Tobacco Firms’ Obligatory Corrective Statements for Cigarette Harm, Addiction Claims Approved

This posting was written by E. Darius Sturmer, Editor of CCH Trade Regulation Reporter.

The federal district court in Washington D.C. yesterday finalized the text of corrective messages that most of the major domestic tobacco firms must publish on each of five topics on which the tobacco firms made false and deceptive statements about the health effects and addictive properties of their cigarettes. (U.S. v. Philip Morris USA, Inc., November 27, 2012, Kessler, G.)

The companies were required to publish the comments as part of a series of injunctive measures imposed by the court in 2006, upon a ruling that they had participated in a long-running RICO conspiracy to conceal the true hazards of smoking.

In association with this finding, the court determined that the tobacco firms had engaged in the scheme by making false and fraudulent statements, representations, and promises in advertising to consumers. These statements concerned: (1) the adverse health effects of smoking; (2) the addictiveness of smoking and nicotine; (3) the lack of any significant health benefit from smoking low tar, light, mild, or natural cigarettes; (4) the firms’ manipulation of cigarette design and composition to ensure optimum nicotine delivery; and (5) the adverse health effects of exposure to secondhand smoke.

The tobacco firms continue to engage in conduct “materially indistinguishable” from their previous unlawful actions “to this day,” the court noted.

The corrective statements are “necessary to prevent and restrain the defendants from continuing to disseminate fraudulent public statements and marketing messages,” according to the court. The court noted a decision by the U.S. Court of Appeals for the District of Columbia Circuit upholding its earlier determination that corrective statements targeted at revealing the previously hidden truth about cigarettes would prevent and restrain future RICO violations. The approved statements read as follows:

A. Adverse Health Effects of Smoking

A Federal Court has ruled that the Defendant tobacco companies deliberately deceived the American public about the health effects of smoking, and has ordered those companies to make this statement. Here is the truth:

• Smoking kills, on average, 1200 Americans. Every day.

• More people die every year from smoking than from murder, AIDS, suicide, drugs, car crashes, and alcohol, combined.

• Smoking causes heart disease, emphysema, acute myeloid leukemia, and cancer of the mouth, esophagus, larynx, lung, stomach, kidney, bladder, and pancreas.

• Smoking also causes reduced fertility, low birth weight in newborns, and cancer of the cervix and uterus.

B. Addictiveness of Smoking and Nicotine

A Federal Court has ruled that the Defendant tobacco companies deliberately deceived the American public about the addictiveness of smoking and nicotine, and has ordered those companies to make this statement. Here is the truth:

• Smoking is highly addictive. Nicotine is the addictive drug in tobacco.

• Cigarette companies intentionally designed cigarettes with enough nicotine to create and sustain addiction.

• It's not easy to quit.

• When you smoke, the nicotine actually changes the brain—that's why quitting is so hard.

C. Lack of Significant Health Benefit from Smoking “Low Tar,” “Light,” “Ultra Light,” “Mild,” and “Natural” Cigarettes

A Federal Court has ruled that the Defendant tobacco companies deliberately deceived the American public by falsely selling and advertising low tar and light cigarettes as less harmful than regular cigarettes, and has ordered those companies to make this statement. Here is the truth:

• Many smokers switch to low tar and light cigarettes rather than quitting because they think low tar and light cigarettes are less harmful. They are not.

• “Low tar” and filtered cigarette smokers inhale essentially the same amount of tar and nicotine as they would from regular cigarettes.

• All cigarettes cause cancer, lung disease, heart attacks, and premature death—lights, low tar, ultra lights, and naturals. There is no safe cigarette.

D. Manipulation of Cigarette Design and Composition to Ensure Optimum Nicotine Delivery

A Federal Court has ruled that the Defendant tobacco companies deliberately deceived the American public about designing cigarettes to enhance the delivery of nicotine, and has ordered those companies to make this statement. Here is the truth:

• Defendant tobacco companies intentionally designed cigarettes to make them more addictive.

• Cigarette companies control the impact and delivery of nicotine in many ways, including designing filters and selecting cigarette paper to maximize the ingestion of nicotine, adding ammonia to make the cigarette taste less harsh, and controlling the physical and chemical make-up of the tobacco blend.

• When you smoke, the nicotine actually changes the brain—that's why quitting is so hard.

E. Adverse Health Effects of Exposure to Secondhand Smoke

A Federal Court has ruled that the Defendant tobacco companies deliberately deceived the American public about the health effects of secondhand smoke, and has ordered those companies to make this statement. Here is the truth:

• Secondhand smoke kills over 3,000 Americans each year.

• Secondhand smoke causes lung cancer and coronary heart disease in adults who do not smoke.

• Children exposed to secondhand smoke are at an increased risk for sudden infant death syndrome (SIDS), acute respiratory infections, ear problems, severe asthma, and reduced lung function.

• There is no safe level of exposure to secondhand smoke.

In selecting from among the parties’ submissions of proposed corrective statements, the District Judge Gladys Kessler stated that the court had “broad discretion to formulate corrective statements.” After reviewing the Supreme Court’s development of the commercial speech doctrine and in light of more recent precedent, the court concluded that the statements passed Constitutional muster.

The statements were “purely factual and uncontroversial,” in the court’s view, and were therefore subject to the standard of review established by the Supreme Court in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985). Under Zauderer, challenged disclosures survive constitutional scrutiny if they are reasonably related to the government interest in preventing consumer deception and not otherwise unjust or unduly burdensome, the court explained.

Citing the massive “scope of the consumer fraud at issue here,” the court found that the preamble language provided important and necessary context for the consumer, and was therefore reasonably related to correcting and preventing future consumer deception. Furthermore, the court observed, the defending tobacco firms’ failure to point to any “burden” or “chill” that the statements would have on their speech precluded their argument that the statements imposed “far greater burdens” on their speech than “necessary to further the Government’s anti-fraud interest.”

The court added that even if the Zauderer requirements had not been met, the statements still would satisfy First Amendment scrutiny under another, lower standard of acceptable commercial speech.

The case is Civil Action No. 99-2496 (GK).

Healthcare Product Ads Falsified Studies; $11 Million Awarded for Corrective Advertising

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

GE Healthcare has been barred from falsifying scientific study results in advertisements for its Visipaque x-ray contrast medium product. The federal district in Trenton, New Jersey entered a permanent injunction and ordered GE to pay over $11.3 million to a competitor (Bracco Diagnostics) for corrective advertising. The court issued a 175-page opinion after a 39-day bench trial.

The crux of Bracco’s case was that GE violated the Lanham Act by falsely advertising Visipaque as superior to Bracco’s product, Isovue. GE Healthcare advertised establishment claims asserting that studies showed Visipaque to be superior in several ways, including renal and cardiovascular safety, lower costs, and less discomfort.

Literal Falsity, Injunction

In late 2002 and early 2003, GE focused its ad claims on a study published in the New England Journal of Medicine in early 2003 (the NEPHRIC study). Visipaque sales spiked following publication of the study.

The study concluded that renal damage may be less likely in high-risk patients when iodoxanol (the scientific name for Visipaque) is used rather than a “low-osmolar, nonionic contrast medium” (LOCM). The study was based on a head-to-head comparison of Visipaque with Omnipaque, an older GE Healthcare product. Both Omnipaque and Bracco’s Isovue are LOCMs.

While the greater number of GE’s advertisements were true, the court ruled that GE’s advertising of Visipaque as proven superior to all LOCMs was literally false. Based on the NEPHRIC study and other studies presented at trial, the court enjoined GE’s literally false claims of renal and cardiovascular safety, lower costs, and less discomfort.

Commercial Advertising and Promotion

While scientific articles are not commercial speech subject to regulation, secondary dissemination of the NEPHRIC article in GE’s advertisements did constitute commercial speech, the court held.

Oral statements made by GE Healthcare sales representatives, as evidenced by sales call notes, constituted commercial advertising or promotion. The sales call notes, albeit limited in number, were part of a full-scale marketing plan by GE to claim the benefits of Visipaque over LOCM alternatives through sales calls, websites, print marketing materials, and more, according to the court.

Lost Profits

Bracco’s request that GE Healthcare be required to disgorge its profits was declined. GE’s actions were not willful or deliberate, the court found. The creation of confusion and deception among customers due to GE’s advertising campaign was based on scientific studies and articles that had limited applicability. No scientific studies had explicitly found the converse of GE’s advertisements, the court noted.

Bracco failed to prove that it failed to win bids from large accounts as a result of GE’s conduct. Bracco also failed to carry its burden of showing that there was any causal connection between GE’s advertisements and the increasing sales of Visipaque to individual doctors and hospitals.

Corrective Advertising

Bracco did succeed in recovering over $11.3 million in costs incurred for corrective advertising. Damages could be presumed from the literally false ad claims, and GE failed to substantiate a claim that there was no connection between Bracco’s corrective advertising and GE’s false advertising. Bracco was not entitled to clinical study expenses allegedly incurred to refute GE’s false claims because such studies were undertaken as a regular cost of business in the healthcare industry, according to the court.

Future Disputes

The court ordered that any dispute between the parties arising from GE’s future advertising be submitted for resolution to a neutral panel or individual of the parties’ choice, such as the National Advertising Division (“NAD”), a division of the Council of Better Business Bureau.

The March 25, 2009 opinion in Bracco Diagnostics, Inc. v. Amersham Health, Inc. will be reported at CCH Advertising Law Guide ¶63,347.