Monday, May 03, 2010

Another Day, Another Lawsuit Against the Protectionist FDA Tobacco Law

If the protection were of the public's health, it would be a great thing. But instead, the only protection offered by the FDA tobacco law is protection of the profits of the biggest of Big Tobacco.

With the FDA and the Act already under siege through a series of lawsuits against the constitutionality of the law's advertising and communication restrictions, the Agency was sunk deeper into a swamp of litigation last week with the filing of a new lawsuit, this one by three small tobacco companies which are claiming that the Act poses unconstitutional restrictions on their commercial speech in a way that threatens their ability to survive as businesses.

As summarized in their Complaint, the three tobacco companies claim that: "The FDA is seeking to impose draconian restrictions on the ability of cigarette manufacturers to engage in commercial speech using their federally-registered trademarks, including brand names that have been in use for years. As explained below, the regulation violates the Free Speech Clause of the First Amendment as well as the Due Process Clause and Takings Clauses of the Fifth Amendment."

The lawsuit relates to a little-noticed clause in the Family Smoking Prevention and Tobacco Control Act, which states: "A manufacturer shall not use a trade or brand name of a nontobacco product as the trade or brand name for a cigarette or smokeless tobacco product, except for a tobacco product whose trade or brand name was on both a tobacco product and a nontobacco product that were sold in the United States on January 1, 1995."

One of the plaintiffs - Renegade Tobacco - produces cigarettes with brand names of Tucson, Tracker, and Barton and has registered trademarks for each of these brands of cigarettes. However, subsequent to the introduction of these products, these same brand names have been used for nontobacco products (automobiles, computers, and alcoholic beverages, respectively). Thus, according to the Act, Tucson, Tracker, and Barton cannot be used as cigarette brand names by Renegade and its products with these brand names must be taken off the market.

Not coincidentally, the top six cigarette brands in the U.S., all manufactured by Big Tobacco companies, are protected by the Act's exemption for products that were used as both a tobacco and nontobacco brand name in 1995. For example, Marlboro merchandise was being sold in the U.S. in 1995, so if any non-tobacco product comes on the market with the Marlboro name, Marlboro products are protected. The same protection holds for Camel, Newport, Winston, Doral, Basic and according to the lawsuit - nearly every brand name being used by the three major tobacco companies. Thus, at least 90% of the market is protected by this exemption, while the market of cigarettes produced by minor companies is at risk.

The plaintiffs argue that this provision of the Act violates the First Amendment of the Constitution because it infringes upon their free speech rights. Specifically, the provision violates the first prong of the Central Hudson test because there is no substantial government interest in ensuring that otherwise lawful and non-misleading brand names be taken off the market.

The Rest of the Story

I believe that the plaintiffs have a very strong case. Before explaining why, let me demonstrate why this provision of the Act represents a protectionist law that has no public health basis, but serves only to protect Big Tobacco profits.

This provision all but ensures that the major tobacco companies can eliminate any competition from the smaller companies. To do this, they simply have to market nontobacco products with the brand names of their competitors.

In other words, all Philip Morris has to do if it wants to eliminate competition from minor tobacco companies is find out the brand names of all the brands these companies are marketing and introduce nontobacco products with those brand names. Unless there were already nontobacco products with those brand names in 1995, those brands will have to be taken off the market, or renamed.

But if they are renamed, then all Philip Morris has to do is introduce another nontobacco product with the new brand name. Essentially, then, the smaller tobacco companies are prohibited from selling any cigarettes.

If the minor companies try to get around this by using as a cigarette brand name the name of a nontobacco product that was on the market in 1995, that doesn't work. Why? Because the name needs to be the brand name of both a nontobacco and a tobacco product in 1995.

This is as protectionist a piece of legislation as I've ever seen. The impact of this provision is merely to prevent smaller tobacco companies from continuing to compete in the marketplace, and to protect the market share of all but the largest tobacco companies.

Moreover, there is no public health justification or aim for this provision. It neither serves nor advances any public health purpose.

One might argue that the government has an interest in preventing companies from marketing branded non-tobacco merchandise because this could promote smoking, especially among youth (I have in fact conducted research myself which documents this assertion). However, the legislation does not advance this interest, because it exempts specifically those brands which were being marketed via nontobacco merchandise. Moreover, it would certainly fail the 4th prong of Central Hudson because it is far broader a restriction than would be necessary to address this concern.

The rest of the story is that like many provisions in the Act, this one serves no legitimate public health purpose. It serves solely to protect the interests and profits of Big Tobacco, especially the largest and most dominant tobacco company: Philip Morris.

And it is for that reason that the provision violates the First Amendment. Since it does not serve to advance any legitimate government interest, it fails the first prong of Central Hudson. One need go no further than that.

While it is the FDA that is going to have to defend itself in the courts in all these lawsuits, it is the health groups which got the FDA into this mess. By supporting legislation which was aimed primarily to protect the dominant market interests of Philip Morris, rather than to protect the public's health, the Campaign for Tobacco-Free Kids and other anti-smoking groups ended up supporting what is clearly unconstitutional legislation, and which will slowly and gradually be emasculated by the federal courts.

Were there any justice, the Campaign for Tobacco-Free Kids would be forced to pay the litigation costs involved in defending these lawsuits.

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