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State attorneys general, in formal talks with tobacco marketers that could resume as soon as next week, are demanding an end to merchandise giveaways and elimination of all outdoor signs as the price of any new accord.

The Federal Trade Commission this year reported tobacco companies in 1996 spent $544 million to give away merchandise not attached to packages; another $1.3 billion was spent on merchandise or coupons attached to cigarette packs. Giveaways of T-shirts and caps have been the main reward in marketing continuity programs like R.J. Reynolds Tobacco Co.'s "Winston Weekends" and catalogs for Philip Morris USA's Marlboro and RJR's Camel brands.

Minnesota's recent settlement with tobacco marketers required them to halt giving away merchandise bearing tobacco brand names in that state, but the settlement allowed tobacco marketers to continue offering merchandise without tobacco brand names.


Similarly, Minnesota's settlement -- and earlier ones in Florida, Mississippi and Texas -- called for dismantling outdoor boards, but signs and banners on the outside of gas stations, convenience stores and groceries weren't included in that definition.

Now the attorneys general are trying to go further, according to Gary Black, an analyst with Sanford C. Bernstein & Co.

They want to stop giveaways of all non-tobacco merchandise and to remove virtually all exterior signage with cigarette brand names, as well as interior signs visible from the street. The concessions would be in addition to industry payments to the state and an industry agreement to fund anti-smoking ad campaigns.

Last week the Promotion Marketing Association decried the demands.

"We think that the giveaway of unbranded items is clearly legal," said Ron Goldbrenner, PMA general counsel. "It is unfair for legal products to become pawns in a controversy without evidence that they are harmful."

In the $368.5 billion deal reached on the national level with state attorneys general, tobacco marketers also had offered limits on magazine ads and creative. Limits on creative are not part of the current state discussions, Mr. Black said.

The national deal, however, anticipated Congress trading some limits on tobacco marketers' liability payments for voluntary marketing curbs.


Tobacco marketers have been negotiating with nine attorneys general in advance of the mid-September start of the state of Washington's case seeking reimbursement for the cost of treating sick smokers. But the negotiations have so far been stymied: While attorneys general are requesting marketing concessions, tobacco marketers are demanding assurance that "renegade" tobacco companies that aren't part of the agreement wouldn't be able to use their freedom to offer premiums and outdoor ads to raise market share.

Mr. Black and a second industry analyst said tobacco marketers also feel the Washington case is weak and might be the best one to take to trial, considering recent decisions in other cases, and initial rulings in the Washington case.

"The industry is in a bargaining position where it hasn't been before," he said.

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