United States of America

United States of America

FEDERAL TRADE COMMISSION

Washington, DC 20580

Division of Advertising Practices

Bureau of Consumer Protection

May 9, 2017

Mark S. Brown, Esq.

King & Spalding LLP

1700 Pennsylvania Ave., NW

Suite 200

Washington, DC 20006-47078

Re:

Request for Informal Staff Guidance Regarding Santa Fe Natural Tobacco

Company’s Consent Order (FTC Dkt. No. C-3952)

Dear Mr. Brown:

The Division of Advertising Practices has reviewed your letter submitted on behalf of

RAI Services Company (“RAI”) and Santa Fe Natural Tobacco Company (“Santa Fe”), dated

March 9, 2017, requesting informal staff guidance concerning the Federal Trade Commission’s

consent order with Santa Fe (“Consent Order”).1 The consent order requires, among other

things, a disclosure that “No additives in our tobacco does NOT mean a safer cigarette” in any

cigarette advertisement that, through the use of phrases such as “no additives,” “no chemicals,”

“additive free,” “chemical-free,” “chemical-additive free,” “100% tobacco,” “pure tobacco,” or

substantially similar terms, represents that a tobacco product has no additives or chemicals

(“cigarette disclosure”).2

This request for guidance was precipitated by a Memorandum of Understanding that

RAI/Santa Fe entered into with the U.S. Food and Drug Administration’s (“FDA”) Center for

Tobacco Products in January 2017. Under the Memorandum of Understanding, RAI/Santa Fe,

agreed, among other things, to remove the phrase “Additive Free” and the term “natural” from

1

Your letter attaches the Santa Fe agreement, which was accepted for public comment on

April 27, 2000. On June 16, 2000, the Commission made final that agreement and issued its

Decision and Order (FTC Dkt. No. C-3952). See https://www.ftc.gov/enforcement/casesproceedings/992-3026/santa-fe-natural-tobacco-company-inc.

2

The Consent Order also requires a triggered disclosure in connection with advertising and

packaging for herbal smoking products, and other remedies. This letter addresses only the

requirements for the cigarette disclosure and does not provide guidance on other provisions of

the Consent Order.

Mark S. Brown, Esq.

Page 2

May 9, 2017

all Natural American Spirit cigarette product labels, labeling, advertising, and promotional

materials, except that Santa Fe may retain the use of the term “Natural” in the “Natural American

Spirit” brand name and trademarks. 3 The Memorandum of Understanding permits Santa Fe to

use the phrases “Tobacco Ingredients: Tobacco & Water” or “Tobacco Filler Ingredients:

Tobacco & Water” if it chooses to do so.

RAI and Santa Fe request staff guidance on two issues. First, they seek staff guidance as

to whether use of the phrases “Tobacco Ingredients: Tobacco & Water” or “Tobacco Filler

Ingredients: Tobacco & Water” triggers the cigarette disclosure required in the FTC’s Consent

Order. As stated above, the Consent Order’s cigarette disclosure is triggered whenever a covered

Santa Fe advertisement uses the specific terms identified in the order or any substantially similar

term that represents, directly or by implication, that a tobacco product has no additives or

chemicals. It is well-established that whether a claim is reasonably conveyed in an

advertisement requires an examination of the entire advertisement and an assessment of the

overall net impression(s) conveyed. POM Wonderful, LLC v. FTC, 777 F.3d 478, 490 (D.C. Cir.

2015. Accord ECM Biofilms, Inc. v. FTC, No. 15-4339, U.S. App. LEXIS 4609, at **14-15 (6th

Cir. Mar. 16, 2017). Thus, determining whether use of the two referenced phrases would

constitute “substantially similar terms” that trigger the cigarette disclosure in the Consent Order

would require an evaluation of specific advertisements in their entirety, and not simply an

evaluation of specific words or phrases. For that reason, we cannot definitively opine whether

use of the phrases “Tobacco Ingredients: Tobacco & Water” or “Tobacco Filler Ingredients:

Tobacco & Water” would trigger the cigarette disclosure required in the FTC’s Consent Order. 4

Looking solely at the phrases, however, raises concerns that, depending on the context,

consumers could reasonably interpret advertisements containing the phrases at issue to mean that

Santa Fe Natural American Spirit cigarettes contain no additives or chemicals. In particular, the

phrases are very similar to “100% tobacco” and “pure tobacco” – each of which specifically

triggers the cigarette disclosure. In addition, advertisements permitted under the Memorandum

of Understanding would continue to use the term “Natural” as part of the “Natural American

Spirit” brand name, potentially adding to an impression that the advertised cigarette contains no

additives or chemicals.

3

A copy of the Memorandum of Agreement is attached to your March 9, 2017 letter. In 2009,

Congress enacted the Family Smoking Prevention and Tobacco Control Act (“Tobacco Control

Act”), which gives FDA broad authority over cigarettes and other tobacco products. It is under

that authority that RAI/Santa Fe entered into the Memorandum of Agreement with FDA. We did

not analyze and provide no guidance concerning RAI/Santa Fe’s compliance with the Tobacco

Control Act or any provision therein.

4

In accordance with Section 1.1 of the Commission’s Rules of Practice and Procedure, 16

C.F.R. § 1.1, we do not ordinarily provide advice if an informed opinion cannot be made or

could be made only after extensive investigation, clinical study, testing or collateral inquiry.

Mark S. Brown, Esq.

Page 3

May 9, 2017

The second issue that RAJ/Santa Fe seek staff guidance on is whether they can replace

the Consent Order's required disclosure with the following disclosure: "Natural American Spirit

cigarettes are not safer than other cigarettes." The Memorandum of Understanding states that

FDA does not object to this disclosure. Although this disclosure differs from that set out in the

Consent Order, both disclosures convey the core message that Santa Fe cigarettes are not safer

than other cigarettes. Thus, FTC staff would not recommend an enforcement action with respect

to the mandated language of the cigarette disclosure if RAI/Santa Fe used the requested

disclosure rather than the specific language set out in the Consent Order as long as the disclosure

was displayed clearly and prominently as set forth in the Consent Order.

The views expressed in this letter are those of FTC staff. They have not been reviewed,

approved, or adopted by the Commission or any individual Commissioner. They are not binding

upon the Commission, and the views are given without prejudice to the right of the Commission

to later rescind the guidance and, when appropriate, to commence an enforcement proceeding.

In addition, the views expressed in this letter are restricted to the facts described above. FTC

staff retains the right to reconsider its advice and, with notice to the requesting parties, rescind or

revoke its guidance if it would be in the public interest to do so.

Pursuant to Section 1.4 of the Commission's Rules of Practice and Procedure, 16 C.F.R.

§ 1.4, this response, along with your request for staff guidance, will be placed on the public

record.

Very truly yours,

/Mt,{L ~'

MaryK.a

T

Associate Director for Advertising Practices

cc:

Ann Simoneau, J.D.

Director, Office of Compliance and Enforcement

Center for Tobacco Products

U.S. Food and Drug Administration

KING &

SPALDING

King & Spalding LLP

1700 Pennsylvania Ave, NW

Suite 200

Washington, D.C. 20006-4707

Tel: + I 202 737 0500

Fax: + I 202 626 3737

www.kslaw.com

Mark S. Brown

Partner

Direct Dial : + I 202 626 5443

Direct Fax: + I 202 626 3737

mbrown@kslaw.com

March 9, 2017

Via Electronic Mail

Rosemary Rosso

Division of Advertising Practices

Federal Trade Commission

Constitution Center

5th Floor, Suite 5610 (Annex J)

400 ?1h Street, SW

Washington, DC 20024

Re:

Request for Informal Staff Guidance Regarding 2017 Agreement Between

Santa Fe Natural Tobacco Company and U.S. Food & Drug Administration

Dear Ms. Rosso:

As you know from our letter dated January 31, 201 7, and from our recent discussions, we

represent RAI Services Company and Santa Fe Natural Tobacco Company (hereinafter "Santa

Fe") in connection with an agreement between Santa Fe and the U.S. Food & Drug

Administration ("FDA") concerning the removal of the phrase "Additive Free" from all Natural

American Spirit cigarette product labels, labeling, advertising, and promotional materials. Santa

Fe expressly reserved the right, in the agreement with FDA, to include the statement "Tobacco

Ingredients: Tobacco & Water" or "Tobacco Filler Ingredients: Tobacco & Water."

Under the terms of Santa Fe's April 27, 2000 Consent Order with the FTC (File No. 992­

3026; Attachment A), Santa Fe agreed to include the disclosure "No additives in our tobacco

does NOT mean a safer cigarette" (for cigarettes) or ''No additives in our tobacco does not mean

safer" (for tobacco products other than cigarettes) on any advertisement that "through the use of

such phrases as "no additives," "no chemicals," "additive-free," "chemical-free," "chemical­

additive-free," "100% tobacco," "pure tobacco," or substantially similar terms, represents that a

tobacco product has no additives or chemicals." (Emphasis supplied).

In the time since Santa Fe entered into the Apri l 2000 Consent Order with the FTC,

Congress enacted the Family Smoking Prevention and Tobacco Control Act ("Tobacco Control

Act"). The Tobacco Control Act gives FDA broad authority over tobacco products, but provides

Rosemary Rosso

March 9, 2017

Page 2

for concurrent, overlapping jurisdiction between FDA and the FTC with regard to regulation of

advertising practices. See 21 U.S.C. § 387n.

Under the Tobacco Control Act, manufacturers must obtain clearance from FDA to

market tobacco products as "modified risk tobacco products." The term "modified risk tobacco

product" is defined as any tobacco product that is "sold or distributed for use to reduce harm or

the risk of tobacco-related disease associated with commercially marketed tobacco products." 2 1

U.S.C. § 387k(b)( l ). Whether a product is "sold or distributed for use to reduce harm or the risk

of tobacco-related disease" is determined, in part, based on the product's label, labeling, and

advertising. It is under this authority that Santa Fe entered into the January 2017 agreement with

FDA.

To assure that Santa Fe continues to meet its obligations under the 2000 Consent Order, it

now seeks an informal, written opinion from the FTC's Division of Advertising Practices on the

following two questions:

(1) Are the phrases "Tobacco Ingredients: Tobacco & Water" or "Tobacco Filler

Ingredients: Tobacco & Water" "substantially similar terms" under the 2000 Consent

Order such that their use triggers the disclosure requirement of the 2000 Consent Order!?

(2) If "Tobacco Ingredients: Tobacco & Water" or "Tobacco Filler Ingredients: Tobacco

& Water" are deemed substantially similar terms, would the FTC either permit or not

otherwise object to Santa Fe replacing the disclosures required under the 2000 Santa Fe

Consent Order with the following disclosure: "Natural American Spirit cigarettes are not

safer than other cigarettes."

We thank you for your attention to this matter, and look forward to a productive dialogue.

If you require any additional information, please contact me at (202) 626-5443 or

mbrown@kslaw.com.

Sincerely,

Attachments:

A: April 27, 2000 FTC Consent Decree

B: January 23, 2017 FDA Memorandum of Agreement

cc:

Ann Simoneau (w/attachments)

Ele Ibarra-Pratt (w/attachments)

Mitch Neuhausuer (w/attachments)

Mil< hC'll /\. Nc·uln111sc·1

Je1viccs

Vice f'1 c~id cnt and

l\ssistanl <:ic11e1 al Counsel · H<:gulatrn y

'101 N. Main Sl1 <'<'I

(OJ11/Jt111Y

l'.O. !lox '1Ci'1

Winston -~al<'111, NC 1./107

k lr.pho1w: :l3G i'll.l-'1~00

r.1x: :13c, OH !I'll! /

1wuf1i1Ull1(<clrj1 l.rc1111

CONFIDENTIAL, NOT l•'OH PUBLIC DISCLOSURE

Vin UPS O\•ernight

January 23, 2017

Ann Simoneau, J.D.

Office of CompI iance and Enforcement

FDA Center for Tobacco Products

c/o Document Control Center

Building 71, Room 0335

I0903 New Hampshire Avenue

Silver Spring, Maryland 20993 -0002

Dear Ms. Simoneau:

Enclosed please find an executed original Memorandum of Agreement. 1 have also

e-mailed a copy to Eli Ibarra-Pratt as you have requested.

sub~_/

/ /

/k--b. ? / ; ; :/

~·/~

Respectfu ll y

Mitchell A. Neuhauser

cc: Eli Ibarra-Pratt

Confldentlal - Not for Public Disclosure

Memorandum of Agreement Between

The United States Food and Drug Administration's (FDA) Center for Tobacco Products (CTP) and RAI

Services Company (RAIS)/Santa Fe Natural Tobacco Company, Inc. (Santa Fe),

(Dated: January 19, 2017)

The parties, the FDA's Center for Tobacco Products (CTP) end RAI Services Company (RAIS)/Santa Fe

Natural Tobacco Company, Inc. (Santa Fe), have been engaged In discussions to resolve the Issues raised

in CTP's Warning Letter dated August 27, 2015. Per those discussions, CTP and Santa Fe agree to the

following steps and conditions:

1. Senta Fe will remove the phrase "Additive Free• from all Natural American Spirit cigarette product

labels, labeling, advertising, and promotional materials.

2. Santa Fe will remove the term •natural" from all Natural American Spirit cigarette product labels,

labeling, advertising, and promotional materials, except as provided In Paragraph Three (3) below.

Santa Fe may, if It chooses to do so, use the statement "Tobacco Ingredients: Tobacco & water" or

"Tobacco Fiiier Ingredients: Tobacco & Water" on product labels, labeling, advertising, and

promotional materials. The use of the phrases "Tobacco Ingredients: Tobacco and Water" and

"Tobacco Flffer Ingredients: Tobacco and Water" Is not required under this Agreement, but Santa Fe

wishes to retain the option of using these statements.

If Santa Fe chooses to use the statement "Tobacco Ingredients: Tobacco & Water" or "Tobacco Filler

Ingredients: Tobacco & Water" on product labels, labeling, advertising, and promotional materials,

Santa Fe agrees to Initiate discussions with the FTC and FDA within 30 days of signing this

Agreement In order to address, and reach a mutually agreeable resolution regarding, whether, under

the Consent Decree entered in 2000 between FTC and Santa Fe regarding Santa Fe's advertising of

Natural American Spirit cigarettes, FTC would require a disclosure with use of the statements

"Tobacco Ingredients: Tobacco & Water" or "Tobacco Filler Ingredients: Tobacco & Water: CTP's

position is that no disclosure would be needed for either of the tobacco Ingredients statements In the

preceding paragraph. .However, CTP would not object to Santa Fe's use of the disclosure "Natural

American Spirit cigarettes are not safer than other cigarettes" on product packaging, labels, labeling,

advertising and promotional materials. Santa Fe agrees to work dlllgently with FTC and FDA to reach

resolution on this issue.

CTP recognizes that Santa Fe will need to coordinate with Its vendors to print and Implement new

product labeling and advertising. However, CTP expects that this process would be completed and

that changes to the labels, labeling, advertising, and promotional materials would be implemented

within seven (7) months from the date Santa Fe receives In writing the agreement reached between

FTC and FDA regarding the necessity, and, if applicable, wording, of a disclosure, and the process

for effectuating It, as a result of the discussions among Santa Fe, FTC, and FDA. Followlng the

seven (7) month de~dline, Santa Fe will not utilize the terms "additive free" or •natural" except as

allowed under Paragraph 3 of this Agreement on the labels, labeling, advertising, or promotional

materials for Natural American Spirit cigarette products. Santa Fe need not, however, remove or

recall products or product labels, labeling, advertising, or promotional materials utilizing the terms

"additive free" or ·natural" that were Introduced Into the market (e.g., through distribution to

wholesalers, dlstrlbuters. retallers, or consumers) prior to the seven (7) month deadline.

3. Santa Fe may retain use of the term "Natural" In the "Natural American Splrlr brand name and

trademarks.

4. To the extent any premarket authorization requirements of section 905(j) and 910 of the FD&C Act

apply, CTP wlll not enforce them with respect to the changes specified in Paragraphs 1 and 2 above.

5. If Santa Fe seeks labeling review from FTC for the changes described In the Agreement. Santa Fe

will submit a letter to CTP's Office of Compliance and Enforcement to inform CTP of such review

once the FTC has completed its review. In addition, Santa Fe will prompUy notify CTP's Office of

Compliance and Enforcement in writing and provide exemplars of Its revised packaging, labels,

Confidential -· Not for Public Disclosure

labeling, advertising, and promotional materials that reflect the removal of "addltivo free" and

"natural" claims, and related changes, in accordance with this Agreement. Thereafter, any

subsequent changes to packaging, labels, labeling, advertising, and promotional materials shall be

communicated In conformance with Section 905(i) of the FD&C Act.

6. Within thirty (30) days after CTP receives exemplars of Santa Fe's revised packaging, labeling,

advertising, and promotional materials pursuant to Paragraph 5, CTP shall determine whether the

exemplars are in compliance with the applicable requirements of the FD&C Act and notify Santa Fe

in writing of its determination.

7. By accepting the terms of this Agreement, Santa Fe does not admit any liability or wrongdoing.

If Santa Fe agrees to the conditions outlined above, CTP will commit to not initiating enforcement action

against Santa Fe related to the August 27, 2015 Warning Letter during the seven (7) month timeframe set

forth in Paragraph 2 for Santa Fe to complete and implement changes to the product packaging, labels,

labeling, advertising and promotional materials. The parties may agree to extend these dates by written

agreement. CTP's Office of Compliance and Enforcement requests periodic updates as to Santa Fe's

progress towards meeting the terms of this Agreement.

This Agreement applies only to the specific products and claims described in this letter. It is Santa Fe's

responsibility to ensure that Its other tobacco products and all related labeling and/or advertising comply with

each applicable provision of the FD&C Act and FDA's Implementing regulations.

-?'

/~ &y- // / , .

//;£~ft;~

MITCHELL A NEUHAUSER

_....,7£,__o_~-·T--..·E..,­

Vice President

Assistant General Counsel-Regulatory

RAI Services Company

ANN SIMONE

Director

Office of Compliance and Enforcement

Center for Tobacco Products

Food and Drug Administration

UNITED STATES OF AMERICA

FEDERAL TRA DE COMMISSION

In the Matter of

SANTA FE NATURAL TOBACCO COMPANY, INC., a corporation.)

FILE NO. 992-3026

AGREEMENT CONTAINING CONSENT ORDER

The Federal Trade Commission has conducted an investigation of certain acts and

practices o f Santa Fe Natural Tobacco Company, Inc., a corporation ("proposed

respondent"). Proposed respondent is willing to enter into an agreement containing a

consent order resolving the allegations contained in the attached draft complaint.

Therefore,

IT IS HEREBY AGREED by and between Santa Fe Natural Tobacco Company, Inc.,

by its duly authorized officer, and counsel for the Federal Trade Commission that:

I. Proposed respondent Santa Fe Natural Tobacco Company, Inc. is a New Mexico

corporation with its principal office or place of business at 1368 Cerri llos Road, Santa

Fe, NM 87505-3507.

2. Proposed respondent admits all the jurisdictional facts set forth in the draft complaint.

This agreement is for settlement purposes only and does not constitute an admission by

proposed respondent that the law has been violated as alleged in the draft complaint, or

that the facts as a lleged in the draft complaint, other than the jurisdictional facts , are true.

3. Proposed respondent waives:

a. Any fu rther procedural steps;

b. The requirement that the Commission's decision contain a statement of findings

of fact and conclusions of Jaw; and

c. All rights to seek judicia l review or otherwise to challenge or contest the validity

of the order entered pursuant to this agreement.

4. This agreement shall not become part of the public record of the proceeding unless and

unti l it is accepted by the Commission. If this agreement is accepted by the Com mission,

it, together with the draft complaint, will be placed on the public record for a period of

thirty (30) days and information about it publicly released. The Commission thereafter

may either w ithdraw its acceptance o f this agreement and so notify proposed respondent,

in which event it will take such action as it may consider appropriate, or issue and serve

its complaint (in such form as the circumstances may require) and decision in disposition

of the proceeding.

5. This agreement contemplates that, if it is accepted by the Commission, and if such

acceptance is not subsequently withdrawn by the Commission pursuant to the provisions

of Section 2.34 of the Commission's Rules, the Comm ission may, without further notice

to proposed respondent, (I) issue its complaint corresponding in form and substance with

the attached draft complaint and its decision containing the following order in disposition

of the proceeding, and (2) make in formation about it public. When so entered, the order

shall have the same force and effect and may be a ltered, modified, or set aside in the

same manner and w ith in the same time provided by statute for other orders. The order

shall become final upon service. Delivery of the complaint and decision and order to

proposed respondent's address as stated in the agreement by any means specified in

Section 4.4 of the Commission's Rules shall constitute service. Proposed respondent

waives any right it may have to any other manner of service. The compla int may be used

in construing the terms of the order. No agreement, understanding, representation, or

interpretation not contained in the order or in the agreement may be used to vary or

contradict the terms of the order.

6. Proposed respondent has read the draft complaint and consent order. It understands

that it may be liable fo r civil penalties in the amount provided by law and other

appropriate rel ief for each violation of the order after it becomes fina l.

ORDER

DEFINITIONS

For purposes of this order, the following definitions shall apply:

I. "Competent and reliable scientific evidence" shall mean tests, analyses, research,

studies, or other evidence based on the expertise of professionals in the relevant area, that

has been conducted and evaluated in an obj ective manner by persons qualified to do so,

using procedures generally accepted in the profession to yield accurate and reliable

results.

2. Unless otherwise specified, "respondent" sha ll mean Santa Fe Natural Tobacco

Company, Inc., a corporation, its successors and assigns and its officers, agents,

representa ti ves, and employees.

3. "Commerce" shall mean as defined in Section 4 of the Federal Trade Comm ission Act,

15 u.s.c. § 44.

4. "Advertisement" shall mean any written or verbal statement, illustration, or depiction

that is designed to effect a sale or create interest in the purchasing of any product,

including but not limited to a statement, illustration or depiction in or on a brochure,

newspaper, magazine, free standing insert, pamphlet, leaflet, circular, mai ler, book insert,

letter, coupon, catalog, poster, chart, billboard, transit advertisement, point of purchase

display, specialty or util itarian item, sponsorship material, package insert, film , slide, or

the Internet or other computer network or systt:m.

5. "Tobacco product" shall mean cigarettes, cigars, cigari llos, little cigars, smokeless

tobacco, cigarette tobacco, pipe tobacco, and any other product made or derived fro m

tobacco that is intended for human consumption, including any component, part, or

accessory of a tobacco product.

6. "Herbal smok ing product" shall mean c igarettes, cigars, cigarillos, little cigars and any

other product made or derived from plant material other than tobacco, that is intended for

human smoking, inc luding any component, part, or accessory of an herbal smoking

product.

7. "Clearly and prominently" shall mean:

a. With regard to advertisements for tobacco and herbal smoking products, in black

type on a solid white background, or in white type on a solid red background, or in

any other color combination that would provide an equivalent or greater degree of

print contrast as objectively dete rmined by densitometer or comparable

measurements of the type and the background color. The color of the ruled

rectang le shall be the same color as that of the type; and

b. (i) With regard to advertisements for tobacco products, centered, both horizontally

and vertically, in a ruled rectangle. The area enclosed by the rectangle shall be no

less than 40% of the size of the area enclosed by the ruled rectangle surrounding

the health warnings for tobacco cigarettes mandated by 15 U.S.C. § 1333. The

width of the rule fonning the rectangle shall be no less than 50% of the width of

the rule required for the health warnings for tobacco cigarettes mandated by 15

u.s.c. § 1333.

Provided that, if, at any time after this order becomes final, 15 U .S.C. § 1333 is

amended, modified, or superseded by any other law, the area enclosed by the ruled

rectangle shall be no less than 40% of the area required for health warnings for

tobacco cigarettes by such amended, modified, or superseding law, and the width

of the rule forming the rectangle shall be no less than 50% of the width of any

surrounding rule required for health warnings for tobacco cigarettes by such

amended, modified, or superseding law; and

(ii) With regard to advertisements for herbal smoking products, centered, both

horizontally and vertically, in a ruled rectangle. The area enc losed by the rectangle

shall be no less than the size of the area enclosed by the ruled rectangle

surrounding the health warnings for tobacco cigarettes mandated by 15 U.S.C. §

1333. The width of the rule forming the rectangle shall be no less than the width of

the rule required for the health warnings for tobacco cigarettes mandated by 15

u.s.c. § 1333.

Provided that, if, at any time after this order becomes final, 15 U.S.C. § 1333 is

amended, modified, or superseded by any other law, the area enclosed by the ruled

rectangle shall be no less than the area required for health warnings for tobacco

cigarettes by such amended, modified, or superseding law, and the width of the

rule forming the rectangle shall be no less than the width of any surrounding rule

required for health warnings for tobacco cigarettes by such amended, modified, or

superseding law; and

c. Jn the same type style and type size as that required for health warnings for

tobacco cigarettes pursuant to 15 U.S.C. § 1333.

Provided that, if, at any time after this order becomes final, 15 U.S.C. § 1333 is

amended, modified, or superseded by any other law, the type sty le and type size of

the disclosure shall be the same as the type style and type size required for health

warnings for tobacco cigarettes by such amended, modified, or superseding law;

and

d. In a clear and prominent location but not immediately next to other written or

textual matter or any rectangular designs, elements, or similar geometric fonns,

including but not limited to any warning statement required under the Federal

Cigarette Labeling and Advertising Act, 15 U.S.C . § 1331 et seq., or the

Comprehensive Smokeless Tobacco Health Education Act, 15 U .S.C. § 440 I et

seq. In addition, the disclosure shall not be positioned in the margin of a print

advertisement. A disclosure shall be deemed "not immediately next to" other

geometric or textual matter if the distance between the disclosure and the other

matter is as great as the distance between the outside left edge of the rule of the

rectangle enclos ing the health warning required by 15 U. S. C. § 1333 and the top

left point of the letter "S" in the word "SURGEON" in that health warning; and

c. For audiov isual or audio advertisements, includ ing but not limited to

advertisements on videotapes, cassettes, discs, or the Internet; promotional film s or

filmstrips; and promotional audiotapes or other types of sound recordings, the

disclosure shall appear on the screen at the end of the advertisement in the format

described above for a length of time and in such a manner that it is easily legible

and shall be announced simultaneously at the end of the advertisement in a manner

that is c learly audible.

Provided, however. that in any advertisement that does not contain a visual

component, the disclosure need not appear in visual format, and in any

adve1tisement that does not contain an audio component, the disclosure need not

be announced in aud io format.

I.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary,

division, or other device, in connection with the advertising, promotion, offering for sale,

sale, or distribution of Natural American Spirit tobacco cigarettes or a ny other tobacco

product in or affecting commerce, shall display in advertisements as specified below,

clearly and prominently, the following disclosures (including the line breaks,

punctuation, bold font and capitalization illustrated):

In cigarette advertisements:

No additives in our tobacco

does NOT mean a safer cigarette.

In advertisements for any other tobacco product:

No additives in our tobacco

does NOT mean safer.

These disclosures shall be displayed beginning no later than thirty (30) days after the

date of service of th is order, in any advertisement that, through the use of such phrases as

"no additives;" "no chemicals," "additive-free," "chemical-free," "chemical-additive­

free," " 100% tobacco," "pure tobacco," or substantially similar terms, represents that a

tobacco product has no additives or chemicals.

Provided, that the above disclosures shall not be required in any cigarette advertisement

that is not required to bear a health warning pursuant to 15 U.S.C. § 1333.

Provided further, that the above disclosures shall not be required if respondent possesses

and relies upon competent and reliable scientific evidence demonstrating that such

cigarette or other tobacco product poses materially lower health risks than other

cigarettes or other products of the same type.

Nothing contrary to, inconsistent with, or in mitigation of any disclosure provided for in

this part shall be used in any advertisement. Provided, however. that this provision shall

not prohibit respondent from truthfully representing, through the use of such phrases as

"no additives," "no chemicals." "additive-free," "chemical-free," "chemical-additive­

free," " I 00% tobacco," "pure tobacco," or substantially similar terms, that a tobacco

product has no additives or chemicals, where such representation is accompanied by the

disclosure mandated by this provision.

11.

IT IS FURTHER ORDERED that respondent, directly or through any corporation,

subsidiary, division, or other device, in connection with the advertising, promotion,

offering for sa le, sale, or distribution of any herbal smoking product in or affecting

commerce, shall display in advertisements and on packaging as specified below, clearly

and prominently, the fo llowing disclosure (including the line breaks, punctuation and

capitalization illustrated):

In advertisements and on packaging for herbal cigarettes:

Herbal cigarettes are dangerous to your health.

They produce tar and carbon monoxide.

In advertisements and on packaging for other herbal smoking products:

Smoking this product is dangerous to your health.

It produces tar and carbon monoxide.

These disclosures shall be displayed beginning no later than thirty (30) days after the

date of service of this order, in any advertisement and on any package that, through the

use of such phrases as "no tobacco," "tobacco-free," "herbal," or substantially similar

terms, represents that an herbal smoking product has no tobacco.

Prov;ded, that the above disclosures shall not be required if respondent possesses and

relies upon competent and reliable scientific evidence demonstrating that such herbal

smoking products do not pose any material health risks.

Nothing contrary to, inconsistent with, or in mitigation of any disclosure provided for in

this part shall be used in any advertisement. Provided, however, that this provision shall

not prohibit respondent from truthfully representing, through the use of such phrases as

"no tobacco," "tobacco-free," "herbal," or substantially similar terms, that an herbal

smoking product has no tobacco, where such representation is accompanied by the

disclosure mandated by this provision.

I I I.

IT IS FURTHER ORDERED that respondent shall:

A. Provide, within forty-five (45) days after the date of service of this order, an exact

copy of the notice attached hereto as Attachment A to each retailer, distributor, or other

purchaser for resale to whom respondent has supplied Natural American Spirit tobacco

cigarettes since January I, 1998. Respondent shall send the notice by first class mail. The

mailing shall not include any other documents.

B. Di scontinue dealing with any retailer, distributor, or other purchaser for resale once

respondent has actual knowledge, or knowledge fairly implied on the basis of objective

circumstances, that such retailer, distributor, or other purchaser for resale has continued

to use or disseminate any of respondent's advertisements for any of respondent's tobacco

products that:

I. represents, through the use of such phrases as "no additives," "no chemicals,"

"additive-free," "chemical-free," "chemical-additive-free," "I 00% tobacco," "pure

tobacco," or substantially similar terms, that the tobacco products have no

additives or chemicals; and

2. does not include the disclosure specified in Part I of this order

unless, upon notification by respondent, such retailer, distributor, or other purchaser for

resale immediately ceases using or disseminating such advertisements. If, after such

notification, respondent obtains actual knowledge, or knowledge fairly implied on the

basis of objective circumstances, that such retailer, distributor, or other purchaser for

resale has not permanently ceased using or dissem inating such advertisements,

respondent must immediately and indefinitely, discontinue dealing with such retailer,

distributor, or other purchaser for resale, until such time as respondent has obtained

written assurance and verified that such retailer, distributor, or other purchaser for resale

has permanently ceased using or disseminating such advertisements.

C . For five (5) years after the date of service of this order, maintain and upon request

make available to the Federal Trade Commission for inspection and copying:

(I) copies of all notification letters sent to retailers, distributors, or other

purchasers for resale pursuant to subparagraph A of this part; and

(2) copies of all communications with retailers, distributors, or other purchasers for

resale pursuant to subparagraph B of this part.

JV.

IT IS FURTHER ORDERED that respondent Santa Fe Natural Tobacco Company, Inc.,

and its successors and assigns, shall, for five (5) years after the last date of d issemination

of any representation covered by this order, maintain and upon request make available to

the Federal Trade Commission for inspection and copying:

A. All advertisements and packaging containing the representation;

B. All materials that were relied upon in disseminating the representation; and

C. All tests, reports, studies, surveys, demonstrations, or other evidence in their

possession or control that contradict, qualify, or call into question the

representation, or the basis relied upon for the representation, including complaints

and other communications with consumers or with governmental or consumer

protection organizations.

v.

IT IS FURTHER ORDERED that respondent Santa Fe Natural Tobacco Company, Inc.,

and its successors and assigns, sha ll deliver a copy of this order, in either paper or

electronic form , to all current and future principals, officers, and directors, and to all

current and future managers, employees, agents, and representatives having

responsibi lities w ith respect to the subject matter of this order. Respondent shall secure

from each such person either I) a signed and dated statement acknowledging receipt of

the o rder; or 2) a dated , e lectronic acknowledgment indicating that the person has read,

downloaded or printed the order. Respondent shall deliver this order to current personnel

w ith in thirty (30) days after the date of service of this order, and to future personnel

within thirty (30) days after the person assumes such position or responsibilities.

Respondent shall maintain and upon request make available to the Federal Trade

Comm ission fo r inspection and copying a copy of each signed statement acknowledging

receipt of the order or a record, in either electronic or paper form, of each electronic

acknowledgment o f receipt of the order.

VI.

IT IS FURTHER ORDERED that respondent Santa Fe Natural Tobacco Company, Inc.,

and its successors and assigns shall notify the Commission at least thirty (30) days prior

to the sale of any of its tobacco products or herbal smoking products for which the

composition or formula has been changed in such a manner as may affect compliance

obligations arising under this order, including but not lim ited to the addition o f any

additives to any variety of such products. All notices required by this Part shall be sent

by certified mail to the Associate Director, Division of Enforcement, Bureau of

Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N. W.,

Washington, D.C. 20580.

VII.

IT IS FURTHER ORDERED that respondent Santa Fe Natural Tobacco Company, Inc.,

and its successors and assigns shall notify the Commission at least thirty (30) days prior

to any change in the corporation that may affect compliance obligations arising under

this order, including but not limited to a dissolution of a subsidiary, parent or affiliate that

engages in any acts or practices subject to this order; the proposed filing of a bankruptcy

petition; or a change in the corporate name or address. Provided, however, that, with

respect to any proposed change in the corporation about which respondent learns less

than thirty (30) days prior to the date such action is to take place, respondent shall notify

the Commission as soon as is practicable after obtaining such knowledge. All notices

required by this Part shall be sent by certified mail to the Associate Director, Division of

Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600

Pennsylvania Avenue, N.W., Washington, D.C. 20580.

VIII.

IT IS FURTHER ORDERED that respondent Santa Fe Natural Tobacco Company, Inc.,

and its successors and assigns shall, within sixty (60) days after the date of service of this

order, and at such other times as the Federal Trade Commission may require, file with the

Commission a report, in writing, setting forth in detail the manner and form in which

they have complied with this order.

IX.

This order will terminate twenty (20) years from the date of its issuance, or twenty (20)

years from the most recent date that the United States or the Federal Trade Commission

files a complaint (with or without an accompanying consent decree) in federal court

alleging any violation of the order, whichever comes later; provided, however, that the

filing o f such a complaint will not effect the duration of:

A. Any Part in this order that terminates in less than twenty (20) years;

B. This order's appl ication to any respondent that is not named as a defendant in

such complaint; and

C. This order if such complaint is tiled after the order has terminated pursuant to

this Part.

Provided further, that if such complaint is dismissed or a federal court rules that the

respondent did not violate any provision of the order, and the dismissal or ruling is either

not appealed or upheld on appeal, then the order will terminate according to this Part as

though the complaint had never been filed, except that the order will not terminate

between the date such complaint is filed and the later of the deadline for appealing such

dismissal or ruling and the date such dismissal or ruling is upheld on appeal.

Signed this _ _ _ _ day of_ _ _ _ _ _ _, 2000

SANTA FE NATURAL TOBACCO COMPANY, INC.

By:

Robin Sommers

President

------ ---­

C. Randall Nuckolls

Long Aldridge & Norman, LLP

Attorney for Respondent

Michael Ostheimer

Shira Model!

Counsel for the Federal Trade Commission

APPROVED :

C. Lee Peeler

Associate Director

Division of Advertising Practices

Joan Z. Bernstein

Director

Bureau of Consumer Protection

ATTACHMENT A

[To be printed on Santa Fe Natural Tobacco Company, Inc. letterhead]

[date]

Dear [retailer, distributor, or other purchaser for resale]:

This letter is to inform you that Santa Fe Natural Tobacco Company, Inc. recently

reached a settlement agreement with the Federal Trade Comm ission ("FTC") concerning

certain past advertising for Natural American Spirit cigarettes. The FTC has been

reviewing "no additive" claims for cigarettes and other tobacco products as a result of

concerns that such representations might mislead consumers to believe that tobacco

products without additives are safer than tobacco products containing additives. As part

of this rev iew, the FTC conducted a n investigation of past advertising for Natural

American Spirit cigarettes and alleged that certain of our past advertising was

misleading. Although we do not admit the FTC's allegations, we have agreed to notify

our distributors, retailers and others who sell our cigarettes to consumers that we will be

adding a new disclosure statement to certain advertisements making a "no additive"

claim and that they should discontinue the use of certain old advertising materials not

contain ing the new disclosure language.

The FTC Agreement

The FTC claimed that because we state that the tobacco used in Natural American Spirit

cigarettes contains no additives or chemicals, we made implied, unsubstantiated claims

that smoking our cigarettes is less hazardous to a smoker's health than smoking otherwise

comparable cigarettes that contain additives or chemicals. Beginning in late 1997, we

voluntari ly began placing the statement ''To our knowledge there is no research

indicating cigarettes containing additive-free tobacco are safer than cigarettes with

tobacco contain ing additives" in certain ads for Natural American Spirit tobacco

cigarettes. Since early I998, we have also included the statement "We make no

representation expressed or implied that these cigarettes are any less hazardous than any

other cigarettes" on the packaging of Natural American Spirit cigarettes. We have now

agreed to revise our disclosure in certain advertisements for Natural American Spirit

tobacco cigarettes to stale the following:

No additives in our tobacco

does NOT mean a safer cigarette.

Our Notifi cation Obligations

In addition to agreeing to revise our disclosure statement, we have also agreed to request

that you discontinue using, relying on or distributing certain old Natural American Spirit

advertisements or promotional materials in your possession that do not contain the new

disclosure statement. Certain existing point of sale items may continue to be used

without the new disclosure statement while other items will need to be discontinued or

removed unless a sticker is applied containing the new disc losure statement. In the near

future, we will provide instructions for dealing with these existing items and we will be

sending you new Natural American Spirit promotional materials. If you are a distributor,

we also ask that you make this information available to your Natural American Spirit

dealers who may have existing material s so that they can take similar action. The FTC

agreement requires us to cease doing business with even our most loyal customers in the

event they continue using noncompliant materials, so please help us make this transition

in an orderly and prompt fashion.

If you have any questions, you may call us at (xxx) xxx-xxxx. We apologize for any

inconvenience this may cause you and thank you for your assistance.

Sincerely,

Robin Sommers, President

Santa Fe Natural Tobacco Company, Inc.