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,~ CONFIDENTIAL: MINNESOTA TOBACCO LITIGATION A~' 1 ~J~• - f•.. J~ ~ •f ,~ MEMORANDUM F6R-RE£ORD From: Howard S. Liebengood Date: April 1, 1985 Subject: Labeling Bill The Comprehensive Smoking Education Act (October 12, 1984) reflected the results of months of compromise negotiations between tobacco and advertising industry representatives, principally myself and Vern Clark of OAAA, and certain Members of the House Energy and Commerce Committee and their staff, principally Albert Gore and Mike Synar. The compromise negotiations were an effort to accomodate the public health and information concerns of the Congress in a manner that would not impose an undue and unreasonable commercial burden on the tobacco and advertising industries. This-legislation deli.neated.new health warning,labels for cigarette products and requires in Section 4(c) that such labels be "rotated... quarterly in alternating sequence" on packages and in advertising. Section 2 states the purpose of the act, is, ... "to provide a new strategy for making Americans more aware of any adverse health effects of smoking, to assure the timely and widespread dissemination of research findings and to enable individuals to make informed decisions about smoking." Section 4(c) provides that the tobacco industry submit implementation plans to the.FTC and that the FTC approve such plans that provide the required rotation and. assure that all required labels are displayed by a manufacturer or importer at the same time. For the past several months, the tobacco-industry has been seeking the FTC`.s approval of an implementation plan. Time is of the essence as the statute requires compliance by October 12, 1985, and many months of lead time are required. Such negotiations were completed approximately one month ago -- with all elements of the plan meeting with staff approval at the FTC save one. The one troublesome aspect of the plan involves packaging. Since passage of the Comprehensive Smoking Education Act, the industry and the FTC have discovered and concur that quarterly label rotation per se on packages is logistically and economically impractical, and in certain circumstances not feasible. To avoid this unforseen consequence, the industry has proposed simultaneous rotation of package warnings, wherein the labels on each brand not only rotate every quarter - they rotate in equal proportions within each quarter. The FTC staff is reluctant to recommend approval of such rotation and matters are at an untimely .statemate. TIMN 0013811

2. CONFIDENTIAL: MINNESOTA TOBACCO LITIGATION Federal Trade Commission reluctance to approve a cigarette labeling plan that encompasses simultaneous label rotation on packaging is grounded on a series of false premises, to wit: 1. That Congress intended that only quarterly rotation would be acceptable. 2. That the tobacco industry insisted on quarterly rotation and now must suffer the consequences. 3. That the FTC has no administrative discretion to approve any aspect of a plan not literally tracking the statutory language. 4. That a technical amendment is the most propitious means of resolving the dilemma. Adherence to these faulty propositions is threatening to frustrate a landmark -legisla.tive initiative to enhance public awareness of cautionary health warnings. Each deserves a thorough examination. CONGRESSIONAL INTENT As one who participated in virtually all substantive negotiations relative to the "compromise" bill, I have no doubt as to the intent of the language "shall be rotated quarterly in alternating sequence." This_language, crafted to address advertising concerns,.not packaging concerns, was intended to set'a minimum standard that the tobacco industry must meet so as to ensure that over a period of time all labels would be fully before the public. At no time during hearings, Committee deliberations, staff negotiations, private Member negotiations, consultations relative to legislative history, etc., am I aware of even a solitary hint or suggestion that quarterly rotation in someway enhanced (particularly vis-a-vis simultaneous rotation) the purposes of the act, was preferrable, or in any way relevant beyond ensuring a minimum threshold of compliance. To have suggested otherwise would have been then, and is now, ludicrous. No one working with this legislation could detail a definitive plan. What they could detail was a minimum standard. That is precisely what they did. I have personally consulted with now Senator Gore; Congressman. Syn-ar; their staffers, Peter Knight and Meg Porfido; Staff Director of Energy and Commerce, Michael Kitzmiller; Vern Clark of OAAA; and, Matt Myers of the Coalition of Smoking and Health. All were in one way or another key players in forging the compromise and none take issue with. my interpretation of the legislative intent of the language in question. TIMN 0013812

3. TOBACCO INSISTENCE CONFIDENTIAL: MINNESOTA TOBACCO LITIGATION The suggestion that the tobacco industry insisted on quarterly rotation, thereby making for themselves a bed in which they should be forced to lie, is vindictive in tone and erroneous in fact. It is true that among the elements of the original Waxman bill that both the tobacco and advertising industry strenuously objected to was that bill's provision that the new health warnings rotate an "equal number of times" in the course of a year. The Outdoor Advertising Association of America took the lead in negotiations to remove such language on the grounds that it was too burdensome and offered toP great a potential for inadvertent non-compliance The language "quarterly, in an. alternating sequence" was a Vern Clark concept ---designed to clarify and.provide certainty relative to a mini-mum standard in an advertising.mode. In fact, at the time-- suggested and first utilized in draft "compromise" texts, the tobacco industry was still hopeful of limiting packages to a sin le non-rotating label. By the time that position was abandoned, i.e., single packaging label determined to be thoroughly non-negotiable by the Committee Members, the quarterly advertising rotation was no longer at issue and.packaging.was readily lumped in with the advertising standard. It is unfortunate that no one on either side foresaw the problem that_has arisen in implementing a strict quarterly standard"~ pack-. aging. However, before one becomes too critical of such-an-oversight, it should be remembered that it was virtually inconceivable that the statute might be construed as to prevent or that anyone might object to the industry desiring to do more than it was required_ to do. As stated previously, the entire thrust of the rotational scheme was to ensure that the tobacco industry would display all labels a minimum number of times and in such a fashion as to guarantee_ that- after a period of time -- all warnings would be fully before the public. For purposes of illustration, I respectfully submit that were I to have perceived the problem that developed and requested express language to allow the tobacco industry to volunteer to do more than the statute required, a serious effort would have been made to have me committed -- with all sides willing to sign the papers. So preposterous is the foundation upon which this current dilemma rests. FTC DISCRETION The written legislative history supporting the Comprehensive Smoking ,eRtd Education Act clearlyi ifivisioned that the FTC was reposed with an administrative discretion that might n$*4-to be exercised in present circumstances. For example, at page 19 the report states: ~ TIMN 0013813 -a' i

4. CONFIDENTIAL: MINNESOTA TOBACCO LITIGATION ..."in preparing a rotational system for submission to the FTC for approval, the Committee recognizes that there may be more than one system which would comply ... Any such system must of necessity take into account practical constraints on the production and distribution of cigarette packages and the dissimination of cigarette advertising." The House report repeatedly suggests that the FTC is to proceed "reasonably" and to give adherence to that which is "commercially feasible" and does not impose "an undue burden on any manufacturer or importer." One can scarcely imagine circumstances more clearly demanding the . exercise of )Cdministratil4$_discretion-than those posed by the packaging issue. A rigid statutory interpretation that only a single quarterly rotation suffices is noty commercially feasible; it does im ose an undue burden; was_not-intended_by the.statute; and does not serve the purposes of act as well as a proposed plan which not only ensures the quarterly rotation required by the statute, but exceeds voluntarily the requirement, and does so in a way that enhances the other require- ment of the act,;-ensuring display at the same time. TECHNICAL AMENDMENT It is my understanding that.no small port.ion of FTC reluctance to move forward with the proposed plan is their:concerri that Chairman Dingell and Congressman-Waxman believe a technical amendment is required to authorize approval. More specifically, the FTC staff believes it has received informal signals to this eff4W from the Dingell and Waxman staff. Michael Kitzmiller, Staff Director of House Energy and Commerce, advises that it would be inappropriate _-.-pe-r Chairman Dingell to send a signal of any kind to the FTC at this Ripley Forbes with time and that he has not and will not do so . Congressman Waxman advises that they have indeed written the FTC suggesting a technical amendment is necessary to effect approval. Congressman Waxman has personally confirmed to me his belief in that proposition, stating further that such an amendment should also contain a clarification and expansion of the FTC's jurisdiction. I respectfully suggest that Congressman Waxman's suggestion that technical amendment is requisite is in error for the reasons here- tofore stated. Further, the prudence of a legislative solution is suspect for the following reasons: a. Dela - The statute imposes an October 12 implement- ation deadline and months of lead time pest plan approval. It is doubtful that legislation can be sufficiently expedited to accomodate such a time constraint. Should that be the case, one ponders the prospect of litigation and does so with dread for all concerned. b. Controversy - The content of the amendment might become attacked, altered, or the subject of extended debate, by zealous TIMN 0013814

5. advocates on either side of what has already proven to be a highly --emotional and volatile issue. c. Accomplishment - Legislation can accomplish nothing in the public interest relative to the dissemination of health warnings that cannot be accomplished by the reasonable and approp- riate application of administrative discretion by the FTC. All interests affected by the Comprehensive Smoking Education Act are far better served by a timely approval of~plan fully within both the spirit and contemplated letter of the Act itself. Conclusion The Comprehensive Smoking Education Act became a reality with only the greatest of difficulty. The balancing of health and pub-lic.interest concerns with legit-imate commercial concerns was perilous and traumatic for all involved:- Both sides felt somewhat unfulfilled at best or betrayed at worst by the actions of one party or another. . To be certain, elements of the tobacco industry were less than gracious. in refusing to allow interested Members of the U.S. Senate the full benefit of House negotiations and understandings, and in eleventh hour efforts to undermine negotiated understandings with floor state- ments and confusing consultations. It is further certain that such actions fostered or exacerbated ill will among friend and foe alike. Whatever the scar tissue; the time has come to call a halt to retrib- ution..and move forward in the public and private interests of all. The legislation was passed into law. The intent of:that legislation is no mystery.. The obligations of the tobacco industry,-the.adver- tising industry, and..the FTC are sufficiently established. All have . worked diligently together in good faith to craft a. workable imple- mentation scheme. It incorporates a feasible packaging plan, going beyond the strictest confines of the rigid letter of the statute by a means that further enhances the public purpose that gave rise to the statute in the first place. It would be extraordinarily tragic to torture reason in the name of either vengence or legalism to frustrate such an undertaking. I sincerely believe that reason and good sense dictate that the FTC proceed with its mandate, unfettered by ominous political signals however subtle, and approve a commerc- ially feasible plan that accomplishes the purposes of the statute without further delay. Nothing would better serve the interests of the health community, the tobacco and advertising industries, the legislative and administrative process, and the public at large. z TIMN 0013815