Saturday, August 27, 2005

DOJ Defends its Remedies Requests - POST 2: Public Education and Counter-Marketing Campaign

In a post-trial brief submitted last week, the Department of Justice defended its proposed remedies in the RICO case against the tobacco companies, addressing specifically the argument that these remedies are not consistent with the D.C. Court of Appeals decision that RICO civil remedies must be forward-looking, designed to prevent and restrain future RICO-related misconduct of the defendants.

This is the second of a series of three posts that will address the 3 major monetary remedies: a smoking cessation program, a national anti-smoking education campaign, and youth smoking reduction targets. This post will deal with the second of these - the request for the industry to be required to fund a national public education and counter-marketing campaign.


DOJ argues that "the Court can prevent and restrain future racketeering activity by requiring Defendants to fund public education and counter-marketing activities. Counter-marketing in conjunction with other remedies will diminish the future 'returns' to Defendants of making fraudulent and deceptive statements and fraudulently marketing to youth because it will reduce the profitability of such conduct."

"Counter-marketing campaigns have been linked to significant reductions in youth smoking initiation, as well as declines in adult smoking prevalence. Accordingly, as discussed below, counter-marketing: (1) dilutes the impact of Defendants’ fraudulent statements made for the purpose of maintaining and attracting new smokers; and (2) dilutes the efficacy of Defendants’ marketing efforts targeted towards underage smokers. Counter-marketing will prevent and restrain Defendants from making fraudulent statements and marketing to youth by eliminating or substantially reducing the economic incentive to engage in such conduct. ... As Dr. Bazerman explained, 'If a counter-marketing campaign is effective in the long-term, it will remove from the marketplace a population of consumers and potential consumers of defendants’ products, namely children. Thus, their incentive to market to this population will be eliminated and their behavior will change accordingly.'"

The Rest of The Story

What is interesting here is that DOJ is making a very different argument to support its request for a counter-marketing campaign compared to the argument it used to support its request for a smoking cessation program. The latter argument was essentially a plea for equitable relief: that is, for a program that would help redress the damages, on a population basis, of the harms that are expected to result from the defendants' continued RICO violations in the future.

Here, however, DOJ is arguing that the remedy is appropriate because it will prevent and restrain future misconduct by the defendants. This is once again, very different from what I thought DOJ would argue. I thought the government would attempt to convince Judge Kessler that a national smoking cessation program would deter future RICO violations, but instead the basis for the government's request is that such a program would provide necessary remedial relief for future RICO violations. Here, I expected DOJ to argue that a counter-marketing campaign was necessary to remediate false or misleading claims of the industry and thus help to undo the damages caused by its RICO violations (in other words, these could be considered to be "corrective communications.") Instead, DOJ is actually arguing here that this remedy fits directly into the jurisdiction given the court by section 1964(a) of the RICO statute because it will prevent and restrain future RICO violations.

The issue that needs to be considered here is thus very different from in my first post. The issue here is not whether a remedy designed to prevent future misconduct is permissible, but instead, whether or not the requested remedy will in fact prevent and restrain future misconduct, and whether it is specifically designed to do so.

Here, DOJ is not suggesting that the counter-marketing program will have any direct effect of preventing and restraining future RICO-related misconduct. The argument is that the effects of the program will create an economic incentive for the companies not to engage in such unlawful behavior.

But how would a counter-marketing campaign create a strong economic incentive for the companies not to commit future RICO violations (which in this case is primarily deceptive and fraudulent marketing to youths)? The argument is that such a campaign would dilute the impact of any deceptive statements intended to mislead youths about smoking and dilute the impact of any fraudulent marketing aimed at influencing youths to start smoking. And that because the effects of such youth marketing would be reduced, cigarette companies would no longer have a financial incentive to engage in such youth marketing practices.

And it is here that I think that the argument not only falls apart, but is actually the opposite of what it purports to be.

If it is true that the requested public education and counter-marketing campaign would dilute the impact of deceptive and fraudulent tobacco industry marketing to youths (and we'll set aside for now the question of whether the evidence supports that the campaign will actually be effective), then what I think the logical response of any tobacco company would be is to increase their youth marketing, to become more aggressive in this marketing, in order to overcome the decreasing effectiveness of the marketing and to yield a steady and continuing stream of new customers.

In other words, the likely impact of a counter-marketing campaign (assuming, in the first place, that it was tremendously effective) would be to create a strong incentive for companies to increase and strengthen their youth marketing activities. (see my March 30 post for a more detailed discussion of this issue)

In addition, by allowing cigarette companies to hide behind the fact that they were funding a national anti-tobacco media campaign, it would actually decrease public and political pressure on the companies to refrain from youth marketing. The environment, I believe, would be one in which the incentive for and feasibility of continued youth marketing violations would actually be strengthened, not eliminated or substantially reduced.

In order to defend its argument, I think that the government is boxed into a corner. There is only one argument it can make to save this line of reasoning. This argument is that the counter-marketing campaign will be so effective that it completely immunizes youths against exposure to tobacco marketing and that no marketing they subsequently are exposed to will have any impact on their behavior.

Unfortunately, such an argument is based on pure fantasy. I wish there was a media campaign that could completely prevent the effects of tobacco marketing on youths, so that the impact of this marketing on kids would be completely negated. But there simply is not any such campaign available. In fact, I don't see any credible evidence to even support a contention that the proposed counter-marketing campaign by the American Legacy Foundation will have any effect on youth smoking behavior, because I believe that the present evidence most reasonably supports a conclusion that the Legacy's "truth" campaign did not have any impact on youth smoking behavior.

But let's assume, for the sake of argument, that everything Legacy has concluded about its own campaign is true, and that the campaign would indeed cut smoking among youths by 22%. Let's even assume that the campaign would be more than twice as effective as claimed and that it would cut smoking by 50%. If true, this would create a tremendously strong incentive for the cigarette companies to be ever more aggressive in marketing their products to youths, because they would have to be twice as successful among the smaller proportion of youths available to them in order to maintain their customer base.

Let's even accept the argument that Legacy could fashion a campaign that would completely immunize 50% of youths against any and all tobacco marketing. Let's assume that after seeing a few "truth" ads, 50% of all youths would have no capability whatsoever of being influenced in any way by tobacco marketing in any way, shape, or form. What that means is that the tobacco companies would have an enormous financial incentive to figure out a way to design a youth marketing strategy that was twice as effective as current strategies, since their available customer base would have been reduced in half.

The only way out of this conundrum would be to argue that the Legacy Foundation's campaign would be 100% effective in immunizing all kids against any and all influence of exposure to tobacco company public relations and marketing activities. And that is pure fantasy.

There is one other possible way out, which is to argue that the tobacco companies could not effectively market their products to youths because of the other remedies (such as direct marketing restrictions) being requested. But if that's the case, then there is no need for the counter-marketing campaign in the first place.

And if the government were to argue that the other remedies would not completely restrain the companies from marketing to youths, but enough so that they could not counteract the effects of decreasing marketing effectiveness, then the government would be putting its entire remedy request in jeopardy, because it would be admitting that the other requested remedies would not be effective in preventing and restraining future RICO violations.

In short, I believe that the government's defense of its request for a national public education and counter-marketing campaign run by the American Legacy Foundation is weak and unlikely to be compelling to the Court. It relies on the argument that the requested campaign will essentially be effective in immunizing all kids against the influence of tobacco public relations and marketing activities, which is impossible. As I've argued, there isn't even strong evidence that the current national anti-smoking campaign has prevented any kids from starting to smoke, since the campaign appears to be ineffective among kids with the highest exposure to the "truth" ads.

The rest of the story suggests that DOJ's argument used to support the request for a public education and counter-marketing campaign is uncompelling because such a campaign would actually strengthen, not weaken the financial incentive for companies to market their products to youths.

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