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MarketScreener Homepage  >  Equities  >  Nyse  >  Reynolds American, Inc.    RAI

REYNOLDS AMERICAN, INC. (RAI)
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Reynolds American : Cigarette corrective statement ads set to begin in November Cigarette-makers to run corrective ads on smoking dangers starting in November

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10/04/2017 | 10:08am CEST

The order from federal judge Gladys provides specific "truth" statements for five categories:

* Adverse health effects of smoking, such as "more people die every year from smoking than from murder, AIDS, suicide, drugs, car crashes and alcohol combined.

* Addictiveness of smoking and nicotine.

* Lack of significant health benefit from smoking low tar, light, ultra light, mild and natural cigarettes.

* Manipulation of cigarette design and composition to ensure optimum nicotine delivery, such as "when you smoke, the nicotine actually changes the brain - that's why quitting is so hard."

* Adverse health effects of exposure to secondhand smoke, such as 'secondhand smoke kills over 3,000 Americans each year."

The nation's three largest tobacco manufacturers have agreed on the wording and timing of federal court-ordered corrective statements about the dangers of smoking combustible cigarettes.

The ads will commence Nov. 26. Full-page newspaper ads will run in major U.S. metropolitan areas, and 30- to 45-second spot ads will be shown on the ABC, CBS and NBC television networks. In North Carolina, the newspaper ads will be published only in Charlotte.

The ads are projected to cost several millions of dollars for each manufacturer. R.J. Reynolds Tobacco Co. said Tuesday that it could cost $20 million to comply.

Reynolds spokesman David Howard said Reynolds remains the entity obligated to comply with the court order even though it is now the U.S. subsidiary of British American Tobacco PLC.

"R.J. Reynolds Tobacco Co., along with the other parties, including the U.S. Department of Justice, filed joint consent motions in the U.S. District Court concerning the implementation of the court-ordered corrective statements," Reynolds said in a statement.

Each statement will begin: "A federal court has ordered Altria, R.J. Reynolds Tobacco, Lorillard and Philip Morris USA to make this statement ..." The manufacturers will take turns being the first listed in the statement.

The agreement settles an 18-year-old lawsuit about the marketing of the manufacturers and their various affiliates and acquisitions going back to the 1950s.

In 2006, U.S. District Judge Gladys Kessler ruled the manufacturers had concealed the dangers of smoking for decades. The U.S. Justice Department filed a civil case in 1999 under the federal Racketeer Influenced and Corrupt Organizations law, or RICO.

In April, a federal appeals court reaffirmed that the manufacturers are required to include corrective warning statements.

However, the U.S. Court of Appeals for the District of Columbia Circuit also ruled that the statements cannot include the phrase that Kessler required: "Here is the truth."

The court's order requires that the companies publish five statements related to cigarette smoking across several communication channels, including on their websites and on cigarette packs for at least a year.

The statement will cover these categories:

The adverse health effects of smoking.Addictiveness of smoking and nicotine.Lack of significant health benefit from smoking "low tar," "light," "ultra light," "mild" and "natural' cigarettes.Manipulation of cigarette design and composition to ensure optimum nicotine delivery.Adverse health effect of exposure to secondhand smoke.

"This industry has changed dramatically over the last 20 years, including becoming regulated by the FDA, which we supported," Murray Garnick, the general counsel for Philip Morris USA's parent company Altria Group Inc., said in a statement.

"We're focused on the future and, with FDA in place, working to develop less-risky tobacco products."

Ads to have themes

The newspaper ads with the corrective statements will appear in the front section of the Sunday edition on five different dates: Nov. 26, Dec. 10, Jan. 7, Feb. 4 and March 4.

Each week will feature a different statement theme. Some Spanish-language publications are among the newspapers listed for the ads.

The five broadcast TV ads will run weekly for an entire year, with the manufacturers having the option of when the ads run between 7 and 10 p.m. between Mondays and Thursdays.

The manufacturers are required to notify the federal court a week in advance which statement will run and on which network and in which time slot.

The parties are negotiating how the corrective statements will appear on the manufacturers' websites for the first five years of the court order. The goal is to reach a mock-up resolution by Oct. 23.

The 1998 Master Settlement Agreement with 46 state attorneys general led to significant industry changes that included banning cigarette billboards, stadium advertisements and brand-name merchandise.

Restrictions became more extensive in 2009 when Congress gave the Food and Drug Administration broad regulatory authority over nearly every aspect of tobacco product manufacturing and marketing.

"We remain committed to aligning our business practices with society's expectations of a responsible company," Garnick said. "This includes communicating openly about the health effects of our products, continuing to support cessation efforts, helping reduce underage tobacco use and developing potentially reduced-risk products."

Matthew Myers, the president of Campaign for Tobacco-Free Kids, said in April that he had mixed feelings about the appellate court's ruling.

"While the ruling should clear the way for publication of these long-overdue corrective statements, it is disappointing that the court rejected the 'here is the truth' requirement," Myers said.

"The fact that tobacco companies have repeatedly fought this simple phrase shows they haven't changed and remain as allergic to the truth as ever," he said.

In court filings, the manufacturers have argued that the 2009 Tobacco Control Act eliminated any reasonable likelihood the companies would commit future violations, thus making the need for remedies, such as corrective statements, moot.

The manufacturers filed a joint appeal of Kessler's ruling in January 2013. They have tried to persuade Kessler to reject the statements, calling them "forced public confessions" in legal filings.

The appellate court judges, in dealing with that appeal, ruled that Kessler's overarching statement and five "preambles" exceeded in part the U.S. District Court's limited remedial authority.

The statements were sent back to Kessler for further review.

The appeals court ruled in May 2015 that proposed federal corrective statements on cigarette advertising exceeded their legal reach with some parts of their language, particularly that tobacco manufacturers lied to consumers.

rcraver@wsjournal.com 336-727-7376 @rcraverWSJ

© © Copyright 2017, Winston-Salem Journal, Winston-Salem, NC, source Newspapers

Stocks mentioned in the article
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REYNOLDS AMERICAN, INC. 0.00%-End-of-day quote.0.00%
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Managers
NameTitle
Ricardo Oberlander President & Chief Executive Officer
McDara P. Folan Secretary, Director, SVP & General Counsel
Martin L. Holton Director & Chief communications officer
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