Tobacco pact could split ad community

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The agreement between the tobacco industry and state attorneys general is threatening to split the ad community's united opposition to new law that would restrict advertising as newly released details of the settlement pose new questions about the extent of the curbs it envisions.

The 68-page text of the agreement details a host of new restrictions that extend beyond earlier disclosures of bans on outdoor ads; on using people or characters in all ads; and the acceptance of Food & Drug Administration rules on print ads, continuity programs, giveaways and sponsorships.

ONE-FIFTH OF AD FOR WARNINGS

For example, under the agreement the print ads the industry will be allowed to run--in adult-targeted publications--would have to devote 20% of the space to health warnings. Tobacco signage in most stores would be limited to just two b&w signs from each marketer based on market share; marketers with more than a 25% share would get three. However, those signs would have to be placed away from candy products.

The Federal Trade Commission, which now shares with the Bureau of Alcohol, Tobacco & Firearms some oversight of tobacco, would find that the FDA also has gained some advertising-evaluation duties in the agreement.

Most advertising and media groups are concerned that if these kinds of restrictions are written into law, it would fuel pressure for similar restrictions on other industries.

"It is always true that once Congress sets up some kind of formula, someone will say, `Let's do it across the board,' " said Wally Snyder, president of the American Advertising Federation. "Our answer would be [that] this was done by tobacco voluntarily, and it should not have a binding effect on others."

Mr. Snyder last week questioned the wisdom of the ad industry waging a fight against legislative language implementing the agreement, even language the industry believes is unconstitutional.

"I am not convinced that any actions taken by Congress would set a precedent," he said. "It seems to me it is a voluntary settlement and should have no precedent-setting effect."

DRAWING A DISTINCTION

Mr. Snyder said he wasn't proposing the industry abandon its so-far-successful challenge of FDA tobacco-advertising regulations, now being appealed by the government after a U.S. District Court judge ruled the FDA had no Tobacco

ad limits authority to restrict advertising. Instead, he drew a distinction between rules imposed by government and any new laws to implement a voluntary industry agreement to limit its advertising and marketing.

Other ad groups are in sharp disagreement, especially following the news that two influential U.S. senators questioned whether alcoholic beverages should not face similar ad restrictions.

"Are you going to work to solve the alcohol problems? It kills more people than tobacco," Sen. Strom Thurmond (R., S.C.) asked Mississippi Attorney General Michael Moore at a hearing last week.

TOBACCO'S `EVIL TWIN'

Sen. Robert Byrd (D., W.Va.), in unsuccessfully seeking to limit the deductibility of advertising for alcohol products, told the Senate: "While I applaud the step that is being taken [on tobacco], I am concerned that its evil twin is being ignored."

O. Burtch Drake, president-CEO of the American Association of Advertising Agencies, said he remains unsure how much of the agreement will be written into law.

Mr. Moore said he hopes to write the ad restrictions into laws but also into contracts and consent decrees.

"The ultimate concern is the `slippery slope' and that nothing that comes out of this establishes a precedent for other products," Mr. Drake said.

Dan Jaffe, exec VP of the Association of National Advertisers, said that while his main concern is what will be written into law, he also has questions about whether companies legally can bargain away their First Amendment rights, and whether government negotiations can really be considered voluntary.

As Congress began to examine the pact, other important deal-related developments materialized.

SLOTTING FEES TO DISAPPEAR?

Mr. Moore said the $1.8 billion that tobacco companies pay annually in retail slotting fees would probably disappear under the deal.

"I can't imagine why anyone would pay if everything is behind the counter," he said.

The National Association of Convenience Stores, whose members would be affected, also warned that by allowing cigarette signage and advertising in adult venues but not in other stores, the deal could have the unintended consequence of switching tobacco sales to tobacco-only stores. That would cost his group's members 25% of their non-gasoline revenues.

Two decisions by the U.S. Supreme Court last week also may affect the chances for congressional approval of the deal.

In one, the high court put new limits on the kind of class-action suits the state attorneys generals were using that brought the tobacco industry to the bargaining table. And, in overturning the Communications Decency Act's restrictions on "indecent" content on the Web, the court rejected government-imposed restrictions on free speech to benefit children that also cuts off adults' rights to information unless narrowly tailored.

The agreement's text also provided two other significant points:

  • It revealed that $75 million annually would be set aside for up to 10 years to compensate events and sports teams losing tobacco sponsorships.

  • It limits the rights of industry groups to represent tobacco companies--even on non-tobacco issues such as advertising. A tobacco company would have to sign off on each issue undertaken by a group in its behalf.1

    Copyright June 1997, Crain Communications Inc.

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