Brill's Content: Big Tobacco's Turnaround

Posted June 9

BIG TOBACCO'S TURNAROUND

How Philip Morris may save billions by pulling ads from 40 magazines.

Philip Morris's announcement this week that it would yank its ads from at least 40 magazines with a large youth readership (including heavyweights like Cosmopolitan, People, and Newsweek) was an unexpected turnaround. For the last two years, the nation's largest cigarette maker has claimed to be following the "letter and the spirit" of the 1998 tobacco settlement agreement, which curtailed marketing practices to youth. In fact, according to a document obtained by The Associated Press, just last month Philip Morris president Michael Szymanczyk denied in a deposition that his company's ads targeted youth. Why the sudden change of heart?

It seems that money -- or the chance of losing it -- talks. Unless Philip Morris and other tobacco companies can prove they have significantly overhauled their marketing practices, a jury could decide to level billions of dollars in punitive damages against them in a historic Florida lawsuit, the first class-action suit won by smokers. Just days before arguments on damages began, both the Massachusetts Department of Public Health (MDPH) and the American Legacy Foundation released studies showing that tobacco companies had actually significantly increased advertising in magazines with hefty teen readership since 1998 (by nearly $30 million, according to the MDPH).

To add to the bad tidings, news also broke on May 17 that attorneys general were investigating the increase, and were even considering legal action if the tobacco companies didn't shape up. Philip Morris immediately fired off a press release reiterating its commitment to following the agreement and claiming it knew nothing about the investigation. Crowning the opportunities for negative publicity, however, is the coming bi-annual meeting between the tobacco companies and the attorneys general, where this very issue is going to be on the table. The meeting happens to be set for next week.

Meanwhile, the prosecution in the Florida case wrapped up its arguments earlier this week, and included testimony about the new studies. The defense -- including Philip Morris president Michael Szymanczyk -- was about to take the stand when the company made its big announcement about withdrawing ads. "It's kind of like some of [Bill] Gates benevolence," jokes Drew Edmondson, the Oklahoma Attorney General, who chairs the enforcement sub-committee for the 1998 settlement. Edward Sweda, the senior attorney for the Tobacco Control Resource Center at Northeastern University's School of Law, is more pointed. "Beyond any doubt whatsoever, the reason Philip Morris is doing this is the imminent prospect of a massive punitive damage award," he says. "[I]f the [Florida] case did not exist, Philip Morris would not have made this announcement."

Health and advocacy organizations had been aggressively pushing for such a move for years. Even before the 1998 agreement, the Food and Drug Administration proposed rules in 1995 that would limit advertising in magazines with either 15 percent or over two million readers under 18 years old -- the very guidelines that Philip Morris adopted this week. (The Supreme Court ruled this March that the FDA has no authority to regulate tobacco.) In February the Campaign for Tobacco-Free Kids released data from the Simmons Market Research Bureau, an independent research firm that tracks magazine readership, showing the Philip Morris continues to target young readers. The tobacco giant denied these allegations, saying that the firm used unreliable measurements. Philip Morris insists that its recent bout of altruism has nothing to do with the threat of huge damages or with the upcoming meeting with the attorneys general. "It has been the way we do business to constantly evaluate our policies, and this action is just the latest in a long line of ongoing discussions..." says company spokesman Brendan McCormick. He cites the company's decision to ban back-cover ads this April and the fact that it pulled its ads from Vibe and Spin magazines earlier this year after determining that they are too youth-oriented.

The company, however, has been left itself some wiggle room. The new ad policy won't take effect September, and Philip Morris is pushing for what it says is a more accurate way to measure the number of readers under 18, which could result in the company pulling ads from fewer magazines. The number two tobacco firm, RJ Reynolds, has already announced that it won't follow Philip Morris in banning ads, and according to news reports, both Lorillard and Brown and Williamson are holding off a decision until the tobacco companies and attorneys general agree on a new way to measure demographics.

"My sense is that they're going to use the fact that the other three companies aren't on board as a way to compromise," says Dr. Greg Connelly, the director of the Massachusetts Tobacco Control Program, which produced the Department of Health study showing an increase in ads to youths. "But Philip Morris is smart enough to realize that unless they do something, they'll have trouble with this jury."