R.J. Reynolds Fined $20 Million For Targeting Teens

Judge Rules Against Tobacco Giant in Magazine Ad Case

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WASHINGTON (AdAge.com) -- A California judge has fined R.J. Reynolds Tobacco Co. $20 million for targeting teens in magazine ad campaigns, a decision that holds the potential to force tobacco companies to pull more of their ads from consumer titles.

The decision, by San Diego Superior Court Judge Ronald Prager, stems from a case arising out of the 1998 agreement settling state tobacco suits. Known as the Masters Settlement Agreement, which tobacco companies reached with 46 states, it banned cigarette advertising that targeted those under the smoking age. The settlement prohibited the use of big outdoor billboards and cartoon characters like Joe Camel, but it didn't specifically say how magazine ads were barred, leading to a subsequent court battle.

Targeting teens
California's attorney general argued that RJR was violating the agreement by indirectly targeting teens in its tobacco advertising campaign.

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Judge Prager agreed, writing that "RJR made absolutely no changes to its advertising campaigns, failed to include the goal of reducing youth exposure to tobacco advertising it its marketing plans and failed to take any actions to track whether or not it was meeting its professed goal of reducing youth smoking."

In his ruling, Judge Prager took RJR to task for failing to use media tools to measure the size of a magazine's adult and youth readership. He said the country's No. 2 tobacco company, which markets brands including Winston, Camel and Doral, failed to develop and implement media plans that reduced exposing teens to cigarette advertising in magazines.

"In the current business environment, capable managers, such as those at JRJ, routinely set goals and measure whether the goals set are achieved. Yet, unlike other media-related goals, RJR does not incorporate the goal of avoiding youth in its advertising into its media plan," Judge Prager wrote.

The decision quickly drew praise from tobacco critics.

'Gives teeth'
"It gives teeth to the Master Settlement Agreement," said Matthew Myers, president of the Campaign for Tobacco-Free Kids. "It means the agreement can apply to specific advertising."

Mr. Myers said that the decision could also open up RJR to damages under separate class action suits filed in the state.

"Today's decision has nothing to do with kids, and everything to do with the attorney general's desire

The Percentages Issue

The year after the MSA was signed, the California attorney general initiated a multi-state effort to persuade tobacco companies to stop advertising in magazines that had more than 15% youth readership.
> In 2000, RJR's rivals Philip Morris USA and Brown & Williamson Tobacco Corp. adopted that policy, and continue it today.
> But RJR did not follow suit, instead using the less stringent policy of not placing magazine ads in any magazines exceeding more than 33.3% youth readership.
> On March 19, 2001, the California attorney general filed the suit (decided June 6) against RJR, charging that it violated the MSA by indirectly targeting youth in magazines. That same day, RJR revised its policy by limiting its advertising to those titles that had less than 25% youth readership, or fewer than 2 million underage readers in cases where audience measurement data is not available. RJR still follows that same policy.

to censor, if not ban, legal marketing to adult smokers," Tommy Payne, RJR's executive vice president of external relations, said in a statement.

Mr. Payne also said California did not produce evidence showing RJR targets kids. "Quite the contrary, the state conceded in sworn statements that Reynolds Tobacco has no specific intent to target cigarette advertising to youth," he said in the statement.

Less relevant
But magazine advertising is becoming less relevant for tobacco companies, which have been cutting back print spending for years. In 1981, the cigarette category was the medium's No. 1 revenue generator; today it's No. 21, as tobacco marketers focus shifts to retail incentives and promotions.

Industry leader Philip Morris, for one, said earlier this year it is reducing magazine advertising further in 2002. The company said it decreased magazine spending 50% from 1999 to 2001, primarily due to its voluntary pull out from more than 40 titles with high youth readership and off the back covers of all publications.

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