Proposed Reynolds-Lorillard Merger:… | Campaign for Tobacco-Free Kids
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Proposed Reynolds-Lorillard Merger: A Marriage of Tobacco Racketeers With Long Histories of Marketing to Kids

Statement of Matthew L. Myers, President, Campaign for Tobacco-Free Kids
July 15, 2014

WASHINGTON, DC — The proposed merger of the Reynolds American and Lorillard tobacco companies raises important questions that go beyond antitrust. It raises important public health issues as well because it would bring together two tobacco giants with a long history of marketing to kids and deceiving the public about the deadly consequences of their products. These companies sell two of the three most popular cigarette brands among U.S. youth (Lorillard's Newport and Reynolds' Camel) and the most popular smokeless tobacco brand among youth (Grizzly, made by Reynolds' American Snuff Company subsidiary).

Regulators must be on guard to ensure not only that the proposed merger complies with antitrust laws, but also that it does not increase the power of these companies to market to kids or otherwise harm public health.

Reynolds American and Lorillard are not merely two benign corporations seeking to maximize profits through a merger. These companies make products that are the number one cause of preventable death and disease in the United States. Their products fuel a tobacco epidemic that kills 480,000 Americans and costs the nation at least $289 billion in health care bills and economic losses each year.

These companies in fact have engaged in illegal conduct, leading a federal judge in 2006 to rule that Reynolds, Lorillard and other major cigarette manufacturers have violated civil racketeering laws by perpetuating a decades-long fraud on the American people. As U.S. District Judge Gladys Kessler concluded, 'Defendants have marketed and sold their lethal products with zeal, with deception, with a single-minded focus on their financial success, and without regard for the human tragedy or social costs that success exacted.' Importantly, Judge Kessler found that this unlawful conduct is ongoing.

Here are the facts about Reynolds' and Lorillard's history of marketing to kids and other irresponsible conduct:

Reynolds and Lorillard sell several of the most popular cigarette and smokeless tobacco brands among kids. Newport, preferred by 23.2 percent of youth smokers (ages 12-17), and Camel, preferred by 14.9 percent of youth smokers, are the second and third most popular cigarette brands among kids, behind Philip Morris' Marlboro (preferred by 47.7 percent of youth smokers). Reynolds’ Grizzly is by far the most popular smokeless tobacco brand among youth, with 48.4 percent of the youth market. (Data source: 2012 National Survey on Drug Use and Health issued by the federal Substance and Mental Health Services Administration). Based on this market share, Newport and Camel cigarettes are used most often by about one million of the 2.7 million kids in the United States who currently smoke.

Reynolds has long marketed Camel cigarettes to kids, most egregiously with the Joe Camel cartoon character. From 1988 to 1997, Reynolds targeted kids with a hip cartoon character, Joe Camel, which significantly boosted the brand's market share among youth smokers and became nearly as recognizable to six-year-olds as Mickey Mouse. Reynolds ended the campaign in 1997 in the face of lawsuits, government investigations and public outrage. In 2007, Reynolds again faced widespread criticism after it introduced Camel No. 9 cigarettes targeted to teenage girls and young women. U.S. Rep. Lois Capps (D-CA) called Camel No. 9 'the pink version of Joe Camel.' In 2013, Reynolds resumed advertising Camel cigarettes in magazines with large youth readerships, such as Sports Illustrated and Rolling Stone, after a five-year hiatus.

Lorillard has a long history of targeting the African-American community with marketing for Newport, which is by far the most popular cigarette brand among African-American youth. The tobacco industry has gone to great lengths to target the African-American community through strategies such as more intensive advertising and lower prices, and Newport, the leading menthol brand, has done so most successfully. More than seven out of every ten African-American youth smokers (73.6 percent) smoke Newport, according to the 2012 National Survey on Drug Use and Health. Research has also shown that African-American youth are three times more likely to recognize the Newport brand than other youth. In 2013, the Food and Drug Administration issued a report that found menthol cigarettes lead to increased smoking initiation among youth and young adults, greater addiction and decreased success in quitting smoking.

Reynolds' Grizzly smokeless tobacco is marketed in ways that appeal to teen boys and is by far the most popular smokeless brand among youth. Grizzly is heavily marketed in magazines with messages telling teen boys they can’t be real men without smokeless tobacco –— one tag line stated, 'May cause the urge to act like a man.' It's no wonder that nearly half of youth smokeless tobacco users prefer Grizzly. While youth cigarette smoking has steadily declined in the U.S., youth smokeless tobacco use has not fallen since 1999. In 2013, 8.8 percent of all high school students and 14.7 percent of high school boys were current users of smokeless tobacco, according to a CDC survey released last month.

Reynolds' Santa Fe subsidiary continues to mislead consumers about the health risks of smoking with advertising for its Natural American cigarettes. Recent American Spirit ads are rife with claims that imply a safer cigarette, including '100% additive-free natural tobacco' 'organic' and 'eco-friendly.' These claims overwhelm a small disclaimer stating, 'No additives in our tobacco does NOT mean a safer cigarette.' There’s no evidence that these cigarettes expose smokers to any fewer toxins or are any less likely to sicken and kill them.

While claiming they don't want kids to use tobacco, Reynolds and Lorillard have aggressively fought proven measures to reduce tobacco use. These companies repeatedly have fought policies such as higher tobacco taxes and smoke-free air laws and filed lawsuits to block implementation of effective measures, such as restrictions on marketing to kids and graphic cigarette warnings proposed by the Food and Drug Administration. As alternatives, they offer so-called 'youth tobacco prevention' programs, which studies have found are ineffective at best and may even encourage kids to smoke.

The proposed merger also involves the sale of several cigarette brands and Lorillard's best-selling electronic cigarette brand, Blu, to Imperial Tobacco. Blu has been one of the most irresponsibly marketed e-cigarette brands and has used many of the same themes and tactics long used to market regular cigarettes to kids. This marketing has included use of celebrities and even cartoons to pitch the product, sponsorships of race cars and music festivals that have been banned for regular cigarettes, and slick magazine ads that portray e-cigarette use as glamorous, sexy and rebellious. An ad in this year's issue of the Sports Illustrated swimsuit issue placed the Blu logo on the bikini bottom of a shapely model. A recent video promoting Blu featured the teen dance craze twerking.

This proposed merger is clearly driven by steep smoking declines in the U.S. Cigarette sales fell by 37.1 percent from 2000 to 2013, with the largest decline in 2009, when a 62-cent per pack increase in the federal cigarette tax was implemented. Reynolds and Lorillard no doubt hope the economic and political power of a merged company will help them slow or reverse these trends. Elected officials and regulators must be equally aggressive in working to accelerate progress in reducing smoking and other tobacco use. It is time for a national commitment to end the tobacco epidemic for good.