Cigarette Marketing at a Record High, New FTC Report Shows

Statement of Daniel McGoldrick Director of Research, Campaign for Tobacco-Free Kids

Aug. 9 2005

Washington, DC — The major cigarette companies increased their marketing expenditures to an all-time high of $15.15 billion – $41 million a day – in 2003, according to the annual Federal Trade Commission report on cigarette marketing and sales released today. This represents a one-year increase of $2.68 billion or 21.5 percent from the $12.5 billion spent in 2002. The tobacco companies have more than doubled their marketing and promotional expenditures since promising to stop marketing to kids and curtail some aspects of their marketing as part of the November 1998 legal settlement with the states.

The tobacco companies continue to speak out of both sides of their mouths by repeatedly claiming during the federal government's tobacco lawsuit that they have made “profound and permanent” changes in their marketing since the 1998 settlement, while they continue to spend record amounts on marketing their products. Although the settlement restricted some forms of cigarette marketing effective at reaching kids, such as billboards and event sponsorships, the tobacco companies have simply shifted their resources and increased spending in other ways that appeal to kids, especially price discounts that make cigarettes more affordable to kids and high-visibility store displays.

The new FTC report shows that 71.4 percent of cigarette marketing in 2003, or $10.81 billion, was spent on price discounts paid to cigarette retailers or wholesalers in order to reduce the price of cigarettes to consumers. An additional $1.3 billion was spent on coupons and free cigarette promotions (e.g., buy one, get one free). These price promotions have served to effectively undercut the many state tobacco excise tax increases that the companies know reduce smoking, especially among kids. This helps explain why progress in reducing youth smoking has slowed considerably in recent years.

The fact that the tobacco companies act so aggressively to undermine the public health benefits of cigarette taxes, in addition to their well-financed opposition campaigns against the taxes, shows that they cannot be taken seriously when they say they do not want kids to smoke. States should respond by further increasing taxes on cigarettes in order to counter price discounts and reduce their appeal to children.

The $15.15 billion spent by the tobacco companies to promote their deadly products, dwarfs the amount spent by states on tobacco prevention programs. To counter this massive marketing campaign, it is imperative that states allocate more of their tobacco settlement and tobacco tax revenues to tobacco prevention programs. In Fiscal Year 2005, the states cumulatively allocated $538 million for tobacco prevention programs, which amounts to just less than four percent of cigarette marketing expenditures as reported today by the FTC. In fact, the tobacco companies spend more to market cigarettes in a single day ($41 million) than all but four states (California, Pennsylvania, Ohio and New York) currently spend in an entire year on tobacco prevention. It is unconscionable that the states have been cutting back on programs proven to protect our kids from tobacco addiction at the same time that the tobacco industry is spending record amounts to market its deadly products. The states collect nearly $20 billion a year in revenue from tobacco taxes and the tobacco settlement. It would take only about eight percent of this revenue for every state to fund tobacco prevention programs at the minimum levels recommended by the U.S. Centers for Disease Control and Prevention.

Today's FTC report underscores the need for Congress to enact legislation granting the U.S. Food and Drug Administration (FDA) effective authority to regulate tobacco products, including the authority to restrict marketing that appeals to children. Among other things, this legislation would have given the FDA the authority to restrict tobacco marketing to the extent permitted by the First Amendment, including especially marketing that impacts kids. Until Congress grants the FDA this authority, the tobacco companies will face only minimal restrictions on their ability to engage in marketing that impacts our children.

Tobacco use is the leading preventable cause of death in the U.S., killing more than 400,000 people and costing the nation more than $89 billion in health care bills every year. Every day, another 2,000 kids become daily, regular smokers, one-third of whom will die prematurely as a result. Today's FTC report makes it clear that the tobacco industry has not changed and remains a major cause of the problem. Congress and state legislatures must act to protect our kids and reduce the terrible toll of tobacco.

 

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