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October 14, 1983


The opinion of the court was delivered by: GESELL


 This is an enforcement proceeding brought by the Federal Trade Commission ("FTC") pursuant to section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b), to enjoin Brown & Williamson Tobacco Corporation ("B & W") from deceptively advertising the tar content of the Barclay king-size cigarette, which B & W advertises as "1 mg. tar" and "99% tar free." *fn1" The FTC charges that Barclay advertising violates Section 5(a) of the FTC Act, which prohibits unfair methods of competition and unfair or deceptive acts or practices in commerce. 15 U.S.C. § 45(a). *fn2" After receiving numerous affidavits, hearing the testimony of six witnesses, and considering the briefs and arguments of counsel, the case is now before the Court for final judgment on the merits. *fn3" The Court's findings of fact and conclusions of law follow.

 The FTC periodically publishes reports which rate the amount of tar and nicotine of each cigarette sold in the United States. *fn4" These official figures, reported in milligrams, are determined by the FTC using a smoking machine which measures the amount of tar and nicotine the cigarette delivers. The FTC smoking machine does not and is not intended to duplicate actual smoking behavior. Rather, it smokes each cigarette in an identical way, using a standard set of "puff parameters." *fn5" Since no smoker can or would smoke exactly like the machine, *fn6" this test method does not measure how much tar and nicotine a smoker would actually take into his mouth were he to smoke a given cigarette. It does purport, however, to tell a smoker the relative amounts of tar and nicotine he would receive in his mouth if he smoked two cigarettes in the same manner. Thus, if a smoker smoked a "10 mg. tar" cigarette in the identical manner as a "5 mg. tar" cigarette, he would get approximately twice as much tar in his mouth from the former as he would from the latter.

 For over ten years cigarette companies have publicized these official FTC ratings in advertising and on some cigarette packages pursuant to a voluntary agreement with the Commission. *fn7" Many cigarette smokers note and rely on these FTC ratings in making their decision to purchase a particular brand. Cigarettes with low tar and nicotine ratings are generally considered by smokers to be relatively less risky to health and cigarette companies emphasize low ratings to promote certain brands. *fn8" B & W undertook a major promotional campaign when it introduced its new Barclay cigarette in 1981, emphasizing its then official FTC rating of 1 mg. of tar and claiming that Barclay was "99% tar free." The cigarette was widely accepted by consumers. *fn9"

 Most "low tar" cigarettes obtain their low ratings in part by diluting the smoke which the smoker takes in through the tobacco rod with outside air. *fn10" Typically this is accomplished by vents or perforations near the point where the tobacco rod meets the cigarette filter, so that the smoke drawn through the rod and the outside air drawn through the vents or perforations are mixed together as they pass through the filter before entering the smoker's mouth. The Barclay cigarette, however, uses a different dilution process based on a unique design. The outside air is channeled through the filter tip separately from the smoke by means of four separate, sealed longitudinal vents in the filter itself. This causes the outside air to be drawn directly into the smoker's mouth before it mingles with the smoke drawn through the cigarette. Because of this design, the exit holes for the outside air vents are placed in close proximity to the smoker's lips. *fn11"

 In the December, 1981, FTC Report the Barclay cigarette received an official FTC rating of 1 mg. tar based on the standard test using the FTC smoking machine. *fn12" Following Barclay's successful introduction into the market, however, R. J. Reynolds and Philip Morris, the industry's two largest companies, complained that in actual smoking the Barclay vents were being "crushed" by lip pressure and/or blocked by lip "drapage" so that dilution with outside air was being reduced and the tar delivered by the Barclay cigarette to the mouth of the smoker was thus substantially greater than the amount the FTC machine tests reflected. Thereafter the FTC commenced an extensive investigation, soliciting and examining studies prepared by B & W and by its competitors, and sending these studies to several recognized outside experts for review. *fn13"

  On June 25, 1982, the FTC determined that Barclay was not accurately assessed by the FTC machine method and directed that a Federal Register notice be issued amending the December, 1981, FTC Report to reflect this conclusion. The same day B & W filed suit in federal district court in Kentucky, and obtained an injunction which prevented the FTC from publishing its notice in the Federal Register or from initiating any enforcement action. On April 1, 1983, the injunction was dissolved by the United States Court of Appeals for the Sixth Circuit pending appeal, and on April 13, 1983, the FTC announced in the Federal Register that its testing methods were inadequate to test the Barclay cigarette with accuracy, that based on the evidence before it the Commission estimated Barclay was more properly rated from 3 to 7 mgs. of tar rather than 1 mg. as originally reported, and that until new testing methods were developed the FTC would no longer report an official rating for the Barclay cigarette. *fn14" On June 24, 1983, the Sixth Circuit held that the Commission did not act arbitrarily or capriciously in revoking Barclay's rating. *fn15"

 In response to the FTC's action, B & W has deleted from its advertising any direct reference to an FTC rating and its advertisements now state that Barclay is 1 mg. tar "by a recognized method used by B & W and supported by independent laboratories." *fn16" While conceding the literal truth of this advertising claim, the FTC asserts that the Barclay claim is still deceptive because it falsely suggests to consumers that Barclay is officially rated 1 mg. by the FTC and because it leads consumers to believe, incorrectly, that Barclay's tar delivery is comparable to that of other cigarettes rated 1 mg. by the FTC. Moreover, while also conceding the literal truth of Barclay's "99% tar free" slogan, the FTC asserts that this claim is also misleading because it falsely suggests that Barclay is "virtually free of tar."

 In opposing the injunction B & W has vigorously presented a number of defenses. Despite the long-standing acceptance of the FTC rating system by B & W and other major U.S. cigarette companies, B & W contends that recent scientific evidence demonstrates that the FTC system is so flawed that it is itself deceptive. Accordingly, B & W urges that the FTC cannot ask for equitable relief even if its factual assertions are true. As a second major defense, B & W argues that the FTC has failed to carry its burden of showing that consumers perceive Barclay ads in the manner the FTC contends. Finally, B & W argues that even if consumers do perceive B & W to be making the claim that Barclay delivers the same amount of tar as other cigarettes rated 1 mg., such a claim cannot be deceptive because it is in fact true.

 A. The FTC Rating System.

 The FTC rating system has enjoyed almost universal acceptance for over a decade. Recently, however, the system has been subjected to criticism, largely but not entirely in connection with the Barclay controversy. Seeking to defeat the present suit by demonstrating that the entire FTC rating system is itself misleading, B & W has presented to the Court several "cotinine" studies. Such studies measure by indirect means the amount of nicotine a smoker actually ingests. *fn17" The principal studies upon which B & W relies are an "800-person" study conducted by Dr. Gio Gori, a B & W consultant, and a study by Dr. Neal Benowitz. *fn18"

 The Gori and Benowitz studies undoubtedly suggest that small differences in FTC ratings may not be as significant as many would believe. The Gori study found that between cigarettes whose FTC nicotine ratings differed by a factor of seven, differences in smokers' blood cotinine levels averaged only 30-40%. *fn19" The principal explanation offered for this effect is that many smokers "compensate" -- they change their smoking habits to receive more tar and nicotine from low-rated cigarettes and less tar and nicotine from high-rated cigarettes than the FTC ratings would suggest. *fn20"

 This evidence, however, is not sufficient to lead the Court to hold that the FTC system is meaningless or deceptive. First, the Gori study does in fact validate the FTC system at least to a certain extent by demonstrating that a positive relationship exists between nominal FTC ratings and blood levels of nicotine. *fn21" Even if the levels of tar and nicotine differ by only 30-40%, this difference has significant health implications, as Dr. Gori acknowledged in his testimony. *fn22" Exactly how small a difference is of significance is impossible to determine given the current state of scientific knowledge, *fn23" and it is possible that even very small differences might account for a significant number of early deaths across the nation. *fn24" Furthermore, because the relatively small difference in nicotine levels between the high and low FTC-rated cigarettes is due in part to the manner in which they are smoked -- the "compensation" effect -- a smoker who avoids engaging in compensatory behavior would still receive tar and nicotine into his mouth in rough proportion to the FTC numbers. Even accepting Dr. Gori's results, his study thus fails to discredit the FTC system.

 A second reason exists for finding that B & W has failed to demonstrate that the FTC system is not of value to consumers. The FTC system attempts only to determine how much relative tar and nicotine a smoker would get in his mouth were he to smoke two cigarettes in the same manner. B & W has utterly failed to show that the system does not do this. Nor has it shown that a better method for determining the relative health hazards of the many different varieties of cigarettes on the market is currently feasible. Dr. Gori, while arguing for the use of cotinine studies rather than the current rating system, estimated it would take a study using 40,000 people to test properly the brands of cigarettes now rated by the FTC. *fn25" Moreover, even such a massive and expensive study would leave unanswered questions. The cotinine method measures only the amount of nicotine a smoker ingests. The major health danger to smokers comes not from the ingestion of nicotine, however, but from the ingestion and retention of tar in the body. *fn26" Because actual tar ingestion cannot be directly measured by any known process, *fn27" in order to derive tar data from the cotinine experiments it is necessary to calculate a "tar/nicotine" ratio for each brand based on independent experiments. How this ratio can properly be determined is the subject of scientific dispute, *fn28" and the issue has yet to be resolved.

 Although serious questions have been raised, it is thus too early to sound the death knell for the current FTC rating system. While the FTC system is in need of improvement, on the evidence before it the Court concludes that the system does provide legitimate comparative information to consumers who wish to reduce the health hazards the Surgeon General has concluded are inherent in cigarette smoking.

 B. Barclay's "1 mg. Tar" Claim.

 Although the 1970 voluntary agreement to publish FTC ratings has no legal effect, as a result of industry adherence to the agreement consumers have for years been exposed to only FTC ratings *fn29" and have come to rely upon these ratings on the understanding that they all derive from this one official source. *fn30" B & W's change in the wording of its advertising legend, deleting specific reference to the FTC testing method, is not sufficient to put consumers on notice that the rating given is not an official FTC rating. *fn31" Furthermore, the Barclay cigarette package makes no mention of any rating system at all, but only states "1 mg. tar." Consumers will naturally assume, incorrectly, that this represents an official rating. *fn32" Barclay advertising is therefore deceptive in that it leads consumers to believe that Barclay is rated 1 mg. by the FTC.

 This situation might be cured by requiring Barclay to carry a legend which specifically states that Barclay does not have an FTC rating. The FTC urges, however, that the "1 mg." claim must be eliminated altogether. Since to a consumer a milligram tar rating has no significance except in relation to other such ratings, a rating number standing alone or based on a different rating scale gives no useful information about relative health risk. *fn33" It can only be understood in reference to ratings found in other cigarette advertisements, which are FTC ratings. Thus even if consumers were informed that Barclay's rating is not government approved and that, indeed, the government has withdrawn Barclay's rating, they would still take Barclay's "1 mg." designation to be a claim that Barclay delivers to the smoker the same amount of tar as those cigarettes rated 1 mg. by the FTC. The accuracy of such a claim is the principal dispute underlying the entire Barclay controversy.

 The evidence presented by the FTC demonstrates that Barclay delivers to the smoker's mouth significantly more tar than other cigarettes with a 1 mg. FTC rating. The so-called "ventilation" studies submitted to the FTC by R. J. Reynolds and Philip Morris and reviewed by the Commission's independent experts show that, unlike with other cigarettes, dilution of Barclay smoke with outside air through the cigarette's ventilation mechanism is greatly reduced in human smoking as compared to machine smoking. *fn34" The principal theory relied upon to explain this phenomenon is that smokers unconsciously and inevitably "drape" their lip tissue over the exit openings in the Barclay longitudinal vents, thus cutting off or reducing the flow of outside air into the mouth. *fn35" As a result, the "puff" which the smoker draws into his mouth contains a higher percentage of air drawn through the tar-containing tobacco rod, thus increasing the net amount of tar in the puff of smoke which enters the smoker's mouth. Other cigarettes, with their more conventional construction, are not susceptible to this phenomenon.

 B & W attacked these studies on the ground that they are merely laboratory experiments and do not provide useful information about actual smoking behavior. Scientific experiments, of course, are often unable to duplicate real world conditions precisely. The Court accepts the testimony of the Commission's experts that the ventilation studies are useful and scientifically valid. *fn36" No evidence was introduced which demonstrated that the methodology of the experiments significantly biased the results against Barclay. *fn37" B & W had most of the test data before it, including videotapes of some of the tests being conducted. There was no evidence that B & W's competitors conducted or sponsored other such tests which have not been revealed. *fn38"

 B & W presented no ventilation studies of its own. The Reynolds and Philip Morris studies were thus the only significant evidence presented to the Court going directly to the question of how much tar Barclay delivers to the human mouth -- the question which the FTC method attempts to answer. *fn39" The Court concludes that the ventilation studies provide strong evidence that Barclay is improperly rated 1 mg. by the FTC testing machine.

 B & W points to cotinine studies by Dr. Gori, however, as proof that Barclay delivers into the smoker's body no more tar than other 1 mg. rated cigarettes. The principal Gori study addressing the issue of Barclay's proper rating was the "288-person" study which tested Barclay against other cigarettes rated 1 mg. by the FTC. *fn40" This study indicated that smokers who smoked Barclay received approximately 1-1/2 to 2 times as much nicotine into their systems as smokers of the other cigarettes tested. *fn41" Dr. Gori testified that if one applied tar/nicotine ratios obtained for each different cigarette from a separate study to the nicotine figures obtained in his study, one could conclude that Barclay should also be rated approximately 1 mg., as each of the cigarettes tested gave approximately the same amount of tar. *fn42"

 Two factors prevent the Court from giving much weight to this conclusion. The first is the ongoing controversy over the application of tar/nicotine ratios. *fn43" The second factor, also related to the uncertainty over tar/nicotine ratios, is the possibility of an alternative explanation for the data Dr. Gori obtained. Barclay was tested only against cigarettes rated 1 mg. tar by the FTC and recorded a higher nicotine content than each of the other cigarettes tested, a result which B & W argues is explained by Barclay's higher ratio of nicotine to tar. It is possible, however, that this difference in nicotine delivery resulted not simply from a difference in tar/nicotine ratios but also, in part, because Barclay does in fact have a higher tar and nicotine content than the other cigarettes tested. *fn44" A smaller cotinine study commissioned by Reynolds, in which Barclay was compared with a 5 mg. cigarette as well as with a 1 mg. cigarette, suggests that this latter explanation may be correct. *fn45" If so, the Gori 288-person data would not be inconsistent with the ventilation studies presented by the Commission.

 The Court concludes that the preponderance of the evidence demonstrates that Barclay is in fact improperly rated 1 mg. by the FTC method and that any claim that Barclay is a 1 mg. cigarette is deceptive. *fn46" The ventilation studies presented by the FTC are the only credible evidence which addressed the question of how much tar a smoker receives in his mouth, the issue the FTC testing method attempts to determine. These studies provide strong evidence that Barclay is improperly rated as 1 mg. because its vent system is "compromised" under actual smoking conditions, unlike the vent systems of other low-tar cigarettes. The evidence presented by B & W failed to refute the ventilation studies and did not provide significant contrary evidence.

 C. Barclay's "99% Tar Free" Claim.

 Unlike the dispute concerning the 1 mg. claim, no scientific controversy exists over B & W's claim that Barclay is "99% tar free." *fn47" The lone issue is how consumers perceive that assertion. The FTC argues that a substantial number of consumers interpret 99% tar free to mean "virtually free of tar," a claim it considers false. *fn48" B & W contends that the consumer surveys upon which the FTC relies do not support their contention. *fn49"

 The evidence clearly shows that consumers do not perceive the "99% tar free" claim as an assertion that Barclay has a particular milligram rating, even when accompanied by a specific milligram rating as in the current advertisement. Indeed, consumers have difficulty even relating the claim to any milligram number. *fn50" Furthermore, there is little support for the FTC's view that consumers understand the claim to assert that Barclay is among the lowest-rated cigarettes. Even the FTC's own consumer survey suggests that the overwhelming majority of consumers perceive "99% tar free" as a general low tar claim. *fn51" Other evidence before the Court reinforces this interpretation. *fn52" The Court concludes, therefore, that the FTC has failed to show that Barclay's "99% tar free" claim, unaccompanied by the "1 mg. tar" claim, is deceptive.

 D. Conclusion.

 The Court finds that B & W's current advertising claim that Barclay is "1 mg. tar" is deceptive within the meaning of 15 U.S.C. § 45(a). The FTC has failed to show, however, that the "99% tar free" claim, unaccompanied by the "1 mg. tar" claim, is also deceptive. Accordingly, the FTC's prayer for relief is granted in part and denied in part. B & W must be permanently enjoined from promoting its Barclay cigarettes by advertising, package layout or other means with any claim of a specific milligram tar content rating, unless such rating is approved by the FTC or derived using a test methodology approved by the FTC for measuring Barclay. *fn53" Counsel shall immediately confer and present an agreed form of order consistent with the foregoing on or before October 21, 1983. Failing agreement, separate forms of order proposed by each party shall be presented by that date.

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