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Set forth below are the key documents in the FTC's proposed settlement with R.J. Reynolds over its claims about being additive free.
The agreement includes provisions for so-called "corrective advertising," a new legal remedy made possible by law professor John Banzhaf, ASH's Executive Director, who many years ago brought legal actions to persuade the Federal Trade Commission to adopt the new remedy of "corrective advertising," under which a manufacturer found guilty of deceptive advertising may be required to confess his deception to the public in future ads, and to persuade the agency to provide funding for public interest participation. See Campbell Soup Co., 77 F.T.C. 664 (1970); Firestone Tire & Rubber Co., 81 F.T.C. 398 (1971).
The documents on this page include:
1. Agreement and Consent Order
2. Complaint
3. Analysis
4. Concurring Statement
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
In the Matter of
R.J. REYNOLDS TOBACCO COMPANY, a corporation.
FILE NO. 992-3025
AGREEMENT CONTAINING CONSENT ORDER
The
Federal Trade Commission has conducted an investigation of certain acts
and practices of
R.J. Reynolds Tobacco Company, a corporation ("proposed respondent"). Proposed
respondent, having been represented by counsel, is willing to enter into
an agreement containing
a consent order resolving the allegations contained in the attached draft
complaint. Therefore,
IT
IS HEREBY AGREED by and between R.J. Reynolds Tobacco Company, by its duly
authorized officer, and counsel for the Federal Trade Commission that:
1.
Proposed respondent R.J. Reynolds Tobacco Company is a New Jersey corporation
with its
principal office or place of business at 401 North Main Street, P.O.B.
2959, Winston-Salem,
North Carolina 27102.
2.
Proposed respondent admits all the jurisdictional facts set forth in the
draft complaint. This
agreement is for settlement purposes only and does not constitute an admission
by proposed
respondent that the law has been violated as alleged in the draft complaint,
or that the facts as
alleged in the draft complaint, other than the jurisdictional facts, are
true.
3. Proposed respondent waives:
a. Any further procedural steps;
b. The requirement that the Commission's decision contain a statement of
findings
of fact and conclusions of law; and
c. All rights to seek judicial review or otherwise to challenge or contest
the validity
of the order entered pursuant to this agreement.
4.
This agreement shall not become part of the public record of the proceeding
unless and until it
is accepted by the Commission. If this agreement is accepted by the Commission,
it, together
with the draft complaint, will be placed on the public record for a period
of sixty (60) days and
information about it publicly released. The Commission thereafter may either
withdraw its
acceptance of this agreement and so notify proposed respondent, in which
event it will take such
action as it may consider appropriate, or issue and serve its complaint
(in such form as the
circumstances may require) and decision in disposition of the proceeding.
5.
This agreement contemplates that, if it is accepted by the Commission,
and if such acceptance
is not subsequently withdrawn by the Commission pursuant to the provisions
of Section 2.34 of
the Commission's Rules, the Commission may, without further notice to proposed
respondent,
(1) issue its complaint corresponding in form and substance with the attached
draft complaint
and its decision containing the following order in disposition of the proceeding,
and (2) make
information about it public. When so entered, the order shall have the
same force and effect and
may be altered, modified, or set aside in the same manner and within the
same time provided by
statute for other orders. The order shall become final upon service. Delivery
of the complaint and
decision and order to proposed respondent's address as stated in the agreement
by any means
specified in Section 4.4 of the Commission's Rules shall constitute service.
Proposed respondent
waives any right it may have to any other manner of service. The complaint
may be used in
construing the terms of the order. No agreement, understanding, representation,
or interpretation
not contained in the order or in the agreement may be used to vary or contradict
the terms of the
order.
6.
Proposed respondent has read the draft complaint and consent order. It
understands that it
may be liable for civil penalties in the amount provided by law and other
appropriate relief for
each violation of the order after it becomes final.
ORDER
DEFINITIONS
For purposes of this order, the following definitions shall apply:
1. "Competent and reliable scientific evidence" shall mean tests, analyses,
research,
studies, or other evidence based on the expertise of professionals in the
relevant
area, that has been conducted and evaluated in an objective manner by persons
qualified to do so, using procedures generally accepted in the profession
to yield
accurate and reliable results.
2. Unless otherwise specified, "respondent" shall mean R.J. Reynolds Tobacco
Company, a corporation, its successors and assigns and its officers, agents,
representatives and employees.
3. "Commerce" shall mean as defined in Section 4 of the Federal Trade
Commission Act, 15 U.S.C. § 44.
4. "Advertisement" shall mean any written or verbal statement, illustration,
or
depiction that is designed to effect a sale or create interest in the purchasing
of any
tobacco product, including but not limited to a statement, illustration
or depiction in
or on a brochure, newspaper, magazine, free standing insert, pamphlet,
leaflet,
circular, mailer, book insert, letter, coupon, catalog, poster, chart,
billboard, transit
advertisement, point of purchase display, specialty or utilitarian item,
sponsorship
material, package insert, film, slide, or the Internet or other computer
network or
system.
5. "Tobacco product" shall mean cigarettes, cigars, cigarillos, little
cigars,
smokeless tobacco, cigarette tobacco, pipe tobacco, and any other product
made
or derived from tobacco that is intended for human consumption, including
any
component, part, or accessory of a tobacco product.
6. "Winston cigarettes" shall mean all varieties and styles of the Winston
brand of
cigarettes, including but not limited to all lengths, strengths, hard pack
or soft pack,
menthol or not.
I.
IT
IS ORDERED that respondent, directly or through any corporation, subsidiary,
division, or
other device, in connection with the advertising, promotion, offering for
sale, sale, or distribution
of Winston cigarettes or any other tobacco product in or affecting commerce,
shall display in
advertisements as specified below, clearly and prominently, the following
disclosures (including
the line breaks, punctuation and capitalization illustrated):
In cigarette advertisements:
No additives in our tobacco
does NOT mean a safer cigarette.
In advertisements for any other tobacco product:
No additives in our tobacco
does NOT mean safer.
These disclosures shall be displayed:
A. Beginning no later than July 15, 1999, and continuing for a period of
one year
thereafter, in all advertisements for Winston cigarettes that contain no
additives.
B. Except as provided for in Part II.A of this order, beginning no later
than thirty
(30) days after the date of issuance of this order, in any advertisement
that, through
the use of such phrases as "no additives," "100% tobacco," "additive-free,"
"pure
tobacco," "does not contain additives," or substantially similar terms,
represents that
a tobacco product has no additives.
Provided,
that the above disclosures shall not be required in any advertisement that
is not
required to bear a health warning pursuant to 15 U.S.C. § 1333.
Provided
further, that the above disclosures shall not be required in any advertisement
for a
bona fide event, entrant, team or series presented or sponsored by any
Winston tobacco
product where (i) the advertisement contains the word Winston only as part
of the name of the
event, entrant, team or series and/or as part of the phrase "brought to
you by Winston King,"
"presented by Winston King," "sponsored by Winston King," or the equivalent
("the Phrase"); (ii)
the Phrase is displayed in a type size, manner and color contrast no greater
than reasonably
necessary so that it may be read; (iii) the advertisement does not, through
the use of such
phrases as "no additives," "100% tobacco," "additive-free," "pure tobacco,"
"does not contain
additives," or substantially similar terms, represent that the tobacco
product has no additives; and
(iv) there is no other selling message describing a feature or attribute
of Winston tobacco
products.
Provided
further, that the above disclosures shall not be required if respondent
possesses and
relies upon competent and reliable scientific evidence demonstrating that
such cigarettes or other
tobacco product pose materially lower health risks than other cigarettes
or other products of the
same type.
For
purposes of this Part, "clearly and prominently" shall mean, as exemplified
by Exhibits 1 and
2, attached to this order:
1. In black type and black rule on a solid white background, or in white
type and
white rule on a solid red background, or in any other color combination
that would
provide an equivalent or greater degree of print contrast as objectively
determined
by densitometer or comparable measurements of the type and rule color and
the
background color; and
2. Centered, both horizontally and vertically, in a ruled rectangle. The
area
enclosed by the rectangle shall be no less than 40% of the size of the
area enclosed
by the ruled rectangle surrounding the health warnings mandated by 15 U.S.C.
§
1333. The width of the rule forming the rectangle shall be no less than
50% of the
width of the rule required for the health warnings mandated by 15 U.S.C.
§ 1333.
Provided
that, if, at any time after this order becomes final, 15 U.S.C. §
1333 is amended,
modified, or superseded by any other law, the area enclosed by the ruled
rectangle shall be no
less than 40% of the area required for health warnings by such amended,
modified, or
superseding law, and the width of the rule forming the rectangle shall
be no less than 50% of the
width of any surrounding rule required by such amended, modified, or superseding
law; and
3. In the same type style and type size as that required for health warnings
pursuant
to 15 U.S.C. § 1333. The word "NOT" shall be in bold typeface.
Provided
that, if, at any time after this order becomes final, 15 U.S.C. §
1333 is amended,
modified, or superseded by any other law, the type style and type size
of the disclosure shall be
the same as the type style and type size required for warnings by such
amended, modified, or
superseding law; and
4. In a clear and prominent location but not immediately next to other
written or
textual matter or any rectangular designs, elements, or similar geometric
forms,
including but not limited to any warning statement required under the Federal
Cigarette Labeling and Advertising Act, 15 U.S.C. § 1331 et seq.,
or the
Comprehensive Smokeless Tobacco Health Education Act, 15 U.S.C. §
4401 et
seq. In addition, the disclosure shall not be positioned in the margin
of a print
advertisement. A disclosure shall be deemed "not immediately next to" other
geometric or textual matter if the distance between the disclosure and
the other
matter is as great as the distance between the outside left edge of the
rule of the
rectangle enclosing the health warning required by 15 U. S. C. § 1333
and the top
left point of the letter "S" in the word "SURGEON" in that health warning;
and
5. For audiovisual or audio advertisements, including but not limited to
advertisements on videotapes, cassettes, discs, or the Internet; promotional
films or
filmstrips; and promotional audiotapes or other types of sound recordings,
the
disclosure shall appear on the screen at the end of the advertisement in
the format
described above for a length of time and in such a manner that it is easily
legible
and shall be announced simultaneously at the end of the advertisement in
a manner
that is clearly audible.
Provided,
however, that in any advertisement that does not contain a visual component,
the
disclosure need not appear in visual format, and in any advertisement that
does not contain an
audio component, the disclosure need not be announced in audial format.
Nothing
contrary to, inconsistent with, or in mitigation of any disclosure provided
for in this part
shall be used in any advertisement. Provided, however, that this provision
shall not prohibit
respondent from truthfully representing, through the use of such phrases
"no additives," "100%
tobacco," "additive-free," "pure tobacco," "does not contain additives,"
or substantially similar
terms, that a tobacco product has no additives, where such representation
is accompanied by
the disclosure mandated by this order.
II.
IT IS FURTHER ORDERED that respondent shall:
A. Instruct each R.J. Reynolds Tobacco Company sales representative to
remove
or sticker with the disclosure specified in Part I of this order any advertisement
for
Winston cigarettes displayed in a retail establishment where such advertisement,
through the use of such phrases as "no additives," "100% tobacco," "additive-free,"
"pure tobacco," "does not contain additives," or substantially similar
terms,
represents that Winston cigarettes have no additives and does not include
the
disclosure specified in Part I of this order. The sales representative
may remove or
sticker such advertisements in the ordinary course of performing his or
her duties,
but in any event, shall remove or sticker all such advertisements in each
of the retail
establishments for which the representative is responsible no later than
July 15,
1999.
B. For five (5) years after the date of issuance of this order, maintain
and upon
request make available to the Federal Trade Commission for inspection and
copying 1) a copy of each different version of the letter instructing R.J.
Reynolds
Tobacco Company sales representatives to remove or sticker advertising
pursuant
to subparagraph A of this Part; and 2) a list of the name and address of
each R.J.
Reynolds Tobacco Company sales representative to whom such a letter was
sent.
III.
IT
IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company, and its
successors and assigns, shall, for five (5) years after the last date of
dissemination of any
representation covered by this order, maintain and upon request make available
to the Federal
Trade Commission for inspection and copying:
A. All advertisements containing the representation;
B. For any representation covered by this order that is not accompanied
by a
disclosure set forth in Part I of this order:
1. All materials that were relied upon in disseminating the
representation; and
2. All tests, reports, studies, surveys, demonstrations, or other
evidence in their possession or control that contradict, qualify, or call
into question the representation, or the basis relied upon for the
representation, including complaints and other communications with
consumers or with governmental or consumer protection
organizations.
IV.
IT
IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company, and its
successors and assigns, shall deliver a copy of this order, in either paper
or electronic form, to all
current and future principals, officers, and directors, and to all current
and future managers,
employees, agents, and representatives having responsibilities with respect
to the subject matter
of this order. Respondent shall secure from each such person either 1)
a signed and dated
statement acknowledging receipt of the order; or 2) a dated, electronic
acknowledgment
indicating that the person has read, downloaded or printed the order. Respondent
shall deliver
this order to current personnel within thirty (30) days after the date
of service of this order, and
to future personnel within thirty (30) days after the person assumes such
position or
responsibilities. Respondent shall maintain and upon request make available
to the Federal Trade
Commission for inspection and copying a copy of each signed statement acknowledging
receipt
of the order or a record, in either electronic or paper form, of each electronic
acknowledgement
of receipt of the order.
V.
IT
IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company and its
successors and assigns shall notify the Commission at least thirty (30)
days prior to the sale of
any Winston cigarettes for which the composition or formula has been changed
in such a manner
as may affect compliance obligations arising under this order, including
but not limited to the
addition of any additives to any variety of Winston cigarettes. All notices
required by this Part
shall be sent by certified mail to the Associate Director, Division of
Enforcement, Bureau of
Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue,
N.W.,
Washington, D.C. 20580.
VI.
IT
IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company and its
successors and assigns shall notify the Commission at least thirty (30)
days prior to any change in
the corporation that may affect compliance obligations arising under this
order, including but not
limited to a dissolution of a subsidiary, parent or affiliate that engages
in any acts or practices
subject to this order; the proposed filing of a bankruptcy petition; or
a change in the corporate
name or address. Provided, however, that, with respect to any proposed
change in the
corporation about which respondent learns less than thirty (30) days prior
to the date such action
is to take place, respondent shall notify the Commission as soon as is
practicable after obtaining
such knowledge. All notices required by this Part shall be sent by certified
mail to the Associate
Director, Division of Enforcement, Bureau of Consumer Protection, Federal
Trade Commission,
600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
VII.
IT
IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company, and its
successors and assigns shall, within sixty (60) days after the date of
service of this order, and at
such other times as the Federal Trade Commission may require, file with
the Commission a
report, in writing, setting forth in detail the manner and form in which
they have complied with
this order.
VIII.
This
order will terminate twenty (20) years from the date of its issuance, or
twenty (20) years
from the most recent date that the United States or the Federal Trade Commission
files a
complaint (with or without an accompanying consent decree) in federal court
alleging any
violation of the order, whichever comes later; provided, however, that
the filing of such a
complaint will not effect the duration of:
A. Any Part in this order that terminates in less than twenty (20) years;
B. This order's application to any respondent that is not named as a defendant
in
such complaint; and
C. This order if such complaint is filed after the order has terminated
pursuant to
this Part.
Provided
further, that if such complaint is dismissed or a federal court rules that
the respondent
did not violate any provision of the order, and the dismissal or ruling
is either not appealed or
upheld on appeal, then the order will terminate according to this Part
as though the complaint
had never been filed, except that the order will not terminate between
the date such complaint is
filed and the later of the deadline for appealing such dismissal or ruling
and the date such
dismissal or ruling is upheld on appeal.
Signed this _________ day of ________________, 1999
R.J. REYNOLDS TOBACCO COMPANY
By:
_______________________
GUY M. BLYNN
Vice-President, Deputy General Counsel
and Secretary
________________________
JUDITH L. OLDHAM
Collier, Shannon, Rill & Scott, PLLC
Attorney for Respondent
_______________________
BETH GROSSMAN
Counsel for the
Federal Trade Commission
APPROVED:
____________________
C. LEE PEELER
Associate Director
Division of Advertising Practices
___________________
JOAN Z. BERNSTEIN
Director
Bureau of Consumer Protection
COMPLAINT:
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
In the Matter of
R. J. REYNOLDS TOBACCO COMPANY, a corporation.
DOCKET NO.
COMPLAINT
The Federal Trade Commission, having reason to believe that R.J. Reynolds
Tobacco
Company, a corporation ("respondent"), has violated the provisions of the
Federal Trade
Commission Act, and it appearing to the Commission that this proceeding
is in the public
interest, alleges:
1. Respondent R.J. Reynolds Tobacco Company is a New Jersey corporation
with its principal
office or place of business at 401 North Main Street, P.O.B. 2959 Winston-Salem,
North
Carolina 27102.
2. Respondent has advertised, promoted, offered for sale, sold and distributed
tobacco
products, including Winston cigarettes.
3. The acts and practices of respondent alleged in this complaint have
been in or affecting
commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission
Act.
4. Respondent has disseminated or has caused to be disseminated advertisements
for Winston
cigarettes, including but not necessarily limited to the attached Exhibits
A through F. These
advertisements contain the following statements:
(A) "Yours have additives. 94% tobacco 6% additives New Winstons don't.
100%
tobacco True taste."
Circular brand containing the words "No BULL"
(B) "Winston just got naked. No additives."
Circular brand containing the words "No BULL"
(C) "Thank you for not smoking additives."
Circular brand containing the words "No BULL"
"100% tobacco True taste"
(D) "I get enough bull at work.
I don't need to smoke it.
WINSTON NO ADDITIVES TRUE TASTE"
Circular brand containing the words "No BULL"
(E) "I'm not all sugar & spice.
And neither are my smokes.
WINSTON NO ADDITIVES TRUE TASTE"
Circular brand containing the words "No BULL"
(F) "Still smoking additives?"
Circular logo containing the words:
Winston straight up
NO ADDITIVES • TRUE TASTE
5. Through the means described in Paragraph 4, respondent has represented,
expressly or by
implication, that smoking Winston cigarettes, because they contain no additives,
is less hazardous
to a smoker's health than smoking otherwise comparable cigarettes that
contain additives.
6. Through the means described in Paragraph 4, respondent has represented,
expressly or by
implication, that it possessed and relied upon a reasonable basis that
substantiated the
representation set forth in Paragraph 5, at the time the representation
was made.
7. In truth and in fact, respondent did not possess and rely upon a reasonable
basis that
substantiated the representation set forth in Paragraph 5, at the time
the representation was
made. Among other reasons, the smoke from Winston cigarettes, like the
smoke from all
cigarettes, contains numerous carcinogens and toxins. Therefore, the representation
set forth in
Paragraph 6 was, and is, false or misleading.
8. The acts and practices of respondent as alleged in this complaint constitute
unfair or deceptive
acts or practices, in or affecting commerce in violation of Section 5(a)
of the Federal Trade
Commission Act.
THEREFORE, the Federal Trade Commission this day of , 1999 , has issued
this complaint
against respondent.
By the Commission.
Donald S. Clark
Secretary
ANALYSIS OF PROPOSED CONSENT ORDER TO AID PUBLIC COMMENT
The
Federal Trade Commission has accepted an agreement to a proposed consent
order from
R.J. Reynolds Tobacco Company ("Reynolds").
The
proposed consent order has been placed on the public record for sixty (60)
days for receipt
of comments by interested persons. Comments received during this period
will become part of
the public record. After sixty (60) days, the Commission will again review
the agreement and the
comments received, and will decide whether it should withdraw from the
agreement or make
final the agreement's proposed order.
This
matter involves an alleged deceptive representation for Winston cigarettes,
that Reynolds
has advertised do not contain additives. According to the FTC complaint,
through these
advertisements, Reynolds represented that smoking Winston cigarettes, because
they contain no
additives, is less hazardous to a smoker's health than smoking otherwise
comparable cigarettes
that contain additives. The complaint alleges that Reynolds did not have
a reasonable basis for
the representation at the time it was made. Among other reasons, according
to the complaint, the
smoke from Winston cigarettes, like the smoke from all cigarettes, contains
numerous
carcinogens and toxins.
The
proposed consent order contains provisions designed to prevent Reynolds
from engaging in
similar acts and practices in the future.
Part
I of the order requires Reynolds to include the following clear and prominent
disclosure in
certain advertising for its Winston cigarettes: No additives in our tobacco
does NOT mean a
safer cigarette. (The order requires a similar disclosure in advertising
for other tobacco
products Reynolds advertises as having no additives.) The disclosure must
be included in all
advertising for Winston no-additive cigarettes, regardless of whether that
advertising contains a
"no additives" claim, for a period of one year beginning no later than
July 15, 1999. The
disclosure must be included in all Winston advertising that represents
(through such phrases as
"no additives" or "100% tobacco") that the product has no additives, for
the duration of the
order. This Part also contains certain exemptions from the disclosure requirement:
advertisements not required to bear the Surgeon General's health warning;
certain ads for bona fide events or teams sponsored by Winston which contain
neither a
"no additives" claim nor any other selling message or product description;
and
if Reynolds possesses scientific evidence demonstrating that its "no additives"
cigarette
poses materially lower health risks than other cigarettes of the same type.
Part
I also specifies the manner in which the disclosure must be made, which
is exemplified by
two model advertisements attached to the order. In general, the disclosure
must be within a
rectangular box that is no less than 40% of the size of the box containing
the Surgeon General's
warning.
Part
II of the order requires Reynolds to instruct each of its sales representatives
to remove or
sticker, with the applicable disclosure, any advertisement displayed in
a retail establishment
representing that Winston cigarettes have no additives. All such actions
must be completed by
July 15, 1999.
Part
III-VII of the order require Reynolds to keep copies of relevant advertisements
and
materials substantiating claims made in the advertisements; to provide
copies of the order to
certain of its personnel; to notify the Commission of changes in the composition
or formula of
Winston cigarettes that may affect the order; to notify the Commission
of changes in corporate
structure; and to file compliance reports with the Commission. Part VIII
provides that the order
will terminate after twenty (20) years under certain circumstances.
The
purpose of this analysis is to facilitate public comment on the proposed
order, and it is not
intended to constitute an official interpretation of the agreement and
proposed order or to modify
in any way their terms.
R.J. Reynolds Tobacco Co., File No. 992-3025
I
have voted to accept this consent agreement for public comment because
the remedies,
including a corrective statement in Winston advertisements for one year,
are warranted by the
facts of this case. The nationwide advertising campaign for "no additives"
Winston cigarettes,
launched in August 1997, is unusually extensive. Based on my reading of
the record, I am
convinced that many consumers interpret ads containing express "no additives"
claims to mean
that Winstons are not as harmful as other cigarettes, and such a health
claim is presumably
important to consumers in their purchasing decisions. Based on the extent
and magnitude of the
ongoing ad campaign and the demonstrated strength of the implied health
claim, I am willing to
infer that the claim will linger in the minds of consumers for one year
absent a corrective
statement. I am particularly concerned about a lingering effect of the
ads because of the
well-recognized health risks of smoking. Under these circumstances, I support
the corrective
advertising remedy contained in the proposed consent order.
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