Press background: summary of the US settlement

Saturday 21 June 1997
ASH/ Press releases/

ASH – Action on Smoking and Health

US Tobacco Litigation Settlement: Overview of the Deal


The full text of the agreement runs to 70 pages Because the deal requires legislation, the President Clinton and the Congress will have to ratify it. Clinton has set up a task force to examine the deal headed by Donna Shalala, Clinton’s secretary of health and human services, and Bruce Reed, domestic policy adviser. They are expected to report within 30 days.

Tobacco Industry Liability and Other Legal Issues


The tobacco industry has lost only one court challenge in its history and only Liggett has actually paid any money in damages. Nonetheless, the tobacco industry faces unprecedented court challenges today. Under the agreement:

  • The rights of individuals to sue for compensatory damages will not be abridged. There will be no limits on individual judgements.
  • The tobacco industry would pay approximately $368.5 billion over 25 years, including approximately $60 billion in lieu of punitive damages for past conduct.
  • Funding includes approximately $1.5 billion for tobacco control purposes per year and a $25 billion trust fund, to be created over 8 years, to fund additional public health-related matters.
  • The tobacco industry would be fully liable for punitive damages for any future behaviour.
  • Tobacco companies would be required to reserve $4 billion per year to pay for compensatory damages arising from individual lawsuits.
  • The total amount the industry would be required to pay through litigation in any one year would be capped at $5 billion per year. It is highly unlikely that this fund would be exhausted in any one year. However, if this were to occur, payments to individuals winning cases against the industry would be extended over more than one year. This would not result in restricting the overall award an individual could receive, but it could lead to a delay in the total payment. Any money from the annual fund not won through litigation would then be transferred to national public health, anti-tobacco programs and would not revert to the tobacco industry.
  • The Attorneys Generals’ lawsuits would be legislatively settled in return for these public health concessions, with the payment of a substantial sum of money to the states to reimburse them for the tobacco-related costs they have incurred.
  • Funding provided to the states would be sufficient to extend health insurance to uninsured children consistent with proposals recently debated in Congress by Senators Hatch and Kennedy.
  • Class action lawsuits also will be legislatively settled in return for these public health concessions, and future class action lawsuits based on past conduct of the tobacco companies will not be allowed.
  • The tobacco industry will drop all pending lawsuits against the FDA, EPA and FTC.
  • The Tobacco Institute and the Council for Tobacco Research will be disbanded.


General Authority of the FDA


FDA’s authority over tobacco products as “drugs” and “devices” has been upheld by the trial court in North Carolina and is now on appeal. To date, the FDA has only sought to exercise its authority by establishing youth access and marketing rules, but it has far broader authority.

Under the agreement:

  • The judicial challenge by the tobacco industry would be dropped and FDA’s authority explicitly recognised. Therefore, tobacco will continue to be categorised as a “drug” and a “device” under the Food, Drug and Cosmetic Act and the agency’s authority to regulate the products as “restricted medical devices” will be recognised.
  • FDA’s authority to regulate nicotine, carcinogens and all other tobacco constituents will be recognised. The agency will create a Science Advisory Board immediately to begin to study and advise how best to regulate nicotine and the other components of tobacco products.
  • FDA will be authorised to remove harmful ingredients and to reduce nicotine levels immediately if it finds that to do so will reduce harm, is technologically feasible, and will not lead to a significant black market in unregulated tobacco products.
  • Administrative procedures consistent with the Food, Drug and Cosmetic Act would apply. After 12 years, the Agency will be authorised to eliminate nicotine entirely, but to do so in a manner that gives Congress time to review it, if it so desires.
  • For the first time, all non-tobacco ingredients in tobacco products would be required to meet safety standards established by the FDA, with the burden placed on the industry to demonstrate that they are not harmful when used as intended. The safety standard will apply to new ingredients immediately, and to existing ingredients after a five year grace period.
  • Tobacco companies would be required to provide the FDA with complete information regarding tobacco additives, and would be required to disclose all additives publicly in a manner analogous to the disclosure of food ingredients. However, companies would be protected from disclosure of confidential and proprietary information to the public during the five year grace period.
  • Provisions are included to require tobacco companies to use the best available technology to produce and market “reduced risk” products.
  • Implicit health claims for tobacco products, including “low tar” and “low nicotine” products, will be strictly regulated by the FDA. Words such as “light” and that are part of currently established brand names would be allowed to continue, but with the addition of statements to prevent them from being misinterpreted as health claims.
  • FDA would exercise its normal authority to inspect, enter manufacturing plants, demand certain records and record keeping, and would have its normal enforcement authority.
  • The tobacco industry would be required to provide FDA with all current and future research and all non-public information it receives that relates to health, toxicity, addiction and drug dependence.
  • The FDA would be required to create a Scientific Advisory Committee to study issues relating to the regulation of nicotine and other health and safety issues.


Marketing and Advertising


The industry has agreed to the full substance of the August 28, 1996 FDA youth advertising and marketing provisions (which were struck down in Federal District court but which have been appealed):

The FDA rule before the court ruling:

  • Text-only ads in youth oriented magazines and newspapers;
  • Ban brand name event sponsorship;
  • Limit billboards near schools and limit billboards to text only with no colour;
  • Ban use of non-tobacco brand names on tobacco products;
  • Ban advertising on non-tobacco products, like clothing and gear;
  • Ban offers of non-tobacco items or gifts based on proof of purchase; and
  • Require ads to carry FDA-mandated statement of intended use.


In addition to the FDA provisions above, the industry has agreed to:

  • The elimination of all billboards and outdoor signs, including all signs in stadia and arenas and signs that face outwards in enclosed areas, such as stores;
  • The elimination of all human images and cartoon characters from all advertising and from all cigarette packages;
  • Additional restrictions on point of purchase advertising regarding the placement on point of purchase ads to limit their size and number, remove them from the line of sight of children and remove them from close proximity to candy and other goods likely to attract children;
  • The elimination of Internet advertising and the agreement on the use of whatever technology is available to make tobacco advertisements that are placed on the Internet from foreign countries inaccessible in the US;
  • The prohibition on product placement in movies and on TV;
  • The prohibition on any payments or fees to celebrities to smoke in movies or on TV or to any other person or entity to glamorise tobacco use in movies or on TV, and the prohibition of any “in-kind” actions to accomplish any of these same purposes;
  • Without limiting the FDA’s normal authority, limits on the use of words, such as “light”, that currently appear in some product names and that could be misinterpreted as health claims;
  • Protection against First Amendment challenge: an agreement to consent to the placement of all of the advertising restrictions contained in the August 28, 1996 FDA rule plus the above noted restrictions in consent decrees to insulate the restrictions from First Amendment challenges by parties outside the tobacco industry;
  • Dual enforcement authority with both the FDA and state attorneys general, each being able to enforce these provisions. In addition, the FDA will have the power to contract with other state and local authorities to assist it to enforce the rules; and
  • Funding from the tobacco industry to pay the cost of enforcement for both FDA and the state authorities with enforcement power.


Youth Access


The full substance of the August 28, 1996 FDA youth access provisions have been agreed upon.

The existing FDA rule:

    • Bans sales to kids under 18; Requires proof of age; Limits, but does not ban vending machines; Limits self-service displays, but permits tobacco to be displayed on the counter;
  • Establishes the minimum pack size at 20 and prohibits the sale of single cigarettes;
  • Bans free sampling; and
  • Uses FDA’s normal enforcement tools with enforcement funding subject to annual Congressional appropriations.


In addition the tobacco industry has agreed to:

  • A ban on all vending machines;
  • The placement of tobacco products behind the counter and out of reach of consumers;
  • Further restrictions of mail order sales, subject to conditions that demonstrate that an effective mechanism exists to restrict sales only to adults;
  • A nation-wide licensing system for all sellers of tobacco products with graduated penalties and license suspensions for violations of
  • the youth access and marketing provisions to be established. The licensing system shall apply to all sellers of nicotine – containing tobacco products, including manufacturers, distributors, wholesalers, retailers and importers;
  • Full funding from money paid by the tobacco industry for enforcement by FDA and state and local authorities;
  • States and local governments would not be pre-empted from enacting stronger laws;
  • Dual enforcement authority with both the FDA and state attorneys general, each being able to enforce these provisions. In addition, the FDA will have the power to contract with other state and local authorities to assist it to enforce the rules; and
  • Enforcement to require unannounced, random stings.


Public Education/Counter Advertising


The tentative agreement with the tobacco industry includes:

Funds for the largest, most-sustained nation-wide public education/counter advertising program ever done for tobacco or for any other public health hazard. The campaign would be similar to those campaigns in Massachusetts and California. The program would operate independent of the tobacco industry, which would have no say over the content or placement of the program. Funding for the program would be guaranteed, and to the extent possible, the program would be insulated from political pressure.

Health Warnings


There would be a dramatic revision of the warning label system. The current system would be replaced with the far more specific, more detailed eight Canadian warnings.

They include warnings, such as:

¨”WARNING: Cigarettes are Addictive”;

¨”WARNING: Cigarettes Cause Cancer”;

¨”WARNING: Smoking Can Kill You”; and

¨”WARNING: Tobacco Smoke Causes Fatal Lung Disease In Non- Smokers”

  • The warnings on packages would be moved to the front of the cigarette package and the most prominent side of the smokeless tobacco product package.
  • The warnings would appear in the Canadian format (the top of the front with white lettering on a black background).
  • The warning would occupy at least 25 percent of the top of the front of the package.
  • All warnings would appear simultaneously on tobacco packages and would be rotated quarterly on ads by brand.


Full Disclosure


Under the agreement: Each company will make specific changes in its position regarding the harm caused by its products. At least as many, and very likely many more documents will be made public through the settlement process than would have been revealed through the litigation process. Also, the industry has agreed to make public its past, present and future health-related research.


Youth Smoking Targets


The industry would be subject to penalties if youth tobacco use fails to drop by 30percent in 5 years, 50 percent in 7 years and 60 percent in 10 years. The penalty would be based on the value of a teen tobacco user to the industry over the lifetime of the individual. It would be worth approximately $80 million per percentage point each and every year in which the target is not met, up to a maximum of $2 billion per year. The baseline for measurement of youth smoking will be an average of youth prevalence rates for the past ten years. This will require a much more substantial reduction in youth smoking than would be required if only the most recent data were used to establish the baseline.


Funding for State and Local Tobacco Control Activity


Active state and local tobacco control efforts have been proven successful in reducing tobacco use. Current programs are under funded and funding for these programs is in jeopardy.

Under the agreement: State and local tobacco control activity modelled after the successful ASSIST program would be funded out of tobacco industry funds, permitting the ASSIST program to be funded in every state from these funds.


Tobacco Cessation


Under the agreement: Out of funds to be provided by the industry, funding would be provided for tobacco cessation programs and devices for those who want to quit and for whom cost is an issue. These funds would be available to individuals nation-wide.


Protection from Environmental Tobacco Smoke (passive smoking)


Under the agreement:

  • Protection from environmental tobacco smoke would come from the enactment of the text of HR 3434 (the bill originally introduced by Congressman Waxman) that restricts tobacco use in public places and most workplaces to locations that are separately ventilated to the outside and through which non-smokers do not pass. To avoid heavy opposition from the hospitality industry, restaurants (excluding fast food restaurants), casinos, bingo parlours, and bars would be exempted.
  • The federal law would not pre-empt state and local governments from retaining or enacting more restrictive requirements governing ETS.


Monitoring Corporate Behaviour


The tobacco industry has the most irresponsible corporate record of any industry in the United States. Currently, no mechanism exists to ensure that the industry complies with the letter or the spirit of existing law.

Under the agreement:

  • Manufacturers would be required to develop detailed compliance plans describing how they intend to comply with the law and monitor their own employees behaviour.
  • Corporations would be required to set up incentive plans to encourage compliance and internal compliance checks to catch and report violations.
  • Corporations would be required to establish a corporate code of behaviour with outside monitors, a system of auditing, and reports to shareholders and the FDA.

June 1997


102 Clifton Street

London EC2A 4HW

Based on a document prepared by the US Group “Tobacco Free Kids”