Imagine a television commercial promoting the comforts and amenities of a new resort. The ad begins with a panoramic shot of the deluxe hotel as the narrator welcomes you to the Boondoggle Casino and Resort. Taxis and limousines line the semicircle driveway leading to the portico. The camera follows an elegantly clad couple as they step out of their limousine and stroll through the extravagant lobby to their oversized suite that overlooks a sparkling swimming pool and hot tub. The couple then emerges dressed in evening attire and heads to the hotel restaurant for gourmet dining. After dinner, they dance into the wee hours of the morning at the hotel disco. As they retire to their suite, the narrator invites you to experience the excitement and luxury that is the Boondoggle Casino and Resort, where the "odds for fun are high."
Now imagine the same advertisement with one change. Instead of returning to their room after dancing, they head to the hotel casino, sit down at the blackjack table, and begin placing rather large bets. Until recently, the first ad was perfectly legal, but the second violated federal law. A broadcast advertisement could use the word "casino" only if it was part of the name of the establishment,1 and only activities other than gambling could be promoted.2 Therefore, the first ad would be considered acceptable because the establishment’s name contains the word "casino," but the second would violate federal law because it explicitly shows gambling activities.
Imagine further that the second ad is placed by a local Indian tribe and promotes a casino located on a nearby reservation. Now the ad is legal and may be broadcast over the airwaves.
On June 14, 1999, radio and television stations nationwide were freed from the burden of scrutinizing ad copy for casino gambling establishments to ensure compliance with intricate federal regulations. In Greater New Orleans Broadcasting Association, Inc. v. United States,3 the U.S. Supreme Court struck down 18 U.S.C. § 1304, the federal law that imposed the blanket ban on broadcast advertising of casino gambling, as an unconstitutional regulation of commercial speech under the First Amendment. The unanimous opinion, written by Justice Stevens, resolved a split in the circuits by concluding that the regulation failed to directly advance to a material degree the asserted governmental interests of discouraging casino gambling and protecting states that prohibit gambling.4
The Greater New Orleans Broadcasting case originated from the Fifth Circuit, which upheld the constitutionality of the statutory ban on two prior occasions. The Fifth Circuit’s most recent decision was in direct conflict with decisions from the Ninth Circuit and a federal district court in New Jersey that had declared the statute unconstitutional.5 Although the Supreme Court struck down the statute on narrow grounds, the Court’s opinion renews the hope that content-based governmental regulations of commercial speech will eventually be subjected to the same heightened review standard that is applied to regulation of other constitutionally protected speech.
Statutory Framework
The Communications Act of 1934 contains the statutory ban on radio and television advertising of private commercial casino gambling, as codified at 18 U.S.C. § 1304:
Whoever broadcasts by means of any radio or television station for which a license is required by any law of the United States, or whoever, operating any such station, knowingly permits the broadcasting of, any advertisement of or information concerning any lottery, gift enterprise, or similar scheme, offering prizes depending in whole or in part upon lot or chance, or any list of the prizes drawn or awarded by means of any such lottery, gift enterprise, or scheme, whether said list contains any part or all of such prizes, shall be fined under this title or imprisoned not more than one year, or both. Each day’s broadcasting shall constitute a separate offense.6
Courts have held that casino gambling falls within the definition of a "lottery, gift enterprise, or similar scheme" under the statute.7 Although the statute imposes criminal penalties, the FCC has traditionally enforced the provision through administrative sanctions.8
When the ban was first implemented in 1934,9 the federal government pursued a consistent policy of discouraging the operation of lotteries and similar schemes, including bans on dissemination of information relating to such enterprises.10 By 1997, however, gambling in some form was permitted in nearly every state,11 and thirty-seven states and the District of Columbia operated lotteries.12 Commercial casino gambling now exists in eleven states, and about half of the states host legalized Indian gaming, which includes casino gambling that could be advertised on radio and television even before the Greater New Orleans decision.13
The legal landscape has similarly changed. In the early part of the twentieth century, commercial advertising was afforded no First Amendment protection.14 Commercial advertising now receives First Amendment protection, albeit a limited form of protection that falls short of the strict scrutiny standard used to analyze other governmental regulations of protected speech.15
As a reflection of the increased social tolerance of gambling, the federal government has continued to graft exceptions onto the statute. The most recent exceptions to the ban include:
(1) state lotteries, (2) fishing contests, (3) any gaming conducted by an Indian Tribe pursuant to the Indian Gaming Regulatory Act, and (4) any lottery, gift enterprise, or similar scheme, other than that defined by the statutory ban and not otherwise prohibited by the state in which it is conducted, conducted by a not-for-profit organization or as a promotional activity by a commercial organization clearly occasional or ancillary to the primary business of the organization.16
With these numerous exceptions in place, the federal ban is internally contradictory. Consider that a private, commercial casino gambling establishment legally operating in Mississippi cannot advertise over the airwaves to the citizens of Mississippi, but the Choctaw Indian Tribe can freely advertise identical gambling activities in Mississippi to a nationwide audience. Any explanation offered to justify this outcome based on the stated goal of protecting the public would by necessity be a subtle one.
Constitutional Framework
The ban on broadcast advertising of casino gambling implicates commercial speech, which the U.S. Supreme Court has defined as "expression related solely to the economic interests of the speaker and its audience" or "speech proposing a commercial transaction."17 The Court has extended limited First Amendment protection to commercial speech.18 In Central Hudson Gas & Electric Corp. v. Public Service Commission,19 which invalidated a New York law that banned promotional advertising by electric utilities, the Court articulated a four-part test to determine if regulation of commercial speech passes constitutional muster: (1) the regulated speech accurately must inform the public about a lawful activity, (2) the governmental interest behind the regulation must be substantial, (3) the regulation must directly advance the interest asserted, and (4) the regulation must be no more extensive than necessary.20
The Court has applied the Central Hudson test to advertising regulations on numerous occasions, including those covering otherwise legal gambling activities. In Posadas de Puerto Rico Assocs. v. Tourism Co. of Puerto Rico,21 the Court upheld a Puerto Rico statute banning the advertisement of casino gambling that was directed to local residents. The Court found that the state interest in restricting advertisements to reduce demand for casino gambling, which—in turn—would protect the health, safety, and welfare of Puerto Rican residents, was a substantial governmental interest. Under the third and fourth prongs of the Central Hudson test, the Court concluded that the restrictions directly advanced the asserted interest, and because the restrictions were limited to advertising within Puerto Rico, the regulation was no more extensive than necessary.22
In United States v. Edge Broadcasting Co.,23 the Court addressed whether the § 1304 ban on broadcast advertising of lotteries could bar a radio station in North Carolina, where no state lottery existed, from advertising a state operated lottery in Virginia.24 The Court applied the Central Hudson test, concluding that the federal interest in protecting state policy choice concerning lotteries was substantial.25 With respect to the third prong of the test, the Court had "no doubt that the statutes directly advanced the governmental interest at stake in this case."26 The Court also concluded that the statute was no broader than necessary to advance the government’s interest, thus satisfying the fourth part of the Central Hudson test.27
In Rubin v. Coors Brewing Co.,28 the Court held unconstitutional a federal statute that prohibited beer labels from displaying alcohol content. The Court applied the Central Hudson test and concluded that, while the government may have a substantial interest in preventing strength wars in the beer market, other countervailing regulations prevented the statute from achieving the government’s goal in a direct and material fashion.29 Since less intrusive alternatives existed to achieve the governmental objective, the statute failed to pass the fourth prong of the Central Hudson test.
Prior to Greater New Orleans Broadcasting, the Supreme Court’s most recent pronouncement on advertising regulations appeared in 44 Liquormart v. Rhode Island.30 In 44 Liquormart, a unanimous Court struck down a state statute that banned price advertising of alcoholic beverages. The Court applied Central Hudson, concluding that a complete ban on price advertising suppressed truthful speech to an unacceptable degree. Justice Stevens, writing for a plurality of four, complained that "Posadas erroneously performed the First Amendment analysis," and the government "does not have the broad discretion to suppress truthful, non-misleading information for paternalistic purposes that the Posadas majority was willing to tolerate."31 The Court rejected the notion that the ban would significantly advance the state’s asserted interest in promoting temperance. Moreover, the ban was far more extensive than necessary because of alternative measures that were available, including direct regulation or higher taxes.32 When complete suppression of truthful speech is at issue, the Court applies a "more stringent constitutional review."33
Although the Court was unanimous in its judgment, four separate opinions were issued. Justices Scalia and Thomas filed opinions concurring in part and concurring in the judgment, expressing the shared view that Central Hudson should be reconsidered as a balancing test when truthful commercial speech is prohibited.34 Justice O’Connor, writing for a plurality of four (that included Chief Justice Rehnquist and Justices Souter and Breyer), agreed that the Court has required "a closer look" at commercial speech regulations since Posadas.35 The O’Connor plurality, however, felt no need to adopt a heightened analysis for commercial speech cases when the regulation at issue failed to satisfy even the less stringent standard set out in Central Hudson.36
Round One in the Fifth Circuit
In February 1994, the Greater New Orleans Broadcasting Association, a nonprofit trade association, and several member radio and television stations (collectively referred to as the broadcasters) filed suit against the federal government and the Federal Communications Commission in federal court in New Orleans, seeking a declaratory judgment that 18 U.S.C. § 1304 was unconstitutional and asking for injunctive relief that would permit the broadcast of gambling advertisements.
The broadcasters based their case on two arguments. First, casino gambling did not fall within the definition of a "lottery, gift enterprise, or similar scheme" under § 1304 and was, therefore, not subject to the advertising ban. Second, the broadcasters argued that § 1304 was an unconstitutional restriction of their First Amendment right to freedom of speech.37 The U.S. District Court for the Eastern District of Louisiana, with Judge Helen G. Berri-gan presiding, entered summary judgment for the government, concluding that casino gambling fell within the advertising ban and that § 1304 was a permissible restriction of commercial speech under the Central Hudson test.38
The broadcasters appealed the summary judgment ruling to the Fifth Circuit court, drawing a panel of Chief Judge Politz and Judges Jones and Parker. In a two-to-one decision with Chief Judge Politz dissenting, the court concluded that § 1304 and the supporting regulations directly advanced the government’s substantial interests in discouraging public participation in gambling and supporting states’ antigambling policies in a manner no more extensive than necessary.39
The majority opinion, written by Judge Jones, began by stating that the advertising ban implicated commercial speech and thus the constitutionality of the regulation would turn on the Central Hudson test. The court noted that under Central Hudson’s first prong, the parties did not dispute that the casino advertisements at issue discussed a legal activity in a nonmisleading manner. Under the second prong, the government asserted a substantial interest in (1) protecting states that do not have legalized casino gambling from advertisements of gambling in other states, and (2) discouraging the public from participating in casino gambling, thereby reducing the social costs associated with gambling.40 The court agreed with the lower court’s assessment that both asserted interests were indeed substantial, rejecting the argument advanced by the broadcasters that United States v. Edge Broadcasting precluded the assertion of any substantial federal interest other than protecting state choice in gambling decisions.41 The court concluded that the first interest asserted was clearly substantial under Supreme Court precedent upholding regulations of interstate commerce related to gambling. In finding the second interest asserted to be substantial, the court specifically relied on the U.S. Supreme Court’s decision in Posadas,42 which "involved virtually identical facts."43 In Posadas, the Supreme Court held that Puerto Rico could constitutionally prohibit advertisements of casino gambling in an attempt to discourage participation in gambling.44 Since the state interest in Posadas was substantial, the Court concluded that the federal interest was also substantial.
Turning to the third and fourth prongs of the Central Hudson test, which involve the "fit" between the interests asserted and the means employed, the court stated that "the [b]roadcasters face a much more difficult challenge on the last two parts of the Central Hudson analysis," since they "cannot seriously dispute that a prohibition of advertising casino gambling directly advances the governmental interest in discouraging such gambling."45 The court dismissed the argument that the various exceptions to the statutory ban emasculated the statute, rendering it ineffective in advancing the governmental interests asserted. The court again relied on Posadas for the proposition that the government need not forbid advertising for all games of chance to satisfy the third prong of Central Hudson. Furthermore, the court distinguished Rubin v. Coors Brewing Co.46 because the irrational nature of the legislation in that case was based on conflicting federal laws that negated any unified, coherent policy goal. Here, the court argued, the statutory ban on casino gambling advertisements reflects "legitimate, quintessentially legislative choices" that the social costs of certain activities were less than those of casino gambling.47 Finally, under the fourth prong, the court noted that the test to be employed is not a "least restrictive means" test, but only that the regulation’s restrictions "reasonably fit" the desired objective.48 Since the ban is aimed at the promotion of casino gambling, and since public demand is reduced by the ban, the court concluded that the ban was no more extensive than necessary to achieve the government’s asserted interests.49
As a final note, the court expressed regret that the Supreme Court had distanced itself in Rubin from the position taken in Edge Broadcasting that advertisements related to gambling lay no greater claim on constitutional protection than the underlying activity, which itself can be extensively regulated or even prohibited. The Fifth Circuit panel was willing to draw a distinction for traditional vice activity that would free legislatures to regulate speech related to such activities while avoiding litigation over the Central Hudson analysis.50 But the panel conceded that such "[c]larity is a virtue seldom attained and too seldom even prized in constitutional law."51
Chief Judge Politz, in dissent, contended that the ban could not be upheld because it is now "deeply gutted by exceptions and in conflict with the policies of many states that have legalized gambling."52 Thus, the substantial interests that may exist can no longer be directly advanced by the statutory ban. The government simply cannot show that the restriction decreases demand for casino gambling to any appreciable extent. Moreover, the ban is broader than necessary to achieve its stated goal because the ban is nationwide, even though some states permit casino gambling, thus unnecessarily impinging on the policies of states that have legalized casino gambling.53
The broadcasters filed a petition for certiorari with the U.S. Supreme Court. The Supreme Court granted certiorari and immediately vacated the Fifth Circuit’s opinion, remanding the matter for further consideration in light of the Supreme Court’s recent decision in 44 Liquormart v. Rhode Island.54 Before the Fifth Circuit could reconsider its prior opinion based on 44 Liquormart, two other federal courts considered the constitutionality of 18 U.S.C. § 1304.
A Split in the Circuits
In 1997, both the Ninth Circuit and the U.S. District Court for New Jersey held that the federal ban on casino gambling advertising was unconstitutional, relying on the Supreme Court’s most recent commercial speech opinion in 44 Liquormart.
In Valley Broadcasting Co. v. United States,55 the Ninth Circuit applied the Central Hudson test and held that the federal ban did, in fact, violate the First Amendment. The court noted that the parties agreed that the advertising at issue was neither illegal nor misleading under the first prong of the Central Hudson test. Under the second prong, the government asserted the same two federal interests asserted in Greater New Orleans Broadcasting. First, the government has an interest in reducing public participation in commercial gambling. Second, the federal government has an interest in protecting those states that choose not to permit casino gambling within their borders.56 The Ninth Circuit concluded that both of the asserted interests were indeed substantial, thus satisfying the second prong of the Central Hudson test. The court ultimately decided the matter on the third prong of the Central Hudson test without reaching the question whether the regulation was more extensive than necessary. In concluding that the advertising ban did not directly advance the governmental interest asserted, the court noted that the Supreme Court recently tightened the standard in 44 Liquormart: "While 44 Liquormart fails to present a coherent framework for reviewing these claims, one point is clear: the government’s asserted interest in reducing demand for casino gambling seems less likely to succeed following the Court’s decision."57
The court also relied on Rubin v. Coors Brewing Co.,58 in which the Supreme Court stated in the context of a ban on the disclosure of alcohol content on beer labels that numerous statutory exceptions could result in "irrational" legislation that would undermine the substantial interests asserted by the government. The Ninth Circuit applied the same logic to conclude that the existence of numerous statutory exceptions to the federal ban on casino advertising resulted in irrational legislation that directly undermined and counteracted the ban’s effect.59 Although the statutory ban prohibits casinos from advertising on radio or television, the ban does not apply to state lotteries, casinos operated by Indian Tribes, and nonprofit organizations. The court concluded that these exceptions undermined the government’s asserted interests. The court further distinguished its decision from Posadas,60 in which the Supreme Court concluded that restrictions imposed by the Puerto Rico legislature on advertising of casino gambling directly advanced the state’s interest in reducing demand for games of chance. The Ninth Circuit stated that the Posadas decision involved reduction of demand for casino gambling in Puerto Rico only, not an asserted interest in reducing public participation in all commercial gambling nationwide.61 Moreover, unlike Posadas, the casino gambling advertising ban contained an exception for casino gambling itself, i.e., casinos operated by Indian Tribes pursuant to the Indian Gaming Regulatory Act.62 Therefore, the interest asserted by the government was broader in scope by permitting certain forms of casino gambling advertising, but not others.
Similarly, in Players International, Inc. v. United States,63 the U.S. District Court for New Jersey held that the statutory prohibition against casino gambling advertising violated First Amendment rights. Noting that the parties were in agreement that the first prong of the Central Hudson test was not at issue, the court proceeded to analyze the government’s alleged interest in the regulation. As in Valley Broadcasting Co., the government asserted an interest in supporting states with antigambling policies and in reducing participation in casino gambling.64 The court rejected the government’s reliance on Posadas to argue that the Supreme Court has already recognized that reducing the demand in casino gambling is a substantial interest of the government. Instead, Posadas should be read more narrowly and confined to its facts, which involved Puerto Rican legislation directed at its own residents. Moreover, the U.S. Supreme Court in 44 Liquormart rejected the state discretion view set forth in Posadas, finding that the Posadas court "erroneously performed the First Amendment analysis."65 Under 44 Liquormart, while the government may regulate "vice" activities, it cannot regulate such activities by imposing speech constraints, "particularly where alternatives exist which satisfy the same needs and achieve the same end."66 Therefore, the court looked to the third and fourth prongs of the Central Hudson test to determine whether the alleged "substantial" interest asserted by the government was implemented by means that directly advanced the interest in a manner no more extensive than necessary.
The court concluded that 44 Liquormart controlled the analysis of whether the interest articulated was materially advanced by the complete ban of advertising of casino gambling. The court found that the ban at issue was analogous to the Rhode Island ban on advertisements of alcohol content on beer labels in 44 Liquormart. Not only did the ban seek to direct social behavior by prohibiting the publication of truthful information, but there was no evidentiary support that the ban would significantly reduce the addictive behaviors associated with gambling. Furthermore, the ban was subverted by the exceptions listed in the statute. In light of the government’s ability to regulate gambling conduct directly, the court held that the "blanket ban on truthful and nonmisleading advertisements of gaming activities fails constitutional muster."67
The Supreme Court denied the government’s petition for certiorari in Valley Broadcasting.68 The government filed a petition for certiorari in Players International before judgment on appeal in the Third Circuit, but the Supreme Court denied certiorari.69
Second Round, Same Result
On remand of Greater New Orleans Broadcasting to the Fifth Circuit, and after the decisions in Valley Broadcasting and Players International, Judge Jones, again writing for a two-to-one majority with Chief Judge Politz dissenting, stated that although 44 Liquormart required the court to amend the analysis previously employed, the decision did not require the panel to change its conclusion that the statutory ban did, in fact, meet constitutional requirements.70
The court began by characterizing the 44 Liquormart decision as creating a "welter of confusion" out of a fairly straightforward analysis and suggested that the Supreme Court’s jurisprudence "has become as complex and difficult to rationalize as the statutory advertising regulations the Court has condemned."71 The court asserted that precedent supported the panel’s prior conclusion that the purpose and effect of advertising are to increase consumer demand and, conversely, that limits on advertising will dampen demand.72 The court also noted that the decision in Rubin v. Coors Brewing Co.,73 while striking down a federal prohibition on labeling the alcoholic strength of beer, also relied upon the fact that the entire legislative scheme constituted "irrational" patchwork that actually approved promotional advertising of stronger alcoholic beverages, a situation that the court contended did not exist with the statute at issue.
The court proceeded to analyze the 44 Liquormart decision, noting that the Supreme Court refused to modify the Central Hudson test, and divided over the interpretation of the third and fourth prongs of the test. Justice Stevens, writing for four members, would require that the statute directly advance the asserted interest by a showing that the advertising ban significantly reduced alcohol consumption.74 Justice O’Connor, writing for three members of the Court, declined to adopt Justice Stevens’s approach,75 thus leaving unsettled the level of proof required to demonstrate "direct advancement" of a state interest. The Fifth Circuit rejected the notion that Justice Stevens’s opinion now requires the government to make an evidentiary showing that the advertising ban at issue results in a "significant" reduction in the underlying conduct.76 Instead, the panel continued to rely on the "series of decisions that has found a commonsense connection between promotional advertising and the stimulation of consumer demand for the products advertised."77 The Court rejected the Ninth Circuit’s analysis of the third prong in Valley Broadcasting Co. v. United States,78 which found that the exceptions to the alcohol content ban were inconsistent with the asserted interests. The Fifth Circuit contended that the Ninth Circuit’s analysis relied on Rubin v. Coors Brewing Co., not 44 Liquormart, and the Fifth Circuit had distinguished Rubin in its original opinion.
Concerning the fourth prong, the Fifth Circuit agreed that the "reasonable fit" test now imposes a "tougher standard for the state to satisfy" after 44 Liquormart.79 The "tougher standard" did not reach the level of strict scrutiny, but the Supreme Court in 44 Liquormart did express a willingness to scrutinize more closely whether the state’s chosen regulation of commercial speech was closely enough tailored to serve the governmental interests without unduly burdening free speech. Applying this tougher standard, the Fifth Circuit maintained that the federal ban was not broader than necessary because the restriction was limited to television and radio broadcasts, and the limitation of such advertising directly influences consumer demand.80 Relying on Edge Broadcasting, the court asserted that if the government can restrict all advertising whether the conduct is legal or not in a given state, it can restrict a smaller range of advertising to achieve a substantial governmental interest in protecting states that do not permit casino gambling.81 Furthermore, the court emphasized that states without legalized casinos could not protect themselves from advertisements of casinos in other states that permit casino gambling activities. Finally, the court commented that the effectiveness of the ban must be evident from the vigorous pursuit of litigation to overturn it.82
Chief Judge Politz again dissented, noting that the "stricter standard" employed in 44 Liquormart only strengthened his conviction that the federal ban was unconstitutional.83 Chief Judge Politz also took the opportunity to criticize the Supreme Court for depriving the lower courts of guidance with a coherent, dispositive framework for evaluating commercial speech restrictions. However, the Supreme Court in 44 Liquormart did make clear that courts should not defer to legislative judgment or grant the government broad discretion to act for paternalistic purposes.84
On September 2, 1998, the broadcasters filed yet another petition for certiorari, contending that the Fifth Circuit’s opinion on remand was at odds with the Ninth Circuit’s decision in Valley Broadcasting Co. v. United States,85 which held that the same advertising ban violated the First Amendment. In their petition, the broadcasters criticized the Fifth Circuit for relying upon two cases that they contended had been discredited: Posadas de Puerto Rico Associates v. Tourism Co. of Puerto Rico86 and United States v. Edge Broadcasting Co.87
The Supreme Court Shows Its Cards
The Supreme Court granted certiorari on January 15, 1999.88 Several groups filed amicus briefs, including the Institute for Justice,89 Association of National Advertisers, Inc.,90 American Gaming Association,91 Valley Broadcasting Company and Sierra Broadcasting Company,92 Washington Legal Foundation,93 American Advertising Federation,94 and the National Association of Broadcasters.95 The briefs submitted by the amicus groups uniformly concluded that § 1304 was an impermissible regulation of commercial speech that impinged on First Amendment protections of truthful, nonmisleading advertising. Most, but not all, of the amicus briefs also called for the adoption of strict scrutiny review of content-based governmental restrictions of truthful, nonmisleading commercial speech.96
The Supreme Court, however, successfully avoided the call for strict scrutiny review of commercial speech regulations, stating that it is "an established part of our constitutional jurisprudence that we do not ordinarily reach out to make novel or unnecessarily broad pronouncements on constitutional issues when a case can be fully resolved on a narrower ground."97 The Court, in a unanimous decision written by Justice Stevens, relied on such a narrower ground in holding that § 1304 may not be applied to advertisements of private casino gambling that are broadcast by radio or television stations where such gambling is legal because the regulation fails the third and fourth prongs of the Central Hudson test.98 Chief Justice Rehnquist filed a concurring opinion, and Justice Thomas filed an opinion concurring in the judgment only.
The Court began with an analysis of the history of § 1304, including the numerous exceptions to the blanket ban that have been enacted. The most significant occurred in 1988 with passage of the Indian Gaming Regulatory Act (IGRA).99 The IGRA authorized Native American tribes to conduct various forms of gambling, including casino gambling, pursuant to tribal-State compacts.100 The IGRA exempted the gaming conducted by the Indian tribe from the broadcast restrictions of § 1304. The Court noted that the uniform federal policy that prevailed in 1934 has given way to accommodation of both gambling and antigambling segments of the national polity.101
The Court summarized the district court’s finding that the government had indeed asserted two substantial interests supporting the regulation: (1) reducing participation in gambling, and (2) protection of nonlottery states. The Court noted that the original Fifth Circuit opinion upheld the substantiality of both interests by relying "heavily" on the Supreme Court’s decision in Posadas.102 However, Justice Stevens took issue with the Fifth Circuit’s pronouncement, based on Posadas, that because gambling is a vice activity that can be banned altogether, advertising of such activity could "lay no greater claim on constitutional protection."103 The Supreme Court’s decision in 44 Liqourmart v. Rhode Island,104 issued while the broadcasters’ original petition for certiorari was pending, made clear that the Central Hudson test had to be applied "more strictly." The plurality opinion in 44 Liquormart "rejected the argument that the power to restrict speech about certain socially harmful activities was as broad as the power to prohibit such conduct."105 The Fifth Circuit’s opinion after remand continued to rely on Posadas, even under the "tougher standard" that the government would be required to satisfy after 44 Liquormart.
The Court applied the four-part Central Hudson test as refined and strengthened by 44 Liquormart. Under the first prong, the parties agreed that the speech at issue was not misleading and concerned lawful activities.106 Under the second prong, the government bears the burden of identifying a substantial interest that justifies the challenged legislation.107 The two interests asserted by the government were premised on the alleged consequences of gambling, including the danger of compulsive gambling, corruption and organized crime, bribery, narcotics trafficking, and "regressive taxation" of the poor.108 The Court accepted the "characterization" of these interests as substantial, but noted that the conclusion was "by no means self-evident."109 The Court pointed out the equivocal nature of the government’s policy toward gambling. While imposing restrictions on broadcast advertising, the government also sought to reap economic benefits from gambling by sanctioning casino gambling for Indian tribes through tribal-state compacts, approving state-operated lotteries, and carving out numerous exceptions to the broadcast advertising ban. The Court concluded that Congress was unwilling to adopt a single national policy that consistently endorsed either of the interests asserted by the government in support of the broadcast ban, leaving the ban "more difficult for the government to defend."110
The Court proceeded to examine whether the speech restriction directly and materially advanced the asserted governmental interest, and whether the restriction was not more extensive than necessary. The Court’s analysis at this point combined the third and fourth prongs of the Central Hudson test, which is consistent with the Court’s view that the elements of the test are not discrete but interrelated.111 To satisfy the final two prongs of the test, the government could not rely on speculation or conjecture; rather, there must be a demonstration that the harms recited are real and the restriction will in fact alleviate them to a "material degree" by means that are narrowly tailored to the goal.112 The Court reiterated that the fourth prong is not a "least restrictive means" analysis. Instead, the government must only demonstrate narrow tailoring of the regulation that reflects a fit that is a reasonable and careful calculation of costs and benefits associated with the burden on speech.113
The Court rejected the argument that the statute satisfied the third and fourth prongs of Central Hudson by directly decreasing demand for casino gambling, one of two substantial interests asserted. First, although advertising, may well have some impact on overall demand, it is also fair to assume that much of the advertising may merely channel gamblers from one casino to another. Second, the effectiveness of the restriction is offset by the simultaneous promotion of tribal casino gambling. Third, no connection is made between advertising of casino gambling and compulsive gambling and the other identified social ills allegedly caused by gambling. In fact, no matter what level of evidence the government could produce in support of the causal connections alleged, the regulation "is so pierced with exemptions and inconsistencies that the government cannot hope to exonerate it."114
Moreover, the exemption for Indian gaming, and the intricate FCC regulations enacted in support of the ban, are at odds with the governmental interests asserted in this case. As in Rubin v. Coors Brewing Co.,115 where the Court concluded that the regulatory scheme at issue was irrational and could not support the interests asserted, the broadcast advertising ban was incoherent, especially where other regulatory options are available that directly address the underlying conduct.116 The second interest asserted by the government, protecting states that prohibit casino gambling, was dismissed by the Court.117 If the broadcast restriction could not achieve the goal of dampening demand for casino gambling with respect to the federal interest, the restriction could not directly and adequately further any similar state interest. Even if state policies were more coherent and consistent than the federal policy, the ban "sacrifices an intolerable amount of truthful speech about lawful conduct" compared to all policies at stake and the social ills that could reasonably be eliminated by such a ban. Although the federal government may restrict a certain amount of speech outside the target of regulation, in this case the regulation constitutes neither a rough approximation of efficacy, nor a reasonable accommodation of competing state and private interests. Therefore, the second asserted interest provides no more basis for upholding the ban than the first interest.118
The Court concluded its opinion by noting that the speaker and the audience, not the government, should ordinarily be left to assess the value of accurate and nonmisleading information about lawful conduct. If the government had adopted a more coherent policy, or accommodated the rights of speakers in states that have legalized the underlying conduct, this might have been a different case.119
Justice Rehnquist filed a concurring opinion, noting that if the government chose instead to enact substantive regulation of the gambling industry, the exceptions and inconsistencies of § 1304 may prove constitutionally tolerable.120 But since the statute at issue regulated commercial speech, "the Central Hudson test imposes a more demanding standard of review"121 that was not satisfied by the government.
Justice Thomas concurred only in the judgment. In a one-paragraph opinion, Justice Thomas reiterated his view that governmental regulations of commercial speech designed to keep legal users of a product ignorant to manipulate their choices in the marketplace are per se illegitimate and are not subject to the Central Hudson analysis.122
As a result of the Supreme Court’s decision, the Fifth Circuit remanded the case to the district court with instructions to hold 18 U.S.C. § 1304 unconstitutional.123
Conclusion
The Supreme Court’s decision should be applauded as another step toward heightened
scrutiny of content-based governmental regulations of commercial speech. The
Court properly refused to rubber stamp the federal government’s chosen means
of implementing a dubious and paternalistic policy of protecting the public
through restriction of truthful and nonmisleading speech. Even if such a policy
were desirable,
§ 1304 was simply too riddled with exceptions for the government to achieve
the desired results.
It should be noted that the Supreme Court’s ruling in Greater New Orleans Broadcasting was the result of an "as applied" constitutional analysis of advertisements of private casino gambling that are broadcast by radio or television stations located in Louisiana, where such gambling is legal. The decision did not explicitly address the application of the federal ban to advertisements in states where casino gambling is illegal, such as Texas. The Supreme Court in United States v. Edge Broadcasting Co. previously held that § 1304 was constitutional as applied to a radio station in a state without a lottery that broadcasts advertisements of a nearby state’s lottery.124 Moreover, the Court in Greater New Orleans Broadcasting noted that had the government "accommodated the rights of speakers in States that have legalized the underlying conduct, this might be a different case," citing Edge Broadcasting Co.125 Therefore, the Court appears to suggest that a ban may pass constitutional muster as applied to an advertisement in a state where the underlying conduct is illegal if the government removed the exceptions to the ban and implemented a coherent national policy on gambling.
Nevertheless, the federal statute at issue failed the strengthened Central Hudson test articulated in 44 Liquormart. The same constitutional infirmities identified in Greater New Orleans Broadcasting would apply to all broadcast advertisements of casino gambling, because the asserted governmental interests are not directly advanced to a material degree by the regulation in light of the multiple exceptions to the ban that deprive the statute of coherence and rationality. Therefore, for all intent and purposes, the advertising ban is now defunct nationwide.126 The FCC Office of General Counsel and the Mass Media Bureau issued a public notice on September 30, 1999, confirming the government’s position that § 1304 "may not be constitutionally applied to truthful advertisements for lawful casino gambling, regardless of whether the broadcaster who transmits the advertisement is located in a state which permits casino gambling or a state which prohibits it."127
Casino gambling may well be a vice that the federal government has a substantial interest in discouraging, although some would argue that such matters should be left to the states. In any event, governmental regulation of this activity, like any other conduct subject to regulation, should first be directed to the conduct itself, not speech related to the conduct. When freedom of speech becomes the first casualty of governmental regulation, the burden placed upon the government to justify the regulation must be very high to protect First Amendment values. Perhaps the Supreme Court will take the "tougher standard" set forth in 44 Liquormart one step further and conclude that regulations restricting the dissemination of truthful, nonmisleading commercial information are subject to strict scrutiny. Until that day arrives, however, we will have to live in the schizophrenic world that Central Hudson and its progeny have created.
1. Letter to DR Partners, 8 F.C.C. Rec. 44 (1992); Letter to Calvenar Broadcasting, Inc., 8 F.C.C. Rec. 32 (1992); Channel 33, Inc., 7 F.C.C. Rec. 3224 (1992).
2. WTMJ, Inc., 8 F.C.C. Rec. 4354 (1993); Channel 33, Inc., 7 F.C.C. Rec. 3224 (1992).
5. See Valley Broadcasting Co. v. United States, 107 F.3d 1328 (9th Cir.), cert. denied, 522 U.S. 1115 (1998); and Players Int’l, Inc. v. United States, 988 F. Supp. 497 (D.N.J. 1997), cert. denied, 119 S. Ct. 852 (1999) (appeal pending).
6. 18 U.S.C. § 1304. The Federal Communications Commission (FCC), which is the federal agency authorized to enforce 18 U.S.C. § 1304, implemented 47 C.F.R. § 73.121, which substantially parallels 18 U.S.C. § 1304 and sets forth several exceptions to the statutory ban.
7. See, e.g., Players Int’l, 988 F. Supp. at 500.
8. See 47 C.F.R. § 73.1211 (1998).
9. 48 Stat. 1088, now codified at 18 U.S.C. § 1304 (broadcasting lottery information).
10. Greater New Orleans Broadcasting, 119 S. Ct. at 1926–27.
14. See Valentine v. Chrestensen, 316 U.S. 52, 54 (1942).
15. See Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y., 447 U.S. 557 (1980).
17. Central Hudson, 447 U.S. at 561–62.
18. See Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 456 (1978).
20. Central Hudson, 447 U.S. at 566.
22. Posadas, 478 U.S. at 345–47.
24. Edge Broadcasting, 509 U.S. at 429–30.
31. 44 Liquormart, 517 U.S. at 509–10.
34. Id. at 517 (Scalia, J., concurring in part); id. at 518 (Thomas, J., concurring in part).
35. Id. at 531 (O’Connor, J., concurring).
37. Greater New Orleans Broadcasting Ass’n v. United States, 69 F.3d 1286, 1299 (5th Cir. 1995).
38. Central Hudson, 447 U.S. at 557.
39. Greater New Orleans Broadcasting, 69 F.3d at 1302.
42. Posadas de Puerto Rico Assoc. v. Tourism Co., 478 U.S. 328 (1986).
43. Greater New Orleans Broadcasting, 69 F.3d at 1300.
47. Greater New Orleans Broadcasting, 69 F.3d at 1301.
52. Id. at 1303 (Politz, C.J., dissenting).
55. 107 F.3d 1328 (9th Cir. 1997).
56. Valley Broadcasting, 107 F.3d at 1331.
61. Valley Broadcasting, 107 F.3d at 1335–36.
62. See id. at 1336 (citing 47 C.F.R. § 73.1211(c)(3)).
63. 988 F. Supp. 497 (D.N.J. 1997), cert. denied, 119 S. Ct. 852 (1999) (appeal pending).
64. Players’ Int’l, 988 F. Supp. at 501.
70. Greater New Orleans Broadcasting, 149 F.3d at 334.
72. Id. at 336 (citing Edge Broadcasting, 509 U.S. at 433–34; Posadas, 478 U.S. at 342; Central Hudson, 447 U.S. at 569).
76. Greater New Orleans Broadcasting, 149 F.3d at 337.
78. 107 F.3d 1328 (9th Cir. 1997).
79. 44 Liquormart, 149 F.3d at 338.
83. Id. at 341 (Politz, C.J., dissenting).
8.5 107 F.3d 1328 (9th Cir. 1997), cert. denied, 118 S. Ct. 1050 (1998).
89. Amicus Brief, 1999 WL 95440 (U.S.).
90. Amicus Brief, 1999 WL 95443 (U.S.).
91. Amicus Brief, 1999 WL 95444 (U.S.).
92. Amicus Brief, 1999 WL 95445 (U.S.).
93. Amicus Brief, 1999 WL 101592 (U.S.).
94. Amicus Brief, 1999 WL 101593 (U.S.).
95. Amicus Brief, 1999 WL 126069 (U.S.). Joining the NAB as amici curiae were the American Association of Advertising Agencies, American Civil Liberties Union, Magazine Publishers of America, Inc., the Media Institute, National Newspaper Association, Newspaper Association of America, and Outdoor Advertising Association of America, Inc.
96. See, e.g., Amicus Brief, 1999 WL 95440 at *5 (U.S.).
97. Greater New Orleans Broadcasting, 119 S. Ct. at 1930.
100. Greater New Orleans Broadcasting, 119 S. Ct. at 1928.
105. Greater New Orleans Broadcasting, 119 S. Ct. at 1929 (citing 44 Liquormart, 517 U.S. at 513–14).
116. Greater New Orleans Broadcasting, 119 S. Ct. at 1934.
120. Id. at 1936 (Rehnquist, C.J., concurring).
122. Id. (Thomas, J., concurring in judgment).
123. 185 F.3d 917 (per curiam).
125. Greater New Orleans Broadcasting, 119 S. Ct. at 1936 (citation omitted).
126. See, e.g., Supplemental Brief of the United States and FCC, Cause No. 98–5127, United States v. Players’ International, Inc. (3d Cir.) (filed 8/6/99) (Greater New Orleans Broadcasting bars application of § 1304 to interstate advertising of casino gambling by broadcasters).
127. Casino Advertising Enforcement Pending Disposition of Players International Case, DA 99–2034, 1999 WL 777511 (F.C.C. 9/30/99).
John K. Edwards is an associate in the Houston, Texas, office of Jackson Walker L.L.P.