Title of Regulation: 3VAC5-20. Advertising (amending 3VAC5-20-40).

Statutory Authority: §§ 4.1-103 and 4.1-111 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: June 29, 2016.

Effective Date: July 15, 2016.

Agency Contact: Shawn Walker, Director of Law Enforcement, Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4569, FAX (804) 213-4411, or email shawn.walker@abc.virginia.gov.

Basis: Section 4.1-103 of the Code of Virginia authorizes the Alcoholic Beverage Control Board to promulgate regulations in accordance with the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia) and § 4.1-111 of the Code of Virginia. Section 4.1-111 also provides the board with broad authority to promulgate reasonable regulations necessary to carry out the provisions of Title 4.1 of the Code of Virginia.

Purpose: The prohibition against advertising alcoholic beverages in college publications as currently found in 3VAC5-20-40 A 2 was held to be in violation of the First Amendment to the United States Constitution by the U.S. Court of Appeals for the Fourth Circuit in the case of Educational Media Co. v. Insley, 731 F.3d 291. The amendment will remove the language from the existing regulation found to be in violation of the First Amendment. The amendment to 3VAC5-20-40 A 3 removes language referring back to the deleted subdivision A 2, which is no longer necessary. 3VAC5-20-40 A 4 does not violate the First Amendment under the reasoning of Educational Media Co. v. Insley. However, with the deletion of subdivision A 2, it is no longer necessary to authorize the forum of advertising in college student publications described in subdivision A 4.

Rationale for Using Fast-Track Rulemaking Process: This action is expected to be noncontroversial because the agency is only proposing to amend the regulation to comply with the ruling of the U.S. Court of Appeals for the Fourth Circuit in the case of Educational Media Co. v Insley and modify the rest of the regulation for consistency.

Substance: The removal of the prohibition of advertising alcoholic beverages in college student publications will bring the regulation into compliance with the decision of the U.S. Court of Appeals for the Fourth Circuit.

Issues: The primary advantage for the agency is the removal of the language in 3VAC5-20-40 that the U.S. Court of Appeals for the Fourth Circuit found to be in violation of the First Amendment and making the rest of the regulation consistent with the court's ruling. There are no disadvantages.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. As the result of a court ruling,¹ the Alcoholic Beverage Control Board (Board) proposes to remove language from this regulation that prohibits the advertising of alcoholic beverages in college newspapers.

Result of Analysis. Benefits likely outweigh costs for this proposed regulatory change.

Estimated Economic Impact. Current regulatory language prohibits advertising of alcoholic beverages in college student publications except in reference to a dining establishment. Presumably, the Board promulgated this rule because they felt that allowing alcoholic beverage advertisements in publications meant to be read by a population that is largely under the age of 21 might encourage underage drinking. Because this was ruled a violation of the free speech rights of college newspapers, the Board now proposes to eliminate the prohibition from this regulation.

This change will benefit alcohol manufacturers and distributers as they will have more choices as to where they can legally advertise their products, so as to maximize both current and future profits, and will benefit college publications as they will be able to widen the array of companies they can sell ads to. The state will also benefit from this change as it will bring regulation into compliance with the U.S. Constitution and thus avoid future lawsuits that might be costly to defend. No individuals will likely be harmed by this change because individuals under the age of 21 likely already see alcoholic beverage ads on billboards and in magazines and newspapers of general circulation. The state also has other means of preventing underage drinking as businesses that sell alcoholic beverages are required by law to check the identification of individuals purchasing those beverages to make sure they are not underage.

Businesses and Entities Affected. This proposed regulatory change will affect all manufacturers, wholesalers and retailers as well as any college newspapers who would like to accept ads from those entities. Board staff reports that there are more than 10,000 entities that will be affected and that the majority of those entities are small businesses.

Localities Particularly Affected. No locality will be particularly affected by this proposed regulatory change.

Projected Impact on Employment. This proposed regulatory change is unlikely to have any effect on employment in the Commonwealth.

Effects on the Use and Value of Private Property. This proposed regulatory change may increase the value of the non-profit corporations that own college newspapers if ad revenues increase on account of alcoholic beverage ads being allowed in their publications. The present and/or future value of alcoholic beverage manufacturers, wholesalers and retailers businesses may increase also if ads in college publications increase present sales or increase brand loyalty so that future sales increase.

Real Estate Development Costs. This proposed regulatory change is unlikely to affect real estate development costs in the Commonwealth.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. Small businesses are unlikely to incur any costs on account of this proposed regulatory change.

Alternative Method that Minimizes Adverse Impact. Small businesses are unlikely to incur any costs on account of this proposed regulatory change.

Adverse Impacts:

Businesses. Businesses are unlikely to incur any costs on account of this proposed regulatory change.

Localities. Localities in the Commonwealth are unlikely to see any adverse impacts on account of this proposed regulatory change.

Other Entities. No other entities are likely to be adversely affected by this proposed change.

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¹ Educational Media Co. v. Insley which can be found here: http://www.ca4.uscourts.gov/Opinions/Published/122183.P.pdf

Agency's Response to Economic Impact Analysis: The Department of Alcoholic Beverage Control concurs.

Summary:

The amendments remove the prohibition from advertising alcoholic beverages in college student publications to conform the regulation to the decision of the U.S. Court of Appeals for the Fourth Circuit in the case of Educational Media Co. v. Insley (731 F.3d 291).

3VAC5-20-40. Advertising; print and electronic media.

A. Alcoholic beverage advertising in the print or electronic media is permitted with the following requirements and conditions:

1. All alcoholic beverage advertising shall include the name and address (street address optional) of the responsible advertiser.

2. Advertisements of alcoholic beverages are not allowed in college student publications unless in reference to a dining establishment, except as provided below. A "college student publication" is defined as any college or university publication that is prepared, edited or published primarily by students at such institution, is sanctioned as a curricular or extra-curricular activity by such institution and which is distributed or intended to be distributed primarily to persons under 21 years of age.

3. 2. Advertisements of alcoholic beverages are prohibited in publications not of general circulation which that are distributed or intended to be distributed primarily to persons under 21 years of age, except in reference to a dining establishment as provided in subdivision 3; notwithstanding the above mentioned provisions, all All advertisements of alcoholic beverages are prohibited in publications distributed or intended to be distributed primarily to a high school or younger age level.

4. Notwithstanding the provisions of this or any other regulation of the board pertaining to advertising, a manufacturer, bottler or wholesaler of alcoholic beverages may place an advertisement in a college student publication which is distributed or intended to be distributed primarily to persons over 18 and under 21 years of age which has a message relating solely to and promoting public health, safety and welfare, including, but not limited to, moderation and responsible drinking messages, anti-drug use messages and driving under the influence warnings. Such advertisement may contain the name, logo and address of the sponsoring industry member, provided such recognition is at the bottom of and subordinate to the message and contains no pictures of the sponsor's product. Any public service advertisement involving alcoholic beverages shall contain a statement specifying the legal drinking age in the Commonwealth.

B. As used in the section, "electronic media" shall mean any system involving the transfer of signs, signals, writing, images, sounds, data, or intelligence of any nature transmitted in whole or in part by a wire, radio, television, electromagnetic, photo-electronic, or photo-optical system, including, but not limited to, radio, television, electronic mail, and the Internet.