COMPROMISE ON TOBACCO ADS DIES IN SENATE

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A carefully crafted attempt to put tobacco ad curbs into law in a way that balanced tobacco critics' desires against lawyers' worries about the First Amendment spectacularly blew apart on the Senate floor late last week.

The decision to remove a cap on liability payments from the legislation on the floor effectively killed "voluntary" ad curbs tied to the bill, and appeared to set the stage for a major debate about ad restrictions and First Amendment rights next week.

The action meant that ad restrictions -- ranging from additional, precedent-setting limits on deductibility of tobacco advertising to more curbs on the use of outdoor -- now may be written directly into the Senate bill.

UNRAVELING

"The bill is unraveling," said John Fithian, legal counsel for the Freedom to Advertise Coalition. "We are going to fight like crazy to keep additional ad restrictions away."

The voluntary-curb "protocol" was part of a two-step approach to advertising taken by the bill proposed by the Commerce Committee chairman, Sen. John McCain (R., Ariz.).

It first gave the Food & Drug Administration authority to issue ad restrictions -- which a U.S. District Court judge in Greensboro, N.C., earlier ruled the agency didn't have -- and avoided constitutional questions by not writing any of the FDA's ad curbs directly into law.

A TRADE-OFF

Then, in an attempt to mollify tobacco critics who demanded even greater restrictions than the FDA's, and who had seen the industry offer state attorneys general stronger curbs in return for liability protection, the McCain bill offered a trade: Tobacco marketers could get a cap on annual liability payments by accepting other ad and marketing restrictions.

Those included 1) No use of people, animals or caricatures in either ads or on packages; 2) No tobacco ads on the Internet; 3) No outdoor ads; 4) No tobacco ads on magazine back covers; and 5) A ban on licensing of products with tobacco brand names.

There also was an agreement in that protocol not to challenge "look back" penalties that require payments from tobacco marketers whose brands don't see sufficient drops in underage use.

Although tobacco marketers had rejected the trade, the inclusion of those additional restrictions in the bill had seemed to satisfy some Senate tobacco critics. But with the protocol restrictions effectively removed because of the vote against the liability cap, Sen. McCain, other senators and ad groups monitoring the situation all expect a move to write restrictions into the law.

The FDA rules not cited in the law limited ads in magazines with under 18 readership; limited tobacco sponsorships; and barred outdoor ads within 1,000 feet of a school or playground. The 4th U.S. Circuit Court of Appeals in Charleston, W.Va., is set to hear that case's appeal on June 9.

REMOVING DEDUCTIBILITY

Last week, Sen. Jack Reed (D., R.I.) said he would seek to have the deductibility of tobacco advertising removed for any tobacco marketer found in violation of the FDA rules.

An aide to Sen. Olympia Snowe (R., Maine) said she had drafted an amendment to write the FDA rules into law, although Sen. Snowe had not made a decision on whether to introduce it.

"There are plenty of other amendments . . . there are plenty of other ways to attack this issue," said Sen. McCain, who added that he planned to deal with the ad restrictions when the Senate returns to the tobacco issue on June 1. "I do not want to share our strategy with our opponents, who do not share theirs with us."

The senator, in trying to forestall efforts to strike the liability cap, had distributed a letter from the White House warning that without the cap to trade, the constitutionality of writing the "voluntary" ad restrictions could be questioned.

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