Tobacco Documents Online

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": 500-09-001296-912 .v. :i:!: 500-09-001297 -910 :"' ":1-: :.; .X. :°% ..... .X" • X- Montreal ".v 52-; v." :-':'. .j:~ ~::: 1981, avenue McGill College X< Bureau 1100 +2. Non~r6al ~::: .v+'V" T~I. : (514) 847-4747 MacKENZIE, GERPAIS (Me George6 R. Thibaudeau) P~oeu~eu~6 de l'intim~e RJR-MaeDonald Inc. 770, rue Sherbrooke ouest Bureau 1300 Montreal (Qu4bec) H3A IGI T~I.: (514) 842-9831 OSLER, HOSKIN t HARCOURT ::::: (Lgado. A.J. Baane6, Eaq.) .:.:. ImpeaZa£ Tobacco Ltd i, First Canadian Place Box 50 Toronto (Ontario) M5X T4I. : (416) 362-2111 BERNARD, ROV ~ ASSOCI~S Paocuaeua6 du Mi~ en cause Palais de Justice I, rue Notre-Dame est Bureau 8.00 Montr+al (Qu+bec) H2Y IB6 T~I.: (514) 393-2336 "E- %!: 2.2.1 .'-X ::::: X-." .v. 4. Notre-Dame Street East .v. '" tultifactum -'..:. Suite 100 :':'" Montreal, Qc H2Y 1B7 INC. Fax: (514) 866-4861 .'[.'-': ::~X~X~:~:~:~.'.~X~X~X~X~X~:~...:~X~X~X~,X~:~X~2.~:~X~;~:~

.v. 500-09-001296-912 .v. 500-09-001297-910 ::- ::::: :.:.: '" our d'Npp l '" "?'~ • .":- Montreal ::::: :.:.: • :.:. ~.n appel de deux jugements rendus le 26 juillet 1991, par :.:.: :.:.:1'honorable juge Jean-Jude Chabot, de la Cour sup4rieure, :.'. .v. district: de Nontr4al .v. ":"" Nos : :.:-: ::::: -<.: 500-09-001296-912 C.a.M. - 500-05-009755-883 C.s.M. LE PROCUREUR G~N~RAL DU CANADA APPELANT-Intim4 RJR-MacDONALD INC. INTIM~E-Requ4rante -et- LE PROCUREUR G~N~RAL DU QUEBEC MIS EN CAUSE-Mis en cause X: Nos: 500-05-001297-910 C.a.M. - 500-05-009760-883 C.s.M. LE PROCUREUR G~N~RAL DU CANADA APPELANT-Intim4 IMPERIAL TOBACCO LTD INTIM~E-Requ4rante -et- LE PROCUREUR G~N~RAL DU QUEBEC MIS EN CAUSE-Mis en cause :.:.." +i" X-: D O S S I E R C O N J O I N T .:.:- v." Volume VII: pages 892 ~ 1115 .....::::: ( D 4 p o s i t i o n s ) .....:::::..... ,.~,~o ~o~.o~,oo ~' ~11 ~mi~ ~l]{ultifa d:um ,~o. ,o,o~oo,~o,:'°'~°~°°~: ,~,'~'~' ~_~,,~'~°~ ,...,...:.:.: "" Mor, treal. Qc H2Y 187 :.'.

::::: 500-09-001296-912,..;.v- .':. 500-09-001297-910 .v. :... :.:..- :.:.: ::. ::::: :.:.: "':" Montreal .v. +1. ,:.:. :.:-: BAKER, NUI)LEWAN ~: LAWOI4TAGI~E We IAWES WABBUTT. c.~. :-.'-: .':. ::::: (We Ro<je~ F. Ba~e~, e.r.) Paocu,'teu,,t de l'Appelant :... ::::: P~ocu~e,u,'t~ de. £'Appe.£an,t Tour ~st ::::: .v. 1155, boul Rend-Ldvesque ouest 140, rue O'Connor .v. .v.:" Bureau 2720 17e ~tage .'.'. :!~: Montreal (Qu4bec) Ottawa (Ontario) .v. X." H3B 2K8 KIA OG5 :.'. .'?;'.. T61. : (514) 866-6674 T41. : (613) 996-4425 .v...... ..'..'. o°o°o :" PAUL EVRAIRE, E~qt :.'. :... We CLAUO£ lOYAL :" :.: .: ". .v...:. Ploeuae.~l de. £'Appe.Za.~ Ploc~le-I de. £'Appe.£a.~ .v...:. o:O. o°o: .v. 2, First Canadian Place Ministgre de la Justice .v. ::::: Bureau 3400 du Canada .v.:... ;::.':Exchange Tower, Box 36 Complexe Gug-Favreau :...':" .v. ".'-i- • ".'. Toronto (Ontario) 200, boul. Ren6-Ldvesque ouest ::" .:: M5X IK6 Tour est, 9e 6tage .v. T@I : (416) 973-0927 Montr4al (Quebec) :...:" .v. H2Z lX4 :" .v. T41.: (514) 283-4040 .v. ~,oOo :,;.: .v. • X" :" WcW^ST~:R, WEIG.~ LEANER ...iii!! IWe Coti, K. I~vZ.~) IWe Ea,tt A. Che,t,ti_a~, c.~.} ::::: :i:i:P,toca,te-,t~ de. £'/_n.tZm4.e. P,toctt,te.a,ta de. £'X.n.t~_,,,ge. """ X.: RJR-WacPona£d Inc. RJR-gacPonaLd Inc. :.'. .v. 630, boul. Ren6-L6vesque ouest Scotia Plaza .v. • Z. .v. ....v.. Bureau 700 40, rue King ouest .v...: :!:i: Nontr6al (Qu6bec) 19e 6rage Box 210 ::::: ooo ' o;Oo ::::: H3B 4[-17 Toronto (Ontario) .':::: ::::: T61. : (514) 954-3147 NSI-t 3Y2 ::.".: ":':: :i:i: i:i:: T61. : (416) 867-3076 :.:.: • X" ;" • .... ::::: ::::" :... ::::: ":':" 4. rue Notce-Dame EsI .,. • ~,~. l~.lOcopiet, f. (5141 866-4861 .-... .v. Montreal. Qc H2Y 187 .'°'. ~~~~~.~~)..~...~....~~~~:~~~2.~~~.~~~~~.~~~~5:.~~~~~.~.~.~~~~~~~.~.~~...~.-...~....X.~....~.~~~~~~~~ ~~~~~.~.~.~~-~.~~~.~`~-~.~.~.~~~~5~.~.~~~~...~~~~~~~.~.-..~.~.......~.~.~~~~)~~?~~~.?~~~.~~.......~. ~~~`...~~~~~.~~~....~~?~.~.~.:.2)2~.~.~~~~~.:~:~~~~~~.~.~.~~~~..'..~~'~.~~k~.~.~.~.~.~.~..~-~~~.~

:':'-" 500-09-001296-912 :!.':.: 500-09-001297 -910 ".'-'.:: :"" ( our '"" ::::: ..... ::::: ::-:... ~:~ Montreal • ..:.: ~ae~E~Z I E, GE~AIS ::::: • ":" (Me. Geo,,.ge,s R Th,Lbaudeaul ":':" ...,.'.'. P,~oeuaea,~s de ~'~ntimge :.:.: ~.: RJR-~aePona£d Inc. .v. • :.:. :!:i: ::" 770, rue Sherbrooke ouest -.. .v. Bureau 1300 .'.'. • Z. "E- v.- Montr4al (Qu4bec) v: v." H3A 1G1 .v. ".'+ "X' :.:.: T41 . : (514) 842-9831 :.:.: ;2, • ":. ......: • :.:. OGILVV REAIAULT OSLER, HOSKI~I Z HARCOURT v.. i!!i! {~le P,Le,~,te BZenuenal Paoea~teua,s de l'gntimge :...::" :.:.: P~oeu~tgu~t6 de l'intimge Impeeia£ Tobacco Ltd ::::::" • :.:.lmpe~ZaZ Tobacco L;td i, First Canadian Place ..:::: X.:.. 1981, avenue McGill College Box 50 :...::. -'"- Bureau 1100 Toronto (Ontario) .v.":" • ".'.Montr4al (Qu6bec) M5X IB8 ::.": • E" .'.'. v." H3A 3CI T4I : (416) 362-2111 :.'. +3 T~I : (514) 847-4747 "::: ..<.: - ,.-.:. • :::1 ::" Z.: .'..'.. :... • ."':'v BER~A~, ROY ~ ASSOCI£S :.:-: "" I~e Jean-Vue~ Be~tnaad) :i:!: v." :.:.: v.. P~toeu~te.u~t6 dot bl~6 e.n cart6 g .v. :'." Palais de Justice .v. <.;. 1, rue Notre-Dame est .v. ::::: Bureau 8. O0 .v. :'Z Montreal (Qu4bec) ::'..". :::;: H 2 Y 1 B 6 "X. :%" ::::: T61. : (514) 393-2336 :": .:.:. v.- • :.'.. 4. Notre-Dame Stroet East :.,. Montreal, Qc H2Y 1B7 '~" :':':

TABLE DES MATI~RES Vol. Page Le 27 septembre 1989 PREUVE DE LA REQU~RANTE RJR-MacDONALD INC. ~ L'ENQU~TE (SUITE) PETER HOULT (Suite) Vol. 4 - pp. 364 ~ 457 Vol. 4- pp. 458 ~ 466 Vol. 4 - pp. 466 ~ 523 Vol. 4 - pp. 523 ~ 526 Contre-int. par Me Baker VII 899 Discussion VII 993- Contre-int. par Me Baker VII 993 Discussion VII 1058 Le 28 septembre 1989 PREUVE DE LA REQU~RANTE RJR-MacDONALD INC. ~ L'ENQU~TE (SUITE) PETER HOULT (Suite) Vol. 5 - pp. 537 ~ 552 Vol. 5 - pp. 553 ~ 559 Vol. 5 - pp. 560 ~ 567 Vol. 5 - pp. 567-568 Vol. 5 - pp. 568 ~ 574 Vol. 5 - pp. 574 ~ 576 Vol. 5 - pp. 576 ~ 581 Discussion VII 1062 Contre-int. par Me Baker VII 1071 Argumentation VII 1087 R4-int. par Me Irving VII 1094 Re-contre-int. par Me Baker VII ii01 Argumentation VII 1102 R4-int. par Me Irving VII 1108 Argumentation VII iii0

892 CANADA PROVINCE DE QUt~BE.C DISTRICT DE MONTREAL COUR SUPI~RIEURE SOUS LA PRI~SIDENCE DE L'HONORABLE JUGE JEAN-JUDE CHABOT, J.C.S. No 500-05-009755-883 R JR-MACDONALD INC. Requ~rame Co LE PROCUREUR GENERAL DU C,L\'ADA Intim6 No 500-05-009760-883 IMPERIAL TOBACCO LIMITI~E Requ6rante LE PROCUREUR GI~NI~IL~,L DU CANADA Intim6 27 septembre 1989 - Vol. 4 COMPARUTIONS " Pour la requ6rante RJR-MACDONALD INC. Pour la requ6rante IMPERIAL TOBACCO LIMITI~E M~ COLIN K. IRVING, M~ GEORGES R. THIBAUDEAU, EARL A. CHERNIAK, Q,C., M' MICHEL A. PINSONNAULT, Avocats M' SIMON V. POTTER, M° PIERRE BIENVENU, LYNDON A.J. BARNES, ESQ., M~ GREGORY BORDAN Avocats MACKENZIE GERVAIS Procureurs OGILVY, RENAULT Procureurs Pour l'intim6 LE PROCUREUR GI~NI~RAL DU CANADA ROGER E. BAKER, Q.C., M' CLAUDE JOYAL, PAUL EVRAIRE, ESQ., Avocats COTI~ & OUELLET Procureurs AUDIOTRANSCRIPT,- Division de Vilaire & Associ6s - St6nographes Officiels - Court reporters 4 est, Notre-Dame, Bureau 201, Montr6al H2Y 1BS--T61.:871-1219

893 358 INDEX PROOF OF PETITIONER PETER HOULT Cross-examination (Contd) 362 AUDIOTRANSCRIPT, Division de Pierre Viloire & As$oci6s

894 359 AG-I AG-2 AG-3 AG-4 AG-5 AG-6 AG-7 AG-8 AG-9 AG-10 AG-II AG-12 AG-I 3 AG-14 AG-15 AG-16 LIST OF EXHIBITS 377 383 Montreal Magazine (D6cembre 1988) Ad "Export "A" (number 89) Two ads "Export "A" (same cardboard) (number 72) 388 Two ads "Export "A" (same cardboard) 395 Book "Chemical & Biological Studies" (New cigarette prototypes that heat instead of burn tobacco) 410 Document - Tobacco P.R. 416 List of reputed chemical constituants 438 Document - Export Family - draft brand positioning statement, October 16, 1986 441 Document entitled Vantage Marketing, Copy Strategy, Recommendation (February 1982) 484 Document entitled, "Right Attitude" Advertising test 81-012 485 Document entitled Vantage Advertisement Research 494 Document - Vantage Brand Positioning Statement 496 Document 'Export "A" Cup,' 'La Coupe Export "A"' 501 (en liasse) 1978 Business Plans of RJR-Macdonald Inc. and International Plans 505 Document 'Export "A" Brand Long Term Strategy,' (October 21, 1987) 512 Document, "Third Family Creative Direction Recommendation," (September 19, 1984) 517 AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~, Lt~e

895 360 LIST OF EXHIBITS AG-17 Document "Tempo Qualitative Post- Launch Evaluation" (January 1986) 518 AUDIOTRANSCRIPT, Division de Pierr~ Vilaire & As,oci~, L,4e

896 361 2. 3. 4. LIST OF OBJECTIONS Objection ................. Objection ................. Objection ................. Objection ................. 427 428 451 459 AUDIOTRANSCRIPT, D~,,i,~oo de Pierre Vilaire & Associ~s Lt4e

897 362 LIST OF UNDERTAKINGS Provide audited financial statements from 1976 through 1987 .......... Determine whether Petitioner ever ran a series of ads called "Smoke Smart" .... 466 490 AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ4s L,4e

898 363 i0 15 In the year of Our Lord nineteen hundred and eighty-nine (1989), on this twenty-seventh (27th) day of the month of September, PERSONALLY CAME AND APPEARED: Me COLIN K. IRVING: Pour la requ~rante RJR-Macdonald, Colin Irving et Georges Thibaudeau. Me SIMON V. POTTER: Et pour la requ~rante Imperial, Simon Potter, Lyndon Barnes, Pierre Bienvenu et Greg Bordan. Me ROGER E. BAKER, Q.C.: Pour l'intim~ le Procureur g~n~ral du Canada, Roger Baker, Lise Tremblay, Claude Joyal et James Mabbutt. AUDIOTRANSCRIPT, Division de Pierr~ Vilaire & Associ4s Lt~e

899 364 5 i0 A- 15 Q- A- Q- 20 A- Q- 25 A- In the year of Our Lord nineteen hundred and eighty-nine (1989), on this twenty-seventh (27th) day of the month of September, PERSONALLY CAME AND APPEARED: PETER HOULT, WHO, having been duly sworn on the Holy Bible, doth depose and say as follows: CROSS-EXAMINATION BY Me ROGER E. BAKER, Q.C., for Respondent: Q- Do you recall, Mr. Hoult, you were talking yesterday about information in the advertising? Yes. Do you distinguish in respect of information between new brands and existing brands? Well, in that new brands frequently have the descriptor "New", yes. "New"? Yes. So, that would be the most unique way, in your company's advertising, of giving information in a new advertisement or in an advertisement for a new brand, is that correct, by calling it "new"? Yes, or some word which is the equivalent of "new". AUDIOTRANSCRIPT, Division de Pierre Viloire

900 365 i0 15 20 25 Hm, hm. And that is supposed to be information on which the consumer would relate to and deal with and perhaps act on it? Yes. And apart from describing something as new, in a general sense if you might, could you tell the Court what other kinds of things you do in respect of new brands, the advertising of new brands? Well, a new brand usually but not always would focus upon the packaging, and the packaging would be very strongly illustrated so that the potential consumer or purchaser of that would recognize that brand. Focus on the packaging? Yes. What do you mean by "focus on the packaging"? Well, the packaging would be well illustrated, it would be normally large, the packaging, of course, being the most recognizable element of a new brand, at least initially and until the smoker had tried the cigarette. Is that information? Do you actually mean to say that illustrating the package is information? Oh, it's very important information, yes. You mean the color of the package is important information? I mean the color of the packaging and the name of the AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s Ll~e

901 366 10 15 2O 25 brand... I'm talking about the packaging per se. Yes. Leave the name out for a moment, please, Mr. Hoult. No, but the name is part of the packaging. I see. All right. So would you give us an example? An example of a new brand advertisement? Yes. Well... An illustration of what you've just said. If we were introducing a line extension to the Export family -- and I remember very clearly,-when I first came to Canada in nineteen seventy-nine (1979), the first new brand I introduced was Export "A" Medium, which was a blue package. It was introduced about four (4) months after I joined the company. The whole advertisement was essentially the pack, the descriptor "New" was there, we were very keen to communicate that this was a line extension, the pack looked exactly like the parent, except it was blue rather than green. Exactly like the parent, except that -- I beg your pardon? Except that it was blue rather than green. The package? The package. AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ~, Lt~e

902 367 i0 15 20 25 THE COURT: Q- Would you refresh my memory as to what is a line extension new product? A- Yes. I was referring, My Lord, earlier in my testimony, to families of brands. And families of brands usually start with one when it's a successful brand. And as consumer tastes and wants change over time, you would capitalize on the name of the parent, like Export, and you would introduce new brands which were clearly intended to benefit from the heritage of the parent but add something new, whether it be lower tar and nicotine, lightness or mildness or length. And these are called They're extensions from the main line extensions. family line. Me BAKER: Q- In your experience, Mr. Hoult, in the Canadian cigarette market, would you say that the three (3) major companies, really the three (3) only companies that produce cigarettes in this country, that is to say Imperial, RJR and Rothmans Benson & Hedges, tend to advertise in somewhat the same fashion? In general terms, yes. In general terms, yes. And of course, it's part of your company's practice and after your own as a marketing, as a former marketing vice-president, to look at the other AUDIOTRANSCRIPT, Division 4, Pierre Vilalre & Associ~s Lt~e

903 368 i0 15 2O 25 companfes as to see what they're doing and to see how their brands are doing and to track things of that nature? Would that be fair to say? A- Yes, we do. Q- Mr. Hoult, I'm going to show you a December, nineteen eighty-eight (1988), copy of Montreal Magazine. Me IRVING: Are we to look at the cover? Me BAKER: My Lord, before I put these documents to the witness, I would like to show you the magazines, so you'll understand what we're doing. And it will be three (3) ads appearing where there are yellow tabs. THE COURT: Do you have an objection to make? Me IRVING: My Lord, I was simply going to observe, as you will notice, that those are not RJR-Macdonald ads. If my friend wishes, given Mr. Hoult's qualifications, to ask opinion evidence, I don't object. Me BAKER: Q- Now, Mr. Hoult, I am opening this magazine. Just inside the front cover, you will see a fold-out of what appears to be a zebra across the three (3) frames, stamped on which you see the words "Benson & Hedges". And at the AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s Lt~e

904 369 Am i0 A- Q- 15 A- 20 Q- 25 bottom, you see the warning of the Department of Health Do you see that? and Welfare. I do. Hm, hm. From your experience in the cigarette industry, would you take that to be an advertisement for cigarettes, Mr. Hoult? I know it's an advertisement for cigarettes from my experience in the industry. Are you asking me... Address yourself to the Judge, please. I know that's an advertisement for cigarettes because I know the name Benson & Hedges. Thank you. Now, could you look at that advertisement, please, and tell the Court what information is in that advertisement? I think that is a very poor ad because I think the amount of information is minimal. The only information I see in that ad is Benson & Hedges, the name, and of course the health warning. We have evaluated this ad and I am aware that its effectiveness is very low, for reasons that I've intimated earlier: the amount of information on it is both low and ineffective. Hm, hm. So you don't think they would have evaluated it -- of course, I'm asking you to speculate -- the way you... AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ4s [t4e

905 370 i0 15 20 25 THE COURT: Well, don't you think that's not the proper witness to testify on a Benson & Hedges ad? I mean to what -- what probative value would that have? Me BAKER: My Lord, this man is one of the senior tobacco executives in the world. With respect, I think his views on either his own company's ads or other companies ads are of extreme importance for you to appreciate what it is that these companies do with their advertising. THE COURT: Well, I think what's important to me is what they do in RJR with their advertisement, and we will see what Imperial Tobacco, what they do. But I mean, how can he comment on what Benson & Hedges wanted to do with that, unless to speculate that they were trying to get some market and try to seduce somebody by some imagery? But apart from that, I mean he hasn't been privy to the conception of that ad. Me BAKER: With great respect to you, My Lord, if Mr. Hoult is not an appropriate person to analyze an ad for Your Lordship, how then can we expect the consumer who is looking at that ad, or any other company's ads, his company's or any of the other company's, to appreciate AUDIOTI~ANSCI~IPT, D~v~ioo ae Pierre

906 371 i0 15 2O 25 it the way they want them to appreciate? Who better a person? I'm not asking him to go behind the strategy of Benson & Hedges. I'm asking him simply to look at the ad and tell Your Lordship what information is in that ad. , THE COURT: Well, you've heard me. Proceed. Me BAKER: Thank you. Me BAKER: Q- Thank you. In the same magazine, Mr. Hoult, after page twenty-five (25), the same ad for Matinee Special Mild. You see the words "introducing." A- Yes. Q- So it would be a fair assumption then that is a new product? A- Yes. Q- All right. Beyond that, would you tell the Court what the information is in that ad? A- I want to make it clear that when we evaluate competitive ads, we have our opinion as marketing executives, but if the ad is seen as particularly important, we would go to the consumer to evaluate competitive ads. I'm very pleased to give you my opinion, but that's AUDIOTRANSCRIPT, Division de Pierre Viloire & Asso¢i~s

907 372 5 i0 15 2O 25 Om Om Am all it is and we would not act upon that opinion in a business situation. Mr. Hoult, I didn't ask you whether you thought the ad was a good ad or a bad ad, I asked you if you would be good enough to tell the Court what information appears in that ad? The information that I get out of this ad, and I'm not a consumer, the information that I get out of this advertisement is firstly yes, that it is new, because of the word "Introducing." I mentioned earlier the importance of the pack communication for a new brand. And you see in this advertisement that the pack is rather large; it's a very large advertisement, double page advertisement. Secondly, you'll get the information very clearly that this is a line extension to a well known family, Matinee, and this line extension is special mild. Now, excuse me, if I might interrupt you. Do you know that it's a line extension simply because of the use of the word "Matinee?" No, I know it's a line extension because, as a consumer, not as a C.E.O., or ex-C.E.O, of RJR, I am aware of the family of brands called Matinee. And I wasn't aware of special mild before this ad. This is a line extension therefore. AUDIOTRANSCRIPT, Division de Pierre Vilaire & As,ocigs Lt~e

908 373 5 i0 15 2O 25 AB Qm Aw So it's telling the consumer that there is a new product? Yes. A new product to the Matinee family. And what is the information about that new product? Well, firstly, that it's special mild. It's a mild product, clearly. Secondly, because as a smoker I'm interested in tar and nicotine numbers, and the tar and nicotine numbers are given there at the bottom of the ad. Is that part of the advertisement? That is the information that we carry. Is that information that your advertising agencies dream up or is that something that's imposed on you by the government of Canada as a consequence of an agreement that was executed several years ago? The latter, but it's information in the ad, whether we like it or not. M'hm. But would you... Very important information. Right. I see part of a white band at the bottom of the ad. You don't really try and want to convince this Court that that's part of your advertising strategy to put the Surgeon General's Warning on that you spoke of yesterday with American cigarettes or the Department of Health and Welfare in Canada; do you? AUDIOTRANSCRIPT, Division de Pierre Viloire & A,soci~s L,~,

909 374 i0 15 20 25 Aw Oh, no! I mean you don't really like to have to put that warning on, do you? It's not been an issue of discussion. It's part of doing business. The warning is on and ads are always designed to carry that warning in their layout and in the total configuration. Continue. The other information that the ad carries in terms of words, is that what -- the basic copy objective they're trying to communicate with this is the smoothness of the product. It's stated quite specifically, "smoothness makes it special." Now, smooth. If you'd stop there for just a moment. You were discussing some Export "A" advertisements yesterday afternoon with the word "smooth," were you not? Yes. M'hm. So what's the difference for the consumer, would you think, between your company's use of the word "smooth," and Imperial's use of the word "smooth" in connection with a Matinee ad, Mr. Hoult? Well, there are two (2) fundamental differences which immediately leap out. The first is smoothness as associated with the brand Export and smoothness as AUDIOTRANSCRIPT, Division de Pierr~ Viloi,e & Associ4s Lt~'e

910 375 i0 15 20 25 5 A- Me IRVING : Just a minute. associated with the brand Matinee. Both these brands, as far as the consumer is concerned, have different flavours. It's nothing to do with strength specifically, it's just a different fLavoured cigarette. And that smoothness is a descriptor of flavour? My Lord, I wonder if I could ask again if Mr. Hoult could be permitted to finish his question. One of the problems is the transcript is coming through an audio feed and when Mr. Baker speaks over Mr. Hoult, we don't get the answers in. And I wonder if my friend could be careful to let finish. I'm simply saying that smoothness in the context of the Export family is a different smoothness to the smoothness in a Matinee family, because they are totally different blends made up according to totally different recipes. How is the consumer supposed to know that? Well, the consumer knows that as we have seen from so many pieces of research, from the standpoint of the imagery that he has of the different brands going back many, many years. If I could stop you for a moment. The imagery of the brands going back many, many years: does the imagery of the brands really talk about the blends of the tobacco AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ4s Ll4e

911 376 5 A- i0 Q- A- 15 Q- A- Q- A- 20 25 leading into what you've just described as smoothness Well... ...to distinguish between Export and the Matinee range of cigarettes? The imagery of a brand doesn't talk about anything. The imagery of a brand is what the consumer has in his head. It is not that which we're saying. We're trying to develop an imagery, but when we talk about imagery, it's something that the consumer has, something the consumer describes. What do you mean, the consumer describes, don't you describe the imagery in your advertising? We describe the imagery -- we describe our objective -- I'll start again. Please. We set out to develop a certain imagery. M'hm. And the way we develop that, or try to develop that, is through our advertising. The imagery which eventually ensues is the consumer's imagery, not ours. And, as I said yesterday, frequently the consumer develops an imagery of a brand which may not be particularly valuable or may not be particularly attractive or may not be particularly wanted. AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ~s Ll~e

912 377 i0 15 20 25 Aw Q- Show this to the Judge... So then you distinguish between the image the consumer has in his or her mind in respect of a brand and the images that appear in the advertisements themselves? Oh, yes. There's always a difference. You try to make them congruent because, as I said yesterday, you try to build on a brand's strengths. And you try to limit or address weaknesses and you're not always successful. Oh, sorry. Me IRVING: Could we have that marked before... THE COURT: Are you finishing with the magazine before or...? Me BAKER: Yes, we will produce this magazine as AG-I. THE COURT: It's not like on T.V., you can't switch channels. Me BAKER: I just want you to see them first, My Lord. Q- Now, Mr. Hoult, I'm showing you a large piece of cardboard which is marked at the top 'Export "A"'. THE COURT: Just give me the number at the bottom. Me BAKER: Eighty-nine (89). AUDIOTRANSCRIPT, Divi,ion de Pierre Vilaire & As,ocig,

913 378 5 i0 15 2O 25 THE COURT: Okay. BY Me BAKER: Q- That is one of your company's advertisements? A- Yes, it's a piece of point of sale in cardboard, which would appear in a retail outlet. Q- Right. Now, that piece of point of sale, as you call it, is an advertisement, is it not? Yes, it's the type of advertisement, using the word broadly, that -- or the definition broadly -- that would appear in stores and in shops. Now, as I've said, I see at the top of that rather large piece of cardboard the words 'Export "A"', and there's a photograph at the top left corner, quite small, of the Macdonald's lady which is your traditional symbol, or your company's traditional symbol, am I correct? Yes. And then the mass of the ad is a male in a canoe, it would appear, with a lot of white water around the canoe, is that fair to say? Yes. Now, could you tell the Court what information is in that -- one side at a time if you don't mind, Mr. Hoult. I'm sorry, I... So as not to confuse either the Court or the record. If AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ4s Lt4e

914 379 5 I0 Q- 15 A- Q- 2O A- 25 An you'd be good enough to tell the Court what information is contained in that advertisement on which your company expected a consumer to relate and perhaps purchase? We're talking about information now, Mr. Hoult. Yes, I'd be glad to -- but before I do, I'd just like to say, you have to look at this as a totality. The whole of the piece is an advertisement. I can't deal with half and then turn over and look at the other half, it must be looked... Well, the last time I looked at any human being, I find they have only one set of eyes and can't look at the front of something and the back of something at exactly the same point in time. I take it that you will agree with me, Mr. Hoult. Therefore, let us concentrate, if you don't mind, on this side of the cardboard and if you wish, by way of explanation, you can get to the other side of the cardboard after. Very well. Fair enough. Now, we're looking at the man in the canoe in the white water with the yellow and blue shirt or jacket or whatever it is he's wearing and tell the Court what the information is in that advertisement? This piece of advertising has a specific purpose, and that is to be used in-store. In-store is an important part of any advertising campaign, but the advertising AUDIOTRANSCRIPT, Division de Pierre Vilalre & Associ4s Lt4e

380 5 i0 15 Q- 20 A- Q- A- 25 in-store is often quite different from the advertising that you will see in magazines or on billboards. The reason for that is that the shopper, the purchaser, doesn't normally spend a lot of time reading. Therefore, typically, advertisements as they appear in-store would be modifications of the advertisements that the smoker would have seen previously in magazines or on billboards. So the first thing I would say is that the information is much more limited and it has the intent, much more, of being reminder advertising at the point of purchase. So the information on here, for the beginning, is quite deliberately less than the information that you would see in the equivalent ads in magazines. But essentially... Hum, hum. Deliberately less. But if I could just stop you there for a moment. You said "deliberately less", but what information, if any -- that was a general sort of answer you've just given me. What information is there on the face of that document? Well, I was about to go on to that, Mr. Baker. Please do. The information on here first and foremostly is the name Export "A" -- and remember I said the purpose was AUDIOTRANSCRIPT, Div~,~o~ ~e Pierre Vilaire & Asso¢i4s Li'@e

916 381 5 10 15 20 25 Q- reminder. Export "A" in bold letters at the top with the logo, the lassie, as we call it, to the left... THE COURT: The "lassie"? A- The lassie -- the Scottish lassie in a circle, My Lord, which is a well-recognized mnemonic or logo for our brand. And we know that that lassie is associated with tradition and high quality. And we use it for that reason on all our packs and quite a lot of our advertising. If I recall at the time this particular campaign -- and a campaign is made up of many advertisements, not just one -- at the time this campaign was running in Canada, we were attempting to, over time, change the imagery of our brand Export, from being particularly blue collar, down market if you like, to be more classless. In other words, we had determined strategically to avoid situations that might be communicating down market. The previous campaign, for example, was a truck driver. And while that had many pieces of information in it, in addition to -- had many pieces of information in it. One of the things that was coming over was that this was reinforcing the blue collar image of the brand. And this person in the ad that you've got in front of AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ4s Lt4e

917 382 i0 15 2O 25 5 you certainly doesn't look like a truck driver, does it? No. And deliberately so. Right. Now... Just -- could I finish? Well... Me IRVING: Let Mr. Hoult finish please. Me BAKER: Yes, why don't you... A- Therefore... Q- ...continue the litany. A- Well, I'll keep it short. Therefore, in choosing this situation: A) It was a classless situation. B) It was an outdoors enjoyable situation, which we knew from our segmentation and our attitudinal research, our smokers, our Export smokers, particularly light, and very importantly, he was a young adult. And young adults, male adults, were the target for this particular campaign. Would you agree with me that that is a young-looking healthy, male adult, Mr. Hoult? Yes, he is. Pursuing something that is quite athletic, apparently going against the rapids, or certainly in rapids with AUDIOTRANSCRIPT, D~,~,;o~ de Pierre V~lo~re & Associgs Lt#e

918 383 5 i0 15 20 25 all kinds of white water around him, exercising considerable strength and athleticism, one would think? A- Well, you used that word yesterday and it was not a quality that was considered in developing this advertisement at all. Q- That's not what I asked you, I'm asking you to look at the ad and tell the Court whether you agree with me whether that doesn't appear to be certainly a strenuous athletic pursuit? A- No, it does not. Q- It does not? A- It seems to me to be a normal vacation or weekend activity pursuit that any young average person could involve himself in. Q- If one was, presumably, involved in things like canoeing and white water rafting. I mean it's not a stroll around the local golf course, is it, Mr. Hoult? A- No, but I don't think young adults stroll around golf courses either. Q- They may go to different golf courses. Would you file this ad as AG-2o Me IRVING: It's the -- it designates an AG-2 -- it applies to both sides, I presume? AUDIOTR~NSCRIPT, Di,,;,ioo d, Pierre Vilolre & Associ~s Lt~e

919 384 i0 15 2O 25 Me BAKER: Well, it's one piece of paper, it's one document. Me IRVING: Hum hum. I see. A- Now, I would like to point out, Mr. Baker, that we haven't discussed the other side of that ad, which does contain more information than you... BY Me BAKER: Q- Well, I have some questions for you, Mr. Hoult, and I'm sure your counsel will see fit, when he reexamines you, to give you ample opportunity to discuss anything you wish to discuss. A- I thought you wanted to discuss both sides, I was just reminding you, Mr .... Q- I'll let you know what it is that I wish to discuss. BY THE COURT: Just await the questions. BY Me BAKER: Q- I am now showing you a piece of cardboard on which appears two (2) advertisements. THE COURT: And you're referring to what number? Me BAKER: C'est num~ro 72, Votre Seigneurie. Q- They would appear to be, and you'll tell the Court if

920 385 5 i0 15 2O A- Q- A- 25 I'm wrong, advertisements for Export "A" Light, Export Mild, but they are two (2) different advertisements, is that not correct? A- Yes, they are. Q- Well, let us refer to them for frame of reference as the advertisement on the left and the advertisement on the right. THE COURT: Left being... Me BAKER: As you look at it, My Lord. Left -- we'll call it "Left Skier". and we're going to call this one "The Windsurfer" A- Yes. Q- Could you tell the Court why, if you're not trying to suggest to the consumer a connection between smoking and athleticism, you would put a photograph of a good looking, husky, young or healthy young male, driving his knees through real deep snow in a super terrific position that looks strenuous as hell to do, Mr. Hoult, excuse me, My Lord. Explain that? Well, I'll try and explain it again. Yes. The skier on the left is obviously enjoying himself. The expression on his face is one of pure enjoyment. As AUDIOTRANSCRIPT, Division 4e Pierre Vitaire ~ Assoc~@s Lt@e

921 386 5 10 15 2O Q- 25 I think I said yesterday, and certainly in discoveries, we had for many years been sponsoring, in a fairly major way, skiing. Skiing was associated with the brand Export "A". This campaign, therefore, evolved both from that association with skiing and also it evolved from the previous campaign which was described as Big Country. And Big Country, to our smokers, was Canada. And we were showing many scenes, attractive, visual scenes, from different parts of Canada and skiing was seen, not only by our smokers, as part of that Big Country in winter, but also something that they would enjoy doing themselves. Indeed many did. In addition, this advertisement was advertising two (2) brands, to which we were now focusing our attention away from the green brand and these were the lighter brands in the family, Light and Mild, but we were trying to maintain the heritage of the parent, the well-known green Export cigarette by consistent usage of the green border, which you see very predominantly displayed in this ad. As with your previous answer, would it be your testimony that the image of the skier in that advertisement is consistent with the tradition of green Export image of the truck driver? AUDIOTRANSCRIPT, D~vi,;o. ae Pierre Vila;re & Associ~s [,~e

922 387 i0 A- Q- A- Q- 15 A- Q- A- Q- 2O A- Q- A- 25 No, but that's what we were trying to address. Get away from that? Yes. Now if you move to the right side of that page, which for the moment we're calling Document 72, to the windsurfer, I think we've agreed we'll call it. Did your company sponsor windsurfing contests too? Yes. I see. side of the page in the windsurfing? Yes. The same? Yes. But he's not smiling like the skier? Well, I'm sorry I can't see his mouth, but... Have a good look at it, sir. He seems to be concentrating on the task in hand. Right. Is the task in hand controlling the windsurf or smoking? Oh, he's controlling the windsurf. Hum, hum. Are you selling windsurfing or smoking with this ad, Mr. Hoult? We're selling an association with enjoyment, outdoors, and as I say, directing our focus on young, male, adult smokers. And is that another happy young man on the right AUDIOTRANSCRIPT, Division de Pierre Vilalre & Associ4s Lt~e

923 388 i0 15 2O 25 Q- So, you're sort of selling pleasure? A- Yes. Q- Outdoor, in this ad, in these two (2) ads, the skier and the windsurfer, you're selling outdoor pleasure? A- That would certainly be part of the information, as we used that word earlier. But there is an awful lot more information in it. Q- It would be, to use the language you used a few moments ago, it would be incongruent, wouldn't it, to have a windsurfer in this photograph with a cigarette hanging out of his mouth, wouldn't it be? A- I think it would be a physical impossibility, to smoke a cigarette. Q- Because people tend not to smoke and to go windsurfing at the same time? A- I think you'd have to be eccentric to do that. Q- Eccentric. So then -- right. Let's file this one as AG-3. Pourriez-vous le montrer ~ la Cour, s'il vous plait? THE COURT: Are you filing both of them at the same time? Me BAKER: No, I want you to see the second one before I get into it, My Lord. AUDIOTRANSCRIPT, D;vision ae Pi~rr~ Vilaire & Asso~:;~s

924 389 i0 15 2O 25 THE COURT: C'est 71, celui-IA? Me BAKER: C'est ga, Votre Seigneurie. Mr. Hoult, I now show you another piece of cardboard on which appears two (2) advertisements. On the left one, do we see people kayaking? Yes. Would it be a fair description of the activity there? Yes. And in the right one, we see airplanes? Yes. Seaplanes, it would appear, one landing and one following it in? Yes. In a lovely scene on a river or a lake. Yes. All right? Again the man in the kayak, as with the previous advertisement of the skier, the man in the kayak seems to be smiling. Yes. He's got a pair of oars -- or an oar in his hands, correct? Yes. And behind him, in deep water, there's a smaller picture AUDIOTRANSCRIPT, Division de Pierre VilQire & Associgs Lt4e

925 390 5 i0 15 20 25 Qm of another kayaker, is that not correct? Yes. Can you explain to the Court the purpose of showing that kind of an image in connection with selling a cigarette? Any cigarette? Well my... Export "A" Light, Export "A" Mild, take your choice, sir. My responses broadly would be exactly the same as I've used already, but in addition I point out that this particular series of ads was halfway between a previous campaign and the skiers and the surfers that you saw earlier. So you see, in this particular advertisement, rather more intrusion of what I described earlier as the big country. And this evolved from pictures of good and dramatic scenery to the focus on the skier and the windsurfer respectively. But apart from that, my responses would be exactly what I've made already. I see. Would it be your testimony, Mr. Hoult, that because we see on that document, in both ads, in large print, "A taste for adventure", that that would be a serious part of the information or content of those two (2) advertisements? Yes, I think so. Right. Now, I understand the English language, so I AUDIOTRANSCRIPT, Division de Pierre

926 391 i0 15 2O 25 5 A- know what the words "A taste for adventure" means, Mr. Hoult, and I'm sure the Court does too, but could you tell the Court, please, what's the information in those four (4) words, "A taste for adventure", in connection with information, cigarettes and consumer's understanding of what it is he's supposed to be buying and why? Well, as you say, you understand the literal explanation of "A taste for adventure". Yes, as we all do. In the context of Export cigarettes, the adventure aspect of that is-not only something that we knew young adult male smokers were interested in, we also knew from our attitudinal work, which was described yesterday, that adventurousness and adventures and things were what they were interested in. The taste was an attempt -- you might think it was a weak attempt -- to join the taste of the cigarette with the taste for adventure and, immediately underneath that, it talks about Export °'A" satisfaction. When you say "it talks about"... It refers to. ... it doesn't talk about, Mr. Hoult, it just says: "Export "A" satisfaction". That's simply a word. Well, all right, I'll rephrase it. The sub-headline, as AUDIOTRANSCRIPT, Divls;on de Pierre Vilaire & Associ~s Ll~e

927 392 i0 15 2O 25 5 it's called, is "Export "A" satisfaction" and we knew, and we know, from all our product testing and our attitude and our imagery studies on the brand Export, that above all, satisfaction was how they would describe the flavor of this particular cigarette versus competitive brands like Player's. Taste and satisfaction are very very important parts of the product reason for smoking our brands rather than others. Now, Mr. Hoult, imagine, if you will, a smoker of another company's cigarette, a competitor. You want to get that smoker into your company's clutches, as it were, or you want them to become one of your consumers or your customers, right? And so you would call that, as I think you have called in the past, an attempt to get that person to do a brand switch, correct? Correct. Right. So you have this consumer who is already a smoker. Yes. Right? He has a brand, he's used the brand for, I don't know, six (6) months or a year, a year and a half (1½), two (2) years, it doesn't matter. Right? Right. He's got this brand. That brand he associates with the AUDIOTRANSCRIPT, Division de Pierre Vilalre & Asso6~s Lt4e

928 393 i0 15 20 25 taste because he tastes it or she tastes it every day of his or her life, right? Right. Many times. Along comes this consumer and whips out a magazine and sees any of the ads you've got in front of you, either of the two (2), the kayaker or the person in the airplane. Yes. And we see "A taste for adventure". And we see "Export satisfaction". Yes. I mean, other than the fact that it'.s exciting to go kayaking and to land an airplane on a small river with white rapids on it, what is that supposed to mean to the consumer of another brand in respect of taste, in respect of the product? Aren't you selling a product, Mr. Hoult? Well, we're selling a product but we're marketing a total image, or trying to. And I think it's very interesting that you should raise that issue of the competitive nature of these ads because that's exactly what we're trying to do. At the time that this advertising was introduced, the major competitor to the Export family was the Player's family marketed by Imperial. Imperial's AUDIOTRANSCRIPT, Division de Pierre Vilo~re & Associ~s Lt4e

929 394 5 i0 15 2O Q- A- 25 advertising, if we were to be able to pull it out at the same time as this, for their brand Player's, was quite different. It was also imagery advertising... I might be able to accomodate you. Do you know what year that ad was run? I think if you were to get anything out from the early eighties, it would be -- we would be able to see it, but I can -- I can describe the advertising in general terms which, I think, is all I need to do to make a point. And that is that their advertising at that time was very sociable. Groups of young people, males as well as females, were collected together on a beach or something like that in very passive but obviously very enjoyable situations. What we were trying to do here was to draw a very large difference in imagery between Export and Player's in that regard, because we knew from our advertising testing and from our attitudinal studies, that there were a number of young male adults who were particularly interested more in the activity that we're denoting here, which is very definitely male... Adventure? An adventure rather than the passivity of the beach. So it was very definitely and deliberately developed to be a counterpoint... AUDIOTRANSCRIPT, D;~;,;oo de Pierre Vila;r, & Assod~s Lt~e

930 395 5 Q- A- Q- A- i0 Q- A- Q- 15 A- 2O Q- A- 25 Q- I see. A- ... to the Player's advertising. Q- To the passive Player's smoker in imagery. Which involved females too. Which involved females too. Yes. So the attempt, therefore, is to associate Export with adventure and outdoorsiness and things of that nature? Activity... Activity. ... rather than passivity. Right. AG-4. Mr. Hoult, does the research of RJR-Macdonald disclose that people actually smoke a particular brand because of what other people will think of them? Certainly there are some brands which are seen as brands which their peers smoke, and we do know that the incidence of smoking a certain brand is greater if the... THE COURT: Is what? The incidence of smoking a certain brand is greater, depending on whether their friends smoke the same brand or not. Particularly young adults in their early twenties. AUDIOTRANSCRIPT, Division de Pierre Vilalre & Assod#, Llge

931 396 5 i0 15 2O 25 Me BAKER: Q- So you're... A- It diminishes later in life. Q- So you're talking about peer group influence? A- Yes. Q- Hm, hm. I see. But when you have a cigarette in your mouth or a cigarette in your hand, how do your friends know what it is you're smoking? I mean, you don't going around screaming 'Export "A" -- Export "A"' at the top of your lungs, so how are your friends supposed to know? How are you supposed to influence what your friends think of you by the cigarette you smoke? A- Well, you're describing it as if it's a very active and deliberate process and I don't think it necessarily is. I think... Q- Point it to the Court. A- What you have just described is -- you say: "How are you supposed to influence your friends?"; I don't think that necessarily comes into it at all. Friends are influenced by friends. So in answer to your question, the act of smoking the actual cigarette is only part of the whole ritual. Smoking is very often, particularly again among young adults, carried out in social situations, bars and restaurants. The pack is taken out, perhaps even the cigarette is handed around. AUDIOTRANSCRIPT, Division de Pierre V/Iolre & Assoclgs L,4e

932 397 5 l0 A- Q- 15 A- Q- 20 A- Q- 25 A- Also it's the package. The package is very important. So it's the imagery in respect of the package that makes your friends, the friends of the young adults, understand what kind of cigarette that person is smoking and therefore perhaps what kind of person that person is because of the cigarettes or the brand that they smoke? Well, that is the most obvious visual cue... I see. ... as to what brand you're smoking. I see. So you're actually saying that young adults influence what their friends think of them, some do~ by the brands they smoke, because of the packages they flash. I think that's true of cigarettes, I think it's true of beer, and I think it's true of clothing, and I think it's true of most of the consumer goods that young people buy. They buy it with their friends in mind. We're talking about cigarettes. But I think it's a general phenomenon. I'm sorry, Mr. Baker. I don't think it's restricted to cigarettes. You don't need to apologize to me, Mr. Hoult. Could you point to the Court why the packaging in your company's cigarettes has gotten so attractive in the last years? Well, that's kind of you to say so. I wasn't aware that AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ4s L,4e

933 398 5 i0 15 2O 25 Q- I'm talking about packages now, Mr. Hoult. talking about the product. Me IRVING: it had become more attractive than it was. Doesn't your company try to make it more attractive? Our company always tries to introduce products in the most appropriate and the most attractive packaging. I'm not Mr. Hoult was answering about packages if you'd let him do so. A-We research packaging always before we introduce a new brand. Recently, in the last five (5) years that is, we have made significant changes to our Export family of packs and I, when I was the marketing vice-president, initiated this. And the reasons for that were essentially that we knew from our research that the packaging was starting to look very old-fashioned. And the whole exercise over a period of time, because we evolved into new packaging, was to make the pack contemporary. Me BAKER: Q- Mr. Hoult, does the variation in package presentation, including art work and color, influence consumer beliefs that the cigarette is milder or less strong? A- We try to communicate characteristics of the cigarette through the packaging. AUDIOTRANSCRIPT, Division de Pierre Vila;re & Associ4s Lt4e

934 399 i0 15 2O 25 Q- Hm, hm. A- So the answer is yes. Q- You test all your packaging before it's put on to the market, don't you? A- We do in the vast majority of cases. There have been occasions, particularly with a line extension, and if we were moving very quickly for whatever commercial reason, where we would not, but it's an exception. Normally we test our packaging extensively. Q- Mr. Hoult, does your company deliberately produce lighter-colored packages for lighter cigarettes? A- Yes. Q- Why? A- As I said, the packaging is a most important means of communication and consumers have an expectation that the lighter the pack, the -- or the total pack get-up, the lighter the cigarette. THE COURT: Q- When you say "lighter", you mean light in terms of light... A- Yes. Q- ... colors? Me BAKER: To get the terminology straightened, because you had asked the witness a question about that yesterday, light AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s Ltge

935 400 i0 15 20 25 meaning whatever he chooses to call it. I mean, they call light... THE COURT: Light could be "l~ger", light could be "pastel", light could be a cigarette. Me BAKER: Precisely. THE COURT: Q- Or a beer. Okay, but what you're talking now, you're trying to make lighter colors associated with lighter in terms of tars and nicotine cigarettes? A- Yes. Me BAKER: Q- So that the package is a very important part of the whole marketing process of a particular brand or sub-brand or line extension. It's a really serious thing. A- Yes, it is. Q- I see. And it's so serious that people identify the smoker with the brand and the imagery of the brand because of the package in the smoker's hand, as it were, correct? A- I don't understand the question. Q- Well, I'll try and put it in simpler language for you, Mr. Hoult. It's very important because you have said AUDIOTRANSCRIPT, Divi,ioo d, Pi~ Vi~oi~ & A,,o~;~, Lt~e

936 401 I0 15 20 25 5 that people are influenced about their friends by the brands that they smoke and they know the brands that they smoke by the cigarette package that they're flashing or have in their hands. So then to me, because the cigarette doesn't have big bold letters on it that says Export "A" with images, it's the package, not the cigarette per se that tells other people what it is you're smoking, right? I didn't understand the early part but clearly... Do you understand it now? Clearly -- I don't understand it, frankly -- but clearly, the package does communicate the cigarette they're smoking and we believe that people choose their cigarettes according to what those cigarettes are, and that includes imagery. Hm, hm. And therefore, yes, they do communicate the imagery of the brand through the package. I see. So, in a way, a package is a kind of portable advertisement, isn't it? It simply communicates the brand in itself. It has no imagery in comparison to an advertisement, but having seen the advertisement, having developed an imagery for a brand, yes, obviously if you saw that pack, you'd say: "Ah, that's Export", and you would associate Export with AUDIOTRANSCRIPT, Di,,i,ioo de Pierre Vilolre & Associ6s Ltee

937 402 l0 15 20 25 5 Q- the imagery... Yes. ... that's built up, incidentally, over fifty (50) years. Precisely. This is not something that happens over a week. It's just like the song, you know, "The memory lingers on". So, therefore, the imagery of the originating ads, as it were, isn't really lost out there. It's sort of complemented or completed by the packaging. So therefore, it is a kind of portable advertisement, as it were, for your company, is it not? No, it's not. It's simply a reminder, if you saw the pack of the brand and the brand has certain imagery and certain associations. But the pack itself obviously contains certain pieces of information -- we talked about lightness earlier -- but it doesn't contain anything like the richness of information that an advertisement communicates in terms of imagery. In terms of imagery. Well, if we could go back for just a moment, I'm interested in that expression "richness of imagery". What does any one of those previous ads that we were just referring to, the skier, the white water rapider, the kayaker, the guy in the airplane, what's the richness of imagery association there, other than AUDIOTRANSCRIPT, D~,;oo .~ Pi~,,~ V~lo;,~ a. A,,o~, ~.~.

938 403 I0 15 2O 25 just being out in the great outdoors and health? Well... And exercise and athleticism? Maybe you would tell the Court. Take your choice. Could I just say? You keep using this word, "other than athleticism and health", and I've never used those words. They're your words. No, I quite agree with you. Those are my words, but these are your company's ads, Mr. Hoult, and I don't see people in a dark crowded room playing poker. I see a skier, a windsurfer, a canoer, a kayaker and an airplaner. Yes. Now, what's the richness of imagery there that -- that is so important, that makes people get attracted to the cigarettes for the cigarette's sake? I think, My Lord, I've answered this question before. Well, you're going to answer it again because I've just put the question to you, Mr. Hoult. Very well, Mr. Baker. If I was to take the advertisement on the right, the imagery of the brand Export, as we knew from our attitudinal research, was associated with the big country. This is an expression that was used, has been used by our own smokers and which therefore we wanted to reinforce. We felt that we AUDIOTRANSCRIPT, Division de Pierre V~lalre & Associ4s Ll4e

939 404 5 A- i0 Q- A- Q- 15 20 A- Q- A- 25 had a property or a positioning in this regard that was quite unique. You may recall, Mr. Hoult, if I can interrupt you for a moment, this question was triggered by your use of the expression "richness of information". No, it was... We're not... Excuse me. Excuse me, Me Baker, it was "richness of imagery". Excuse me, "richness of imagery". Yes. Quite so. Now, the richness of imagery in any of these ads -- they're pretty similar, they're just different sporting events, are they not -- how does that relate to the smoking of a cigarette beyond that you want to attract a smoker by thinking that it's a good thing to do, to smoke a cigarette, and that it might even be exciting and that it might even be healthy, because all five (5) of these seem to be healthy, athletic enterprises to me? Well, it may appear like that to you and you keep repeating it, so I assume that they do, but I... But they don't to you? The descriptors "athletic and healthy" are absolutely not part of the copy objective that we were trying to AUDIOTRANSCRIPT, Di,,'i,ion ~e Pierre Vilolre & As,o6~s L,~e

940 405 5 i0 15 2O 25 address in this advertising. Neither does that emerge in terms of the evaluation of the ads. The richness of imagery I described was the big outdoors, enjoyment, things I'd like to do, taste for adventure, yes, that's me, Export satisfaction, I know it's a satisfying cigarette. Yes, this is building on the heritage of Export as I've known it for years. cigarettes outdoors. All of this. I like to smoke And I'm just using phrases now that emerge from talking to our consumers. That is what I call richness of imagery. I don't see any of that per se in a pack of cigarettes. However, a pack of cigarettes, if it has the name Export on, can remind the smoker, yes. That is the advertising for this brand. But it hasn't the imagery in itself. Me BAKER: My Lord, I'm about to go to a new subject, so I wonder if you want to take a break now or continue through eleven fifteen (11:15). THE COURT: No, eleven fifteen (11:15). Me BAKER: Fine. THE COURT: We still have twenty (20) minutes to go. AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s ['4e

941 406 10 15 20 25 5 Me BAKER: Excuse me for just a moment, My Lord. THE COURT: Unless you really need some time to get... Me BAKER: No. No, no, I'll just be a few seconds. Q- All right, Mr. Hoult. In your examination in chief a few days ago you spoke of a new product that was tried out in the United States by RJR, Reynolds, okay, a new kind of cigarette? I referred to two (2). One was a cigarette with low side-stream smoke... Which one -- which one was that? ...which was a line extension of Vantage. I beg your pardon? Which was a line extension of Vantage. And what was it called? That was called "Vantage Excel." M'hm. And when was that brought out on the market? That was introduced into test market, in which it still is, in January or February of this year. That's in the United States? Yes. It's still in the test market? Yes.

942 407 5 10 15 Q- 20 A- Q- A- 25 And then there was another thing that you brought out in the United States? The other cigarette I referred to was Premier. Premier. And, if you don't mind, could you tell the Court perhaps a little bit about this thing. It was not a regular kind of cigarette, I don't think? Premier is a cigarette that does not burn tobacco. The cigarette contains a carbon element at the front of the cigarette, which is lit, and this burns for a few minutes, about the same length of time as a conventional cigarette. The hot air from this carbon burning element is drawn through the cigarette and absorbs flavour and nicotine from a capsule which is embedded in the cigarette. This flavour from the capsule is then drawn through tobacco, then through a conventional filter into the mouth. You've just said a mouthful. Now, what was the purpose of the development of this kind of, I suppose we could call it a cigarette? Yes. Any special reason why this invention came into being? I mean it's certainly not a traditional cigarette. No, it's not. It was very much, in our terms, leading edge technology. The objective of developing this cigarette, which took a number of years, obviously, was AUDIOTRANSCRIPT, o~v~,~oo de Pierre Viloir, & Asso¢i~, Li'6e

943 408 i0 15 20 25 to evolve cigarette smoking to the point where we could actually produce a cigarette which did not produce conventional tar. Tar is measured and, as you see, described in the health warnings. So it was an attempt by RJR-Macdonald's parent company, RJR, Reynolds to produce a cigarette with less tar? Yes. And other components in the burning of -- that emerge from the burning of any substance, including tobacco; tar being the most common. M'hm. Did it have anything to do with taste? Did the development of this cigarette have anything to do with taste? M'hm. Well, all new cigarettes that are developed have to appeal to consumers' taste. And, of course, there was an attempt therefore to produce a good tasting cigarette. But aside from the fact that you wanted to produce a good tasting cigarette, did it have anything to do with the existing taste in existing low tar, low nicotine cigarettes that were already on the market and marketed by your company and others? Well, yes, and that taste was what we were trying to match while, at the same time, eliminating conventional tar. AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ6s Lt4e

944 409 5 i0 A- Q- 15 A- Q- A- 2O Q- A- Q- 25 A- Were you trying to match that taste or in fact make the flavour a little better, Mr. Hoult? I was not involved in the development of that, I was in Canada at the time. But I think it's very safe to say that if we could produce a better tasting product, that would be seen as a great achievement. But was it seen by the people, your own company, Mr. Hoult, as a way to make a cigarette taste more flavorful, as it were, because the consumer wasn't terribly happy with the flavour of existing very low tar cigarettes? The drive behind the development of this product was to eliminate tar. M'hm. Not to produce a superior tasting cigarette. Would you explain to the Court why there was the drive to eliminate tar? Well, as we have seen over the last decade, and as our data demonstrate, consumers are -- consumers are going in large numbers to lower tar and nicotine cigarettes. And they don't like the taste very often of those low tar and nicotine cigarettes, do they, Mr. Hoult? Quite often they say that o.. They don't. ...the taste of these cigarettes is not sufficient to AUDIOTRANSCRIPT, Di~,~,~on ~e Pierre Vil~i~e & Assoc;c;s L,%e

945 410 5 i0 15 20 25 satisfy them. Q- Because with many of the brands, as we both know, it's very hard to even draw the smoke into your mouth, isn't it, Mr. Hoult, in the very, very low tar nicotine cigarettes? A- I smoke the lowest tar nicotine cigarette and I have no difficulty. But it is a consumer complaint, yes. Q- Is it -- yes. Now, I show you a book that has been given to me or given to us by your counsel, called "Chemical and Biological Studies, New Cigarette Prototypes that Heat Instead of Burn Tobacco -- RJR, Reynolds Tobacco Company, Winston-Salem, North Carolina." A- Yes. Q- This is the book that has been produced in connection with the cigarette Premier, that you're talking about? A- It is. Q- And if we could produce this book as AG-5. Me IRVING: My Lord, as you will see -- I mean if there's something particularly in it my friend wants to refer to, otherwise we have an eight hundred (800) page book suddenly introduced into evidence, which is going to have to become part of the record forever. AUDIOTRANSCRIPT, Di,~,~o,~ de Pierre Vilaire & Associ~s L,4e

946 411 i0 15 20 25 Me BAKER: Not necessarily. Me IRVING: Well, if it's an Exhibit, it seems to me the whole book is here. Is there any particular reason why you need eight hundred (800) pages of this book? Me BAKER: I don't know that I have the obligation to explain to my friend why that book goes into the record as an Exhibit, My Lord. Me IRVING: Well, My Lord... THE COURT: No, but he just wanted to know. If you want to put it in, we can put it in. Me BAKER: I do want to put it in. Q- Now, Mr. Hoult, could you tell the Court, who is James A. Fyock? A- James Fyock was, until recently, a senior manager with the RJR, Reynolds Tobacco Company in the United States, specializing in public affairs and public relations. Mr. Fyock is now an independent consultant. THE COURT: Mr. who? AUDIOTRANSCRIPT, Division de Pierre Vilaire & A,soci#s L,4e

947 412 5 i0 15 2O 25 A- Fyock. Me BAKER: F-Y-O-C-K. He left the employ of RJR, Reynolds when? In the course of the last six (6) months. I'm not entirely sure about the exact date. Did RJR, Reynolds commission from James A. Fyock, through his new company, James A. Fyock & Associate, a document that dealt with a series of issues, the nature of which are being discussed in this Courtroom and will continue to be discussed in this Courtroom for use as a tool, perhaps in connection with the issues being discussed here? I was not involved in that commissioning, but I believe SO. I show you a document encaptioned: "Tobacco PR," sort of in booklet form. On page -- the top page, you see, "A-I." In the right column you see, "Introduction," there's a table of content, discussions and so on and so forth. Could you look at the document briefly ... Me IRVING: May I just see it? Me BAKER: ...and tell the Court whether that's the document to AUDIOTRANSCRIPT, Division de P;erre Vilolre & A,soci@s L,@e

948 413 i0 15 20 25 which you're referring? Me IRVING: Have you got a copy of this for us, Mr. Baker? Me BAKER: Oh, I do. That is for you and this for the Court, and here is a copy for you, Mr. Hoult. C'est pour la Cour. A- Mr. Baker, you asked me to see if this was the document... THE COURT: Just a minute. Me BAKER: Yes. THE COURT: Do you have -- do you have something to say or not? Me IRVING: My Lord, it's rather a long document. I'm just trying to establish which document it is exactly. If I could just have a moment to discuss it with Mr. Thibaudeau. My Lord, I have no objection to the document being put in. But it was given, I think it was given through an undertaking which we made to Mr. Baker at the discovery, and I want to check that undertaking just , before... Me BAKER: No, I can assure you, Mr. Irving, that it was not given AUDIOTRANSCRIPT, Division de Pierre Vilolre ~, Associ@s Llge

949 414 5 I0 15 20 25 to us in the course of an undertaking. I got that through entirely independent means, having nothing to do with you or your law office or the discovery. THE COURT: Well, if you have no objection... Me IRVING: Well, in any event, we'll proceed. A- Mr. Baker, you asked me to confirm this is the document I didn't refer to any document at I was referring to. all. Me BAKER: Q- Well, I'm asking you to look at that piece of paper, that booklet you have in front of you, and to confirm to the Court that that was commissioned by RJR, Reynolds, of James A. Fyock & Associates, and that is what Fyock & Associates produced for your company? I have never seen this before in my life. The first (ist) of February, afternoon session. I put it to you, Mr. Hoult, I'm getting the transcript now, that this document was shown to you in an examination on discovery in February of nineteen eighty-nine (1989). You looked at it and admitted on that occasion that this was, in fact, commissioned by RJR, and paid for, and it was produced by Fyock & Associates. So would you like to amend your answer or do you AUDIOTRANSCRIPT, Division de Pierre Viloire & AssociCs

950 415 5 i0 15 20 25 want me to show you the transcript? A- I would have to be shown the transcript, because I have no recollection of seeing this before. Q- And you don't have any recollection of having discussed this document in the discovery? A- I don't -- I don't know what this particular document is, I've not read it as it was presented to me this morning. I -- I don't know where... Q- That's why I asked you to take your time and familiarize yourself with the document. A- Yes, and I have tried... THE COURT: Well, you know, in all fairness to the witness, if you have examined the witness on that piece of document, why don't you show him that. Me BAKER: I intend to, My Lord. THE COURT: We'll suspend for fifteen (15) minutes. Me BAKER: Thank you, My Lord. THE COURT: Give you the time to... SHORT RECESS AUDIOTRANSCRIPT, Division de Pierre Vilalre & Associ~s Ll~e

951 416 i0 15 20 25 Me BAKER: Q- Mr. Hoult, presumably in the course of the break you've had a chance to look at the transcripts which your counsel has given you. I'd ask you now to look at the document which I offered to you shortly before the break and tell the Court whether in fact this is the document that was commissioned by RJR, Reynolds, from James A. Fyock and Associates? A- It is. Q- Would you file this document, which we'll call Tobacco P.R., as AG... THE COURT: Tobacco P.R. Me BAKER: Yes. Do you have a copy of it, My Lord? THE COURT: NO, I don't. Me BAKER: Q- Now, Mr. Hoult, does RJR-Macdonald have a position in respect of whether the consumption of tobacco is addictive? THE COURT: Is? Me BAKER: Addictive. AUDIOTRANSCRIPT, Division de Pierre Viloire & Asso¢i~s L,~e

952 417 i0 15 2O 25 THE COURT: Addictive. A- I said in discoveries and I say here today that my position and the position of RJR-Macdonald is that the definition of addiction is something that scientists and doctors are not agreed upon and we do not have a position that cigarette smoking is addictive in the usage of that word, the normal usage of that word. Me BAKER: Q- I'm not sure I understood you a hundred percent (100%). So do I take your answer to mean that your position is that smoking is not addictive? A- That is my position, that is the company position. Q- And that is equally the position of the company's parent company RJR, Reynolds, of Winston-Salem, North Carolina? A- As far as I'm aware, yes. Q- Well, you -- what is your position there? A- Well, I'm the executive marketing vice-president and I haven't had any discussions on this issue since I went to Winston-Salem last September. Q- You just take it as a given that consumption of tobacco is not an addictive force? A- Yes. Q- Is that correct, right. Has your company ever considered informing consumers that consumption of AUDIOTRANSCRIPT, Division cle Pierre Vilolre & A,,oci~s Lt~e

953 418 5 i0 A- 15 Q- A- 2O Q- A- Q- 25 A- cigarettes or the usage of cigarettes might be habit-forming? No, we have not. Would you agree with me, Mr. Hoult, that the use of cigarettes is, at the very least, possibly habit-forming? Yes, I would. You would. Now, why wouldn't you then inform the consumers about something like that, Mr. Hoult? I think there are many products that are habit-forming. I think there are very many products that consumers believe are habit-forming, and I don't think this is a necessary piece of information to give to consumers in that it would be redundant. And I think that applies to cigarettes as well as to other products. So you're talking about information now, that's not necessary information to give consumers because it would be redundant? Yes. Right. Redundant information that you contend they already have? Yes. So then anything that is redundant, you wouldn't want to put in your advertising... Well, not necessarily... AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s

954 419 i0 15 20 25 On ...simply because it is redundant? Not necessarily. Well, then, would you explain that please? Well, our advertising is somewhat repetitive. You could argue, therefore, that repetition is redundant. We repeat our advertising, it's called the frequency of advertising in order to ensure that the consumer does get the opportunity to see the messages, the information, the advertisements that we put out. Mr. Hoult, has the research of RJR-Macdonald disclosed to you and your co-executives over the years that people with less education rather than more education are less aware of the health risks attached to smoking? No. It has not? No. From your company's research, Mr. Hoult -- and when I say your company, I now refer to RJR-Macdonald -- would you say that better educated people smoke less proportionally than less educated people? Yes, smoking is certainly becoming more and more of a custom of the lower socio-economic groupings and socio -- lower socio-economic groupings are associated with lower education. Does RJR-Macdonald do research on profiles of its AUDIOTRANSCRIPT, Divi,~oo ae Pierre Vila;re

955 420 5 i0 15 2O A- 25 smokers in respect of education? A- Yes, this is a standard question that's asked. Q- Yes, well why, could you tell the Court why you're interested in the education of your smokers or other companies' smokers? A- Because in order to develop the full segmentations that I described at length yesterday, we asked as many demographic questions as we can and that is one (i) of them. And that statement, by the way, is true of all consumer marketing companies. It's a very standard, it's a very standard element in the question. Q- Again, we're not dealing today in this Courtroom with all consumer marketing of all products, Mr. Hoult, we are dealing with cigarettes now. THE COURT: Well, he's allowed to terminate his answer if he wishes. Me BAKER: Q- Once you have information on the education of your potential smokers or your existing smokers, how does that have an impact on the strategy of RJR-Macdonald? Well, it doesn't have a direct influence on our strategy. I think it would be fair to say that it could have an influence on tactics. For example, we do know that the interest of smokers in long copy, a lot of words on an advertisement is very low and therefore AUDIOTRANSCRIPT, Division cle Pierre Viloire ~ Asso¢i~s Ll4e

956 421 5 Q- i0 A- 15 Q- A- 2O 25 there might be an indirect interest, an indirect impact on that knowledge to say well, a lower educated person would not be particularly interested in wading through a full page of copy. A lower educated person would not be interested in wading through a full page of copy. When was the last time your company put out an advertisement with a full page of copy, a half a page of copy or a quarter page of copy or an eighth of a page of copy, Mr. Hoult? Well, I did say it could -- and that would be -- and I gave you an example of a tactic which it could influence. I wasn't putting it forth as a, as a literal example of what we do. But you asked me how could it and I tried to answer that way. Does your company have a position in respect of smoking and health, and let me be more specific, do you and your corporation, RJR-Macdonald, believe that the use of cigarettes can lead to ill health? The position of, of the company and of myself -- and I concur with the company position -- is that there is extensive epidemiological evidence that cigarette smoking does correlate with certain conditions. There is no scientific evidence or demonstration of this though it has been attempted many hundreds of times over the last twenty (20) years. AUDIOTRANSCRIPT, Division de Pierre Viloire & A,soci4s

957 422 i0 15 2O 25 THE COURT: I'm sorry, I didn't get all your answer. You say there is extensive epidemiological... Me BAKER: It took me about three (3) weeks to be able to get that one out, My Lord. THE COURT: Especially with my problem here. A- I said there was a lot of that evidence, My Lord, but that evidence amounted to correlation. Q- And what do you mean... A- I was repeatingmy answer for His Lordship. Me IRVING: Carry on Mr. Hoult, please, the Judge wanted to get it. Me BAKER: Sorry, I thought he had finished. A- I then went on to say that despite this and despite many hundreds of experiments in laboratories, a direct relationship had never been established. Q- So then, you make a distinction between a correlation and causation? A- Yes, I do. Q- And when you distinguish between -- when you distinguish between epidemiology and causation, do you mean simply that epidemiology is simply statistics and that AUDIOTRANSCRIPT, Di~,~oo de Pierre Vilaire 8, Associ4s Lt@e

958 423 10 15 20 25 causation is something else? I don't mean it's simply statistics. I mean that the statistical evidence would point to a relationship between certain diseases and cigarette smoking and that is entirely different from demonstrating, if you do x, y will happen and that is the result of a scientific experimentation and that is what I am saying has not occurred to date. I see. So you're suggesting, then, that it's only a question of correlation, that there is no scientific basis for the assertion that the use of cigarettes causes ill health, is that correct? That is correct. Tell the Court why, in your view, there is no scientific basis for the conclusion that smoking causes ill health? Well, I didn't say there was no scientific basis. There may, in due course, be scientific basis. I simply said to the Court that at the moment a scientific basis had not yet been established and I have to say that, not as a scientist, but as a person interested, of course, in the subject and to the best of my ability, reading what I can about the subject, but I don't answer as a scientist. But you, you do read quite a lot on the subject? I read whatever is available and I, no I wouldn't say I AUDIOTRANSCRIPT, Div~slon cle Pierre Vilaire & Associ4, LI6e

959 424 i0 15 2O 25 5 read quite a lot on the subject. I would say, of course, I read more, far more than the average. Would it be fair to say, Mr. Hoult, in relation to the sale of cigarettes and advertising expenditures that if advertising expenditures go up and sales go up, could one conclude on a scientific basis that advertising caused the sales increase? No. Why not? Because that would be a correlation. What would you need, a controlled experiment to show real cause and effect? To show real cause and effect, yes, you would. And sometimes we attempt that by having a different advertisement in one market and compare and contrast with another. So it would be your testimony then, if I understand you correctly, Mr. Hoult, that without factoring in all of the variables, correlation of statistics is only of marginal value? No, I think it's of great value. Oh, what value? I think it's of great value to indicate to the scientists that something is happening, i.e. a correlation means that things aren't happening by AUDIOTRANSCRIPT, Di','is~on 4e Pierre Viloire & A~so¢I4s Lt@e

960 425 5 A- 20 Q- A- 25 chance. I think that's the scientific or the statistical definition of a correlation. And the value, the value of a correlation is that it should encourage the scientist to then say "okay, I'm now going to form hypotheses and test those hypotheses..." And then go further in their... And then go further... ...in their research? Exactly. So it does, it has immense value. Right. So it has immense value as a starter? Yes. As a promoter for the scientist, as it were, and once these great correlations, these epidemiological statistics are available, it's a signal to the scientists that they should rush forward and do an awful lot of more research so that one could then show conclusively that there is that connection between smoking and ill health, correct? Well, I, that would be the ultimate aim but I would think another aim would be to understand the situation far better. So it's not necessarily conclusivity that's... I beg your pardon? It's not necessarily conclusiveness that is the only goal. I would have thought better and fuller AUDIOTRANSCRIPT, Division de Pierre Vilaire 8, Associ~s Lt4e

961 426 5 io Q- A- 15 Q- 2O A- 25 understanding would be also a goal. Yes, but we're talking about a conclusivity, as I think you called it. So it's your testimony then that until, unless and until that is done, that the cause is not really proven. So, for example, that when a series of smokers develop lung cancer, it would be your testimony that in no way could that be attributed to their use of the product? No, it would not. That it would only be epidemiological evidence? No, that would not be my statement, that in no way could it be anything to do with the smoking of cigarettes. I think in a correlation way, it would have something to do with cigarettes, but my answer is it is a mere correlation, not scientific proof, because many smokers, as you know and is well-known, many heavy smokers do not develop the conditions you're referring to. Would you agree with me, Mr. Hoult, that virtually everybody who smokes should be conscious that they're taking a considerable health risk? I think the epidemiological evidence is, yes, they, they should be taking informed decisions on a product that presumably they enjoy but which has been demonstrated to have a correlation with certain conditions, as I think they should with other adult products too. AUDIOTRANSCRIPT, Division de Pierre Viloire & Assoclr~s L,~e

962 427 5 i0 15 2O 25 Q- You say that all of the epidemiological evidence is suggestive that there's a risk involved with smoking, but that it is basically a signal to the medical world that they should go out and do more research to prove causation; correct? A- Yes, that's my position. Q- You are aware, Mr. Hoult, that in your country, the country that you're working in now, the United States, in Canada, all over the world, since at least, at the very least, the early sixties, thousands and thousands and thousands, in fact tens of thousands of studies have been produced by some of the best medical minds in the world, all of which suggest that there is a very close link between smoking and ill health. Now, could you please explain to this Court, why it is that you and your industry somehow seem to think that there's some kind of world-wide medical conspiracy against the tobacco companies. Because I don't understand your answer, Mr. Hoult. Could you please explain it, why you think all the doctors all over the world somehow are against the tobacco companies? Me IRVING: Just a moment, Mr. Hoult. My Lord, I have an objection to the form of that question. Mr. Hoult is here to speak for the applicant, RJR-Macdonald, and I have no AUDIOTRANSCRIPT, Division 4e Pierre Viloire & A,,oci~s L,~e

963 428 i0 15 20 25 objection to him giving the view of the company on these issues. It's clear, of course, Mr. Hoult is not a medical doctor, nor is he a scientist, nor is he here to testify for any industry at large around the world. Now, if Mr. Baker wants to ask Mr. Hoult the view of the Canadian company on the matter in general, that's fine, but that question takes Mr. Hoult way beyond either his position in this Court or his expertise. THE COURT: And also it contains an editorial comment which is not warranted by the testimony of Mr. Hoult. Why don't you address the question to his -- in his capacity as C.E.O. as he is, as he then was. Me BAKER: Right. Well, he was a C.E.O., he is no longer. Q- In your capacity as vice-chairman of RJR-Macdonald and senior executive, whatever it is you are with RJR, Reynolds, in Winston-Salem, could you explain to the Court... Me IRVING: My Lord -- just a moment -- Mr. Hoult is here on behalf of the Canadian company. Let's just stick to that, please. Me BAKER: My Lord, he may be here on behalf of the Canadian AUDIOTRANSCRIPT, D;vision de Pierre Vilolre & Associ~s Lt~e

964 429 5 i0 Q- 15 A- 2O 25 company, but he is employed by and paid by the owner of the Canadian company, which is an American company, which is one of the largest tobacco companies in the world. So while it may please Mr. Irving to have brought him here in what he would like to think is a tailored version of his capacity, this is a man who is employed by an American multi-national. THE COURT: The question is allowed. The question is allowed. A- My response to the question which, if I recollect, was with these thousands of scientists putting forth their evidence, why do you think there's a conspiracy? I... Me BAKER: Medical conspiracy. Medical conspiracy. I certainly don't think there's a medical conspiracy, of course. But I would point out that all these thousands of studies and there are, indeed, thousands of studies, a great number of them have been essentially epidemiologically directed, that is, taking thousands of people who smoke and thousands of people who don't smoke and looking at the differences, or following people throughout their lives. That's, as far as I understand it, epidemiology is the figures for large numbers. I do repeat what I have said and that is that of AUDIOTRANSCRIPT, Divi,ion de Pierre Vilaire & As,oci6, Lt@e

965 430 i0 15 20 25 the experiments that have been carried out in a laboratory, Mr. Baker, there have not been any that have demonstrated the causal relationships that you have referred to. And I would also say that there are certain medical people who do not acknowledge that there is yet a causal relationship, and I believe that they will be giving evidence themselves in this Court. Q- It's news to me! Is there something I don't know, Mr. Irving? Have you got a list of doctors that hasn't been given to us that are coming in to testify? Me IRVING: My Lord, Mr. Baker knows the rules as well as I do. We have not filed reports of medical witnesses. Mr. Baker has. Perhaps he'd like to read them. THE COURT: Let's proceed with the examination. Me BAKER: Q- Now, Mr. Hoult, after a cigarette is lit and it is in use by a smoker, what are the ingredients that go into a smoker's mouth? A- Mr. Baker, there are, I believe, literally thousands of ingredients and I'm not in a position to list these. I do not have the knowledge to list more than a few of these. Q- Could you -- the knowledge you do have, though, could AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ~s b4e

966 431 i0 15 20 25 5 you give them to the Judge? A- Well, water vapour -- water vapour, nicotine and a very complex compound known generally as tar. There are other gases, carbon monoxide being one of them. And I'm not in a position, technically, to go very much further than that, because the ingredients that you refer to do number many thousands. There are agreements with governments on what ingredients may be included in tobacco, and we, as a company, both subscribe and adhere to that in Canada, as we do elsewhere. Q- So you've listed nicotine and a combination of things that you call "tar," and water vapour? - A- Yes. Q- Your document number thirty-seven (37). I'm showing you a document, Mr. Hoult, which was given to us by your counsel in connection with a Subpoena, which is in alphabetical order... THE COURT: Ingredients? What is it called? Me BAKER: Well, it's not really called anything. It's a list of ingredients. I think it might fairly be called a list of reputed chemical constituents. Have you got a copy? No, I don't. AUDIOTRANSCRIPT, Division tie Pierre V~laire &

967 432 i0 15 2O 25 Here you go. Thank you. It is called in the index that was prepared by my friends, it was called in the index, "a list of reputed chemical constituents." It simply doesn't appear on the document itself. Now, this document, Mr. Hoult, on the first page, starts with "A," and it's got a name at the top of the list that I certainly don't intend to try and pronounce, and some sixty (60) pages later, at four o five three (4053), it ends with something called "zirconium." Now, as you know, Mr. Hoult, this was a document that was prepared by your company for use in this case in response to a question as to what the chemical constituents were in cigarette smoke; correct? Correct. Now, when you were asked to list the ingredients a few moments ago, you said there was tar, you said there was nicotine and you said there was water vapour. Yes. Now, without, you know, you're now looking through the document, which is certainly appropriate, but could you explain how it is that a man like yourself, who's been involved in the cigarette industry for a good part of his adult life just doesn't know what's in the smoke AUDIOTRANSCRIPT, Division de Pierre Vilolre & Associ6s U4e

968 433 5 i0 15 20 25 A- that's in the product that he's selling? Well, yes, because there are thousands of compounds, elements and traces in cigarettes. And I said that tar was a general term that included many of these; it was complex, and I also said there were many gases. M'hm. But I don't think it's reasonable for anybody to know -- to be able to pronounce, as you say, let alone to recall several thousand ingredients. I haven't suggested to you that it would be appropriate for you to be able to do that. I simply asked you if you knew what some of the constituents were. And I wonder, you see, as I'm not a scientist myself, Mr. Hoult, and as I look through this list, some of the names scare me a little bit and I wonder whether in your view it might not be appropriate to inform the consumer out there what's in the product they're smoking. You see, you talked about informing yesterday when Mr. Irving asked you the question yesterday morning: what kind of information do you give your consumer? And you said, "well, with one ad that it came from a very well known Canadian corporation." And that was a nice answer. And then you also said, "well, we inform them about the tar and nicotine level," you see. M'hm. AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ4s L,4e

969 434 i0 15 20 25 And that's information. But I look at page three nine eight nine (3989), which is the second page into this very large document, about ten from the bottom, and I see, "arsenic," you see. And you think that's a good thing to be ingesting into your lungs, Mr. Hoult? Well, I say this, not being a doctor, but to choose that one particular, arsenic in small traces, I understand is sometimes used for medical purposes, so I'm not able to say -- to answer that question. That would be a good piece of information. So why don't you think you would tell the consumer that, Mr. Hoult? Because, as I think you would acknowledge, Mr. Baker, many compounds are dangerous in large quantities, harmless in small or even beneficial in small. And I don't think it's reasonable to inform the consumer of a selection of these. Would you then say, "well, why don't you inform them of all?" Well... This information is available because of the government requirements on -- and we have informed the government of what our products contain. But, you see, it's you who are the manufacturer, Mr. Hoult, it is you who are the marketer, it is you who are the advertiser of this product. It is you who contend that there is information in your advertising. It is AUDIOTRANSCRIPT, Division de Pierre Viloire & Asso¢i~, Lt~e

970 435 you who admit, at least to a certain extent, that there is a certain risk involved with the use of your product; do you not? Yes, I did. Right. You are aware that there is a serious risk of lung cancer in the use of your product. You have read those studies, have you not? I have. You are aware -- do you agree that there is a risk of lung cancer in respect of the use of your product? The studies on lung cancer, like the other studies, do indicate that there is a high correlation between certain types of lung cancer and cigarette smoking. And heart disease? And heart disease. M'hm. And chronic bronchitis? I believe so. And emphysema? Yes. So there is a connection, some kind of connection, you're willing to concede, between the use of the product and these diseases that we've just referred to? Yes, but as I said earlier, a connection or a correlation is certainly not causal and therefore, to use the word "connection" to imply at all, and I'm not AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ4s Lt4e

971 436 i0 15 2O 25 suggesting you are but it often is, to imply causality is absolutely incorrect scientifically. Q- M'hm. Something in the smoke that people inhale into their lungs is triggering the studies that trigger the epidemiological conclusions that allow you to make the concession that there is a very serious risk in connection with the use of the product. There is something in there. A- No, sir. Q- It's not hot dogs that they're sucking into their lungs, Mr. Hoult, it's a combination of the things in this document. Me IRVING: My Lord, I wonder if my... A- I do not accept what you have just said. Me IRVING: Just a moment. My Lord .... Me BAKER: Q- You do not accept that? Right. We will file... Me IRVING: Just a moment. Me BAKER: Yes. Me IRVING: My Lord, I don't like to interrupt my friend, but his AUDIOTRANSCRIPT, Di,,~,~o0 ~, Pierre ViJo~re & k,Soci~, Lt4e

972 437 5 i0 15 20 25 questions are now containing more and more and more editorial comment, they're getting longer and longer. We know we're not talking about hot dogs. My friend doesn't need to introduce that subject. I wonder if my friend could just keep his questions free of editorial comment and come to the point? THE COURT: Especially that these aspects will be discussed at length... Me IRVING: Yes. I mean there are... THE COURT: ...with the experts who know what they're talking about. Me IRVING: ...nine (9) or ten (i0) medical witnesses to come. Mr. Hoult is not a doctor or a scientist. And this... THE COURT: By the way, I see from the list that tar is not even mentioned in the list. A- I used the word "tar," My Lord, to be the residual matter which contains many of these compounds and elements. THE COURT: It's going to be AG what -- 7? AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s Lt~,=

973 438 5 i0 15 20 25 Me IRVING: You'd better put a title on it because... THE COURT: There is a title on it. Me BAKER: I think the one the Court has does have a title, List of Reputable... THE COURT: List of... Me BAKER: Q- Now, Mr. Hoult, we're in an era now where most people who are of the age of reason, whatever that age is, are aware to some extent that there's a controversy, as you had put it, in respect of smoking and health and that smoking might not be good for you; is that correct? A- I agree. Q- You agree. Does your company's advertising tell people that it's okay to smoke? A- We would not use that particular expression, but obviously we would want our brand smokers to be confident in smoking and confident in the brand they were smoking. Q- Confident? A- Confident about the brand they were smoking. Q- M'hm. I refer you, Mr. Hoult, to a document dated AUDIOTRANSCRIPT, Division de Pierre Vilolre & Associ~s L,~e

974 439 5 i0 15 20 25 October sixteen (16), nineteen eighty-six (1986), called "RJR-Macdonald Inc. Export Family Draft Brand Positioning Statement." It sounds pretty impressive to me. And I refer you to page o four one one (0411). A- Yes, I'm there. Q- And I see in the second paragraph... THE COURT: What page? Me BAKER: Zero quatre onze (0411), Votre Seigneurie. THE COURT: M'hm. Me BAKER: Q- I see the line, "...the Export smoker must also be constantly reassured that it's all right to smoke." Now, why do you need to reassure smokers that it's all right to smoke? Is it -- do some people think it's not all right to smoke so you have to reassure them that it is all right to smoke? A- That is correct. Q- Is that correct? A- Yes. Q- Do you think it's appropriate, fair and moral in the face of the medical evidence that is out there to be AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s L,4e

975 440 10 15 20 25 5 reassuring people that it's all right to smoke? I thought you were just sort of advertising for brand loyalty and for switchers? A- Well, we are... Q- But now you're reassuring them that it's okay to -- they're smoking the product, right? A- They're smoking the brand. Me IRVING: My Lord, would my friend please let the witness answer the first question he puts and then not go on to another one. I thought cross-examination was a question and an answer; it's mostly speeches at the moment. Me BAKER: I'm sure you'll straighten it out when it's your turn, Mr. Irving. THE COURT: Well, let t'he witness at least answer. Me BAKER: Very well, My Lord. Well, you asked me whether this was a proper thing to do. Yes. And whether it was necessary. Certainly I think it is a proper thing to do, and certainly I think it's becoming increasingly necessary, because in a social sense, there AUDIOTRANSCRIPT, Division de Pierre Vitoire 8, Associ~s Lt~e

976 441 5 i0 15 20 25 are -- there is a large body of non-smokers who not only think it's not okay to smoke, but are particularly overt and sometimes rude in their statements to smokers. So that is what was meant by, "it's okay to smoke." Now, you asked whether that was proper, ethical, moral in light of what I have acknowledged with regard to the risks of smoking? And I say: yes, because that is not what it's referring to. We believe that smoking is an individual choice made on the basis of very full information. And I think it is also fair to say that the knowledge of the risks of smoking are so wide as to be virtually universal, and that is not what we're referring to, we're referring to the social aspects of smoking here. Q- M'hm. So it's just a sort of a gentle reassurance? A- Yes. Q- Constant? A- Yes. Q- It is a constant reassurance. Would you file this document, please, as AG-8. BY Me BAKER: Q- You told the Court two (2) days ago, Mr. Hoult, that your company doesn't advertise to kids, children. A- No, we don't advertise to anyone under eighteen (18). Neither do we market, neither do we do marketing AUDIOTRANSCRIPT, Division de P~erre Viloire & Associ4s Ll4e

977 442 i0 15 2O 25 5 research. Now -- why not? Because we believe that cigarette smoking is an adult custom. We recognize the controversy, we recognize the statistical correlations and we feel that a person should be mature in order to take those individual decisions as to the balance between the enjoyment of smoking and the alleged risks. We have chosen the age of eighteen (18), even though the law, in most provinces of Canada, with the exception of Ontario, permits people over the age of sixteen (16) to purchase cigarettes. You know, you talked about informed decisions and mature decisions, what is it about obtaining maturity that allows a person to make a more informed decision and rather a less informed decision, Mr. Hoult? What kind of information are you talking about? Well, I'm talking about knowledge of the world around. For example, the reading of newspapers is a pretty important source of information to most people, watching news broadcasts or news programs on television, and essentially we believe that the more knowledge that people have in this regard, the better they're able to take informed decisions. And, judgementally, we say that a child cannot take fully informed decisions, the adult can. We have said we will regard people over the AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s L,~e

978 443 i0 15 20 25 Qm Am age of eighteen (18) as adults. Do you not worry about people under eighteen (18) being attracted by your ads? Well, you know very well, Mr. Baker, my position on advertising of cigarettes, that it doesn't cause people to smoke. And I'm utterly convinced of that. Yes. Could you tell the Court on what research that statement is based? This is based not only on the research that we had commissioned, as a Canadian tobacco industry, but I did research myself previously... Before you get into your own research, you said research that you had commissioned as a Canadian tobacco company. Yes, a children's research study that was submitted in discoveries and it was discussed. Oh, but it's not -- I don't see it in this courtroom, you didn't refer to it in your testimony. Now, what did that research tell you? That the influence on whether people started or did not start to smoke was a function of many many factors, mainly social, in fact virtually all social: Peer pressure, wanting to be like one's friends, wanting to appear adult, parental example, but advertising itself was not a function of whether people took up the smoking habit. AUDIOTRANSCRIPT, Divls~on de Pierre V~loire 8, Associ~s Lt~e

979 444 5 Now, Mr. Hoult, have you ever read the research to which you've just made reference? Yes, I have. Have you read it recently? No, I haven't. Do you remember what you read in that research, Mr. Hoult? Yes, I do. Hum hum. Would it be fair to say, Mr. Hoult, that that research dealt with why children take their first cigarette only, and that's all that research had anything to do with? Not becoming smokers as real smokers but simply the very first cigarette, would you agree with me that that's what the Glen Smith Children Research stuff is all about? But to become a smoker you have to take your first cigarette, Mr. Baker. I see. So then you make the case that advertising has no connection with being attracted to smoking, simply because it can't be proven that a seven year old (7) kid started to smoke because he or she saw an ad, is that correct? Could you repeat the question, I'm sorry. I say you try and make the case that there is no connection between advertising and use of the product AUDIOTRANSCEIPT, Division de

980 445 i0 15 20 25 from non-users simply because Glen Smith has told you that you can't prove that seven year old (7) kids were attracted to their first cigarette by... Me IRVING: My Lord, if my friend is... Me BAKER: I'm not quite finished. THE COURT: Well, the way you're phrasing your question is totally inappropriate. You're putting many comments in your question, which is, first of all, it's confusing to me, because I haven't seen that study, and secondly, I'm sure it's confusing to the witness. Me BAKER: Have you got a copy of that research with you, Mr. Hoult? A- No. Q- No. Me IRVING: I was going to say, My Lord, if my friend wants to cross-examine on a particular piece of research, he'll have to put it in. It's his exhibit. Me BAKER: I don't have ready access to the document, My Lord. It's going to take me a moment to find it, My Lord. AUDIOTRANSCRIPT, Division de Pierre viloire & Asso¢i4s L,4e

981 446 lO 15 20 2S THE COURT: Well, we could come back to it maybe in the afternoon then -- on this. BY Me BAKER: Q- So then, I take it from your previous answers, Mr. Hoult, that you and your company feel no sense of responsibility then for children smoking? A- Well, I didn't say that, because, in addition to that belief I have, that firm belief, that advertising does not cause people to smoke anymore than it causes them to stop smoking, we do everything that we can, as a company, to focus our advertising on our target smokers. I've already described to you that we don't market, we don't advertise it, we don't do research, and in terms of our activities, our media selection, we focus our activities on existing smokers, either to -- and they are all over eighteen (18) -- either to maintain loyalty or to encourage brand switching. Q- Has it ever occurred to you that in your advertising you might want to tell youngsters that they shouldn't be smoking and that you don't approve of it as a company? A- We did have a campaign in the United States for a short period of time to that effect, stating that we did believe that smoking is an adult habit and furthermore in our dealings with the trade, as an industry through AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s Lt~e

982 447 5 l0 A- 15 Q- 2O A- Q- 25 the CTMC, we make it absolutely clear that the trade should not sell cigarettes to minors and we even provide materials like decals for doors to that effect. The question was in Canada. Yes, and I was referring to the Canadian situation. In Canada, have you ever said in your advertising, that children shouldn't smoke and it is your company's position that children shouldn't smoke? We have not, because it would be ineffective. And it would be ineffective because? Because advertising from tobacco companies telling people not to smoke would not have credibility. Secondly, as I've said, whether people smoke or do not smoke is not a function of advertising. Whether it's advertising which states our position or whether it's brand advertising. You'll agree with me, Mr. Hoult, that some ads are better than other ads, some are great ads, some ads actually are able to attract switchers from other of your rivals? Yes. Hum, hum. Could you affirm under oath, Mr. Hoult, that an ad that's so good that you can get a switcher from a rival's company into your company might not be attractive to a fifteen-year-old (15) youngster and have AUDIOTRANSCRIPT, Di.,~,~o. ~le Pierre Viloire & A,,oci~s [t4e

983 448 i0 15 20 25 that fifteen-year-old (15) youngster start smoking? A- I couldn't affirm under oath that it wouldn't attract a fifteen-year-old (15) smoker to our brand rather than the competitor's brand, but I can affirm under oath that that advertisement, no matter how brilliant, would not persuade that individual to smoke, according to my own experience and beliefs. Q- Never under any circumstances? A- I just don't believe that advertising causes people to start smoking. Q- Would you agree with me that in Canada, in nineteen eighty-seven (1987)~ nineteen eighty-eight (1988), the industry -- combined industry, that is Imperial and yourselves and Rothmans Benson & Hedges, spent somewhere between seventy-five ($75,000,000) and a hundred million dollars ($100,000,000) a year in advertising? A- Yes, it would be of that order. Q- And in the United States in the same period of time, the industry spends approximately two billion dollars ($2,000,000,000) a year in cigarette advertising and promotion? A- Yes. THE COURT: I didn't get the number, Mr... AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ~s Lt~e

984 449 I0 15 20 25 Me BAKER: Two billion ($2,000,000,000). THE COURT: No, but in Canada. Me BAKER: Seventy-five ($75,000,000) to one hundred million ($i00,000,000), My Lord. THE COURT: And in the U.S. two billion ($2,000,000,000)? Me BAKER: Two billion ($2,000,000,000). Q- You've got to get a lot of switchers to make it worthwhile, wouldn't you agree with me, Mr. Hoult? A- Well, as I said yesterday, the function is not only switching it is also to defend your own position. And if you didn't defend your own position, switching would certainly take place in very very great order. Q- My goodness. Now, two (2) days ago, you filed a document which showed that in nineteen eighty-seven (1987) your company spent thirty-five million ($35,000,000) on advertising and promotional spending. I just don't have the exhibit number for the moment, My Lord. RJR-3. Now I have a document that comes from your company, it's also called RJR-Macdonald Inc. Advertising and AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ~s Lt~e

985 450 5 A- 10 A- Q- A- Q- 15 A- Q- 2O A- Q- A- 25 Promotional Spending, and it also indicates that in the year nineteen eighty-seven (1987) thirty-five million dollars ($35,000,000) -- it's just a little more detailed, as you'll see. Yes. And as one flips through the pages, one sees the various categories under which the spending takes place. Yes. Sponsorships, point of sale, print advertising, signs. Yes. Production on medium signs, agency ... Yes. And, of course, what we don't see in the document which I have in my hand, which I will file in a moment, My Lord, is retail -- and that appears in the document RJR-3 at eighteen million dollars ($18,000,000)? Yes. Now, does this thirty-five million dollars ($35,000,000) include all the market research that your company does in respect to all this advertising and promotion? Yes. All of it? Yes, it should. And it says here we spent in nineteen eighty-seven (1987), one point seven million dollars ($1,700,000) in marketing research. AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s [,4e