SUPREME COURT RULING BOLSTERS ADVERTISER RIGHTS;DECISION COULD QUASH RECENT EFFORTS TO PUT LIMITS ON COMMERICAL SPEECH

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Excerpts from the Supreme Court opinions are on Page 57.

A unanimous U.S. Supreme Court decision solidifying and broadening advertiser rights to truthful commercial speech could spell an end to current attempts to curb advertising.

Baltimore's attempt to use a ban on outdoor advertising to limit alcohol abuse could be dead. And the federal government's attempt to ban Nevada casino advertising and the Washington Legal Foundation's challenge to limit Food & Drug Administration rules on the mailing of informational materials for prescription drugs could see the first effects of the Supreme Court's decision in the 44 Liquormart case.

FAR-REACHING EFFECTS

Advertising lawyers, however, say the effects are far broader, extending not only to FDA's attempts to limit tobacco ads and the proposal from U.S. Rep. Joe Kennedy (D., Mass.) to curb alcohol advertising, but to any regulation of advertising that's not tied to truthfulness or fairness.

"It's one of the most powerful statements by the court in favor of commercial speech," said Dan Jaffe, exec VP of the Association of National Advertisers.

The court early last week struck down a Rhode Island law that banned liquor price advertising. Lawyers say the reasoning the court used is the key to the case's importance.

For the first time, the current high court spoke clearly on advertising, spelling out and greatly expanding positions it touched on in other cases. Four justices said there was no "vice" exception to the freedom of speech for commercial speech.

CHANGING DIRECTION

In essence, the court overturned its previous biggest ruling on the subject, one that had allowed easy regulation of advertising to achieve social policy aims.

Eight justices said the Posadas decision allowing the Puerto Rico Legislature to ban casino gambling ads was a mistake. The court had justified that 1986 decision by saying that since a legislature could ban a product, then it must have the authority to limit the product's advertising.

Last week's decision called such bans "paternalistic" and warned that commercial speech curbs could have broader effects than a product ban.

Finally, the majority of the court called for broadening the standard for judging attempts to curb advertising.

CHANGING THE RULES

Before last week, lawful, non-misleading advertising could be curbed if a state claimed a substantial interest in regulation; demonstrated the regulation directly advanced government's interest; and showed it wasn't "more extensive than necessary," a series of tests developed in a 1980 case filed by Central Hudson Gas & Electric Co. against New York's public utility commission.

In the 44 Liquormart case, three justices said the Central Hudson test should be applied only to curbs aimed at providing fairness in consumer marketing. Other advertising should get greater rein, they said.

"Bans that target truthful, nonmisleading commercial messages rarely protect consumers from such harms. Instead, such bans often serve only to obscure an `underlying governmental policy' that could be implemented without regulating speech," said Justice John Paul Stevens' opinion, supported by Justices Anthony Kennedy and Ruth Bader Ginsburg.

"In this way, these commercial speech bans not only hinder consumer choice but also impede debate over central issues of public policy."

A fourth justice, Clarence Thomas, went further and said Central Hudson should never be used; Justice Antonin Scalia indicated he, too, was troubled by that test but needed more information on advertising history before overturning it.

The four remaining justices said since the Rhode Island ban didn't meet the criteria set up by Central Hudson, there was no reason to look at other issues, at least yet.

`MAJOR VICTORY'

"It's a major victory for the cause of protecting commercial speech," said Floyd Abrams, a First Amendment lawyer who has filed comments with the FDA on behalf of tobacco companies.

"It does not end by any means the continued legal warfare, but for a number of legal reasons, it's a major step forward. The very unanimity in an area where there was so much disagreement in the past-it's rare to have an unanimous decision, let alone one in favor of protecting commercial speech. And some of the opinions take extremely broad positions and are strong in their articulation."

While most other advertising lawyers agreed, they also cautioned that the decision doesn't end litigation; it just changes the playing field.

The Baltimore ban on outdoor boards for alcoholic beverages in all but a few areas appears to be flagrantly in violation of the new court standard (the advertising has continued pending court action). Some others are less clear.

U.S. attempts to ban Nevada casinos from TV advertising (in Valley Broadcasting v. U.S.) because the ads are seen in California could be in trouble if decided on advertising issues. The federal government is expected to claim, however, that broadcast licensing gives it greater control over TV advertising.

PHILIP MORRIS OPTIMISTIC

Philip Morris USA officials and some ad lawyers said the Rhode Island case could make it difficult for FDA's attempt to enact limits on tobacco advertising aimed at reducing underage smoking.

The FDA has proposed sharp limits on marketers' abilities to use "characters" on outdoor boards, limits on event sponsorship identification, restrictions on magazine ads, and curbs on giveaways of cigarette brand-emblazoned merchandise.

"I believe that this opinion makes it much harder for them," said Dan Troy, an attorney with the firm representing the American Advertising Federation. "It undercuts the linchpin of their regulation."

R.J. Reynolds Tobacco Co. called the Rhode Island law and the proposed FDA restrictions "strikingly similar."

Tobacco critics, including FDA and the White House, are contending that there are big differences between the specific ad restrictions aimed at reducing illegal underage smoking and Rhode Island's law aimed at discouraging legal drinking.

"The Supreme Court has clearly said it won't tolerate haphazard, irresponsible advertising restrictions, but there is nothing in the decision that indicates the FDA is wrong," said Matthew Myers, counsel for the Campaign for Tobacco-Free Kids.

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