Dossier D.C.: All Fired Up


Stepping back and looking at the big picture, it seems that all the current regulation surrounding cigarette advertising on the state and federal levels could be for naught. Tobacco companies, including R.J. Reynolds, have made it clear in their close-door negotiations with the 29 state attorneys general that they are more than ready to part with close to $400 million in advertising in order to save their $10 billion a year business.

Of course, we don’t know where these clandestine talks will lead, and some misgivings about a settlement have been leaked to the daily press. But it is important to note that the tobacco industry considers advertising its bargaining chip in the battle to secure protection from liability.

At the same time, the Federal Trade Commission, formerly denigrated by some lobbyists as the ‘toothless tiger,’ is revealing itself as a tough regulator ready to take on one of the industry’s most notorious and controversial cigarette campaigns–Joe Camel.

The FTC charged R.J. Reynolds with unfair advertising a week and a half ago, stating that the Joe Camel campaign violates federal law because it appeals to children. The agency is seeking an order that would bar RJR from using ‘Old Joe’ to advertise to children and would require the company to conduct a public-education campaign discouraging young people from smoking. ‘R.J. Reynolds has conducted one of the most effective advertising campaigns in decades,’ says Jodie Bernstein, director of the FTC’s bureau of consumer protection. ‘Joe Camel has become as recognizable to kids as Mickey Mouse. Yet the campaign promotes a product that causes serious injury, addiction and death.’ Ever the consumer advocate, Bernstein adds that Joe Camel ‘appeals to our young people. It is illegal and should be stopped.’

RJR immediately contested the FTC’s action. The company said in a statement the complaint is ‘based on a theory that advertising for any age-sensitive product is illegal if it succeeds in boosting sales to adults, whose behavior may be imitated by younger consumers.’

According to Charles Blixt, senior vice president and general counsel for RJR, ‘The real loser today is the American public.’ ‘When the theory on which the commission has proceeded is examined, I expect that those in the motion picture, music, cosmetic, lottery, beer, wine and spirits businesses, to name a few, will feel the cold chill of potential regulation on their backs,’ he adds.

Despite the tobacco company’s outrage, the ad industry has responded calmly to the FTC charges. Some lobbyists would not talk on the record since their organizations’ members are divided on the subject of Joe Camel specifically and cigarette advertising generally. They do admit, however, that Joe Camel has been an albatross for them as defenders of both the ad industry and commercial speech. One lobbyist put it bluntly: ‘Defending Old Joe is a big loser for us.’

Indeed, some lobbyists were even a bit gleeful at the FTC flexing its muscle. Why? They believe the move drives another nail in the coffin of the Food and Drug Administration. ‘If the FTC handles this well,’ says one trade association lobbyist, ‘it may hasten the end of the era when the FDA thought it could ban all cigarette advertising.’

‘The FTC is back in the business of regulating tobacco with both feet in,’ another lobbyist agrees, ‘but while the FTC is back at work, the whole tobacco industry is trying to give up any and all advertising to protect themselves from liability.’

‘I’ve always said the FTC is clearly a tough regulator; if they have the evidence they will act,’ says Dan Jaffe, executive vice president, government relations for the Association of National Advertisers in Washington, D.C.

‘However, to restrict commercial speech is a very heavy burden.’ In fact, the FTC voted 3-2 to bring the charges; two commissioners thought there was not enough evidence to demonstrate ‘unfair practice’ in the advertising campaign.

‘We certainly prefer that the FTC look at tobacco advertising, rather than the FDA,’ explains Wally Snyder, president of the American Advertising Federation, which is also in Washington.

Moreover, sources within the FDA say they are watching this case very closely. Until Commissioner David Kessler is replaced, it remains a mystery whether the FDA will continue to try and regulate (read ban) most tobacco advertising. Take note: A U.S. District Court recently decided that the FDA could regulate tobacco but not its advertising.

Yet some industry analysts worry that the FTC may be drafting policy by sending political messages on a case-by-case basis. ‘Who will be next,’ asks one lobbyist, ‘the colorful Kool ads or the Marlboro man?’

Amid all the intrigue, the question remains whether the FTC, which cannot talk about this ongoing case, has new internal documents to reveal. Sources at Reynolds insist that the FTC does not have any documents not already seen by the FDA or the FTC when it tried to bring a case a few years ago. Other insiders say there are new internal documents that will help the FTC win its case.

What does the FTC have to prove? Under the rarely used unfairness doctrine, the FTC must show that Joe Camel advertising causes injury; that the consumer can’t reasonably avoid the injury; and that there are no offsetting benefits. The toughest element to prove in this three-pronged enforcement test is injury. There are varying judicial views on how one proves injury, according to former FTC attorney Barry Cutler.

‘One extreme is that you merely have to show that market share among teenagers went up once the company advertised,’ says Cutler. ‘On the other end of the spectrum, the FTC will have to prove that teenagers would not have smoked, or smoked Camel, but for the advertising.’

Bernstein claims that the FTC does not have to prove that individual kids smoke Camel cigarettes in order to prove injury. ‘Our judgment is that we have to prove that the advertising contributes to children’s continuing to smoke or starting to smoke (any brand),’ she says. Administrative law judge James Timony, who will hear the case later this month, will decide the exact nature of the FTC’s burden of proof. In the meantime, tobacco companies will continue to hash out their future around a conference table in a no-smoking room.

Whichever party loses the case has the option of appeal. Oddly enough, the appeal will first be heard by the FTC, which acts as its own judge. Then, if the FTC decides to pursue the case further, it will be heard by a U.S. Court of Appeals. ‘This is going to take more than a few years,’ said one attorney close to the process. ‘The FTC is making a tough statement. But because of the ongoing talks, I wonder if they really expect they’ll ever have to see the end of this case.’

Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED