The American Tobacco Company; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 932-3368]

The American Tobacco Company; Proposed Consent Agreement With

Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

prohibit, among other things, a Stamford, Connecticut based company

from disseminating ads for Carlton or any other cigarettes that

represent that consumers will get less tar or nicotine by smoking any

number of cigarettes of any of its brands than by smoking one or more

cigarettes of any other brand, unless such representations are both

true and substantiated by competent and reliable scientific evidence.

DATES: Comments must be received on or before December 12, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th Street and Pennsylvania Avenue NW., Washington, D.C.

20580.

FOR FURTHER INFORMATION CONTACT:

C. Lee Peeler or Shira D. Modell, FTC/601 Bldg.--Rm. 4002, Washington,

D.C. 20580. (202) 326-3090 or (202) 326-3116.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the

Commission's Rules of Practice (16 CFR 2.34), notice is hereby given

that the following consent agreement containing a consent order to

cease and desist, having been filed with and accepted, subject to final

approval, by the Commission, has been placed on the public record for a

period of sixty (60) days. Public comment is invited. Such comments or

views will be considered by the Commission and will be available for

inspection and copying at its principal office in accordance with

Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR

4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

In the matter of: The American Tobacco Company, a corporation.

The Federal Trade Commission having initiated an investigation of

certain acts and practices of The American Tobacco Company, a

corporation, and it now appearing that The American Tobacco Company, a

corporation (hereinafter sometimes referred to as ``proposed

respondent''), is willing to enter into an agreement containing an

order to cease and desist from the use of the acts and practices being

investigated,

It is hereby agreed by and between The American Tobacco Company, by

its duly authorized officer, and counsel for the Federal Trade

Commission that:

1. Proposed respondent The American Tobacco Company is a

corporation organized, existing and doing business under and by virtue

of the laws of the State of Delaware, with its office and principal

place of business located at 281 Tresser Boulevard, in the City of

Stamford, State of Connecticut.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft of complaint here attached.

3. Proposed respondent waives:

a. Any further procedural steps;

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

statement of findings of fact and conclusions of law;

c. All rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement;

and

d. All claims under the Equal Access to Justice Act.

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

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission, it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify the 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 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 of complaint here attached, or that

the facts as alleged in the draft complaint, other than jurisdictional

facts, are true.

6. 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 Sec. 2.34 of the Commission's

Rules, the Commission may, without further notice to proposed

respondent, (1) issue its complaint corresponding in form and substance

with the draft of complaint here attached and its decision containing

the following order to cease and desist in disposition of the

proceeding and (2) make information public in respect thereto. When so

entered, the order to cease and desist shall have the same force and

effect and may be altered, modified or set aside in the same manner and

within the same time provided by statute for other orders. The order

shall become final upon service. Delivery by the U.S. Postal Service of

the complaint and decision containing the agreed-to order to proposed

respondent's address as stated in this agreement shall constitute

service. Proposed respondent waives any right it may have to any other

manner of service. The complaint may be used in construing the terms of

the order, and no agreement, understanding, representation or

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

to vary or contradict the terms of the order.

7. Proposed respondent has read the proposed complaint and order

contemplated hereby. Proposed respondent understands that once the

order has been issued, it will be required to file one or more

compliance reports showing that it has fully complied with the order.

Proposed respondent further understands that it may be liable for civil

penalties in the amount provided by law for each violation of the order

after it becomes final.

Order

I

It is ordered that respondent, The American Tobacco Company, a

corporation, its successors and assigns, and its officers, agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labelling, advertising, promotion, offering for sale,

sale or distribution of any cigarette in or affecting commerce, as

``commerce'' is defined in the Federal Trade Commission Act, do

forthwith cease and desist from representing, through the presentation

of the tar ratings of any of respondent's brands of cigarettes as a

numerical multiple, fraction or ratio of the tar of any other brand of

cigarettes, and/or the visual depiction of ten packs or a carton of any

of respondent's brands versus one pack of any other brand, directly or

by implication, that consumers will get less tar by smoking ten packs

of any cigarette rated as having 1 mg. of tar than by smoking a single

pack of any other brand of cigarettes that is rated as having more than

10 mg. of tar. For purposes of this Order, the term ``cigarette' shall

be as defined in Section 1332 (1) of Title 15 of the United States

Code.

II

It is further ordered that respondent, The American Tobacco

Company, a corporation, its successors and assigns, and its officers,

agents, representatives and employees, directly or through any

corporation, subsidiary, division or other device, in connection with

the manufacturing, labelling, advertising, promotion, offering for

sale, sale or distribution of any cigarette in or affecting commerce,

as ``commerce'' is defined in the Federal Trade Commission Act, do

forthwith cease and desist from representing, through the presentation

of the tar or nicotine ratings of any of respondent's brands of

cigarettes as a numerical multiple, fraction or ratio of the tar or

nicotine ratings of any other brand of cigarettes, and/or the visual

depiction of more than one pack of any of respondent's brands versus

one pack of any other brand, directly or by implication, that consumers

will get less tar or nicotine by smoking any number of cigarettes (or

packs or cartons of cigarettes) of any of respondent's brands than by

smoking one or more cigarettes (or packs or cartons of cigarettes) of

any other brand, unless such representation is true and, at the time of

making such representation, respondent possesses and relies upon

component and reliable scientific evidence that substantiates the

representation. For purposes of this Order, ``component 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 any objective manner by

persons qualified to do so, using procedures generally accepted in the

profession to yield accurate and reliable results.

III

It is further ordered that presentation of the tar and/or nicotine

ratings of any of respondent's brands of cigarettes and the tar and/or

nicotine ratings of any other brand (with or without an express or

implied representation that respondent's brand is ``low,'' ``lower,''

or ``lowest'' in tar and/or nicotine) shall not be deemed to constitute

a numerical multiple, fraction or ratio and shall not, in and of

itself, be deemed to violate Paragraph I or II of this Order where no

more than a single cigarette or pack of respondent's brand is visually

depicted versus a single cigarette or pack of any other brand.

IV

It is further ordered that for five (5) years after the last date

of dissemination of any representation covered by this Order,

respondent or its successors and assigns, shall maintain and upon

request make available to the Federal Trade Commission for inspection

and copying:

A. All materials that were relied upon in disseminating such

representation; and

B. All tests, reports, studies, surveys, demonstrations or other

evidence in its possession or control that contradict, qualify, or call

into question such representation, or the basis relied upon for such

representation, including complaints from consumers.

V

It is further ordered that respondent shall distribute a copy of

this Order to each of its operating divisions and to each of its

officers, agents, representatives, or employees engaged in the

preparation and placement of advertisements, promotional materials,

product labels or other such sales materials covered by this Order.

VI

It is further ordered that respondent shall notify the Commission

at least thirty (30) days prior to any proposed change in the

corporation, such as dissolution, assignment, or sale resulting in the

emergence of a successor corporation, the creation or dissolution of

subsidiaries, or any other change in the corporation which may affect

compliance obligations under this Order.

VII

It is further ordered that respondent shall, within sixty (60) days

after 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 it has

complied with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from The American Tobacco Company (``American

Tobacco'').

The proposed consent order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or make final the agreement's proposed

order.

This matter concerns claims made by American Tobacco in its

advertising for cigarettes.

The Commission's complaint in this matter charges American Tobacco

with engaging in unfair or deceptive practices in connection with the

advertising of its Carlton brand cigarettes. According to the

complaint, American Tobacco falsely represented, through the

presentation of the tar of its Carlton product as a numerical multiple,

fraction or ratio of the tar of other brands of cigarettes, and/or the

visual depiction of ten packs or a carton of Carlton cigarettes versus

one pack of the other brands: (1) That consumers will get less tar by

smoking ten packs of Carlton brand cigarettes than by smoking a single

pack of the other brands of cigarettes depicted in the ads, which are

rated as having more than 10 mg. of tar; and (2) that it had a

reasonable basis for claims that consumers will get less tar by smoking

ten packs of Carlton brand cigarettes than by smoking a single pack of

the other brands of cigarettes depicted in the ads.

The consent order contains provisions designed to remedy the

violations charged and to prevent American Tobacco from engaging in

similar deceptive and unfair acts and practices in the future.

Part I of the order prohibits American Tobacco from representing,

through certain means specified in the order, that consumers will get

less tar by smoking ten packs of any cigarette rated as having 1 mg. of

tar than by smoking a single pack of any other brand of cigarettes that

is rated as having more than 10 mg. of tar.

Part II of the order prohibits American Tobacco from representing,

through those same means, that consumers will get less tar or nicotine

by smoking any number of cigarettes (or packs or cartons of cigarettes)

of any of respondent's brands than by smoking one or more cigarettes

(or packs or cartons of cigarettes) of any other brand, unless, the

representation is true and, at the time it makes such claims, American

Tobacco has competent and reliable scientific evidence to substantiate

the claims.

Part III of the order provides a limited ``safe harbor'' for

advertising that complies with certain specific requirements in its use

of official tar and nicotine ratings. Specifically, presentation of the

tar and/or nicotine ratings of any of American Tobacco's brands of

cigarettes and the tar and/or nicotine ratings of any other brand shall

not, in and of itself, be deemed to violate Part I or Part II of the

order where no more than a single cigarette or pack or American

Tobacco's brand is visually depicted versus a single cigarette or pack

of any other brand.

Part IV of the order requires American Tobacco to maintain copies

of all materials relied upon in making any representations covered by

the order, as well as all materials that contradict or call into

question those representations.

Part V of the order requires American Tobacco to distribute copies

of the order to each of its operating divisions and to various

officers, agents, representatives or employees of American Tobacco.

Part VI of the order requires American Tobacco to notify the

Commission of any changes in corporate structure that might affect

compliance with the order.

Part VII of the order requires American Tobacco to file with the

Commission one or more reports detailing compliance with the order.

The purpose of this analysis is to facilitate public comment on the

proposed order, and it is not intended to constitute an official

interpretation of the agreement and proposed order, or to modify any of

their terms.

Donald S. Clark,

Secretary.

[FR Doc. 94-25333 Filed 10-12-94; 8:45 am]

BILLING CODE 6750-01-M