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New FTC Report Shows Tobacco Marketing Increased Nearly 67 Percent in Three Years After Settlement

Statement of William V. Corr Executive Vice President, Campaign for Tobacco-Free Kids
June 12, 2003

Washington, D.C. — The major cigarette companies increased their marketing and promotional expenditures to a record $11.22 billion – $30.7 million a day – in 2001, according to the annual Federal Trade Commission report on cigarette marketing and sales released today. This represents a one-year increase of 17 percent from the $9.59 billion spent in 2000 and a 66.6 percent increase in the first three years after the tobacco companies agreed to curtail some aspects of their marketing as part of the November 1998 legal settlement with the states.

The tobacco companies have tried to convince the public and policy makers that they have changed for the better and curtailed their harmful marketing practices since the state tobacco settlement. But today's report provides powerful evidence that the tobacco companies have changed for the worse and have in fact increased their marketing in ways effective at addicting children. While the settlement restricted some forms of 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, such as high-visibility store displays, price discounts that make cigarettes more affordable to kids, and free gifts with purchase.

Today's FTC report underscores the need for Congress to enact legislation granting the U.S. Food and Drug Administration effective authority to regulate tobacco products, including the authority to restrict marketing that appeals to children. It also underscores the need for states to increase their tobacco taxes and use more of their tobacco settlement and tobacco tax revenues to fund comprehensive tobacco prevention and cessation programs, rather than cut back or eliminate such programs as many states have done recently. In Fiscal Year 2003, the states cumulatively had allocated $682.3 million for tobacco prevention, which amounts to just six percent of tobacco marketing expenditures as reported today by the FTC. The states have cut prevention funding for the coming year, while tobacco marketing expenditures have likely continued to increase. In fact the tobacco companies spend more on marketing in a single day ($30.7 million) than all but three states (California, New York and Pennsylvania) currently spend in an entire year on tobacco prevention. It is unconscionable that the states are cutting back on programs proven to protect our kids from tobacco addiction at the same time that the tobacco industry is spending more than ever to market its deadly products.

The FTC report found that the greatest increases in cigarette advertising and promotional spending were in the areas of 'promotional allowances', which include payments to retailers for displaying and merchandising cigarette brands in stores, and 'retail value added,' which includes price promotions (such as 'buy one, get one free' offers) and gift giveaways such as t-shirts and lighters. 2001 spending increased by 13.8 percent for promotional allowances to $4.45 billion and by 37.9 percent for retail value added to $4.76 billion. Together, these two categories accounted for 82 percent of tobacco advertising and promotional expenditures in 2001, underscoring the tobacco industry's increasing reliance on store promotions and price discounts to market its products. Store promotions are a highly effective way of reaching teens, who studies show visit a convenience store at least once a week, and price discounts make cigarettes more affordable to kids, who have less disposable income than adults. Over the past two years, the cigarette companies have further increased spending on price discounts in an effort to undermine state cigarette tax increases, which are a proven way to reduce smoking among both kids and adults.

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 $75 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.

View the FTC report