In commercial speech cases, a four-part analysis has developed. At the outset, a court must determine whether the expression is protected by U.S. Const. amend. I. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, a court asks whether the asserted governmental interest is substantial. Finally, a court must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.
During the winter, in the time of a fuel shortage, the Public Service Commission of the State of New York ordered electric utilities in the state to cease all advertising promoting the use of electricity because the state's interconnected utility system did not have sufficient fuel stocks or sources of supply to meet all customer demands for the winter. Three years later, once the fuel shortage had eased, the Commission proposed to continue the ban on advertising and sought comments from the public. Notwithstanding opposition to continuation of the ban by an electric utility in the state which argued that the advertising prohibition violated the First Amendment, the Commission extended the prohibition against "promotional" advertising (advertising intended to stimulate the purchase of utility services) on the basis of the state's interests in conserving energy and ensuring fair and effective rates for electricity. The utility thereafter challenged the ban on advertising in the New York state courts, claiming that the Commission had restrained commercial speech in violation of the First and Fourteenth Amendments. Ultimately, the Court of Appeals of New York upheld the prohibition on advertising, concluding that the governmental interests in the prohibition outweighed the limited constitutional value of the commercial speech at issue.
Did the ban on promotional advertising, imposed by the Public Service Commission, violate the First and Fourteenth Amendments to the U.S. Constitution?
The Court held that the ban on promotional advertising by electric utilities imposed by the Public Service Commission violated the First Amendment, as applied to the states through the Fourteenth Amendment. According to the Court, despite the substantial nature of the state's asserted interests in prohibiting such advertising - which advertising was concededly neither inaccurate nor related to unlawful activity, and which was a species of commercial speech protected by the First Amendment, notwithstanding the monopoly power of electric utilities in the state over the sale of electricity - the link between the advertising prohibition and the state's interest in ensuring fair and efficient rates was too tenuous and speculative to justify the ban, and the prohibition, even though it directly related to the substantial state interest in conserving energy, was more extensive that necessary to further such state interest.