Reynolds Ads Targeted Youth, Court Agrees
A California appeals court Wednesday affirmed a ruling that R.J. Reynolds Tobacco Co. violated youth advertising restrictions, but the judges ordered a lower court to reconsider the $20-million penalty imposed in the case.
The decision upheld a finding by a San Diego Superior Court judge that Reynolds had violated terms of the national tobacco settlement reached with state attorneys general in 1998 by failing to reduce the exposure of teens to its cigarette ads.
But the 55-page order by the 4th District Court of Appeal rejected Judge Ronald S. Prager’s decision to impose sanctions of $20 million. The panel did not say that the figure was too high, but rather that it was incorrectly determined -- thus leaving open the potential for a sizable fine.
A spokesman for California Atty. Gen. Bill Lockyer, who filed the case against Reynolds in 2001, called the ruling “a significant victory.”
“We’re pleased the court recognized the company failed to honor the agreement it signed to stop marketing to kids,” Lockyer spokesman Tom Dresslar said.
Reynolds spokeswoman Jan Smith declined to comment, saying company lawyers were studying the opinion.
Prager’s ruling in June 2002 was the first penalty imposed by a court for a violation of the settlement in which cigarette makers agreed to pay the states $246 billion over 25 years in exchange for the dismissal of massive lawsuits. The agreement also barred tobacco firms from taking “any action, directly or indirectly, to target youth” in the marketing of their brands.
The lawsuit claimed that Reynolds’ major competitors had taken significant steps to reduce teens’ exposure to their ads, but Reynolds had continued to run many ads in magazines with large youth readership, such as Rolling Stone, Sports Illustrated, Spin and Vibe.
The company contended that it was targeting those age 21 and older and couldn’t stop underage readers from being exposed to its ads.
But Prager ruled -- and the appeals court agreed -- that this made the company no less culpable.
“If Reynolds intended its print advertising to target young adults but knew to a substantial certainty it would be exposed to youth to the same extent as young adults, then as a matter of law,” Reynolds targeted “youth as well as young adults,” the appellate court said.
However, the court said Prager erred in setting Reynolds’ fine at $20 million -- a sum equal to 10% of its nationwide magazine advertising budget in 1999-2001, when Prager found the violations took place. Instead, the court ruled, the penalty should be based on activity within California.
“We definitely plan to go back to the trial court and make a case for a substantial civil penalty,” Dresslar said. “It could be $20 million, it could be more.”
The case is one of four that Lockyer has filed in recent years that accuse Reynolds of improper marketing practices.
One case ended in an agreement by the company to verify the ages of customers getting cigarettes through the mail, and another resulted in an order to reduce advertising at auto racing events. Reynolds also was fined $15 million for violating a state law that bars cigarette giveaways at places accessible to teens. That case is under appeal.
