Chapter 5
Advertising, Big Business, and Uncle Sam

When the negative health effects of tobacco use were first made public, the medical community pressed the government to respond. Through the last half of the twentieth century, the U.S. and state governments have increased regulations and taxes on tobacco products, regulated advertising, and sued tobacco companies for the medical costs that have resulted from smoking-related illnesses. The result has been a dramatic change in tobacco use in the United States.

The "Healthful" Cigarettes of the 1950s

Although scientists have published studies through the years showing the negative health effects of tobacco use, most of these have been ignored or downplayed by the media and the tobacco industry. Often the tobacco companies responded by publishing their own information touting the health benefits of tobacco use. Or they would propose other theories, including some that stated that viruses were responsible for lung cancer. Finally, in 1950, The Journal of the American Medical Association published studies that definitively linked smoking with lung cancer. These reports scared the public, and cigarette sales fell.

The tobacco companies recovered business by making changes to their cigarettes. One change was the introduction of special filters that were supposed to reduce the amount of tar and nicotine the smoker would inhale, and thus decrease the hazards to the tobacco user. Lorillard introduced a special Micronite filter, which purportedly provided "the greatest health protection in cigarette history."³⁹ Its secret ingredient? Asbestos, a substance now known to cause cancer itself. (Lorillard discontinued the use of this filter in 1956.)

In actuality, there was little difference between the amounts of tar and nicotine in filtered and unfiltered cigarettes, but the public believed the tobacco companies' ads. At the beginning of the fifties, 2 percent of cigarettes were filtered. By the end of the decade, over 50 percent were.

Men in white lab coats, who looked like doctors, were employed by the tobacco companies to deliver advertisements in support of filtered cigarettes. Liggett and Myers advertised the results of their own tests in 1952, which supposedly demonstrated that "smoking Chesterfields would have no adverse effects on the throat, sinuses or affected organs."⁴⁰ In 1954, Liggett and Meyers ran ads that featured the popular actresses Barbara Stanwyck and Rosalind Russell. They called their new alpha-cellulose filter "just what the doctor ordered."⁴¹

Cigarette sales rebounded with the tobacco industry's reassurances to the public. However, the government did not like all the unfounded health claims. In 1955, it clamped down. The Federal Trade Commission (FTC) published new rules that prohibited tobacco advertisements from referring to the throat, larynx, lungs, nose, or other parts of the body, and banned advertisements pertaining to digestion, energy, nerves, or doctors. With these new rules, the FTC hoped to avoid unsubstantiated claims that tobacco use improved health. However, there were still many unanswered questions about what role, positive or negative, tobacco actually did play in human health.

The 1964 U.S. Surgeon General's Report

In the early 1960s, various health organizations, the American Cancer Society, and other groups pressured President John Kennedy to find out definitively whether tobacco use was harmful or not. In 1962, a committee of eminent scientists and experts was formed to study the issue. Headed by U.S. surgeon general Luther Terry, a heavy smoker from the South who had picked tobacco as a boy, the committee was chosen very carefully. Terry gave the tobacco industry the right to veto any committee member so that they could not later claim the committee was biased.

Half of the ten committee members used tobacco themselves. All the tobacco users on the advisory committee agreed not to alter their smoking habits during their review so that they would not appear to be endorsing the view that tobacco was harmful. The committee's work would be kept entirely secret from the general public.

Once formed, the committee examined data and statistics from over seven thousand studies published over the years. They visited medical researchers to look at their slides of pathological changes in smokers' lungs and examined scientists' work in the field. They listened to researchers who told them their views on the dangers of tobacco and the scientific basis for those views. For instance, one view stated that there were two genetically different types of people. If one type of person was genetically predisposed to tobacco use, perhaps this same genotype was also genetically predisposed to lung cancer. This could mean that any apparent link of smoking to lung cancer was related only to a person's genetics and not to a cause-effect relationship.

In 1964, after two years of study, the committee finally revealed its conclusions. The report announced that smoking causes lung cancer and laryngeal cancer in men, was a probable cause of lung cancer in women, may cause heart disease, and was the most important cause of chronic bronchitis. In addition, the committee discovered a relationship between smoking and emphysema and found that cancer-causing compounds (seven at the time) were present in cigarettes. The committee called tobacco "habit forming" rather than "addicting." (A habit can be changed more easily than an addiction—nicotine was first called addicting in the 1988 U.S. surgeon general's report.)

The report also noted that using tobacco had the positive benefit of promoting intestinal health and countering obesity. However, those benefits did very little to temper the message: Cigarette smoking was a serious health hazard and a significant threat to public health in the United States.

The extremely negative character of the 1964 report stunned the tobacco industry. They had believed that the surgeon general's report would be more balanced—if not in their favor, at least not so overwhelmingly against them. They immediately tried to find fault with the report and did point out several potential problems. One complaint was that highly filtered cigarettes had not been on the market long enough for researchers to accurately determine mortality rates of

smokers using them. However, despite that and other complaints, the body of the report from the Surgeon General's Advisory Committee stood up to public scrutiny. Smoking rates in the United States dropped almost 20 percent soon after the report came out.

Warning Labels and the Fairness Doctrine

Just one week after the surgeon general's report came out, the FTC announced that warning labels would be required on all cigarette packs in the future. In 1965 Congress passed a law that required the statement "Warning: Cigarette Smoking May Be Hazardous to Your Health" to be written on all cigarette packs. (These warnings have since gotten more detailed, and in Canada, warning labels actually display pictures; for example, a diseased lung or a diseased mouth.)

Although hotly debated, it was decided that warnings would not be required in advertisements at that time. This was in part because the tobacco industry had voluntarily restricted tobacco ads from mentioning any implied or actual health benefits from tobacco in general. An industry-selected monitor reviewed and rejected ads that showed too many positive aspects of cigarettes and tobacco. Yet tobacco companies were not restricted from showing their products as being pleasurable and having taste and flavor. As a result, tobacco companies purchased quite a bit of advertising time to tout the benefits of their brands.

However, the Fairness Doctrine required television companies to give equal time to opposing viewpoints on any subject. In 1967, John Banzhoff, a young lawyer who believed the Fairness Doctrine applied to tobacco advertising, petitioned the FTC. Although in news stories the broadcast companies presented both sides of the argument, Banzhoff argued that the commercials sponsored by tobacco companies were one-sided and did not present the opposing viewpoint that tobacco is unhealthy. Banzhoff took his case all the way to the Supreme Court and won. By 1969, broadcast companies were required to give free, equal advertising time to antitobacco groups. Ads created by the American Cancer Society and others did much to reduce smoking rates

Some Important Events in the History of Environmental Tobacco Smoke

In the last three decades, public policy has shifted toward the nonsmoker. Most workplaces and public buildings are now smoke free, as are buses, trains, and planes. Restaurants are either smoke free or have ventilated smoking sections. This excerpt entitled "Tobacco Timeline" from the Tobacco BBS (www.tobacco.org) shows important events in the history of environmental tobacco smoke.

1969      Ralph Nader asks FAA to prohibit in-flight smoking since it is unhealthy and a fire hazard

1969      Pan American creates the first nonsmoking section

1972      The US Surgeon General's Report talks about secondhand smoke or "public exposure to air pollution from tobacco smoke"

1983      San Francisco bans smoking in private workplaces

1987      Congress prohibits smoking on short flights (less than two hours)

1987      Beverly Hills, CA, bans smoking in restaurants

1988      New York City passes "Clean Indoor Air Act"

1990      San Luis Obispo, CA, becomes the first city to ban smoking in all public buildings, including restaurants and bars

1990      Bill Clinton outlaws smoking in the White House

1990      Smoking not allowed on most domestic flights of less than six hours

1990      Smoking prohibited on interstate buses

1993      Vermont is the first state to ban indoor smoking

1993      US Postal Service bans smoking in its facilities

1994      Restricted smoking at US military bases

1994      McDonald's bans smoking in all of its restaurants

1995      New York City makes stronger laws with the "Smoke-free Air Act"

1998      California bans smoking in bars

2002      Salt Lake City Olympics maintains a smoke-free policy for athletes and spectators

by presenting the health information and known facts about tobacco usage to the American public.

In 1971, the tobacco industry voluntarily pulled all cigarette ads from television and radio in exchange for Congress's decision to delay controls and restrictions on the sale of cigarettes. Although this appeared to be a positive step because there were no more tobacco ads on television or the radio, there also were no more antitobacco ads. The rate of cigarette smoking began to rise again after these antismoking ads were pulled.

Significant Characters in Tobacco Advertising

Since there were no longer ads on television, tobacco advertising soon increased in other media. Increasingly, tobacco companies turned to new methods, or characters that consumers could identify with, to increase consumer desire for their products.

Joe Camel was a cartoon character developed in 1974 by the R.J. Reynolds Company and used to advertise Camel brand cigarettes. It was first used in a French ad campaign and made its U.S. debut in 1987. By 1991, the sale of Joe Camel merchandise, much of which appealed to kids, was earning R.J. Reynolds over $40 million yearly. In that same year, the Journal of the American Medical Association published studies which showed that Joe Camel was as well-known as Mickey Mouse among preschoolers, and that Camel's market share for smokers under age eighteen had skyrocketed—from under 1 percent in 1987 to almost a third of the market by 1991.

Clearly, cartoon characters worked well. In fact, one study tried using cartoon characters and a real person to deliver the same anti-smoking message. Young people remembered more details about the ad with the cartoon character, stated the ad was more believable, and were better able to comprehend and interpret the message.

Philip Morris created another highly successful character—the Marlboro Man. A rugged, individualistic cowboy, working hard with his horses on the range, invited smokers to "Come to Marlboro Country." They could leave behind all the hassles of the city or suburbia and escape with the Marlboro Man. Ironically, several

actors used in the Marlboro Men ads have since died of lung cancer including Marlboro Man Wayne McLaren. In the 1992 shareholder's meeting of Philip Morris McLaren informed the board that he had lung cancer as a result of his pack-and-a-half-a-day smoking habit and asked the company to reduce its advertising in the hopes of reducing the number of smokers. The company responded that they would not change its practices. Just four months later, McLaren was dead from lung cancer.

Tobacco in the Media

For years, many characters in movies and on television shows smoked. Thomas Stanislao, who smoked for twenty years before quitting, says, "I fell in love with old 1940s movies—what would Humphrey Bogart be if he weren't wreathed in romantic clouds of smoke? (Of course, it killed him at 58.) So I started to smoke. One minute I was a nonsmoker, the next I was a pack-a-dayer."⁴²

Tobacco companies also advertise by paying large sums of money for brand-name or logo exposures in movies. In 1980, for about forty-two thousand dollars, Philip Morris purchased twenty-two exposures of the Marlboro logo in the movie Superman II. Lois Lane becomes a chain-smoker of Marlboro Lights. There are Marlboro billboards and a van with the Marlboro logo on it. The taxi in the final scene has a Marlboro sign on top. As a result, the company received much public exposure. Besides its initial run, Superman II was rerun on television countless times during the 1980s, is still available as a videotape rental, and still runs occasionally on syndicated television channels.

Tobacco companies used to have another way of getting media exposure. They used to be able to place ads around ballparks. When games were televised, the company's tobacco products were

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instantly advertised. While those ads are now banned, tobacco companies can still get media exposure by sponsoring a vehicle in a sporting event. When they sponsor a car or boat in a race, that vehicle is often covered with the tobacco company's logo. Some boats have even been named after their sponsors, like the Winston Eagle and Miss Budweiser unlimited hydroplanes. Race car drivers and pit crew will wear uniforms emblazoned with the name or logo of the sponsor. During television or radio coverage, the brand is advertised constantly. However, recently there have been discussions about banning this practice.

In 2002, the Olympic Games were held in Salt Lake City, Utah. The Olympic Organizing Committee asked Olympic athletes to promote a healthy lifestyle and to promote sports as an alternative to tobacco. Utah law prohibits smoking in public places and the use of cigarettes by or the sale of cigarettes to those under the age of nineteen, one year older than in most states. Visitors to Utah were required to comply with Utah law even if they were considered of legal age to use tobacco in other states. There was a media campaign to increase the awareness of the Olympic tobacco policy and the Utah law among the many visitors from around the world, both athletes and spectators.

Today's Tobacco War:Waged in the Courts

The Olympic policy and the changing public opinion of tobacco use came as a result of hard-won legal battles. In the last five decades, since there have been studies and reports that increasingly verified the negative health effects of tobacco use, the tobacco industry has been embroiled in lawsuits. Many smokers filed suit, blaming the tobacco companies for their illnesses. Some of the lawsuits were successful. Others failed because the judges placed as much blame on the smokers for having decided to smoke as on the companies who produced these highly addictive products.

The tide began to turn in the 1990s because it was disclosed that tobacco companies knew about the detrimental health effects of nicotine all along. There were documents, memos, and other evidence that proved that the tobacco industry had known well

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before the 1964 surgeon general's report. In fact, the tobacco companies tried to reduce known carcinogens and develop more healthful cigarettes. Scientists also manipulated levels of nicotine and other chemicals in tobacco to maintain smokers' addiction. They clearly knew about nicotine's pharmacological actions.

However, the industry conspired to lie to the courts, Congress, and the American public. Tobacco executives testified before Congress that to the best of their knowledge, nicotine was not addictive, even though internal company memos and testimony of tobacco company whistleblowers (those who told the truth or "blew the whistle") stated the opposite. And yet, when confronted, the executives denied everything.

By unifying to deceive the public, the tobacco companies had removed the choice from the hands of consumers. Many consumers may have willfully chosen to smoke, but they were not aware, as the tobacco companies were, of the full health implications of tobacco usage or of the addictive nature of the product. When the extent of the deception was exposed, the courts began to favor the tobacco users who sued. By the mid-1990s, individual states initiated lawsuits against the tobacco companies seeking damages—primarily reimbursement for the costs that the states have paid to care for sick smokers.

The tobacco industry, facing the overwhelming evidence and testimony against them, finally admitted that it did indeed know of nicotine's addictive nature and of the health risks of tobacco use. The Liggett Group broke ranks from the other companies by agreeing to pay the Medicaid bills of California smokers in a lawsuit settled in 1996. In 1997, Liggett admitted it knew of the dangers of smoking for years. It settled with twenty-two states to pay for the health-care costs of smokers who were ill.

Lawsuits against other tobacco companies continued. In 1997, the states' attorneys general and the tobacco companies reached an agreement. More details were changed and worked out as the settlement passed through Congress in 1998. The result of the negotiations produced the Master Settlement Agreement of 1998 between the tobacco companies and the attorneys general of forty-six states and five U.S. territories.

In the settlement, the tobacco companies agreed to compensate the states for all the money that the states have spent to care for sick smokers. In addition, they agreed to run antismoking ads targeted toward young people and change their marketing practices so new ads are directed only toward adults. The tobacco companies must also develop research-based education programs designed to prevent and reduce youth smoking. The total tab for the tobacco companies will be more than $200 billion over twenty-five years.

The Price of Tobacco Today

The high costs of the 1998 settlement have directly raised the cost of tobacco products. Tobacco consumers are paying for a large chunk of the total amount of the tobacco companies' settlement. In addition to tobacco-company expenses like the settlement agreement, the inflated price of cigarettes and other tobacco products is a reflection of the government's belief that increasing the prices of cigarettes will discourage people from smoking as much.

Cash Crop

In the heat of the Great Depression, there were tough times for many smokers. Most could not afford cigarettes. Farmers of all kinds, including tobacco farmers, had crops that could not be sold, and there was soon a glut of tobacco in the marketplace. This led to government action. Congress passed the Agricultural Adjustment Act of 1933, which contained price supports for tobacco and other agricultural products. Farmers could continue to produce tobacco and be guaranteed a decent price for their crops.

The government also determined who could grow and sell tobacco. Those who grew tobacco were given quotas, which refer to burley tobacco, or allotments, which refer to other types of tobacco. The allotments or quotas entitled a farmer to produce one acre of tobacco or a certain number of pounds of tobacco. Quotas and allotments were initially established to help restrict tobacco production and make the prices steady. Tobacco farmers must buy or lease the allotments or quotas from the government. Some people who have inherited allotments or quotas lease their tobacco production rights to tobacco farmers.

Tobacco farmers are reluctant to give up tobacco growing because tobacco earns a higher price than other crops. After the 1998 settlement, the tobacco industry set aside money to help maintain the price farmers earn for tobacco.

Most tobacco farmers defend their right to produce and sell a legal product, especially one that earns so much money. For many farmers, tobacco money is the college fund for their children. Tobacco is also less labor-intensive than some other crops, requiring minimal care for a period of time, and then intense labor during harvesting. Some people have other jobs and grow tobacco for extra income and to ensure a comfortable style of living.

But some people, including some doctors who own allotments, choose not to use them because they no longer believe in selling tobacco. If a quota is not used over a period of years, it will expire and cannot be used again. Some allotments also expire; others are returned to a pool and can be reallocated. Some farmers have decided to change to other crops following the serious tobacco-related illness of a friend or family member.

Tobacco farmers pay a yearly assessment to ensure that the price of tobacco will be guaranteed, even in off years. With that assessment and the funds that tobacco companies set aside to help farmers, tobacco growing is a fantastic cash crop. It will continue to be a good business for farmers as long as there are tobacco users.

The government taxes tobacco products at a higher rate than other products because of the costs that states and the federal government have incurred to treat sick smokers and address public-health issues related to tobacco use. Each state decides how much to tax, what to do with the tax revenues, and also what to do with the tobacco settlement money. There is much debate about the disbursement of these funds.

Minnesota state senate majority leader Roger Moe describes a project in which schoolchildren made a memorial wall with photos, drawings, and stories of relatives who died or who were ill due to tobacco use:

The hundreds of pictures of dead moms and dads, dead grandparents, dead aunts and dead uncles help focus the public policy question of what to do with the [tobacco settlement and tax] money…. We get so boggeddown talking about dollar amounts and endowments, and this makes it all real. I think I don't know of any more graphic way you could show the cost of smoking to Minnesota.⁴³

Diversification

As more and more people recognize the immense human costs of tobacco use, the number of tobacco users has plummeted. Yet tobacco companies face financial difficulties when tobacco users quit in record numbers or when existing users die and new smokers are not there to maintain a base number of tobacco users. The industry has realized this for years and as a result has moved toward diversification of their product offerings. They have purchased other consumer-oriented and food businesses, acquiring, over the years, companies such as Burma Shave, Seven-Up, Kraft, Nabisco, General Foods, Jell-O, and Maxwell House Coffee. By adding new businesses, tobacco companies do not have to depend on changing consumer beliefs about tobacco or laws governing tobacco usage and sales to make a profit.

However, some people feel it is socially responsible to boycott products sponsored by tobacco money and will not purchase or use those products. In June 2001, Philip Morris offered the Kraft Food Company as an initial public offering—essentially its own company with common shares traded on the stock market. However, Philip Morris retained most of the preferred stock, thus keeping 98 percent of the voting rights for the company. Some people still boycott Kraft foods because a tobacco company is the primary owner.

Nicotine as a Pharmaceutical

One controversial business sector that tobacco companies are entering into is the health-care industry. Whether people like it or not, the tobacco companies are experts in the field of nicotine use. For years, they have studied nicotine and its effects on the body. So, as they think of new business prospects, it makes sense for tobacco companies to use their knowledge for health-care purposes. In 1999, R.J. Reynolds launched a new company called Targacept, which focuses on selling Reynolds's expertise to help develop nicotinic drugs.

Nicotine has been described as a means for patients to medicate themselves. Certain groups of people, such as those with schizophrenia, almost universally smoke. Many patients with bipolar disorder smoke. Although it is not certain why, nicotine appears to help people with some mental illnesses to function better.

Even though tobacco use is unhealthy, studies are investigating whether smaller doses of nicotine in a safer delivery system (a patch or an inhaler, for example) can provide medical benefits in some cases. Certain diseases like Parkinson's disease and Alzheimer's disease have been associated with a dopamine deficit. Because nicotine increases dopamine production, studies have shown it may help the functioning and memory of some of these patients.

In other studies, patients with Down syndrome also experienced improvements in functioning with nicotine use. Tourette's syndrome was also improved by nicotine, although most patients had serious side effects since many of the patients in the clinical trials were children. Ulcerative colitis also showed improvement with nicotine, although scientists are not sure why. Other studies have shown that while high doses of nicotine impair blood-vessel tone, low doses can actually promote growth of blood vessels. More research is needed to see if blood vessel growth promoted by nicotine can have a therapeutic effect in the body.

Some people think it is ethically wrong for the tobacco companies to profit from their nicotine expertise—expertise that has been won at the cost of illness and death to hundreds of thousands of people; expertise that has been used to manipulate the tobacco product; and expertise that was used to deceive and deliberately lie to the American public and the tobacco consumer for so many years. Others think it is commendable that the tobacco companies are using their knowledge in a way that is helpful instead of harmful.

The Future for Big Tobacco

Besides therapeutic uses, tobacco companies are focusing attention on other open markets. Many companies realize the prospects for future tobacco sales in the United States are diminishing and the market as they knew it has been altered irrevocably. In the

United States, the antismoking campaign and advertisements, the public-health messages, and the shift in social attitudes are turning the tide against tobacco. Although there will probably always be tobacco users, the number of tobacco smokers in the United States is dropping, and it may continue to decline as more smokers heed the health warnings.

However, this is not the situation in other countries. Many developing countries are far behind the United States in terms of public-health awareness and product regulations. American cigarettes are being exported in ever-increasing numbers. In many countries, tobacco regulations are not as strict, and U.S. tobacco companies can market to adolescents as well as adults. Teens are just as vulnerable to advertising and promotional items in other countries as they are in the United States.

Back on the home front, lawsuits abound, and there are serious financial repercussions for tobacco companies as a result of all the legal action. In the 1998 settlement, the state governments held the tobacco industry accountable for illnesses and increased costs of medical treatments related to tobacco use. The U.S. federal government initiated a lawsuit in 1999 for its losses in providing Medicare and other assistance to tobacco users. The case is still pending. Settlement talks were initiated in June 2001, although the government is still pursuing litigation as well as a settlement.

Other countries have filed suit against U.S. tobacco companies in the U.S. court system as well. Venezuela and Bolivia filed lawsuits in 1999. Russia filed suit in 2000; Tajikistan and Kyrgyzstan in 2001. The European Union and countries such as Ecuador have also filed suits. Most lawsuits claimed that the tobacco companies deliberately harmed their citizens, deceived them by not telling the truth about tobacco and nicotine, and caused astronomical medical costs. Some of these lawsuits have been dismissed or settled, and some have yet to be decided.

In addition to these lawsuits, U.S. states are watching the tobacco industry carefully to make sure it is complying with the 1998 tobacco settlement agreement. In March 2001, five states sued R.J. Reynolds, stating that they were not keeping to the terms of the agreement. There were still concerns about advertising, promotional items displaying tobacco company logos, and other issues. Individual smokers continue to sue tobacco companies for damages. The continuing lawsuits will affect the ongoing viability of individual tobacco companies and the tobacco industry overall.

At one time over half of the men and more than a third of the women in the United States smoked. There has been substantial progress since that time. Yet the use of nicotine products is still pervasive in our society. In 1998, 47.2 million Americans were smokers while 148.6 million Americans were former and nonsmokers. If tobacco was eliminated, over 430,000 deaths each year could be prevented and over $97.2 billion could be saved in medical costs and lost productivity.

Only time will tell whether tobacco will continue to be a viable product in today's business climate. Prohibition or outlawing of both alcohol and tobacco occurred in the early part of the twentieth century. It did not work—people went to clandestine hideaways called speakeasies and continued to smoke and drink despite the penalties for noncompliance. Now, as long as there are tobacco users and tobacco is legal, there will continue to be a demand for tobacco products.