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f Ih1DEX TO APPENDIX PAGP Modified Order to Cease and Desist ................. 1 Findings as to the Facts and Conclusion .............. 4 Commission's Exhibits Numbers 48.................. . 11 49. 50. 53. 58. 225. 227. 13 15 17 19 ..... 21 ..... 22 228 ................. 23 229 ................. 24 Article-Cigarette Ad Fact andl Fiction .............. 25 Stipulation as to the Facts, dated Nbvern e r-20-,t944-~9 Stipulation dated January 17, 1945 .................. 34 Order Rescinding Approval of Stipulations and~ Reopening Case for Further Testimony ..................... 36 Motion to: Strike from the Record the "Order" of the Com- mission dated June 2, 1945, and all Proceedings taken pursuant thereto; and to Proceed to Dispose of the Pro- ceeding upon the Record as it existed~ on January 17, 1945 .... ................................ 38 Letter dated April 9, 1945, from Perkins, Daniels & Perkins to the Fed'erat Trade Commission, to which was an- nexed proposed Stipulation as to the Facts and corre- spondence between Counsel and the Commission re- garding the negotiations leading to the Stipulations of November 20, 1944 and January 17, 1945 .......... 40

t i 1. UNITED STATES' OF AMERICA BEFORE FEDERAL TRADE COMMISSION COMMISSIODIERS': Lowell B. Mason, Acting Chairman William A. Ayres John Carson~ James M. Mead In the Matter of / DOCKET No. 4922 P. LORILLARD COMPANY, a corporation MODIFIED ORDER TO CEASE AND DESIST This proceeding was heard by the Federal `1'rade' Commis- sion upon the complaint, answer of the respondents, testimony and other evidence taken before trial examiners of the Com- mission theretofore duly designated by it, recommended deci- sion of the trial examiner and exceptions filod therem by coun- sel SllDDa_r[in th P rnrr,nl _ ----~~.''

2 for modifying said ord'er to cease and desist; and~ the Commis- sion having considered such additional proposals and having rejected same for the reason that an order to cease and desist embodying such proposals would not adequatelly protect the public against a continuation or resumption of the practices found to be unfair and deceptive, and being of the opinion that the order to cease and desist heretofore issued in this proceeding should be modified' in the respects set forth: in said'l rule to show cause: Now, THEREFORE, IT IS o1MExEV that said order to cease and desistbe, and the same hereby is, modified to read~ as fol- lows: "IT IS oPJ)E-anv that tlie respondent, P. Lorillard Company, a corporation, and its officers, representatives, agents, and em- ployees; directly or through any corporate or other device, in or in connection with the offering for sale, sale, and distribu- tion in commerce, as ` comrnerce" is defined in the Federal Trade Commission~ Act, of its products Beech-Nut cigarettes,. Sensation cigarettes, Old GoU cigarettes, and Friends smoking tobacco, do forthwith cease and desist from representing by any means, directly or indirectly._ "(1)1 That~ Beech-Nut cigarettes, or any other cigarette composed of substantially the same blend of tobaccos, or the smoke therefrom, will not harm or irritate the throat;, or will provide any defense against throat irritation; or that the extra length of Be.ech-Nut cigarettes, or of any other cigarette of substantially the same length, will filter out or eliminate the harmful properties in the smoke from such cigarettes or will cause the smoke from such cigarettes to be cooler than the smoke from cigarettes of standard length; provided, however, that nothing herein shall be construed to prohibit the respondent from representing that during the time the extra: of any such cigarette is being smoked the smoke therefrom will contain less irritating properties and will be cooler than the smoke from standard length cigarettes;

"(2) That Sensation cigarettes, or any, other cigarettee composed of substantially the same blend of tobaccos, aree made of extra-choice imported and domestic tobaccos, or are top quality cigarettes, or are made from the finest to- bacco that~ can be bought; "(3) That Old Gold cigarettes or the smoke therefrom contains less nicotine„ or less tars and resins, or is less irri- tating to the throat~ than the cigarettes or the smoke there- from of any of the six other lieading brands of cigarettes; or "(4) That Friend's smoking tobacco, or any other smok- ing, tobacco manufactured in substantially the same man- ner, is rum-cured, or that the process by which a rum flavor- ing is addedl to such tobacco enriches the tobacco or causes the smoke therefrom to be any less irritating m the throat or any cooler than if such rum flavoring were not added; or that the smoke from~ Friends smoking tobacco, or from any other smoking tobacco composed of substantially the same blend of tobaccos, will not'~ irritate the mouth or throat of a smoker, or is cool, or is free from bite, burn, or harsh- ness. . "IT IS FURTHER ORDEREID that respondent shall, within sixty (60) days after service upon it of this order, file with the Com- mission a report in writing, setting forth in detail the manner and form in which it has complied with this order." By the Commission. /s/ D. C. DANIEL D. C. Daniel, Secretary. ISSUED: May 24, 1950

4 UNITED STATES OF AMERICA BEFORE FEDERAL TRADE COMMISSION COMMISSIONERS: Lowell' B. Mason, Acting Chairman, William A. Ayres, John Carson, James M. Mca& In the Matter of P. LORILLt1RD COMPANY, a corporation. DocxET No, 4922. FINDINGS AS TO THE' FACTS--AND CO11dCLUSION mony and other evidence, the trial examiner's recommended decision and exceptions thereto by counsel supporting the com- Pursuant to the provisions of the Federal Trade Commission Act, theFederal' Trade Commission on March 2, 1943, issued and subsequently served its complaint in this proceeding upon the respondent, P. Lorillard Cornpany,, a corporation of the State of New Jersey, charging said respondent with the use of unfair methods of competition in commerce and unfair and de- ceptive acts and practices in commerce in violation of the provi- sions of that Act. After the filing of the respondent's answer to the complaint, testimony and other evidence were introduced before trial examiners of the Commission theretofore duly desig- nated by it and such testimony and other evidence.were duly recorded and fil'ed in the office of the Commission. Thereafter this proceeding regularly came on for final hearing before the Commission upon the complaint~, the respondent's answer, testi- ._

plaint, and brief in support of the allegations of the complaint (no brief having been filed by respondent and oral argument not having been requested); and the Commissions having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in~ the interest of t'he pub- lic and makes this its findings as to the facts and its conclusion drawn therefrom. FINDINGS AS TO THE FACTS PARAGRAPH SEVnrr: In the course and conduct of its af'ore- said business and for the purpose of aiding and promoting the sale of its aforesaid Old GoU brand of cigarettes, respondent disseminated and caused to be disseminated, by the United States mails, in magazines of nation-wide circulation and news- papers of interstate circulation, by local radio broadcasts and by nation-wide hookups of broadcasts, and by other means in com- merce, advertisements in which it' represented directly and by implication that of the seven~ leading brands of cigarettes, Old Gold cigarettes are lowest in nicotine content and are lowest in throat,irritating tars and resins; and that the July 1942 issue of. Reader's Digest, a monthly magazine of nation-wide and inter- national circulation,, contained a report'of tests of seven leading cigarettes, which tests showed that the smoke from Old Gold cigarettes had less nicotine than~ the smoke, from the other six brands tested and that Old Gold cigarettes contained less throat= irritating tars and resins and were easier on the throat than the other six brands tested. PARAGRAPH EIGHT: Throug4 the use of the aforesaid repre- sentations respondent has represented to the public that both 'the tobacco in Old' Gold cigarettes and: the smoke therefrom contain less nicotine than the tobacco and the smoke therefrom of any of six other leading brands of cigarettes and that Old Gold cigarettes contain less tars and resins and are therefore less irri- tating to the throat than any of six other leading brands of cigar- ettes. It is established by scientific evidence that the nicotine

0 6 content of the smoke of a cigarette is in direct proportion to the nicotine content of the tobacco contained in the cigarette itself. It is further established by scientific evidence that the nicotine content of the tobaccos used in the manufacture of popular brand's of cigarettes, including respondent's Old Gold brand and the six other brands with which respondent's Old GoU cigar- ettes were compared, varies greatly, not only as among the sev- eral types of tobaccos usedi (principally flue-cured, Burley, and Maryland) but al'soas among the indkvidual plants of the same types of tobacco on the same farm and in the same field, and even as among the leaves on the same plant. These variations are due to a number of variablc factors; including weather con- ditions, type of soil, method of fertilization and cultivation, method of harvesting, and handling after harvesting. There is no index by which the tobacco buyers for any cigarette manu- facturer can judge the nicotine content in tobacco leaves by visual inspection. Also due to the aforementioned variations in the nicotiine content of tobacco, constancy in the nicotine con- tent of the tobaccos purchased by any cigarette manufacturer cannot be maintained through the purchase of only the leaves in a: certain position on the tobacco plant, or by sampling speci- mens of the tobaccos, or in any other manner. There is no known practical process by which the nicotine ain the tobacco leaf may be removed or substantially reduced without at~ the same time destroying the tobacco for commercial use. Because of tlre large amount of tobacco leaves used in the manufacture of cigarettes and the extreme variability in nico- tine content of the leaves, it is not practically possible for respondent, or any of the other manufacturers of leading brands of cigarettes, to! maintain a constancy of nicotine in the -finished cigarette. The record contains certain testimony and reports ~concerning a series of tests which were made by the Food and Drug Administration, at the instance of the Commission, 'for ,the purpose of determining, among other things, the nicotine content of the tobacco in andl the smoke from a number of cigar- ettes of six of the largest selling brands, including responclent's ;Old Gold brand. The results of these tests showed that -the

7 nicotine content of both the tobacco in and the smoke from the individual cigarettes involved in the tests varied greatly, both in actual weight and in percentage by weight of the cigarettes, not only as among the six different brands but also as among the individual cigarettes of the same brand. Since the nicotine content of the tobaccos used by respond- ent in the manufacture of its Old GoU cigarettes as well as those used by the manufacturers of other leading brands of cigarettes varies materially, and since it is not practically possible for respondent, or any of its principal competitors, to know the nicotine content'~ of the tobaccos purchased, or to remove or sub- stantially reduce such nicotine content, or to maintain constancy in the amount of nicotine in the finished cigarette or in the smoke therefrom, it follows that respondent's Old Gold cigar- ettes and the smoke therefrom do not contain any less nicotine than do the cigarettes and the smoke therefrom of other leading brands on the market. With respect to the aforesaid representations that Old Gold cigarettes contain less tars and resins and are therefore less irritating to the throat than any of six other leading brands of cigarettes, it is establ7shed' by scientific_evidence that 4he- -tars- and resins in the tobaccos from which respondent's Old Gold cigarettes, as well as other popular brands of cigarettes, are made vary considerably, as does the nicotine content, and for the same reasons. It is not practically possible for respondent, or any of its principal competitors, to determine the amount of tars and resins in the tobaccos purchased, or to remove or substantially reduce the amount of tars and resins in such tobaccos, or to paintain constancy in the amount of tars and resins in the fin- ished cigarettes: The testimony and reports concerning a series of tests made by the Food and Drug Administration, mentioned hereinabove in connection with the nicotine content of cigar- ettes, also show that for the individual cigarettes involved in the .tests the amount of tars and resins in the smoke varied greatly, both in actual weight and in percentage by weight of the cigar- ettes, not, only as between the six different brands tested but also as among the individual cigarettes of the same-brand. The 4': 11

8 tars and'resins in the smoke from all cigarettes have an irritating effect on the human body. Respondent's Old Gold cigarettes contain no less tars and' resins t'han other leading bran.d's of cigarettes and, therefore, the smoke from respondent's Old Gold cigarettes is no~less irritating to, the human body, or easier on the throat, than the. smoke from other leading brands of cigarettes. The Commission finds from, the evidence that the aforesaid representations by respondent that the tobacco in Old Gold cigarettes and the smoke therefrom contain less nicotine than the tobacco and the smoke therefrom of any of six other leading brands of cigarettes on the market, and that its Old Gold cigar ettes contain less tars and resins and are therefore less irritating to, the throat than any of six other leadirig brands of cigarettes, are false; misleading, and deceptive. The July 1942 issue of Reader's Digest contained an article entitled "Cigarette Ad' F'act and Fiction", which was based on a report by a research laboratory on certain tests of seven com- mercial brands of cigarettes. Respondent: in its advertising, made representations concerning said article and the report on which it was based, assct out in Paragraph Seven hereof, without disclosing significant facts contained therein. Said article showed that the average amount of nicotineper cigar- ette and'the percentage of tars in the smoke from the cigaret'testesteJ varieJ but little as between thedifferent brands of cigar rertcs, an& contained thefollowing statement with respect to the tests reported on therein:"The laboratory's general conclusion will be~ sad news for the advertising copy writers, but good' news for the smoker, who, need no longer worry as to which cigarette can most effectively nail down his coffin. For one nailisjust about as good as another. Says the laboratory report: 'The differences between brands are, practicallv speaking, small, and no single brand is so superior to its conrpetitors~ as to justi fy its selection on the ground that it is less hkrmf ul'." q--a-_,~,

In fact, the difference shown: in said article in the average amount of nicotine content per cigarette in the smoke of the Old Gold cigarettes tested and that in each of two other brands tested was only %771s7 of an ounce, and thee difference shown in said~ article between the average amount of nicotine content per cigarette in the smoke of thc, brand of cigarette reported as having the highest'average amount of nicotine content per cigarette and the average amount of nicotine content per cigar- ette of the Old Gold eigarettes tested was only %s s z s of an ounce. The difference shown in~ said article in the percentage of tars in: the smoke of the cigarette reported to have the highest percentage of tars and the percentage~ of tars reported to be contained in the smoke of the Old Gold cigarettes tested was only 0.39 of one percent. The testimony of expert witnesses establishes tlhat'~ these differences in the nicotine content and in the percentage of tars in the, smoke of the cigarettes tested are insignificant from a physiological standpoint. The representations by respondent concerning said article failed' to disclose that the results of the tests reported therein showed that the differences in~ amount and percentage of harm- ful substances in the tobacco: and-irr thc-sTnokr-a€ the cigare es tested were insignificant and that the smoke from the Old Gold cigarettes tested was no less harmful than was the smoke from the six other brands of cigarettes tested. The Commission finds from the evidence of record that said representations were mis- leadfing and deceptive. CONCLUSION The acts and practices of the respondent as herein found are all to the prejudice and injury of the public and of respond- ent's competitors and constitutc unfair methods of competition in commerce and unfair and deceptive acts and practices in