Federal Trade Commission v. Brown & Williamson Tobacco Corp.
(Agency Policy US Dist. Ct. DC 1983 FTC ruling enforced) Citation: 710 F2d 1165 (CA 6, 24 June 1983); 717 F2d 963 (CA 6, 19 Sep 1983); 580 F Supp 981 (D DC, 25 Oct 1983); 465 U.S. 1100 (19 Mar 1984); 778 F.2d 35 (10 Dec 1985)This enforcement proceeding (FTC v. B&W) was brought by the Federal Trade Commission against Brown & Williamson (B&W) on July 7, 1983.
The FTC alleged that B&W's cigarette advertising was deceptive regarding the tar content of its Barclay Kin-Size cigarettes. The advertisements claimed that the cigarettes had "1 mg tar" as tested in independent laboratories. The FTC alleged that these advertisements would mislead consumers to believe that Barclay had less tar content than it actually did and that the 1 mg tar was an official government rating. Philip Morris and R.J. Reynolds provided studies showing that the filter on the Barclay cigarettes was designed to give a low result to the kind of testing machine used by the FTC, but when smoked by a person, his or her lips covered the tiny holes in the filter resulting in a higher tar content than advertised. The FTC announced that its test was inaccurate in regard to Barclay and ordered B&W not to rely on it until a solution could be found. B&W refused to alter its advertising other than to attribute the testing to an independent laboratory rather than the FTC method. The FTC claimed violation of the Federal Trade Commission Act. The FTC sought injunctive relief, enjoining the defendant from advertising its cigarettes as "1 mg tar" or "99% tar free".
B&W sued to enjoin enforcement of the order (B&W v. FTC) on June 25, 1982 (prior to the FTC's enforcement proceedings). B&W challenged the proposed changes in the agency's method of testing tar and nicotine levels in B&W's cigarettes, and the FTC's announcement of those changes in the Federal Register. It claimed that the FTC's actions were arbitrary and capricious, and an abuse of agency discretion. B&W claimed violations of the Administrative Procedures Act's notice and comment requirements.
The Public Citizen Health Research Group filed a brief as amicus curiae. Their focus was on the seal placed on a number of documents, preventing the public from accessing them.
The B&W v. FTC case was heard in the United States District Court for the Western District of Kentucky (No. 82-5594) before the Honorable Boyce F. Martin. The judge issued a temporary restraining order to preserve the status quo while the issues were reviewed. The case was later heard before the Honorable Thomas A. Ballantine Jr. The judge continued the restraining order on July 27, 1982. The judge dissolved the restraining order and dismissed BW's suit for lack of jurisdiction on September 27, 1982. The judge ruled that the agency had not taken final action that would be reviewable by the courts. The judge then issued a stay with the same effect as the restraining order to provide time for appeals.
The United States Court of Appeals, Sixth Circuit (710 F2d 1165) vacated in part, reversed in part and rendered the B&W v. FTC case on June 24, 1983. The court held that the FTC's actions were final agency actions subject to judicial review. The announcement alone may not have been, but paired with the halt in testing Barclay cigarettes and the amendment to the 1981 report, it was sufficient. Pre-enforcement review was valid because the rule-making process required no further fact finding, and postponing the decision until enforcement would require B&W to choose not to comply and risk enforcement or spend company resources to comply with a potentially invalid regulation. Ruling on the merits of the case, rather than remanding it, the court found that the FTC sufficiently followed the Administrative Procedure Act's rule-making procedures. B&W had actual notice and an adequate opportunity to comment on the proposed changes. The FTC did not act arbitrarily or impermissibly discriminatory against Barclay cigarettes, since the evidence shows a difference between its filters and other ultra-low tar brands making it more susceptible to high tar yields to smokers. The court also made two discovery rulings.
The court heard a petition for rehearing (717 F2d 963) on September 19, 1983. The court ruled that rehearing was not warranted by the fact that the court had ruled on the merits of the case while considering an incomplete record. In the original appeal, both sides had explicitly stated that no further fact finding was necessary to decide the issues presented.
The Supreme Court of the United States (465 U.S. 1100) denied B&W's petition for certiorari on March 19, 1984.
The FTC v. BW case was heard in the United States District Court for the District of Columbia (Civil Action No. 83-1940) before the Honorable Gerhard A. Gesell. The judge (580 F Supp 981) entered an injunction against advertising cigarettes as containing 1 mg of tar on October 25, 1983. He found that the defendant had raised serious questions regarding the validity of the FTC method, but that the system still provided useful comparative information. The defendant was unable to suggest a superior alternative method. The defendant's advertisements would mislead consumers who had come to rely on the FTC method. However, the judge did not enjoin the use of "99% tar free" because it did not closely relate to the FTC method. The defendant appealed.
The United States Court of Appeals, District of Columbia Circuit (778 F.2d 35) affirmed in part and remanded in part the FTC v. BW case on December 10, 1985. The court found that the defendant's advertisements were misleading. While consumer surveys as evidence of such deception was preferable, the lack of any would not defeat the claim. No disclaimer of the FTC official rating method would be effective in eliminating the deceptive effect of the 1 mg tar claim. However, an injunction prohibiting similar advertisements without FTC approval was broader than necessary to prevent such deception. The court permitted an injunction limiting the defendant to the 3-7 mg estimate that experts gave in the course of the trial. The court held that FTC must bear the burden of showing the inadequacy of any future testing method used by the defendant. The defendant had actual notice of the FTC procedures. The FTC's enforcement was not discriminatory or arbitrary.