Tuesday, September 06, 2005

Tobacco-Free Kids and Five Other Health Groups Request Huge Monetary Remedies in DOJ Case: POST 3 - Youth Smoking Reduction Targets

Six public health and anti-smoking organizations last week submitted a post-trial brief in the DOJ lawsuit, requesting a series of remedies to address the alleged RICO violations of the tobacco company and defending these remedies as being consistent with the D.C. Court of Appeals' decision that disallowed disgorgement of past profits as a remedy in the case.

The six organizations (hereafter referred to as the interveners) - the Tobacco-Free Kids Action Fund, the American Cancer Society, the American Heart Association, the American Lung Association, Americans for Nonsmokers' Rights, and the National African American Tobacco Prevention Network - proposed three massive monetary remedies, similar to, but in some cases, more costly than proposed by the Department of Justice in its post-trial brief.

This is the third of a series of 3 posts that will provide a commentary on the brief in terms of its arguments supporting each of the 3 major monetary remedies requested: (1) a national smoking cessation program; (2) a public education and counter-marketing campaign; and (3) penalties for failure to meet youth smoking prevalence reduction targets.

This post will address the third of these remedies: the requirement that the tobacco companies pay fines if certain targets for reduced youth smoking prevalence are not met.


The interveners have proposed a remedy by which tobacco companies would be required to pay fines if certain targets for reductions in youth smoking prevalence are not met. Specifically, youth smoking prevalence would have to drop by 42% over the seven-year period from 2003-2010. To avoid penalties, youth smoking prevalence would have to decline by 10.5% by 2007, 21% by 2008, 31.5% by 2009, and 42% by 2010 (using 2003 levels as the baseline). The remedy is similar to that proposed by DOJ, except that the required smoking reductions are more rapid (42% decline by 2010 instead of 2013), the penalties are higher, and smoking within the past month is used as the measure of smoking prevalence rather than daily smoking.

The interveners rationale for this remedy is that it will prevent and restrain future RICO violations by "removing all of the defendants' incentives for marketing to children."

The Rest of the Story

While on the surface, the idea of penalties for failure to achieve certain reductions in youth smoking prevalence may seem to make sense because one would think that it creates an incentive for cigarette companies not to market their products to youths, an analysis of this proposed remedy suggests that it would actually create a strong incentive for cigarette companies to be as aggressive as possible in marketing to youths.

The reason: the required reductions in youth smoking prevalence are so drastic that it is almost unfathomable that they could be achieved simply through the cessation of defendants' marketing to youths. What people need to realize is that while marketing does play a role in youth smoking, it is only one of a large number of factors that influence youth smoking behavior, and when it comes down to it, the tobacco companies cannot simply reduce youth smoking to the specified levels merely by discontinuing marketing to youths.

Faced with the near certainty of having to pay hefty penalties for a goal that is unattainable by the tobacco companies, the likely response would be to be as aggressive as possible in marketing to youths so that they can maintain their customer base given the large price increases that the penalties would bring about. In other words, what this remedy basically does is require the cigarette companies (indirectly) to raise the price of cigarettes. Since that will reduce youth cigarette consumption, it creates an incentive for the companies to do something to maintain their customer base - marketing to youths would be a logical response. But the marketing would have to be more intensive and more aggressive than ever before in order to overcome the effects of the price increase.

So the interveners defense of their proposed youth smoking reduction targets fails because the remedy would not in fact serve the intended purpose; it would likely have the exact opposite effect.

By mucking with the DOJ's proposed remedy, the interveners have in fact greatly weakened the case. If reducing smoking among youths by 42% over 10 years was just a mere possibility, doing so in just 7 years is impossible. After complaining about the DOJ weakening its case due to political interference, the interveners have now substantially weakened the case and destroyed any chance of obtaining this proposed remedy.

But there is a bigger problem with the proposed remedy. Even if it were effective in creating an incentive for companies not to market to youths and therefore not to commit future RICO violations, the remedy would still not be permissible because it is far too remotely tied to the cigarette companies committing 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. It is quite possible that youth smoking prevalence reduction targets would not be met even if the companies completely stop marketing to youths. If the claim that smoking in movies is responsible for half of youth smoking is true, then it would only take a small increase in the portrayal of smoking in movies to offset any gains achieved from the elimination of cigarette marketing to youths.

And, if the American Legacy Foundation's "truth" campaign is as effective as it claims it is, it is entirely possible that youth smoking prevalence reduction targets could be met even if RICO violations continue (since the observed effects in the study that Legacy cites in support of its claims presumably occurred in the presence of RICO violations).

The point is that regardless of what cigarette companies do in terms of committing future RICO violations, youth smoking prevalence could go up, go down, or stay the same. It is simply inappropriate to fashion a RICO remedy by tying that remedy to what happens to youth smoking prevalence in the future.

The rest of the story suggests that none of the monetary remedies that the interveners have proposed are likely to be ordered by Judge Kessler and/or upheld by the D.C. Court of Appeals. It also reveals that the interveners - who had complained about the government having weakened its case by asking for less money in a more narrowly tailored proposed remedy - have requested a set of remedies that are so broad in scope, so indirectly tied to RICO violations, and so over-reaching in terms of the law that they have actually weakened the case considerably - the exact thing that they accused DOJ of doing.

The rest of the story is that the interveners have weakened the case by making it clear to the Court (and to any subsequent reviewing judges) that the requested remedies are nothing other than a wish list of public health programs to combat smoking.

Where the interveners could potentially have focused on direct remedies that would prevent and restrain future RICO violations by specifically and narrowly addressing the precise marketing and public relations activities that are the subject of the RICO lawsuit, they instead have dwelled at great length on monetary remedies that are only remotely relevant to the alleged RICO violations.

The appropriate remedies that might have come out of the case are now very unlikely. In a sense, the intervening anti-smoking groups have thrown out the baby with the bath water.

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