Reports that Matter

United States v. Philip Morris USA Inc.: Amended Final Opinion

Internally, Defendants Expressed Concern that the Mounting Evidence

Section 81 of 129

Internally, Defendants Expressed Concern that the Mounting Evidence

on ETS Posed a Grave Threat to Their Industry 3413. On January 31, 1974, at the 1974 Tobacco Institute's annual meeting in New York,

Tobacco Institute president Horace Kornegay described the gradual acceleration of indoor air restrictions, stating that these restrictions not only impacted sales but also "could lead to the virtual elimination of cigarette smoking." TIMN0067732-7755 at 7734 (US 22047).

  1. Two years later, BAT held its Chairman's Conference in Hot Springs, Virginia. The conference gathered BAT executives from its subsidiaries around the world, including BATCo and Brown & Williamson. At this June 1976 conference, there was "unanimous agreement" that the social unacceptability issue resulting from evidence that cigarette smoke harmed nonsmokers "constitutes 'a more serious threat to the industry's future than any other aspect of the attack on smoking.'" 2025025481-5494 at 5481 (US 37220). The minutes of the Chairman's Conference recorded: "It had been estimated that the issue of passive smoking had already lost the industry cigarette sales of 1,000 million a year" in Germany alone. 680040485-0502 at 0489 (US 25437); 110069862-9862 (US 88580).

  2. BATCo understood that the passive smoking issue not only risked an increasing number of smoking restrictions, but even threatened to reduce the number of starting smokers. Without such starting smokers, the industry could not survive. Papers from Australia, the United States, Canada, and Germany presented at the 1976 Hot Springs conference emphasized that the threat of "social unacceptability" emanating from the health risks to nonsmokers "threatens to undermine smokers' confidence and to dissuade people not to take up the habit." 2025025457-5460

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  1. In preparation for the 1976 Chairman's Conference, former BATCo chairman T.J.N. Foley described the relationship between the health effects of passive smoking and the "social unacceptability" issue in these terms:

Social Unacceptability of Smoking

The subject is inseparably linked with passive smoking and presents a major danger and challenge to the industry. The danger exists in the clearly evident snowballing effect of the tactics aimed at making smoking a distasteful practice. The challenge lies in the industry's need to devise a counter-campaign.

110069860-9875 at 9863 (US 34951*).

  1. In 1978, the Roper Organization conducted a study for the industry, titled "A Study of Public Attitudes Toward Cigarette Smoking and the Tobacco Industry in 1978." Roper advised that:

What the smoker does to himself may be his business, but what the smoker does to the non-smoker is quite a different matter. . . . This we see as the most dangerous development to the viability of the tobacco industry that has yet occurred. While there is little sentiment for an out-right ban on smoking in public gathering places, there is already majority sentiment for providing separate facilities for smokers and non-smokers. As the anti-smoking forces succeed in their efforts to convince non-smokers that their health is at stake too, the pressure for segregated facilities will change from a ripple to a tide as we see it.

TITX0000963-1015 at 0968 (US 88582).

  1. In January 1980, R. J. Reynolds scientist Frank Colby wrote in a draft memorandum addressing the activities of the precursor to the Hoel Committee, "The public smoking issue is, in my judgment, the issue most threatening to the Industry, not only in the United States and Canada, but also in Western Europe and elsewhere." The threat was to sales and profits:
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The "public smoking" activities of the anti-smoking forces do not only tarnish the "image" of the Industry, but they also represent a very substantive threat to sales. A cigarette which a smoker is prevented from smoking because of restrictions to smoke in public areas, is a cigarette not smoked.

502668016-8018 at 8016, 8018 (US 75399).

  1. In a June 29, 1982 letter from Reynolds CEO Ed Horrigan to Lorillard Executive Vice President of Sales Robert Ave, Horrigan stated outright, "We all know that probably the biggest threat to our industry is the issue of passive smoking." 93443843 (US 32289).

  2. In September 1986, William Kloepfer, Senior Vice President of Tobacco Institute Public Relations, acknowledged that ETS "is our biggest public/political issue and deserves top-level navigation." TI10191292-1293 (US 62270).

  3. In 1987, a Philip Morris strategic planning memorandum on "social acceptability" stated that "the effects of ETS on others is now the most powerful anti-smoking weapon being employed against the industry." 2021553739-3926 at 3901-3905 (US 36767).

  4. The BATCo October 23, 1986 "ETS Action Plan" stated: "The world tobacco industry sees the ETS issue as the most serious threat to our whole business." 100993158-3165 at 3158 (US 89556).

  5. In June 1987, Philip Morris Companies held its conference called "Operation Downunder," described in detail in Section V(G)(6)(a)((3)), infra, to formulate a worldwide strategy on passive smoking. Covington & Burling's John Rupp told the group that the industry was "in deep shit" as a result of the 1986 reports and the industry's "serious credibility problem." 2021502102- 2134 at 2105-2106 (US 20346).

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  1. The following typed notes (author unknown) were taken at the June 1987 "Downunder" meeting:

Business Trends -- 2% annual decline in sales in U.S. . . -- Decline in U.S. not explained by price increase . . . In U.S., ETS issue will have devastating effect on sales . . . We are just at beginning of impact of ETS issue. . . 1. Problem -- threatens number of smokers and numbers of cigarettes they smoke. 2. How to alter public perception that ETS is damaging. . . (Assume that #2 causes #1)

2021502102-2134 at 2109-2110 (US 20346).

  1. At the close of "Operation Downunder," Philip Morris Companies Vice Chairman Bill Murray asked about the risks of the proposals, and whether the proposals would "make the situation worse." The presenters responded: "The situation can't get any worse. Sales are down, can't be attributed to taxes or price increases. ETS is the link between smokers and non-smokers and is, thus, the anti's silver bullet." 2021502671-2678 at 2678 (US 22950).

  2. An undated Philip Morris report from the 1990s stated, "Without a doubt, the social acceptability of smoking practices is the most critical issue that our industry is facing today. . . The consequences of any decrease in social acceptability are extremely important because of their direct effect on the total volume of sales . . . Attacks on acceptability are almost exclusively based on claims that ETS can cause diseases in the exposed population." 2026226012-6021 at 6012 (US

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  1. The actual impact of smoking restrictions on cigarette sales was so substantial that by January 1992, Philip Morris was measuring past impacts on sales and modeling the future sales impact of the possible workplace smoking restrictions resulting from public concerns about the significant health impacts of secondhand smoke on non-smokers. John Heironimus, who was directed to study the impact, wrote the following in a January 22, 1992 memorandum to Louis Suwarna, copied to David Beran:

Summary of Major Findings 1. Total prohibition of smoking in the workplace strongly affects industry volume. Smokers facing these restrictions consume 11%-15% less than average and quit at a rate that is 84% higher than average. . . . 4. From 1987 to 1991, the industry lost an estimated incremental 1.7% (9.5 billion units) due to increasing workplace restrictions [alone]. If these trends continue, the industry will lose an additional 1.3% to 1.9% (8.4 to 11.4 billion units) from 1991 to 1996. 5. If smoking were banned in all workplaces, the industry's average consumption would decline 8.7%-10.1% from 1991 levels and the quitting rate would increase 74% (e.g., from 2.5% to 4.4%).

2023914279-4284 at 4280 (US 88584).

  1. In a July 1994 presentation, Philip Morris's Tina Walls stated: "[T]he rights of smokers to smoke where they work, play -- and even where they live -- is under attack as it has never been before. The immediate implications for our business are clear: if our consumers have fewer opportunities to enjoy our products, they will use them less frequently and the result will be an adverse impact on our bottom line." 2041183751-3790 at 3752 (US 37924).
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  1. BATCo counsel, Andrew Foyle, wrote to representatives of the British manufacturers in 1993: "There is a view that the industry now finds itself in the same position in relation to ETS that it was thirty-to-forty years ago in relation to active smoking." 503055325-5326 (US 20712). At a 1987 meeting of the industry's international ETS groups and manufacturer associations, a Philip Morris representative similarly remarked: "I am reminded of the situation 20-30 years ago and all the research we put into active smoking." 2501458142-8148 (US 27951).