Tobacco Companies’ Defense In Federal Lawsuit Is Contradicted by Their Current Behavior, Judge’s Rulings

Statement of William V. Corr Executive Director, Campaign for Tobacco-Free Kids

Sep. 23 2004

Washington, DC — During opening arguments in the federal government’s lawsuit against the tobacco companies, attorneys for the tobacco companies today argued that the government cannot prove a reasonable likelihood of future violations of racketeering laws because of “profound and permanent” changes in their practices, including changes brought about by the 1998 legal settlement between the states and the tobacco companies (the Master Settlement Agreement, or MSA). The tobacco companies’ claims of change are contradicted by their own current behavior, which provides considerable evidence that they continue to market to children and deceive consumers about the harm their products cause. Their arguments are also contradicted by Judge Gladys Kessler’s rulings that past conduct may be sufficient to establish a reasonable likelihood of future violations and the MSA does not preclude such violations.

Claims that the companies do not market to children are undermined by the following evidence:

• Tobacco companies in recent months have introduced a slew of new candy and fruit-flavored products with little appeal to established smokers and obvious appeal to new smokers, 90 percent of whom are teenagers or younger. R.J. Reynolds (now Reynolds American) has introduced flavored versions of Camel cigarettes, including coconut and pineapple-flavored Kauai Kolada and citrus-flavored Twista Lime, while Brown & Williamson (now merged with RJR as part of Reynolds American) has introduced flavored versions of Kool with names like Caribbean Chill, Midnight Berry, Mocha Taboo and Mintrigue. It shows a clear, continuing pattern of marketing to children that many of these flavored cigarettes are being marketed by R.J. Reynolds, the same company that conducted the infamous “Joe Camel” campaign that was responsible for getting millions of kids to start smoking.
• Earlier this year, Brown & Williamson used hip-hop music themes and images, including free giveaways of music CD-ROMs and small radios, to market its Kool cigarettes. Several state attorneys general sued Brown & Williamson, charging that the campaign violated the state settlement’s prohibition on marketing to children, and a New York judge halted aspects of the campaign.
• In June 2001, a California judge fined R.J. Reynolds $20 million for violating the settlement’s prohibition on marketing to children by advertising cigarettes in publications with significant youth readership.
• In a May 2002 case not involving the settlement, another California judge ordered R.J. Reynolds to pay a $14.8 million penalty for handing out free cigarettes on public property in violation of state law.
• In the first three years after the 1998 tobacco settlement, overall tobacco industry marketing expenditures increased by 66 percent to a record $11.45 billion a year, or more than $31 million a day, according to the most recent Federal Trade Commission report on tobacco marketing. The government states in its Final Proposed Conclusions of Law in this case (pages 122-123) that the tobacco companies “continue to employ imagery and messages that they know appeal to teenagers” and “have structured their retail marketing to appeal to young people.” The government adds, “Defendants’ use of price promotions to reach price-sensitive young people and encourage trial and initiation has dramatically increased in recent years.”
• The continued, disproportionate impact of tobacco marketing on kids is demonstrated by the fact that, in 2003, 82 percent of youth smokers (12-17) chose the three most heavily advertised brands – Philip Morris’ Marlboro, R.J. Reynolds’ Camel and Lorillard’s Newport – compared to only half of smokers over age 25 who buy these three brands, according to the 2003 National Survey on Drug Abuse and Health released earlier this month. Philip Morris has been especially aggressive in seeking to create the appearance of change, but the reality is that more kids (49.2 percent of youth smokers) smoke Philip Morris’ Marlboros than nearly all other brands combined.
• The web site of the National Association of Attorneys General lists more than a dozen violations of the MSA, many involving youth-oriented marketing (see www.naag.org/issues/tobacco/index.php?sdpid=922).

The tobacco companies also continue to deceive consumers about the harm caused by their products. They continue to market light and low-tar cigarettes, which the National Cancer Institute and other authorities have concluded mislead consumers into believing these cigarettes are safer. They are repeating the light/low-tar consumer fraud by marketing a new generation of so-called “reduced risk” products that mislead consumers with unproven claims such as “all of the taste…less of the toxins” (Brown & Williamson’s Advance cigarettes); “reduced carcinogens, premium taste” (Vector’s Omni cigarettes); and “less risk of cancer” (R.J. Reynolds’ Eclipse). They continue efforts to sow doubts about the harm caused by secondhand smoke despite the overwhelming scientific consensus on that issue.

Even in statements in this case as late as 2002, the cigarettes companies continued to deny the overwhelming scientific consensus about the harms of tobacco products. As U.S. Representative Henry Waxman (D-CA) concluded in a September 17, 2002, report on statements submitted by the five largest cigarette manufacturers in this case, four of the five still questioned whether smoking causes disease; all five denied that secondhand smoke causes disease in non-smokers; four of five failed to admit that nicotine is addictive; and individual tobacco companies were unwilling to take responsibility for well-documented corporate behavior, such as manipulation of nicotine. (View the Waxman report)

The tobacco companies’ defense is also undermined by Judge Kessler’s previous rulings in the case. On May 6, 2004, Judge Kessler issued a ruling denying the defendants’ motion for summary judgment on the grounds that there is no reasonable likelihood of future RICO violations (the ruling is available at www.dcd.uscourts.gov/99-2496ab.pdf). In that ruling, Judge Kessler reached several important conclusions. First she stated, “To the extent that Defendants are arguing that past RICO violations alone cannot demonstrate a reasonable likelihood of future RICO violations, they are wrong” (footnote, p. 4).

Judge Kessler also stated, “Despite the superficial appeal of Defendants’ argument, the Court concludes that the existence of the MSA cannot establish, as a matter of law, that there is no reasonable likelihood of future RICO violations” (p. 5). The judge listed several reasons for her conclusion, including: 1) she was not prepared to accept that the defendants have complied with the settlement and that the settlement was adequately enforced; 2) Congress has given the responsibility to enforce RICO to the federal government not to the states; 3) the MSA itself precludes defendants from relying upon it in this lawsuit; and 4) the government is seeking considerable relief not covered by the MSA, including disgorgement of $280 billion in illegal profits, funding of smoking cessation therapies and programs to help smokers quit, and other changes in the manufacturing, marketing and sale of tobacco products.

In summary, the judge has ruled that the reasonable likelihood of future violations can be established by past conduct alone. Even so, the government has said that it will provide evidence during the trial of both past and ongoing misconduct, and the industry’s current behavior provides plenty of current examples.