On November 27, 2012, a federal judge ordered tobacco companies Phillip Morris USA, RJ Reynolds Tobacco, and Lorillard Tobacco, to publish corrective advertising statements that (i) say a federal court found that they lied about the dangers of smoking and (ii) disclose negative facts about smoking, including about smoking's negative health effects; the addictiveness of smoking; the lack of significant health benefits from cigarettes marked “low tar,” “light” and similar words; the cigarette companies' manipulation of cigarette design and composition to ensure optimum nicotine delivery; and the adverse health effects of secondhand smoke. The court also found that the corrective advertising did not violate the First Amendment because the statements ordered are purely factual and uncontroversial, and are directed at preventing and restraining the defendants from deceiving the American public in the future. The order and corrective advertising statements can be found here.
The decision comes out of a case brought in 1999 by the Justice Department accusing the tobacco companies of racketeering. In 2006, the same federal judge ruled that the tobacco companies violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by “knowingly and intentionally engag[ing] in a scheme to defraud smokers and potential smokers, for purposes of financial gain, by making false and fraudulent statements, representations, and promises,” and ordered a number of injunctive measures, including corrective advertising. That decision was appealed and was for the most part upheld in 2009 by the court of appeals, including finding that the order for corrective advertising was appropriate to counteract these anticipated future violations.
The recent court ruling orders the tobacco companies and the Justice Department to meet beginning next month to address how to implement the corrective statements. The parties must report to the judge by March 1, 2013, with a plan to disseminate the statements.
Why This is Important: Besides the immediate financial and public-relations ramifications for the tobacco companies, this case has ramifications for other advertisers as well. RICO permits remedies designed to prohibit future RICO violations. Here, the court used its determination of defendants’ likelihood of continued future violations of RICO (i.e., deceiving the public) to craft an unusual RICO penalty – corrective advertising – which is designed to deter defendants from future violations.