R.J. Reynolds Tobacco Company

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IN THE MATTER OF R. J. REYNOLDS TOBACCO COMPANY CO"SENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATIO" OF SEC. 5 OF THE FEDERAL TRADE COMYlISSION ACT Docket C-3892, Complaint, Aug 1999--Decision, Aug. 1999 This consent order, among otherthings, prohibits R.J. Reynolds Tobacco Company, the North Carolina-based advertiser and distributor for Winston cigarettes, from making deceptive or unsubstantiated representations, and requires certain disclosures in the advertisements for cigarettes and other tobacco products. Participants For the Commission: Beth Grossman, Lisa Kopchik, Joel Winston C. Lee Peeler, Joseph Mulholland and Margaret Patterson. For the respondent: Judith Oldham, Coller, Shannon, Ril & Scott Washington, D.

COMPLAINT The Federal Trade Commission, having reason to believe that R.I. Reynolds Tobacco Company, a corporation ("respondent ), has violated the provisions ofthe Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges:

I. Respondent R.I. Reynolds Tobacco Company is a New Jersey corporation with its principal office or place of business at 401 North Main Street, P. B. 2959 Winston-Salem, North Carolina. 2. Respondent has advertised, promoted, offered for sale, sold and distributed tobacco products, including Winston cigarettes. 3. The acts and practices of respondent alleged in this complaint have been in or affecting commerce, as "commerce" is dcfined in Section 4 of the Federal Trade Commission Act. , 4. Respondent has disseminated or has caused to be disseminated advertisements for Winston cigarettes, including but not necessarily limited to the attached Exhibits A through F. These advertisements contain the following statements:

R.I. REYNOLDS TOBACCO COMPANY 263 262 Complaint (A) "Yours have additives. New Winstons don 100% tobacco 94% tobacco 6% additives True taste. Circular brand containing the words "No BULL" (B) "Winston just got naked.

No additives.

Circular brand containing the words "No BULL" (C) "Thank you for not smoking additives. Circular brand containing the words "No BULL" 100% tobacco True taste (D) "I get enough bull at work.

I don t need to smoke it.

WINSTON NO ADDITIVES TRUE TASTE"

Circular brand containing the words "No BULL" (E) " m not all sugar & spice.

And neither are my smokes.

WINSTON NO ADDITIVES TRUE TASTE"

Circular brand containing the words "No BULL" (F) "Still smoking additives Circular logo containing the words:

Winston straight up NO ADDITIVES' TRUE TASTE 5. Through the means described in paragraph four, respondent has represented, expressly or by implication, that smoking Winston cigarettes, because they contain no additives, is less hazardous to a smoker s health than smoking otherwise comparable cigarettes that contain additives.

6. Through the means described in paragraph four, respondent has represented, expressly or by implication, that it possessed and relied upon a reasonable basis that substantiated the representation set forth in paragraph five, at the time the representation was made. Complaint 128 FTC. 7. In truth and in fact, respondent did not possess and rely upon a reasonable basis that substantiated the representation set forth in paragraph five, at the time the representation was made. Among other reasons, the smoke from Winston cigarettes, like the smoke from all cigarettes, contains numerous carcinogens and toxins. Therefore, the representation set forth in paragraph six was, and is false or misleading.

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) ofthe Federal Trade Commission Act.

,,...

R.J. REYNOLDS TOBACCO COMPANY 265 262 Complaint EXHIBIT A 10"" ' 11""'''''''' "'oiJl;C""H'"

SURGEON GENERAL' S WARNING, Cigare\e Smoke Contains Carbon Monoxide.

Yours have additives New Winstons don True taste.

D""',,, ,,,,,.,=,o co, Complaint J28 FTC. EXHIBIT B EXHIBIT 8 ..::.

R.J. REYNOLDS TOBACCO COMPANY 267 262 Complaint EXHIBIT C Thank you for not smoking additives.

Winston 'ii(I0Jor ,,(JI ic1 '.a Omg .ta, . J9'1': niCCI,Coj'" CfCJg.reiie b)irCmeTi 100% tobacco i Wim SUPtGEGN GE"IEqAl'WARNING Qui\tingSmakmg True taste i Now Greatl Recu:es SerlQus Risks \0 Your Heallh 268 . FEDERAL TRADE COMMISSION DECISIONS Complaint 128 FT.C, EXHIBIT D get enougl latwor I don't need to smoke t !J -I _.

R.J. REYNOLDS TOBACCO COMPANY 269 262 Complaint EXHIBIT D o-Y'H'HT 'O Complaint EXHIBIT E SURGEON GENERAL'S WARNING Sinoking Causns Luag Cancer, livart Disease, Fnphysema, And May Complicate Pregnancy, mi not mo ANG! reith e cle n y5 1 13 1 1 7 1165 1596 110 101 66.774994 Sits 1 13 1 1 8 1127 1690 275 192 8.216736 “42 1 14 0 0 0 653 814 564 2169 -1 3 1 14 1 0 0 653 814 564 2169 -1 4 1 14 1 1 0 653 814 564 2169 -1 5 1 14 1 1 1 653 814 564 2169 95.000000 2 1 15 0 0 0 0 2317 0 281 -1 3 1 15 1 0 0 0 2317 0 281 -1 4 1 15 1 1 0 0 2317 0 281 -1 5 1 15 1 1 1 0 2317 0 281 95.000000 2 1 16 0 0 0 506 1102 401 1871 -1 3 1 16 1 0 0 506 1102 401 1871 -1 4 1 16 1 1 0 506 1102 401 1871 -1 5 1 16 1 1 1 506 1102 401 1871 95.000000 2 1 17 0 0 0 756 1167 194 396 -1 3 1 17 1 0 0 760 1167 190 396 -1 4 1 17 1 1 0 877 1168 73 226 -1 5 1 17 1 1 1 877 1168 73 226 95.864853 WINS4 1 17 1 2 0 756 1167 189 396 -1 5 1 17 1 2 1 756 1167 189 396 0.000000 wsron2 1 18 0 0 0 748 1345 41 170 -1 3 1 18 1 0 0 748 1345 41 170 -1 4 1 18 1 1 0 748 1345 41 170 -1 5 1 18 1 1 1 748 1345 41 170 96.066025 TASTE2 1 19 0 0 0 0 2450 0 93 -1 3 1 19 1 0 0 0 2450 0 93 -1 4 1 19 1 1 0 0 2450 0 93 -1 5 1 19 1 1 1 0 2450 0 93 95.000000 2 1 20 0 0 0 765 1087 187 72 -1 3 1 20 1 0 0 765 1087 187 72 -1 4 1 20 1 1 0 827 1089 125 70 -1 5 1 20 1 1 1 827 1089 125 70 40.502998 44 1 20 1 2 0 765 1087 56 68 -1 5 1 20 1 2 1 765 1087 56 68 45.033302 =z2 1 21 0 0 0 0 2915 0 87 -1 3 1 21 1 0 0 0 2915 0 87 -1 4 1 21 1 1 0 0 2915 0 87 -1 5 1 21 1 1 1 0 2915 0 87 95.000000 2 1 22 0 0 0 2234 108 316 3138 -1 3 1 22 1 0 0 2234 108 316 3138 -1 4 1 22 1 1 0 2234 108 316 3138 -1 5 1 22 1 1 1 2234 108 316 3138 95.000000 : , . : .

RJ. REYNOLDS TOBACCO COMPANY 271 262 Complaint EXHIBIT F WINSTC' , sox oC':x ;:1\ SURGEC' , GENERALS V\ARi'ING Q IIII g Smoking /.og;6,... e"",' No.dd"" slnou ::?"m Now G(''''' I Reducos SerlQUS Mlsks :0 '(our Healrh n"l!eldSte 5iH,"IUP Stil smoking additives? r;, , I' strillghtwp Iff- Complaint 128 F, EXHIBIT F F- J. REYNOLDS TOBACCO COMPANY 273 262 Decision and Order DECISION AND ORDER The Federal Trade Commission having initiatcd an investigation of certain acts and practices of thc respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Federal Trade Commission Act; and The respondent, its attorneys, and counsel for Federal Trade Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a 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, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commission s rules; and The Commission having considered the matter and having determined that it had reason to believe that thc respondent has violated the said Act, and that complaint should issue stating its charges in that respect, 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 filed thereafter by interested persons pursuant to Section 2. 34 of its Rules, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

I. Respondent R.I. Reynolds Tobacco Company is a corporation organized, existing, and doing business under and by virtue of the laws of the state of New Jersey, with its principal office or place of business at 401 North Main Street, P. B. 2959, Winston-Salem North Carolina.

2. The Federal Trade Commission has jurisdiction ofthe subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

Decision and Order 128 FTC. ORDER DEFINITONS For purposes of this order, the following definitions shall apply: I. " Competent and reliable scientific evidence shall mean tests analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that has been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.

2. Unless otherwise specified respondent shall mean R.I. Reynolds Tobacco Company, a corporation, its successors and assigns and its officers, agents, representatives and employees. 3. " Commerce shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S. C. 44.

4. "Advertisement shall mean any written or verbal statement illustration, or depiction that is designed to effect a sale or create interest in the purchasing of any tobacco product, including but not limited to a statement, ilustration or depiction in or on a brochure newspaper, magazine, free standing insert, pamphlet, leaflet, circular mailer, book insert, letter, coupon, catalog, poster, chart, billboard transit advertisement, point of purchase display, specialty or utilitarian item, sponsorship material, package insert, film, slide, or the Internet or other computer network or system. 5. " Tobacco product shall mean cigarettes, cigars, cigarilos little cigars, smokeless tobacco, cigarette tobacco, pipe tobacco, and any other product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product.

6. " Winston cigarettes shall mean all varieties and styles ofthe Winston brand of cigarettes, including but not limited to all lengths strengths, hard pack or soft pack, menthol or not. It is ordered That respondent, directly or through any corporation, subsidiar, division, or other device, in connection with the advertising, promotion, offering for sale, sale, or distribution of Winston cigarettes or any other tobacco product in or affecting commerce, shall display in advertisements as specified below, clearly !\ !! !! RJ. REYNOLDS TOBACCO COMPANY 275 262 Decision and Order and prominently, the following disclosures (including the line breaks punctuation and capitalization illustrated): In cigarette advertisements:

No additives in our tobacco does NOT mean a safer cigarette.

In advertisements for any other tobacco product: No additives in our tobacco does NOT mean safer.

These disclosures shall be displayed:

A. Beginoing no later than July 15, 1999, and continuing for a period of one year thereafter, in all advertisements for Winston cigarettes that contain no additives.

B. Except as provided for in Part ILA of this order, beginoing no later than thirty (30) days after the date of issuance of this order, in any advertisement that, through the use of such phrases as " additives, II 100% tobacco additive-free pure tobacco does not contain additives " or substantially similar terms, represents that a tobacco product has no additives.

Provided, that the above disclosures shall not be required in any advertisement that is not required to bear a health warning pursuant to 15 U. c. 1333.

Provided further, that the above disclosures shall not be required in any advertisement for a bona fide event, entrant, team or series presented or sponsored by any Winston tobacco product where (i) the advertisement contains the word Winston only as part of the name of the event, entrant, team or series and/or as part of the phrase "brought to you by Winston King, presented by Winston King, sponsored by Winston King, " or the equivalent ("the Phrase ); (ii) the Phrase is displayed in a type size, manoer and color contrast no greater than reasonably necessary so that it may be read; (iii) the advertisement does not, through the use of such phrases as "no additives 100% tobacco additive-free pure tobacco does not contain additives " or substantially similar terms, represent that the tobacco product has no additives; and (iv) there is no other selling message describing a featurc or attribute of Winston tobacco products. , Dccision and Ordcr 128 FTC Provided further, that the above disclosures shall not be required if respondent posscsses and relies upon competent and reliable scientific evidence demonstrating that such cigarettes or other to bacco product pose materially lower health risks than other cigarettes or other products of the same type.

For purposes of this Part clearly and prominently" shall mean as exemplified by Exhibits I and 2, attached to this order: I. In black type and black rule on a solid white background, or in white type and white rule on a solid red background, or in any other color combination that would provide an equivalent or greater degree of print contrast as objectively determined by densitometer or comparable measurements of the type and rule color and the background color; and 2. Centered, both horizontally and vertically, in a ruled rectangle. The area enclosed by the rectangle shall be no less than 40% of the size of the area enclosed by the ruled rectangle surrounding the health warnings mandated by 15 U. c. 1333. The width ofthe ruleforming the rectangle shall be no less than 50% of the width of the rule required for the health warnings mandated by 15 U. c. 1333. Provided that, if, at any time after this order becomes final, 15 c. 1333 is amended, modified, or superseded by any other law the area enclosed by the ruled rectangle shall be no less than 40% of the area required for health warnings by such amended, modified, or superseding law, and the width of the rule forming the rectangle shall be no less than 50% of the width of any surrounding rule required by such amended, modified, or superseding law; and 3. In the same type style and type size as that required for health warnings pursuant to 15 U. c. 1333. The word "NOT" shall be in bold typeface.

Provided that, if, at any time after this order becomes final, 15 c. 1333 is amended, modified, or superseded by any other law the type style and type size of the disclosure shall be the same as thc type style and type size required for warnings by such amended modified, or superseding law; and 4. In a clear and prominent location but not immediately next to other written or textual matter or any rectangular designs, elements or similar geometric forms, including but not limited to any warning statement required under the Federal Cigarette Labeling and Advertising Act, 15 U. c. I331 et seq. or the Comprehensive R.I. REYNOLDS TOBACCO COMPANY 277 262 Decision and Order c. 4401 et seq.Smokeless Tobacco Health Education Act, 15 U. addition, the disclosure shall not be positioned in the margin of a print advertisement. A disclosure shall be deemed "not immediately next to" other geometric or textual matter if the distance between the disclosure and the other matter is as great as the distance between the outside left edge of the rule of the rectangle enclosing the health warning required by 15 U. c. 1333 and the top left point of the letter S" in the word " SURGEON" in that health warning; and 5. For audiovisual or audio advertisements, including but not limited to advertisements on videotapes, cassettes, discs, or the Internet; promotional films or filmstrips; and promotional audiotapes or other types of sound recordings, the disclosure shall appear on the screen at the end of the advertisement in the format described above for a length of time and in such a manner that it is easily legible and shall be announced simultaneously at the end of the advertisement in a manner that is clearly audible.

Provided, however, that in any advertisement that does not contain a visual component, the disclosure need not appear in visual format, and in any advertisement that does not contain an audio component, the disclosure need not be announced in audial format. or in mitigation of anyNothing contrary to, inconsistent with, disclosure provided for in this part shall be used in any advertisement. Provided, however, that this provision shall not prohibit respondent from truthfully representing, through the use of such phrases " additives 100% tobacco additive-free pure tobacco does not contain additives " or substantially similar terms, that a tobacco product has no additives, where such representation is accompanied by the disclosure mandated by this order. It is further ordered That respondent shall: A. Instruct each RJ. Reynolds Tobacco Company sales representative to remove or sticker with the disclosure specified in Part I ofthis order any advertisement for Winston cigarettes displayed in a retail establishment where such advertisement, through the use of such phrases as "no additives 100% tobacco additive-free pure tobacco does not contain additives " or substantially similar terms, represents that Winston cigarettes have no additives and does Decision and Order 128 FTC. not include the disclosure specified in Part I of this order. The sales representative may remove or sticker such advertisements in the ordinary course of performing his or her duties, but in any event, shall remove or sticker all such advertisements in each of the retail establishments for which the representative is responsible no later than July 15 , 1999.

B. For five (5) years after thc date of issuance of this order maintain and upon request make available to the Federal Trade Commission for inspection and copying I) a copy of each different version of the letter instructing R.J. Reynolds Tobacco Company sales representatives to remove or sticker advertising pursuant to subparagraph A of this Part; and 2) a list of the name and address of each R.J. Reynolds Tobacco Company sales representative to whom such a letter was sent.

It is further ordered That respondent R.J. Reynolds Tobacco Company, and its successors and assigns, shall, for five (5) years after the last date of dissemination of any representation covered by this order, maintain and upon request make available to the Federal Trade Commission for inspcction and copying:

A. All advertisements containing the representation; B. For any representation covered by this order that is not accompanied by a disclosure set forth in Part I of this order: I. All materials that were relied upon in disseminating the representation; and 2. All tests, reports, studies, surveys, demonstrations, or other evidence in their possession or control that contradict, qualify, or call into question the representation, or the basis relied upon for the representation, including complaints and other communications with consumers or with governmental or consumer protection organizations. IV.

It is further ordered That respondent R.J. Reynolds Tobacco Company, and its successors and assigns, shall deliver a copy ofthis order, in either paper or electronic form, to all current and future principals, officers, and directors, and to all current and future managers employees, agents, and representatives having responsibilities with RJ. REYNOLDS TOBACCO COMPANY 279 262 Decision and Order respect to the subject matter of this order. Respondent shah secure from each such person either I) a signed and dated statement acknowledging receipt of the order; or 2) a dated, electronic acknowledgment indicating that the person has read, downloaded or printed the order. Respondent shall deliver this order to current personnel within thirt (30) days after the date of service of this order and to future personnel within thirt (30) days after the person assumes such position or responsibilities. Respondent shah maintain and upon request make available to the Federal Trade Commission for inspection and copying a copy of each signed statement acknowledging receipt of the order or a record, in either electronic or paper form, of each electronic acknowledgment of receipt of the order. It is That respondent R.I. Reynolds Tobacco further ordered Company and its successors and assigns shah notify the Commission at least thirty (30) days prior to the sale of any Winston cigarettes for which the composition or formula has been changed in such a manner as may affect compliance obligations arising under this order including but not limited to the addition of any additives to any variety of Winston cigarettes. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N. , Washington, D. VI.

It is further ordered That respondent R.I. Reynolds Tobacco Company and its successors and assigns shah notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including but not limited to a dissolution of a subsidiary, parent or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankuptcy petition; or a change in the corporatc name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. AH notices required by this Part shall be sent by certified mail to the Associate Director, Division of Decision and Order 128 FTC. Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N. , Washington, D. VII.

It is further ordered That respondent R.I. Reynolds Tobacco Company, and its successors and assigns shall, within sixty (60) days after the date of service of this order, and at such other times as the Federal Trade Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.

VII This order will terminate on August 16, 2019, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation ofthe order, whichever comcs later; provided, however, that the filing of such a complaint will not affect the duration of: A. Any Part in this order that terminates in less than twenty (20) years;

B. This order s application to any respondent that is not named as a defendant in such complaint; and C. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided further, that if such complaint is dismissed or a federal court rules that the respondent did not violate any provision of the order and the dismissal or ruling is either not appealed or upheld on appeal then the order will terminate according to this Part as though the complaint had never been fied, except that the order will not tcrminate between the date such complaint is filed and the later of the dcadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal.

g R.I. REYNOLDS TOBACCO COMPANY 262 Decision and Order EXHIBIT I All taste. No bull.

No additi es in our lobacco does NOT mean a safer cigarene.

,5. ' : I er O(;D!IJ"iN Dir!Q'el1 ;I;mema . r.\. SURGEON GENERAL'S WARN NG Smoking 100% tobacco Causes long Cancer Hem! Disease. Wiu Emoh'fsema. And May Complic,Jte Pregnancy No addities t. I ;: ,. :: .

Decision and Order 128 FTC. EXHJBIT 2 ;E RJ. REYNOLDS TOBACCO COMPANY 283 262 ConcuITiog Statement CONCURING STATEMENT OF COMMISSIONER ORSON SWILE I have voted to issue this consent order because the remedies including a corrective statement in Winston advertisements for one year, are warranted by the facts of this case. The nationwide advertising campaign for "no additives" Winston cigarettes, launched in August 1997, is unusually extensive. Based on my reading of the record, I am convinced that many consumers interpret ads containing express "no additives" claims to mean that Winstons are not as harmful as other cigarettes, and such a heath claim is presumably important to consumers in their purchasing decisions. Based on the extent and magnitude of the ongoing ad campaign and the demonstrated strength of the implied health claim, I am willing to infer that the claim will linger in the minds of consumers for one year absent a corrective statement. I am particularly concerned about a lingering effect of the ads because of the well-recognized health risks of smoking. Under these circumstances, I support the corrective advertising remedy contained in the consent order. CompJflint 128 FTC.