Simply Politics & News

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New Limits Set Over Marketing for Cigarettes

By PHILIP SHENON
Published: August 18, 2006

Her ruling said they were shown in a nine-month trial to have “marketed and sold their lethal product 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.”


WASHINGTON, Aug. 17 — A federal judge ordered strict new limitations on tobacco marketing on Thursday after finding that cigarette makers deserved to be punished for a decades-old conspiracy to deceive the public about the dangers of smoking.

But in her ruling here in a racketeering suit brought by the Justice Department against the industry, Judge Kessler also had good news for the leading tobacco companies.

Judge Kessler ordered the companies to stop labeling cigarettes as “low tar” or “light” or “natural” or with other “deceptive brand descriptors which implicitly or explicitly convey to the smoker and potential smoker that they are less hazardous to health than full-flavor cigarettes.”

She rejected a government proposal that the industry be forced to underwrite a multibillion-dollar program to help smokers quit and to educate young people about the hazards of tobacco. Judge Kessler said that under a recent appeals court ruling she had no power to impose such large financial damages.

The judge said she regretted not being able to punish the companies further.

Her ruling said they were shown in a nine-month trial to have “marketed and sold their lethal product 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.”

Her 1,742-page decision amounted to a detailed history of the efforts of the industry — and, notably, its lawyers — over almost 50 years to confuse the public about a danger that was evident to the health professions.

Cigarette makers, the judge said, profit from “selling a highly addictive product which causes diseases that lead to a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss and a profound burden our national health care system.”

Although the failure to impose tougher penalties disappointed antitobacco groups, the decision could force tobacco companies to overhaul some ways of doing business, especially in marketing and advertising cigarettes and other tobacco products.

Judge Kessler also ordered the companies to begin an advertising campaign in newspapers and on television networks on “the adverse health effects of smoking.”

The remedies apply to Batco; Brown & Williamson; Lorillard; Philip Morris and its parent, Altria; and R. J. Reynolds, part of Reynolds American. Another defendant, Liggett, was excluded. The judge said it did “not have a reasonable likelihood of future violations.”

The Justice Department, which brought the case in 1999 in the Clinton administration and had seemed less eager to pursue it under President Bush, said in a statement it was disappointed that the court did not impose all of the penalties the department had recommended.

But the department said that it was “hopeful that the remedies that were imposed by the court have a significant, positive impact on the health of the American people.’’

In a statement on Thursday night, William S. Ohlemeyer, an Altria vice president and lawyer, said the companies believed that many parts of the decision were “not supported by the law or the evidence presented at trial, and appear to be constitutionally impermissible or infringe on Congress’ sole right to provide for the regulation of tobacco products.”

Wall Street analysts hailed the case as a big victory for the companies. “There’s nothing in this ruling that is going to hurt the profitability of the businesses,” said David Adelman, an analyst at Morgan Stanley.

Mr. Adelman said the ruling threw into question the fate of major brands like Marlboro Lights and Camel Lights. Sales of light brands constitute more than 50 percent of the cigarette market in the United States, according to Mr. Adelman.

Analysts also said they believed that the companies had strong legal grounds for a successful appeal.

“The likelihood that the ‘light’ issue ends here is low,” said Marc Greenberg, an analyst at Deutsche Bank. “I think this will get appealed to D.C. Circuit Court of Appeals, and there may even be issues here for the Supreme Court.”

William V. Corr, executive director of the Campaign for Tobacco-Free Kids, an antismoking group linked to the government suit, said he had hoped for tougher penalties. But Mr. Corr said he was pleased that that the judge had identified the tobacco companies as a “rogue industry” that was guilty of “50 years of lying to the American people.”

Mr. Adelman said he did not think that the companies would be damaged by the finding that they were deceptive. “This industry is not a bunch of Boy Scouts,” he said. “It’s an industry that was not well regarded by the public, anyway. So I don’t think there are significant public relations or legal ramifications from the decision.”

The decision was issued after American stock markets had closed. In early after-hours trading, the stocks of Altria, Reynolds American and other tobacco makers rose.

Among the companies named in the suit, Altria, the country’s largest maker of cigarettes, stands to gain the most, as the ruling clears the way for a much anticipated spinoff of its Kraft Foods unit.

The Associated Press reported that a spokesman for Reynolds, Mark Smith, said executives were “gratified that the court did not award unjustified and extraordinarily expensive monetary penalties.”

Mr. Smith said Reynolds was disappointed by other parts of the ruling, which its lawyers will analyze before suggesting action.

Representatives at Brown & Williamson did not return calls.

Before the ruling, tobacco companies had won a string of victories in cases involving the dangers of smoking. Last month, the Florida Supreme Court upheld a decision to toss out a $145 billion judgment in a class-action suit. In December, the Illinois Supreme Court threw out a similar $10 billion judgment against Philip Morris.

Cigarette makers have argued that it was unfair for the federal government to seek additional penalties in light of their $246 billion settlement in 1998 with state governments.

The federal case dates from 1999, when President Bill Clinton promised in his State of the Union address to unleash the Justice Department to bring a civil racketeering suit against tobacco manufacturers. The suit filed that year was one of the government’s largest in the scope of charges and the resources devoted to it, accusing cigarette makers of decades of fraud, deceptive advertising and dangerous marketing.

But the election of Mr. Bush, a major recipient of campaign donations from the industry, brought a re-examination of the case. John Ashcroft, the new attorney general, called the suit weak and pushed for an out-of-court settlement.

Career prosecutors working on the case protested a Justice Department decision last year to scale back its request for the companies to finance the national stop-smoking campaign, to $10 billion from $130 billion.

The department said it was forced to reduce the amount because of an appeals court decision last year that blocked the department from trying to seize ill-gotten profits from the tobacco industry’s past practices. At the time, Judge Kessler said the appeals court decision was a “body blow to the government’s case.”

Melanie Warner contributed reporting from Boulder, Colo., for this article.

http://www.nytimes.com/2006/08/18/washington/18tobacco.html?_r=1&th&emc=th&oref=slogin