R. J. Reynolds Tobacco Company

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IN THE MATTER OF J. REYNOLDS TOBACCO COMPANY COli SENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9206. Complaint, June 1986-Decision, May 1990 This consent order prohibits, among other things, a Winston-Salem, N. C. tobacco corporation from misrepresenting the results, design, purpose or content of any scientific test or study concerning any association between cigarette smoking and health effects.

Appearances For the Commission: Judith D. Wilkenfeld. For the respondent: Judith Oldham, Collier, Shannon, Rill & Scott Washington, D. C. Floyd Abrams, Cahill, Gordon Reindel New York, N. Y. and WA. Copenhauer, Womble, Carlyle, Sandridge & Rice Winston-Salem, N.

COMPLAINT The Federal Trade Commission, having reason to believe that RJ. Reynolds Tobacco Company, Inc. , a corporation, (RJ. Reynolds or respondent") has violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest alleges:

PARAGRAPH 1. RJ. Reynolds is a Kew Jersey corporation, with its offices and principal place of business located at 401 North Main Street, Winston-Salem, North Carolina.

PAR. 2. Respondent manufactures, advertises, offers for sale, sells and distributes cigarettes and other - tobacco products. PAR. 3. The acts and practices of respondent alleged in this complaint have been in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act. PAR. 4. In the course and conduct of its business, respondent has disseminated or caused the dissemination of an advertisement entitled Of cigarettes and science " attached hereto as Exhibit A. R.J. REYNOLDS TOBACCO COMPANY 345 344 Complaint PAR. 5. In this advertisement respondent has represented, directly or by implication, that:

(a) The Multiple Risk Factor Intervention Trial (The MR FIT study) was designed and performed to test whether cigarette smoking causes coronary heart disease;

(b) A major government study about smoking and coronary hear disease (the MR FIT study) provides credible scientific evidence that smoking is not as hazardous as the public or the reader has been led to believe; and (c) The MR FIT study, a major government study, tends to refute the theory that smoking causes coronary heart disease. PAR. 6. The representations set forth in paragraph five are false or misleading.

PAR. 7. In light of the representations made in the advertisement and because of the way in which the advertisement describes the MR FIT study and its results, respondent's failure to disclose: (a) That men in the study who quit smoking had a significantly lower rate of coronary heart disease death than men who continued to smoke; or (b) That the MR FIT study results are consistent with previous studies showing that those who quit smoking enjoy a substantial decrease in coronary heart disease mortality, renders the advertisement deceptive.

PAR. 8. The acts and practices of respondent as alleged in this complaint constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

346 FEDERAL TRADE COMMISSION DECISIO:oS Complaint 113 F.

EXHIBIT A Of cigartt and science.

Ths is the wa saence is suppose to tht ar statisticay assoted with.t work disease: smoking, high bloo pressure an A scentist observes a cert set of high cholesterolleve!s. fact. To these fact, the scentist Ha of th men reiv no spe exla come up 'Wth a theory medca interventin. Th oth ha re the vadity of th the- ceived Thn, to ch me t:tment tht consistentl ory the scentist perlonns an exrienl reuced al th risk fact", compa If the exrient yields positie results with the !mt group. and is duplicated by other scentists, then It was assumed tht th group with lower risk factors would, over tie sufer the theory is suppqrted. If the exrient pnxuces negatie results, the theory is SlgnUy fewer de;ths frm he2 dis- re-eed, moded or disced. th th higher risk factor group. But, to a scentist, lxth positie and But tht is not the way it tued out negative results should be importt Be- MerlO yea, there was no statisti cause both produce valuable leag. signcat clerence between th Now !ets ta about cigattes. groups in the number of hea disease You probably know about resech tht deaths. lis smoking to cert diseases. Coro- nary hea disease is one of them. The theorypersists Much ofthis evidence consists of stud We at R). Reynolds do not cl ths ies tht show a statistical assotion be- study proves tht smoking doesn t cause tv' een smoking and the disease. hea disease. But we do wish to ma a But stJtiSt1CS themselves caot expla why smoking and hea ctsese ar pointDespite the results of J\ FIT ?J assocted Thus, scentists have devel- other exrients lie it, may sc- ope a theory: tht hea dis€se is tists have not abandoned or mo their by smoking. Then they periormed vaous origi theory or re-eed its assum exrients to check ths theory tions. Vie would li to ted you aoout one of They contiue to be eve thse factrs the most imrtt of these exrients. cause hea disease. But it is imrtt A jjtte-!mown study Ajudgmentlabel theirButbelief acctely.riot scenticIt isfactan opinn. It was caed the MultiJe Risk Factor We beueve in science. TIt is why \\ Interventin Tri (M FIT). contiue to provide fudi for indepe- In the won!s of the Wal Stmtfaurn dent reseh into smoking an heth it ..s "one of th lagest medca exri- But we do not believe thre should be ments ever attmpted Funed by the one set of scntic priciles for th Feera governt, it cost $D5, 00. 00 world, and a dierent set for exents and tookJO yea, endg in 1982. woWi cigattes. Sdnc is scnc. 'T subje were over 12, (X men Prf is prof. Tht is wh th cotrversy MlO were thught to ha a high rik of ovr smoki and heath an open re he2 dise beuse of th nsk fact" one. J""TO'" RJJlynoJds Tobacco ComRaY R.J. REYNOLDS TOBACCO COMPANY 347 344 Decision and Order DISSENTING STATEMENT BY CHAIRMAN DANIEL OLIVER I respectfully dissent from the Commission s decision to issue a complaint challenging R.J. Reynolds' paid "editorial" titled " Cigarettes and Science." The challenged statement, as I read it, engages an issue that is a subject of public concern, and expresses a point of view that is unlikely to be articulated elsewhere. I believe that, as a matter of public policy, it is valuable for the public to hear all sides of an issue, and I am concerned about taking any action that may inhibit free expression of views that might not be popular to government regulators. Although, after reviewing the evidence presented to the Commission, I cannot conclude that issuance of this complaint is in the public interest, I, of course, express no view on the underlying legal and factual issues raised by this case. DECISION AND ORDER The Commission having heretofore issued its complaint charging the respondent, RJ. Reynolds Tobacco Company, with violation of Section 5 of the Federal Trade Commission Act, as amended, and the respondent having been served with a copy of that complaint, together with a notice of contemplated relief; and The respondent, RJ. Reynolds Tobacco Company, its attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by R.J. Reynolds Tobacco aCompany of all the jurisdictional facts set forth in the complaint, statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Secretary of the Commission having thereafter withdrawn this matter from adjudication in accordance with Section 3.25(c) of its Rules; and The Commission having considered the matter and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, and having duly considered the comments fied thereafter by interested persons pursuant to Section 3.25 of its Rules, now in further conformity with the procedures prescribed in Section 3.25(f) of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order:

Decision and Order - 113 F.

1. Respondent R.J. Reynolds Tobacco Company is a corporation organized, existing and doing business under and by virtue of the laws of the Commonwealth of New Jersey, with its office and principal place of business located at 401 Nottingham Street, Winston-Salem North Carolina.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of R.J. Reynolds Tobacco Company, 'and the proceeding is in the public interest.

ORDER It is ordered That respondent, RJ. Reynolds Tobacco Company, a corporation, its successors and assigns, and its officers, representatives, agents and employees, directly or through any corporation subsidiary, division or other device, in connection with the advertising or promotion of cigarettes that constitutes commercial speech under the First Amendment of the U. S. Constitution, in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: A. Representing directly or by implication that the MR FIT study was designed and/or performed to test whether cigarette smoking causes coronary heart disease.

B. Representing directly or by implication that the MR FIT study is credible scientific evidence that cigarette smoking is not as hazardous as the public or the reader had been led to believe. C. Representing directly or by implication that the MR FIT study tends to refute the theory that smoking causes coronary heart disease. D. Failing to disclose, in any discussion of the MR FIT study that questions the relationship between smoking and smokers ' risk of coronary heart disease, that: (a) men in the study who quit smoking had a significantly lower rate of coronary heart disease death than men who continued to smoke: or (b) that the MR FIT study results are consistent with previous studies showing that those who quit smoking enjoy a substantial decrease in coronary heart disease mortality. E. Misrepresenting in any manner, directly or by implication, in any discussion of cigarette smoking and chronic or acute health effects the results, design, purpose or content of any scientific test or study explicitly referred to concerning any claimed association between J. REYNOLDS TOBACCO COMPANY 349 344 Dissenting Statement health; except that thiscigarette smoking and chronic or acute paragraph shah not apply to: (i) any scientific test or study concerning the amount of tar and nicotine in any cigarette; or (ii) claims phrased as opinions unless (a) they are not honestly held, (b) they misrepresent the qualifications of the holder or the basis of his opinion, or (c) reasonable consumers are likely to interpret them as implied state-ments of fact. II.

It is further ordered That respondent shall notify the Commission at least thirty (30) days prior to any proposed change in the corporation such as a dissolution, assignment or sale resulting in the emergence of a successor corporation, the creatio!) or dissolution of subsidiaries, or any other change in the corporation which may affect compliance obligations under this order.

It is further ordered, That respondent shah, within sixty (60) days after servce of this order upon it and at such other times as the Commission may require, fie with the Commission a written report settng forth in detail the manner and form in which it has complied or intends to comply with this order.

Commissioner Azcuenaga dissenting and Commissioner Owen not participating.

DISSENTING STATEMENT OF COMMISSIONER MAY L. AZCUENAGA The consent order the Commission issues today against R. Reynolds Tobacco Company ("Reynolds ) is unusually and conspicuously weak. It provides less protection for consumers than the Commission sought when it issued the complaint in this proceeding, less protection than the Commission ordinarily would seek in deceptive advertising case, particularly ope with serious public health implications, and less protection than is justified under the circumstances. The order to which the majority has acceded conveys to me the troubling message that when a major cigarette company boldly runs an advertisement that misrepresents important scientific evidence about the relationship between smoking and health, this Commission wil do precious litle in response. I dissent. Dissenting Statement 113 F. Beyond its weakness, a more serious peril lurks within this order. The order implicitly represents that the Commission is protecting consumers from deceptive cigarette advertising, even in the guise of a paid-for editorial. Consumers may be lulled by this message into a false sense of security that they can trust what they read in cigarette ads. In recent years, the federal government had displayed an increasingly high degree of care and concern about the relationship between smoking and health, and consumers reasonably may assume from this order that the Federal Trade Commission is guarding their interests with the same high degree of care. In fact, the public health protection this order affords is so illusory that consumers might very well be better off it the Commission issued no order at all. Nothing in the record or the litigation posture to date suggests a need to accept a weak, compromise order. Yet the remarkable concessions that the majority is willing to make to sette this case suggest a certain squeamishness about the Commission s authority to regulate deceptive advertisements that look like editorials, which is the only defense that Reynolds has asserted. Reasonable people may disagree about whether the First Amendment protects a deceptive advertisement that looks like an editorial, such as the so-called "MR. FIT" ad that Reynolds ran, but we can do more to protect consumers if we take a firm position one way or the other. If we announce that the Commission wil not challenge advertisements that are designed to masquerade as editorials, we wil warn consumers to be on guard and to exercise any natural suspicion they may have regarding the truth of a paid-for editorial advertisement.

On the other hand, if we intend to regulate such ads, we should do so decisively and demand remedies that are as rigorous as in any other deceptive advertising matter. By accepting this pared-down order, the majority implicitly asserts that the order is adequate and signals to the 1 At thepublic generally that the Commission is protecting consumers. same time, however, it signals to cigarette companies and other advertisers, through the specifics of the order, which wil be studied by their legal experts, that they may shade the truth, or even deceive consumers outright, if they choose to try the advertising "editorial" approach in the future. Although certainly the Commission does not intend this result, in a very real sense the Commission itself is One of my colleagues has ventured so far as to say this is a "strong" order and a "victory for consumers. Statement of Commissioner Andrew J. Strer.io, Jr. , Concurring in tr.e Commission s Acceptance of the Order for Public Comment, September 20, 1989 (" Strenio Sta':ment" ) at 1 , and Concurrng Statement of Commissioner Andrew J. Strenio, Jr. ("Strenio Concurrence ) at 1. R.J. REYNOLDS TOBACCO COMPANY 351 344 Dissenting Statement practicing a deception on the American consumer, and a dangerous deception at that.

This case involves a Reynolds advertisement that the Commission found reason to believe deceptively represented that a major government study tends to refute the theory that smoking causes coronary heart disease. When it issued the complaint, the Commission attached a proposed order ("notice order ). It indicated that if the facts were established as alleged, the notice order "should issue" and that the Commission might order additional protection as necessary or appropriate.

The heart of the notice order, as I read it, is Paragraph I- , which along with Paragraphs I-A through I- , constitute what usually would be known in Commission parlance as "core relief." The notice order, like other Commission orders, contains- both "core" and fencing- " provisions. Core relief, to the best of my knowledge, has not been formally defined, but it generally refers to the Commission primary law enforcement remedy, which is to prohibit the unlawful conduct. Its message is basically, "Do not do this again. " The Commission s authority to impose core relief stems from Section 5(b) of the FTC Act. All other relief in Commission orders is characterized as "fencing- " relief designed to "close all roads to the prohibited goal, so that (the core relief in thej order may not be by-passed with impunity. FTC v. Ruberoid Co. 343 U. S. 470 , 473 (1952) (footnote omitted).

Reasonable minds sometimes differ over which provisions in a particular order constitute core or fencing- in relief, depending on how one views the scope of the misconduct at issue. From his earlier statement when the Commission accepted the proposed consent for public comment, it appears that Commissioner Strenio views Reynolds' misconduct narrowly, as consisting only of Reynolds ' dissemination of a particular ad. He states that the core relief in the order includes only those provisions in Paragraphs I-A through Iprohibiting Reynolds' further dissemination of that one ad. Strenio Statement at 1 n.2. He designates Paragraph I- , which prohibits misrepresentations of tests or studies' in discussing smoking and health, as fencing-in. Id. at 4. I believe that on this record, Reynolds has violated the law not just by disseminating a single deceptive ad but by the act of misrepresenting scientific tests or studies in advertising that discusses smoking and health, and, in my view Commissioner Strenio s characterization of Reynolds' misconduct is unduly limited.

352 FEDERA TRADE COMMISSION DECISIONS Dissenting Statement 113 F. If the Commission had tried this case and had found liabilty, it doubtless would not hesitate to say that Reynolds had engaged in deceptive advertising by misrepresenting the nature or results of scientific tests or studies in discussing the relationship between smoking and health. It would then no doubt have imposed core relief that is, relief that simply prohibits the unlawfl conduct, with a provision much like Paragraph I-E of the notice order. The most obvious reading is that the Commission viewed Paragraph I-E of the notice order as core relief when it issued the complaint. That was certainly my understanding at that time and is so now. Under Section 5(b) of the FTC Act, once the Commission finds liabilty, it automatically has authority to impose core relief. For fencing-in relief, the Commission also must show that the remedy is reasonably related to the violation and necessary to ensure the core relief. This is often easy to do, but it is nevertheless an additional step the Commission must take. My colleague s narrow and apparently solitary approach to defining core conduct, in my view, does not serve us well in this case and, if ever accepted by the Commission, could impose an undesirable and unnecessary burden on the Commission in future cases.

The core relief contained in Paragraph I-E of the notice order would prohibit Reynolds from:

Misrepresenting in any manner, directly or by implication, the design, purpose content, or results of any scientific test or study in any discussion of smoking and health.

This is a simple requirement that flows directly from the serious allegations in the complaint. Since the complaint issued, nothing has happened to suggest that its allegations are anything less than completely true. Yet the majority now accepts substantially less protection for consumers than it initially projected by adopting several notable limitations to the core prohibition quoted above. When combined, these limitations narrowly constrict the relief imposed and create a potential litigation quagmire should the Commission ever seek to enforce the order. No explanation for these major concessions on the part of the majority is readily apparent, and the resulting order is not more than a gesture in response to deceptive advertising claims that may cause grave consumer injury. 2 2 Although the order probably bars R€yno!ds frm again disseminating the identical "MR. FI" advertisement that gave rise to the complaint, even this is not entirely fr frm doubt. ), ),), R.J. REYNOLDS TOBACCO COMPANY 353 344 Dissenting Statement The principal limitation to the substantive protections of the order narrows the core prohibition in Paragraph I - E to cover only those misrepresentations concerning scientific tests or studies "explicitly referred to" in a Reynolds advertising message. The usual language used to redress misrepresentations of tests or studies, as reflected in the notice order, extends to all references to such tests or studies 3 or generic. Allowing a company under order 'thiseven if implicit much leeway to misrepresent the safety of its product is rare, at best. Indeed, I am aware of no other Commission order that is so limited. See, e. , Removatron International Corp. D. 9200, slip op. at 3 (Nov. 4, 1988) ("cease and desist from misrepresenting the existence contents, validity, results, conclusions, or interpretations of any test or 1989); American Homestudy affd 884 F.2d 1489 (1st Cir. Products Corp. 98 FTC 136 , 425 (1981) ("cease and desist from. . . (m jisrepresenting in any manner any test, study or surveyor any of the results thereof concerning. . . affd 695 F.2d 681 (3d Cir. 1982); Litton Industries, Inc. 97 FTC 1 , 82 (1981) ("cease and desist , samplefrom. . . (mjisrepresenting in any manner the purpose content, reliabilty, results, or conclusions of any surveyor test" , Roebuck Co. 95 FTCaffd 676 F. 2d 364 (9th Cir. 1982); Sears 406 526 (1980) ("cease and desist from. . . (mjisrepresenting. . . the purpose, content or conclusion of any test, experiment, demonstration study, survey, report, or research" affd 676 F.2d 385 (9th Cir. 1982).

Already this provision has spawned questions. Since the agreement was signed, counsel supporting the complaint and counsel for Reynolds have exchanged letters concerning interpretation of Paragraph I- E of the order. See attached correspondence dated August 17 1989 , from Judith Wilkenfeld and Judith Oldham. This correspondence is interesting, but it is not part of the order. Perhaps the correspondence wil help the Commission if it ever needs to enforce the order on this precise point. But other gaps in the coverage of Paragraph I-E have not been filed, even in this informal post hoc fashion. The purpose of the consent order is, after all, to reduce to 3 Prohibiting misrepresentation in implicit references to scientific tests need not discourage accurate descriptions of the makeup of a product or its performance characteristics. 4 The consent agreement signed by Reynolds and counsel supporting the complaint, consistent with the model order specification contained in the Commission Operatlng Manua! (Ch. 6.8 and llustration 2), expressly states: "The complaint may be used in construing the terms of the order, and no agreement understanding, representation, or interpretation not contained in the order or in the agreement may be used to vary or to contradict the terms of the order. " Consent Agreement at 2 , Of 7. 354 FEDERA TRADE COMMISSION DECISIONS Dissenting Statement 113 F. writing any such "understandings" between the parties and to make those "understandings" binding.

It is entirely appropriate and desirable to bar Reynolds from making any deceptive statements that suggest the existence of scientific empirical support or expert, scientific opinion for product claims in addition to those that explicitly mention a "test" or "study." What if for instance, an advertisement deceptively uses phrases such' as experts agree " or "government agency reviews scientific evidence and concludes " or "empirical research shows " or "scientific data prove ? The number of other examples is limited only by the imagination of a good marketing department or advertising agency. Unlike the Commission s notice order, this order does not prohibit Reynolds from using these phrases deceptively. 5 A comment fied with the Commission on behalf of the American Heart Association, the American Cancer Society, the American Lung Association and their umbrella group the Coalition on Smoking OR Health "agrees that it is essential" that the order should apply to references such as those I have just described. The only way the Commission could ensure that the order so applies would be to delete the order provisions that plainly was drafted to exclude those references from the coverage of the order. This the Commission has not done. No quantity of earnest side pronouncements can cure that flaw because the Commission wil not be the final arbiter of what the order covers. That honor wil go to the courts and, it has been my observation, courts generally conclude that orders cover what they say they cover and do not cover that which they specifically exclude. Another limitation on the core provisions of the order arises from the deletion of the simple phrase "smoking and health " which appeared in Paragraph I-E of the notice order and its replacement with the more narrow phrase "smoking and chronic or acute health effects." Under the revised language, the Commission wil be able to enforce the order against only a more limited range of deceptive claims and Reynolds can contest the Commission s interpretation of 5 One of my colleagues stoutly assert that the order does bar such claims. Strenio Concurrnce at 2. To support his point, he is reduced to citing anotherlettr, thereby highlighting the unfortunate lack of coverage in the controlling document, the order itself. His assertion ignores the common sense flag that IWynolds negotiated this change in the order for a reason. 6 Like my colleagues, I acknowledge the substantial expertise of the Coalition on the relationship between smoking and health and their related concern about the accuracy of advertising in this area. Because this order does not seem to promote what I understand to be the Coalition s ultimate goal, I regret that they endorsed the order and did not see fit to employ their considerable persuasiveness to urge a different result. R.J. REYNOLDS TOBACCO CO:.PANY 355 344 Dissenting Statement the additional words "chronic acute " or "effects " none of which is defined in the order.

Still another limitation of the core prohibition appears in the language approved by the majority that condones misrepresentations concerning the amount of tar and nicotine " in cigarettes. Such misrepresentations relate directly to the issues of smoking and health that are at the heart of this proceeding, and therefore, are well within the scope of the Commission s authority to impose relief. See, e. FTC v. Ruberoid Co. 343 U. S. 470 , 473 (1952); Jacob Siegel Co. FTC 327 U. S. 608 , 611 (1946). The Commission previously has treated deceptive tar and nicotine claims as serious violations of Section 5. FTC v. Brown and Williamson Tobacco Corp. 580 F. Supp. 981 (D. C. 1983), aff'd in part and remanded in part 778 2d 35 (D. C. Cir. 1985), modified No. 83- 194'0 (D. D. C. April 4 1986).

The final ornament in the now heavy load of exceptions that decorates Paragraph I - E further limits and complicates the provision by expressly allowing claims that are phrased as opinions unless (i) they are "not honestly held" (a particularly interesting subject for proof), (ii) they misrepresent the qualifications of the holder or the basis of his opinion, or (iii) reasonable consumers are likely to interpret them as implied statements of fact. 8 This provision serves no useful purpose for the Commission or the public, and it has not appeared in other Commission orders. The provision also substantially increases the likelihood that any enforcement of the order wil be difficult and protracted.

In addition to the serious cuts it has approved in the core protections of the order, the majority also has departed from the Commission routine practice by acquiescing in Reynolds' demand that the order expressly apply only to advertising or promotion of cigarettes "that constitutes commercial speech under the First Amendment of the United States Constitution. " Because the Commission s jurisdiction necessarily is limited by the First Amendment, this language is 1 It has been suggested that the new phrase has been defiIJed by the World Health Organization. Even assuming, and I do not, that we want that definition to control, the order does not so specify. This provision derives from the Commission s Deception Statement, which is a statement of policy to which the Commission refers in exercising its prosecutorial discretion. Letters dated October 14 , 1983, to The Honorable Bob Packwood, Chairman, Committee on Commerce, Science, and Transportation, United States Senate and The Honorable John D. Dingell, Chairman, Committee on Energy and Commerce, United States House of Representatives (reprinted in Appendix to Cliffdale Associates, Inc. 103 PIC 110 , 174- 83 (1984)). The fact tnat the Commission finds this language useful in a policy statement the interpretation of which is solely within its own discretion does not make it palatable in an order, every word and phrase of which Reynolds may challenge in an enforcement proceeding. Dissenting Statement 113 F. superfuous. The Commission does not reference in its orders the defenses proffered by respondents and making an exception here is unnecessary and undesirable.

Perhaps more important, when combined with the provision placing claims phrased as opinions" outside the scope of the order, this language tells Reynolds and other advertisers that promotional material cloaked in the mantle of opinion are beyond the reach of the Federal Trade Commission. The Supreme Court, in considering the analogous question whether material containing discussions of public issues nonetheless could constitute "commercial speech " refused to encourage such sophistry:

We have made clear that advertising which ' links a product to a current public debate' is not thereby entitled to the constitutional protection afforded noncommercial speech.

Bolger v. Youngs Drg Products Cor. 463 U. S. 60, 63 (1983) (quoting Central Hudson Gas Elec. Cor. v. Public Utility Comm 447 U. S. 557 , 563, n. 5 (1980)).

Finally, the majority fails to disassociate itself from the staffs letter of May 12 , 1989 (attached), to Reynolds that sets forth the staffs intent" about the scope of the order. 9 To be sure, the letter recites that Reynolds "predicates" its acceptance of the consent agreement simply on the "assurance that this letter will be forwarded to the Commission." It seems all too clear, however, that Reynolds hopes to achieve indirectly by this letter what the Commission has refused to grant it directly: a delineation of what the Commission wi1 consider to be the limits of commercial speech developed without reference to a factual record.

It is well established that the staff has no authority to bind the Commission, but absent a direct and express disavowal of this letter the Commission may be hard pressed to avoid arguments over the letter in an enforcement proceeding. The letter can serve only undermine the force of the order it purports to construe. Another potential inconvenience might arise if, in an enforcement proceeding, the Commission asserts that this letter from complaint counsel interpreting one part of the order does not bind the Commission. The Commission might be hard-pressed to explain why the letter from 9 As a condition of the settlement imposed by Reynolds, complaint counsel Bent a lettr to Reynolds setting forth examples of ionns of speh that they characterize ag noncommercial and therefore, in their opinion outside the scope of the order.

R.J. REYNOLDS TOBACCO COMPANY 357 344 Dissenting Statement Reynolds counsel interpreting another part of the order, discussed earlier, nevertheless should be binding on Reynolds. Such so-called "side letters" unfortunately are not unprecedented but neither are they common. In all events, they are il-advised. The Commission should make clear to the staff and to other potential respondents that they are unacceptable both here and in other cases. Reynolds has argued that the Commission s enforcement a&ion evidences a double standard that disfavors cigarette companies. See Reynolds' Answering Brief on Appeal at 16- 17 and n. 8. The majority s issuance of this consent agreement and order does, indeed suggest the existence of a double standard- but not one that is biased against the cigarette industry. Rather, the order the Commission issues today accords this cigarette company treatment that is far more lenient than that ordinarily given to respondents in deceptive advertising cases. It is a surprising abandonment of the public interest, and I cannot endorse it.

ATTACHMENTS t.:-ITED STATES OF A;\tERICA FEDERAL TRADE COMMISSION WA8HI0.'GTON , D.C. 20580 August 17 1989 Judith Oldham, Esquire Coller, Shannon & Scott 1055 Thomas Jefferson Street, N.

Washington, D. C. 20007 Dear Ms. Oldham;

During Commission consideration of the consent agreement signed by R.J. Reynolds Tobacco Company, a question has been raised about the meaning of phrase in Part I.E. of the order. Specifically, I have been asked to clarify the understanding of the negotiating parties of the phrase "any scientific test or study explicitly referred to," My understanding is that this language, as intended by the parties, woud limit the order s coverage to advertising claims that expressly refer to a test or study; a reference to a specifically named test or study, such as MR FIT, or a generic reference to a test or study, such as "tests prove.... " Please confirm by return mail if this reflects your understanding. Sincerely, Judith P. Wilkenfeld Counsel Supporting the Complaint . .

Dissenting Statement 113 F. Coller, Shannon & Scott Attorneys-at-Law 1055 Thomas Jefferson Street, N.

Washington, D.C. 20007 August 17, 1989 Judith D. Wilkenfeld, Esquire Program Director for Food and Drug Advertising FEDERAL TRADE COMMISSION 601 Pennsylvania Avenue, N.

Room 4007 Washington, D.C. 20580 Re: MR FIT Settlement Dear Ms. Wilkenfeld:

This is to confirm our understanding that the language in Paragraph E of the order in R.J. Reynolds Tobacco Company (Dkt. No. 920&), which prohibits misrepresentation of "the results, design, purpose or content of any specific test or study explicitly referred to concerning any claimed association between cigarett smoking and chronic or acute health. was intended to limit the Order s coverage to advertising claims that expressly referred to a test or study, a reference to a specifically named test or study such as MR FIT , or a generic reference to a test or study, tests prove. Sincerely, JUDITH L. OLDHAM JLO: mdl R.J. REYNOLDS TOBACCO COMPANY 359 344 Dissenting Statement FEDERAL TRADE COMMISSION WASHINGTON , D.C. 20580 May 12, 1989/ James F. Ril, Esquire Collier, Shannon, Ril & Scott 1055 Thomas Jefferson Street, N.

Washington, D.C. 20007 Re: In the Matter of R.J. Revnolds Tobacco Company, Dkt. 9206 Dear Mr. Ril:

During recent discussions concerning a proposed settlement of the above matter you requested on behalf of RJ. Reynolds Tobacco Company, clarification of our understanding of the scope of the meaning of the terms "advertising or promotion of cigarettes that constitute commercial speech under the First Amendment of the U. Constitution " as those terms are used in Section I of the proposed order. The purpose of this letter, which wil be forwarded to the Commission with the signed proposed consent agreement, is to provide some examples of speech we do not intend to come within the definition of "advertising or promotion of cigarettes that constitutes commercial speech" as those terms are used in the proposed order. We understand that the company s acceptance of the consent agreement is predicated on the contents of this letter and the assurance that this letter wil be forwarded to the Commission in connection with its consideration of the signed consent agreement. In addition, it is our intention in writing this letter and providing these examples neither to vary nor contradict the terms of the order, but merely to explain and clarify our intent as to its coverage. Finally, our listing is not intended to be exhaustive or exclusive, but merely to provide examples of speech that we do not intend to be covered by the proposed order.

The following are examples of speech that we believe do not constitute advertising or promotion of cigarettes that constitutes commercial speech: testimony or statements before government bodies communications, including press conferences, with independent news media presentations at scientific, legal and professional conferences op-ed pieces and letters to the editor published by independent news media in the exercise of their editorial judgment articles published in professional, legal or cientific journals, and statements made on independent broadcast news or talk shows. This category excludes statements made in advertisements that take the form of news or talk shows.

Concurrng Statement 113 F.

Sincerely I Judith P. Wilkenfeld Counsel Supporting the Complaint Wiliam C. MacLeod Director Bureau of Consumer Protection CONCURRING STATEMENT OF COMMISSIONER ANDREW J. STRENIO , JR. The Commission s initial review indicated that the consent agreement negotiated by complaint counsel and the R.J. Reynolds Tobacco Company, Inc. ("Reynolds ) was both justified and commensurately strong. The Commission now has reexamined this issue following the receipt of public comments, and appropriately has decided to give final approval to the proposed settlement.

The comments fied by the Coalition on Smoking OR Health (which consists of the American Heart Association, the American Cancer Society, and the American Lung Association) in support of the proposed settement were particularly insightful. Naturally, that came as no surprise since the Coalition has paid long-standing and serious attention to the matter. This interest dates back to the Coalition petition requesting that the Commission initiate an investigation into the " Of Cigarettes and Science" advertisement, and also was evident at many other stages of the proceeding (such as the Coalition participation in the appeal of the Administrative Law Judge dismissal of the case in 1987).

After thoughtful discussion of various issues raised regarding the proposed agreement, the Coalition s comments to the Commission concluded:

(OJn balance the proposed Consent Order and Settlement Agreement represent a major achievement which wil benefit consumers and which wil reduce the type of misrepresentations found in " Of Cigarettes and Science. " The Commission, and particularly the Commission s staff, should be cOIlmended for pursuing this litigation vigorously, for establishing the Commission s jurisdiction over "Of Cigarettes and Science " and for working out a settlement and consent order which wil substantially further the public interest.

, too, have concluded that the proposed settlement represents a victory for the public interest as well as a vindication of the R.J. REYNOLDS TOBACCO COMPANY 361 344 Concurring Statement Commission s authority to challenge false or deceptive advertising in any guise.

Simply put, having found reason to believe that "Of Cigarettes and Science " constituted a deceptive advertisement, the consent order affirms that the Commission has jurisdiction over so-called "advertorials." This is the format where advertising wolves attempt to dress up in the sheep s clothing of editorials. The consent order prohibits Reynolds from using any form of commercial speech to misrepresent either the health risks associated with cigarettes or the results of scientific studies concerning those health risks. Thus, the consent order prevents Reynolds from engaging in the same or similar acts or practices that led to this litigation. Failure to comply with the order would make Reynolds liable for civil penalties of up to $10 000 per day per violation.

These are noteworthy accomplishments for a case with more than its share of complex and novel elements. To be sure, this settement is not written exactly as I would have preferred. By that standard, the settement contains imperfections. However, based upon close scrutiny, I am convinced that under the circumstances these are relatively minor imperfections. My attached earlier statement explains in detail why these imperfections have no appreciable negative effect. Rather than repeat this analysis here, I simply would like to reemphasize two basic points. First, it is implausible that Part LE of the order would be taken out of context and misconstrued to exclude from the order s coverage generic references to tests or studies (such as "tests show" claims). The Commission majority voted to accept this settlement based upon the express understanding that Part LE of the order refers both to specifically identified or named tests as well as to generic references to tests or studies. For elaboration upon this point see the Commission response to the public comment from the Coalition on Smoking OR Health.

Second, the Commission views with disfavor side letters from FTC staff in general, and has made no exception for complaint counsel' guidance letter of May 12 , 1989 in particular. Further, such side letters are not binding upon the Commission as a matter of law. Moreover, the Commission consistently, frequently, and pointedly has refrained from taking any action whatsoever to endorse the letter of May 12th or to otherwise accord it binding effect in any regard. Renouncing the major accomplishments embodied in this consent because of its minor imperfections would be akin to rejecting a Concurrng Statement 113 F.

doughnut because of the hole. Indeed, in accepting this consent, the Commission is putting all advertisers on notice that they cannot escape their legal responsibilties either by camouflaging an advertisement so that it resembles an editorial or by superficially linking a product to a current debate.

Any cigarette company, or other advertiser, who misreads the settlement as somehow symbolizing a lax Commission attitude tov(ard false or deceptive advertising is in for an abrupt and rude awakening. In other words, the consent means that an advertiser who blows this kind of smoke is going to get burned.

In sum, the consent provides proportionate disincentives for recurrence of the allegedly unfair and deceptive advertising claims by Reynolds involving important public health concerns that are the essence of this case. The settlement also should help deter unfair or deceptive conduct by those few advertisers who may be tempted in the future to stray from the straight and narrow. Through careful balancing, the settlement advances both of these desirable goals without impeding the dissemination of truthful and non-deceptive information. This is important because the vast preponderance of advertisers utilze practices that are above reproach in supplying accurate and valued information to consumers. Accordingly, consistent with the Commission s mandate to protect consumers from unfair or deceptive advertising in any industry, acceptance of this consent is in the public interest.

ATTACHMENT A CONCURRING STATEME:oT OF COMMISSIONER ANDREW J. STRENIO , JR. The Commission has chosen to accept, subject to final approval, the consent agreement negotiated by complaint counsel and the R. J. Reynolds Tobacco Company, Inc. ("respondent"). This action appears both justified and commensurately strong.

The action appears justified because the Commission continues to have reason to believe that respondent' s advertisement, entitled " Cigarettes and Science " made false and misleading claims about the health effects of cigarette smoking. Respondent' s advertisement led to the issuance of an FTC administrative complaint on June 16 , 1986. The action appears commensurately strong because the consent 1 Of course, I will review with great care this assessment and all other preliminary conclusions and issues aftr completion of the comment period.

R.J. REYNOLDS TOBACCO COMPANY 363 344 Concurring Statement agreement secures virtually all of the relief sought in the notice order that accompanied the complaint. The settement contains 100 percent of the remedies specified in the notice order for the core conduct at the 2 In addition, the settlement provides theheart of this proceeding. lion s share of the fencing- in relief specified in the notice order. To be sure, the settement does not precisely track the notice order in all regards. But, these differences as a practical matter have. no significant negative effect. Dismissing the public health value of this settlement by focusing disproportionately upon those relatively minor differences from the notice order would seem anomalous. Accordingly, the substantial public interest benefits that would flow from the core conduct and fencing-in relief included in the settlement tip the scales in favor of acceptance.

Should the Commission, then, reject this strong grder and return to litigation in pursuit of a substance order that-if everyhing goes right-might be slightly stronger? I think not. To begin with assuming such litigation were pursued vigorously and concluded successfully, it is improbable that the Commission would garner an appreciably stronger order than the one before us now. Further, the quest for a "perfect" settlement surely would divert agency resources that could be put to more productive use. Moreover, the public in the meantime would be harmed by the lingering uncertainty about the outcome of this case that easily could extend for many more years. Reasonable people can differ over the importance of these individual factors and the overall balance to be struck. The impassioned and articulate dissent from my colleague proves as much. Nonetheless, the dissent' s conclusion that continued litigation (with its attendant risks) necessarily is preferable to any settlement that does not adhere to the notice order in each and every particular exalts form over substance. Turning to the proposed settement, I question whether it would serve the public interest to gamble so much tangible relief in hand, for so little theoretical reward that might-or might not-be lurking in the bush.

Comparison of the notice order and the proposed consent order reveals that the differences between them largely are superfcial. One such difference is a change in the boilerplate language typically used in Commission orders. AI1 things being equal, I would prefer not to 2 The core provisions of the proposed consent order are identical to those of the notice order.Compare Part LA through I.D of both orders.

3 Both orders would prohibit respondent from making deceptive starements about tests or studies that discuss smoking and health. Compare Part r.E of both orders. Concurring Statement 113 F. alter boilerplate. However, this change does not narrow the coverage or undercut the enforceabilty of the order. The boilerplate language in the proposed consent says that the order covers advertising or promotion of cigarettes "that constitutes commercial speech under the First Amendment of the Constitution." This provision merely states the obvious: the Commission has neither the desire nor the authority to obtain an order that would restrict fully protected, noncommercial speech.

Similarly, the added language in Part I.E.ii regarding opinion claims merely makes explicit that the order does not extend to such claims where the net impression is unlikely to mislead consumers. The order stil would cover any opinion claim where the net impression has the potential to mislead consumers.

Part I.E. of the order, the fencing-in section, h s another language modification. The notice order would have prohibited respondent from misrepresenting any scientific test or study in any discussion concerning "cigarette smoking and health. " The proposed consent order changes that phrase to "cigarette smoking and chronic or acute health effects. " This semantic change does not narrow the order coverage, since the revised phrase encompasses all adverse health conditions associated with smoking. In fact, the Office on Smoking and Health, the federal office responsible for preparing the Surgeon General' s annual report on the health consequences of smoking, has indicated that the revised phrase- cigarette smoking and chronic or acute health effects simply is a more precise way to say "cigarette smoking and health.

Also in the fencing-in section, Part I.E of the proposed consent order excludes any scientific test or study regarding the amount of tar or nicotine in cigarettes. Unlike the other differences reviewed above this change does amount to a narrowing of the scope of the fencingrelief specified in the notice order. Thus, if respondent in the future were to misrepresent the quantity of tar or nicotine in its cigarettes the Commission would not be able to fie a lawsuit seeking civil penalties for violation of this order.

While I would rather not narrow tne order in this fashion, the exclusion is limited and does not create a barrier to effective FTC action against misrepresentation of tar or nicotine quantity. Should respondent perpetrate an abuse of this nature, the Commission would retain-and, I trust, exercise-its full power to bring a new lawsuit either as an administrative matter or as an injunction proceeding such R.J. REYNOLDS TOBACCO COMPANY 365 344 Concurrng Statement as the Barclay case. 4 Further, the proposed consent order would cover claims made about tests or studies that discuss health risks associated with any level of tar or nicotine contained in cigarettes. In sum, this exclusion is not cause for rejecting the settement. Moving along to the remaining difference found within the fencingin section, Part I.E of the proposed consent order includes the phrase explicitly referred to." If there were more than a hypothetical chBJce that this phrase could be taken out of context and misconstrued to exclude from the order s coverage generic references to tests or studies (such as "tests show" claims), I would not support the settlement. However, such a cramped construction of the order coverage would be an unreasonable and most unlikely reading of Part I.E. In my view, on the four corners of the order itself, Part I.E does cover claims such as "tests show" and other references to generic tests or studies in addition to claims concerning specifically-named tests or studies (such as the MR FIT study). Finally, there is the question of the complaint counsel guidance Jetter of May 12, 1989. I do not favor side letters such as this one in principle, and would prefer that complaint counsel not agree to send such letters during settlement discussions. However, side Jetters from complaint counsel are not binding upon the Commission as a matter of law. The Commission has taken no action to endorse this side letter or otherwise accord it binding effect. Accordingly, rejecting the settlement due to the mere existence of complaint counsel's letter would give undue weight to the missive.

In conclusion, although I like some aspects of the proposed settement more than others, the net result looks to be that the benefits exceed the costs by a goodJy margin. The proposed settlement appears to provide appropriate disincentives for recurrence of the allegedly unfair and deceptive claims involving important public health concerns that gave rise to this complaint. The proposed settlement also should help deter unfair or deceptive conduct by other advertisers-cigarette and non-cigarette companies alike-without impeding the dissemination of truthful and non-deceptive information. Accordingly, consistent with the Commission s mandate to protect consumers 4 FTC v. Brow Williamson Cry. 778 F.2d 35 (D.C. Cir. 1985). 5 The category of "test or studies" includes all references to any research perfonned according to methoos recognized by the scientific community. There is no requirement for the literal presence of the words "test" or study" before the order applies. Thus, the use of phrases such as "government agency reviews scientific evidence and concludes " or "empirical research shows " or "scientific data prove," or the like, would be covered.

Concurring Statement 113 F. from unfair or deceptive advertising in any industry, acceptance of the settlement for comment appears to be in the public interest. CULUGAN, INC. 367 367 Set Aside Order