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FTC Documents Regarding R.J. Reynolds Additive Settlement

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



AGREEMENT AND CONSENT ORDER:
 

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.



Concurring Statement of Commissioner Orson Swindle

                           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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