By Mark Conrad
A constitutional tug of war between advertising and sponsorship restrictions on tobacco products and a growing first amendment right of commercial speech has been occurring in recent years as governmental efforts to restrict or ban tobacco use have increased by use of a more aggressive statutory and regulatory framework. These statutory and regulatory restrictions have restricted tobacco firms from sponsoring sports events, especially since Congress passed and President Obama signed the Family Smoking Prevention and Tobacco Control Act (FSPTCA) in 2009.
FSPTCA imposes a number of restrictions on the labeling and advertising of tobacco products. It mandates warning labels with graphics on tobacco product packaging, restricts tobacco advertisements to black and white text and bans free sampling and branding of non-tobacco merchandise. The law also prohibits outdoor billboard advertising within 1,000 feet of the perimeter of any public playground or playground area in a public park . . ., elementary school, or secondary school and in arenas and stadiums and bars tobacco manufacturers from promoting their brands through sponsorship of athletic, social and cultural events in the brand name of a tobacco product. (FSPTCA, Sec 102(a)(2)).
Regarding sports, the FSPTCA directs the Food and Drug Administration (FDA) to reissue certain provisions of its 1996 regulation barring the sponsorship by a tobacco company of “any athletic, musical, artistic, or other social or cultural event, or any entry or team in any event in the brand name (alone or in conjunction with any other word), logo, symbol, motto, selling message, recognizable color or pattern of colors, or any other indicia of product identification identical or similar to, or identifiable with, those used for any brand of cigarettes or smokeless tobacco.” 21 C.F.R. § 1140.34 (2010). These regulations were struck down by the Supreme Court in FDA v. Brown & Williamson, 529 U.S. 120 (2000) on the grounds that the agency lacked jurisdiction to regulate tobacco and related products. The FSPTCA was enacted as a legislative response to the ruling.
It is no surprise that the drafters of the legislation addressed the issue of tobacco sponsorship of sports events. Tobacco firms have a long-standing connection with certain sports, sponsoring events using their brand names. Prior to the FSPTCA, cigarette companies spent approximately $114 million on sports sponsorships in 1999 and around $31 million on team or individual player sponsorships in 2005, according to Federal Trade Commission reports. Well known examples include the Virginia Slims Tournament for the Women’s Tennis Association and the Winston Cup for NASCAR.
Advertisers and sponsors can legitimately point to a certain level of constitutional protection for their speech. Commercial speech restrictions have, since 1980, been subject to an intermediate scrutiny test, first enunciated by the Supreme Court in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 US 557, which implemented a multi-part test to justify government restrictions on commercial speech. It requires that if the commercial speech concerns lawful activity and is not misleading, the government can restrict it only when 1) the government’s interest is “substantial;” 2) the regulation “directly advances” that government interest; and 3) the regulation “is not more extensive than necessary” to serve that interest. This standard does give the government some more leeway to regulate advertising as opposed to “political” or “artistic” speech, which is generally subject to a more rigorous standard of review, known as “strict scrutiny.”
A centerpiece of commercial speech challenges has been restrictions on so-called “sin advertising” involving tobacco, liquor, gambling or state-sponsored lotteries, which have resulted in more than 20 cases heard by the Supreme Court. The majority of those cases resulted in rulings against the restrictions. One case of particular interest was Lorillard Tobacco v. Reilly, 533 US 525 (2001) where the court ruled that Massachusetts state restrictions on outdoor and point-of-sale advertising for cigars and smokeless tobacco were unconstitutional. The majority concluded that the regulation failed the Central Hudson test by restricting speech more than necessary to advance the state’s interest in reducing underage use of tobacco products.
Not surprisingly, the provisions of the FSPTCA were challenged on constitutional grounds. Two challenges occurred, but only one of them addressed the sports sponsorship bans. That case, originally titled Commonwealth Brands v. FDA, 678 F. Supp. 2d 512 (W.D. Ky, 2010) was filed in the western district of Kentucky in 2009, shortly after the passage of the law. That court concluded that a number of sections of the statute were unconstitutional as “unduly broad” under the prevailing test for commercial speech regulation. However, it upheld the ban on sports sponsorships, relying heavily on conclusion draws by the FDA when it first attempted to restrict such sponsorships in the mid-1990s. Then, Congress found that “the exposure (which includes television broadcasts) of young people to sponsored events is substantial” and [at the time] “it was estimated that more than 64 million children each year were exposed to tobacco-related advertising on television through auto-racing sponsorship.” 61 Fed. Reg. 44528-29. The district court reasoned that the sponsorship and merchandise limitations were “not more extensive than necessary” under the final prong of Central Hudson, to serve Congress’s substantial interest in reducing youth tobacco use by reducing youth possession of and exposure to branded merchandise.
Both parties appealed the result in Commonwealth Brands, and on March 19, 2012, the U.S. Court of Appeals for the Sixth Circuit Court affirmed much of the lower court ruling, including the ban on sports sponsorships. Renamed Discount Tobacco City & Lottery, et al. v. United States, et al. 674 F. 3d 509 (6th Cir. 2012) the appeals panel, in an opinion by Judge Eric Clay, concluded that the sponsorship ban passed the Central Hudson test, thereby rejecting claims that it was overbroad and failed to “directly advance” the state’s interest. Noting that the purpose of such sponsorship is to attract younger smokers, rather than get existing smokers to change brands, the panel noted “the record suggests that the massive amount of money invested by the tobacco industry in advertising and marketing is largely devoted to (1) attracting new young adult and juvenile smokers, and (2) brand competition in the young adult and juvenile market. The record shows that tobacco advertising has a dramatic impact on juveniles’ decision to use tobacco products.” It added: “Even though cigarette advertising is not permitted on television in the United States, tobacco companies continue to receive millions of dollars’ worth of national television exposure for their brands through sponsoring sports events such as auto racing.” (citing 61 Fed. Reg. at 44528). After noting that the ban “directly advanced” the government’s interest, the court concluded that the ban passed the final part of Central Hudson, as not being more restrictive than necessary. It stated: “Plaintiffs have failed to show that anything other than a nominal amount of protected speech is swept into the regulation.” 674 F. 3d at 543.
In its ruling, the panel deferred to the government’s policy arguments to uphold the breadth of the restriction. Because of its importance, it is possible that the case may ultimately end up in the Supreme Court. If that happens, the court may take the opportunity to revisit the Central Hudson doctrine, either by redefining the standard or overruling it and treating truthful commercial speech with a strict scrutiny standard. If either option occurs, it could make regulating sin advertising more difficult.
As of this writing, no determination as to whether one or both parties will seek en banc review or appeal to the U.S. Supreme Court has been reported.
Mark Conrad is Associate Professor of Law and Ethics at Fordham University’s Gabelli School of Business. He also is an adjunct professor at New York Law School. The author would like to thank Erika Waddell for her assistance in preparation of the article.
