Case Summary and Outcome

The U.S. Supreme Court found that a ban restricting content in advertising violated the right to free expression in the First Amendment. The Public Service Commission of New York (PSC) extended a policy banning advertisements that promoted electricity use to all promotional ads, which were distinguished from informational ads; Central Hudson Gas and Electric filed a lawsuit claiming that the ban violated the right to commercial speech. The Court accepted that while the policy would further the State’s legitimate interest in reducing energy consumption, it was “more extensive than is necessary to serve that interest” as it unconstitutionally restricted all promotional advertising.

Facts

The energy crisis of 1973 resulted in utility shortages, prompting the PSC to ban advertisements that promoted energy consumption. In 1976, after the crisis was over, PSC extended the policy by creating separate categories of advertisements: promotional and informational. Promotional ads were those “intended to stimulate the purchase of utility services” while informational ads were “not clearly intended to promote sales.” Informational ads were permitted under the policy but it banned all promotional advertising as it was “contrary to the national policy of conserving energy.”. 

Hudson challenged this ban, arguing that the ban violated its right to commercial speech guaranteed by the First and Fourteenth Amendments. The trial court upheld the ban, as did the New York Court of Appeals, which noted that “the governmental interest in the prohibition outweighed the limited constitutional value of the commercial speech at issue.”

Decision Overview

Powell, J., delivered the opinion of the Court. The U.S. Supreme Court reversed the lower court’s ruling. The Court recognized the importance of commercial speech — commercial speech serves not only the economic interest of the speaker, but it also assists consumers and aids in disseminating information to the public. The latter is imperative to ensure that the public is well informed.

The Court reiterated that the Constitution affords commercial speech less protection than non-commercial speech. In order for a regulation on commercial speech to be constitutional, a four-part test must be satisfied: 1. the speech must concern lawful activity and not be misleading; 2. the asserted governmental interest must be substantial. If the first two parts are established, then it must also be determined that: 3. the regulation directly advances the governmental interest asserted; and 4. the regulation is not more extensive than is necessary to serve that interest.

In applying this four-part test, the Court found that the advertising was commercial speech that is protected by the First Amendment. In reaching its conclusion, the Court found that the speech at issue concerned a lawful activity that was not misleading. The Court conceded that the State’s justifications — energy conservation, and that utility rates be fair and efficient — for the ban were substantial. The Court also determined that there was an immediate, yet tenuous, connection between the advertising and the demand for electricity. But most significantly, the Court found that the restriction was more extensive than necessary to serve the government’s purpose for the advertising ban.

Stevens, J., wrote an opinion concurring in the judgment.

Rehnquist, J., wrote a dissenting opinion.