Posted: September 12th, 2022

Central Hudson Gas & Elec. Corp. v. Public Service Comm’n
447 U.S. 557
POWELL, J., Opinion of the Court
This case presents the question whether a regulation of the Public Service Commission of the
State of New York violates the First and Fourteenth Amendments because it completely bans
promotional advertising by an electrical utility.
[Procedural posture: Central Hudson challenged a judgment from the Court of Appeals of New
York that upheld as constitution-al a regulation promulgated by appellee that completely
banned promotional advertising by an electrical utility such as appellant. Appellant contended
that the regulation impermissibly restrained commercial speech in violation of the First
Amendment.]
I
In December, 1973, the Commission, appellee here, ordered electric utilities in New York State
to cease all advertising that “promot[es] the use of electricity.” . . .
II
The Commission’s order restricts only commercial speech, that is, expression related solely to
the economic interests of the speaker and its audience. Virginia Pharmacy Board v. Virginia
Citizens Consumer Council, 425 U.S. 748, 762 (1976); Bates v. State Bar of Arizona, 433 U.S.
350, 363-364 (1977); Friedman v. Rogers, 440 U.S. 1, 11 (1979). The First Amendment, as
applied to the States through the Fourteenth Amendment, protects commercial speech from
unwarranted governmental regulation. Virginia Pharmacy Board v. Virginia Citizens Consumer
Council. Commercial expression not only serves the economic interest of the speaker, but also
Helps consumers and furthers the societal interest in the fullest
possible dissemination of information. In applying the First Amendment to this area, we have
rejected the “highly paternalistic” view that government has complete power to suppress or
regulate commercial speech. [P]eople will perceive their own best interests if only they are well
enough informed, and . . . the best means to that end is to open the channels of
communication, rather than to close them. . . . Even when advertising communicates only an
incomplete version of the relevant facts, the First Amendment presumes that some accurate
information is better than no information at all. Bates v. State Bar of Arizona.
Nevertheless, our decisions have recognized the “common sense” distinction between speech
proposing a commercial transaction, which occurs in an area traditionally subject to
government regulation, and other varieties of speech. Ohralik v. Ohio State Bar Assn. The
Constitution therefore accords a lesser protection to commercial speech than to other
constitutionally guaranteed expression. The protection available for particular commercial
expression turns on the nature both of the expression and of the governmental interests served
by its regulation.
The First Amendment’s concern for commercial speech is based on the informational function
of advertising. See First National Bank of Boston v. Bellotti. Consequently, there can be no
constitutional objection to the suppression of commercial messages that do not accurately
inform the public about lawful activity. The government may ban forms of communication more
likely to deceive the public than to inform it, or commercial speech related to illegal activity.
If the communication is neither misleading nor related to unlawful activity, the government’s
power is more circumscribed. The State must assert a substantial interest to be achieved by
restrictions on commercial speech. Moreover, the regulatory technique must be in proportion to
that interest. The limitation on expression must be designed carefully to achieve the State’s
goal. Compliance with this requirement may be measured by two criteria. First, the restriction
must directly advance the state interest involved; the regulation may not be sustained if it
provides only ineffective or remote support for the government’s purpose. Second, if the
governmental interest could be served as well by a more limited restriction on commercial
speech, the excessive restrictions cannot survive.
Under the first criterion, the Court has declined to uphold regulations that only indirectly
advance the state interest involved. In both Bates and Virginia Pharmacy Board, the Court
concluded that an advertising ban could not be imposed to protect the ethical or performance
standards of a profession. The Court noted in Virginia Pharmacy Board that “[t]he advertising
ban does not directly affect professional standards one way or the other.” In Bates, the Court
overturned an advertising prohibition that was designed to protect the “quality” of a lawyer’s
work. “Restraints on advertising . . . are an ineffective way of deterring shoddy work.”
The second criterion recognizes that the First Amendment mandates that speech restrictions
be “narrowly drawn.” The regulatory technique may extend only as far as the interest it serves.
The State cannot regulate speech that poses no danger to the asserted state interest, nor can
it completely suppress information when narrower restrictions on expression would serve its
interest as well. For example, in Bates, the Court explicitly did not “foreclose the possibility that
some limited supplementation, by way of warning or disclaimer or the like, might be required”
in promotional materials. [We have] held that the State’s “arguments . . . do not justify the total
suppression of advertising concerning contraceptives.” This holding left open the possibility
that the State could implement more carefully drawn restrictions.
In commercial speech cases, then, a four-part analysis has developed. [Outline this test.] At the
outset, we must determine whether the expression is protected by the First Amendment. For
commercial speech to come within that provision, it at least must concern lawful activity and
not be misleading. Next, we ask whether the asserted governmental interest is substantial. If
both inquiries yield positive answers, we 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.
III
We now apply this four-step analysis for commercial speech to the Commission’s arguments in
support of its ban on promotional advertising.
A
The Commission does not claim that the expression at issue either is inaccurate or relates to
unlawful activity. Yet the New York Court of Appeals questioned whether Central Hudson’s
advertising is protected commercial speech. Because appellant holds a monopoly over the
sale of electricity in its service area, the state court suggested that the Commission’s order
restricts no commercial speech of any worth. The court stated that advertising in a
“noncompetitive market” could not improve the decisionmaking of consumers. The court saw
no constitutional problem with barring commercial speech that it viewed as conveying little
useful information.
This reasoning falls short of establishing that appellant’s advertising is not commercial speech
protected by the First Amendment. Monopoly over the supply of a product provides no
protection from competition with substitutes for that product. Electric utilities compete with
suppliers of fuel oil and natural gas in several markets, such as those for home heating and
industrial power. . . . Each energy source continues to offer peculiar advantages and
disadvantages that may influence consumer choice. For consumers in those competitive
markets, advertising by utilities is just as valuable as advertising by unregulated firms.
Even in monopoly markets, the suppression of advertising reduces the information available for
consumer decisions, and thereby defeats the purpose of the First Amendment. . . . A consumer
may need information to aid his decision whether or not to use the monopoly service at all, or
how much of the service he should purchase. [A]ppellant’s monopoly position does not alter
the First Amendment’s protection for its commercial speech.
B
The Commission offers two state interests as justifications for the ban on promotional
advertising. The first concerns energy conservation. Any increase in demand for electricity —
during peak or off-peak periods — means greater consumption of energy. The Commission
argues, and the New York court agreed, that the State’s interest in conserving energy is
sufficient to support suppression of advertising designed to increase consumption of
electricity. In view of our country’s dependence on energy resources beyond our control, no
one can doubt the importance of energy conservation. Plainly, therefore, the state interest
asserted is substantial.
The Commission also argues that promotional advertising will aggravate inequities caused by
the failure to base the utilities’ rates on marginal cost. The utilities argued to the Commission
that, if they could promote the use of electricity in periods of low demand, they would improve
their utilization of generating capacity. The Commission responded that promotion of off-peak
consumption also would increase consumption during peak periods. If peak demand were to
rise, the absence of marginal cost rates would mean that the rates charged for the additional
power would not reflect the true costs of expanding production. Instead, the extra costs
would be borne by all consumers through higher overall rates. Without promotional advertising,
the Commission stated, this inequitable turn of events would be less likely to occur. The choice
among rate structures involves difficult and important questions of economic supply and
distributional fairness. The State’s concern that rates be fair and efficient represents a clear
and substantial governmental interest.
C
Next, we focus on the relationship between the State’s interests and the advertising ban.
Under
this criterion, the Commission’s laudable concern over the equity and efficiency of appellant’s
rates does not provide a constitutionally adequate reason for restricting protected speech. The
link between the advertising prohibition and appellant’s rate structure is, at most, tenuous. The
impact of promotional advertising on the equity of appellant’s rates is highly speculative.
Advertising to increase off-peak usage would have to increase peak usage, while other factors
that directly affect the fairness and efficiency of appellant’s rates remained constant. Such
conditional and remote eventualities simply cannot justify silencing appellant’s promotional
advertising.
In contrast, the State’s interest in energy conservation is directly advanced by the Commission
order at issue here. There is an immediate connection between advertising and demand for
electricity. Central Hudson would not contest the advertising ban unless it believed that
promotion would increase its sales. Thus, we find a direct link between the state interest in
conservation and the Commission’s order.
D
We come finally to the critical inquiry in this case: whether the Commission’s complete
suppression of speech ordinarily protected by the First Amendment is no more extensive
than necessary to further the State’s interest in energy conservation. The Commission’s order
reaches all promotional advertising, regardless of the impact of the touted service on overall
energy use. But the energy conservation rationale, as important as it is, cannot justify
suppressing information about electric devices or services that would cause no net increase in
total energy use. In addition, no showing has been made that a more limited restriction on the
content of promotional advertising would not serve adequately the State’s interests.
Appellant insists that, but for the ban, it would advertise products and services that use energy
efficiently. These include the “heat pump,” which both parties acknowledge to be a major
improvement in electric heating, and the use of electric heat as a “backup” to solar and other
heat sources. Although the Commission has questioned the efficiency of electric heating before
this Court, neither the Commission’s Policy Statement nor its order denying rehearing made
findings on this issue. In the absence of authoritative findings to the contrary, we must credit as
within the realm of possibility the claim that electric heat can be an efficient alternative in some
circumstances.
The Commission’s order prevents appellant from promoting electric services that would reduce
energy use by diverting demand from less efficient sources, or that would consume roughly the
same amount of energy as do alternative sources. In neither situation would the utility’s
advertising endanger conservation or mislead the public. To the extent that the Commission’s
order suppresses speech that in no way impairs the State’s interest in energy conservation, the
Commission’s order violates the First and Fourteenth Amendments, and must be
invalidated. See First National Bank of Boston v. Bellotti.
The Commission also has not demonstrated that its interest in conservation cannot be
protected adequately by more limited regulation of appellant’s commercial expression. To
further its policy of conservation, the Commission could attempt to restrict the format and
content of Central Hudson’s advertising. It might, for example, require that the advertisements
include information about the relative efficiency and expense of the offered service, both under
current conditions and for the foreseeable future. In the absence of a showing that more limited
speech regulation would be ineffective, we cannot approve the complete suppression of
Central Hudson’s advertising.
IV
Our decision today in no way disparages the national interest in energy conservation. We
accept without reservation the argument that conservation, as well as the development of
alternative energy sources, is an imperative national goal. Administrative bodies empowered to
regulate electric utilities have the authority — and indeed the duty — to take appropriate action
to further this goal. When, however, such action involves the suppression of speech, the First
and Fourteenth Amendments require that the restriction be no more extensive than is
necessary to serve the state interest. In this case, the record before us fails to show that the
total ban on promotional advertising meets this requirement.
Accordingly, the judgment of the New York Court of Appeals is Reversed.

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