Advertising executives see a federal judge's decision to deny proposed ad restrictions on tobacco products as a stunning setback for the Clinton administration's tactics.
"Of everyone in this fight, we were the only ones whose request was granted," said Hal Shoup, exec VP of the American Association of Advertising Agencies. "[This] is a good day for the advertising industry and the fight to advertise legal products."
AD RESTRICTIONS SET ASIDE
U.S. District Judge William Osteen's April 25 ruling set aside Food & Drug Administration rules that as of Aug. 28 would have limited tobacco ads to b&w text in certain magazines, banned giveaways of merchandise with tobacco logos and barred outdoor boards within 1,000 foot of a school or a playground. A year later, event sponsorships under tobacco brand names would have been banned.
The decision left intact other FDA regulations, however. Among them: a ban on self-service displays that could cost promotion companies $250 million a year and also affect $1.7 billion in tobacco slotting fees to grocers.
"It's not over. This is . . . a long fight," said Mr. Shoup.
Importantly, Judge Osteen did not buy the tobacco industry's argument that FDA either had no authority to regulate tobacco or none to regulate cigarettes as drug-delivery devices.
That decision prompted tobacco critics to portray the decision as a major victory.
"This is a historic and landmark day," said President Clinton. "With this ruling, we can regulate tobacco products and protect our children from a lifetime of addiction."
Both sides promised to appeal the decision.
AT LEAST ONE MORE STEP
The FDA rule requiring those under 26 to show picture identification when buying tobacco remains in effect, but no new regulations will take effect until the case goes at least through a first step of appeal.
The Point-of-Purchase Advertising Institute said the judge, in barring the FDA from enforcing curbs on advertising but allowing curbs on access, left intact the ban on cigarette racks that allow customers to pick up a pack.
Tobacco marketers generally pay slotting fees to get those displays as well as store signage; in 1994, according to the Federal Trade Commission, these companies paid $1.7 billion to grocers.
POPAI President Richard Blatt said neither court pleadings nor oral arguments discussed self-service displays, adding that POPAI intends to return to the judge asking for a clarification of that part of the ruling. That would come before the case is argued at the appeals level.
"Is it an access question or an advertising question?" he asked. "It was overlooked."
Much of the judge's more than 60-page ruling was in rejecting the tobacco industry's portion of the motion, which contended the FDA lacked authority to regulate tobacco and/or to regulate it as a "drug-delivery device."
On the ad industry's specific arguments -- that FDA's tobacco rules should be set aside because the agency had no legal authority to enact advertising restrictions and because the restrictions proposed were so sweeping as to be unconstitutional -- the judge went no farther than the question of legal authority.
In ruling against FDA ad authority, Judge Osteen noted that Congress specifically granted FDA authority to regulate ads for some products -- pharmaceuticals, for instance -- but not for tobacco.
John Fithian, counsel for the Freedom to Advertise Coalition, one of the ad groups behind the filing, said that in trying to assert authority to regulate tobacco advertising, the FDA had cited a section of its statute not used for regulation of other drugs or cosmetics, so the ruling would have limited effect on other products.
POSSIBLE PRESSURE ON CONGRESS
Mr. Fithian also said the ruling could put pressure on Congress to act. "There is going to be big pressure for Congress to act and avoid a long legal battle. Congress can decide all the jurisdictional issues," he said.
Dan Jaffe, exec VP of the Association of National Advertisers, said the effect would be to slow attempts to get the FDA involved in other issues, such as alcoholic beverages.
U.S. Rep. Henry Waxman (D., Calif.) also predicted the judge's decision could put pressure on Congress to give the FDA greater advertising authority as Congress gives the agency even greater power in regulating tobacco.
Sen. Tom Harkin (D., Iowa) said the decision will prompt him to push forward with a new attempt to reduce the deductibility of tobacco advertising.
"It may be constitutional that they have a right to advertise but there is no constitutional right to a tax deduction," he said.
APPELLATE ACTION EXPECTED
Other tobacco critics said they expected the advertising section of the judge's ruling to be overturned at the 4th U.S. Circuit Court of Appeals. Even without it being overturned, they added, FDA authority would give the agency the ability to expand health warning labels and perhaps even warnings in advertisements.
"We are very optimistic, very positive," said Scott Ballin, VP-legislative for the American Heart Association. "Jurisdiction was most critical. We are disappointed on the advertising but it will be overturned or . . . we can use other authority" for restricting advertising .
Bill Novelli, president of the Campaign for Tobacco Free Kids, said he was "fairly confident" the planned FDA rules would be upheld on appeal.
Tobacco companies, however, said they will also appeal and noted the judge has yet to rule on the accuracy of the FDA's evidence for its rules. The judge, the tobacco companies said, merely ruled that if the assertions are accurate the agency could regulate.
"The court noted that the industry can contest those factual assertions as the case proceeds -- and we will," said the tobacco companies in a joint statement.
The effect of Friday's ruling on the settlement talks between tobacco companies, state attorneys general and lawyers representing smokers are unclear.
There was some speculation the judge's decision to approve FDA authority to regulate tobacco might prompt cigarette marketers to be more willing to make the ad concessions they already appear to be making.
Copyright April 1997, Crain Communications Inc.