R.J. Reynolds appealing $14.8 million fine
LOS ANGELES (May 2, 2002 6:19 p.m. EDT) - R.J. Reynolds Co., the maker of Camel, Winston and other popular cigarette brands, says it will appeal a court order to pay a $14.8 million fine for giving away free cigarettes on public grounds where children wer
The fine, upheld Monday by a Los Angeles Superior Court judge, is the largest levied by California against a tobacco company for violating a state law banning most product giveaways.
Lawmakers contend that distributing free cigarettes is an effective way for tobacco companies to hook and addict young smokers.
Tapping the youth market is essential for an industry that each year looses 440,000 customers who die from smoking-related illnesses and another 1.5 million who quit the habit, anti-smoking activists say.
"They need to recruit several thousand new smokers each day, and most of those are going to be teenagers," said Cliff Douglas, president of Tobacco Control Law and Policy Consulting, a research firm in Ann Arbor, Mich.
"What R.J. Reynolds was doing was simply trying to preserve their market, but they got caught," Douglas said.
But R.J. Reynolds denied it was targeting minors. The company said it gave away the cigarettes at enclosed booths where security guards restricted access to people over age 21.
"Reynolds Tobacco continues to believe that our operations did not, in any way, violate state law," Guy M. Blynn, the tobacco manufacturer's vice president and deputy general counsel, said in a prepared statement.
California sued R.J. Reynolds in June 2001 for distributing more than 100,000 free packages of cigarettes at six events held on public property in 1999 and 2000, including the Long Beach Jazz Festival and a hot rod race at the Pomona Raceway.
Judge Conrad Aragon ruled that the Winston-Salem, N.C.-based company had violated state law, although he reduced the fine to $14.8 million from $21.7 million originally demanded by the Attorney General.
"Marketing ploys designed to hook children on cigarettes are illegal and won't be tolerated in California," Bill Lockyer, California's Attorney General said in a release Thursday.
The case will send a strong warning to the tobacco industry that California will enforce tobacco sales and distribution laws, he said.
But R.J. Reynolds, which sells nearly one-quarter of all cigarettes in the United States, said it has a number of grounds for appeal.
"We reported our activities to the state well in advance of when they occurred, and no one ever objected until long after the promotions were completed," Blynn said. "In fact, the state even accepted tax payments based on the samples we distributed to adult smokers."
California's distribution laws exempt public grounds that are leased for private functions where minors are denied access by a licensed security guard, the company said.