APPEALS COURT THROWS CURVE IN BALTIMORE CASE;UPHOLDING OF CITY'S OUTDOOR BANS BOLSTERS FDA'S CHANCES

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A stunning decision last week by the 4th U.S. Circuit Court of Appeals in Richmond, Va., is likely to reopen the door to a host of alcohol and tobacco ad regulation efforts, observers said.

The court voted 2-1 to uphold Baltimore's bans on most outdoor advertising for alcoholic beverages and tobacco, a big surprise for ad industry groups hoping the U.S. Supreme Court had all but eliminated governmental ad bans with its 44 Liquormart decision.

MORE PROBLEMS AHEAD?

The action was the first interpretation of the high court's May Liquormart decision and could foreshadow other problems for advertising. The Richmond court eventually will handle probable appeals in ad and tobacco industry suits against the Food & Drug Administration, slated for trial early next year in Greensboro, N.C.

"It's a positive development," said James O'Hara, FDA associate commissioner for public affairs.

Matthew Myers, counsel for the Campaign for Tobacco Free Kids, called it "a powerful precedent for how the courts look at restrictions on tobacco advertising."

A MISINTERPRETATION

Advertising groups, however, said the ruling misinterpreted the Supreme Court decision and predicted the Baltimore ban again would be overturned.

"Clearly, we believe this is a wrong decision and a serious misreading of the Liquormart case," said Dan Jaffe, exec VP of the Association of National Advertisers. "If this were upheld, it would mean the advertising of consumer products has very little protection under the First Amendment."

Mr. Jaffe said the case will be appealed, but ad groups are trying to decide whether to immediately appeal to the Supreme Court or first seek a hearing before the entire Richmond court.

OUTDOOR BOARD RULES

To curb underage smoking and drinking, Baltimore in 1994 enacted two separate ordinances curtailing liquor and tobacco outdoor boards in the city. Under the ordinances, outdoor signs are allowed only in industrial areas and media specifically protected by Maryland law, including cabs, buses and stadiums selling beer.

The bans were immediately challemged by Penn Advertising, Anheuser-Busch Cos. and ad groups, claiming in part that in trying to protect children, Baltimore had gone too far to restrict legal advertising to adults.

The appellate court earlier upheld the Baltimore ordinances, but the high court's May Liquormart case seemed to nullify that decision.

LIQUORMART'S IMPACT

In Liquormart, the Supreme Court overturned a Rhode Island law banning liquor price advertising, saying it was an unconstitutional restriction of free commercial speech. Further, several justices said a Puerto Rico gambling ad decision widely used as legal justification for broad ad restrictions had been wrongly decided by the high court.

Within two weeks, the Supreme Court set aside the appellate court's decision on the Baltimore case and told the lower court to reconsider it.

In last week's ruling, two of the three appellate court judges contended that because ma rketers had other places to advertise, the Baltimore ordinance wasn't as sweeping as Rhode Island's. The two judges also said the Baltimore City Council's finding that there was a "definite correlation between alcoholic beverage a dvertising and underage drinking" was reasonable.

SOME DISSENT

A dissenting judge claimed there wasn't enough evidence and called for a lower court hearing.

"We don't believe Baltimore has met the constitutional test to restrict com mercial free speech, nor do we believe the city can," said Nancy Fletcher, president-CEO of the Outdoor Advertising Association of America.

"The two-judge majority has undermined free speech protections while only giving lip servi ce to the Constitutional rights of business and the public alike," said Anheuser-Busch in a statement.

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