn. Att'y Gen. Op. 05-040 (Apr. 5, 2005). The rules at issue in that opinion were of statewide applicability and constituted outright bans on public dissemination of truthful and non-misleading information regarding alcoholic beverages.

Unlike the factual situation that was at issue in Opinion 05-040, Tenn. Comp. R. & Regs. 0100-03-.05(1) is not an outright statewide ban on the public dissemination of truthful and non-misleading information about a lawful activity. The advertising ban applies only in counties that have elected to forbid the sale of alcoholic beverages. In such counties, the sale of alcoholic beverages is not a lawful activity. The rule seeks to balance the policy interests of local governments that forbid the sale of alcoholic beverages with the policy interests of local governments that permit the sale of alcoholic beverages. In that way, the rule is similar to the advertising ban addressed by the United States Supreme Court in United States v. Edge Broadcasting Co., 509 U.S. 418 (1993). In Edge Broadcasting, the Court upheld a federal law which restricted radio advertising of state-run lotteries to broadcasters located in states that had adopted a state-run lottery. 509 U.S. at 426-31. Broadcasters located in non-lottery states were prohibited from advertising the lotteries of neighboring states. Applying the Central Hudson analysis, the Court held that the law directly advanced the substantial governmental interest in supporting the policy of non-lottery states and not interfering in the policy of states that had a lottery. Id. at 427-28. The Court likewise held that the law was no more extensive than necessary to advance the government's interest. Id. at 429-31.

In Tennessee, the policy determination regarding whether to permit or forbid the sale of alcoholic beverages is made at the county or municipality level. As in Edge Broadcasting, Tennessee has a substantial governmental interest in supporting the policy of local governments that forbid the sale of alcoholic beverages and not interfering in the policy of local governments that permit the sale of alcoholic beverages. Tenn. Comp. R. & Regs. 0100-03-.05(1) allows alcoholic beverages to be advertised on signs and billboards only in counties that permit the sale of alcoholic beverages. Based on the rationale of the Supreme Court in Edge Broadcasting, the rule should survive a First Amendment challenge because the rule directly advances the State's substantial governmental interest in supporting the policy of "dry" counties and not interfering in the policy of "wet" counties, and the law is no more extensive than necessary to advance the State's interest.

Like the First Amendment, the Tennessee Constitution protects freedom of speech. Article I, Section 19 of the Tennessee Constitution provides that "[t]he free communication of thoughts and opinions, is one of the invaluable rights of man, and every citizen may freely speak, write, and print on any subject, being responsible for the abuse of that liberty." Tenn. Const. Art. I, § 19. The analysis applied above also applies to the determination of the constitutionality of Tenn. Comp. R. & Regs. 0100-03-.05(1) under the Tennessee Constitution. See H & L Messengers, Inc. v. City of Brentwood, 577 S.W.2d 444, 451-52 (Tenn. 1979). Therefore, for the reasons stated above, Tenn. Comp. R. & Regs. 0100-03-.05(1) is valid under Article I, Section 19 of the Tennessee Constitution.

3. By its terms, Tenn. Comp. R. & Regs. 0100-03-.05(1) applies only to advertising of alcoholic beverages. The rule allows sign and billboard advertising of alcoholic beverages only in counties in which the sale of alcoholic beverages has been legalized. The rule does not specifically prohibit a retail package store from advertising in a county in which the sale of alcoholic beverages is illegal, provided that the package store does not advertise alcoholic beverages. The primary purpose of advertising, however, is to convince potential customers to buy the products offered for sale by a business, and here retail package stores are licensed to sell, and primarily in the business of selling, only alcoholic beverages. Thus, advertisements by retail package stores inherently amount to advertisements of alcoholic beverages. See Steppach v. Thomas, 346 S.W.3d 488, 506 (Tenn. Ct. App. 2011) (quoting State v. Edmondson, 231 S.W.3d 925, 927 (Tenn. 2007)) (citing the general rule that, when interpreting the language of a statute, courts will consider "the language of the statute, its subject matter, the object and reach of the statute, the wrong or evil which it seeks to remedy or prevent, and the purpose sought to be accomplished in its enactment").

4. Tenn. Code Ann. § 57-3-106(b) provides that municipalities that meet certain criteria may, by local option election, permit or forbid the sale of alcoholic beverages "within the territorial limits of such municipality." Tenn. Code Ann. § 57-3-106(b). If such a municipality elects to permit the sale of alcohol, the sale of alcohol in the municipality shall be lawful "notwithstanding the fact that the county or any portion thereof in which such municipality is located has, or has not, voted to the contrary under any other provision of this chapter." Id. In other words, certain municipalities are authorized to adopt an alcohol policy that is contrary to the alcohol policy adopted by the county within which the municipality is located. The alcohol policy adopted by such a municipality applies only "within the territorial limits of such municipality." Id.

Tenn. Comp. R. & Regs. 0100-03-.05(1) provides that "[a]lcoholic beverages may be advertised on signs and billboards only in those counties which have legalized the sale of such beverages under the provisions of T.C.A. § 57-3-106." The rule is silent regarding the treatment of outdoor advertising in counties in which the sale of alcoholic beverages has been legalized by a municipality within the county, but not by the county as a whole. The Tennessee Alcoholic Beverage Commission has informed this Office that the Commission applies the outdoor advertising restrictions of Tenn. Comp. R. & Regs. 0100-03-.05(1) only in counties that have not legalized the sale of alcoholic beverages at either the county or municipal level. As applied by the Commission, if a municipality has legalized the sale of alcoholic beverages, then outdoor advertising of alcoholic beverages is permitted throughout the county in which the municipality is located, even if the county as a whole has not legalized the sale of alcoholic beverages.

We believe that the Commission's application of the rule is reasonable. The Commission promulgated the rule pursuant to its statutory authority to regulate the sale and manufacture of intoxicating liquors. The Commission's interpretation of its own rule is entitled to great weight. See Byrd v. Tennessee Bd. of Chiropractic Examiners, 2011 WL 3558166, at *8 (Tenn. Ct. App. Aug. 11, 2011) ("As a general rule, courts must give great deference and controlling weight to an agency's interpretation of its own rules and regulations, except where the interpretation is plainly erroneous or inconsistent with the regulation itself.") Although the rule does not reference municipalities, it does reference legalization of alcoholic beverages under Tenn. Code Ann. § 57-3-106, which authorizes both counties and municipalities to legalize the sale of alcoholic beverages. It is thus reasonable to interpret the rule to allow outdoor advertising of alcoholic beverages within a county that includes a municipality that has legalized the sale of alcoholic beverages, even if the county as a whole has not legalized the sale of alcoholic beverages. This reading is also reasonable because the small geographic size of some municipalities could make it virtually impossible to advertise by signs and billboards within the city limits.

Additionally, the Commission's application of the rule is consistent with the free speech protections of the First Amendment. The United States Supreme Court disfavors bans on truthful, non-misleading speech concerning lawful commercial activities and products. Under the First Amendment, the Commission cannot apply the rule to ban outdoor advertising of alcoholic beverages in municipalities that have legalized the sale of alcoholic beverages. The Commission could perhaps allow outdoor advertising of alcoholic beverages only within the territorial limits of a municipality that has legalized the sale of alcoholic beverages, if the county as a whole has not legalized the sale of alcoholic beverages. In municipalities of small territorial size, however, such an application of the rule would be a significant restriction on commercial speech, and the restriction would be more extensive than necessary to advance the State's substantial governmental interest in balancing the competing policy interests of "dry" localities and "wet" localities. The Commission's application of the rule is preferable because it directly advances the State's substantial governmental interest without being more extensive than necessary.

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

R. MITCHELL PORCELLO
Assistant Attorney General

Requested by:

The Honorable Ryan Haynes
State Representative
214 War Memorial Building
Nashville, Tennessee 37243-0118