Tobacco Ads Grew After Settlement: FTC

WASHINGTON — Cigarette advertising and promotions significantly increased after states settled lawsuits with tobacco companies in 1997 and 1998, according to the Federal Trade Commission.

A 1998 agreement between 46 states and tobacco companies imposed phased-in advertising restrictions on cigarette manufacturers, including limits on the use of outdoor advertising and the distribution of free samples. But those provisions didn’t immediately keep tobacco companies from advertising their product.

The FTC posted a document on its Web site this week stating that the five largest cigarette manufacturers spent $8.2 billion on advertising and promotions in 1999, a 22% increase from 1998. The industry’s total expenditures were the most ever reported to the commission in one year, according to the report. The agency has been tracking such figures since 1967, according to FTC attorney Michael Ostheimer, who noted that some of the advertising restrictions hadn’t taken effect in 1999 or were enacted a few months into the year.

But Campaign for Tobacco-Free Kids President Matthew Myers said the report showed further marketing restrictions should be imposed on cigarette manufacturers.

Philip Morris Cos. (MO) spokesman Tom Ryan acknowledged the company had increased its promotions in retail stores. He said Philip Morris felt it had to offer new discount promotions because it increased prices to pay for the legal settlement with the states.

That settlement was the subject of debate at the U.S. Chamber of Commerce on Wednesday. The organization announced it filed Freedom of Information requests in 21 states to try to determine how law firms were chosen for tobacco litigation and whether the fees they charged were excessive. Chamber President Thomas Donohue also said he was sending a letter to congressional leaders asking them to investigate.

Forty-six states reached a $206 billion settlement with tobacco companies in 1998 to cover government health costs for treating sick smokers. Four other states settled earlier for $40 billion.

Under the agreement, the legal fees were subject to the approval of an arbitration panel and were paid in addition to the settlement amount owed to the states. Some of the highest legal fees went to lawyers in Florida, who were paid $3.4 billion, and Texas, where they earned $3.3 billion.

“This has not cost the states anything, because the money going to pay the attorneys is coming from the tobacco industry,” said Fred Baron, president of the Association of Trial Lawyers of America.

But Mr. Donohue said lower legal fees might have translated into higher state settlements. He expressed fear that the lawyers might use the money to bankroll class-action cases against other industries.

Michael Tigar, a lawyer for the Texas attorneys, defended the fees in that state as “a fair figure for the work that they did and the result they obtained.”

The chamber said it was filing requests for information in Alabama, Florida, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Montana, New Jersey, New York, Ohio, Oklahoma, South Carolina, Texas, Utah, Vermont and West Virginia.

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