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Tobacco Case

In: Business and Management

Submitted By ivyma214
Words 2777
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1.
In the Central Hudson Case, Judge Powell summarized that this case presents the question whether a regulation of the Public Service Commission of the State of New York violates the First and Fourteenth Amendments because it completely bans promotional advertising by an electrical utility, 447 U.S. 557, which is closely related to the tobacco cases. Several opinions presented by Judge Powell can apply in these cases.
First, in applying the First Amendment to this area, Judge Powell rejected the “highly paternalistic” view that government has complete power to suppress or regulate commercial speech.
Second, the Judge also believed that if the communication is neither misleading nor related to unlawful activity, the government’s power is more restricted. The government agency must assert a substantial interest to be achieved by restrictions on commercial speech. Moreover, the regulatory technique must be in proportion to that interest.
Furthermore, the Central Hudson case set the standards as for whether a governmental restriction on speech is constitutionally admissible. It also provided several tests as for whether the restriction is constitutionally admissible.
The Central Hudson case, as a key precedent, also developed a four-part analysis for similar cases. a) Determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. b) Examine whether the asserted governmental interest is substantial. c) If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted and d) whether it is not more extensive than is necessary to serve that interest. I will discuss how the Central Hudson as a precedent applies in the following two tobacco cases according to the four-part analysis method above. 1) Reynolds v. FDA (DC case) a) The tobacco commercials are generally legitimate and protected by the First Amendment. b) In view of the potential damage to health caused by smoking, no one can doubt the importance of warning people of the health risk. Therefore, the governmental interest is substantial. c) For the relationship between the governmental interest and the advertising regulation, FDA’s concern over the health issue does not provide a constitutionally adequate reason for forcing companies to use labels featuring “a man breathing smoke out of a tracheotomy hole in his neck and a mouth punctured with what appear to be cancerous lesions.” d) FDA’s regulation of putting labels on tobacco’s packaging is legitimate, yet the health concern, as important as it is, cannot justify some regulations enforced by FDA, such as the packaging images mentioned above. In addition, “no showing has been made that a more limited enforcement on the packaging would not serve adequately the governmental interests.” In fact, as suggested by Judge Leon, there are alternative ways to convey the health risks of smoking without violating the First Amendment.

2) Discount v. United States of America (KY case) e) The tobacco commercials are generally legitimate and protected by the First Amendment. f) The government’s interests in preventing juvenile smoking and warning the general public are substantial. g) According to district court, the ban of modified risk tobacco products (see 1:09-CV-117-M) does provide constitutional reason for requiring tobacco companies to use specific packaging and graphics. However, the Appeal court decided that the Government failed to show that continuity programs had a material effect on juvenile tobacco use, or that the ban of such programs would result in a material reduction of juvenile use. So the Government failed to sustain its burden under Central Hudson with regard to the ban on continuity programs, but all other marketing bans at issue were constitutional, as certain prohibited statements were inherently misleading and false (see 12a0076p.06; 674 F.3d 509). h) For the most part, the modified risk tobacco products lead a great number of people, especially juveniles, to believe that an unsafe product is relatively safe. So the FSPTCA’s ban is necessary for the commercial speeches that contain misleading or false information.

2. The lower court spent a great deal of efforts into judging the constitutionality of “coerced negative marketing,” and their opinions varied on the issue of what level of court scrutiny should be applied to the legislative and administrative rules here. According to United States Court of Appeal, the level of scrutiny in question should depend on specific restrictions FDA wanted to enforce. According to the Zauderer standard, narrow exceptions do exist and allow the Government to require certain disclosures to protect consumers from confusion or deception. Zauderer, 471 U.S. at 651. In the DC case, the packaging images required by FDA neither meet the Zauderer standard, nor are narrowly tailored to avoid an undue burden to the plaintiffs’ speech, as the graphic-images were either factual nor accurate, and they were designed to provoke the views to quit smoking by evoking a horrifying emotional feeling. So in DC case, the rule does not fit into the Zauderer exception for purely factual and uncontroversial information. See Pac. Gas & Elec., 475 U.S. at 15 n.12. Thus, those images must withstand the strict scrutiny analysis the Supreme Court imposes on Government regulations which compel commercial speech.
In the KY case, although visual images are subjective and cannot be categorized as mere health disclosure warnings, there is no indication that the textual element of the new warning labels, when viewed in isolation, expresses either completely “subjective” or “highly controversial” messages. See 12a0076p.06; 674 F.3d 509. Also, plaintiff cannot prove that the health warnings are in contradict with existing scientific or medical principles. Like other disclosures governed by the Zauderer standard, tobacco disclosures in this case are necessary to prevent its being deceptive. Va. State Bd. of Pharmacy, 425 U.S. at 772 n.24. So a less strict scrutiny is can be applied.
Overall, the level of scrutiny depends on whether the requirements of FDA fall into the type of purely factual, accurate and uncontroversial disclosures. If the requirements are indeed factual and uncontroversial, they are more likely to be reviewed under a less stringent standard.

3. The court applied a rational-basis standard in the KY case and a strict scrutiny standard in the DC case. To be specific, in the KY case, the court believed that a disclosure need not be purely factual and noncontroversial to apply the rational-basis rule because the phrase never appears in Zauderer v. Office of Disciplinary Counsel of the Sup. Ct. of Ohio. Whereas in the DC case, the court based the judgment on the fact that the disclosure required by the government agency failed to be fully factual and uncontroversial, so the provision is not reviewable under a less stringent standard and therefore it is in violation of the First Amendment.
From another perspective, in the DC case, the image enforced by FDA failed to withstand the strict scrutiny analysis imposed on Government regulations which compelled commercial speech. In the KY case, however, Plaintiffs’ attempt to circumvent the distinction between commercial and non-commercial speech by arguing that their commercial speech can be counted as fully protected speech and thus still governed by the “test or fully protected expression”.
As commercial speech is fully protected by the First Amendment and governed by the stricter test for fully protected expression, the plaintiffs in the KY case attempted to argue that their commercial part cannot be separated by non-commercial part of the speech, yet the provision was targeted at the customer-oriented claims regarding a manufacturer’s specific products, so the attempt failed. In addition, the MRTRP’s (modified risk tobacco product rule) requirement survives Central Hudson’s fit and tailoring test, and thus it does not violate the First Amendment. In the DC case, the plaintiffs made no attempt to claim the speech in question is non-commercial.

I found the set of ruling in the DC case more persuasively reasoned out based on the following reasons. First, the appeal court believed a disclosure need not be purely factual and noncontroversial to apply the rational-basis rule simply because the phrase did not appears in the Zauderer case. Yet the United States Supreme Court used the wording “required factual information and only an accurate statement” when describing the disclosure that is scrutinized for on a rational basis.
Second, the strict scrutiny method adopted by the court in judging the KY case tend to be easier and more accurate to determine when it comes to the First Amendment issue. Regulations designed by governmental organizations come in many different forms and wordings, and thus deciding whether the provisions are factual, accurate and uncontroversial becomes the core of the problem. Also, the strict scrutiny standard usually generate more accuracy in judging the provisions, as the assessment of factuality, accuracy and fairness tend to provide more credibility and recognition than basing the judgment mainly on the Zauderer case.
Last but not least, the strict scrutiny standard bears more similarity to the rulings made by the Supreme Court in the First Amendment related cases, as I will be discussing in more details in question 4.

4. The Supreme Court would probably found that First Amendment concerns applied in the tobacco cases based on the following reasons specifically related to the basis used and judgments made in each case. a) In the Sorrell and Brown cases, the Supreme Court contended that Vermont violate Federal Constitution’s First Amendment, because law did not advance stated policy goals of lowering costs of medical services and promoting public health in a permissible way. 131 S. Ct. 2653. Similarly, in the tobacco cases, although the governmental interest of increasing viewers’ awareness of smoking risks is substantial, there is no law stating that this goal is permissible under the First Amendment, and thus the provisions compelled by the governmental institutions are unconstitutional. b) In the Glickman case, the advertising provisions were decided constitutional because (1) the generic advertising assessments did not constitute compelled speech or abridge the freedom of speech protected by the First Amendment; (2) it was error for the Court of Appeals to have applied the Central Hudson commercial speech test; and (3) the advertising program was a species of economic regulation that should have enjoyed the same strong presumption of validity accorded to other policy judgments made by Congress. 521 U.S. 457. However, situations in the tobacco cases are different so the judgment reached by the Supreme Court cannot be directly applied based on the following reasons: i. Whether the graphic-images and other provisions abridged the freedom of speech protected by the First Amendment is open to questions. Many believed that the images “were neither designed to protect the consumer from confusion or deception, nor to increase consumer awareness of smoking risks,” 823 F. Supp. 2d 36. Judging from these opinions, the images’ effects might be evoking a strong negative response urging the viewers to stop smoking rather than the original governmental interest of warning health risks. ii. For the modified risk tobacco products mentioned in the KY case, the Supreme Court might grant a partial unconstitutional judgment for the case if further investigation shows that the statements for these products were indeed misleading and false. iii. Unlike the third point made by the Supreme Court in the Glickman case, the provisions enforced in these tobacco cases were not species of economic regulation that should have enjoyed the same strong presumption of validity accorded to other policy judgments made by Congress. 521 U.S. 457. c) In the Johanns case, the plaintiffs could have challenged compelled support of private speech, but the compelled funding of government speech did not raise First Amendment concerns. Yet in the tobacco cases, there were no concern over the issue of funding government speech. As the Supreme Court acknowledged that the plaintiffs should have based their arguments on the compelled support of private speech, the tobacco provisions have a large chance to be contended as unconstitutional in the Supreme Court. d) In the United Foods case, the Supreme Court found that First Amendment concerns applied since the producers were required to subsidize speech with which they disagreed. 533 U.S. 405. Just as the First Amendment may prevent the government from prohibiting speech, the Amendment may further prevent the government from compelling individuals to express certain views. Also, the United Foods case also mentioned that in the context of commercial speech, the general rule is that the speaker (the tobacco companies) and the viewers should assess the value of the information presented. So whether the governmental interest is presented in the compelled information is open to question. Overall, the provisions imposed on the tobacco companies might be rules as unconstitutional in the Supreme Court.

Since the tobacco companies were compelled to package their products with graphic images that contained information with which they disagree, or forced to include other speeches with value to be determined, the provisions would likely to be determined unconstitutional by the Supreme Court.

5. Decisions made by the Court provide valuable implications for future business operations in the tobacco industry. First I would like to introduce a chart featuring the common tactics used by tobacco industry to resist tobacco control.

Tactic | Goal | Intelligence gathering | To monitor opponents and social trends in order to anticipate future challenges | Public relations | To mould public opinion, using the media to promotepositions favorable to the industry | Political funding | To use campaign contributions to win votes andlegislative favors from politicians | Lobbying | To make deals and influence political processes | Consultancy | To recruit supposedly independent experts who arecritical of tobacco control measures | Funding research, includinguniversities | To create doubt about evidence of the health effects of tobacco use | Smokers’ rights groups | To create an impression of spontaneous, grassrootspublic support | Creating alliances and front groups | To mobilize farmers, retailers, advertising agencies, the hospitality industry, grassroots and anti-tax groups with a view to influencing legislation | Intimidation | To use legal and economic power as a means of harassing and frightening opponents who support tobacco control | Philanthropy | To buy friends and social respectability from arts, sports, humanitarian and cultural groups | Corporate social responsibility | To promote voluntary measures as an effective way to address tobacco control and create an illusion of being a “changed” company and to establish partnerships with health interests | Youth smoking prevention and retailer education programs | To appear to be on the side of efforts to prevent children from smoking and to depict smoking as an adult choice | Litigation | To challenge laws and intimidate tobacco industry opponents | Smuggling | To undermine tobacco excise tax policies and marketing and trade restrictions and thereby increase profits |

Obviously, the strategy adopted by the tobacco companies in question falls into the category of “litigation”, but as we can see, there are a great number of tactics that could be adopted other than legal method, which usually takes a long period of time, requires relatively high financial support and often generates unforeseen outcomes. Considering the degree of uncertainty in the judgments reached by the courts, companies might want to seek other more efficient methods to resist tobacco control from the government and relevant institutions.
On the other hand, judgments from litigation activities usually render valuable suggestions as for how other tactics should be implemented. For example, as mentioned in the United Foods case, the value of the compelled information should be assessed by the speaker and viewers/audience, instead of the government. So the marketing departments of these tobacco companies may want to consider launching a survey assessing the viewers’ perceptions towards the graphic-images and other speech required by the government. If the survey results reveal that the perception is essentially different from the original governmental interest, the tobacco companies might argue the unconstitutionality of the regulations.
Another implication is that tobacco companies should avoid disguising their modified risk tobacco product with untrue or misleading statements. This action is usually easily detected by the court, as a specific two-step test is applied, and thus would not generate desired results.
Finally, if the tobacco companies are considering the possibility to take legal action, one of the most important factors in the determination process should be locating the true vulnerability of the governmental provisions and focus on how the flaw relates to the First Amendment. Otherwise, they may find themselves attacking the wrong aspect of the question, and end up like the plaintiffs in the Johanns case.

--------------------------------------------
[ 1 ]. Stephanie Strom, U.S. Judge Strikes Down F.D.A. Cigarette Labels, February 19, 2012 NY Times
[ 2 ]. Stephanie Strom, U.S. Judge Strikes Down F.D.A. Cigarette Labels, February 19, 2012 NY Times
[ 3 ]. Tobacco Industry Interference with Tobacco Control, World Health Organization, 2008

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Executive Summary of the Case Against the Tobacco Industry

...The Case 2 Available Statistics 3 Political Spending 3 Prior Litigation 3 The Strategy 4 Liggett Breaks Away 4 First Round of Talks 5 First Round Negotiations 6 Problem Assessment after First Round of Negotiations 6 Solutions 6 Second Round of Talks 7 Second Round Negotiations 7 Problems during the Second Round of Negotiations 7 Third Round of Talks 8 Resolution of Issues 8 The Settlement 8 Key Players Prosecution 1. Mike Moore, Attorney General Mississippi 2. Bob Butterworth, Attorney General Florida 3. Dickie Scruggs, Plaintiff Lawyer 4. Scott Harshbarger, Attorney General Massachusetts Defense 1. Steven Goldstone, CEO RJR Nabiasco 2. Geoffrey Bible, CEO Philip Morris 3. Martin Broughton, Head of B. A. T. (parent company of Brown and Williamson) The Case The negotiation took place between the five largest tobacco companies of the United States, namely, Philip Morris, R. J. Reynolds, Brown and Williamson, U. S. Tobacco and Lorillard, and the Attorneys General of several states of America, where the later accused the former of burdening the taxpayer with costs of tobacco-related illnesses through the Medicaid Program, and for breaking the law by selling their product to children under the age of 18. The prosecution wished for the defense to: 1. Accept the responsibility of the illnesses and deaths caused due to the use of their product. 2. Pay a heavy compensation for the Medicaid costs of......

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