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New Jersey Retail Liquor Stores Association v. Degnan

Decided: June 4, 1981.

NEW JERSEY RETAIL LIQUOR STORES ASSOCIATION, PLAINTIFF-APPELLANT,
v.
JOHN J. DEGNAN, ATTORNEY GENERAL OF NEW JERSEY, JOSEPH H. LERNER, DIRECTOR, DEPARTMENT OF LAW AND PUBLIC SAFETY, DIVISION OF ALCOHOLIC BEVERAGE CONTROL AND DEPARTMENT OF LAW AND PUBLIC SAFETY, DIVISION OF ALCOHOLIC BEVERAGE CONTROL, DEFENDANTS-RESPONDENTS, AND OVERPECK LIQUORS, INC., INTERVENOR-RESPONDENT



On appeal from the Division of Alcoholic Beverage Control, New Jersey Department of Law and Public Safety.

Botter and King. The opinion of the court was delivered by King, J.A.D.

King

This action, brought by a trade association of about 800 independently-owned retail liquor dealers, attacks the validity of a regulation of the Division of Alcoholic Beverage Control of the Department of Law and Public Safety which allows cooperative retail price advertising. Overpeck Liquors, Inc., was permitted to intervene in support of the regulation.

The regulation, effective July 3, 1980, states in the pertinent part in controversy:

(a) No manufacturer, importer, registrant, wholesaler, distributor or retailer shall include in any advertising material or in any advertisement, directly or indirectly, any statement, illustration, design, device, name, symbol, sign or representation that:

(7) offers alcoholic beverage pricing information in affiliation with other nonidentically owned licensees in a communication which fails to truthfully disclose and prominently indicate (a) the identity of the individual licensee who established the pricing information, and (b) that the specific prices and products featured may not be available at all businesses represented or indicated as being affiliated. [ N.J.A.C. 13:2-24.10(a)(7)]

By way of background, on April 4, 1979 the ABC promulgated sweeping new regulations for the liquor industry, to become effective on May 1, 1979. 11 N.J.R. 257(c). These new rules replaced a four-decade-old retail price maintenance system. They are commonly called "deregulation" rules. Retail price competition was the new order, replacing the price maintenance system. But sales below wholesale costs, discriminatory credit practices, and tie-in sales were prohibited.

The "deregulation" rules permitted retail licensees to join in cooperative efforts for the purchase and cartage of alcoholic beverages. N.J.A.C. 13:2-26.1. According to the ABC, this would improve the small retailers competitive position in relation to chain store operations. The original 1979 regulations prohibited retail licensees who were not identically owned from joining in any cooperative advertising. N.J.A.C. 13:2-24.11(a)(8) (amended 12 N.J.R. 345). These "deregulation" rules were challenged by various individuals and representatives of retail and wholesale liquor interests and were in most part upheld by our Supreme Court in Heir v. Degnan , 82 N.J. 109 (1980). The only regulation invalidated pertinent to this discussion was N.J.A.C. 13:2-24.11(a)(8), which prohibited joint advertising by competing, independently-owned retailers. In respect of such joint advertising the Supreme Court said:

N.J.A.C. 13:2-24.11(a)(8) (amended) prohibits joint advertising by competing independently owned retailers (cooperative advertising). Appellant retailers argue that this regulation discriminates against small retailers in their efforts to compete with large retailers and also implicates First Amendment rights by

infringing on free speech. The regulation, however, does not prohibit a retailer from advertising. It is aimed at cooperative advertising by competing retailers. At least where price advertising is involved, such cooperative advertising would undoubtedly involve horizontal price fixing, a per se violation of Federal and State antitrust laws. See 15 U.S.C. ยง 1 et seq.; N.J.S.A. 56:9-1, et seq., United States v. Socony-Vacuum Oil Co. , 310 U.S. 150, 60 S. Ct. 811, 84 L. Ed. 1129 (1940). On this basis the regulation is aimed at preventing illegal marketing practices and is a reasonable exercise of the Director's power. However, cooperative advertising which does not involve prices does not come under the rationale for the regulation. No other reason is advanced in support of the regulation and under these circumstances such a restriction runs afoul of the First Amendment's prohibition against unwarranted governmental interference with "commercial speech." See Freidman v. Rogers , 440 U.S. 1, 99 S. Ct. 887, 59 L. Ed. 2d 100 (1979); Bates v. State Bar of Arizona , 433 U.S. 350, 97 S. Ct. 2691, 53 L. Ed. 2d 810 (1977); Virginia Pharmacy Bd. v. Virginia Consumer Council , 425 U.S. 748, 96 S. Ct. 1817, 48 L. Ed. 2d 346 (1976). We therefore hold N.J.A.C. 13:2-24.11(a)(8) (amended) to be invalid insofar as it proscribes cooperative advertising of matters other than prices. [at 125-126]

Appellant Association here contends that the Supreme Court's statement that "cooperative price advertising would undoubtedly involve horizontal price fixing" in violation of federal and state antitrust laws is dispositive of the ...


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