In a highly anticipated ruling that maintains the status quo for alcohol beverage laws across the country, the U.S. Court of Appeals for the Ninth Circuit in Retail Digital Network v. Prieto, 861 F.3d 839 (9th Cir. 2017), recently determined that California's interest in preventing the undue influence of manufacturers over retailers was sufficient to trump First Amendment commercial speech challenges. In so ­holding, the court maintained longstanding precedent supporting the government's right to restrict advertising by alcohol suppliers, directly or indirectly, at the retailer outlets carrying their products, in contrast to business as usual for other nonalcohol brand owners.

At issue in Retail Digital was plaintiff RDN's challenge to certain provisions of California's “tied house” laws, which restrict the ability of manufacturers to provide paid advertising, point-of-sale material or “anything of value” to licensed retailers of their products (see Cal. Bus. & Prof. Code Section 25503). RDN is a nonlicensed, third-party advertising company that runs paid advertisements over LCD screens it installs in retail outlets, as in Retail Digital Network v. Appelsmith, 945 F. Supp. 2d 1119, 1121 (C.D. Cal. 2013). After being unable to contract with alcohol manufacturers, including Anheuser-Busch InBev, MillerCoors and Diageo, due to their concerns that advertising with RDN would violate Section 25503, RDN brought suit against the director of the California Department of Alcoholic Beverage Control, seeking a ­declaratory judgment that Section 25503 was an ­unconstitutional restraint on RDN's First Amendment right to ­commercial speech.

In assessing the merits of RDN's challenge at summary judgment, the court and parties agreed that the case hinged on the legal question of whether the court was required to apply a heightened standard of review due to the U.S. Supreme Court's decisions in Rubin v. Coors Brewing, 514 U.S. 476 (1995); 44 Liquormart v. Rhode Island, 517 U.S. 484 (1996); and Sorrell v. IMS Health, 564 U.S. 552 (2011). As RDN conceded at oral argument, if the previous standard of intermediate scrutiny had not changed, there was “no room for this litigation” because the Ninth Circuit's prior decision in Actmedia v. Stroh, 830 F.2d 957 (9th Cir. 1986) was fatal to RDN's challenge.