Reports that Matter

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

WHEN IT COMES TO THE LOWEST IN TAR, ONLY ONE

Section 70 of 129

WHEN IT COMES TO THE LOWEST IN TAR, ONLY ONE

MEASURES UP. NOW IS LOWEST Of All Soft Pack 100s. By U.S. Gov't. testing method.

(no bates) (US 5852) (1978); 970469347-9474 at 9430, 9429, 9427, 9431 (US 85104).

  1. A 1983 Now Brand Image report, prepared for RJR, concluded that health concerns heavily influenced a smoker's decision to choose one brand over another and that smokers perceived lower tar cigarettes as healthier than their full-flavor counterparts. It stated that "[a] major motivation in brand switching has been concern over health. . . . The typical solution to this dilemma is the two pronged approach of trying to cut down and/or moving to a lower tar brand."
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The report went on to indicate that, when respondents were asked what the words "low" and "lowest" in the advertisements meant to them, "[t]hey interpret this to mean that the two brands are 'safer' and pose less of a health hazard. Consequently, they reason, this would make the brands more appealing to younger people who are very health conscious or to older, long-time smokers who are concerned about the long-range effects of tobacco." 506671319-1418 at 1379 (US 22160).

(2) R.J. Reynolds's Research on the Low Tar Cigarette Category 2504. Internal RJR documents show that RJR conducted research not just on individual low

tar cigarette brands, but on low tar cigarettes as a category. These documents demonstrate that RJR has long known and intended that its advertisements and marketing for low tar cigarettes, featuring claims of lowered tar and nicotine and "light" and "ultra light" brand descriptors, contributed to and reinforced consumers' belief that low tar cigarettes are better for their health, and caused consumers to smoke them for this reason.

  1. A 1974 survey showed that "a substantial majority of smokers said they agreed with the statement, 'low tar and nicotine cigarettes are a major step in making smoking less harmful to their health.'" 501238259-8269 at 8265, 8269, 8271 (US 22072); 501238270-8357 (US 48736).

  2. As part of a 1975 marketing plan to introduce a new low tar Salem product, RJR recognized that "[l]ow numbers are the primary benefit/feature which can solve the concerned smoker's anxiety about health." 50231320-3308 at 3253 (US 22151).

  3. A November 17, 1975 report prepared for RJR by Rosenfeld, Sirowitz & Lawson, Inc., titled "An Evaluation of the 120MM Market and Its Potential for RJR," stated:

Currently RJR divides the total cigarette market into three basic categories: Full Flavor; Medium Flavor; High Filtration. However,

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the recent rapid growth of the High Filtration segment, may be a signal that the consumer is beginning to be more health conscious than ever before, and will be even more so as time goes on. If this is the case, we believe that consumers will ultimately divide the market into three categories which in their minds would be categorized as: "Least Safe Brands" "Safer Brands" "Safest Brands."

The RJR report defined the "Safer" and "Safest" brand categories as follows:

Safer Brands: These are brands which are perceived to combine an acceptable level of taste with mildness. Smokers of these cigarettes, while not overtly concerned with health, do switch to them after feeling some physical discomfort from their previous brand. Although they are not aware of T&N numbers, they know they are "moving down" to a milder cigarette.

Safest Brands: Cigarettes in this category are perceived to have a mild taste. Smokers of these brands are very concerned about health and quite aware of T&N numbers. Their concern -- more than any physical discomfort -- causes them to switch to brands with low T&N numbers.

  1. The report further concluded: "We believe that the most dramatic evidence of the growing interest in Safer Cigarettes may be seen in the growth of the various Lights/Milds line extension products." 500671364-1454 at 1402, 1403, 1405 (US 22158) (emphasis in original). The report also stated: "As previous research has indicated, Smokers of Lights/Milds products

(designated in this report as Safer Brands) are not aware of T&N numbers. Hence, the fact that a

120MM Lights entry will have high T&N numbers (on a total cigarette basis) should not impede its progress." 500671364-1454 at 1408, 1436-37 (US 22158); Schindler WD, 75:5-13.

  1. A November 16, 1976 RJR document, titled "New Brand Development," recommended introducing a "New, Single-Minded Advertising Campaign" that would "convey our lowest 'tar' benefit." In terms of future plans, the document stated "[f]or example, in the new and special wants area, there is style and value which we met with MORE, extreme health concerns which we are meeting with NOW [brand cigarettes], and with the evolution of the market toward low 'tar', many more opportunities will be present in this area . . . ." A section of the document titled "Super Low 'Tar' Products" stated: "We will also be working on super low tar products which address the wants of very concerned smokers. A growing number of smokers seek products with tangible/visible features to assuage their concern about smoking." 501282466-2513 at 2480-2481, 2488, 2496, 2502 (US 48813).
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  1. A June 21, 1982 Product Research Report on Non-Menthol Ultra Low Tar Consumer Probes, written by RJR's Marketing Development Department, stated: "Most respondents [ultra low tar smokers] preferred a white filter to a cork filter because they considered white to be more indicative of ULT cigarettes. The white filter generated strong associations with gentleness, purity, cleanliness, modernization, and innovativeness." 503394459-4485 at 4464 (US 85036).

  2. The 1982 report also stated: "Women are more optimistic about new brands that could offer lower tar. They are more willing to compromise on taste if they feel a cigarette has more personal benefits, although 'It would be great if it has good taste, too.'" The report further stated that ultra low tar smokers "want as little tar as possible, but they want taste to be at least on par with current ULT brands. They feel they have made taste trade-offs by smoking a ULT." The report continued: "It is unlikely ULT smokers would switch brands if the tar level of the new cigarette is equivalent to their current brand. Lower tar is a strong motivating factor." The report also recognized that smokers perceive low tar cigarettes as having less desirable taste, stating: "The main obstacle appears to be to convince smokers the new cigarette delivers a more flavorful, richer taste, and lowering the tar does not reduce taste and smoking satisfaction." The report also noted:

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Women seem to be more accustomed to moderation in their lifestyles. For example, they are inclined to trade-off some taste for the weight control and health benefits of low calorie and low fat foods. They want some taste assurance, but are open to compromise. They are willing to tolerate an adjustment period as they become acclimated to a new product they perceive to be better for them.

The document further stated: "ULT smokers perceive low tar claims to be credible. They try to balance their desire to smoke and personal concerns." 514343517-3566 at 3522, 3524-26, 3530, 3540 (US 51848).

  1. According to Gary Burger, RJR Senior President of Research & Development, RJR was aware that consumers smoke low tar cigarettes for the perceived health benefit. Burger observed that "[c]ertainly, smokers perceive lower tar cigarettes in some ways to be better for them and therefore they want them." He noted that consumers "have that impression that there are higher levels of bad stuff in high tar cigarettes and lower levels of bad stuff in low tar cigarettes." Burger PD, Arch v. American Tobacco Co., 8/21/97, 226:9-243:18.

(3) R.J. Reynolds's Public Statements About Low Tar Cigarettes 2513. In May 2004, RJR's website stated: "Reynolds Tobacco is not interested in trying to

persuade any nonsmokers to begin smoking or in persuading any smokers not to quit." Andrew Schindler, Executive Chairman of Reynolds American Inc., testified that "Reynolds Tobacco is not interested in trying to talk any smokers out of quitting." TLT0770095-0128 (US 72410); Schindler WD, 76:17-77:5.

  1. RJR's website further stated: Our company, like other cigarette manufacturers, uses brand descriptors such as "full flavor," "lights" and "ultra lights" to differentiate cigarette brand-styles in terms of such characteristics as
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strength of taste, and reported "tar" and nicotine yield. These terms do not, and are not meant to, imply that any cigarette brand-style or any category of cigarettes is safer than any other.

TLT0770095-0128 at 0111 (US 72410); Schindler WD, 64:19-65:3.

  1. A March 21, 2003 RJR statement to stockholders presented a proposal "to find appropriate ways of informing our customers about the actual health risks of smoking 'light and ultra light' cigarettes to disassociate them from any belief that such products are safer and deliver less tar and nicotine." This proposal cited the conclusions of NCI Monograph 13 that low tar cigarettes present no significant reduction in harmfulness relative to full-flavor cigarettes, and that "'many smokers choose these products as an alternative to cessation'" out of a mistaken belief that they are less harmful. The proposal also referenced several pending lawsuits against one or more of the Defendants alleging fraudulent marketing of low tar cigarettes as less harmful. The Board of Directors of RJR recommended a vote against this proposal. One of the reasons given by RJR for rejecting this proposal was that, "if implemented, this proposal could significantly interfere with RJR's defense of pending litigation." TLT0960025-0029 at 0027-0028 (US 87993); Schindler WD, 66:4-67:16.

c. Brown & Williamson (1) Brown & Williamson's Marketing of Low Tar Cigarettes 2516. A B&W document, titled "Kool Family Utopian Objectives 1979-1985," stated that

"Kool must move into the health reassurance segment so that 45% of KOOL business will be in the perceived product safety arena by 1982 which will approximate the 45% of total smokers who will be smoking hi-fi products by 1982." Under the heading "Strategies," the document stated: "Provide product safety reassurance while enhance [sic] the satisfaction and refreshment perception of the appropriate KOOL styles through the successful national launch in 1979 of either: 1. Low 'tar' parent [or] 2. Repositioned KOOL Milds." 680559149-9162 at 9149-9150 (US 54048).

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  1. An internal March 25, 1983 B&W memorandum from A. J. Mellman, a B&W marketing employee, to R.A. Blott, B&W Senior Vice President of Domestic Marketing, regarding current cigarette project ideas for the Kool brand family, including low tar brands, stated: "KOOL maintained a three share level for over 30 years (through mid-60's) while positioning itself as a specialty cigarette to be smoked only for remedial or medicinal purposes." The fourth project idea was: "Improve health aspect: Anything that can be done to decrease the risks associated with cigarettes is a positive to most consumers." 514110006-0009 at 0007-0008 (US 21745).

  2. An April 28, 1998 document prepared for B&W, titled "Kool Natural Lights Round I & II Focus Groups: Presentation of Findings Prepared for Brown & Williamson," under the heading "Highlights : Natural Lights Idea," stated: "Respondents assumed that a natural light cigarette would be less harmful than a regular cigarette, they did not assume it would be 'healthy.'" 210430297-0396 at 0322 (US 67711); Smith WD, 83:18-84:20, 85:6-8.

  3. B&W's objectives for the 1957-1961 Viceroy advertisements were to "[a]ttract smokers . . . promising . . . implied health benefits because of filter" and "with substantial health benefit implications, because of blend and filter." Ivey WD, 51:15-52:13; Smith WD, 71:18-72:1; 670001750-1766 at 1754-1755 (US 20962).

  4. A 1975 B&W document, titled "Viceroy Marketing Strategy," identified the "Problem Advertising Must Solve": "[A]dvertising must . . . cope with consumer attitudes about smoking, providing either a rationale or a means of repressing the health concern." 680113760-3763 at 3762 (US 20987); accord 680116947-6968 at 6959, 6961 (US 21877) (1975 document, titled "Viceroy

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Agency Orientation Outline," stating "Test Market Campaigns: Strategy-Given consumers awareness of the smoking and health issue, full flavor smokers must deal with their illogical behavior. Therefore, we attempted to communicate Viceroy's flavor/satisfaction benefits by providing consumers a rationalization for smoking or a repression of the health concern"); Smith WD, 73:2-17.

  1. The memorandum noted that, in 1953-1954, Viceroy's advertising campaign slogan was "VICEROY's double barreled health protection" and "Better Your Health," with the "objective and creative strategy" being to "[a]ttract smokers of all other cigarette brands by promising superior health protection because of more effective filtration from both a new filter and a longer length." The memorandum concluded that "[t]hese two product changes firmly positioned VICEROY as a high-filtration, healthier cigarette and attracted smokers in droves." The same theme continued in 1955-56, when one of the "Objectives and Creative Strategies" listed was to "Attract smokers of non-filter brands and the new filter brands by promising good taste equivalent to non-filter brands and superior health protection because of blend and filter." 670001750-1766 at 1752-1754 (US 20962); see also (US 87468); (US 87469); (US 87470) (1953 magazine advertisements featuring claim of Viceroy's "double barreled health protection").

  2. Carlton is a low tar brand that was originally manufactured by American Tobacco until that brand was acquired by B&W in 1994, along with American Tobacco's Lucky Strikes, Pall Mall, & Tareyton brands. Gesell PD, State of Minnesota v. Philip Morris Inc., 9/18/97, 6:10-17; 117:3-15; 25:23-26:3; 93:2-13.

  3. According to Sharon Smith, former Director of Marketing Services and Operations at B&W, "Carlton advertising focused on tar delivery." She explained:

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For Carlton, it's not an imagery campaign. It's more communication of tar levels. I'm familiar with consumers of competitive brands to Carlton saying in focus groups that to convince them to switch from their brand to Carlton, an understanding of what the tar levels are is more important to them.

Smith further explained that, for those smokers, her research has found that their understanding of the tar and nicotine numbers is based "certainly on our advertising." Smith WD, 69:10-14; 75:3-23.

  1. A B&W document circa 1996-1997, titled "Carlton Creative Plans," disclosed that the first "Primary" trait of Carlton's target audience was "Health Conscious." With respect to print advertisements, the report stated: "Magazine [advertisements for Carlton] Will be Driven by Editorial That is: 'Health Conscious.'" Carlton's "brand strategy" was "to continue to defend the franchise while communicating its 'lowest' positioning to maintain switching inflows from those smokers trading down in tar levels." The document went on to state that "CARLTON packaging issues will be explored to determine how best to communicate ultra light product cues . . . hype its increased communication of ultra low tar." 176020783-0800 at 0785, 0792, 0798 (US 23351); accord 176020856-0926 at 0868-0869 (US 23357).

  2. In 1999, B&W began a promotional campaign emphasizing that Carlton cigarettes were Ultra Ultra Light, including package statements that Carlton delivered only "1 mg." of tar. B&W's advertisements featured the slogan "Isn't it time you started thinking about number one?" According to Susan Ivey, "many factors drove consumers' preference for Carlton, and for some smokers, one of those factors was a belief that ultra low tar could reduce one's risk." Ivey WD, 52:14-53:15; ADV027 0780-0782 (US 9846); ADV045 0468-0470 (US 11362) (1999 advertisement); ADV027 0924-0926 (US 9892); ADV032 0011-0013 (US 10678).

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  1. In March 1999, Nicholas Brookes, B&W Chairman and CEO from 1995 to 2000, became aware of a discrepancy in the tar delivery of Carlton cigarettes. The cigarette, when smoked by human smokers, delivered three milligrams instead of the advertised one milligram of tar. Because B&W had just introduced a new advertising campaign "touting Carlton as the '1' for you," Brookes attempted to delay the publication of a study that would have alerted the public to the new findings. Brookes did not direct B&W's marketing department to discontinue the "Carlton is the '1' for you" campaign, even though he acknowledged that it might cause confusion for consumers. 190245079-5080 (US 85018); Brookes PD, United States v. Philip Morris, 3/31/03, 146:18-148:12; 149:3-149:20; 150:14-150:18.

  2. A July 27, 2000 document prepared for B&W by Kay Harwood Marketing Analysts, Inc., titled "Topline Report of Findings for Carlton Advertising Research," indicated that smokers continue to view Carlton cigarettes as healthier, stating: "Focus groups were allowed to submit two words in addition to those suggested by the group hosts. Among the words independently chosen to describe Carlton cigarettes were 'feeling healthier' and 'healthier.'" Among the Report's 'Key Findings' are the statements from the focus groups in response to several Carlton campaigns. The statements include:

Healthier -- trying to sell a healthy cigarette -- Very few people have realized that Ultra is better . . . Purity/better for you. . . . Fewer people have health problems smoking this brand . . . . This cigarette is best for you . . . better for you. . . . Clean & improved -- healthier brand; less nicotine. . . . Healthier living. . . . Carlton is healthier for you. . . . Gives next to nothing harmful -- means healthier -- Carlton is healthier for you . . . safe cigarette. . . . They are much better for you -- A healthier cigarette. . . . Healthier. . . . This is the best for you -- lowest in bad stuff. . . . Better for you, lighter smoke. . . . Carlton will make you happier and healthier. . . . Health-minded, concerned people (get healthier). . . . The safe cigarette -- Cut down

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your risk -- Light and less harmful. . . . This will save you -- this is the solution you have been waiting for.

250255336-5347 at 5340, 5343-5347 (US 22031). These statements were repeated in an August 8, 2000 document prepared for B&W by Kay Harwood, Marketing Analysts, Inc. titled "Carlton Advertising Research: Report of Key Findings." 250255060-5075 at 5064, 5066-5068, 5071-5075 (US 22170).

  1. A document, titled "Carlton Advertising Research: Four Focus Groups," bearing MAI (Marketing Analysts, Inc.) and B&W insignia on the cover, discussed July 2000 focus groups stating that smokers of both Carlton and competitive Carlton Ultra light associated Carlton cigarettes with being "[b]etter for you/[h]ealthier." The Report concluded that the Carlton "It's the Least You Can Do" campaign (labeled the "U" campaign) created the impression that "Carlton is better for you." The Report's "Key Recommendations" include: "If the primary objective of the advertising campaign is to position Carlton as a lower/the lowest tar and nicotine cigarette, the current research suggests the "U" campaign (It's the least you can do) effectively conveys this positioning." 250221262-1294 at 1275, 1277, 1287 (US 22030); Ivey WD, 59:20-6060:12.

(2) Brown & Williamson's Research on the Low Tar Cigarette Category 2529. Susan Ivey acknowledged that she is aware that "some smokers choose lights because

they perceive a health benefit," and that "Brown & Williamson's consumer research . . . indicates that certain smokers switch to low tar cigarettes because they believe that these cigarettes are 'less harmful' than regular cigarettes." As demonstrated below, these consumer research documents establish that B&W has long known and intended that its advertisements and marketing for low tar cigarettes, featuring claims of lowered tar and nicotine and "light" and "ultra light" brand descriptors, contributed to and reinforced consumers' mistaken belief that low tar cigarettes are better for their health, and caused consumers to smoke them for this reason.

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  1. For instance, a 1967 B&W advertising and marketing strategy for high-filtration/low tar products describes B&W's marketing strategies:

[Vanguard brand strategy:] "To capitalize upon a prevalent smoker desire to lessen the health risk involved in his smoking via a switch to a low tar cigarette . . . . Advertising Objective -- Communicate a dual smoker benefit: low tar and satisfying taste."

Modified LIFE "Marketing Strategy -- To fully capitalize on health vs. cigarette smoking publicity and publishing of tar/nicotine data by marketing LIFE as the lowest tar cigarette in the filter 85 segment."

Filter 70's "Marketing Strategy -- To capitalize on smoker concern of 'smoking too much' by offering a means for reducing smoking without . . . cutting down on number of cigarettes smoked . . . . Advertising -- Filter 70's would offer smokers the opportunity to smoke up to one-third less (shorter tobacco section), but they can light up as often."

Ivey WD, 57:22-58:10, 63:1-8; 670186789-6824 at 6790, 6792, 6798, 6802, 6804 (US 21431).

  1. An August 1967 B&W document, titled "A Psychological Map of the Cigarette

World," stated that