North Carolina law requires that alcoholic beverage advertising disseminated in the state comply with rules enacted by the state Alcoholic Beverage Control Commission.[24] In its extensive and complicated sets of rules, the ABC Commission defines “advertising” as publicizing “alcoholic beverages by brand name, manufacturer’s name or by other reference” including publicizing the “trade name” of a retailer in connection with the licensed sale of alcoholic beverages.[25] The commission does not regulate editorial content in media, of course, so long as the content has not been directly or indirectly paid for by anyone subject to the authority of the commission.[26]
Generally, retailers with permits to sell malt beverages (such as beer), wine and mixed beverages may advertise price and brand of these alcoholic beverage products for sale using media including newspapers, magazines, circulars, radio, television and the Internet.[27] The rules define the term “magazines” as those with a general circulation that publish at least every three months, and the term “newspapers” as those that publish at least once a month.[28] Notably, the rules prohibit retailers from advertising alcoholic beverages on billboards and outdoor signs except for certain signs on their premises as specified in the rules.[29]
The rules often treat “industry members” – defined as “any manufacturer, bottler, importer, vendor, representative, or wholesaler of alcoholic beverages”[30] – differently from retailers for purposes of alcoholic beverage advertising. For example, under the rules, industry members may advertise malt beverages and wine “on outdoor billboards, by radio, television, newspaper or magazine, and by similar means.” [31] Industry members also may advertise spirituous liquors on outdoor billboards and by “radio, television, newspaper, magazine or internet, and by other similar means.” [32] However, the rules prohibit retailers and industry members from directly or indirectly participating in cooperative advertising for alcoholic beverages with the exceptions of point-of-sale advertising and certain promotions that are allowed under the ABC Commission rules.[33]
It is important to note here that the rules specifically prohibit any alcoholic beverage advertising during radio and television broadcasts of any events and activities connected with an elementary or secondary school – such as a high school football game – and also in the programs for these events and activities.[34] In addition, the rules prohibit alcoholic beverage advertising using sound trucks and advertising for spirituous liquors on motion picture screens.[35] In addition to these general rules, there are myriad other rules that apply specifically to alcoholic beverage advertising by retailers and industry members.
False and misleading claims in alcoholic beverage advertising. The ABC Commission rules generally prohibit claims in alcoholic beverage advertising that are materially false or misleading in any manner.[36] Specific provisions in the commission rules restrict the use of “analysis, standards or tests” to advertise alcoholic beverages in any manner that is likely to mislead consumers.[37] In addition, false “place of origin” claims are prohibited. That means that advertisements may not falsely represent that an alcoholic beverage product was made or imported from someplace other than its place of “actual origin” or was made by someone other than the “actual producer or processor.”[38] The rules prohibit alcoholic beverage advertising from offering a guaranty that is likely to mislead consumers and prescribe the following specific wording for a guaranty offered in alcoholic beverage advertising: “We will refund the purchase price to the purchaser if he [or she] is in any manner dissatisfied with the contents of this package,” or substantially similar wording.[39]
Prohibited claims related to the government. The ABC Commission rules generally restrict various statements in alcoholic beverage advertising that relate to the government. For instance, an advertising claim that an alcoholic beverage was “produced, blended, made, bottled, packed or sold under or in accordance with any authorization, law or regulation” of any government or branch of government – domestic or foreign – is prohibited unless the statement is required or specifically authorized by the governmental entity mentioned in the advertisement.[40] Also, if a government-issued permit number is included in alcoholic beverage advertising, the commission rules prohibit “any additional statement” that comments on that number.[41]
Similarly, the rules prohibit alcoholic beverage advertising that includes government symbols – meaning a “flag, seal, coat of arms, crest or other insignia” – that are likely to mislead consumers into believing that the beverage being advertised has been “endorsed, made or used by, produced for or under the supervision of or in accordance with the specifications of the government [entity]” this is represented by the particular symbol depicted in the advertisement.[42] The rules also prohibit using “any statement, design, device or pictorial representation of or relating to or capable of being construed as relating to the armed forces of the United States or the American Flag, state flag, or any emblem, seal, insignia or decoration associated with any such flag of armed forces of the United States.”[43]
Prohibited claims related to athletes and athleticism. The ABC Commission rules prohibit advertising claims that are likely to mislead consumers into thinking that there is a positive correlation between alcoholic beverage consumption and enhanced athletic performance. For instance, the rules specifically prohibit alcoholic beverage advertising that includes a “statement, picture or illustration” that implies to consumers that “consumption of alcoholic beverages enhances athletic prowess.”[44] In addition, in alcoholic beverage advertisements, the rules prohibit any “statement, picture or illustration referring to any known athlete” that implies or reasonably infers to readers that using the advertised alcoholic beverage “contributed to [the] athlete’s athletic achievements.”[45]
Other specific claims prohibited in alcoholic beverage advertising. The ABC Commission rules also contain a number of provisions that generally prohibit other specific content and claims in alcoholic beverage advertising. For instance, the commission rules prohibit advertising with “direct or indirect references to the intoxicating effect” of alcoholic beverages including the use of terms such as “high test,” “high proof,” “full strength” and “extra strong.”[46] The rules also prohibit content – meaning any “statement, picture or illustration” – that “induc[es] persons under 21 years of age to drink”[47] and content that is either “inconsistent with the spirit of safety or safe driving programs”[48] or “contrary to state laws and rules governing sale, storage and consumption of alcoholic beverages.”[49]
Additionally, the rules forbid statements in alcoholic beverage advertising that are “disparaging of a competitor’s product”[50] and also prohibit depictions of nudity along with “obscene” and “indecent” content in alcoholic beverage advertising.[51] Even more broadly, the rules prohibit “any picture or illustration depicting the use of alcoholic beverages in a scene which is undignified, immodest or in bad taste.”[52] However, the legality – including First Amendment constitutionality – of some of these content restrictions is questionable to the extent they prohibit content in alcoholic beverage advertising that is not false or misleading, obscene, or otherwise illegal. For instance, in 1999, an administrative law judge in North Carolina ruled that the ABC Commission’s blanket ban on nudity in alcoholic beverage advertising and labeling exceeded the statutory authority of the commission, was void and thus could not be used to prohibit the sale of two beer products with labels that depicted nudity but were not obscene.[53]
Two provisions in the rules apply specifically to advertising for branded alcoholic beverage products. First, statements in advertisements for a branded alcoholic beverage product must be consistent with the product’s labeling statements.[54] In addition, the rules prohibit false claims – and claims that are likely to be misleading – that using a branded alcoholic beverage product will have “curative or therapeutic effects.”[55]
Price and advertising for alcoholic beverages. As mentioned, a retailer that holds an ABC Commission permit to sell malt beverages (such as beer), wine or mixed beverages may advertise price and brand via circulars, newspapers, magazines, radio, television and the Internet.[56] On the other hand, commission rules prohibit alcoholic beverage manufacturers, bottlers, importers, vendors, representatives and wholesalers – again, called “industry members” under the rules – from advertising the price of any malt beverage or wine product for sale.[57] However, the constitutionality of state bans on truthful, non-misleading price advertising for lawful alcoholic beverages is suspect. For example, in 1996, the U.S. Supreme Court held that a Rhode Island statute that banned truthful, non-misleading price advertising for lawful alcoholic beverages sold by retailers, manufacturers, wholesalers and shippers was unconstitutional under the First Amendment protection for commercial speech (such as advertising) and could not be constitutionally enforced.[58]
Promotions sponsored by alcoholic beverage brands. Unless exempt under the rules, the ABC Commission must approve in advance promotions sponsored by alcoholic beverage industry members (manufacturers, bottlers, importers, vendors, representatives and wholesalers).[59] The rules define a “promotion” as “any advertising publicity or sponsorship activity in connection with any special event, function or holiday that is outside the scope of routine sales and marketing” including “fundraisers, concerts, sporting events, festivals, celebrations, anniversaries, ceremonies, operations, observances, sweepstakes [and] contests.”[60] The approval process for such promotions includes submission of “copies of broadcast and print advertisements” by the sponsoring industry recommended no later than two months before the scheduled promotion.[61]
Under the rules, alcoholic beverage advertising may not promote “prizes, premiums or merchandise to individuals for which any purchase of alcoholic beverages is required.”[62] This includes a promotion for prizes, premiums or merchandise that requires consumers to bring in empty containers of the sponsoring brand’s alcoholic beverage product.[63] However, this does not include a promotion in which a consumer may bring in an empty container of any brand of a type of similar alcoholic beverage product and receive the same prize, premium or merchandise, even if the brand is different than the advertised brand that is sponsoring the promotion.[64]
Discounts and refund offers in alcoholic beverage advertising. Under the ABC Commission rules, no advertisements for alcoholic beverages may include a coupon or offer for a free drink at a retail establishment that sells alcoholic beverages.[65] In addition, the rules limit who may legally advertise discounts with coupons, rebates and loyalty/discount/membership cards (collectively referred here to as “loyalty cards”) for retail purchases of malt beverage and wine, and under what conditions.[66] The permissible uses of these types of discounts vary depending on the type of licensed alcoholic beverage retailer running the advertisement, as explained more fully below. In addition, manufacturers, importers, distillers, rectifiers and bottlers of spirituous liquors may advertise a “refund offer” in the state under certain conditions, as explained below.[67]
Retailers licensed to sell malt beverages or wine for either on-premises or off-premises consumption, and licensed wine shops, may advertise discounts with coupons or rebates but only for consumers purchasing malt beverage and wine products that the retailer sells to drink off of the premises.[68] These coupons and rebates may not be honored for consumers under the legal drinking age, may not exceed 25 percent of the advertised retail price of the malt beverage or wine product being sold, may not be advertised in publications produced by or for institutions of higher education like colleges and universities, and must include the statement “Drink Responsibly-Be 21” in the coupon or rebate in the advertisement.[69] These retailers may require the use of a loyalty card to obtain the advertised discount, under the same conditions just mentioned, with the requirement that the statement “Drink Responsibly-Be 21” be printed on any loyalty card that is printed in the advertisement.[70] Licensed retailers may not cooperate directly or indirectly with industry members (like manufacturers) on marketing, redeeming or funding discounts allowed under the rules for malt beverage and wine products whether by coupon, rebate or loyalty card.[71]
As mentioned above, the rules allow refund offers including rebates in connection with the purchase of spirituous liquor products when the offer is made by a “manufacturer, importer, distiller, rectifier or bottler of spirituous liquor.” [72] The rules allow these offers to be advertised by “newspapers, magazines or direct mail.”[73] However, the redemption form for the refund may not be published in the advertisement itself but instead must be made available on the product packaging or container, or on a “tear-off pad” at the store.[74] These refund offers may be made only to “purchasers of the manufacturer’s original unopened container of liquor [when] purchased from a local [state-operated] ABC store.”[75] The refund offer must be applicable across the entire state, have an expiration date and explain pertinent redemption procedures; and the refund only may be redeemed by mail sent to either to the industry member offering the refund or a designated agent that may not include a retailer or wholesaler licensed in the state to sell alcoholic beverages.[76]
Advertisements for “happy hours.” Bars, taverns and other establishments that hold permits to sell alcoholic beverages for on-premises consumption may not advertise drink specials such as “2 for 1,” “buy 1 get 1 free” or “any other similar statement indicating that a patron must buy more than one drink.”[77] They also may not conduct or advertise “happy hours” that involve selling more than one drink to a consumer for one price, offering a single price that requires the purchase of more than one drink or serving more than one drink to a consumer at a time.[78] They may offer and advertise free and reduced-price drinks only if the offer is good for a full business day or longer and available to all patrons and not just women or men, for example.[79] In addition, they may offer and advertise a package that includes alcoholic beverages with a meal or entertainment,[80] or a meal and alcoholic beverage at a single price as long as the total price includes the full retail price of the drink.[81]
Additional requirements for wine advertising. In addition to the rules discussed above, there are even more ABC Commission rules that apply specifically to wine advertisements. Wine advertisements may include the number of a bonded wine cellar or winery “in direct conjunction with the name and address of the person operating such winery or storeroom” stated in one of the following manners: “Bonded Winecellar No. _____,” “B.W.C. No. _____,” “Bonded Winery No. _____,” or “B.W. No. _____.”[82] No additional references regarding these numbers are permitted, and wine advertising in the state may not “convey the impression” that the advertised wine product was “made or matured under United States Government or any state government supervision,” or under any governmental “specifications or standards.”[83]
Under the rules, wine advertisements may not include any “statement, design or representation” relating to “alcoholic content” including content that “may convey the impression that a wine is ‘unfortified’ or has been ‘fortified’ or has intoxicating qualities.”[84] In addition, wine advertisements may not contain any “statement of age or dates, or any statement of age or representation relative to age.”[85] However, a wine advertisement may include the vintage year when the year also appears on the product label[86] and also may state the date of bottling in the following form: “‘Bottled in _____ (inserting the year in which the wine was bottled).”[87] In addition, wine advertisements may include “[t]ruthful references of a general and informative nature” concerning “storage and aging” of a wine such as “This wine has been mellowed in oak casks,” “Stored in small barrels” or “Matured at regulated temperatures in our cellars.”[88]
Other than vintage year and bottling date, any other dates that appear in wine advertising must be accompanied by a disclosure explaining their “significance.”[89] This would include the “date of establishment of any business, firm or corporation,” for instance.[90] When required under the rules, the explanation for a date in wine advertising must appear in the “same size and kind of printing” as the date itself.[91]
Out-of-state wine manufacturers and sellers. In light of recent court decisions, out-of-state wine manufacturers and sellers probably can lawfully advertise offers to ship wine for sale to adult consumers in North Carolina despite seemingly contrary provisions in the state statutes that only allow such sales to licensed wine wholesalers in the state.[92] In 2003, the U.S. Court of Appeals for the Fourth Circuit ruled that these provisions unconstitutionally discriminated against interstate commerce and thus could not be lawfully enforced by North Carolina to the extent that they prevented out-of-state wine manufacturers and sellers from shipping their products to adult consumers in the state.[93] Decisions of the Fourth Circuit are binding precedent on all federal trial courts in North Carolina. In 2005, the U.S. Supreme Court struck down similar statutory provisions in Michigan and New York to the extent that those provisions limited out-of-state wine shipments to adult consumers in those states.[94]
Additional requirements for spirituous liquor advertising. In addition to the rules already discussed, the ABC Commission has additional rules that apply specifically to advertising of spirituous liquors. Terms such as “bond,” “bonded” and “bottled in bond” are prohibited under the rules in a spirituous liquor advertising unless the term also appears on the product labeling and is presented in the advertisement in the same “manner and form” as it appears on the label.[95] In addition, the rules for spirituous liquor advertising prohibit the term “pure” unless it is part of the “bona fide name” of the advertiser, and also prohibit terms like “double distilled” and “triple distilled.”[96]
The rules prohibit “statements of age” in spirituous liquor advertising including “any statement, design or device directly or by implication concerning age or maturity of any brand or lot of spirituous liquor” unless the same information appears on the labeling for the advertised product.[97] When a statement of product age is permitted in a spirituous liquor advertisement, any qualifying information that appears on the labeling also must appear in the advertisement next to the date itself with “substantially equal conspicuousness” as the date.[98] However, when advertising whisky or brandy that does not include a specific age on its label, or rum that is more than four years old, the advertisement may use “inconspicuous age, maturity or other similar representation[s]” such as “aged in wood” or “mellowed in fine oak casks.”[99]
[24] N.C. Gen. Stat. § 18B-105(a). The statute gives the ABC Commission specific authority to enact rules that:
(1) Prohibit or regulate advertising of alcoholic beverages by permittees in newspapers, pamphlets, and other print media;
(2) Prohibit or regulate advertising by on-premises permittees of brands or prices of alcoholic beverages via newspapers, radio, television, and other mass media;
(3) Prohibit deceptive or misleading advertising of alcoholic beverages;
(4) Require all advertisements of alcoholic beverages to disclose fully the identity of the advertiser and the products being advertised;
(5) Prohibit advertisements of alcoholic beverages on the premises of a permittee, or regulate the size, number, and appearance of those advertisements;
(6) Prohibit or regulate advertisement of prices and alcoholic beverages on the premises of a permitee;
(7) Prohibit or regulate alcoholic beverage advertisements on billboards;
(8) Prohibit alcoholic beverage advertisements on outdoor signs, or regulate the nature, size, number, and appearance of those advertisements;
(9) Prohibit or regulate advertising of alcoholic beverages by mail;
(10) Prohibit or regulate contests, games, or other promotions which serve or tend to serve as advertisement for a specific brand or brands of alcoholic beverages; and
(11) Prohibit or regulate any advertising of alcoholic beverages which is contrary to the public interest.
Id. at (b). The term “permitee” is defined in the ABC Commission rules as any person to whom the commission has issued a “permit,” which means a “written or printed authorization to engage in some phase of the alcoholic beverage industry.” 4 N.C. Admin. Code § 2R.0103(8)-(9). Other rules require that permittees and affiliates comply with all commission rules when advertising alcoholic beverages in any advertising medium and only advertise brands listed as approved by the commission at the time the advertising is published. 4 N.C. Admin. Code § 2S.1004(a), (d).
[25] 4 N.C. Admin. Code § 2S.1001(2). The term “advertising” also includes “any display intended to attract attention by a combination of letters, pictures, objects, lighting effects, illustrations, etc.” Id. Among other exclusions, advertising does not include labeling although there are restrictions in the rules that specifically apply to labeling. See id. at (2)(a).
[26] Id. at (b) (stating that alcoholic beverage advertising and publicity do not include “any editorial for which no money or other valuable consideration is paid or promised, directly or indirectly, by any person subject to [the ABC Commission] Rules”).
[27] 4 N.C. Admin. Code § 2S.1008(d).
[28] 4 N.C. Admin. Code §2S.1001(7) (defining “magazines”), (8) (defining “newspapers”).
[29] N.C. Admin. Code § 2S.1008(b)(2). However, industry members like manufacturers and wholesalers who also have a retail permit may advertise tastings on billboards and outdoor signs. Id.
[30] 4 N.C. Admin. Code § 2R.0103(7).
[31] 4 N.C. Admin. Code § 2S.1009(a). Industry members may not advertise malt beverages and wine on outdoor billboards or signs “on the premises of any retail permittee’s establishment nor in areas where the sale of that product is unlawful.” Id.
[32] 4 N.C. Admin. Code § 2S.1011(c). Industry members may not advertise spirituous liquors on outdoor billboards or signs located “on the premises of any retail permittee’s establishment nor in areas where the sale of that product is unlawful.” Id. Under the rules, when using print advertisements that are targeted to college students and promote a malt beverage or wine product, industry members must submit the advertisements in advance to the ABC Commission for approval – two months in advance is recommended. 4 N.C. Gen. Stat. § 2S.1009(f).
[33] 4 N.C. Admin. Code § 2T.1007.
[34] 4 N.C. Admin. code 2S.1006(c) (applies to alcoholic beverage advertising sponsored by retailers and also “industry members” like wholesalers and vendors, for example).
[35] Id. at (d), (e).
[36] Id. at (a)(1). This provision covers labeling for alcoholic beverages as well, so depictions of alcoholic beverage products and their labeling in advertising seemingly also would be covered. See id.
[37] 4 N.C. Admin. Code § 2S.1005(a)(4) (applies “irrespective of falsity”).
[38] Id. at (a)(15).
[39] Id. at (a)(5) (applies “irrespective of falsity”).
[40] Id. at (a)(6).
[41] Id.
[42] Id. at (16). The ABC Commission rules also prohibit the use of such symbols that are associated with an “organization[],” a “family” or an “individual” when the use of the symbol is “likely to mislead” consumers into falsely concluding that the organization, family or individual either makes, uses or endorses the product or otherwise supervises or provides specifications for the manufacturer of the product. Id.
[43] Id.
[44] Id. at (a)(7).
[45] Id.
[46] Id. at (a)(17).
[47] Id. at (a)(10).
[48] Id. at (a)(11).
[49] Id. at (a)(12).
[50] Id. at (a)(2).
[51] Id. at (a)(3).
[52] Id. at (a)(8).
[53] Shelton v. N.C. Alcoholic Beverage Control Comm’n, 99 A.B.C. 1641 (Dec. 7, 1999). The commission also suggested there were First Amendment constitutional concerns regarding the blanket ban on depictions of non-obscene nudity but noted that constitutional issues needed to be decided in the courts and simply ordered the commission to consider the constitutionality of the ban on non-obscene nudity under the First Amendment. Id. See also Bad Frog Brewery, Inc. v. New York State Liquor Auth., 134 F.3d 87, 91, 101 (2d Cir. 1998) (not dealing with nudity or obscenity but holding that the State of New York could not constitutionally ban the use of a cartoon frog depicted as giving “the finger” on the labeling of “Bad Frog” beer products sold in the state on findings that the illustration was “combative in nature”).
[54] 4 N.C. Admin. Code 2S.1005(a)(13).
[55] Id. at (a)(14).
[56] 4 N.C. Admin. Code § 2S.1008(d).
[57] 4 N.C. Admin. Code §§ 2R.0103(a)(7) (defining the term “industry members”); 2S.1009(e) (containing the ban on price and brand advertising for “industry members”). The rules, however, allow industry members to provide a “wholesale price list that contains the brand names and prices of his products to retail permittees.” 4 N.C. Admin. Code § 2S.1009(e).
[58] 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 489 (1996). The statutory ban applied to malt beverages, cordials, wine and distilled liquor. Id. at 490. Also, other statutory provisions at issue in the case specifically prohibited media outlets in the state from accepting any price advertising for alcoholic beverages. Id.
[59] Id. at (a) (requiring advance approval by the ABC Commission of promotions sponsored by an “industry member” as defined in 4 N.C. Admin. Code § 2R.0103(a)(7)). The rules exempt from the approval process specified activities including certain sponsorships of non-profit organizations, certain point-of-sale advertising and retail specialty or novelty items, promotions that occur on a “regular basis” in a similar format that already has been approved by the ABC Commission and sponsorship of individual amateur sports teams so long as the teams are not composed of employees of the alcoholic beverage-related sponsor, all as more fully described in the rules. See id. at (1)-(4). The term “point-of-sale advertising” is defined in the rules as “advertising material such as signs, posters, banners, and decorations that bears conspicuous and substantial product advertising matter, that has no secondary value to the retailer, and that is designed and intended to be used inside a retailer’s licensed premises where alcoholic beverage products are displayed or sold.” 4 N.C. Admin. Code 2T.0702(2).
[60] 4 N.C. Admin. Code § 2T.0702(3).
[61] 4 N.C. Admin. Code § 2T.0717(c)(3), (g).
[62] 4 N.C. Admin. Code § 2S.1006(f).
[63] Id.
[64] Id.
[65] Id. at (b). The rules define a “coupon” as “a part of a retail permittee’s advertisement that is redeemed to the retail permittee to obtain a discount at the time of sale.” Id. at (a)(1).
[66] Id. at (b). The rules define a “rebate” for retail permittees as “a promise by the retail permitee to return a portion of the amount paid by the purchaser upon the condition the purchaser completes a rebate form and the purchaser meets the terms and conditions of the rebate form’s requirements.” Id. at (a)(3). The rules define a “loyalty card, discount card, or membership card” as “a card that is issued by a retail permittee to customers that, upon presentation to the retail permittee, provides for the purchaser to receive a [card] or coupon discount on a portion of the amount paid by the purchaser for off-premises beer or wine consumption sales at the time of sale.” Id. at (a)(2).
[67] 4 N.C. Admin. Code 2S.1020(a), (d). A “refund offer” is defined in the rules as “an offer to a consumer for a rebate of money or merchandise from a liquor industry member, obtained by mailing a form.” Id. at (b).
[68] 4 N.C. Admin. Code § 2S.1006 (b)(1)(A)-(B).
[69] Id. at (b)(1)(C)-(E). The retailer may require the use of a loyalty card with a coupon or rebate to obtain the discount. Id. at (b)(1)(B).
The constitutionality of state ABC Commission rules limiting alcoholic beverage advertising in college and university publications has not been addressed in a published court opinion to date. However, the U.S. Court of Appeals for the Fourth Circuit – whose rulings are binding on federal trial courts in North Carolina – ruled in 2010 that various state limitations on alcoholic beverage advertising in college student publications in Virginia did not violate the First Amendment protection for commercial speech. Educ. Media Co. at Va. Tech, Inc. v. Swecker, 602 F.3d 583, 591
