Monday, October 10, 2005

NYC Citizens Lobbying Against Smoker Harassment (C.L.A.S.H.) Files Letter with Judge Kessler in DOJ Tobacco Case

In a September 26 letter to Judge Gladys Kessler, Audrey Silk, founder of NYC Citizens Lobbying Against Smoker Harassment (C.L.A.S.H.) asked the Court to consider the interests of her organization and its members. Specifically, the letter asks the Court to take into consideration the impact the proposed remedies would have on C.L.A.S.H. members.

C.L.A.S.H. argues that the proposed remedies would essentially result in increased cigarette prices, as tobacco companies would certainly pass along their increased costs (due to the required funding of the anti-smoking campaign and smoking cessation program) to smokers. C.L.A.S.H. also argues that the proposed anti-smoking ad campaign would likely lead to harassment of smokers, as similar ad campaigns in the past have attempted to demonize smokers.

"If the Public Health Intervenors'’ 'remedies' were actually imposed, it is we, not the Defendants, who would actually pay monetarily (through higher cigarette prices) and socially (as a result of anti-smoking ad campaigns that historically have demonized the cigarette smoker as much as the cigarette). Our interests are in dire need of equal judicial protection."

The letter backs up its assertion that the Defendants' costs would be passed on to consumers by noting that the Intervenors actually stated that: "In order to achieve the 10.5 percent reduction proposed by the Government, a 15.5 percent increase in the price of cigarettes would be required” (Intervenors'’ Post Trial Brief, Section C, sub 1, sub c / p. 77)."

The letter backs up its assertion that anti-smoking campaigns have demonized smokers by quoting from one ad it states was shown in California and Massachusetts: “"One of the television ads features a cartoon character, a smoker, who laments with Woody-Allen-like angst that he can'’t quit. He says ‘it'’s no use. I a’m scum. I'’ve always been scum."”

The letter also takes issue with the proposed remedy by which cigarette companies would be prohibited from offering price promotions for the top five cigarette brands smoked by youths. It argues that such a remedy would penalize adult smokers, since it would deprive them of the opportunity to take part in any price promotion for the products they consume.

Finally, the letter takes issue with the proposal that a Cessation Administrative Organization be given the authority to develop and disseminate smoking cessation messages to all smokers on any marketing databases of the defendant cigarette companies, without any input from the defendants. The letter notes that the consumers involved do not necessarily consent to the use of these marketing databases for the purpose of sending them unsolicited messages urging them to discontinue the use of the products they have purchased. This may be viewed, C.L.A.S.H. argues, as a form of "uninvited harassment" and as an invasion of privacy.

The letter closes by noting that a huge number of smokers have successfully quit smoking and that most who have quit have done so without intervention by the government or public health organizations and without the help of pharmaceutical aid. The letter argues that smokers do have a choice to quit smoking if they so desire and that others opinions about whether they should smoke or not should not be imposed upon them by a Court-imposed remedy.

The Rest of the Story

Although C.L.A.S.H. may not be offered legal standing to have its views considered in the case, I think the letter makes some very important and insightful observations that anti-smoking groups should seriously bear in mind and which are relevant to the merit of the remedies proposed by the intervening health groups.

First, the most basic point made by the letter, which I think is right on the mark, is that the request for monetary remedies in this case essentially will result in costs for the defendants that will simply be passed along to their customers in the form of price increases.

There is strong precedent to believe that this is an accurate depiction of the effect of these monetary remedies. The costs of the 1998 Master Settlement Agreement, estimated at $246 billion over 25 years, were apparently offset by a 45 cents per pack price increase, implemented immediately upon the signing of the contract. There is no reason to think that Court-imposed remedies that required payments by the tobacco industry defendants would not be dealt with by increasing cigarette prices.

What I think this argument exposes is the punitive nature of the proposed monetary penalties and the not-so-hidden agenda of the Intervenors to try to obtain funding for public health anti-smoking initiatives as a secondary benefit (or perhaps even primary benefit) of the litigation.

If the case were really about RICO, then the proposed remedies would be narrowly focused on directly preventing and restraining future RICO violations. Since most, if not all, of these alleged violations relate to marketing activities of the cigarette companies (including advertising, public relations statements, communications to customers and the public, etc.), one would naturally expect the proposed remedies to relate to direct restrictions on marketing that would prevent these alleged violations from recurring or continuing.

Instead, the intent seems to be to inflict pain on the cigarette companies in order to make them pay for their past (and perhaps future) wrongs. While this may be a desirable outcome from a public health perspective, it is not appropriate under the RICO statute and the law governing the case.

What do I think would actually happen if the Court ordered the requested monetary remedies (and they were miraculously upheld on appeal)? I think that the pain inflicted on the cigarette companies would need to be offset. And the likely way that the companies would offset the pain would be: (1) increasing the price of cigarettes to recoup some or all of their losses; and (2) becoming more aggressive in recruiting new smokers and retaining existing ones, in order to make up for remaining losses (in other words, by continuing and even increasing the alleged RICO violations).

Thus, I think the requested monetary remedies would have the exact opposite of the intended effect that Intervenors assert these remedies would have.

A second important implication of the argument made by C.L.A.S.H.'s letter is that the proposed anti-smoking media campaign has goals that are far beyond, and only remotely related to, the underlying goal of restraining future RICO violations. If it is indeed true that some of the anti-smoking ads put out by groups like Legacy have the effect of demonizing smokers, then it becomes quite difficult to see how such a program could directly advance the goal of restraining RICO violations.

It would be one thing if the Intervenors were asking for a very narrow public education campaign, such as one designed to force the companies to directly communicate certain factual information to smokers and the public in order to prevent them from issuing future fraudulent or misleading communications that make up the bulk of the alleged RICO violations. But a broad anti-smoking counter-marketing campaign that, in part, aims to demonize smokers or make them feel like outcasts goes far beyond any shred of perceived relation to preventing a RICO violation.

Third, I think NYC C.L.A.S.H. points to a serious flaw in the proposed remedy by which companies would not be allowed to conduct price promotions for certain cigarette brands. Clearly, price promotions affect adult and youth customers. So this is not a remedy narrowly tailored to prevent future RICO violations. It is a broad infringement upon the way that cigarette companies can do business. Even if these companies immediately ceased to market products to youths, they would still conduct price promotions, because price is a critical aspect of competition for the adult market. In fact, price promotions are probably far more important for adult business than for youths because youths tend to smoke only certain brands, and will not switch to generic or discount brands for price reasons.

Fourth, I think the C.L.A.S.H. letter points out a huge flaw in the proposed remedy related to the powers of the Cessation Administrative Organization (CAO). The Intervenors have argued that this group should be allowed access to the tobacco industry's database of consumers in order to send all of these consumers communications urging them to quit smoking or provide other information deemed appropriate by the CAO.

While I think it would not be unreasonable to release the names and contact information to allow consumers to be reached in cases of an unknown product defect or a product recall or something of that nature, I tend to agree with C.L.A.S.H. that there is a violation of privacy here because smokers have not authorized the use of their private information for the purposes of soliciting them to stop using the product which they bought from the defendants.

So if it was found, for example, that a Toys 'R Us product was dangerous for kids (e.g., "shards o'glass"), then I think it would be appropriate for a court or government agency to intervene and use the company's database of product purchasers to notify them of the defect in the product. But I hardly think it would be appropriate to require Toys 'R Us to release their list of customers to a public health organization so that they could run an education campaign to try to urge these customers not to buy so many toys because of their harmful effects on children's reading skills, for example.

But I think there is an even more important and more over-riding concern that becomes apparent after reading the C.L.A.S.H. letter.

What becomes apparent, I think, is that unlike any other tobacco-related litigation, this is one case in which it is being assumed that the aggrieved party (that is, smokers who were the object of all of the alleged RICO violations), in its entirety, wants to stop using the product that is at issue. While it may be reasonable to assume that correcting fraudulent information that may have been transmitted to consumers of this product is in the best interests of the aggrieved customers who may have been misled by these misrepresentations, can it also be assumed that programs to encourage these consumers to stop using the product are also an appropriate part of a plan to remedy the effects of the alleged violations?

That is, even if the Supreme Court were to rule that a program to remedy the effects of past industry wrongs were allowable under RICO, would a program to encourage smokers to quit smoking be an appropriate way to remedy the RICO violations? Would it not be more appropriate to simply correct the false or misleading information and then let the customers decide how they wish to proceed? After all, if the violations are not severe enough that the Court decides that the product must be taken off the market, then isn't there a valid argument that the customers should be allowed to make their own decisions with respect to what action to take after the misleading communications are corrected?

In other words, is it not paternalistic to ask the Court to make a decision that all smokers should want to quit and that efforts need to be taken to make sure that all smokers do indeed want to quit, even if they presently do not? Is is not paternalistic to assume that the only way to remedy the effects of past industry marketing fraud is to make sure that all of its present customers stop using the product?

Perhaps an analogy might help to explain this reasoning. Suppose that it were found that McDonalds had put an addictive substance in their Big Mac to try to hook customers, that McDonalds was lying about the nutritional information and health effects of the Big Mac, and that this fraudulent activity resulted in thousands of Americans starting to eat Big Macs, becoming addicted, and not being able to stop eating them even if they wanted to quit.

A court finds McDonalds guilty of RICO violations and under an unexpected Supreme Court ruling, is able to fashion remedies to "correct" the damage done by past McDonalds wrongs. The court decides, first of all, that the company must pay for an intense communication campaign to let all consumers and potential consumers know that the product is indeed addictive, that it is not of nutritional value, that the company had been lying, and that the product could be harmful to health. But the product is not so harmful that it is deemed necessary to pull it off the market in order to correct any past wrongs. Let's say that the court also forces the disgorgement of industry profits related to its fraudulent activities.

What more need the court do to remedy the effects of McDonalds actions? Does it need to run a program to urge all consumers who eat Big Macs to quit eating them? If the fraudulent communications are corrected, mechanisms put in place to prevent future fraud, and past profits disgorged, then why is it appropriate for the court to attempt to get all McDonalds customers to stop eating Big Macs, and in fact, to stop eating hamburgers at all?

As I contemplate the DOJ case more, I am beginning to see that in many ways, the case is all about the interests of a few public health groups being imposed upon the nation.

You know something? If the wrongs caused by tobacco industry RICO violations are so bad that in order to remedy them, we need to get almost every smoker to quit, then why don't the Intervenors simply ask the court to require the removal of these products from the market? Why beat around the bush? Why have to resort to persuasive communications and counter-marketing strategies when you could just cut right to the chase and effect the cessation of every smoker in the country by simply taking the product off the market?

I'm not arguing here for Prohibition, but what I am perhaps suggesting is that the RICO statute is so ill-suited to the specific case of the tobacco industry that when it comes down to it, it is so obvious that the square peg will not fit into the round hole that you would think those who are hammering so incessantly would realize that something doesn't seem to be working right.

Instead, the greedy public health groups are going out and getting larger and larger square pegs. And I think the desperation and futility of their hammering is becoming obvious to just about everyone except for them.

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