Price Promotions

There are two cases involving local authority to restrict the use of price promotions at the point of sale:
National Association of Tobacco Outlets, Inc. v. New York City (2014)
National Association of Tobacco Outlets, Inc. v. City of Providence (2013)

National Association of Tobacco Outlets, Inc. v. City of New York, 1:14-cv-00577 (2014)

On June 18, 2014, the United States District Court for the Southern District of New York upheld a New York City (City) ordinance prohibiting certain tobacco price discounting practices. In November 2013, the New York City Council adopted the “Sensible Tobacco Enforcement Policies” designed to combat illegal cigarette smuggling and impose certain pricing restrictions on tobacco product sales. In January of this year, the National Association of Tobacco Outlets (NATO) and other trade groups and tobacco manufacturers (collectively “plaintiffs”) filed suit challenging the law’s restriction on the redemption of discount coupons and multipack sales by tobacco retailers as violating the plaintiffs’ rights under the First Amendment of the U.S. Constitution. Plaintiffs also argued the law is preempted (or prohibited) by the Federal Cigarette Labeling and Advertising Act (FCLAA) and a New York State law restricting tobacco product sampling.

Specifically, the plaintiffs claimed:

  • Restricting the redemption of discount coupons unconstitutionally restricts their ability to communicate with adult consumers about product price and value;
  • The law aims to regulate the content of cigarette promotions (rather than the time, place or manner of those promotions) and is therefore preempted by the FCLAA; and
  • The Adolescent Tobacco Use Prevention Act (ATUPA) regulates discount coupon redemption and expressly prohibits local regulation of the same.

The City defended the law as a vital component of its comprehensive tobacco control program. District Court Judge Thomas Griesa agreed with the City’s arguments that the price regulation has no effect on the information plaintiffs’ may convey to adult consumers—it merely regulates the sales transaction (i.e., prohibits the use of certain price reductions). The judge also agreed that the law regulates the manner, not the content of, cigarette promotions (e.g., through the redemption of discount coupons) and is therefore permissible under the FCLAA (as amended by the Family Smoking Prevention and Tobacco Control Act). Finally, the judge held that the ordinance does not regulate the distribution of free tobacco products, which is the sole subject of the sampling regulation of ATUPA, and therefore is not preempted by the state law.

The District Court opinion mirrors a similar decision by the U.S. Court of Appeals for the First Circuit last year. In that case, the same plaintiffs (with the exception of two regional trade groups) argued that a Providence, Rhode Island law restricting certain tobacco product price promotions violated the First Amendment and was preempted by the FCLAA. Both the United States District Court and the Court of Appeals upheld the law.

The District Court opinion from 2014 is available here.


National Association of Tobacco Outlets, Inc. v. City of Providence, 731 F.3d 71 (2013)

On September 30, 2013, the United States Court of Appeals for the First Circuit affirmed a lower court ruling upholding two tobacco control ordinances adopted by the City of Providence in 2012. In December of 2012, District Court Judge Lisi held that the laws, which restrict price discounting of tobacco products as well as the sale of flavored products, do not violate the U.S. Constitution nor are they preempted by federal law. Plaintiffs appealed that decision.

Plaintiffs, the National Association of Tobacco Outlets Inc., the Cigar Association of America (CAA), and seven tobacco manufacturers and distributors, filed suit against the city soon after the laws were adopted. The laws at issue prohibit tobacco retailers from accepting or redeeming coupons and multi-pack discounts for any tobacco products or cigarettes (Ordinance 14-303 or “price ordinance”) and restrict the sale of flavored tobacco products, except menthol products (Ordinance 14-309 or “flavor ordinance”). The plaintiffs argued that the laws violate the First Amendment and are preempted by the Federal Cigarette Labeling and Advertising Act (“Labeling Act”) and the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”).

The court found the following:

The actions prohibited by the price ordinance do not amount to commercial speech or expressive conduct and are not protected by the First Amendment.

Plaintiffs argued on appeal that the price ordinance violates their First Amendment rights. They argued that the “price ordinance” unconstitutionally restricts “commercial speech” by restricting communication with consumers about the price of tobacco products. The court, looking to the plain language of the ordinance, found that found that the law regulates the price of tobacco products, not the dissemination of price information to consumers. Thus, it is a regulation of economic activity, not commercial speech (or even of “expressive conduct,” a category under which, plaintiffs argued, such promotions could alternatively be considered) protected by the First Amendment.

The ordinances are not preempted by federal law.

Plaintiffs also argued that the ordinances are preempted (or barred) by federal law, specifically, the Labeling Act and the FSPTCA. The Labeling Act was enacted in 1965 to establish uniform labeling and warning requirements for all cigarettes, and until recently prohibited states and local governments from establishing their own requirements and possibly setting up a confusing system for tobacco companies to follow. In 2009, Congress amended the Labeling Act through the FSPTCA and explicitly authorized states and local governments to enact laws to regulate the time, place, and manner, but not the content, of cigarette advertising or promotion.

In this case, Plaintiffs argued that the price ordinance is preempted by the Labeling Act as it is a regulation of the “content” of cigarette promotion. The court disagreed. While the court accepted the idea that discounting and distribution of coupons are promotional activities, it found that the price ordinance is a proper regulation of the “manner” of cigarette promotion in the City of Providence. In other words, the ordinance regulates the manner in which these products are sold; specifically, without the application of discounts through coupons or multi-pack offers.

Plaintiffs also argued that the flavor ordinance is preempted by the FSPTCA—that it seeks to regulate beyond the FSPTCA and is a de facto regulation of tobacco product standards, which is a power reserved to the Food and Drug Administration (FDA). The FSTPCA prohibits flavors other than tobacco and menthol in cigarettes, but permits the manufacture of other tobacco products with flavors. The federal law also preempts state and local action on tobacco product manufacturing standards. However, the law specifically authorizes states and localities to regulate the sale and distribution of tobacco products. As a result, the court found that the restriction of the sale of flavored tobacco products was proper under the FSPTCA.

The appellate court affirmed the district court’s dismissal of plaintiffs’ claims (including the state claims brought by the plaintiffs).  While this case is not binding on courts in New York or Vermont (which are covered by the Second Circuit), it does provide support for these types of tobacco regulations. Together with the Second Circuit decision upholding the restriction on the sale of flavored tobacco products in New York City, this decision bolsters efforts to reduce the appeal of tobacco products to youth, and to reduce youth exposure to point-of-sale marketing (e.g., price promotions).

Read the entire opinion here.