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Statement: New FTC Report Shows Tobacco Companies Have Greatly Increased Marketing Expenditures Since 1998 Tobacco Settlement

Statement by Matthew L. Myers, President Campaign for Tobacco-Free Kids
March 14, 2001

Washington, DC — Since their November 1998 legal settlement with the states, the tobacco companies have claimed that they have changed for the better and curtailed their harmful marketing practices. Now, the Federal Trade Commission (FTC) has released conclusive new data showing that the tobacco companies have indeed changed — for the worse.

The FTC's annual report on cigarette sales and advertising for 1999, the first full year after the state settlement, shows that cigarette manufacturers spent a record $8.24 billion on advertising and promotion for that year, an increase of $1.51 billion or 22.3 percent, from the $6.73 billion spent in 1998. That is the largest increase in dollar terms since the FTC began tracking cigarette sales and advertising in 1970. The tobacco industry in 1999 spent $22.5 million a day to advertise and promote its deadly products.

The tobacco industry has embarked on an expensive public relations campaign to convince the public and policy makers that it now acts responsibly and that the state settlement significantly restricted tobacco marketing. Philip Morris has claimed that the settlement 'fundamentally changed the way cigarettes are marketed in this country…thereby significantly reducing the visibility of tobacco advertising to young people.'

The new FTC report shows that these claims are a self-serving sham aimed at heading off real change in the form of legislation to establish meaningful federal regulation of tobacco products by the U.S. Food and Drug Administration. The fact is that the settlement restricted only a small portion of tobacco industry marketing. Rather than reducing its overall marketing expenditures, the industry has simply shifted its money to other venues allowed under the settlement and significantly increased spending in these areas. Only comprehensive federal regulation will truly restrict the industry's marketing practices, especially to kids, and protect the public health.

The two largest categories of industry marketing expenditures were totally unaffected by the settlement and increased significantly from 1998 to 1999. The largest category, promotional allowances including payments to retailers for shelf space and product placement, increased by 43 percent to $3.54 billion. Spending on retail value added — which includes multi-pack promotions ('buy one, get one free') and point-of-purchase giveaways such as hats and lighters, increased by 64.6 percent to $2.56 billion. Giveaways and shelf placement help increase the appeal of tobacco products to kids, and promotions reduce the price, making these products more affordable to kids.

Other marketing categories effective at reaching kids also showed large increases. These include magazines (up 34.2 percent), newspapers (up 73 percent), point of sale (retail store) advertising (up 13 percent), and direct mail (up 63.8 percent).

The report makes it imperative that Congress act quickly to grant the FDA effective authority over tobacco products so that it can restrict tobacco marketing and sales to kids and regulate tobacco products to protect the public health. And it underscores the need for states to use tobacco settlement money for comprehensive tobacco prevention programs, including aggressive counter-advertising, community and school–based programs, cessation services, and youth access enforcement.

The FTC report adds to the growing pile of evidence that the tobacco industry continues to act as irresponsibly as ever, especially with regard to its marketing practices and continued deception about its products.

Just two weeks ago, the Institute of Medicine of the National Academy of Sciences released a report casting grave doubt on the tobacco companies' claims that some of their products pose a 'reduced risk' to smokers. The IOM report reached two primary conclusions. First, none of the so-called 'reduced risk 'products now on the market have been proven to be less hazardous and may in fact increase the incidence of tobacco-related disease by deterring current smokers from quitting or encouraging new smokers to start. Second, tobacco products need to be regulated like other consumable products to protect the public health.

The tobacco products that are the subject of these two reports kill more than 400,000 Americans every year. They cause one of every five deaths in the United States, including nearly one out of every three deaths from cancer, one out of every five deaths from heart disease and 87 percent of all lung cancer cases. They addict 3,000 more kids each day, one-third of whom will die prematurely as a result. In fact, 90 percent of all smokers begin at or before age 18.

The evidence is powerful and clear: The tobacco companies have not changed and the toll of death and disease caused by their products continues to mount. Only Congress can protect the American people, and especially our kids, by enacting legislation to grant the FDA effective authority over tobacco.