Monday, May 23, 2005

DOJ Case Ends with Request for Multi-Billion Dollar Smoking Cessation Program

The Justice Department last week concluded its testimony regarding potential remedies in its RICO case against the tobacco companies by requesting that the companies be required to fund a $5.2 billion per year national smoking cessation program. The program would include "$3.2 billion annually for quit lines and medications, a $1 billion per year media campaign and another $1 billion per year in research and training." The total cost, over 25 years, would come to $130 billion.

The Rest of the Story

While a national smoking cessation program would be of great public health benefit, I do not think that forcing the companies to fund smoking cessation programs is consistent with section 18 U.S.C. section 1964(a) (the civil remedies provision of the RICO statute) and is therefore not likely to be upheld by the Appeals Court. I do not see how funding a smoking cessation program has anything to do with changing tobacco company conduct with regard to the alleged RICO violations. Such a remedy appears to be aimed at "remedying the effects of past conduct to restore the status quo," exactly what the Appeals Court ruled was not permissible under RICO. It's not clear to me how forcing the companies to fund smoking cessation would help prevent and restrain future RICO violations. I have presented an in depth discussion of this issue previously.

I see two meaningful remedies that are likely to withstand Appeals Court scrutiny, as they are directly tied to the prevention of future RICO violations:
  • requiring substantial changes in cigarette advertising and marketing, including measures to prevent the marketing of cigarettes to youths and to prevent certain deceptive aspects of the marketing, such as the potential health value of "light" and "low-tar" cigarettes; and
  • requiring substantial changes in cigarette labeling and packaging, including larger, stronger, and more graphic warning labels.
I think the real question mark in terms of the remedies is the government's request for establishing a series of targets for youth smoking prevalence declines, with penalties assessed to the tobacco companies if these targets are not met. MIT economics professor Jonathan Gruber suggested setting "specific targets to achieve a 60% reduction in youth smoking rates by 2013, with cigarette makers receiving credit for reductions that have been achieved since 1997. For each young adult by which the targets are missed, cigarette makers would be assessed a $3,000 penalty."

Since this plan establishes a financial incentive for cigarette companies not to market their products to youths, it can be argued that this remedy is forward-looking and aims to prevent future RICO violations. The potential problem is that youth smoking prevalence is a measure only indirectly tied to future RICO violations. There are a number of reasons why youth smoking prevalence targets may not be met, of which continued marketing to youths is only one. So it is unclear whether the D.C. Appeals Court would find this remedy to be consistent with 18 U.S.C. section 1964(a).

But other than directly establishing requirements for cigarette marketing and labeling, it is the only meaningful remedy (and the only monetary one) that I think has any chance to be upheld.


Anonymous said...

If the government knew that major tobacco was aware of the Wellstone compound 6 years ago, they would have hung them on this one.

Anonymous said...

More SPAM from the Wellstone penny stock holders, I see.

There are no secrets here. Wellstone is a publically traded company with an open product. While it fashionable to blame the Tobacco companies for every possible societal ill and every possible disease associated with smoking, the fact is, there is still a free market out there.

If Wellstone is so convinced its products are so helpful, why don't they market their own damn cigarettes the way Star Scientific did?

Let Wellstone make the health claims and get sued out of existence when they can't substantiate them.

Who is stopping them?