U.S. to Seek Tough Restrictions On Cigarette Marketing, Sales
By JOHN R. WILKE
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The Justice Department will ask a federal judge to impose tough restrictions on the marketing, manufacture and sale of cigarettes, as government lawyers show their hand for the first time in their three-year legal assault on the tobacco industry.
The Justice Department disclosed the proposed remedies in a recent exchange of documents with tobacco-industry lawyers. The government's civil lawsuit alleges fraud, racketeering and conspiracy by the major tobacco companies to conceal health risks of an addictive and deadly product. Smoking-related diseases kill an estimated 400,000 people a year in the U.S., and cost $20 billion a year in federal health-care payments, the Justice Department suit says.
The government's new demands signal that it intends to pursue its legal battle with the industry despite doubts raised last year when Attorney General John Ashcroft called for settlement talks to end the case, which was filed in 1999. The demands appear to mark a striking departure for the Bush administration, which so far has been friendly to the industry and received millions of dollars in campaign donations from tobacco companies.
In the new pretrial documents, reviewed by The Wall Street Journal, the government says it will ask the court to restrict all cigarette advertising to black-and-white, print-only formats, with half the space in any ad reserved for "graphic health warnings." The restrictions would effectively bar the colorful "lifestyle" advertising now favored by the industry, sending the Marlboro Man into early retirement.
The government also will seek to end trade promotions and give-aways and ban all vending-machine sales. The suit says that in 1999 tobacco-product trade promotions rose to $3.54 billion -- 43% of the industry's promotional budget -- as the industry sought new ways to drive sales while complying with marketing restrictions imposed by a 1998 legal settlement with 46 states.
Under the proposed remedies, cigarette companies also would be forbidden from labeling cigarettes as "light," "low-tar" or "mild"; be required to list all ingredients, additives and toxic chemicals in cigarettes; and be forced to disclose their manufacturing methods and marketing research.
The government also will seek sweeping restrictions on retail cigarette sales, including elimination of lucrative "slotting fees" paid to most retailers for favorable placement of tobacco products in stores. These fees and promotions are an important revenue source for retailers -- as much $20,000 a year for a busy convenience store, federal investigators found.
Cigarette packaging also would change markedly, with 50% of the surface of a cigarette pack carrying "graphic health warnings," along with health-information messages "created and supervised by the U.S. Surgeon General" on leaflet inserts.
These demands go well beyond restrictions agreed to in the $200 billion-plus legal settlement with the states. They include some cigarette-marketing limits that had been sought earlier by the U.S. Food and Drug Administration, but the Supreme Court ended the FDA's aggressive campaign to regulate cigarettes two years ago.
In the document that outlines the government's new approach to remedy in the case, prosecutors signal they have obtained new evidence that could bolster their argument. Much of the focus of the suit and the restrictions it seeks revolve around curtailing youth smoking, and the document cites a secret tobacco-industry study conducted "as recently as May 1997 … on Brand Preferences Among Young Smokers" that surveyed smokers 12 to 20 years old.
The tobacco defendants have rejected the suit's allegations and are aggressively fighting the case in court. Peggy Roberts, a spokeswoman for lead defendant Philip Morris Cos., declined to comment on specific remedies and called the case "a politically motivated suit filed by the Clinton administration" that should be dismissed.
R.J. Reynolds Tobacco Co. says the state settlement "comprehensively addresses the issue of underage smoking" and says it will fight any further restrictions in court.
Tobacco-control advocates support the proposed remedies, but they also say Justice has sent mixed signals. "The Department of Justice attorneys are proceeding to meet the deadlines established by the court for the continuation of the lawsuit, but it is still unclear whether the attorney general and other senior officials fully support the suit and will assure it is fully funded," said William V. Corr, executive vice president of the Campaign for Tobacco-Free Kids, a Washington, D.C., nonprofit group.
Indeed, while Attorney General Ashcroft has expressed strong personal opposition to smoking -- he once called tobacco companies "merchants of death" -- he also has limited funding for the case and pressed for settlement talks last year. But the negotiations collapsed after a single one-hour meeting in July, and no new talks are scheduled, people close to the case said.
Now, with the disclosure of the agency's remedy proposals, some in the industry fear the suit may gain new momentum. While career Justice staff have pursued the case aggressively, its support by senior political appointees in the department is uncertain. Yet Mr. Ashcroft's latest budget includes a sharp increase to $25 million in direct funding; the legal team on the case will have access to $18 million more through other funding sources. And he has sent a letter asking that all federal agencies cooperate with subpoenas related to the suit, calling it an "important case."
A Justice spokeswoman said Friday that the agency "remains committed to this case." The suit was filed in November 1999, seeking recovery of the federal government's medical costs related to smoking. A federal judge narrowed the case in September 2000, dismissing the damage claims while letting the fraud and racketeering charges proceed. The trial is set to begin here in June 2003 before U.S. District Judge Gladys Kessler. |
