R.J. Reynolds Fined $20 Million Over Ads
SAN DIEGO (Reuters) - A California judge on Thursday fined cigarette maker R.J. Reynolds $20 million for violating the 1998 nationwide tobacco settlement by targeting youths in a magazine advertising campaign.
San Diego Superior Court Judge Ronald Prager found that the No. 2. U.S. tobacco company -- whose brands include Winston, Camel and Doral -- indirectly targeted youth in its cigarette advertising in a number of magazines such as Rolling Stone, Sports Illustrated and other popular publications.
In addition to the fine, he ordered the Winston-Salem, North Carolina-based company to take "reasonable" measures to reduce youth exposure to its advertising.
"Since the Master Settlement Agreement was signed, RJR has exposed youth to its tobacco advertising levels very similar to those of targeted groups of adult smokers," the judge wrote in his ruling.
Officials at R.J. Reynolds Tobacco Holdings Inc. slammed the decision as censorship and said it only advertises in magazines with at least 75 percent adult readers. R.J. Reynolds shares closed down $1.08, or 1.55 percent, at $68.71 on the New York Stock Exchange on Thursday.
"Today's decision has nothing to do with kids, and everything to do with the attorney general's desire to censor, if not ban, legal marketing to adult smokers," Tommy Payne, a R.J. Reynolds executive vice president, said in a statement.
But Prager disagreed, noting that the company's rivals such as Philip Morris Cos. Inc. and Brown & Williamson Tobacco Corp., restricted their advertisements in magazines with less than 15 percent youth readership.
R.J. Reynolds, on the other hand, violated a provision in the landmark $206 billion deal between the major tobacco companies and 46 states by turning to magazines such as Sports Illustrated -- which has about 5 million young readers -- to "directly or indirectly" reach youths with its ads, he said.
"RJR made absolutely no changes to its advertising campaigns, failed to include the goal of reducing youth exposure to tobacco advertising it its marketing plans and failed to take any actions to track whether or not it was meeting its professed goal of reducing youth smoking," Prager wrote.
He said the evidence indicated that Reynold's youth-targeted ads were spurred in part by the company's fears that it was losing market share, saying RJR "believed it had to be more aggressive than other tobacco companies in its advertising."
CALIFORNIA PUSH ON YOUTH SMOKING
The decision marked the latest victory for California's Attorney General Bill Lockyer, who has sought to hold R.J. Reynolds accountable for allegedly trying to target youth smokers -- a violation of the 1998 nationwide tobacco deal.
Last month, for example, a Los Angeles court fined R.J. Reynolds nearly $15 million for handing out free cigarettes at events like street fairs and car races where children are present. Lockyer also reached a settlement with the firm in January 2001 regarding the company's practice of mailing free cigarettes to consumers without determining if they were over the age of 18.
The attorney general, citing studies showing 80 percent of all adult smokers started before the age of 18, added the latest decision represents the fourth successful lawsuit against R.J. Reynolds in two years.
"When hundreds of your customers die every day, the only way to stay in business is to hook new ones," Lockyer said in a statement. "But targeting children in your quest for new consumers is unlawful, shameful and will not be tolerated in California."
California and four other states filed separate lawsuits in 2001 charging R.J. Reynolds with putting cigarette advertisements in magazines that could reach up to 95 percent of America's youths aged 12-17.
Reynolds, which argued that the magazines were intended for adult readers, said the lawsuits sought to impose restrictions beyond those contained in the landmark 1998 tobacco settlement deal and hamper its ability to compete for adult smokers' business.
Anti-smoking advocates hailed the ruling, saying they hoped it would spur other states to crack down on any tobacco company that violated the national settlement agreement.
"This ruling should spur other state attorneys general to aggressively pursue any violations by the tobacco industry of the settlement's prohibition on 'any action, directly or indirectly, to target youth,"' Matthew Myers, president of Campaign for Tobacco-Free Kids said in a statement.
The California ruling came one day after an Oregon appeals judge reinstated an $80 million award against Philip Morris to the family of a dead smoker.