44396 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

DEPARTMENT OF HEALTH AND as delivery devices for , 3. The Restricted Device Provision HUMAN SERVICES incorporated as part of the regulations Authorizes FDA to Establish Access and for purposes of, and to facilitate, Advertising Restrictions Food and Administration congressional review under the Small 4. Application of Other Device Business Regulatory Enforcement Authorities 5. FDA Will Classify and 21 CFR Parts 801, 803, 804, 807, 820, Fairness Act of 1996. and 897 Under Section 513 of the DATES: Effective date. The regulation is Act [Docket No. 95N±0253] effective August 28, 1997, except that D. The Fact That the Act’s Drug Authorities § 897.14(a) and (b) are effective February Authorize the Imposition of Similar RIN 0910±AA48 28, 1997 and § 897.34(c) is effective Restrictions Supports the Reasonableness of Regulations Restricting the Sale and February 28, 1998. the Restrictions That the Agency Has Imposed Distribution of Cigarettes and Compliance dates. Manufacturers and distributors are required to comply with E. Constitutional Issues Regarding Smokeless Tobacco to Protect Authority Children and Adolescents the requirements of 21 CFR parts 803 and 804 August 28, 1997; manufacturers 1. Separation of Powers 2. Nondelegation Doctrine AGENCY: Food and Drug Administration, are required to comply with the III. Overview of Comments, HHS. requirements of 21 CFR parts 807 and Prevalence Rates Among Minors, Scope, ACTION: Final rule. 820 February 28, 1998. Purpose, and Definitions ADDRESSES: References listed in the A. Overview of Comments SUMMARY: The Food and Drug footnotes of this document have been B. Smoking Prevalence Rates Among Administration (FDA) is issuing placed on public display at the Dockets Minors regulations governing access to and Management Branch (HFA–305), Food C. Scope promotion of nicotine-containing and Drug Administration, 12420 D. Purpose (§ 897.2) cigarettes and smokeless tobacco to E. Definitions (§ 897.3) Parklawn Dr., rm. 1–23, Rockville, MD IV. Access children and adolescents. 20857, and may be seen by interested The regulations prohibit the sale of A. General Comments persons between 9 a.m. and 4 p.m., B. General Responsibilities of nicotine-containing cigarettes and Monday through Friday. smokeless tobacco to individuals under Manufacturers, Distributors, and Retailers FOR FURTHER INFORMATION CONTACT: (§ 897.10) the age of 18; require manufacturers, C. Additional Responsibilities of distributors, and retailers to comply Nancy Yeates, Office of Policy (HF–26), Food and Drug Administration, 5600 Manufacturers (§ 897.12) with certain conditions regarding the 1. Removal of Manufacturer-Supplied or sale and distribution of these products; Fishers Lane, Rockville, MD 20857, 301–827–0867. Manufacturer-Owned Items That Do Not require retailers to verify a purchaser’s Comply With the Regulations age by photographic identification; SUPPLEMENTARY INFORMATION: 2. Visual Inspections by a Manufacturer’s prohibit all free samples and prohibit Preamble Outline Representative at Each Point of Sale the sale of these products through I. Introduction D. Additional Responsibilities of Retailers A. Purpose and Overview of the Rule vending machines and self-service (§ 897.14) B. Background 1. Use of Photographic Identification to displays except in facilities where C. Provisions of the Rule individuals under the age of 18 are not Verify Age II. Legal Authority 2. Minimum Age present or permitted at any time; limit A. Legal Principles Applicable to 3. Restrictions Against ‘‘Impersonal’’ the advertising and labeling to which Combination Drug/Device Products Modes of Sale children and adolescents are exposed to 1. The SMDA Recognized Combination 4. Restrictions Against the Sale of Products for the First Time a black-and-white, text-only format; Individual Cigarettes 2. The SMDA Leaves to FDA’s Discretion prohibit the sale or distribution of 5. Additional Comments the Determination of Which Regulatory brand-identified promotional E. Conditions of Manufacture, Sale, and Authorities to Apply to Particular Distribution (§ 897.16) nontobacco items such as hats and tee Combination Products 1. Restrictions on Nontobacco Trade shirts; prohibit sponsorship of sporting 3. Interpreting the SMDA to Allow the Names on Tobacco Products and other events, teams, and entries in Agency to Determine Which Regulatory a brand name of a tobacco product, but Scheme Best Serves the Public Health is 2. Minimum Package Size permit such sponsorship in a corporate Consistent With 50 Years of Case Law 3. Maximum Package Size 4. Impersonal Modes of Sale name; and require manufacturers to 4. The Implementing Regulations and the V. Label provide intended use information on all Delegations of Authority Reflect FDA’s Interpretation That Section 503(g) of the Act A. Established Name (§ 897.24) and smokeless tobacco product B. Package Design labels and in cigarette advertising. Authorizes the Agency to Determine the Appropriate Regulatory Authorities C. Ingredient Labeling These regulations will address the 5. The Intercenter Agreements and D. Labeling for Intended Use serious public health problems caused Administrative Precedent Recognize That E. Adequate Directions for Use and by cigarettes and smokeless tobacco FDA May Determine Which Regulatory Warnings Against Use (Section 502(f) of the products. They will reduce children’s Authority to Apply to a Particular Product act) and adolescents’ easy access to B. Cigarettes and Smokeless Tobacco Have F. Package Inserts cigarettes and smokeless tobacco and Both a Drug and a Device Component and VI. Advertising will significantly decrease the amount Are Therefore Combination Products A. Subpart D—Restrictions on Advertising of positive imagery that makes these C. FDA’s Choice of Legal Authorities and Labeling of Tobacco Products products so appealing to that age group. 1. FDA Will Regulate Cigarettes and B. The Need for Advertising Restrictions Smokeless Tobacco Under the Act’s Device 1. Advertising and Young People The regulations are predicated on the Authorities 2. Advertising and Adults agency’s assertion of jurisdiction under 2. Cigarettes and Smokeless Tobacco C. The Regulations Under the First the Federal Food, Drug, and Cosmetic Will be Subject to the Full Range of Device Amendment Act over cigarettes and smokeless Authorities 1. Introduction Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44397

2. The Central Hudson Test C. Procedural Due Process Under the Fifth 7. Excise Tax Revenues 3. Is Cigarette and Smokeless Tobacco Amendment F. Small Business Impacts Advertising Misleading, or Does It Relate to XII. Procedural Issues G. Other Alternatives Unlawful Activity? A. Introduction H. Unfunded Mandates Reform Act of 1995 4. Is the Asserted Government Interest B. Adequacy of the Record XVI. Paperwork Reduction Act of 1995 Substantial? 1. The Administrative Record A. Comments on the Paperwork Reduction D. Evidence Supporting FDA’s Advertising 2. The Agency’s Use of Confidential Act Statement Restrictions Documents B. Information Collection Provisions in the 1. Introduction 3. The Claim that FDA Relied on Final Rule 2. Do the Regulations Directly Advance ‘‘Unknown’’ Undisclosed Data XVII. Congressional Review the Governmental Interest Asserted? 4. The Claim that FDA Failed to Include Codified Language 3. Is There Harm? Does Advertising in the Record New Drug Application (NDA) Affect the Decision by Young People to Use Data on Which it Relied I. Introduction Tobacco Products? 5. The Agency’s Reliance in the Final 4. Why Young People Use Tobacco and Rulemaking on New Materials A. Purpose and Overview of the Rule the Role of Advertising in That Process C. Adequacy of the Notice 5. Has The Agency Met Its Burden? 1. The Agency Provided Adequate Notice This rule establishes regulations 6. The Efficacy of the Restrictions; of the Key Legal and Factual Issues restricting the sale and distribution of Empirical Evidence Concerning Advertising 2. The Agency Provided a ‘‘Reasoned cigarettes and smokeless tobacco to Restrictions Explanation’’ for its Current Position E. Provisions of the Final Rule children and adolescents, implementing D. Adequacy of the Comment Period FDA’s determination that it has 1. Are FDA’s Regulations Narrowly E. Conclusion jurisdiction over these products under Drawn? XIII. Executive Orders 2. Section 897.30(a)—Permissible Forms A. Executive Order 12606: The Family the Federal Food, Drug, and Cosmetic of Labeling and Advertising B. Executive Order 12612: Federalism Act (the act). As described in ‘‘Nicotine 3. Section 897.30(b)—Billboards C. Executive Order 12630: Governmental in Cigarettes and Smokeless Tobacco Is 4. Section 897.32(a)—Text-Only Format Actions and Interference with a Drug and These Products Are Nicotine 5. Section 897.32(a)—Definition of Constitutionally Protected Property Rights Delivery Devices Under the Federal ‘‘Adult Publication’’ XIV. Environmental Impact Food, Drug, and Cosmetic Act: 6. Advertising—§ 897.32 Requirements XV. Analysis of Impacts Jurisdictional Determination’’ (the 1996 for Disclosure of Important Information A. Introduction and Summary Jurisdictional Determination), annexed 7. Section 897.34(a) and (b)— B. Statement of Need for Action Promotions, Nontobacco Items, and Contests hereto, FDA has determined that C. Regulatory Benefits cigarettes and smokeless tobacco are and Games of Chance 1. Prevalence-Based Studies 8. Section 897.34(c)—Sponsorship of 2. FDA’s Methodology intended to affect the structure or Events 3. Reduced Incidence of New Young function of the body, within the 9. Proposed § 897.36—False or Smokers meaning of the act’s definitions of Misleading Statements 4. Reduced Number of Adult Smokers ‘‘drug’’ and ‘‘device.’’ The nicotine in F. Additional First Amendment Issues 5. Lives Saved cigarettes and smokeless tobacco is a VII. Education Campaign 6. Life-Years Saved ‘‘drug,’’ which produces significant VIII. Additional Regulatory Requirements 7. Monetized Benefits of Reduced IX. Implementation Dates pharmacological effects in consumers, Tobacco Use X. Relationship Between the Rule and Other including satisfaction of addiction, 8. Reduced Medical Costs Federal and State Laws stimulation, sedation, and weight 9. Reduced Morbidity Costs A. The Federal Cigarette Labeling and control. Cigarettes and smokeless 10. Benefits of Reduced Mortality Rates Advertising Act tobacco are combination products 11. Reduced Fire Costs B. The Comprehensive Smokeless Tobacco consisting of the drug nicotine and Health Education Act 12. Smokeless Tobacco 13. Summary of Benefits device components intended to deliver C. Conflict with Congressional Purpose nicotine to the body. Behind Current Regulatory Scheme for D. Regulatory Costs Tobacco Products 1. Number of Affected Retail FDA has chosen to regulate cigarettes 1. The Cigarette Act and the Smokeless Establishments and smokeless tobacco under the act’s Act 2. Removing Self-Service and Other device authorities. This rule allows the 2. The PHS Act Prohibited Retail Displays continued marketing of these products, D. Occupation of the Field 3. Label Changes 4. Educational Program while employing measures to prevent E. Preemption of State and Local future generations of Americans from Requirements Under Section 521(a) of the 5. Restricted Advertising and becoming addicted to them. As Act Promotional Activities F. Preemption of State Product Liability 6. Training discussed in section I.B. of this Claims Under Section 521(a) of the Act 7. Access Restrictions document, most people who use XI. Miscellaneous Constitutional Issues 8. I.D. Checks cigarettes and smokeless tobacco begin A. Takings Under the Fifth Amendment 9. Vending Machines their use before the age of 18 and, 1. The Interests at Issue 10. Readership Surveys therefore, before they fully understand 2. The Takings Analysis 11. Records and Reports the addictive nature and serious health 3. The Character of the Governmental 12. Government Enforcement risks of these products. Even though the Action 13. Comparison of Benefits to Cost sale of tobacco products to minors is 4. The Economic Impact of the E. Distributional Effects illegal in 50 States, the Governmental Action 1. Tobacco Manufacturers and has adopted extensive marketing 5. Interference with Reasonable Distributors Investment-backed Expectations 2. Tobacco Growers campaigns which appeal to children 6. Summary 3. Vending Machine Operators and adolescents. Therefore, the rule B. Substantive Due Process, Equal 4. Advertising Sector effects measures that would both Protection, and Restrictions on Use of Trade 5. Retail Sector complement the existing State Names 6. Other Private Sectors restrictions on access and prevent 44398 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations tobacco companies from marketing their more people each year in the United the record does not establish that such products to children and adolescents. States than acquired immunodeficiency a ban is the appropriate public health In determining the best course of syndrome (AIDS), car accidents, response under the act. action, the agency considered the highly , homicides, illegal , To effectively address the and addictive nature of cigarettes and suicides, and fires, combined. 4 disease caused by tobacco products, smokeless tobacco and the fact that Tobacco products have historically addiction to cigarettes and smokeless these products have previously been been legal and widely available in this tobacco must be eliminated or lawfully marketed to millions of adult country. It was only after millions of substantially reduced. The evidence Americans. The agency has determined people became addicted to the nicotine demonstrates that this can be achieved that the approach outlined in this in cigarettes and smokeless tobacco that only by preventing children and document—restrictions to reduce the health experts became fully aware of the adolescents from starting to use tobacco. use of cigarettes and smokeless tobacco extraordinary health risks involved in Most people who suffer the adverse by individuals under the age of 18 while the consumption of these products. health consequences of using cigarettes leaving these products on the market for Consequently, tobacco use has become and smokeless tobacco begin their use adults—is the available option that is one of the most serious public health before they reach the age of 18, an age the most consistent with both the act problems facing the United States today. when they are not prepared for, or and the agency’s mission to protect the Because of the grave health equipped to, make a decision that, for public health. consequences of the use of tobacco many, will have lifelong consequences. The agency intends to assist affected products, some have argued that they These young people do not fully entities, including retailers, distributors, should be removed from the market. understand the serious health risks of and manufacturers, in complying with However, a ban would have adverse these products or do not believe that the rule. The agency also will issue a health consequences and would not be those risks apply to them. They are also small entities guide in easy to likely to prevent individuals from very impressionable and therefore understand language. In addition, the gaining access to these products. Of the vulnerable to the sophisticated agency will conduct workshops 50 million people who use cigarettes, 77 marketing techniques employed by the throughout the country to assist affected to 92 percent are addicted. 5 Data tobacco industry, techniques that entities in complying with the rule. suggest that almost as many smokeless associate the use of tobacco products 6 with excitement, glamour, and B. Background tobacco users may be addicted. Adverse health consequences could independence. When cigarette and Approximately 50 million Americans result if these people were suddenly smokeless tobacco use by children and currently smoke cigarettes and another deprived of the nicotine these products adolescents results in addiction, as it so 1 6 million use smokeless tobacco. In the deliver. As stated in the preamble to the often does, these youths lose their Federal Register of August 11, 1995 (60 1995 proposed rule: freedom to choose whether or not to use FR 41314), FDA published a proposed Because of the high addiction rates and the the products as adults. rule entitled ‘‘Regulations Restricting difficulties smokers experience when they The facts on underage use confirm the Sale and Distribution of Cigarettes attempt to quit, there may be adverse health this pattern. As stated in the preamble and Smokeless Tobacco Products to consequences for many individuals if the to the 1995 proposed rule, Protect Children and Adolescents’’ (the products were to be withdrawn suddenly approximately 3 million American 1995 proposed rule). As stated in the from the marketplace. Our current health adolescents currently smoke and an preamble to the 1995 proposed rule, care system and available pharmaceuticals additional 1 million adolescent males tobacco use is the single leading cause may not be able to provide adequate or use smokeless tobacco. 7 Eighty-two of preventable death in the United sufficiently safe treatment for such a percent of adults who ever smoked had States. 2 More than 400,000 people die precipitous withdrawal. their first cigarette before the age of 18, each year from tobacco-related illnesses, (60 FR 41314 at 41348) and more than half of them had already such as cancer, respiratory illnesses, A similar situation would exist for become regular smokers by that age. 8 and heart disease, often suffering long addicted smokeless tobacco users. Among smokers ages 12 to 17 years, 70 and painful deaths. 3 Tobacco alone kills It is probable also that a black market percent already regret their decision to and smuggling would develop to supply smoke and 66 percent say that they 1 ‘‘National Household Survey on Drug Abuse: addicted users with these products. As want to quit. 9 Population Estimate 1993, Department of Health stated in the preamble to the 1995 Moreover, children and adolescents and Human Services (DHHS), Public Health Service proposed rule, and discussed further in (PHS), Substance and Mental Health Services are beginning to smoke at younger ages section II.C.5. of this document, ‘‘[t]he than ever before. Despite a decline in Administration (SAMHSA), Office of Applied products that would be available Studies, Rockville, MD, Pub. No. (SMA) 94–3017, smoking rates in most segments of the pp. 89 and 95, 1994. through a black market could very well American adult population, the rates 2 ‘‘Cigarette Smoking—Attributable Mortality and be more dangerous (e.g., cigarettes among children and adolescents have Years of Potential Life Lost—United States, 1990,’’ containing more tar or nicotine, or more recently begun to rise. 10 Data reported Mortality and Morbidity Weekly Report, (MMWR) toxic additives) than products currently CDC, DHHS, vol. 42, No. 33, pp. 645–649, 1993; on the market’’ (60 FR 41314 at 41349). 7 Lynch, B. S., and R. J. Bonnie, editors, Growing Up ‘‘Preventing Tobacco Use Among Young People: Tobacco Free—Preventing Nicotine Addiction in Thus, the agency has concluded that, A Report of the Surgeon General,’’ DHHS, PHS, Children and Youths, Committee on Preventing while taking cigarettes and smokeless CDC, National Center for Chronic Disease Nicotine Addiction in Children and Youths, tobacco off the market could prevent Prevention and Health Promotion, the Office on Division of Biobehavioral Sciences and Mental some people from becoming addicted Smoking and Health (OSH), Atlanta, GA, p. 5, 1994, Disorders, Institute of Medicine, National Academy (hereinafter cited as ‘‘1994 SGR’’). Press, Washington, DC, p.3, 1994, (hereinafter cited and reduce death and disease for others, 8 1994 SGR, p. 65. as ‘‘IOM Report’’). 9 ‘‘Teen-Age Attitudes and Behavior Concerning 3 ‘‘Cigarette Smoking—Attributable Mortality and 4 IOM Report, pp. 3–4. Tobacco,’’ The George H. Gallup International Years of Potential Life Lost—United States, 1990,’’ 5 See authorities cited at 1996 Jurisdictional Institute, p. 54, September 1992. MMWR, CDC, DHHS, vol. 42, No. 33, pp. 645–649, Determination, Section II(B)(2)(a). 10 ‘‘Cigarette Smoking Among Adults—United 1993. 6 Id. States, 1991,’’ MMWR, DHHS, CDC, vol. 42, No. 12, Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44399 in December 1995, after publication of Approximately one out of every three way to achieve such a reduction is by the 1995 proposed rule, showed young people who become regular limiting the access to, and attractiveness increases in 30-day prevalence rates of smokers each day will die prematurely of, cigarettes and smokeless tobacco to cigarette smoking for 4 consecutive as a result. 17 young people. FDA concludes that the years for 8th- and 10th-graders, and 3 Similar problems exist with underage act provides sufficient authority to issue consecutive years for high school use of smokeless tobacco. As stated in regulations that, while leaving these seniors. 11 Daily use of cigarettes by 8th- the 1995 proposed rule, the market for products on the market for adult use, , 10th-, and 12th-graders has also smokeless tobacco has shifted restrict access to and promotion of increased in each of the last 3 years. 12 dramatically toward young people since cigarettes and smokeless tobacco to The percentage of 8th- and 10th-graders 1970 (60 FR 41314 at 41317). School- those under 18 years of age. who reported smoking in the 30 days based surveys in 1991 estimated that before the survey had risen by one-third 19.2 percent of 9th to 12th-grade boys C. Provisions of the Rule since 1991 to about 19 percent and 28 use smokeless tobacco. 18 Among high After considering numerous percent, respectively. 13 Similarly, the school seniors who had ever tried comments submitted in response to the percentage of high school seniors saying smokeless tobacco, 73 percent did so by 1995 proposed rule, the agency is that they had smoked in the 30 days the 9th grade. 19 adopting the rule in modified form. New before the survey had increased by more As long as children and adolescents part 897 is being added to Title 21 of the than one-fifth since 1991, to about 33.5 become addicted to cigarette and Code of Federal Regulations and percent or one in three. 14 smokeless tobacco use in these contains the regulations governing the An adolescent whose cigarette use numbers, there is little chance that labeling, advertising, sale, and continues into adulthood increases his society will be able reduce the toll of distribution of cigarettes and smokeless or her risk of dying from cancer, tobacco-related illnesses. If, however, tobacco to children and adolescents. cardiovascular disease, or lung the number of children and adolescents FDA is regulating nicotine-containing disease. 15 Moreover, the earlier a young who begin tobacco use can be cigarettes and smokeless tobacco as person’s smoking habit begins, the more substantially diminished, tobacco- restricted devices within the meaning of likely he or she will become a heavy related illness can be correspondingly the section 520(e) of the act (21 U.S.C. smoker and therefore suffer a greater reduced because data suggest that 360j(e)). While leaving these products risk of diseases caused by smoking. 16 anyone who does not begin smoking in on the market for adults, the final rule childhood or adolescence is unlikely to prohibits the sale of nicotine-containing pp. 230–233, 1993; Johnston, L. D., P. M. O’Malley, ever begin. 20 cigarettes and smokeless tobacco to and J. G. Bachman, ‘‘National Survey Results on On the basis of this evidence, the individuals under the age of 18 and Drug Use from the Monitoring the Future Study agency has determined that establishing 1975–1993, vol. I: Secondary School Students,’’ requires manufacturers, distributors, Rockville, MD, DHHS, PHS, National Institutes of restrictions to substantially reduce the and retailers to comply with certain Health (NIH), National Institute on Drug Abuse number of children and adolescents conditions regarding access to, and (NIDA), NIH Pub. No. 94–3809, pp. 9 and 19, 79, who become addicted to cigarettes and promotion of, these products. Among 80, and 101, 1994; ‘‘Smoking Rates Climb Among smokeless tobacco best serves its public American Teen-agers, Who Find Smoking other things, the final rule requires Increasingly Acceptable and Seriously health obligations. Because such a small retailers to verify a purchaser’s age by Underestimate the Risks,’’ The University of percentage of the U.S. population begins photographic identification. It also Michigan News and Information Service, Table 1., tobacco use after the age of 18, limiting prohibits all free samples and prohibits July 17, 1995. the use of these products to the adult the sale of these products through 11 ‘‘Results from the 1995 Monitoring the Future population would substantially reduce vending machines and self-service Survey,’’ National Institute on Drug Abuse Briefing the principal source of new users. Thus, for Donna E. Shalala, Ph.D., Secretary of Health and displays except in facilities where Human Services, December 13, 1995. the appropriate emphasis is on reducing individuals under the age of 18 are not 12 Id. the use of tobacco products by children present or permitted at any time. The 13 Id. and adolescents. rule also limits the advertising and 14 Id. Evidence in the administrative record labeling to which children and 15 McGinnis, J. M., and W. H. Foege, ‘‘Actual demonstrates that the most effective Causes of Death in the United States,’’ Journal of adolescents are exposed. The rule the American Medical Association (JAMA), vol. accomplishes this by generally U.S. High School Students,’’ JAMA, vol. 269, No. 270, No. 18, pp. 2207–2212, 1993; ‘‘Reducing 11, pp. 1391–1395, 1993; see also 1994 SGR, p. 65. restricting advertising to which children Health Consequences of Smoking: 25 Years of 17 and adolescents are exposed to a black- Progress, A Report of the Surgeon General,’’ DHHS, Memorandum from Michael P. Eriksen (CDC) PHS, CDC, National Center for Chronic Disease to Catherine Lorraine (FDA) August 7, 1995 and and-white, text-only format. In addition, Prevention and Health Promotion (NCCDPHP), CDC Fact Sheet (based on J. P. Pierce, M. C. Fiore, billboards and other outdoor advertising OSH, DHHS Pub. No. 89–8411, p. 5, 1989, T. E. Novotny, E. J. Hatziandreu, and R. M. Davis, are prohibited within 1,000 feet of (hereinafter cited as ‘‘1989 SGR’’); See generally ‘‘Trends in Cigarette Smoking in the United States: Projections to the Year 2000,’’ JAMA, vol. 261, pp. schools and public playgrounds. The ‘‘The Health Consequences of Smoking: Chronic rule also prohibits the sale or Obstructive Lung Disease: A Report of the Surgeon 61–65, 1989; Unpublished data from the 1986 General,’’ DHHS, PHS, OSH, 1984, (hereinafter National Mortality Followback Survey, CDC, OSH; distribution of brand-identified cited as ‘‘1984 SGR’’); ‘‘The Health Consequences Peto, R., A. D. Lopez, J. Boreham, M. Thun, and C. promotional, nontobacco items such as of Smoking: Cardiovascular Disease—A Report of Heath, Jr., ‘‘Mortality from Smoking in Developed hats and tee shirts. Furthermore, the Countries, 1950–2000: Indirect Estimates from the Surgeon General,’’ DHHS, PHS, OSH, 1983 rule prohibits sponsorship of sporting (hereinafter cited as ‘‘1983 SGR’’); ‘‘The Health National Vital Statistics,’’ Oxford University Press, Consequences of Smoking: Cancer—A Report of the Oxford, 1994). and other events, teams, and entries in Surgeon General,’’ DHHS, PHS, OSH, 1982, 18 Kann, L., W. Warren, J. L. Collins, J. Ross, B. a brand name of a tobacco product, but (hereinafter cited as ‘‘1982 SGR’’). Collins, and L. J. Kolbe, ‘‘Results from the National permits such sponsorship in a corporate 16 Taioli, E., and E. L. Wynder, ‘‘Effect of the Age School-Based 1991 Youth Risk Behavior Survey and name. This rule is intended to Progress Toward Achieving Related Health at Which Smoking Begins on Frequency of Smoking complement the regulations issued by in Adulthood,’’ The New England Journal of Objectives for the Nation,’’ Public Health Reports, Medicine, vol. 325, No. 13, pp. 968–969, 1991; vol. 108, (Supp. 1), pp. 47–54, 1993. SAMHSA implementing section 1926 of Escobedo, L. G., et al. ‘‘Sports Participation, Age at 19 1994 SGR, p. 101. the Public Health Service Act (42 U.S.C. Smoking Initiation, and the Risk of Smoking Among 20 Id., pp. 5, 58, and 65–67. 300x–26) regarding the sale and 44400 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations distribution of tobacco products to responsibility for various categories of definitional change was made ‘‘to individuals under the age of 18 (the combination products (56 FR 58760, accommodate the principle of SAMHSA rule). November 21, 1991). In addition to the [combination products in] section 20’’ In this document, FDA: (1) Presents authority provided by the SMDA, the (S. Rept. 101–513, 101st Cong. 2d sess., its analysis of its authority to issue agency’s discretion is also based on the at 30 (1990)). For the first time it was regulations that impose the enumerated principles recognized by the Supreme possible, as a legal matter, for a single restrictions on the sale and promotion of Court in cases such as United States v. product to have both drug and device cigarettes and smokeless tobacco to An Article of Drug * * * Bacto-Unidisk, components. those under the age of 18, while leaving 394 U.S. 784 (1969). In Bacto-Unidisk, The SMDA also permitted a wider cigarettes and smokeless tobacco on the for example, the Supreme Court upheld range of products to meet the definition market for adults; and (2) responds to the agency’s decision to regulate a of a device. Prior to its amendment by comments on the proposed rule. diagnostic test kit under its drug the SMDA, section 201(h) of the act II. Legal Authority authorities on the grounds that ‘‘[i]t is defined a ‘‘device’’ as an instrument or enough for us that the expert agency other item that, among other things, In the 1996 Jurisdictional charged with the enforcement of ‘‘does not achieve any of its principal Determination, annexed hereto, the remedial legislation has determined that intended purposes through chemical 21 Food and Drug Administration (FDA) such regulation is desirable for the action within or on the body of man or has determined that cigarettes and public health * * *.’’ (Bacto-Unidisk other animals and which is not smokeless tobacco are combination 394 U.S. at 791–792.) dependent upon being metabolized for products consisting of a drug (nicotine) The discussion that follows describes the achievement of any of its principal and device components intended to in more detail FDA’s interpretation of intended purposes.’’ The SMDA deliver nicotine to the body. The agency the combination product provisions of changed the phrase ‘‘any of its principal may regulate a drug/device combination the SMDA, the agency’s understanding intended purposes’’ in the definition to product using the Federal Food, Drug, of combination products, and the way in read, ‘‘its primary intended purposes.’’ and Cosmetic Act’s (the act’s) drug which the agency has exercised its This change broadened the definition of authorities, device authorities, or both. discretion in determining the most device and allowed more products to be The agency exercises its discretion to appropriate authorities to apply to categorized as devices. determine which authorities to apply in regulate combination products. 2. The SMDA Leaves to FDA’s the regulation of combination products 1. The SMDA Recognized Combination Discretion the Determination of Which to provide the most effective protection Products for the First Time Regulatory Authorities to Apply to to the public health. FDA has Congress enacted the SMDA’s Particular Combination Products determined that tobacco products are combination product provisions to Having recognized combination most appropriately regulated under the recognize combination products as products, the SMDA also provided a device provisions of the act, including distinct entities subject to regulation clear mechanism for determining which the restricted device authority in section under the act and to alleviate the agency component a particular 520(e) of the act (21 U.S.C. 360j(e)). difficulty the agency had experienced in combination product should be directed A. Legal Principles Applicable to regulating such products, especially to for review. Under the SMDA, the Combination Drug/Device Products those consisting of components of both agency must: [d]etermine the primary mode of action of The agency’s discretion to choose the a drug and a device. First, the SMDA explicitly recognized the existence of the combination product. If the [agency] appropriate regulatory tools under the determines that the primary mode of action act is based, in part, on the authority products that ‘‘constitute a combination of a drug, device, or biological product’’ is that of— provided under the Safe Medical (A) a drug (other than a biological product), (section 503(g)(1) of the act (21 U.S.C. Devices Act of 1990 (the SMDA). FDA’s the persons charged with premarket review interpretation, supported by the 353(g)(1))). Second, the statute provided of drugs shall have primary jurisdiction, language of the statute and its legislative a mechanism for determining which (B) a device, the persons charged with history, is embodied in the agency’s agency component would be assigned premarket review of devices shall have implementing regulations codified at the administrative responsibility of primary jurisdiction, or part 3 (21 CFR part 3), the delegations regulating a particular combination (C) a biological product, the persons of premarket approval authority to product (Id.). charged with premarket review of biological FDA’s Center for Drug Evaluation and In accordance with its recognition of products shall have primary jurisdiction. Research (CDER), Center for Devices and combination products, the SMDA (Section 503(g)(1) of the act) Radiological Health (CDRH), and Center changed the statutory definitions of This section of the SMDA ‘‘provide[d] for Biologics Evaluation and Research ‘‘drug’’ and ‘‘device’’ at section 201(g) the [agency] with firm ground rules to (CBER) that enable all three Centers to and (h) of the act (21 U.S.C. 321(g) and direct products promptly to that part of administer statutory authority for drugs, (h)). Before the enactment of the SMDA, FDA responsible for reviewing the devices, and biologics (56 FR 58758, section 201(g) of the act provided that article that provides the primary mode November 21, 1991), and the a drug ‘‘does not include devices or of action of the combination product’’ ‘‘intercenter agreements’’ that guide the their components, parts, or accessories.’’ (S. Rept. 101–513, 101st Cong., 2d sess., agency in allocating Center The SMDA removed this language from 30 (1990)). the definition of ‘‘drug’’ so that the Although the SMDA provided a 21 The Secretary of the Department of Health and terms ‘‘drug’’ and ‘‘device’’ were no mechanism for determining which Human Services (DHHS) (the Secretary) has the longer mutually exclusive, thereby agency component, i.e., a Center, should authority to carry out functions under the act making it possible for a combination review a particular combination through the Commissioner of Food and Drugs (the product consisting of both a drug and product, the legislation left to FDA the Commissioner). (See section 903 of the act (21 U.S.C. 393); 21 CFR 5.10 and 5.11.) Throughout this device to be regarded as an independent discretion to decide which statutory document, references to FDA include the Secretary entity subject to regulation. The authorities it would use in regulating a and the Commissioner. legislative history indicates that this particular combination product. The Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44401 language of the SMDA makes this clear, Drug Evaluation and Research] and [the interpreting the act in a manner that is as does the legislative history of the Center for Devices and Radiological Health] consistent with the public health statute. Indeed, an earlier version of the each may use both the drug and device purposes of the act was recognized by bill, S. 3006, would arguably have provisions of the Federal Food, Drug, and the Supreme Court in United States v. removed this discretion by requiring the Cosmetic Act as appropriate to regulate a Dotterweich, 320 U.S. 277 (1943). This combination product. agency to regulate a product based only case, decided shortly after substantial on its Center assignment. Thus, for (See 21 CFR Part 3). changes were made to expand the example, if the primary mode of action (See also 56 FR 58754 at 58759, agency’s authority by the 1938 act, were that of a drug, the product would November 21, 1991 (FDA amending its addressed the breadth of the term be subject to regulation by CDER under procedural regulations at part 5 by ‘‘person’’ in determining who was the act’s drug authorities. The earlier adding delegations of authority relating subject to prosecution for violations of version’s language, which Congress to the premarket review of combination the act. The Court described the spirit chose to strike from the final enactment, products to state that those specified in which the statute should be provided in relevant part: officials in CBER, CDRH, or CDER ‘‘who interpreted: The [agency] shall require only one market currently hold delegated premarket By the Act of 1938, Congress extended the clearance route for an article that constitutes approval authority for biologics, range of its control over illicit and noxious a combination of a device, drug, or biological devices, or drugs, respectively, are articles and stiffened the penalties for product. If the [agency] determines that the hereby delegated all the authorities disobedience. The purposes of this primary mode of action of the combination necessary for premarket approval of any legislation thus touch phases of the lives and article is that of— product that is a biologic, a device, or health of people which, in the circumstances (A) a drug (other than a biological product), a drug, or any combination of two or of modern industrialism, are largely beyond neither the combination article nor any part more of these products: * * *’’ (21 CFR self-protection. Regard for these purposes of the article shall be treated as a device or 5.33).) Thus, when a combination should infuse construction of the legislation as a biological product for market clearance if it is to be treated as a working instrument product, a single entity, consists of a purposes; of government and not merely as a collection (B) a device, neither the combination component that may be regulated as a of English words. article nor any part of the article shall be drug, the act’s drug provisions and (Id. at 280) treated as a drug or a biological product for device provisions are ‘‘resources’’ The approach in Dotterweich was market clearance purposes; or available to the agency for regulating the followed by a number of cases in which (C) a biological product, neither the product. combination article nor any part of the article FDA’s interpretation of the statute, shall be treated as a drug or a device for (1) One comment disputed the especially in the area of selecting how market clearance purposes. agency’s interpretation of section to regulate a product to achieve a public (136 Congressional Record, S.12493, 503(g)(2) of the act, stating that the health purpose, has been granted 101st Cong., 2d sess., August 4, 1990) language of section 503(g)(2) can be deference and has been upheld. In The omission of this language from construed to mean only ‘‘people, United States v. An Article of Drug the statute indicates that while Congress laboratories, and other agency support. ** * Bacto-Unidisk, 394 U.S. 784 considered dictating which regulatory The term ‘Agency resources’ does not (1969), FDA’s interpretation of the authority must be applied to particular mean ‘legal authorities’ as FDA would definition of the term ‘‘drug’’ and the combination products, and knew how to like to believe.’’ applicability of the premarket review craft language to accomplish such a FDA disagrees with this comment. requirements were at issue. The Court result, Congress ultimately chose to rely The agency notes that there is nothing upheld the agency’s expansive on FDA’s expertise in determining the in the statute itself or the legislative interpretation of the definition of most appropriate regulatory tools history that suggests any reason that the ‘‘drug’’ to include a laboratory screening needed to ensure the safety and expansive phrase ‘‘any FDA resources’’ product, in large part because this effectiveness of the combination should be narrowly interpreted given interpretation resulted in greater products that it regulates. the important public health benefit protection of the public health by virtue Moreover, Congress enacted language (‘‘ensuring an adequate premarket of the premarket review that the product that recognizes that the agency may review’’) that is the goal of this section would be subject to as a drug. As the choose the appropriate regulatory of the SMDA. The agency’s Court reasoned: authority for a particular combination interpretation of this language is It is enough for us that the expert agency product. Section 503(g)(2) of the act supported by the SMDA’s legislative charged with the enforcement of remedial provides that nothing ‘‘shall prevent the history, which is discussed more fully legislation has determined that such [Agency] from using any agency in section II.A.2. of this document. More regulation is desirable for the public health, resources of the Food and Drug importantly, as discussed previously, for we are hardly qualified to second-guess the Secretary’s medical judgment. Administration necessary to ensure the agency has the discretion under the adequate review of the safety, statute as enacted to choose the (Bacto-Unidisk, 394 U.S. at 791–792) effectiveness, or substantial equivalence regulatory authorities most appropriate The Court further stated: The historical expansion of the definition of an article.’’ Since the enactment of to the specific product at issue. of drug, and the creation of a parallel concept the SMDA, the agency has interpreted 3. Interpreting the SMDA to Allow the Agency to Determine Which Regulatory of devices, clearly show, we think, that the phrase ‘‘any agency resources’’ to Congress fully intended that the Act’s include administrative resources and all Scheme Best Serves the Public Health is Consistent With 50 Years of Case Law coverage be as broad as its literal language applicable statutory authorities. See indicates—and equally clearly, broader than Drug/Device Intercenter Agreement, p. Construing the act as allowing the any strict medical definition might otherwise 2, contemporaneous interpretation that: agency discretion to choose the most allow * * *. But we are all the more [u]nder the provisions of the Safe Medical appropriate regulatory tools for a convinced that we must give effect to Devices Act of 1990 and regulations particular combination product is congressional intent in view of the well- promulgated to implement the combination consistent with over 50 years of judicial accepted principle that remedial legislation product provisions of the Act, [the Center for precedent. The importance of such as the Food, Drug, and Cosmetic Act is 44402 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations to be given a liberal construction consistent § 3.2(e)(1), FDA defined a combination that the device component of the with the Act’s overriding purpose to protect product to include, in relevant part: product presented the most important the public health, and specifically, § 507’s A product comprised of two or more regulatory and scientific questions, the purpose to ensure that antibiotic products regulated components, i.e., drug/device, delegations make it possible for CDER marketed serve the public with ‘efficacy’ and biologic/device, drug/biologic, or drug/ ‘safety.’ officials to conduct the premarket device/biologic, that are physically, review of the product under the device (Id. at 798); (See also U.S. v. 25 Cases, chemically, or otherwise combined or mixed provisions of the act. More or Less, of An Article of a Device, and produced as a single entity[.] The regulations and the delegations of ** * Sensor Pads, 942 F.2d 1179 (7th In a final rule that published in the authority constitute the agency’s Cir. 1991) (upholding FDA’s Federal Register of November 21, 1991 contemporaneous interpretation of determination that a latex bag filled (56 FR 58754), the agency explained section 503(g) of the act as granting the with a layer of silicone lubricant that that ‘‘the term combination product agency discretion to choose the was intended to aid women in self- means a product comprised of two or premarket approval authority that examinations for early detection of more different regulated entities, e.g., provides the best public health breast cancer was a device, because, drug, device, or biologic * * *’’ or that protection. Such contemporaneous among other reasons, the court deferred are produced together as a single entity, interpretations by an agency are entitled to the agency’s discretion to interpret its packaged together, or used together to to considerable deference by the courts. own statute based on the legislative achieve the intended effect. Thus, the (See Young v. Community Nutrition history of the act and on the principles fact that a single product contains Institute, 476 U.S. 974 (1986).) announced in Chevron U.S.A., Inc. v. elements of two or more regulated 5. The Intercenter Agreements and Natural Resources Defense Council, entities does not change the regulatory Administrative Precedent Recognize Inc., 467 U.S. 837 (1984)); AMP, Inc. v. status of the individual elements. Each That FDA May Determine Which Gardner, 389 F.2d 825, 830 (2d Cir.), ‘‘different regulated entit[y]’’ of the Regulatory Authority to Apply to a cert. denied, sub nom. AMP, Inc. v. combination continues to satisfy the Particular Product Cohen, 393 U.S. 825 (1968) (upholding criteria of its relevant statutory In addition to the regulations and FDA’s classification of appellant’s definition; that is, a drug component delegations of authority implementing product for tying off severed blood must satisfy the definition in section section 503(g) of the act, FDA has also vessels as a drug because, in part, the 201(g) of the act, and a device adopted and made public three court was reluctant to give a narrow component must comply with the construction to the act, ‘‘touching the guidance documents, entitled definition in section 201(h) of the act. public health as it does’’).) ‘‘Intercenter Agreements,’’ that describe Because the elements of a combination These cases stand for two principles: the agreements reached among the product meet more than one (1) FDA’s interpretations of its own Centers about regulatory pathways for jurisdictional definition, the agency may statute should be given deference, and specified products or classes of products apply one or more sets of regulatory (2) the act should be interpreted as of October 31, 1991. (See Intercenter provisions to the product. expansively to achieve its primary Agreement Between the Center for purpose, protecting the public health. In the same issue of the Federal Biologics Evaluation and Research and These principles support the agency’s Register in which the agency published the Center for Devices and Radiological determinations, carefully made after the final regulations governing Health; Intercenter Agreement Between applying its considerable scientific combination products, the agency the Center for Drug Evaluation and expertise to the evaluation of the published delegations of authority that Research and the Center for Devices and evidence before it, that cigarettes and allow the officials in CDER, CDRH, and Radiological Health (the Drug/Device smokeless tobacco are drug delivery CBER to utilize the premarket approval Agreement); and Intercenter Agreement devices and that these combination authorities for any product that is a Between the Center for Drug Evaluation products are most appropriately drug, device, biologic, or any and Research and the Center for regulated using the device authorities of combination of two or more of these (56 Biologics Evaluation and Research.) the act. The agency’s decision regarding FR 58758, November 21, 1991 (21 CFR These documents detail which Center tobacco products is consistent with 5.32)). These delegations allow the generally will have the lead other determinations that the agency has officials of one Center to conduct a responsibility for regulating particular made, which have been upheld and premarket review of a product under types of products. The Intercenter endorsed by the courts, to regulate another Center’s regulatory authority, Agreements also state which regulatory products in the most reasonable manner thereby making it possible, for example, authority usually will be applied to that will result in the best protection of for CDER to review a drug/device specific products. For example, the the public health. combination product under the device Drug/Device Agreement provides that a 4. The Implementing Regulations and authorities. While the combination device with the primary purpose of the Delegations of Authority Reflect product regulations created the delivering or aiding in the delivery of a FDA’s Interpretation That Section 503(g) procedure for making the proper Center drug and distributed containing a drug of the Act Authorizes the Agency to assignment, the delegations were (i.e., ‘‘prefilled delivery system’’) will be Determine the Appropriate Regulatory necessary in order for FDA to exercise regulated by ‘‘CDER using drug Authorities its discretion to determine which authorities and device authorities, as FDA’s implementing regulations and regulatory authority is most appropriate necessary’’ (Drug/Device Agreement, p. delegations of authority, adopted shortly and to make it possible to apply that 6). Examples given of such combination after passage of the SMDA, reflect the authority to review a particular product. products include a nebulizer, prefilled agency’s contemporaneous If the primary mode of action of a syringe, and transdermal patch (Drug/ interpretation of section 503(g) of the act combination product having drug and Device Agreement, p. 6). The Drug/ as authorizing the agency to apply the device components resulted in the Device Agreement specifically provides most appropriate regulatory authorities assignment of the product to CDER, for that such combination products may be to any given combination product. In example, but the agency determined regulated under either the drug or Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44403 device authorities, whichever is more Another example of the agency’s use B. Cigarettes and Smokeless Tobacco appropriate for a particular product. 22 of its discretion and its ability under the Have Both a Drug and a Device FDA’s implementation of the guidance in the Intercenter Agreements Component and Are Therefore Intercenter Agreement reflects these to make a sensible decision about Combination Products understandings. For example, one drug product assignment is its decision As discussed in detail in the 1996 delivery product that has been regulated regarding regulation of a catheter flush Jurisdictional Determination, the agency under the device authorities under the solution containing a blood-thinning has concluded that the nicotine in Drug/Device Agreement is the prefilled, drug and an antibiotic. The solution is cigarettes and smokeless tobacco is a intravenous infusion pump, intended as a flush solution to prevent drug within the meaning of section manufactured by two companies. These the catheter (or tube) inserted into a 201(g)(1)(C) of the act. The agency has are pumps designed to be sold prefilled patient’s body from becoming clogged also concluded that cigarettes and with a diluent, either a sodium chloride with blood and to prevent dangerous smokeless tobacco contain, in addition solution or a dextrose solution. FDA bacteria from growing in the catheter. to the drug nicotine, delivery device regulates the diluents in the pumps as Under the Drug/Device Agreement, this components that deliver a controlled drugs under section 201(g)(1)(B) of the product would appear to fit into the amount of nicotine to the body. Thus, act because they are intended for use in category of a ‘‘liquid * * * or other cigarettes and smokeless tobacco are the treatment of disease. The pumps are similar formulation intended only to combination products that contain both combination products consisting of a a ‘‘drug’’ and a ‘‘device.’’ serve as a component * * * to a device device component, the pump, and a The agency further concluded that with a primary mode of action that is drug component, the diluent; and the processed loose cigarette tobacco, which product’s purpose is to deliver the physical in nature [and] will be is used by smokers who roll their own diluent to be mixed by the doctor or regulated as a device by CDRH’’ (see cigarettes, is a combination product. other health care provider attending the Drug/Device Agreement, p. 13). The patient with another drug substance for agency did determine that the product’s C. FDA’s Choice of Legal Authorities infusion into the patient. These pumps premarket review would be conducted 1. FDA Will Regulate Cigarettes and prefilled with diluents are clearly ‘‘a under the device authorities, but it Smokeless Tobacco Under the Act’s device containing a drug substance as a assigned the review responsibility to Device Authorities component with the primary purpose of CDER. The decision to follow an Having established that cigarettes and the combination product being to fulfill approach different from the one smokeless tobacco are combination a drug purpose’’ that would be regulated generally suggested in the Drug/Device products consisting of both a drug as a drug according to the general Agreement was based on the fact that component and device components, the principle stated in the Drug/Device the inclusion of the blood-thinning and agency has the discretion to choose Agreement (Drug/Device Agreement, p. anti-infective drugs in the flush solution whether it will regulate these products 14). However, the agency exercised its represented an innovation in such under the act’s drug authorities, device discretion and determined that these solutions and raised important scientific authorities, or both if appropriate. drug delivery products should be and regulatory questions that were most Making this determination requires FDA regulated under the device authorities. properly reviewed by the scientists in to consider how the public health goals of the act can be best accomplished. The agency based its determination CDER. Because CDER was assigned the The act’s drug and device provisions on the fact that the drugs that were lead, the sponsor of this product was have a common objective: To ensure the delivered by the products, saline and informed that the clinical investigations dextrose, are two ingredients very safety and effectiveness of regulated of this product should proceed under commonly used in intravenous products. They also provide the agency the investigational drug provisions of infusions about which the agency had a with similar authorities to regulate the act (section 505(i) of the act (21 wealth of scientific information and drugs and devices. In certain ways, thorough regulatory experience. The U.S.C. 355(i)). This determination however, the device provisions offer pumps, the device component of this tailored the act’s premarket review FDA more flexibility. The Medical combination, however, operated on provisions, incorporating the most Device Amendments of 1976 (the novel design principles. Because the appropriate sections of both the drug Medical Device Amendments) were device components of these and device authorities without being enacted nearly 40 years after the act combination products were new and redundant, to the special features of this itself. During that period of time, raised significant regulatory questions, original product. Congress observed FDA’s efforts to the agency determined that the products The agency has thus in the past made regulate devices under the authority of would receive the most appropriate its jurisdiction decisions by determining the act, noting that the agency’s premarket review if the device the most reasonable course of action to authority over devices became authorities were applied. protect public health given the scientific increasingly inadequate as the nature of the devices on the market changed (H. questions presented by each product. 22 Rept. 94–853, 94th Cong., 2d sess., 6–10 A later section of the Drug/Device Agreement FDA considers essential its ability to states that a ‘‘device containing a drug substance as (1976)). a component with the primary purpose of the continue to assess the individual In 1938 most of the devices in use combination product being to fulfill a drug purpose circumstances of particular products. were ‘‘relatively simple items which is a combination product and will be regulated as This will allow the agency to respond to a drug by CDER.’’ While this is the approach that applied basic scientific concepts * * *’’ FDA will usually take with such products, the technological developments, expanded (H. Rept. 94–853, 6). However, by the earlier language of the Drug/Device Agreement scientific understanding, or additional time the Medical Device Amendments expressly recognizes that FDA may use its device factual information concerning a were enacted, the universe of device authorities where appropriate, and as discussed in specific product or class of products. the text, there are several examples of this type of products had evolved from primarily prefilled delivery system being regulated using the simple products, such as tongue device authorities. depressors and bandages, to include a 44404 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations variety of scientifically and devices, while others, such as premarket FDA for cigarettes and smokeless technologically sophisticated products, approval and restrictions on sale, tobacco distort the regulatory scheme such as cardiac pacemakers, lasers, and distribution, and use, are to be applied for devices established by Congress. magnetic resonance imaging equipment. only where FDA concludes that they are These comments contended that FDA This wide range of technology posed necessary to provide reasonable has: (1) Selectively applied the many more varied regulatory concerns assurance of safety and effectiveness for provisions of the Medical Device than those posed by drugs, which as a particular devices. The Medical Device Amendments; (2) inappropriately relied group of products are less diverse in Amendments are thus designed to allow on section 520(e) of the act (restrictions nature. the agency to regulate individual on sale, distribution, or use) while Congress recognized the need for devices with controls that are tailored to ignoring other mandatory provisions of specific authority for devices that would address the safety and effectiveness the act, such as classification; and (3) take into account ‘‘the great diversity problems raised by those devices. determined that cigarettes and among the various medical devices and As devices, cigarettes and smokeless smokeless tobacco are unsafe and yet their varying potentials for harm as well tobacco will be subject to all mandatory failed to invoke provisions of the act as their potential benefit to improved provisions of the act, except where that, according to the comments, require health’’ (S. Rept. 94–33, 94th Cong., 1st exemption is permitted by statute and is the agency to remove them from the sess., 10 (1975)). Thus, with the Medical appropriate for these products. In market. Device Amendments, Congress addition, cigarettes and smokeless FDA disagrees with these comments. enhanced FDA’s authority to tailor tobacco will be subject to other As already described, FDA intends to regulatory controls, from an array of discretionary provisions of the act that apply to cigarettes and smokeless statutory tools, to fit the particular the agency has concluded are necessary tobacco all of the mandatory provisions safety and effectiveness issues presented to address the special safety issues of the Medical Device Amendments. by individual devices. posed by these products. Thus, FDA is neither selectively Because of this additional flexibility, The basic requirements of the act applying the provisions of the act nor the agency has determined that the applicable to all devices include: ignoring mandatory provisions. device authorities provide the most Adulteration and misbranding Although FDA intends to impose on appropriate basis for regulating provisions (sections 501 and 502 of the cigarettes and smokeless tobacco all cigarettes and smokeless tobacco. act (21 U.S.C. 351 and 352)), labeling requirements applicable to devices, the Because millions of Americans are requirements (section 502), act does not provide that these addicted to cigarettes and smokeless establishment registration, device requirements should all be imposed tobacco, regulation of these products listing, and premarket notification immediately. Classification serves the presents unique safety problems that (section 510 (21 U.S.C. 360)), purpose of identifying which devices require careful, tailored solutions. The recordkeeping and reporting need to be subject to special controls Medical Device Amendments provide requirements (section 519 (21 U.S.C. (class II) or premarket approval (class the agency with regulatory options that 360i)), and good manufacturing practice III) in addition to the general controls are well suited to the unique problems (GMP) requirements (section 520(f)). As applicable to all devices. Classification presented by cigarettes and smokeless described in more detail in section requires FDA to institute a separate tobacco. II.C.4. of this document, FDA intends to rulemaking proceeding. The act does Although the agency has determined apply these requirements, where not require the agency to classify a that the device authorities are the most appropriate, to cigarettes and smokeless device before general controls become appropriate authorities for regulating tobacco at a future time. In addition, the applicable to it. Rather, the general cigarettes and smokeless tobacco, the act requires the agency to classify controls provisions of the act apply to agency disagrees with the comments devices into one of three classes. all devices both before and after that suggest that the agency could not Depending on the class into which a classification and irrespective of the regulate cigarettes and smokeless product is classified, additional class into which a device is ultimately tobacco as drugs. To the contrary, as regulatory requirements may apply: classified. Because the classification discussed in section II.D. of this Class I (general controls), class II process involves many steps and can document, the agency could have used (special controls), and class III take years to complete, FDA does not its drug authorities to implement similar (premarket approval). As described in ordinarily complete the classification types of controls on cigarettes and more detail in section II.C.5. of this process before regulating the device smokeless tobacco as it is imposing document, as the act contemplates, FDA under its general controls. under the somewhat more flexible intends to classify cigarettes and Moreover, the statute contains no device authorities. smokeless tobacco at a future time, and requirement that the agency complete a 2. Cigarettes and Smokeless Tobacco will impose any additional classification rulemaking before Will be Subject to the Full Range of requirements that apply as a result of invoking the general controls that apply Device Authorities their classification. to all devices. For example, each of the In regulating cigarettes and smokeless The agency has determined that the literally thousands of medical devices tobacco, FDA will follow the regulatory safety of cigarettes and smokeless that have been classified by rulemaking scheme created by Congress for devices. tobacco cannot be assured without under section 513 of the act (21 U.S.C. Because the universe of devices is restrictions on the sale, distribution, and 360c) were subject to the general extremely diverse, presenting a broad use of these products to children and controls of the statute—such as the spectrum of safety and effectiveness adolescents. Accordingly, FDA is provisions on adulteration, issues, the Medical Device Amendments imposing restrictions under the misbranding, registration, include a wide range of regulatory authority granted in section 520(e) of investigational device controls, and controls. Some of these controls, such as the act. GMP—in advance of the completion of the adulteration and misbranding (2) Several comments argued that the the classification rulemaking requirements, are applicable to all regulatory requirements proposed by proceedings. (See, e.g., Contact Lens Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44405

Mfrs. Association v. FDA, 766 F.2d 592, FDA discusses classification of As described more fully later in this 603 (D.C. Cir. 1985), cert. denied 474 cigarettes and smokeless tobacco. section of this document, the agency’s U.S. 1062 (1986).) Indeed, in some 3. The Restricted Device Provision use of section 520(e) of the act in this cases, the general controls provisions Authorizes FDA to Establish Access and rule is consistent with the plain were applicable to marketed devices for Advertising Restrictions language of section 520(e), the many years before completion of Congress provided FDA with legislative history, and the agency’s classification. authority to prevent the use of a device prior use of section 520(e) in, for Consistent with the agency’s practice, by those not competent to use it safely example, restricting the sale, FDA has made a decision to apply the in the restricted device provision distribution, and use of hearing aids (42 general controls provisions of the act to (section 520(e) of the act). Specifically, FR 9285, February 15, 1977, as amended cigarettes and smokeless tobacco, section 520(e) of the act states in part: at 47 FR 9397 through 9398, March 5, including restrictions on their (1) The [agency] may by regulation require 1982). distribution, sale, and use under section that a device be restricted to sale, As discussed in section II.C.5. of this 520(e) of the act, before classifying distribution, or use— document, the agency intends to classify cigarettes and smokeless tobacco. As (A) only upon the written or oral cigarettes and smokeless tobacco under described in section II.C.5. of this authorization of a practitioner licensed by the procedures contained in section 513 document, FDA will, in a future law to administer or use such device, or of the act. The classification process is rulemaking, classify cigarettes and (B) upon such other conditions as the the time at which the agency determines smokeless tobacco in accordance with [agency] may prescribe in such regulation, if, what degree of regulation is necessary to the procedures in section 513 of the act. because of its potentiality for harmful effect provide a ‘‘reasonable assurance of In the meantime, the general controls or the collateral measures necessary to its safety and effectiveness’’ for a particular will apply. use, the [agency] determines that there product, such as tobacco products. cannot otherwise be reasonable assurance of FDA also disagrees that the act its safety and effectiveness. However, the act does not specify the requires the agency to remove cigarettes timing of the application of device and smokeless tobacco from the market. Section 520(e) is one of the act’s authorities, and the agency is therefore As described in the preamble to the ‘‘general controls’’ (see section able to issue restrictions under section 1995 proposed rule (60 FR 41314), 513(a)(1)(A) of the act). As a general 520(e) of the act prior to initiating the although cigarettes and smokeless control, section 520(e) of the act can be classification process. The agency also tobacco pose very grave risks, the used by FDA to regulate any class of did so in its regulation of hearing aids. agency cannot conclude that removing device (section 513(a) of the act). In 1977, FDA adopted regulations under them from the market would most Because its applicability does not section 520(e) of the act containing effectively meet the statutory goal of depend upon the outcome of the restrictions on the sale, distribution, and providing reasonable assurance of safety classification process, 520(e) of the act— use of hearing aids (42 FR 9285, and effectiveness. Because millions of like the other general controls—can be February 15, 1977, as amended at 47 FR Americans are addicted to cigarettes and used by FDA to regulate a device prior 9397 and 9398, March 5, 1982), but did smokeless tobacco, the consequences of to the classification of the device. not classify these products until 1986 their removal from the market, as In applying section 520(e) of the act (51 FR 40378 at 40389, November 6, discussed in greater detail in section to restrict the sale, distribution, or use 1986). II.C.5. of this document, would include of a device, FDA must find that without FDA is following a similar course adverse health effects from sudden the restriction ‘‘there cannot otherwise here. The agency has determined that withdrawal, the likely development of a be reasonable assurance of its safety and unless measures are taken now to black market, and the possibility that effectiveness.’’ This provision requires prohibit the sale and promotion of these the products that would be available FDA to find that the restrictions in products to young people under the age through a black market would pose section 520(e) of the act are necessary to of 18, there cannot otherwise be greater risks than those currently on the assure the safety and effectiveness of the reasonable assurance of safety. market. None of the statutory sections device, but FDA does not have to find Therefore, FDA is acting under section cited by the comments require the that the restrictions are sufficient to 520(e) of the act to restrict the sale, agency to remove products from the assure safety and effectiveness. During distribution, and use of cigarettes and market where the agency concludes that the classification process, FDA smokeless tobacco. such action would be contrary to the determines whether additional controls a. The restricted device provision public health. Here, FDA has beyond section 520(e) of the act and the authorizes FDA to prevent access to determined that the unique safety issues other general controls applicable to all persons who cannot use a device safely presented by highly addictive and long- devices are needed to assure the safety or effectively. Section 520(e) of the act marketed products like cigarettes and and effectiveness of the device. is in part the device counterpart to smokeless tobacco can most effectively The restricted device provision in section 503(b), the act’s prescription be addressed by actions to prevent new section 520(e) of the act authorizes FDA drug provision. Section 503(b)(1) of the users from becoming addicted to these to adopt regulations that ensure that act, for instance, authorizes FDA to devices. children and adolescents, who by State restrict access to potentially dangerous In section II.C.3. of this document, law are not competent to use cigarettes drugs by requiring that they be FDA discusses its authority to impose and smokeless tobacco, will not be able dispensed ‘‘only upon a * ** restrictions on sale, distribution, and to obtain them. In particular, FDA has prescription of a practitioner licensed use to prevent children and adolescents determined that section 520(e) of the act by law to administer such a drug from becoming addicted to cigarettes authorizes the access and advertising ** *.’’ Similarly, section 520(e)(1)(A) and smokeless tobacco. In section II.C.4 restrictions in the final rule because of the act authorizes FDA to restrict of this document, FDA discusses without these restrictions ‘‘there cannot access to potentially dangerous medical imposition of other general controls, otherwise be reasonable assurance of devices ‘‘only upon the * ** and, in section II.C.5 of this document, * * * safety * * *.’’ authorization of a practitioner licensed 44406 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations by law to administer or use such device authority covers all aspects of the sale that the agency adopts under section * * *.’’ of a device, including the offer of sale. 520(e). The agency should not be—and The restricted device provision, How a device is sold involves many under section 520(e) of the act is not— however, is significantly broader than elements. It involves not only the powerless to prevent advertising that the prescription drug provision. Not circumstances surrounding the encourages sales that the agency has only may FDA restrict sale, distribution exchange of money for the device, but barred under section 520(e). Rather, the and use by prescription, but it may do also whether the device must be sold agency may use its authority to impose so upon ‘‘such other conditions as [it] only on the authorization of a ‘‘such other conditions as the [agency] may prescribe in such regulation’’ practitioner, whether age limits on users may prescribe’’ to restrict advertising (section 520(e)(1)(B) of the act are appropriately established, and how that directly undercuts the agency’s (emphasis added)). There is no the device is represented to potential restrictions on sale, distribution, and counterpart to this ‘‘other conditions’’ users. It is in the latter regard that use. authority in the prescription drug advertising plays a role and may be c. The restricted device provision provisions. restricted under section 520(e) of the authorizes FDA’s restrictions on youth act. access and on advertising designed to Section 520(e) of the act was designed The Supreme Court cases on make cigarettes and smokeless tobacco to deal with the risks that are created by commercial speech recognize that a appealing to youth. The restricted improper use of a device. The legislative State’s interest in regulating sales device provision authorizes the history of the Medical Device extends to advertising promoting the restrictions on youth access and on Amendments specifically states that sale. In Edenfield v. Fane, 507 U.S. 761, advertising in this final rule. Section section 520(e) of the act was intended to 767 (1993), the Supreme Court said that 520(e) of the act contemplates these ‘‘supersede[ ]’’ and ‘‘add[ ]’’ to the commercial transactions are ‘‘linked types of restrictions on sale and prescription authority derived from inextricably’’ with the commercial distribution. Moreover, they are section 503(b) of the act (H. Rept. 94– speech that proposes the transaction, necessary if FDA ever were to be able 853, 94th Cong. 2d sess., 24–25 (1976)). and that the State’s interest in regulating to find that there is a reasonable This confirms that Congress intended to the underlying transaction may give it a assurance of the safety of cigarettes and give FDA broad authority to restrict concomitant interest in the expression smokeless tobacco under the act. As access to potentially dangerous devices. itself. Likewise, under section 520(e) of section 520(e) of the act provides, (See also ‘‘Medical Device Regulation: the act, the sale of a device is ‘‘linked without these restrictions ‘‘there cannot The FDA’s Neglected Child,’’ Report of inextricably’’ to the advertising that otherwise be reasonable assurance of the Subcommittee on Oversight and promotes the sale, giving FDA safety and effectiveness.’’ Investigations, House Committee on concomitant authority to impose The provisions in the final rule that Energy and Commerce, 98th Cong., 1st necessary restrictions on the restrict the access of minors to cigarettes sess., 31 (1985).) advertising. and smokeless tobacco are clearly Congress’ use of the phrase ‘‘could FDA’s regulation of hearing aids restrictions on ‘‘sale, distribution, or include’’ indicates that this discussion exemplifies this aspect of section 520(e) use’’ of a device within the meaning of was intended to be illustrative rather of the act. One of the most important section 520(e) of the act. FDA’s access than exhaustive. The examples of purposes of the restrictions on sale, restrictions are designed to ensure that possible restrictions described in the distribution, and use imposed on children and adolescents are unable to legislative history demonstrate that hearing aids was to respond to have access to cigarettes and smokeless Congress intended to give the agency widespread inappropriate promotion of tobacco. These restrictions directly limit authority to restrict access to devices in hearing aids to consumers for whom the the sale of cigarettes and smokeless a variety of ways, depending upon the devices are not effective (see 41 FR tobacco by, for instance, banning the type of risk posed by the device and the 16756 at 16757 (April 21, 1976)). In that sale of these products to persons under measures needed to ensure that the regulation, in addition to restricting 18. They also directly limit the device is not used inappropriately. In sales to persons who had been distribution of cigarettes and smokeless short, the legislative history supports medically evaluated for hearing aids, tobacco by, for instance, banning the the statutory language and establishes FDA relied upon section 520(e) of the distribution of free samples. Hence, that Congress intended FDA’s authority act to require that an instructional these access restrictions are within the to restrict the sale, distribution, and use brochure be distributed to each plain language of section 520(e) of the of devices ‘‘upon such other conditions prospective hearing aid user. These act. as the [agency] may prescribe’’ to be a brochures described the adverse The advertising restrictions in the flexible authority that allows FDA to reactions and side effects associated final rule are also among the types of tailor restrictions on sale, distribution, with hearing aids and encouraged restriction that section 520(e) of the act and use according to the circumstances prospective users to seek medical authorizes. As in the case of the posed by the device being regulated. evaluations. The distribution of the restrictions imposed on hearing aids, b. The restricted device provision also brochure was required as a means of the advertising restrictions are designed authorizes FDA to restrict promotional ensuring that advertising for hearing to address inappropriate promotion of activities that encourage uses that are aids did not inappropriately induce cigarettes and smokeless tobacco to inconsistent with the regulatory scheme. persons who had not been medically individuals for whom the potentiality Section 520(e) of the act is a broad grant evaluated to purchase the hearing aids. for harm is particularly great. The of authority. The Secretary, and by The agency’s authority to use section advertising restrictions are necessary to delegation FDA, is authorized to restrict 520(e) of the act to restrict advertising prevent advertising by the the sale, distribution, or use of a device is especially strong when limits on manufacturers of cigarettes and ‘‘upon such other conditions as the advertising are necessary to ensure that smokeless tobacco from undercutting [agency] may prescribe in such advertising does not undermine the the access restrictions. The effectiveness regulation.’’ This broad grant of conditions on sale, distribution, or use of the restrictions on youth access Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44407 would be substantially diminished if the advertising restrictions. A comment (4) With regard to access, industry manufacturers were free to entice from a public interest group, however, comments contended that FDA’s children and adolescents to circumvent fully supported FDA’s reliance on authority under the provisions of the act the access restrictions. In this section 520(e). FDA also received a large relating to restricted devices was circumstance, restrictions on advertising number of comments from a broad intended to be no broader than its are properly treated as restrictions on cross-section of the public that prescription drug authority and, ‘‘sale, distribution, or use’’ within the expressed support for, or opposition to, accordingly, could not extend to meaning of section 520(e) of the act. the proposed restrictions without restrictions such as those in the 1995 The final requirement of section delving into the legal issues analyzed in proposed rule. 520(e) of the act is that the agency the 1995 proposed rule. FDA disagrees with this view and establish that without the restrictions on (3) One comment said that FDA uses believes that it is unsupported by the the device ‘‘there cannot otherwise be the term ‘‘conditions’’ in section clear language of the act and the reasonable assurance of its safety and 520(e)(1)(B) of the act to mean any legislative history (see H. Rept. 94–853, effectiveness.’’ This requirement is regulatory imposition that the agency 94th Cong., 2d. sess., 24–25 (1976)). Had plainly met in the case of the access and believes would bring about an Congress meant for the authority advertising restrictions for cigarettes improvement in safety in some way granted FDA under section 520(e) of the and smokeless tobacco. Without related to the device in question. The act to be no broader than the authority effective restrictions on sale and comment argued that FDA has used this granted in section 503(b)(1) of the act to distribution of cigarettes and smokeless term in such an overinclusive way that limit drugs to prescription use, it could tobacco to children and adolescents it would authorize FDA to impose many simply have amended section 503(b)(1) under 18, young people will continue to of the requirements that Congress of the act to add ‘‘or device’’ after become addicted to these products and, imposed in other provisions of the act. ‘‘drug’’ each time the term is used. once addicted, will as adults continue to For example, the comment argued that Indeed, as discussed in Becton, use them in spite of their potential for under FDA’s interpretation it could Dickinson and Company v. Food and harmful effects. As stated in section I.B. require premarket approval of a device Drug Administration, 589 F.2d 1175 (2d of this document, the earlier tobacco use with a potentiality for harmful effect as Cir. 1978) that approach was the one begins, the greater the risk of disease a ‘‘condition’’ on the ‘‘sale, distribution, used in early versions of the legislation caused by, or associated with, the use of or use’’ of the device, on the theory that that became the 1976 amendments but these products. Thus, there can be no without premarket approval it would be was abandoned in favor of the broader doubt that without the access and impossible for there to be ‘‘reasonable ‘‘restricted device’’ approach that has advertising restrictions imposed in this assurance of its safety.’’ been a part of the law for 20 years. The final rule, no finding that there is a FDA disagrees with this comment. plain language of the enacted provision reasonable assurance of safety for FDA’s interpretation of section 520(e) of contains no limitation on the types of cigarettes and smokeless tobacco would the act does not create any redundancy restrictions that can be imposed and be possible. with the other provisions of the Medical certainly is not limited by its terms to Although FDA finds that the Device Amendments. Most of the restriction to prescription use. restrictions under section 520(e) of the general controls authorized under the Moreover, as previously discussed, the act are necessary for providing a act, and the major thrust of the legislative history specifically states that reasonable assurance of safety, FDA is provisions on performance standards the agency’s authority under section not required under section 520(e) of the and premarket approval, are geared 520(e) of the act is broader than its act to show that the restrictions are toward ensuring that finished devices, authority under the prescription drug sufficient by themselves to provide a when ready for use, will be free from provisions (H. Rept. 94–853, 94th Cong., reasonable assurance of safety or defects and will provide a reasonable 2d sess., 24–25, 1976). effectiveness. Under section 520(e) of assurance of safety and effectiveness for (5) An industry comment contended the act, all that FDA must establish is their labeled use. Restrictions under that ‘‘FDA uses what is merely the that without the section 520(e) section 520(e) of the act, on the other medical device version of prescription restrictions, the device could not be hand, are imposed because the device’s drug status as the sole legal justification found to be safe. ‘‘potentiality for harmful effect or the for an elaborate system of controls far It is in the classification process—not collateral measures necessary to its broader and more intrusive than is in the application of section 520(e) of use,’’ and the determination that, authorized even for true medical the act—that FDA must determine what without such restrictions, there cannot devices.’’ controls are necessary if the agency is to otherwise be a reasonable assurance of As discussed in section II.C.3. of this find that there is a reasonable assurance safety and effectiveness. The restrictions document, FDA’s restricted device that a device is safe and effective for its under section 520(e) of the act on authority is significantly broader than intended use. As discussed in section cigarettes and smokeless tobacco focus suggested by this comment. Given the II.C.5. of this document, FDA intends to on those who may not purchase and use potentiality for harm from cigarettes and classify cigarettes and smokeless these products rather than on those who smokeless tobacco, FDA has ample tobacco in a future rulemaking. will be using the products. Without authority to impose the conditions on d. Response to other comments. FDA successful restrictions on sale, their sale, distribution, and use that it is received several comments on whether distribution, and use of cigarettes and adopting. section 520(e) of the act authorizes smokeless tobacco to children and As is the case with other medical restrictions on youth access and adolescents under 18, there will never devices, cigarettes and smokeless advertising. Most of the comments were be reasonable assurance of the safety of tobacco are subject to those regulatory from tobacco trade associations, tobacco these products because they would controls that are appropriate for medical companies, and advertisers, arguing that continue to be available to these young devices generally (e.g., registration, section 520(e) of the act does not people, who, by State law, are not labeling, and inspection), along with provide authority for either the access or competent to use them. those tailored to the product in question 44408 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations and the risks that it presents (access them before the age of 18 and who lack Thus, Congress clearly intended restrictions and advertising controls). the competency to decide to do so. FDA section 502(q)(1) and (r) of the act and Thus, FDA is treating cigarettes and has determined, as explained in sections any restrictions that FDA adopts under smokeless tobacco in a manner that is VI.B. and D. of this document, that how section 520(e) of the act to be consistent with how it treats other cigarettes and smokeless tobacco are complementary. This intent is further medical devices. advertised plays a material role in the evidenced by the fact that section (6) Turning to the advertising decision of children and adolescents 502(q)(2) of the act provides that a restrictions, several comments argued under 18 to purchase and use these restricted device is misbranded if it is that section 520(e) of the act authorizes products. Thus, if the restrictions on sold, distributed, or used in violation of only restrictions on ‘‘sale, distribution, how cigarettes are sold, distributed, and regulations prescribed under section or use,’’ and that it does not include the used that FDA is adopting under section 520(e) of the act. Section 502(q)(2) of the words ‘‘offer for sale.’’ These comments 520(e) of the act are to be effective, they act thus complements sections 502(q)(1) pointed out that Congress used the must include restrictions on how and (r) of the act, which, as previously words ‘‘offer for sale’’ elsewhere in the cigarettes and smokeless tobacco are explained, address different aspects of act (sections 301(m) and (o) (21 U.S.C. advertised. the regulation of restricted devices than 331(m) and (o)) and 503(c)), and they (7) The comments also argued that does section 520(e) of the act. therefore drew the inference that if section 520(e) of the act on its face says FDA’s interpretation of section 520(e) Congress had intended section 520(e) of nothing about advertising. Thus, of the act accordingly does not render the act to authorize restrictions on how according to these comments, FDA’s either section 502(q)(1) or (r) of the act medical devices are offered for sale, it authority to regulate the advertising of superfluous. Rather, the three would have made this fact explicit. restricted devices is limited by section provisions support and reinforce each FDA is not persuaded by this 502(q)(1) of the act, which prohibits other. argument. In each of the instances cited false or misleading advertising, and (8) An additional argument advanced in the comments where Congress has section 502(r) of the act, which by two tobacco trade associations was included the phrase ‘‘offer for sale’’ in prescribes certain statements in the that the interpretation of section the act, it was defining a prohibited act, advertising for these devices. One 520(e)(1)(B) of the act, which authorizes that is, an act whose commission would comment implied that FDA’s FDA to restrict the sale of a device upon violate the statute, in which the interpretation of section 520(e)(1) of the such ‘‘other conditions’’ as it deems prohibition focused, at least in part, on act had rendered section 502(q)(1) and necessary, is governed and limited by the sale of a food, drug, or device. By (r) of the act superfluous. the rule of ejusdem generis. This rule of including the phrase ‘‘offered for sale’’ FDA is not persuaded by these statutory construction provides that, in these provisions, Congress sought to comments. The interpretation of section where general words follow an ensure that the statutory objective of 520(e) of the act that FDA has adopted enumeration of persons or things of a preventing the actual sale of products in this proceeding would not render particular and specific meaning, such where advertising or labeling does not either section 502(q)(1) or (r) of the act general words are not to be construed in meet the statutory requirement would inoperative or superfluous. These their widest extent but are to be held as be met by including products merely sections impose requirements on applying to only persons or things of the ‘‘offered for sale’’ within the statute’s advertising of the permissible sale, same general kind or class as those coverage. The agency notes that, distribution, and use of restricted specifically mentioned. Thus, the similarly, the words ‘‘offered for sale’’ devices. They set out conditions on comment argued that here, ejusdem appear in section 502(q) of the act, the advertising to which manufacturers generis limits the scope of ‘‘other provision that the agency would use to must adhere in offering these devices for conditions’’ in section 520(e)(1)(B) of enforce section 520(e) of the act. Thus, sale. Section 520(e) of the act, on the the act to restrictions similar in nature Congress did in fact include ‘‘offer for other hand, is the means by which FDA to the restriction to prescription use in sale’’ in the scope of conduct regulated demarcates permissible and section 520(e)(1)(A) of the act. The under section 520(e) of the act and its nonpermissible conditions of sale, comment argued that it would be totally enforcement clause, section 502(q). The distribution, and use of these devices. In inconsistent with the rule of ejusdem comment’s argument, however, misses so doing, as has been explained in generis to expand the scope of ‘‘other the significance of section 520(e) of the response to the previous comments, conditions’’ to include a provision as act. FDA may by regulation impose limits on dissimilar to a prescription requirement As discussed in section II.C.3. of this advertising that it finds are necessary to as a restriction on advertising. FDA does document, the authority to restrict the ensure that advertising is not used to not agree that ejusdem generis is ‘‘sale, distribution, or use’’ of a device undermine the conditions on sale, controlling, or that it has any includes the authority to restrict the distribution, or use that the agency application here. In Norfolk & Western circumstances surrounding the sale and adopts. This is what §§ 897.30, v. American Train Dispatchers Ass’n, distribution of the device, including the 897.32(a), and 897.34, the regulations the Supreme Court held that this canon device’s advertising. The use of section that set out the restrictions on does not control ‘‘when the whole 520(e) of the act to restrict advertising advertising, are designed to accomplish. context dictates a different conclusion’’ is particularly appropriate when the In fact, section 502(q)(1) of the act (499 U.S. 117, 129 (1991)). The context advertising restrictions are necessary to reinforces this authority because any involving section 520(e) of the act does ensure that access restrictions issued advertisement that promotes the sale of not support the application of ejusdem under section 520(e) of the act are not a device for a use that is inconsistent generis to it. There is no indication that undermined by a manufacturer’s with a restriction established by FDA Congress thought that it was providing advertising. Here, FDA is restricting the would be false and misleading because a list of similar measures in section sale of cigarettes and smokeless tobacco it would represent that the device is 520(e)(1)(A) and (e)(1)(B) of the act. In because of their potential harmful appropriate for that use, which would fact, the face of the act is to the contrary. effects on individuals who start using not be the case. After specifying one means of restricting Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44409 the sale, distribution, and use of a regulation rule that included a authority under section 520(e) of the act device, Congress granted the Secretary prohibition of certain selling techniques to impose conditions on the sale, broad authority to impose ‘‘such other (42 FR 9286 at 9287). FDA said that it distribution, and use of a medical conditions as [she] may prescribe in was avoiding any duplication of effort device to prevent its misuse, including such regulation.’’ Congress, rather than with FTC. Thus, it was not necessary for the access and advertising restrictions in limiting the Secretary’s options, left it to FDA to consider the extent of its the final rule. FDA is imposing controls the Secretary to decide what conditions authority to specifically regulate selling on the sale of cigarettes and smokeless are necessary for a particular device. techniques of hearing aid dispensers. tobacco to ensure that individuals under Nor does the legislative history support Contrary to the comment’s assertion, 18 will not be able to purchase them. the comments. As stated in section this proceeding is consistent with the Further, to ensure that these controls on II.C.3.a. of this document, Congress hearing aid proceeding. Although FDA sale, distribution, and use are not intended section 520(e) of the act to add did not duplicate FTC’s effort and undermined, FDA has found that they to the agency’s authority beyond directly regulate selling techniques, must include restrictions on how these providing for use by prescription only FDA imposed various restrictions that products are advertised, so that (H. Rept. 94–853, 94th Cong., 2d sess., were tailored to restrict inappropriate individuals under 18 are not encouraged 24–25 (1976)). promotion of hearing aids including to purchase or use them. These actions Moreover, the ‘‘or’’ connecting section requiring a medical evaluation before are consistent with the language and 520(e)(1)(A) of the act with section purchase and distribution of a user purpose of section 520(e) of the act. 520(e)(1)(B) is properly read here as instructional brochure. In the case of 4. Application of Other Device disjunctive rather than conjunctive. (See cigarettes and smokeless tobacco, FDA Authorities Garcia v. United States, 469 U.S. 70, 73 is imposing restrictions that are tailored As described in section II.C.2. of this (1984).) Section 520(e) of the act is to promotion of tobacco products to document, FDA intends to follow its intended to authorize such conditions ensure that advertising does not induce normal course and apply the ‘‘general on the sale, distribution, or use of a the use of cigarettes and smokeless controls’’ provisions of the Medical device as are necessary to ensure that tobacco by children and adolescents Device Amendments to cigarettes and the device is not improperly used and under 18. smokeless tobacco pending without which a reasonable assurance of (10) Finally, several comments argued classification of these products. The its safety and effectiveness cannot be that FDA lacks statutory authority for general controls authorized by the provided. There is no basis on the face the advertising restrictions that it is Medical Device Amendments include of the act or in the legislative history to imposing. Some of these comments adulteration and misbranding (sections conclude that Congress was trying to sought to analogize this rulemaking to 501 and 502 of the act), establishment limit the conditions that FDA could American Pharmaceutical Ass’n v. registration, device listing, and impose to achieve that end (other than Weinberger, 377 F. Supp. 824, 831 premarket notification (section 510), the admonition not to base a physician (D.D.C. 1974), aff’d sub nom. American labeling requirements (section 502), restriction on board certification). Pharmaceutical Ass’n v. Mathews, 530 recordkeeping and reporting (9) One comment argued that the F.2d 1054 (D.C. Cir. 1976) (per curiam). requirements (section 519), and GMP interpretation of section 520(e) of the act That case involved an attempt by FDA (sections 501 and 520(f)). that FDA is advancing in this to limit the distribution of methadone to (11) Tobacco industry comments proceeding is contrary to the certain designated facilities under the claimed that FDA had ignored a number interpretation that the agency offered in drug authorities of the act. The court of mandatory provisions of the act imposing restrictions on hearing aids in held that the statutory drug authority applicable to devices, ‘‘presumably 1977. The comment pointed out that did not authorize the agency to impose because they again recognize that those FDA stated at that time: ‘‘The these limitations on the distribution of provisions would mean the prohibition Commissioner notes, however, that the methadone, even though methadone of tobacco sales.’’ The comments also [Act] regulates the safety * * * of the posed unique problems of medical asserted that FDA had picked and [device] itself’’ (42 FR 9286 at 9287, judgement, law enforcement, and public chosen among statutory provisions and February 15, 1977). The comment policy. had misinterpreted Heckler v. Chaney, asserted that, for this reason, FDA FDA regards the American 470 U.S. 821 (1985), as authorizing this concluded that it could not prescribe Pharmaceutical Ass’n case as a selective regulatory approach. These competency standards for hearing questionable precedent. The case comments also argued that FDA had health professionals, fix the price of predates both the Supreme Court’s ignored section 520(a) of the act, which hearing aids, or control the promotional decision in Chevron U.S.A., Inc. v. provides that the adulteration, practices of hearing aid dispensers, all Natural Resources Defense Council, 467 misbranding, and records and reports matters that were being handled by the U.S. 837 (1984), and the Medical Device requirements are applicable to devices Federal Trade Commission (FTC) (42 FR Amendments. In Chevron, the Court until the applicability of these 9286 at 9287). The comment argued stated that ‘‘considerable weight should requirements is changed by an action that, for the same reasons, FDA may not, be accorded to an executive under the classification, premarket under section 520(e) of the act, regulate department’s construction of a statutory approval, standard-setting, or attire, contests, or athletic or cultural scheme it is entrusted to administer investigational device provisions of the events. ** *’’ (467 U.S. at 844). Moreover, act. FDA does not agree that the hearing when Congress enacted section 520(e) of The agency disagrees with these aid proceeding provides any support for the act, one of its objectives was to comments. FDA is applying to cigarettes the view that the agency has been provide FDA with precisely the kind of and smokeless tobacco the general inconsistent in its interpretation of authority over medical devices that the controls applicable to all devices. section 520(e) of the act. In that court found that the agency did not have In the following discussion, the proceeding, FDA was aware that FTC over drugs in American Pharmaceutical agency elaborates on the applicability of had developed a proposed trade Ass’n. Thus, FDA now has explicit the general controls provisions to 44410 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations cigarettes and smokeless tobacco, and does not require rulemaking by the otherwise ensure its safety and on matters the agency has reconsidered agency. effectiveness. Similarly, section 519(b) in response to comments (the Section 510(k) of the act requires of the act requires medical device user applicability of labeling requirements to submission of a premarket notification facilities to make reports to device cigarettes and smokeless tobacco is to the agency whenever a manufacturer manufacturers and the agency when discussed in sections V. and VI. of this markets a device for the first time, they become aware of information document). Overall, FDA believes that it whenever there is a major change in the suggesting that a device has caused or has developed a regulatory system for intended use of an already marketed contributed to a death, serious injury, or cigarettes and smokeless tobacco that is device, or whenever an already serious illness. Under this authority, the consistent with the statutory scheme marketed device is to be modified in a agency has issued part 803 (21 CFR part and the record of this rulemaking. way that could significantly alter its 803), on medical device reporting, and a. Adulteration and misbranding. safety or effectiveness (§ 807.81). The part 804 (21 CFR part 804), on medical Cigarettes and smokeless tobacco will be device may not be commercially device distributor reporting (the MDR subject to the adulteration and distributed unless the agency issues an requirements). These regulations were misbranding provisions in sections 501 order finding the device substantially recently amended by a final rule and 502 of the act, and the equivalent to one or more predicate published in the Federal Register of implementing regulations, with one devices already legally marketed in the December 11, 1995 (60 FR 63578) (the exception that is permitted by statute. United States for which premarket 1995 reporting requirements final rule), Section 502(f) of the act authorizes the approval is not required (section 513(i) reflecting changes in the reporting agency to grant exemptions from section of the act (§ 807.100), or unless the requirements of section 519 of the act 502(f)(1) of the act under certain agency approves a premarket approval that were mandated by the SMDA and circumstances. As described in section application for a device subject to an the Medical Device Amendments of V.E. of this document, FDA has approval requirement under section 515 1992. determined that an exemption from of the act (21 U.S.C. 360(e)). Substantial The 1995 proposed rule would have section 502(f)(1) of the act is appropriate equivalence means that a device has the amended parts 803 and 804 to exempt for cigarettes and smokeless tobacco. In same intended use and the same cigarettes and smokeless tobacco from addition, section VI.E.6. of this technological characteristics as the the MDR requirements. These proposed document also contains a more detailed predicate device; or has the same exemptions were based on the fact that description of the applicability of technological characteristics, but it can ‘‘the adverse health effects attributable specific labeling requirements to be demonstrated that the device is as to cigarettes and smokeless tobacco cigarettes and smokeless tobacco. safe and effective as the predicate products are extensive and well- The adulteration and misbranding device and does not raise different documented’’ (60 FR 41314 at 41342). provisions are largely self-executing and questions regarding safety and The agency stated that it did not do not require the agency to impose effectiveness (section 513(i) of the act). anticipate any real benefit in requiring requirements by regulation. The premarket notification submission manufacturers and distributors of these must include either a summary of the products to report such information b. Device registration and listing. safety and effectiveness information (Id.). Section 510 of the act and part 807 (21 upon which a substantial equivalence (12) The agency received several CFR part 807) of the regulations require determination may be based, or state comments criticizing this proposed that device manufacturers and importers that safety and effectiveness data will be exemption. One comment from a trade register their establishments with the made available to anyone upon request association stated that, although it agency. Every year an annual (section 513(i)(3)(A) of the act (21 U.S.C. disagreed with the agency’s registration form is sent to all registered 360c(i)(3)(A)), and §§ 807.87(h) and classification of cigarettes as medical establishments to be completed and 807.92). devices, the agency had no authority to returned to the agency (§ 807.22(a)). Any c. Records and reports. Section 519 of exempt manufacturers from this significant changes of information to the the act contains several requirements reporting requirement. This trade original must be reported to FDA within relating to the keeping of records and association also stated that, because the 30 days of the change (§ 807.26). making of reports on devices. In agency has concluded that cigarettes are Manufacturers are also required to list addition to implementing the specific not safe for individual users, this their devices that are in commercial requirements of the act, the agency has exemption cannot be reconciled with distribution in the United States (part used its authority under section 519 of the standard under section 519(c) of the 807). Foreign manufacturers may, but the act to issue several regulations. As act for exempting this product. (Section are not required to, register (§ 807.40). nicotine delivery devices, which are 519(c)(3) of the act provides for However, they are required to list their drug-device combination products that exemptions upon a finding that devices (§ 807.40(b)). Manufacturers are FDA is regulating under its device compliance with recordkeeping and required to update their listing if there authorities, cigarettes and smokeless reporting is not necessary to ensure that are significant changes to listing tobacco are subject to the requirements a device is not adulterated or information. of section 519 of the act and the misbranded or to otherwise ensure its Manufacturers of cigarettes and implementing regulations unless safety and effectiveness.) Another trade smokeless tobacco will be subject to the otherwise exempted. association claimed that the agency did establishment registration and device Section 519(a) of the act requires not follow the proper exemption listing requirements in section 510 of manufacturers, importers, and procedures under the act. A trade the act and part 807 of FDA’s distributors of devices to establish and association also noted that the agency regulations. The application of these maintain records, and make reports and did not propose to require such user provisions to cigarettes and smokeless other information available to the facility reports for cigarettes and also tobacco derives from their status under agency, to ensure that a device is not noted that such reports are not the device provisions of the act and adulterated or misbranded and to ‘‘suitable’’ for cigarettes. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44411

In view of these comments, the For similar reasons, FDA is also tobacco. To implement section 519(f) of agency has reconsidered its tentative modifying the MDR requirements for the act, FDA issued a proposed rule in position regarding the application of the distributors of cigarettes and smokeless the Federal Register of March 23, 1994 MDR requirements in parts 803 and 804. tobacco. Because distributors handle (59 FR 13828), that would require The adverse health effects attributable to these products, break open cartons, and manufacturers, importers, and these products are extensive and well- even affix the tax stamp, the agency distributors of devices to report documented. As a result, the cost of believes that distributors could be promptly to FDA any corrections or processing the enormously high volume responsible for, or aware of, removals of a device undertaken to of MDR reports related to the use of contamination of these products. The reduce a risk to health posed by the cigarettes and smokeless tobacco would agency does not believe, however, that device or to remedy a violation of the likely be prohibitive in light of the small distributors are likely to have direct act caused by the device which may benefit to be gained from reports knowledge of any change in ingredient present a risk to health. The agency documenting adverse health effects or manufacturing process or any serious expects that the final rule will publish already known to the agency. adverse event that is not well-known or in 1996. This rule will apply to Nevertheless, there would be a benefit well-documented by the scientific removals and corrections of medical to receiving information regarding community. Therefore, the agency is devices including cigarettes and adverse events that are not well- limiting the MDR requirements for smokeless tobacco. documented and thus, not well-known distributors to require reports d. GMP. In the preamble to the 1995 or anticipated. Therefore, the agency has concerning cigarettes and smokeless proposed rule, FDA specifically determined that it will require MDR tobacco only for adverse events relating recognized that the GMP regulations reporting in certain limited to contamination. may be appropriate for tobacco products circumstances, and is amending The agency notes that it has granted (60 FR 41314 at 41352). In this final §§ 803.19 and 804.25 of its regulations similar variances in the past for rule, FDA is requiring that the to make this clear. circumstances that justify modifications manufacturers of cigarettes and to the MDR requirements and has issued smokeless tobacco comply with GMP In the preamble to the 1995 reporting guidance that establishes criteria for regulations in part 820 (21 CFR part requirements final rule, the agency modified reporting. Examples where 820), which the agency is currently clarified that it may grant a written reporting has been modified include revising. (See 58 FR 61952, November exemption, variance, or alternative to events involving health care 11, 1993.) Application of GMP’s to some or all of the MDR requirements professionals being stuck by needles cigarettes and smokeless tobacco will ‘‘when it determines compliance with and certain events involving assist the tobacco industry in avoiding all MDR requirements is not necessary defibrillators. These modifications were such situations as the recall of to protect the public health’’ (60 FR made in order to clarify which events Marlboros in 1995 because of a 63578 at 63592). The agency cited, as an would provide valuable information to contamination mishap in processing example for an appropriate exemption, the agency given the inherently risky and, in such cases, may advance public devices for which ‘‘adverse events that circumstances surrounding the use of health by reducing to some degree the are known and well documented, are these devices. A variance from the MDR overall risk associated with these occurring at a normal rate, and do not requirements has also been granted to products. justify the initiation of remedial action the manufacturers of breast implants in (14) A comment from a tobacco trade * * *’’ (Id.). order to limit the frequency of reports association urged that FDA provide To limit the volume of reports that for events already known to the agency. ample time for compliance with GMP could otherwise be required, the agency (13) Industry comments also and requested a 2-year period for is modifying the MDR requirements for questioned why FDA had not proposed compliance. adverse events relating to tobacco. The to apply device tracking and premarket FDA recognizes that manufacturers agency has added § 803.19(f) to the surveillance provisions to cigarettes and will need an adequate amount of time regulation’s ‘‘Exemption, variances, and smokeless tobacco. Section 519(e) of the to comply with GMP requirements and alternative reporting requirements’’ act, governing device tracking, applies is accepting the suggestion in the section in order to limit the medical only to products that are permanently comment by adopting a 2-year period device reports concerning cigarettes and implantable, life-sustaining or life- for compliance. The tobacco industry smokeless tobacco; specifically, new supporting, or have been designated by already has a sophisticated approach to paragraph (f) requires reports from the agency to be tracked. Cigarettes and quality control with the production of manufacturers only for those adverse smokeless tobacco do not fall within the their products. Thus, much of what is events related to contamination, a first two categories, and the agency has required to meet the requirements of change in any ingredient or any not designated them for tracking. part 820 appears to be in place already, manufacturing process, or any serious For the reasons cited in the previous and therefore, 2 years should be a adverse event that is not well-known or discussion of 519(e) of the act, sufficient time for compliance. well-documented by the scientific postmarket surveillance will not be (15) In response to comments from community. required unless, at a future date, the tobacco distributors expressing concern The agency notes that user facilities agency specifically designates these about present or future applicability of are not likely to have direct knowledge products under section 522 of the act the GMP regulations, FDA advises that of even these limited adverse events (21 U.S.C. 360l). it is exempting distributors from part required to be reported by Section 519(f) of the act, which 820. The agency has decided to amend manufacturers. Therefore, the agency is requires FDA to issue regulations to part 820 by adding a new § 820.1(f) to adding § 897.19(g) to exempt user require reports on device removals and exempt distributors from the facilities from the MDR requirements corrections, will apply to requirement of complying with GMP relating to cigarettes and smokeless manufacturers, importers, and regulations because it has concluded tobacco. distributors of cigarettes and smokeless that compliance with GMP requirements 44412 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations by distributors is not necessary to assure such device’’ and provide interested smokeless tobacco under class III. that these devices will be safe and persons ‘‘an opportunity to submit According to the industry, classifying effective or otherwise in compliance comments on such recommendation and cigarettes and smokeless tobacco under with the act. the proposed regulation’’ (section 513(d) class III would lead to a ban of cigarettes 5. FDA Will Classify Cigarettes and of the act). After reviewing the and smokeless tobacco because FDA Smokeless Tobacco Under Section 513 comments, FDA must classify the device cannot grant premarket approval of a of the Act ‘‘by regulation’’ (Id.). class III device until it is satisfied that In addition to applying the general As required by section 513 of the act, there is reasonable assurance that the device authorities previously described FDA will, in a future rulemaking, device is safe. The tobacco industry to cigarettes and smokeless tobacco, the classify cigarettes and smokeless argues that the inability of FDA to agency will classify cigarettes and tobacco in accordance with the classify cigarettes and smokeless smokeless tobacco under section 513 of procedures in section 513 of the act. tobacco without triggering a ban of the the act. The agency relies on Without prejudging that proceeding, the products demonstrates that the act was classification to determine what level of agency recognizes that it will involve never intended to apply to cigarettes control of the device is required to consideration of both the known risks of and smokeless tobacco. provide a reasonable assurance of safety tobacco products and the public health It would not be appropriate for FDA and effectiveness. For devices classified concerns that could be raised by to make a final determination at this into class I, general controls (sections withdrawal from the market of cigarettes time as to whether the application of all 501, 502, 510, 516, 518, 519, and 520 of and smokeless tobacco to which many appropriate regulatory controls the act (21 U.S.C. 351, 352, 360, 360f, adults are addicted. Moreover, the identified in a classification proceeding 360h, 360i, and 360j, respectively)) are agency’s restrictions on access and would result in a reasonable assurance sufficient to provide a reasonable advertising in this final rule, which are of safety and effectiveness for cigarettes assurance of safety and effectiveness. carefully designed to help prevent and smokeless tobacco for any users. For devices classified into class II, young people from becoming addicted, This determination must await special controls (such as performance will need to be factored in as well. completion of the classification process standards under section 514 of the act Consistent with the statute and the and of any regulatory steps identified in (21 U.S.C. 360d)) are needed in addition agency’s normal practice, however, FDA the classification process (section 513 of to the general controls to provide a is not postponing regulation of the act). Nonetheless, it seems clear that reasonable assurance of safety and cigarettes and smokeless tobacco under the best public health result is one that effectiveness. For devices classified into its general authorities pending prevents access to tobacco products by class III (premarket approval), neither classification. Such a postponement children and adolescents while allowing general nor special controls are would serve no useful purpose, because their continued availability for adults. sufficient to provide a reasonable the general authorities will be Moreover, the agency disagrees with assurance of safety and effectiveness, applicable to cigarettes and smokeless industry comments that argue that it without the added safeguard of tobacco regardless of the outcome of the does not have the authority to permit premarket approval. Therefore, these classification proceeding. To the the sale of tobacco products to adults devices are subject to ‘‘premarket contrary, postponing application of because the agency has found that approval’’ under section 515 of the act. FDA’s general authorities would have tobacco products are unsafe. The process of classification is an adverse consequences for public health In considering this issue, the agency important component of device because, during the several years that it reiterates that tobacco products are regulation, but it includes numerous may require to complete classification, dangerous. As discussed more fully in procedural steps and thus cannot be the applicability of the controls put in section I. of this document and in the part of this final rule. Under section 513 place by this final rule, as well as the preamble to the 1995 proposed rule, of the act, FDA is required to convene registration, GMP, and other general cigarettes and smokeless tobacco cause or use a classification panel, which controls discussed in this document, great pain and suffering from illness, should consist of experts who ‘‘possess would be delayed with respect to such as cancer, respiratory illnesses, skill in the use of, or experience in the cigarettes and smokeless tobacco. and heart disease. More than 400,000 people die each year as a result of development, manufacture, or During this period, millions of children tobacco use. 23 utilization of,’’ the device and who and adolescents would be likely to use If the act required that the agency provide ‘‘adequately diversified cigarettes and smokeless tobacco for the limit its consideration to the risks of expertise in such fields as clinical and first time and, in the absence of FDA tobacco products, then it could not find administrative medicine, engineering, regulation under its general authorities, that there is a reasonable assurance of biological and physical sciences, and become addicted to these dangerous safety. To the contrary, tobacco products other related professions’’ (section products. are unsafe, as that term is 513(b)(2) of the act). The classification The tobacco industry argues that FDA conventionally understood. However, as panel is required to ‘‘provide an cannot classify cigarettes and smokeless reflected in the act and in judicial opportunity for interested persons to tobacco because, given ‘‘FDA’s view of decisions, the determination as to submit data and views on the the health effects’’ of cigarettes and whether there is a ‘‘reasonable classification’’ and, after consideration smokeless tobacco, classification would assurance of safety’’ involves of these data and views, to submit to inevitably lead to a ban of the products. consideration of not only the risks FDA its ‘‘recommendation for the According to the industry, FDA cannot presented by a product but also any of classification of the device’’ (section classify cigarettes under class I or class the countervailing effects of use of that 513(c)(1) and (c)(2) of the act). Upon II because neither the general nor the product, including the consequences of receipt of the panel recommendation, special controls will provide what FDA FDA must publish in the Federal will regard as a reasonable assurance of 23 ‘‘Cigarette Smoking-Attributable Mortality and Register ‘‘the panel’s recommendation safety, leaving FDA with only one Years of Potential Life Lost—United States, 1990,’’ and a proposed regulation classifying option: To classify cigarettes and MMWR, CDC, vol. 42, No. 33, pp. 645–649, 1993. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44413 not permitting the product to be approximately 50 million Americans decision that for many will have lifelong marketed. Thus, section 513(a)(2)(C) of who currently smoke and another 6 consequences. 24 the act declares that, with respect to million who use smokeless tobacco. It In contrast, adults generally have the safety and effectiveness, the agency is particularly relevant that 77 to 92 capacity to make informed decisions. In must ‘‘weigh[] any probable benefit to percent of all smokers are addicted 25 the case of cigarette and smokeless health from the use of the device against and that a substantial number of all tobacco, very few adults who have not any probable risk of injury or illness users of smokeless tobacco are used tobacco as children and from such use (see also 21 CFR addicted. 26 adolescents choose to use these 860.7(d)(1)). According to the legislative The agency believes that these factors products as adults. 29 Unfortunately, for history of the Medical Device must be considered when developing a Amendments, ‘‘[the reasonable regulatory scheme that achieves the best the many individuals who have become assurance of safety standard] is public health result for these products. addicted, their capacity to choose predicated upon the recognition that no The sudden withdrawal from the market whether to use cigarettes or smokeless regulatory mechanism can guarantee of products to which so many millions tobacco in large measure no longer that a product will never cause injury’’ of people are addicted would be exists. Thus, the agency must take their because ‘‘[r]egulation cannot eliminate dangerous. First, there could be addiction into consideration when all risks but rather must eliminate those significant health risks to many of these developing its regulatory scheme. risks which are unreasonable in relation individuals. Second, it is possible that Serious health consequences follow to the benefits derived’’ (H. Rept. 94– our health care system would be both from the option of leaving tobacco 853, 94th Cong., 2d sess., 16, 17 (1976); overwhelmed by the treatment demands products on the market and from the see also United States v. Rutherford, 442 that these people would create, and it is option of banning tobacco products. U.S. 544, 555 (1979)). unlikely that the pharmaceuticals However, on balance, an approach that An example of the balancing of risks available could successfully treat the prohibits the sale and promotion of of using a product against the risks of withdrawal symptoms of many tobacco cigarettes and smokeless tobacco to not using a product can be found in the users. Third, the agency also believes children and adolescents, while agency’s approval of a number of drugs that, given the strength of the addiction permitting the sale to adults seems most used in the treatment of various cancers. and the resulting difficulty of quitting appropriate. It is consistent with the These drugs are highly toxic to patients tobacco use, a black market and statutory standard of reasonable who receive them, and in approving smuggling would develop to supply these drugs for chemotherapy, FDA smokers with these products. 27 It also assurance of safety and is more effective balances the seriousness of the diseases seems likely that any black market in achieving public health goals than a these drugs were intended to treat products would be even more dangerous ban on all tobacco products. Therefore, against the drugs’ toxicity. In cases than those currently marketed, in that FDA is adopting this approach in this where the risks of not treating the they could contain even higher levels of final rule. cancer outweighed the risks of the tar, nicotine, and toxic additives. 28 There is also a basis for finding that drugs, FDA has approved these Whether individuals who use these these products are ‘‘effective’’ for adults products. products have an opportunity to make who are addicted to tobacco products Similarly, in the case of tobacco an informed choice is also relevant. because such products sustain with products, the agency must weigh the Most individuals who use these great efficacy the individual’s continued risks of leaving cigarettes and smokeless products begin as children and need for the active ingredient nicotine. tobacco on the market against the risks adolescents, at an age when they are not Tobacco products are effective for of removing these products from the prepared for or equipped to make a preventing withdrawal symptoms in market. For children and adolescents, the serious health consequences of individuals addicted to nicotine in 24 ‘‘National Household Survey on Drug Abuse: much the same way that methadone is using tobacco products support an Population Estimate 1993,’’ DHHS, PHS, SAMHSA, approach designed to reduce their use, Office of Applied Studies, Rockville, MD, Pub. No. effective in preventing withdrawal. as all 50 States and many of the tobacco (SMA) 94–3017, pp. 89 and 95, 1994. Section 516 of the act supports this companies themselves recognize. It is 25 1996 Jurisdictional Determination, section analysis. Section 516 of the act is the also relevant that many children who II(B)(2)(a). 26 Id. provision that gives the agency the use tobacco products are in the period 27 That a black market and smuggling will occur authority to ban medical devices. Under of initiation and are not addicted, and can be predicted by examining the current situation that provision, the agency ‘‘may’’ ban a thus a prohibition of the sale and with illegal drugs in the United States and past device if it finds that the device presents promotion to this segment of the experience with prohibition of respect to alcoholic ‘‘an unreasonable and substantial risk of population will effectively reduce their beverages. In both situations, individuals continued using the products. Moreover, in the case of illness or injury.’’ There are two use of tobacco products. Although some cigarettes, even increased cost due to tax disparities elements of discretion which plainly children and adolescents are addicted to can lead to smuggling and black markets. S. Rept. allow the agency to leave these products tobacco products, the agency has 95–962, 95th Cong., 2d Sess., (June 28, 1978); on the market—the word ‘‘may’’ which concluded that the approach that most Joossens, L., and M. Raw, ‘‘Smuggling and Cross applies to the entire banned device effectively takes into account the health Border Shopping of Tobacco in Europe,’’ British Medical Journal, vol. 310, May 27, 1995. authority; and the standard of of young people is one that prohibits the 28 Such has been the case with illegally produced ‘‘unreasonable ** * risk of illness or sale and promotion of tobacco products alcohol. See ‘‘Elevated Blood Lead Levels injury,’’ which gives the agency ample to children and adolescents under 18 Associated with Illicitly Distilled Alcohol— years of age. Alabama, 1990–1991,’’ MMWR, CDC, DHHS, vol. discretion to balance the unique The issue is more difficult with 41, No. 17, pp. 294–295, 1992; Pegues, D. A., B. J. circumstances surrounding this product. Hughes, C. H., Woernle, ‘‘Elevated Blood Lead respect to adults, particularly adults Levels Associated with Illegally Distilled Alcohol,’’ who are addicted to cigarettes and other Archives of Internal Medicine, vol. 153, pp. 1501– tobacco products. There are 1504, 1993. 29 1994 SGR, pp. 5, 58, and 65–67. 44414 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

D. The Fact That the Act’s Drug statutory sources to achieve some of the fail to follow the directions from taking Authorities Authorize the Imposition of same regulatory results for a drug. The a lethal dose of the product (see 60 FR Similar Restrictions Supports the agency routinely imposes restrictions to 52474 at 52491, 52502, and 52503, Reasonableness of the Restrictions That protect against unsafe uses of drug October 6, 1995, and § 355.20 (21 CFR the Agency Has Imposed products—even where those uses are 355.20) (final monograph setting (16) At least one tobacco industry otherwise unlawful, wholly irrational, package size limitations on OTC comment argued that the agency’s or in contravention of express warnings. anticaries drugs to prevent individuals proposed access and advertising From the time of the product’s from ingesting an acutely toxic dose)). restrictions were an affront to ‘‘common development and manufacture through (Compare § 897.16(b) (setting minimum sense’’—i.e., that the types of its retail sale, the agency is authorized package size for cigarettes).) restrictions the agency had proposed, to ensure that drug products are neither Along the same lines, the agency has under the device provisions of the act, unsafe, misbranded, nor adulterated. used its authority to ensure that drugs went well beyond what the plain (See sections 201(n), 301, 501, 502, 503 are not misbranded to restrict the language of the act could be read to and 505 of the act; United States v. marketing of certain drug products support. The agency, however, could Sullivan, 332 U.S. 689, 696 (1948) where consumers simply were unable or have chosen to impose similar (Congress intended ‘‘to safeguard the unwilling to heed the warnings on these restrictions using the act’s drug consumer by applying the Act to articles products. In some instances, the agency authorities. As this section from the moment of their introduction has banned altogether the marketing of demonstrates, the agency has restricted into interstate commerce all the way to persistently misused drug products. the marketing of a number of drug the moment of their delivery to the (See, e.g., 47 FR 41716 at 41719, products, using the adulteration, ultimate consumer’’).) September 21, 1982 (camphorated oil misbranding, and marketing provisions Consistent with this broad grant of products deemed misbranded because, governing drug products. That similar authority, Congress also authorized the despite label warnings, consumers restrictions can be invoked under either agency to issue regulations for the continued to misuse the product); 47 FR the act’s device authorities or under the ‘‘efficient enforcement’’ of the act, such 34636, August 10, 1982 (proposing act’s drug authorities supports the as regulations that set forth the withdrawal of all drugs containing reasonableness of restrictions adopted conditions under which a drug must be phenacetin because of persistent abuse, in the final rule. marketed to ensure that it will not be and associated health risks, despite As discussed in the 1995 proposed deemed violative of the act (see section label warnings contained on those rule and in sections II.A. and B. of this 701(a) of the act (21 U.S.C. 371); United products).) In other instances, the document, cigarettes and smokeless States v. Nova Scotia Food Products agency has restricted the product to tobacco are drug delivery systems—i.e., Corp., 568 F.2d 240, 246 (2d Cir. 1977); prescription use. (See, e.g., § 250.12 (21 they combine a drug component and a and Pharmaceutical Manufacturers CFR 250.12) (requiring prescription device component in a single Association v. FDA, 484 F. Supp. 1179, dispensing of OTC stramonium combination product (60 FR 41314 at 1183 (D. Del. 1980) (FDA has broad preparations because, despite package 41347 through 41349). As such, authority to issue drug regulations warnings, young people continued to cigarettes and smokeless tobacco are reasonably related to the public health abuse and misuse them); § 250.100 (21 subject to regulation under the device purposes of the act, so long as the CFR 250.100) (switching amyl nitrite provisions of the act, the drug regulations further congressional inhalant from OTC to prescription provisions of the act, or a combination objectives evidenced elsewhere in the dispensing because of persistent off- of the two. The agency has determined act)). label use and abuse); see also 60 FR that it should use the act’s device With this authority, the agency has 38643, July 27, 1995 (proposing to authority to regulate these products imposed restrictions on the advertising, restrict ephedrine drug products to because the device provisions of the act labeling, and packaging of drug prescription marketing because of the offer the agency greater regulatory products, as well as restrictions on illicit use of OTC ephedrine in the flexibility than do the drug provisions of access to drug products, without which manufacture of certain controlled the act (see section II.B. of this the products could not be lawfully substances).) document and the 1995 proposed rule at marketed. For example, the agency has 60 FR 41314 at 41347 through 41349). used its authority to ensure that drug Finally, the agency has approved drug However, if there were no device products are not adulterated to require products with strict limits on component to cigarettes and smokeless special packaging requirements for over- distribution, to ensure that the drug will tobacco, or if the agency had chosen to the-counter (OTC) drugs, to protect be safe for use under the conditions, regulate these combination products against product tampering (see 47 FR prescribed, recommended, or suggested under the act’s drug authorities, the 50442 at 50447, November 5, 1982); in the product’s labeling. For example,  agency nevertheless could have limited § 211.132 (21 CFR 211.132)). Thus, the the drug Clozaril (clozapine), used in the access to and advertising of these agency has imposed industry-wide the treatment of schizophrenia, can products in order to protect children packaging requirements to protect cause the onset of a potentially fatal and adolescents. against product contamination as well blood condition, agranulocytosis. Although the agency’s authority to as unintended, unsafe uses of drug However, early detection of impose access restrictions on a drug products. (Compare § 897.14(d) agranulocytosis through routine blood product is not as explicit as it is under (prohibiting retailers from breaking testing can substantially reduce the risk the device provisions of the act (see open cigarette and smokeless tobacco of death. FDA, therefore, approved the section 520(e) of the act authorizing packages to sell loose cigarettes or drug with labeling that provides that the controls over the ‘‘sale, distribution, or smokeless tobacco).) drug is available ‘‘only through a use’’ of a device to protect against a Similarly, the agency has authority to distribution system that ensures weekly potentially harmful or unsafe use), the control carefully the package size of [white blood cell] testing prior to agency has in fact drawn from several drug products to protect persons who delivery of the next week’s supply of Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44415 medication.’’ 30 This labeling was requirement for cigarettes and OTC] drug which is deemed too intended to ensure that Clozaril would smokeless tobacco (see § 897.14(a)), and dangerous to be sold with label not continue to be administered to those the controls on packaging (see warnings alone,’’ it would be ‘‘proper for whom it presents an unreasonable §§ 897.14(d) and 897.16(b) and (d)), for the agency * * * to ensure that ads risk of harm. The marketing of Clozaril vending machine sales (see §§ 897.14(b) do not undercut otherwise sufficient in contravention of the labeling would and 897.16(c)), and self-service displays labeling’’); see also 57 FR 13234 at result in the product being deemed (see §§ 897.14(c) and 897.16(c)), follow 13237, April 15, 1992 (preamble to misbranded and subject to regulatory this same path. Without these Accelerated Approval Regulations action. More recently, the agency issued restrictions, cigarettes and smokeless discussing requirement of submission of regulations authorizing generally tobacco as drug products could be promotional materials to ensure that the restrictions on the distribution of drug deemed misbranded or adulterated drug drugs approved under this section will products in instances where ‘‘a drug products and could present too great a not be put to inappropriate or unsafe product shown to be effective can be safety risk to be marketed at all. uses).) And, irrespective of whether a safely used only if distribution or use is The final rule also regulates the drug is marketed OTC or by restricted * * *’’ (see § 314.520 (21 CFR advertising used to promote cigarettes prescription, the agency has authority to 314.520)). (Compare § 897.16 (setting and smokeless tobacco (see §§ 897.30, prohibit the distribution of ‘‘false or conditions on the manufacture, sale, 897.32, and 897.34). While the act’s misleading’’ product ‘‘labeling’’ (see and distribution of cigarettes and device provisions provide the most section 502(a) of the act). smokeless tobacco); § 897.14(b)(1) direct and extensive basis for regulating Last, had the agency chosen to use the (requiring retailers to verify the the advertising of these products (see act’s drug authorities to regulate these consumer’s age to ensure that the section VI. of this document), the drug products, one possible means of limiting product will not be used by minors) provisions of the act also would have their access would have been to require § 897.16(c)(1) (prohibiting use of self- allowed the agency to regulate the some form of prescription dispensing. In service displays at retail advertising of these products. that case, the agency’s authority to establishments).) 31 Whether a drug is marketed on a regulate the advertising of cigarettes and These examples illustrate how the prescription basis or OTC, the agency smokeless tobacco would be extensive agency has interpreted sections 501, has authority to prohibit advertising that (see section 502(n) of the act; § 202.1 (21 502, 503, and 505 of the act (in promotes the product for a use for CFR 202.1); § 314.81(b)(3)(i) (21 CFR conjunction with sections 201(n), 301, which it would be unapproved or 314.81(b)(3)(i))). The agency, for and 701(a) of the act) as authorizing an misbranded (see sections 201(n), 301, example, has discretion under the act to array of controls to prevent unsafe uses 502, and 505 of the act; see also regulate both the presentation and of drug products. The minimum age § 201.128 (21 CFR 201.128) (advertising format of prescription drug advertising. of a drug product may be used to According to the House Conference 30  Clozaril (clozapine tablets) product labeling, establish that the product is being Report on section 502(n) of the act, Sandoz Pharmaceuticals, March 1994, in Physician’s Desk Reference, 50th edition, p. 2252, marketed for a use for which it is Congress contemplated that: 1996. neither labeled nor approved)). Though [I]n administering the requirement 31 ‘‘The Federal Food, Drug, and Cosmetic Act the agency generally will defer to FTC contained in the conference substitute that provides authority for FDA to restrict the conditions with respect to the advertising of OTC advertisements contain brief summaries of for use, including the channels of distribution and side effects, etc., the Secretary under the use, of any drug, or withdraw approval of an NDA, drugs (see Food and Drug Administration and Federal Trade conference substitute has sufficient if a drug cannot otherwise safely be used’’ (H. Rept. discretion to exercise due regard to the size No. 93–884, 93d Cong., 2d Sess., p.4, 1974, Commission Memorandum of of the advertisement, the need for protecting reprinted in U.S. Cong. & Admin. News, pp. 3029– Understanding (36 FR 18539, September the public health, and the conditions for 3032). But see American Pharmaceutical Ass’n v. 16, 1971)), the agency retains authority Weinberger, 377 F.Supp. 824, 829 (D.D.C. 1974) which the drug is offered in the (striking down an FDA regulation restricting the to take action against an OTC drug that advertisement. distribution of methadone), aff’d per curiam sub is promoted for an unapproved use. (See (Report of the Committee of Conference, nom. American Pharmaceutical Ass’n v. Mathews, § 330.1(d) (21 CFR 330.1(d)) (for an OTC H. Conf. Rept. 2526, 87th Cong. 2d sess., 530 F.2d 1054 (D.C. Cir. 1976). The American drug to be generally recognized as safe Pharmaceutical Ass’n case, however, was decided (Oct. 3, 1962) reprinted in 1962 U.S. before the emergence of cases such as Chevron and effective, and not misbranded, the Code Cong. and Admin. News 2927, U.S.A., Inc. v. Natural Resources Defense Council, advertising for the drug must not 2934 (emphasis added).) 467 U.S. 837 (1984), in which the Court signaled prescribe, recommend, or suggest its use Further, the agency may take action the importance of deferring to an agency’s under conditions not stated in the against a prescription drug interpretation of its own statute, provided the interpretation is sufficiently rational. The case also labeling); see, e.g., § 310.519 (21CFR advertisement to the extent it lacks ‘‘fair involved some unique circumstances: the agency 310.519) (prohibiting the marketing of balance’’ or is otherwise ‘‘false or had withdrawn approval of the NDA for the drug any OTC drug that is ‘‘labeled, misleading’’ (see sections 201(n), 502(a), (methadone), but nevertheless permitted the drug to represented, or promoted as an OTC and (n) of the act; § 202.1 (21 CFR be marketed under a regulation to certain treatment programs and pharmacies. Also, because daytime sedative (or any similar or 202.1)). Thus, had the agency chosen to methadone is a controlled substance within the related indication)’’.) regulate these products as prescription provisions of the Controlled Substances Act, the The agency also has authority to drugs, the agency’s existing prescription district court concluded that issues regarding require that a drug product not be drug advertising regulations themselves restrictions on the distribution of the drug were advertised in a manner that would would require significant changes to the more properly within the jurisdiction of the Department of Justice than FDA. In most other undercut or counteract the product’s content and format of the tobacco instances, however, where a drug is not subject to labeling, including label-based industry’s advertising campaigns. the Controlled Substances Act, and where certain warnings. (See McNeilab, Inc. v. The final concern—had the agency marketing restrictions are necessary to ensure that Heckler, Food Drug Cosm. L. Rep. (CCH regulated these products as drugs—is the drug will be used safely and effectively, under the conditions contemplated in a new drug 1985) (Transfer Binder) ¶38,317, p. 39, whether cigarettes and smokeless application, the American Pharmaceutical Ass’n 787 (D.D.C. 1985) (while FDA ‘‘cannot tobacco could continue to be marketed case is distinguishable. rely on advertising to make safe [an to adults. As discussed in greater detail 44416 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations in section II.C.5. of this document, there involves a complex weighing of factors branches. In particular, under this are compelling public health reasons for ‘‘peculiarly’’ within the agency’s scheme only Congress has the permitting the continued marketing of expertise. (Id. at 831). These factors constitutional authority to make law. these products to adults. The same include, ‘‘whether agency resources are (17) Numerous comments by industry, rationale would apply had these best spent on this violation or another,’’ media, and retailer trade associations products been regulated as drugs. As is ‘‘whether the agency has enough and by State legislators and individuals the case with respect to devices, there resources to undertake the action at all,’’ argued that FDA’s assertion of is a basis for concluding that an and ‘‘whether the particular jurisdiction over tobacco products approach that prohibits the sale and enforcement action requested best fits supersedes Congress’ legislative promotion of cigarettes and smokeless the agency’s overall policies.’’ (Id. at judgment, and, some argued, therefore tobacco to children and adolescents, yet 831–832). violates the doctrine of Separation of allows these products to continue to be A decision by the agency to focus its Powers. The comments contended that marketed to adults who are addicted to resources on youth access to cigarettes Congress has provided statutory these products, could be found to be and smokeless tobacco involves the authority over tobacco products to the consistent with the statutory standard of same ‘‘ordering of priorities’’—i.e., the Executive Branch only under the ‘‘safe’’ and ‘‘effective’’ under section 505 same balancing of agency-specific statutes that it has enacted that of the act for these products. factors—on which the rule crafted in expressly apply to tobacco products, It is, of course, essential to this Chaney rests. Thus, were the agency to such as the Comprehensive Smokeless analysis that the agency’s youth access enforce the act only with respect to the Tobacco Health and Education Act (the restrictions in new part 897 be promotion and sale of these products to Smokeless Act) (15 U.S.C. 4401 et seq.) implemented. These restrictions are children and adolescents, such a and the Federal Cigarette Labeling and necessary to help ensure that the most decision would enjoy the full force of Advertising Act (the Cigarette Act) (15 alarming safety issue associated with the Chaney Court’s presumption of U.S.C. 1331 et seq.) and not at all under these products will have been nonreviewability. 33 the act. The comments cited the history contained. Absent these restrictions, the Thus, while the agency finds that of proposals in Congress further to risks associated with the continued cigarettes and smokeless tobacco are regulate tobacco products, none of marketing of these products, even to more appropriately regulated as which came to fruition, as evidence that adults, may be overwhelming. The close restricted devices, as the discussion in Congress has exercised its legislative issue of whether the public health is section II.C. of this document will not to act further on tobacco better served by allowing adults to demonstrates, the agency could have regulation. continue to use these products, such crafted a serviceable regulatory scheme The agency does not agree that the that the agency could find that cigarettes for these products under the drug rule violates the Separation of Powers and smokeless tobacco are ‘‘safe’’ and provisions of the act. Contrary to the Doctrine. The relevant legal standards ‘‘effective,’’ depends heavily on the comments that have argued that the act are set out in Youngstown Sheet and agency’s ability to prevent the most is inherently unfit for regulation of these Tube Co. v. Sawyer, 343 U.S. 579 (1952), alarming use of these products, namely, products, or that the agency’s proposed and Chrysler Corp. v. Brown, 441 U.S. use by substantial numbers of children. restrictions exceeded the common sense 281 (1979), which are cited in the Moreover, the approach of allowing boundaries of the act, both the device comments. Justice Black’s opinion for the continued marketing of these provisions and the drug provisions of the Court in Youngstown stands for the products to adults, so long as youth the act provide sound authority for proposition that the Executive Branch access is carefully controlled, would be controlling the access to and promotion may not act unless authorized by the consistent with the agency’s inherent of these drug delivery devices. Constitution or by statute to do so. In discretion to take enforcement action particular, lacking Constitutional against some uses of a drug product, but E. Constitutional Issues Regarding authority, the Executive Branch may act not others. Such an exercise of Authority only under the aegis of a statute passed discretion would be unreviewable 1. Separation of Powers by Congress under its ‘‘law making (Heckler v. Chaney, 470 U.S. 821 The doctrine of Separation of Powers power’’ (see Youngstown, 343 U.S. at (1985)). 32 refers to the distribution under the 585–586, 589). In resolving that there is a Constitution of the Federal Executive Branch agencies frequently presumption against judicial review of Government’s powers among the act by rulemaking. In Chrysler, the agency determinations not to take legislative, executive, and judicial Supreme Court considered the enforcement action, the Chaney Court prerequisite for an agency’s ‘‘legislative’’ reasoned that an agency’s 33 In a number of other contexts, the agency has or ‘‘substantive’’ rules to have the ‘‘force nonenforcement policy generally declined to take enforcement action against and effect of law’’ (see Chrysler, 441 particular uses of unapproved drug products. U.S. at 301–302). ‘‘The legislative power 32 See Cutler v. Hayes, 818 F.2d 879, 893 (D.C. Indeed, the agency has on occasion set forth Cir. 1987) (‘‘The FDC act imposes no clear duty detailed guidelines outlining the conditions under of the United States is vested in the upon FDA to bring enforcement proceedings to which it will, as a general matter, refrain from Congress, and the exercise of quasi- effectuate either the safety or the efficacy taking regulatory action. (See, e.g., FDA Compliance legislative authority by governmental requirements of the Act’’); Schering Corp. v. Policy Guide, (CPG) 7132b.15 (stating that pending departments and agencies must be Heckler, 779 F.2d 683, 686 (D.C. Cir. 1985) (FDA’s completion of the OTC Drug Review, FDA generally rooted in a grant of such power by the agreement not to take enforcement action against an will not take regulatory action against unapproved unapproved product for a period of 18 months was or misbranded OTC drugs prior to completion of a Congress and subject to limitations unreviewable); see also Cutler v. Kennedy, 475 final monograph); CPG 7125.06 (setting conditions which that body imposes’’ (Id. at 302). F.Supp. 838, 856 (D.D.C. 1979) (while FDA may not exempting extra-label use of new animal drugs from Therefore, for legislative rules to have formally authorize the sale of drugs that it has regulatory action); Regulatory Procedures Manual the ‘‘force and effect of law,’’ they must found do not comply with the safety and 9–71 (setting conditions under which FDA effectiveness provisions of the act, the agency may generally will permit the import of small quantities be ‘‘reasonably within the use its enforcement discretion not to move against of unapproved drugs for personal use which are not contemplation of [the statutory] grant of these unapproved drug products). available domestically).) authority’’ (Id. at 306). The ‘‘thread’’ Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44417 between the regulations and the statute the legislative power vested in it by the (See, e.g., Panama Refining Co. v. Ryan, relied upon may not be ‘‘so strained that Constitution. 293 U.S. 388, 418 (1935) (holding it would do violence to established (18) While maintaining that Congress statute authorizing the President to principles of separation of powers to has not granted FDA the authority to prohibit interstate shipment of ‘‘hot oil’’ denominate the[] particular regulations regulate tobacco products, an industry determined by State law or regulation to ‘legislative’ and credit them with the comment argued that FDA seeks to be ‘‘excess’’ to be unconstitutional ‘binding effect of law’’’ (Id. at 307–308). assume authority that, under the delegation because ‘‘Congress left the This is not to say that any grant of Nondelegation Doctrine, Congress could matter to the President without standard legislative authority to a Federal agency by not have delegated to the Executive or rule, to be dealt with as he pleased’’); Congress must be specific before regulations Branch. In particular, the comment Schechter Poultry Corp. v. United promulgated pursuant to it can be binding on argued that the act requires FDA to States, 295 U.S. 495, 541–542 (1935) courts in a manner akin to statutes. What is approve a new drug as safe and (reversing convictions for violations of important is that the reviewing court effective, or to ban it, and to classify a code of conduct for poultry suppliers reasonably be able to conclude that the grant of authority contemplates the regulations device into one of three categories in because ‘‘the discretion of the President issued. which it will be required to meet in approving or prescribing [such] conditions that ensure that it is safe and (Id. at 308.) codes, and thus enacting laws for the effective. Because FDA proposed to do government of trade and industry Youngstown therefore requires that FDA neither with respect to nicotine and throughout the country, is virtually act under a statutory grant by Congress, cigarettes and smokeless tobacco, the unfettered’’).) while Chrysler demands a ‘‘nexus comment contended, the agency is free More recently, the courts have between [FDA’s] regulations and some to choose any course it wishes; and had delegation of the requisite legislative applied the Nondelegation Doctrine to Congress delegated to FDA such reach, or require from an agency, a authority by Congress’’ (see Chrysler, unlimited authority, it would have 441 U.S. at 304). narrow interpretation of a statutory violated the Nondelegation Doctrine. provision that would otherwise be too As discussed elsewhere in this The comment can also be read to broad a delegation. (See, e.g., Industrial document, Congress exercised its suggest that, if FDA has the flexibility to Union Dep’t., AFL-CIO v. American lawmaking power to provide FDA with regulate medical devices, and in Petroleum Inst., 448 U.S. 607, 646 the authority to regulate any product particular tobacco products, as it (1980); International Union, UAW v. that is a drug or device as defined in proposed, then Congress provided the OSHA, 37 F.3d 665, 668–69 (D.C. Cir. section 201 of the act. The evidence agency without a standard, that is, with 1994); International Union, UAW v. cited in both the 1995 Jurisdictional too much discretion. OSHA, 938 F.2d 1310, 1316–17 (D.C. Analysis and the 1996 Jurisdictional The agency disagrees with this Cir. 1991).) Determination annexed hereto comment. The act, while vesting FDA demonstrates that cigarettes and Unlike the statutes under review in with broad discretion to regulate foods, Panama Refining and Schechter, the act smokeless tobacco meet the statutory drugs, and devices, does so by precisely definitions of drug and device. FDA sets standards for FDA to follow. The defining the agency’s jurisdictional agency need not narrowly interpret the may therefore act to regulate tobacco ambit in section 201 of the act and by products, and in doing so, it is acting act to avoid an otherwise over-broad establishing a range of requirements and delegation, and courts have repeatedly ‘‘pursuant to an express or implied enforcement provisions—for example, authorization of Congress,’’ and the directed that the act be construed in sections 301, 302, 303, 304, 501, 502, liberally in light of its public health executive branch’s ‘‘authority is at its 505, 510, 513, 514, 515, 516, 517, 518, maximum * * *’’ (see Youngstown, 343 purpose (see sections I.B. and II.A. of 519, 520, and 701 of the act (21 U.S.C. this document). The agency’s U.S. at 635 (Jackson, J., concurring)). 331, 332, 333, 334, 351, 352, 355, 360, Moreover, Chrysler does not require that rulemaking with respect to tobacco 360c, 360d, 360e, 360f, 360g, 360h, 360i, products is a legitimate application of the act specifically refer to tobacco 360j, and 371 respectively)—for it to products, as the comments suggested those standards to the facts before the pursue when, in its discretion, Heckler agency. The agency therefore concludes (see Chrysler, 441 U.S. at 308). In fact, v. Chaney, 470 U.S. 821 (1985), it has most products regulated by FDA are not that neither the act nor this rulemaking found the operative facts established by violates the Nondelegation Doctrine. specifically referred to in the act. In Congress. The act therefore involves no addition, as discussed in sections X.A. delegation of Congress’ legislative III. Overview of Comments, Smoking and X.B. of this document, neither the power that violates the Nondelegation Prevalence Rates Among Minors, Smokeless Act nor the Cigarette Act Doctrine, as the courts have repeatedly Scope, Purpose, and Definitions precludes regulation under the act of held. (See, e.g., United States v. A. Overview of Comments cigarettes and smokeless tobacco as drug Shreveport Grain and Elevator Co., 287 delivery devices. FDA’s assertion of U.S. 77, 85 (1932); United States v. From the time the 1995 proposed rule jurisdiction over cigarettes and Garfinkel, 29 F.3d 451, 457–59 (8th Cir. was published on August 11, 1995 (60 smokeless tobacco is therefore 1994); White v. United States, 395 F.2d FR 41314), until January 2, 1996, the reasonably contemplated by the laws as 5, 9–10 (1st Cir.), cert. denied, 393 U.S. Food and Drug Administration (FDA) enacted by Congress. Consequently, in 928 (1968)); United States v. 62 accepted public comments. This regulating tobacco products under the Packages, More or Less, of Marmola comment period was the opportunity for act, FDA is not asserting the lawmaking Prescription Tablets, 48 F. Supp. 878, the public to speak to FDA about the power reserved by the Constitution to 884 (W.D. Wis. 1943), aff’d, 142 F.2d matter of regulating nicotine-containing Congress. 107 (7th Cir.), cert. denied, 323 U.S. 731 tobacco products. On March 18, 1996, 2. Nondelegation Doctrine (1944).) the agency reopened the comment The Nondelegation Doctrine, broadly The Supreme Court has only period for 30 days to make additional speaking, imposes constraints on infrequently invalidated a congressional information relevant to this rulemaking Congress’ authority to delegate to others delegation to the Executive Branch. available for public comment. 44418 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

The 1995 proposed rule generated promotion and distribution of cigarettes available information, as stated in more responses than the agency had and . I grow tobacco, section II. and in the 1996 Jurisdictional received at any other time in its history but I know it is wrong to sell death. I Determination annexed hereto, FDA has on any other subject. Altogether, the really feel sorry for people who are determined that nicotine is an addictive agency received more than 700,000 ’hooked’ on nicotine.’’ Other supporting drug, and that cigarettes and smokeless pieces of mail, representing the views of comments came from more traditional tobacco are drug delivery devices, nearly 1 million individuals. Most of the sources, especially the medical and which are combination products under submissions were form letters or post public health communities. One letter section 503(g) of the Federal Food, Drug, cards. The agency identified more than from a coalition of medical associations and Cosmetic Act (the act) (21 U.S.C. 500 different types of form letters. 34 that was addressed to President Clinton 353(g)). As such, these products fall Others were petitions with sometimes said: ‘‘We, the undersigned 125 within the traditional scope of FDA’s hundreds of signatures. More than organizations, representing more than jurisdiction. Therefore, by regulating 95,000 submissions expressed 18 million members and volunteers, these products, FDA is carrying out its individual comments on the 1995 urge your strong support for Food and traditional role. proposed rule, including more than Drug Administration actions to protect (2) FDA received thousands of 35,000 from children who were children and teenagers from tobacco.’’ comments about how smoking was an overwhelmingly supportive. The Many expressed strong overall issue of free choice for adults. Most of individual comments included one from opposition to the rule. One comment the comments focused either on the an industry trade association which said: ‘‘I am taking the time to write this ideological issue of freedom to choose delivered a single submission of some letter to express my overwhelming anything, even something dangerous, or 45,000 pages on the last day of the dissatisfaction with the action of the on related economic issues, such as the announced comment period. FDA in trying to rewrite the freedom to receive discount or specialty As may be expected, comments Constitution and take control of the tobacco products by mail. Many differed sharply on the overarching Tobacco Industry.’’ comments said the Government must issues of whether FDA should regulate Although many comments opposed not attempt to regulate human behavior, cigarettes and smokeless tobacco, and FDA’s regulation of tobacco products, especially for adults, even when there whether the 1995 proposed rule would there was nearly unanimous are health consequences. Letters like have the desired effect of reducing the agreement—even from the tobacco this were typical: ‘‘As individuals we availability and attractiveness of these companies and smokers—that children too have been promised the freedom of products to children and adolescents. under the age of 18 should not be using choice and this should continue to be. Several Government officials nicotine-containing products, either I don’t want the government regulating commented, including U.S. Senators cigarettes or smokeless tobacco. A few my personal freedoms.’’ and Congressmen, other Federal children, however, did write that, even Supporters of the rule countered that agencies, State governors and if tobacco use is unhealthy, it should because nicotine addiction is a pediatric legislators, and law enforcement still be their choice, even if they are disease, the choice to start smoking is officials. Comments came from every younger than 18. The agency received not being made by adults, but by corner of the country. FDA heard from thousands of general comments about adolescents who constitute a most smokers who could not understand why the addictive and harmful consequences vulnerable population. Because they are the Government was meddling in their of tobacco use, and they called on the not yet mature individuals, they are not lives, and from smokers who agency to act. really expressing a free choice, the desperately wanted to quit, but could A summary of the general issues comments said. In addition, supporters not. It heard from employers and reflected in the thousands of comments, of the rule stated that adolescents, who employees in the affected industries, and the agency’s responses, follows: are so impressionable, are being including tobacco farmers, wholesalers, (1) The agency received several manipulated by the tobacco companies, cigarette manufacturers, and even thousand comments stating that FDA especially through advertising, and laborers with the lowest paying jobs should focus on the products it already therefore, are actually being denied a who feared that they might lose the only regulates. In addition, many comments free choice. Instead, the comments jobs they know. The agency even heard said that FDA should not expand its urged that adolescents not be allowed to from school children who wanted to be responsibilities because the agency’s choose something addictive that may protected from tobacco. ‘‘It is not fair,’’ resources already are inadequate. Others damage their health or shorten their wrote one 13-year-old, ‘‘that the tobacco stated that the regulation of tobacco is lives. companies try to get kids to use a responsibility that Congress has FDA believes that adults should tobacco.’’ reserved for itself. continue to have the freedom to choose Although many of the comments were In contrast, many supporters of the whether or not they will use tobacco addressed to specific portions of the 1995 proposed rule argued that it was products. However, because nicotine is tobacco regulation proposal, tens of appropriate for FDA to take action on addictive, the choice of continuing to thousands of letters commented in this issue. One woman wrote: ‘‘As the smoke, or use smokeless tobacco, may general. Thousands of general Federal agency designed to protect not be truly voluntary. Because comments supported the rule. Some, consumers from harmful consumer abundant evidence shows that nicotine like this one, came from surprising products, FDA clearly has both the right is addictive and that children are not sources: ‘‘I support regulations and the responsibility to take these equipped to make a mature choice about restricting the sale, advertising, actions against the most serious health using tobacco products, the agency threat to our young people.’’ believes children under age 18 must be 34 Opponents and proponents of the rule The regulation of drugs and medical protected from this addictive substance. organized letter-writing campaigns. One, a massive tobacco company-orchestrated campaign, generated devices sold through interstate (3) Numerous comments, many from some 300,000 pieces of mail—nearly half of all of commerce is central to FDA’s adult smokers, expressed the fear that the mail received by the agency on this topic. established role. Based on recently FDA’s true goal is a total ban of all Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44419 tobacco products. Some asserted that product is already highly regulated. from smoking. One woman wrote: the 1995 proposed rule is a prelude to Many comments observed that all 50 ‘‘Thirty years of experience in prohibition. One woman wrote: ‘‘The States have passed their own laws compromising with the tobacco industry most insidious insight into this prohibiting the sale of tobacco products has proven that the industry can not be proposed regulatory act is the Federal to minors younger than 18. Comments trusted. After the release of the Surgeon Government’s thinly veiled motive of on existing State enforcement programs General’s report in 1964, the tobacco the eventual prohibition of tobacco sales primarily came from those opposed to industry promised to abide by a in the United States to appease a small FDA’s proposed regulation, including voluntary advertising code, but the code minority of fanatical anti-smoking legislators from more than a dozen was quickly ignored after the threat of zealots.’’ States. These comments claimed that government regulation had passed.’’ FDA strongly disagrees with these this should remain a State matter, that Another comment said: ‘‘When tobacco comments and reiterates that it has no State laws are either sufficient or companies fear government regulation, intention of banning cigarettes and superior to the 1995 proposed rule, that they often adopt voluntarily the smokeless tobacco. FDA is aware that at State officials, unlike FDA, are restrictions the government is least one tobacco manufacturer, in responsive to the concerns of State considering. However, there is no letters sent to its customers encouraging citizens, and that States and private penalty for violating a voluntary them to submit comments opposing the groups are more responsible and guideline. The tobacco industry has a rule, claimed that the ‘‘real agenda is effective than a Federal agency. track record that speaks for itself. Please Backdoor Prohibition of all tobacco Comments like this were common: don’t play the tobacco industry’s game!’’ products.’’ These allegations are ‘‘Many states have strict restrictions on The agency believes that the baseless and ignore statements made by tobacco sales to minors already and in comments opposing the rule on the the President and FDA to the contrary. my State () these regulations basis that the States already have For example, when the President are being enforced with great success.’’ restrictions have misinterpreted its announced the proposed FDA Many supporters of the 1995 scope and application. FDA, under the regulations on August 10, 1995, one proposed rule, however, pointed out act, regulates human and animal drug reporter asked whether an outright ban that State rules generally have failed to products, certain foods, and devices that would be more logical than a stop minors from purchasing tobacco are, or have been in interstate ‘‘regulatory partial step.’’ The President products. One individual wrote: ‘‘I commerce. The fact that these products replied: currently live in a State where there is move across State lines makes their I think it would be wrong to ban cigarettes absolutely no enforcement of the laws regulation a Federal matter. outright because, number one, it’s not illegal banning sales of tobacco to minors,’’ and Other statutes and regulations provide for adults to use them * * * tens of millions of adults do use them. And I think it would numerous other comments referred to further evidence that tobacco regulation be as ineffective as prohibition was. But I do specific instances in which they said is not reserved to States. The Federal think to focus on our children is the right State laws were not observed. A joint Cigarette Labeling and Advertising Act thing to do. letter sent by attorney generals from 25 (15 U.S.C. 1331 et seq.) (Cigarette Act) (Transcript, ‘‘Press Conference by the States, as well as Guam and Puerto Rico, and the Comprehensive Smokeless President,’’ dated August 10, 1995) welcomed the 1995 proposed rule, Tobacco Health Education Act (15 The preamble to the 1995 proposed rule saying: U.S.C. 4401 et seq.) (Smokeless Act), expressed a similar view that removing Although every State bans the sale of among other things, place federally- cigarettes and smokeless tobacco from tobacco to minors, studies show that children required statements and warnings on the market would not be in the best have easy access to tobacco. * * * We cigarettes and smokeless tobacco and believe the proposed rule, which emphasizes interest of public health (60 FR 41314 at require manufacturers to submit reports reducing access and limiting the appeal of to the Federal Government. These 41348 and 41349). tobacco products to children, should be a Rather than instituting prohibition, crucial component of a national effort by products are also subject to Federal the agency’s rule will inhibit the spread Federal, State and local officials to help our taxes (see, e.g., 26 U.S.C. 5701) and of smoking behavior from one youngest generation of Americans avoid Federal, rather than State, laws and generation to the next. As a result, fewer suffering preventable disease and premature regulations intended to guard against and fewer adolescents will become death from the use of tobacco products. contraband cigarettes (see 18 U.S.C. addicted to nicotine-containing Many comments stated that the 2341 et seq.; 27 CFR part 296, subpart products. As current smokers either quit tobacco industry has in place guidelines F). Thus, tobacco regulation is clearly or die, the total number of smokers will to prevent the sale of tobacco products both a Federal and State matter. gradually decline as they are replaced to minors. Said one comment: ‘‘I fail to FDA also disagrees with those by fewer and fewer new smokers. The see why the government is so quick to comments suggesting that States and agency wants to reassure those who fear dismiss voluntary action on the part of private groups may be more responsible that FDA is taking the first steps that the industry.’’ Other comments or efficient than FDA or that FDA may would lead inexorably to a ban on the recommended that voluntary education not be as responsive to citizens’ sale of these products to those 18 and programs aimed at retailers, or, more concerns. Federal regulation of these over that FDA will not ban these specifically, at retail sales clerks, would products has several significant products for adults. Thus, any claim be sufficient. These educational advantages over State or private group that the rule is a prelude to or would programs would either be based on oversight alone; for example, the rule lead to prohibition is totally without voluntary efforts by the affected establishes minimum, national merit. industries or in-house, employee standards for the sale and distribution of (4) FDA received many comments training programs. these products whereas State or private from politicians, industry Supporters of the rule, however, group efforts may be limited to a representatives, and private citizens expressed widespread distrust of the specific locality or to group members. who argued that the agency does not industry and of its promise to use FDA’s regulations also create need to regulate tobacco because the voluntary programs to prevent minors enforceable obligations whereas private 44420 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations group efforts, voluntary codes, and While it is true that production of cigarettes and smokeless tobacco as industry policies do not. tobacco products is regulated, and the nicotine delivery devices justify or FDA notes that this regulation does industry is heavily taxed, virtually none require the regulation of coffee cups and not necessarily preclude States from of these measures is aimed at the shot glasses. enforcing their own laws. In fact, under product’s impact on the health of the First, the agency notes that currently section 1926 of the Public Health individuals using them or on public it regulates both caffeine and alcohol Service Act (the PHS Act) (42 U.S.C. health. FDA regulation of tobacco under the authority of the act. Caffeine 300x-26), States are expected to enact products is intended to have a naturally occurs in coffee, tea, and other and to enforce laws to prohibit any completely different effect than any of foods. It is also used as an ingredient in manufacturer, retailer, or distributor of the rules that currently applies to the soft drinks. The act defines ‘‘food’’ as tobacco products from selling or tobacco industry. The agency’s ‘‘articles used for food or drink for man distributing such products to any regulatory effort will attempt to reduce or other animals’’ (section 201(f)(1) of individual under age 18. the number of young people who smoke the act (21 U.S.C. 321(f)(1))). When Moreover, States may choose to or use tobacco products, consistent with caffeine naturally occurs in products regulate areas that are not addressed in FDA’s mission to protect public health that are foods, such as coffee, or when this rule and not authorized by the act, by existing laws. caffeine is used in soft drink products such as requiring licenses for retailers. (6) Many comments objected to the in accordance with section 402 of the FDA agrees with the comments from 1995 proposed rule, stating that act (21 U.S.C. 342), the product is a State attorneys general that effective cigarettes and smokeless tobacco are ‘‘food’’ under section 201(f)(1) of the act regulation of cigarettes and smokeless legal products and should be treated and thus explicitly excepted from the tobacco, in order to protect children and like any other legal consumer product. definition of ‘‘drug’’ in section adolescents, will involve cooperation FDA believes that the comments 201(g)(1)(C) (21 U.S.C. 321(g)(1)(C)). and joint efforts by Federal and State misunderstand the regulatory basis for Caffeine used in soft drinks in officials and FDA’s rule will enhance, the rulemaking. FDA has determined accordance with section 402 of the act rather than hinder, State that these products contain both a drug is appropriately regulated as a food efforts. and device component as defined in under 201(f)(1) of the act. Caffeine is section 201(g) and (h) of the act (21 also used as an active ingredient in Moreover, States are not precluded U.S.C. 321(g) and (h)), respectively, several products regulated as drugs by from taking action in areas that are because the products, and the nicotine the agency, including over-the-counter addressed in this rule. Although some of in the products, are intended to affect , internal analgesics and these requirements may be preempted, the structure and function of the body. menstrual discomfort relief products. the State may petition the agency for an The agency has further determined that Likewise, alcohol is used as an exemption from the act’s preemptive these products should be regulated as ingredient in products regulated as effect under section 521(b) of the act (21 devices. Thus, the issue is not merely drugs under the act, including over-the- U.S.C. 360k(b)). A more detailed whether the products themselves have counter cough and cold preparations. discussion of preemption can be found been legally marketed, but how they There is no evidence to suggest that the in section X. of this document. may be most appropriately regulated to agency’s current regulation of these Finally, regarding the comments protect the public health, given their substances is inappropriate or questioning FDA’s response to State or status under the act and potential to do inadequate to protect the public health. citizen concerns, mechanisms do exist harm. Therefore, there is no factual or for States and individual citizens to seek (7) Some comments suggested that if scientific basis for the agency to change regulatory action or changes by FDA. the Government begins regulating the manner in which these substances FDA regulations permit any person to tobacco, it will soon regulate many are now being regulated. petition the agency to request an action other consumer products that are now FDA’s attention was drawn to tobacco (such as issuance, amendment, or legal, but judged to be harmful to health, rather than caffeine and alcohol because revocation of a rule), to reconsider an including alcohol and caffeine. They of certain fundamental differences action, or to stay an administrative expressed fear that, once FDA begins to among the substances. Nicotine is a action (see §§ 10.30, 10.33, and 10.35 regulate one consumer product, it will highly addictive drug. As discussed in (21 CFR 10.30, 10.33, and 10.35)). Less be obligated to regulate others. Said one section I.B. of this document, studies formal mechanisms for communicating man: ‘‘The FDA thinks it is being sly by estimate that as many as 92 percent of with FDA, such as letters or meetings, defining cigarettes as ‘nicotine delivery all smokers are addicted to the nicotine exist as well. devices.’ A shot glass must then be in cigarettes. There is no evidence that (5) Many comments opposing this described as a device for alcohol either caffeine or alcohol pose this kind rule argued that the tobacco industry consumption. A coffee mug must be a of health problem. Moreover, cigarettes already is intensely regulated, and that device for caffeine consumption. Will and smokeless tobacco are dangerous more regulation is unneeded and the FDA be regulating my morning products that are associated with lung unjustified. One person wrote: ‘‘As you coffee by restricting the size of my cancer, heart disease, and many other know the tobacco industry is already cup?’’ Some supporters of the proposed serious illnesses and conditions. one of the most heavily regulated rule said that FDA should regulate some Yet these factors only served to draw industries in the United States. Current of the other consumer products FDA’s attention to the tobacco problem. laws would accomplish the stated associated with medical disorders. What ultimately separates caffeine and objective of the proposed FDA Wrote one: ‘‘Bud frogs are no different alcohol from nicotine and tobacco regulations.’’ Others disagreed: ‘‘I than Joe Camel.’’ products is that caffeine and alcohol are believe that the tobacco industry has a FDA strongly disagrees with these currently being appropriately regulated long, sorry, and cynical record * * *. It comments and believes that the as foods or drugs based on their is an industry that greatly deserves to be concerns they express are misplaced. In intended use. Nicotine and tobacco regulated further.’’ no way does the agency’s regulation of products, on the other hand, are drugs Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44421 and medical devices, respectively, that, of the products themselves, will prevent authority in the course of a criminal in large measure, are not being more young people from using the investigation (§ 20.64 (21 CFR 20.64(a))). appropriately regulated. FDA is moving products. B. Smoking Prevalence Rates Among to correct this situation, and the public FDA also emphasizes that cigarettes Minors health will undoubtedly benefit as a and smokeless tobacco are combination result. drug-device products that are subject to The agency received some comments (8) Several comments argued that it is regulation under the act. Consequently, stressing the importance of accurately the responsibility of parents and the rule properly addresses issues measuring youth consumption of teachers, not the Federal government, to relating to the sale, distribution, and use tobacco products, reiterating the educate young people about cigarette of these products by children and problem of growing use among young and smokeless tobacco use. Some adolescents. The rule does not adversely people, and stressing the need to curb comments feared that FDA’s effort to affect a parent’s or teacher’s ability to such growth to improve health and to reduce the use of nicotine-containing discuss cigarette and smokeless tobacco reduce the tremendous health care costs cigarettes and smokeless tobacco by use with young people. attributable to tobacco-related illnesses. However, several disputed the statistics youth might interfere with the (9) Comments suggested that, for FDA cited on the number of youth relationship between parents and their some, illegal drugs and crime evoke smokers and challenged the data children. Many comments voiced the stronger emotions than tobacco use. sources used. These comments are argument that this rule is a sign of big Many comments stated that the discussed below. Government getting in the way of Government, although not FDA (11) One comment objected to FDA’s parents educating their children. One specifically, should spend more of its description of smoking as a ‘‘pediatric comment stated, ‘‘This is obviously a resources on fighting crime instead of problem,’’ arguing that ‘‘TAPS II case of misplaced priorities * * *. The trying to regulate a legal product such [Teenage Attitude and Practice Survey battle will really be won on the home as tobacco. One of the form letters stated II] demonstrates that smoking in any front. Parental guidance will go a long it this way: ‘‘Federal dollars would be meaningful sense is a phenomenon that way in curbing underage smoking.’’ much better spent addressing inner-city occurs in the later teenage years, not in Other parents, however, were grateful violence, illegal drug sales, and this the pre-teen or early teen years.’’ It for any assistance they could get to help country’s deteriorating education further charged that the agency’s use of protect their children from nicotine system.’’ addiction. One person said: ‘‘The the term ‘‘pediatric’’ is intended to serve parents cannot do it all alone.’’ FDA’s authority is defined by the act. ‘‘emotive and/or political purposes, not Furthermore, most parents who FDA lacks the authority to help with to describe the problem of underage submitted comments stated that a strong other social ills such as crime and illicit smoking in scientific or medical terms.’’ national approach to reducing these drug sales. A comment from a public health products’ accessibility and appeal (10) One comment urged FDA to association, however, cited the TAPS II would reinforce messages that their institute policies that would facilitate survey as showing that ‘‘the average children get at home. One comment ‘‘whistleblowing.’’ The comment said teen smoker initiates smoking at age 13, stated, ‘‘While I am in no way an that FDA should encourage tobacco and becomes a regular smoker by age advocate of government in my life, this company employees to disclose 14.5.’’ It also referred to the Center for to me is a totally different circumstance allegedly illegal or dishonest practices. Disease Control and Prevention (CDC’s) ** * children should not be expected Any person, regardless of the industry 1992 Youth Risk Behavior Survey, to make these choices.’’ One comment that employs that person, can provide which showed ‘‘similar patterns of early from a middle school student said, records and information to FDA for law initiation rates, with smoking initiation ‘‘Giving school age children the enforcement purposes with the rates rising rapidly between 10 and 14 opportunity to purchase things that will assurance that his or her identity, and years of age.’’ endanger them is inexcusable.’’ the information and records that he or The agency maintains its position that The agency recognizes the unique role she provides, will not be publicly smoking is a pediatric disease. It agrees that parents and teachers have in disclosed. Current Federal statutes and with the comment citing TAPS II and educating young people and has no FDA regulations already protect records Youth Risk Behavior Survey data intention of intervening in that or information compiled for law showing that the average teen smoker relationship. Rather, FDA expects the enforcement purposes from public begins smoking in the early teens or rule to complement parental and disclosure. For example, the Freedom of even preteens, rather than later years. educational efforts by reducing the Information Act exempts law Furthermore, the American Academy availability and appeal of tobacco enforcement records and information of Pediatrics’ Council on Child and products. The preamble to the 1995 from public disclosure. FDA’s Adolescent Health states that the proposed rule contained ample regulations governing public disclosure purview of pediatrics includes the evidence as to how these products are elaborate on this exemption, stating, physical and psychosocial growth, easily accessible to and appeal to young among other things, that the agency may development, and health of the people and how a comprehensive withhold from public disclosure records individual beginning before birth approach, aimed at reducing both access or information compiled for law through early adulthood, and that ‘‘[t]he and appeal, will be more effective than enforcement purposes to the extent that responsibility of pediatrics may an educational approach alone. disclosure of such records or therefore begin with the fetus and Educating young people about health information could reasonably be continue through 21 years of age.’’ This risks may deter some young people from expected to disclose the identity of a definition of pediatrics obviously trying cigarettes and smokeless tobacco, confidential source and information includes the age group FDA has targeted but educating them and simultaneously furnished by a confidential source in the to reduce smoking. reducing their ability to acquire the case of a record compiled by FDA or any (12) One comment from the tobacco products, as well as reducing the appeal other criminal law enforcement industry charged that FDA’s assertion 44422 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations that smoking has increased among 8th- Combined National Health Interview and morbidity effects of the toxic and 10th-grade students ignored CDC’s Surveys for 1987 to 1988, 92 percent of components of cigarette smoke and tobacco. TAPS II data showing that the incidence 20-year-old smokers started smoking by As discussed in section I.B. of this of underage smoking declined between age 18. Taking into account the document, the agency believes that, on 1989 and 1993. TAPS II, the comment comment and these data, the agency balance, it is better for cigarettes and maintained, showed that ‘‘[a]lthough believes that it is accurate to state that smokeless tobacco to remain available total smoking in the interview sample approximately 3,000 young people for use by adults. [1993] has increased as minors have begin to smoke each day, regardless of (16) Several comments urged that the aged since 1989, comparing the results whether young people is defined as scope should be expanded to include all for minors of a given age indicates that under 18, or 20 years and under, nicotine containing products, including the incidence of underage smoking although the agency would note that of cigars and pipes. Another comment declined between the two surveys’’ and the 3,000 young people who begin expressed concern that the sale and use that ‘‘between the two surveys both smoking each day, 2,722 are under age of big cigars and pipe tobacco by youth daily smoking and any smoking in the 18. may be increasing, and therefore past 30 days declined among minors.’’ recommended that FDA expand the C. Scope The introduction to TAPS II stated scope ‘‘to include all presently marketed that its prevalence findings were Proposed § 897.1(a) would have stated nicotine delivery devices,’’ or to comparable to or lower than those of that ‘‘[t]his part is intended to establish ‘‘include regular monitoring of youth’s other national surveys. It explained that the conditions under which cigarettes use of these products, and should that the survey method used in TAPS II, and smokeless tobacco products that use increase, provide a means to extend computer-assisted telephone interviews, contain or deliver nicotine, because of the FDA’s rulings to include those had several limitations that may have their potential for harmful effect, shall products.’’ led to the lower estimates. For example, be sold, distributed, or used under the Another comment stated that since young people may be fearful of restricted devices provisions of the ‘‘federal regulations often take seven to disclosing smoking behavior if a parent Federal Food, Drug, and Cosmetic Act.’’ ten years to enact and enforce, it is is present in the room during the Proposed § 897.1(b) would have stated essential that the regulation be written telephone interview. Further, telephone that ‘‘[r]eferences in this part to pro-actively to adequately address the interviews do not afford the same regulatory sections to the Code of problem at the outset.’’ The comment opportunity for building a rapport Federal Regulations are to chapter I of stated that ‘‘[i]t is therefore, important to between the interviewer and the Title 21, unless otherwise noted.’’ The write regulations to protect the public respondent as do in-person interviews. final rule is being amended to explicitly from all ‘nicotine delivery devices’ that As a result, young people being state that failure to comply with any in the future, might be placed in interviewed in this manner may be less applicable provision would render the something other than tobacco’’ because likely to disclose their real smoking product misbranded. ‘‘[a]ny product containing the addictive behavior. For these reasons, the The preamble to the 1995 proposed substance of nicotine has a future introduction stated, ‘‘prevalence rule stated that ‘‘[t]he proposed rule market because of its addictive nature.’’ estimates from TAPS II may be lower would not apply to pipe tobacco or to Finally, this comment asserted that than they would have been had the cigars because the agency does not FDA should broaden the scope of the entire TAPS I cohort been successfully currently have sufficient evidence that rule to include all products that deliver reinterviewed and therefore, should be these products are drug delivery devices nicotine, because the comment stated interpreted with caution.’’ 35 under the act’’ (60 FR 41314 at 41322). that smoking mothers are at greatest risk (13) One comment challenged FDA’s The preamble stated that ‘‘FDA has for reproductive hazards, such as low claim that 3,000 young people become focused its investigation of its authority birth weight babies. The comment stated new smokers every day. The comment over tobacco products on cigarettes and that ‘‘[c]onsidering that over 50% of maintained that ‘‘the study from which smokeless tobacco products, and not on births are unplanned, and that people the ‘3,000 per day’ number was derived pipe tobacco or cigars, because young believe they can always quit smoking, it did not refer to children at all,’’ but to people predominantly use cigarettes and is too late to avoid damage by smoking smokers ‘‘aged 20 years old’’ (Pierce et smokeless tobacco products’’ (Id.). mothers by the time they realize they al., 1989) (emphasis from original). 36 (14) A comment opposing this are pregnant.’’ The agency agrees that the study provision stated that FDA does not have The preamble to the 1995 proposed surveyed individuals who were 20- authority to regulate cigarettes under the rule stated that ‘‘[t]he proposed rule years-old, although the agency referred restricted device (or any other) would not apply to pipe tobacco or to to these individuals in essentially the provision of the act. cigars because the agency does not same terms used by the authors of the The agency disagrees. A full currently have sufficient evidence that study—‘‘young persons.’’ discussion of the agency’s authority can these products are drug delivery devices Any potential confusion is mitigated be found in section II. of this document. under the act’’ (60 FR 41314 at 41322). The preamble stated that ‘‘FDA has by the fact that subsequent surveys (15) Several comments supported the focused its investigation of its authority indicate that the vast majority of 20- provision. Some comments over tobacco products on cigarettes and year-olds begin smoking at a younger recommended that the scope of the rule smokeless tobacco, and not on pipe age. For example, according to the should also apply to adult smokers. One tobacco or cigars, because young people comment stated that: 35 ‘‘1993 Teenage Attitudes and Practices Survey, [I]t is evident from the FDCA [the Federal predominantly use cigarettes and Public Use DataTape,’’ CDC, OSH, p. 3, 1993 Food, Drug, and Cosmetic Act] that the FDA smokeless tobacco products’’ (60 FR (unpublished data). 41314 at 41322). 36 Pierce, J. P., M. C. Fiore, T. E. Novotny, E. J. has clear and unambiguous authority to Hatziandreu, and R. M. Davis, ‘‘Trends in Cigarette regulate and restrict the sale of the subject The agency advises that, at this time, Smoking in United States: Projections to the Year products not only to minors but also to there is insufficient evidence of cigar or 2000,’’ JAMA, vol. 261, pp. 61–65, January 6, 1989. adults, who suffer equally from the mortality pipe tobacco use by children and Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44423 adolescents to support the inclusion of restrictions under the Federal Food, individuals under the age of 18. The cigar, pipe tobacco, or ‘‘all presently Drug, and Cosmetic Act (the act) on the SAMHSA rule contains standards for marketed nicotine delivery devices’’ sale, distribution, and use of cigarettes determining State compliance with within the scope of the final rule and smokeless tobacco that contain section 1926 relating to the enactment (section III.E. of this document). nicotine.’’ This sentence is comparable and enforcement of State laws In response to the comment stating to proposed § 897.1(a), but more prohibiting the sale and distribution of that the agency should monitor youths’ accurate because the 1995 proposed rule tobacco products to individuals under use of products such as cigars or pipe only referred to FDA’s restricted device the age of 18. Both sets of regulations tobacco, and that the agency should authority. FDA has also added a new are designed to help address the serious provide a means to ‘‘extend FDA’s § 891.1(b) stating that ‘‘[t]he failure to public health problem caused by young rulings to include these products,’’ the comply with any applicable provision people’s use of nicotine-containing agency advises that, as stated in the in this part in the sale, distribution, and tobacco products. By approaching this 1995 proposed rule, the objective of the use of cigarettes and smokeless tobacco pediatric disease from different final rule is to meet the goal of the renders the product misbranded under perspectives, these regulations together report ‘‘Healthy People 2000,’’ by the act.’’ This sentence is intended to will help achieve the Administration’s reducing roughly by half children’s and remind parties that violations of a goal of reducing the number of young adolescents’ use of tobacco products. regulation for a restricted device and people who use tobacco products by 50 The agency is not asserting jurisdiction other actions relating to the sale of a percent. over pipes and cigars at this time device may cause a device to be (17) One comment opposing this because it does not have sufficient ‘‘misbranded’’ under the act. Proposed provision stated that ‘‘it will have little evidence that these products satisfy the § 897.1(b), which would have stated that effect on tobacco use by young people, definitions of drug and device in the act. regulatory references are to title 21 of is beyond FDA’S statutory authority, is However, the agency will consider any the Code of Federal Regulations, has unjustified as a matter of policy, and additional evidence that becomes been renumbered as § 891.1(c) in the would violate the Constitution.’’ available, including any new evidence final rule and has not been changed. The agency believes that the comment that these products meet the statutory opposing this provision misinterprets D. Purpose (§ 897.2) definitions as well as evidence that § 897.2. This particular provision indicates that cigars and pipe tobacco Proposed § 897.2(a) would have stated merely states the purpose of the entire are used significantly by young people. that: rule and is not intended, in and of itself, FDA also disagrees with the comment [t]he purpose of this part is to establish to impose any new restrictions. The claiming that Federal regulations take 7 conditions for the sale, distribution, and use agency disagrees that the entire rule will to 10 years to enact and enforce. While of cigarettes and smokeless tobacco products have little effect on tobacco use by it may be true that rulemaking, in in order to: * * * [r]educe the number of young people; that it is beyond the people under 18 years of age who become general, can be a time-consuming task, addicted to nicotine, thus avoiding the life- agency’s statutory authority; that it is the agency can and has taken prompt threatening consequences associated with unjustified as a matter of policy; and action to issue rules with significant tobacco use and to provide important that it violates the Constitution. All of public health implications. For information regarding the use of these these issues are discussed in detail example, the proposed rule for this final products to users * * *. elsewhere in this document. rule appeared in the Federal Register of The agency has modified the final rule (18) Several comments supported the August 11, 1995 (60 FR 41314). (See to provide information regarding the use provision, stating that a national policy also 56 FR 60366 et al., November 27, of these products only to users; it has is essential because State laws are 1991, and 58 FR 2066 et al., January 6, deleted potential users because the final ineffective and inconsistent. 1993 (15 months to issue Nutrition rule no longer includes an education The agency agrees with these Labeling and Education Act program for young people. Proposed comments and advises that the final rule regulations); 60 FR 5530, January 27, § 897.2(b) stated that this part of the complements the existing efforts by 1995, and 60 FR 63372, December 8, provision is intended to ‘‘[p]rovide States to enforce restrictions on young 1995 (11 months to issue regulations to important information regarding the use people’s access to cigarettes and facilitate communications between FDA of these products to users and potential smokeless tobacco. As stated in the and State and foreign governments in users.’’ The agency’s response to more comments, all States currently have order to enhance regulatory specific comments follows. laws prohibiting the sale of tobacco cooperation).) If it is necessary to amend The preamble to the 1995 proposed products to minors. Section 1926 of the this regulation, the agency will also be rule stated that the proposed rule would PHS Act creates an incentive for the able to do so expeditiously. reduce ‘‘the appeal of and access to States to reduce the unlawful sales of The agency agrees with the comment cigarettes and smokeless tobacco tobacco products to young people by stating that smoking mothers are at risk products by persons under 18 years of ‘‘requiring States to have in effect laws for certain reproductive hazards. FDA age,’’ but ‘‘would preserve access to which prohibit the sale of tobacco has chosen to tailor its regulation to cigarettes and smokeless tobacco products to minors as a condition of address only children and adolescents. products by persons 18 years of age and receipt of grants.’’ This However, other agencies within the older’’ (60 FR 41314 at 41322). rule would only preempt individual Department of Health and Human This rule is designed to complement State requirements that are different Services (DHHS) have programs that the regulations (sometimes referred to as from or in addition to these regulations currently address tobacco use by ‘‘the Synar regulations’’) issued by the (see section 521(a) of the act (21 U.S.C. persons of all ages. Substance Abuse and Mental Health 360k(a))). Thus, a State restriction on FDA, on its own initiative, has revised Services Administration (SAMHSA) (the the sale of cigarettes and smokeless § 897.1 to simplify and to clarify the SAMHSA rule) implementing section tobacco to individuals under the age of scope of the rule. As revised, § 897.1(a) 1926 of the PHS Act regarding the sale 18 will continue to be enforced by the states that part 897 ‘‘sets out the and distribution of tobacco products to State. (See preemption discussion, 44424 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations section X. of this document.) While the ** * and as to which 1,000 units weigh not definition also would have stated that agency expects the State laws to reduce more that 3 pounds. ‘‘[u]nless otherwise stated, the smoking among young people, those (20) Several comments supported the requirements pertaining to cigarettes laws unlike FDA’s rule, only reduce inclusion of ‘‘little cigars’’ in the shall also apply to cigarette tobacco.’’ access and not the appeal of smoking to definition of ‘‘cigarette’’ and suggested (21) One comment by manufacturers young people. Thus, the agency believes that the definition be broadened to of ‘‘roll-your-own’’ (RYO) cigarette that the rule will help States achieve include other tobacco products as well. tobacco argued that the inclusion of their goals under the substance abuse These comments argued that all tobacco, RYO cigarette tobacco under the 1995 programs. including ‘‘snuff,’’ chewing tobacco, proposed rule was arbitrary and (19) One comment supporting the cigars, and pipes, should be regulated in capricious, as the agency had no factual provision stated that although the focus the same manner as cigarettes, as these information about RYO’s composition, of the rule should be on children, ‘‘the products are also nicotine delivery marketing, and usage. This comment needs of adult smokers should not be systems. These comments further stated also asserted that there is no evidence abandoned.’’ Another comment stated that there is evidence to show that cigar of RYO tobacco usage by minors. that: smoking is becoming increasingly The agency disagrees that the Cigarettes and smokeless tobacco products popular among young adults and inclusion of cigarette tobacco in the rule are nicotine delivery devices and they adolescents. is arbitrary and capricious. RYO tobacco regularly cause addiction in their users. In contrast, several comments from is nothing less than cigarettes that have Because addiction often leads to serious industry indicated that little cigars are not yet been assembled. illness and death, it is important to reduce unique products which should not be Unquestionably, RYO cigarettes contain the number of people under 18 years of age regulated as cigarettes. One comment tobacco and are smoked. The comment who become addicted to nicotine. Similarly, stated that the agency has no studies to did not challenge the agency’s proposed it is important to provide accurate support the inclusion of little cigars in information about the use of these products finding that the smoke from RYO to users and to potential users. the rule. Moreover, the U.S. Treasury cigarettes is inhaled, that the RYO The agency appreciates the Department’s Bureau of Alcohol, tobacco is processed, and that RYO comment’s suggestion, but advises that, Tobacco and Firearms (BATF) cigarettes deliver nicotine. Unlike ‘‘little for reasons explained in section I.B. of submitted a comment opposing the cigars,’’ discussed in paragraph 1 of this this document, the final rule focuses inclusion of little cigars in the section of the document, the agency principally on children and adolescents. ‘‘cigarette’’ definition, as this would believes that there is no significant FDA, on its own initiative, has revised require little cigars to be labeled and difference in the composition of RYO § 897.2 to state that the purpose of part advertised as a cigarette under the FDA tobacco or in the reason consumers use 897 is ‘‘to establish restrictions on the regulations, but taxed and labeled as a it (to deliver nicotine) from cigarettes. sale, distribution, and use of cigarettes ‘‘cigar,’’ under the Internal Revenue The agency believes that, because a RYO and smokeless tobacco in order to regulations enforced by BATF. cigarette is fundamentally the same reduce the number of children and The agency has decided, based upon product as a commercially adolescents who use these products, the comments and the record of this manufactured cigarette posing the same and to reduce the life-threatening proceeding, not to include little cigars risks, it should be subject to the consequences associated with tobacco in the definition of ‘‘cigarettes’’ for the restrictions in this rule in order to use.’’ FDA believes this revision is a purposes of the regulation. The protect the public health. simpler and more accurate statement of differences between little cigars and Furthermore, it is important to the rule’s purpose. cigarettes are significant—the products include RYO tobacco because to exclude are easily distinguishable, taxed at it would provide a simple and obvious E. Definitions (§ 897.3) different levels, and marketed to way to avoid the restrictions in this Proposed § 897.3 would have different consumers. Moreover, little regulation. If such an exception existed, contained definitions for the terms cigars are neither advertised extensively cigarettes could be packaged and sold in ‘‘cigarette,’’ ‘‘cigarette tobacco,’’ nor sold in vending machines. Most such a way as to be considered RYO ‘‘distributor,’’ ‘‘manufacturer,’’ importantly, the agency is not currently products. Tobacco companies would ‘‘nicotine,’’ ‘‘package,’’ ‘‘point of sale,’’ aware of sufficient evidence of use of then be free to sell these products using ‘‘retailer,’’ and ‘‘smokeless tobacco.’’ little cigars by children or adolescents to all the marketing and promotion The agency received several comments support inclusion of such products in techniques currently used for cigarettes, on the definition section of the the rule. Therefore, FDA has deleted techniques that are particularly proposal, regarding either the specific little cigars from the definition of successful with young people. An definitions provided or requesting ‘‘cigarette’’ in § 897.3(a). Moreover, FDA exception so broad would quickly definitions for additional terms. In will continue to coordinate definitions undermine the entire purpose of the response to the comments, the agency with BATF as appropriate. rule. Additionally, FDA has made a has clarified several terms, including Additionally, FDA has deleted minor change to § 897.3(b) to have ‘‘distributor’’ and ‘‘retailer,’’ and has ‘‘components, accessories, or parts’’ ‘‘cigarette tobacco’’ mean ‘‘any product modified the term ‘‘cigarette’’ to exclude from § 897.3(a). The reference to that consists of loose tobacco * * *.’’ little cigars. ‘‘components, accessories, or parts’’ was The addition of the words ‘‘any Proposed § 897.3(a)(3) would have unnecessary because the statutory product’’ is intended to make § 897.3(b) provided a definition of ‘‘cigarette’’ definition of ‘‘device’’ includes ‘‘any conform with the format used for other which included the following language, component, part, or accessory.’’ definitions. modeled after the definition of ‘‘little Proposed § 897.3(b) would have (22) In proposed § 897.3(c), cigar’’ contained in the Cigarette act: defined ‘‘cigarette tobacco’’ as ‘‘any ‘‘distributor’’ would have been defined (a) Cigarette means * * * loose tobacco that contains or delivers as ‘‘any person who furthers the (3) [a]ny roll of tobacco wrapped in leaf nicotine and is intended for use by marketing of cigarettes or smokeless tobacco or any substance containing tobacco consumers in a cigarette.’’ The proposed tobacco products * * * from the Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44425 original place of manufacture to the Furthermore, the modified definition are offered for sale, sold, or otherwise person who makes final delivery or sale clearly does not apply to advertising distributed to consumers. to the ultimate user, but who does not agencies. Although advertising agencies FDA did not receive any comments repackage or otherwise change the may be said to further the ‘‘marketing’’ that would warrant a change to container, wrapper, or labeling of the of a product they advertise, they do not § 897.3(f) but has, on its own initiative, ** * products.’’ further the ‘‘distribution’’ of that deleted the word ‘‘products’’ from Several comments stated that the product. As for truckers and other ‘‘smokeless tobacco products’’ to definition of ‘‘distributor’’ is vague and carriers, section 703 of the act only correspond to similar changes over broad, because: requires ‘‘carriers engaged in interstate throughout the rule. [P]ersons ‘who further the marketing of commerce’’ and persons receiving or (25) Proposed § 897.3(g) would have cigarettes or smokeless tobacco’ [may holding devices in interstate commerce defined ‘‘point of sale’’ to mean ‘‘any include] literally everyone involved in the to provide access to records showing the location at which a consumer can production, shipping, advertising, or devices’ movement or holding in purchase or otherwise obtain cigarettes promotion of cigarettes. Such ‘distributors’ interstate commerce. Thus, such carriers or smokeless tobacco products for could thus include, for example, cigarette personal consumption.’’ One comment manufacturers and their employees; truckers would not be subject to the and shipping clerks involved in the physical requirements applicable to distributors stated that this definition is movement of the product; advertising under this part. unconstitutionally vague and over agencies; people involved in promotional (24) Proposed § 897.3(d) would have broad, because ‘‘a person can ‘obtain’ activities and the manufacture of defined ‘‘manufacturer,’’ in part, ‘‘as any cigarettes from a social acquaintance or promotional materials; retailers and their person, including any repacker and/or family member * * * in any number of employees; and conceivably even individuals relabeler, who manufactures, fabricates, ** * settings.’’ The comment who ‘deliver’ cigarettes to social suggested that ‘‘point of sale’’ be limited assembles, processes, or labels a acquaintances or family members as ‘ultimate to ‘‘commercial establishments where finished cigarette or smokeless tobacco users.’ Including such persons and entities tobacco products are sold in arm’s- product.’’ One comment suggested that within the definition of ‘distributor’ would, length commercial transactions.’’ this definition be modified to exclude in turn, render them ‘responsible,’ * * * for The agency agrees that obtaining a ensuring that the cigarettes the ‘marketing’ of foreign manufacturers and cigarette from a social acquaintance or which they ‘further’ comply with ‘all manufacturers of products that make up family member should not render the applicable requirements’ of part 897. less than 1 percent of the total U.S. venue of this ‘‘transaction’’ a ‘‘point of (23) One comment suggested that an cigarette market. individual advocating a particular brand sale.’’ However, the agency does not The agency disagrees that foreign believe that the definition of ‘‘point of of cigarette would fall within the manufacturers and ‘‘small’’ definition of ‘‘distributor.’’ sale’’ is vague or overly broad, or that manufacturers should be excluded from it needs to be modified. The definition, The agency recognizes the concerns the definition. A company that expressed about the proposed definition as proposed, makes it clear that ‘‘point manufactures a small amount of a of sale’’ does not contemplate venues of ‘‘distributor.’’ Therefore, based upon product is, nevertheless, a the comments received, the agency has where cigarettes are lent or offered to manufacturer. Thus, small social acquaintances or family members. determined that the definition should be manufacturers and foreign modified to clarify the term. The The definition in § 897.3(d) refers to the manufacturers of products marketed in ‘‘location at which a consumer can definition of ‘‘distributor’’ has been the United States are included in the modified to mean ‘‘any person who purchase or otherwise obtain’’ the definition of ‘‘manufacturer’’ and are product (emphasis added). The term furthers the distribution of cigarettes or subject to the provisions of this rule. smokeless tobacco, whether domestic or ‘‘consumer,’’ means ‘‘a person who buys Furthermore, as discussed in more goods or services for personal needs and imported, at any point from the original detail later, FDA regulates devices as a place of manufacture to the person who not for resale or to use in the production class without making exceptions for of other goods for resale.’’ 37 sells or distributes the product to Thus, in its small market share. normal use, the term ‘‘consumer’’ individuals for personal consumption.’’ implies a commercial relationship and The term does not include persons who Additionally, FDA, on its own precludes the possibility that, for do not manufacture, fabricate, assemble, initiative, has deleted the part of the example, the act of providing a cigarette process, or label a finished cigarette or definition which would have stated that to a travel partner would render the smokeless tobacco product, and does a ‘‘manufacturer’’ ‘‘does not include any vehicle in which both are traveling the not repackage or otherwise change the person who only distributes finished ‘‘point of sale’’ for that product. container, wrapper, or labeling of the cigarettes or smokeless tobacco (26) Proposed § 897.3(h) would have cigarette or smokeless tobacco product, products.’’ FDA believes this text was defined ‘‘retailer’’ to mean ‘‘any person because such persons would be unnecessary given the definition of ‘‘distributor’’ in § 897.3(c). who sells or distributes cigarettes or ‘‘manufacturers’’ under § 897.3(d). smokeless tobacco products to Under this modified definition, one Proposed § 897.3(e) would have individuals for personal consumption.’’ who manufactures cigarettes or defined ‘‘nicotine’’ by its chemical One comment stated that this definition smokeless tobacco is not considered a formula, 3-(1-Methyl-2-pyrolidinyl) is unconstitutionally vague and over distributor, but is subject to the pyridine, and would have included any broad, because a ‘‘manufacturer or requirements applicable to salt or complex of nicotine. FDA did not wholesaler that ‘distributes’ manufacturers (see § 897.3(d), definition receive any comments that would complimentary cigarettes to its of ‘‘manufacturer’’). Similarly, one who warrant a change to § 897.3(e), and has employees, or to guests at a private ‘‘sells or distributes the product to finalized this definition without change. function, would be a ‘retailer,’ as would individuals for personal consumption’’ Proposed § 897.3(f) would have is not a distributor, but is subject to the defined ‘‘package’’ as a pack, box, 37 Webster’s New World Dictionary, edited by V. requirements applicable to retailers (see carton, or container of any kind in Neufeldt, Third College Edition, Prentice Hall, New § 897.3(h), definition of ‘‘retailer’’). which cigarettes or smokeless tobacco York, p. 299, 1991. 44426 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations be any individual who gives any other added some examples to § 897.30. A violations. The Woodridge program individual a cigarette.’’ discussion of the comments regarding reduced illegal sales from 70 percent to The agency agrees that, although the the definition of ‘‘playground’’ can be less than 5 percent almost 2 years later intended meaning of the term is clear, found in section VI. of this document. (60 FR 41314 at 41322). Rates of both a ‘‘person who * * * distributes * ** experimentation and regular smoking IV. Access [a product] to individuals for personal decreased more than 50 percent among consumption’’ may include transactions Subpart B of part 897 (now retitled as seventh and eighth grade students (60 that the agency does not intend to ‘‘Prohibition of Sale and Distribution to FR 41314 at 41322). regulate (i.e., noncommercial Persons Younger than 18 Years of Age’’) In contrast, another study cited in the transactions). Therefore, the definition contains the restrictions on access to 1995 proposed rule indicated that is modified to mean ‘‘any person who cigarettes and smokeless tobacco by retailer education programs, alone, may sells cigarettes or smokeless tobacco to individuals under the age of 18. This have limited utility. In the study, individuals for personal consumption.’’ subpart, by imposing restrictions on retailers received informational Additionally, under § 897.3(h) as manufacturers, distributors, and packages on preventing illegal sales to revised, a retailer can be any person retailers, is intended to ensure that young people, yet despite these ‘‘who operates a facility where vending children and adolescents cannot informational packages, young people machines and self-service displays are purchase these products. were able to buy cigarettes in 73 percent permitted under this part.’’ This change In support of proposed subpart B, the of the stores that received these complements a change to § 897.16(c) preamble to the 1995 proposed rule informational packages, and, after a which permits vending machines and cited studies showing that the majority comprehensive retailer educational self-service displays in facilities where of junior high and high school program was conducted, illegal sales no person under age 18 is present, or students—from 67 percent of 9th grade were still found to occur in 68 percent permitted to enter, at any time. The students in a 1990 survey to 94 percent of the stores (60 FR 41314 at 41322). agency addresses § 897.16(c) in greater of junior high and high school students When the program began issuing detail below. in a 1986 survey—believed that citations to violative establishments, the Proposed § 897.3(i) would have purchasing cigarettes and smokeless illegal sales rate dropped to 31 percent defined smokeless tobacco as ‘‘any cut, tobacco was easy (60 FR 41314 at 41322, (Id.). This study, as well as other studies ground, powdered, or leaf tobacco that August 11, 1995). Other studies reviewed by the agency in the 1995 contains or delivers nicotine and that is supported that belief. As noted in the proposed rule and made available for intended to be placed in the oral preamble to the 1995 proposed rule, the public comment and review, led the cavity.’’ 1994 Surgeon General’s Report entitled Food and Drug Administration (FDA) to FDA did not receive any comments ‘‘Preventing Use Among Young People: draft a comprehensive proposal to that would warrant a change to A Report of the Surgeon General’’ (the reduce young people’s access to § 897.3(i). However, FDA has revised 1994 SGR) examined 13 studies of over- cigarettes and smokeless tobacco and to the definition to refer to ‘‘any product the-counter (OTC) sales and determined make explicit the responsibility of that consists of cut, ground, powdered, that approximately 67 percent of minors manufacturers, distributors, and or leaf tobacco * * *.’’ The agency are able to purchase cigarettes illegally. retailers to prevent cigarette and made this change because the words The 1994 SGR examined nine studies smokeless tobacco product sales to ‘‘smokeless tobacco’’ are often and found that the weighted average persons under 18 years of age. understood as meaning a ‘‘smokeless rate of illegal sales to children and Subpart B to part 897 consists of four tobacco product’’ or products. adolescents from vending machines was provisions. Section 897.10 establishes Additionally, elsewhere in this rule, 88 percent. 38 the general responsibilities of FDA has replaced ‘‘smokeless tobacco Significant numbers of children and manufacturers, distributors, and product’’ with ‘‘smokeless tobacco.’’ adolescents successfully purchased retailers to ensure that the cigarettes and (27) Several comments requested smokeless tobacco as well, with the smokeless tobacco that they definitions for additional terms. success rate ranging from 30 percent for manufacture, label, advertise, package, Specifically, one comment requested junior high school students to 62 distribute, sell, or otherwise hold for that ‘‘advertising’’ be defined to percent for senior high school students sale comply with the requirements in distinguish between trade and consumer (60 FR 41314 at 41322). Ninety percent this subpart. The agency made one advertising; several comments requested of smokeless tobacco users in junior minor change to this provision, to that ‘‘vending machine’’ be defined to high and high school in a 1986 survey change ‘‘smokeless tobacco products’’ to exempt machines which dispense said they bought their own smokeless ‘‘smokeless tobacco.’’ cigarettes to cashiers, machines that tobacco (60 FR 41314 at 41322). Section 897.12 sets forth additional dispense individual cigarettes, or Studies indicate that a comprehensive responsibilities of manufacturers. machines that scan a driver’s license or approach to reducing young people’s Proposed § 897.12(a) would have age of majority card before dispensing access to cigarettes and smokeless required manufacturers to remove from cigarettes; and several comments tobacco would be more effective than point of sale all violative self-service requested that ‘‘playground’’ be defined relying primarily on retailer education displays, advertising, labeling, and other for clarity. programs about the need to prevent manufacturer-supplied or manufacturer- The agency disagrees that additional sales to underage persons. For example, owned items. In response to comments definitions are necessary for the terms the preamble to the 1995 proposed rule from manufacturers and sales ‘‘advertising’’ and ‘‘vending machine.’’ cited a comprehensive community representatives objecting to their However, the agency has clarified the intervention in Woodridge, IL, involving responsibility for items not owned by use of those terms in the relevant retailer licensing, regular compliance them, the agency has amended this sections of the preamble. The agency checks, and penalties for merchant provision to require manufacturers only has determined that a definition for the to remove from point of sale all violative term ‘‘playground’’ is necessary, and has 38 1994 SGR, p. 249. self-service displays, advertising, Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44427 labeling, and other items owned by the quantity in the unopened products. In cigarettes), and self-service displays manufacturer. order to clarify the intent of this (merchandisers) in facilities that are Proposed § 897.12(b) would have provision, the final rule prohibits inaccessible to persons under the age of required manufacturers’ representatives retailers from breaking or otherwise 18. who visit a point of sale in the normal opening ‘‘any cigarette or smokeless Proposed § 897.16(d) would have course of business to visually inspect tobacco product package to sell or prohibited manufacturers, distributors, and ensure that products are labeled, distribute individual cigarettes or a and retailers from distributing any free advertised, and distributed in number of unpackaged cigarettes that is samples of cigarettes or smokeless accordance with this subpart. In smaller than the quantity in the tobacco. FDA made one minor change to response to comments questioning the minimum cigarette package size defined this provision, changing the words need for and operation of this in § 897.16(b), or any quantity of ‘‘manufacturers, distributors, and requirement, FDA has deleted this cigarette tobacco or smokeless tobacco retailers may not distribute’’ to ‘‘no provision. that is smaller than the smallest package manufacturer, distributor, or retailer Section 897.14 sets forth additional distributed by the manufacturer for may distribute’’ free samples. responsibilities of retailers. Many of the individual consumer use.’’ The final rule adds a new § 897.16(e) comments supported the requirements The final rule also adds § 897.14(e) to to prohibit manufacturers, distributors, to verify age and to ban the sale of single clarify that each retailer is responsible and retailers from selling, distributing, cigarettes. Comments were divided on for removing all violative self-service or causing to be sold or distributed the requirement for a direct transaction. displays, advertising, labeling, and other cigarettes or smokeless tobacco with The comments opposing the 1995 items located in the retailer’s advertising or labeling that does not proposed rule were taken into account establishment or for bringing those comply with the rule’s advertising and in the modifications to the final rule. items into compliance with the labeling requirements. This provision is The final rule contains a new requirements in this rule. This provision intended to clarify that the rule’s § 897.14(a), which states that no retailer complements § 897.12 which requires advertising and labeling requirements may sell cigarettes or smokeless tobacco manufacturers to remove manufacturer- are conditions on the sale, distribution, to any person younger than 18 years of owned, violative items from retail and use of these products. age. This new paragraph codifies a establishments. A. General Comments concept that was implicit in the 1995 Section 897.16 establishes the proposed rule. conditions of manufacture, sale, and The agency received many general Proposed § 897.14(a) (now distribution. Proposed § 897.16(a) comments both in support of and in renumbered as § 897.14(b)) would have would have prohibited the use of a trade opposition to proposed subpart B of part required that the retailer or an employee or brand name for a nontobacco product 897. Comments supporting the 1995 of the retailer verify by means of as the trade or brand name for a tobacco proposed rule often stated that the rule, photographic identification showing the product ‘‘except for tobacco products on if finalized, would help prevent young bearer’s date of birth that no purchaser which a trade or brand name of people from obtaining or using is younger than 18 years of age. In nontobacco product was in use on cigarettes and smokeless tobacco and response to changes made to § 897.16 January 1, 1995.’’ The only change to would eventually lead to a healthier regarding mail-order and vending § 897.16(a) has been to clarify the population and lower health care costs. machine sales and self-service displays agency’s intent by amending the The agency also received comments in facilities inaccessible to children and language to restrict manufacturers to from attorneys general of more than 25 adolescents, the final rule excepts the those product names ‘‘whose trade or States concluding that, overall, the 1995 requirements for proof of age under brand name was on both a tobacco proposed rule ‘‘should be a crucial these limited circumstances. New product and a nontobacco product that component of a national effort by § 897.14(b)(2) eliminates the verification were sold in the United States on Federal, State, and local officials to help requirement for consumers 26 years of January 1, 1995.’’ our youngest generation of Americans age or older. Section 897.16(b) would have avoid suffering preventable disease and Proposed § 897.14(b) (now numbered established a minimum package size of premature death from the use of tobacco as § 897.14(c)) would have required that 20 for cigarettes. The final rule was products.’’ cigarettes or smokeless tobacco be amended only to provide a very limited Comments opposing the 1995 provided to the purchaser by the retailer exception consistent with the changes proposed rule, in general, asserted that or an employee of the retailer, without made to § 897.16(c)(2)(ii), discussed FDA regulation was unnecessary or the assistance of an electronic or below. unauthorized or that the proposed mechanical device, such as a vending Proposed § 897.16(c) would have requirements would be ineffective. The machine. The final provision has been prohibited vending machines, self- following is an analysis of and response modified to reflect changes made to service displays, mail-order sales, and to these general comments. § 897.16 permitting vending machines other ‘‘impersonal’’ modes of sale and (1) Several comments stated that the and self-service displays in certain required direct, face-to-face exchanges 1995 proposed rule violates the limited circumstances and to between retailers and consumers. In Commerce Clause of the Constitution. correspond more closely to the response to comments criticizing the The comments argued that there is no requirements in § 897.16(c)(1). restrictions as inconveniencing adults, equivalent to a congressional finding Proposed § 897.14(c) (now the agency has amended this section. that the regulated activity at issue—the renumbered as § 897.14(d)) would have The final rule allows mail-order sales sale of tobacco products to children and prohibited the retailer or an employee (except for mail-order redemption of adolescents—affects interstate from opening any cigarette or smokeless coupons and the distribution of free commerce, nor is the regulation tobacco package to sell or distribute samples through the mail). The final reasonably adapted to an end permitted individual cigarettes or any quantity of rule also allows vending machines (even by the Constitution. They argued that the product that is smaller than the those selling packaged, single the regulation of tobacco products by 44428 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations the Federal Government is e.g., Katzenbach v. McClung, 379 U.S. minimum age for the purchase of impermissible based on United States v. 294, 298–304 (1964) (under the tobacco products. Lopez, 115 S.Ct. 1624 (1995) (Congress Commerce Clause, Congress may The agency disagrees. The cases cited lacked power under Commerce Clause regulate activities of restaurants that in these comments, South v. to criminalize possession of a gun serve food, a substantial portion of Dole, 483 U.S. 203 (1987) and Oregon v. within 1,000 feet of a school). which has moved in interstate Mitchell, 400 U.S. 112 (1970), do not The agency disagrees with these commerce)). In addition, the purpose address the Commerce Clause, and there comments. The Constitution gives and design of the regulation—to deter is no case law suggesting that an agency Congress the power ‘‘[t]o regulate this commercial activity directed at may not impose regulations on Commerce with foreign Nations, and persons under the age of 18 in order to commerce based on the age of people among the several States, and with the reduce addiction to the nicotine in these involved, under a statute passed Indian Tribes.’’ Under the Commerce products—has the requisite commercial pursuant to Congress’ Commerce Clause Clause, Congress may ‘‘regulate those nexus. (See, e.g., Heart of Atlanta Hotel, power, and in particular that an agency activities having a substantial Inc. v. United States, 379 U.S. 241 may not set a national minimum age for relationship to interstate commerce, i.e., (1964); Perez v. United States, 402 U.S. sales of cigarettes and smokeless those activities that substantially affect 146 (1971).) Moreover, because youths tobacco in order to reduce the risks of interstate commerce’’ (Lopez, 115 S.Ct. alone purchase an estimated $1.26 addiction and to health associated with at 1629–30 (citation omitted)). The billion of tobacco products annually, the their use by individuals under age 18. Supreme Court has consistently held regulated activity—sales of tobacco In fact, under its authority to regulate that Congress acted within its powers products—substantially affects commerce, Congress may exclude from under the Commerce Clause when it interstate commerce. 39 interstate commerce goods produced by enacted and subsequently amended the As noted, tobacco products are in children workers, United States v. Federal Food, Drug, and Cosmetic Act interstate commerce as defined in Darby, 312 U.S. 100, 115–17 (1941) (the act). (See United States v. Sullivan, section 201(b) of the act (21 U.S.C. (overruling Hammer v. Dagenhart, 247 332 U.S. 689, 697–98 (1948); United 321(b)). Cigarettes manufactured in the U.S. 251 (1918), which held that States v. Walsh, 331 U.S. 432, 437–38 United States include myriad Congress lacked power to exclude (1947); Weeks v. United States, 245 U.S. components that are in interstate products of child labor from interstate 618, 622 (1918); Seven Cases of commerce. For example, American-type commerce), and criminalize, for Eckman’s Alternative v. United States, blended cigarettes contain oriental example, the transportation in interstate 239 U.S. 510, 514–15 (1916); McDermott tobacco imported from Greece, Turkey, commerce of pornography involving v. Wisconsin, 228 U.S. 115, 128 (1913); Russia, Yugoslavia, or Bulgaria, and children (18 U.S.C. 2251 through 2259), Hipolite Egg Co. v. United States, 220 they may also contain imported flue- or the sale of firearms and ammunition U.S. 45, 58 (1911).) Regulation of cured tobacco from, for example, to individuals under the age of 18 (18 tobacco products is a legitimate exercise Zimbabwe or . In addition, they U.S.C. 922(b)(l)). of FDA’s authority under the act to contain other tobacco and tobacco Moreover, ‘‘‘[t]he authority of the regulate drugs and devices and is products, filters, paper, ammonia, Federal government over interstate therefore within the scope of Congress’ sugars, humectant, licorice, and cocoa, commerce does not differ’ * * * ‘in power under the Commerce Clause. among nearly 600 other possible extent or character from that retained by The Supreme Court’s recent opinion ingredients. (See generally Brown, C. L., the states over intrastate commerce.’’’ in Lopez does not affect this analysis. As The Design of Cigarettes, Hoechst (See Heart of Atlanta Hotel, 379 U.S. at the Court noted, ‘‘[t]he possession of a Celanese Corp., Charlotte, NC (3d ed. 260 (quoting United States v. Rock gun in a local school zone is in no sense 1990); ‘‘Ingredients Added to Tobacco Royal Co-op., Inc., 307 U.S. 533, 569–70 an economic activity that might, in the Manufacture of Cigarettes by the (1939)).) States may set a minimum age through repetition elsewhere, Six Major American Cigarette for sales of cigarettes and smokeless substantially affect any sort of interstate Companies,’’ (April 12, 1994)). tobacco, and these products are in commerce.’’ (See Lopez, 115 S.Ct. at Similarly, smokeless tobacco is made interstate commerce (and as devices, are 1634; see also Id. at 1640 (Kennedy, J., from tobacco grown in Pennsylvania presumed under section 709 of the act concurring) (‘‘[H]ere neither the actors and Wisconsin or in Kentucky and to be in interstate commerce for the nor their conduct have a commercial Tennessee and contains other purpose of jurisdiction under the act). ingredients from a list of over 560, such character, and neither the purposes nor Thus, it follows that the Federal as sugar, molasses, and licorice, which the design of the statute have an evident Government may establish a national are in interstate commerce. (See The commercial nexus.’’).) minimum age for sales of tobacco Health Consequences of Using By contrast, this tobacco regulation products. Smokeless Tobacco: A Report of the affects conduct that is distinctly In summary, the imposition of a Advisory Committee to the Surgeon commercial in character. In particular, national minimum age for purchase of General, DHHS, PHS, p. 5, 1986; the access restrictions—the national tobacco products and restrictions on ‘‘Smokeless Tobacco Ingredient List as minimum age for purchase of tobacco hand-to-hand sales, sales from opened of April 4, 1994, attached to letter of products and the restrictions on hand- packages, package size, vending May 3, 1994, from Stuart M. Pape to the to-hand sales, sales from opened machine sales, and self-service displays Hon. Henry A. Waxman and the Hon. packages, package size, vending is within Congress’ authority under the Thomas J. Bliley, Jr.) machine sales, and self-service (2) The comments also suggested that Commerce Clause. displays—all involve actors (3) Several comments argued that the Congress’ Commerce Clause powers do (manufacturers, vendors, and regulation’s imposition of a national not allow imposition of a national consumers) and conduct (the marketing, minimum age for purchase of tobacco sale, and purchase of products that are 39 DiFranza, J. R., and J. B. Tye, ‘‘Who Profits from products and its restrictions on themselves in interstate commerce) that Tobacco Sales to Children?’’ JAMA, vol. 263, No. impersonal sales, sales from opened are quintessentially commercial (see, 20, pp. 2784–2787, 1990. packages, package size, vending Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44429 machine sales, and self-service displays acting under the Commerce Clause, (See Bowers v. Hardwick, 478 U.S. 186, violate the Tenth Amendment to the makes its intention to subject 190 (1986).) Nor does the agency believe Constitution. In particular, the unconsenting States to Federal suits by that it is merely a specific manifestation comments argued that the regulation of private parties absolutely clear, the of a broader right, Id. at 199 (Blackmun, tobacco products and decisions about Eleventh Amendment bars such suits). J., dissenting), whether styled as the eligibility and maturity are traditionally Regulation of the sale of cigarettes and right to privacy, Griswold, 381 U.S. at State functions, and that this fact smokeless tobacco does not 484–485, or to be let alone, Olmstead v. required Congress to have made it fundamentally affect the States’ United States, 277 U.S. 438, 478 (1928) unmistakably clear by statute that it prerogatives under the Constitution (Brandeis, J., dissenting), or to intended FDA to regulate tobacco (such as abrogating the States’ sovereign individual autonomy, Carey v. products. immunity), and so Congress need not Population Services Int’l, 431 U.S. 678, The agency believes that this have made it unmistakably clear by 687 (1977). regulation does not violate the Tenth statute that it intended FDA to regulate In particular, the right to privacy does Amendment. The Tenth Amendment their sale. not protect commercial access to provides that ‘‘[t]he powers not In summary, the agency is imposing a tobacco products for young people, delegated to the United States by the national minimum age for purchase of because restricting sales of addicting Constitution, nor prohibited by it to the tobacco products and restrictions on tobacco products to young people ‘‘is States, are reserved to the States impersonal sales, sales from opened within the area of governmental interest respectively, or to the people.’’ It packages, package size, vending in protecting public health.’’ (See follows that, ‘‘[i]f a power is delegated machine sales, and self-service displays Rutherford v. United States, 616 F.2d to Congress in the Constitution, the in order to eliminate the health risks to 455, 457 (10th Cir.), (right to privacy Tenth Amendment expressly disclaims young people associated with products does not include access to laetrile) cert. any reservation of that power to the in interstate commerce. These denied, 449 U.S. 937 (1980); see also States.’’ (See New York v. United States, provisions therefore do not violate the Carnohan v. United States, 616 F.2d 505 U.S. 144, 156.) Because FDA is Tenth Amendment. 1120, 1122 (9th Cir. 1980) acting under the act, which Congress (4) A comment from an industry trade (‘‘Constitutional rights of privacy and enacted under its Commerce Clause association stated that the Ninth personal liberty do not give individuals authority, there is no Tenth Amendment Amendment to the Constitution is a the right to obtain laetrile free of the violation. ‘‘barrier to federal laws that would lawful exercise of government police FDA disagrees that regulation of restrict freedom of adults as well as power’’); United States v. Horsley, 519 tobacco sales or decisions about others to use tobacco products.’’ Several F.2d 1264, 1265 (5th Cir. 1975), (holding eligibility and maturity are traditional comments from adults expressed similar that right of privacy does not protect State functions. Even if they were, arguments regarding an adult’s possession of marijuana with intent to however, that fact would not implicate ‘‘freedom’’ to purchase or use tobacco distribute) cert. denied, 424 U.S. 944 the Tenth Amendment. ‘‘As long as it is products. (1976); United States v. Kiffer, 477 F.2d acting within the powers granted it The agency disagrees that its 349, 352 (2d Cir.) (same), cert. denied, under the Constitution, * * * Congress imposition of a national minimum age 414 U.S. 831 (1973).) The agency may legislate in areas traditionally for purchase of tobacco products and its therefore concludes that this rule does regulated by the States’’ (Gregory v. restrictions on hand-to-hand sales, sales not abridge an unenumerated, Ashcroft, 501 U.S. 452, 460 (1991)). from opened packages, package size, fundamental right reserved to the Because the agency is acting to regulate vending machine sales, and self-service people by the Ninth Amendment to the cigarette and smokeless tobacco sales in displays impinge on unenumerated Constitution. order to eliminate the health risks of rights protected by the Ninth (5) Several comments suggested that those products, and is doing so under a Amendment. comprehensive regulations were statute passed under Congress’ The Ninth Amendment provides that unnecessary. Instead, these comments Commerce Clause power, these ‘‘[t]he enumeration in the Constitution, advocated training programs for retailers provisions do not violate the Tenth of certain rights, shall not be construed and, more specifically, for retail sales Amendment. to deny or disparage others retained by clerks. These training programs would Further, Congress need not make its the people.’’ Although not a source of be based either on voluntary efforts by intention to regulate in such areas rights itself, the Ninth Amendment the affected industries or on in-house, ‘‘unmistakably clear in the language of nevertheless ‘‘show[s] the existence of employee training programs. A few [a] statute,’’ Will v. Michigan Dept. of other fundamental personal rights’’ and comments argued that any regulations to State Police, 491 U.S. 58, 65 (1989) that ‘liberty’ protected by the Fifth restrict access to cigarettes and (quotations omitted), as suggested in the ** * Amendment[] from infringement smokeless tobacco would be futile comments. This requirement only by the Federal Government * * * is not because young people ‘‘would get the applies to Federal statutes that ‘‘go[] restricted to rights specifically products anyway.’’ beyond an area traditionally regulated mentioned in the first eight The agency disagrees with these by the States’’ to affect ‘‘decision[s] of amendments.’’ Griswold v. Connecticut, comments. The preamble to the 1995 the most fundamental sort for a 381 U.S. 479, 493 (1965) (Goldberg, J. proposed rule indicated that sovereign entity,’’ Gregory, 501 U.S. 460, concurring). informational or training programs, because such statutes ‘‘alter the usual The final rule regulates commercial alone or without any enforcement constitutional balance between the transactions involving tobacco products mechanisms, have limited success (60 States and the Federal Government,’’ to limit young people’s access to them. FR 41314 at 41322). Given the health Will, 491 U.S. 65 (quotations omitted); Young people do not have an risks caused by or associated with these see also Seminole Tribe of Florida v. unenumerated, fundamental right products and the evidence that current, Florida, 116 S.Ct. 1114, 1123–1132 protected by the Constitution to have voluntary restrictions on youth access (1996) (holding that, even if Congress, commercial access to tobacco products. are ineffective, FDA believes that it 44430 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations needs to develop an effective, and establishing the scope of the narrowly focused the rule to address mandatory program under the act to commissioned official’s duties. those activities and practices that are restrict young people’s access to (7) A few comments claimed that the especially appealing to, or used by, cigarettes and smokeless tobacco. The rule would create friction between young people and to preserve, to the agency cannot and should not abdicate States and the Federal Government fullest extent practicable, an adult’s its public health responsibilities in because, according to these comments, ability to purchase these products. Any deference to voluntary efforts to inform FDA would be interfering in State inconvenience to adults should be employees or other parties on the sale affairs. Some comments also claimed slight. For example, although the final and distribution of these products, given that the rule would make State efforts rule eliminates self-service displays for the evidence cited in the preamble to less effective because State regulatory or cigarette packages in facilities that are the 1995 proposed rule that such police agencies would defer to FDA. accessible to young people, the limited programs must be bolstered by In contrast, as noted above, several amount of time spent in requesting and government sanctions and measures like State attorneys general expressed a receiving a from a retail those in subpart B of part 897 in order different view, stating that the rule clerk should not result in hardship on to be effective. would strengthen State efforts to reduce adults. The agency has also amended (6) Other comments, particularly cigarette and smokeless tobacco use the rule, as discussed in section IV.E. of those submitted by a few State among young people. this document to retain specific modes legislators, claimed that States should The agency respectfully disagrees of sale that are restricted to—or used be free to allocate their resources as they with those comments that claim FDA almost exclusively by—adults. These wished so that, if a State decided not to will be interfering in State affairs or that amendments respond to comments from address a particular issue, such as the rule will create friction or adult consumers and retailers that access to tobacco products, that decision undermine the effectiveness of State young people cannot or do not use would be within the State’s purview. officials. The agency has a history of certain modes of sale and so those In contrast, comments submitted by cooperative relations with State modes of sale should remain available State and local public health officials regulatory officials. For example, as to adults. were unanimous in recommending mentioned earlier, section 702(a) of the (9) Several comments argued that the strong Federal leadership in reducing act authorizes FDA to commission State 1995 proposed rule ‘‘intruded’’ on young people’s access to cigarettes and officials to perform specific functions on private life or ‘‘discriminated’’ against smokeless tobacco. FDA’s behalf. FDA also works with adult cigarette and smokeless tobacco The agency believes that the State officials in implementing statutes users. comments opposing the rule such as the Prescription Drug Marketing In contrast, other comments agreed misinterpret the rule’s scope and Act of 1987, the Nutrition Labeling and that FDA has jurisdiction over cigarettes application. The rule does not require Education Act of 1990, and the and smokeless tobacco and that the rule States to enforce any provision, nor does Mammography Quality Standards Act of was an appropriate exercise of FDA’s it require States to allocate resources in 1992. Given this history of cooperation authority and properly focused on any manner. FDA will enforce the rule between FDA and State regulatory curtailing access by young people. as it does any other rule, by using FDA’s agencies, FDA does not agree that the Several comments suggested amending own resources or, where appropriate rule will create friction between FDA the rule to add restrictions for adults, to and with cooperation from State and State authorities or undermine the ban smoking, or to provide information officials, by ‘‘commissioning’’ State effectiveness of State officials. to help all smokers to stop smoking. officials to perform specific functions on (8) Many comments argued that the As stated earlier, the agency has the agency’s behalf. FDA is authorized, 1995 proposed rule would restrict an drafted the rule as narrowly as possible under section 702(a) of the act (21 adult’s ability to purchase or select to restrict the sale and distribution of U.S.C. 372), to conduct examinations cigarettes and smokeless tobacco. these products to children and and investigations through any health, Several asserted that regulations would adolescents, while preserving adults’ food, or drug officer or employee of any be ineffective because young people ability to purchase the products. As for extending the rule to include State, territory, or political subdivision would obtain cigarettes and smokeless adults or to ban smoking, FDA declines commissioned as an officer of DHHS. In tobacco anyway. Hence, these to adopt the comments’ suggestion. As most cases, a commissioned State or comments would eliminate all discussed in section III.A. of this local government official is authorized provisions intended to reduce a young document, the President, and the agency to perform one or more of the following person’s access to these products. In contrast, many comments in its preamble to the 1995 proposed functions: (1) Conduct examinations, supported the rule, stating that it would rule, have stated that removing inspections, and investigations under reduce a young person’s easy access to cigarettes and smokeless tobacco from the act; (2) collect and obtain samples; and opportunity for early the market would not be in the best (3) copy and verify records; and (4) experimentation with cigarettes and interests of the public health. The receive and review official FDA smokeless tobacco, help reduce the use agency adheres to this position. documents. 40 The scope of the official’s of those products by young people, and (10) Many comments urged FDA to authority depends on his or her prevent young people from suffering refrain from rulemaking and instead rely qualifications, and the commissioning adverse health effects associated with on voluntary, manufacturer-developed process involves active and voluntary using these products. or retailer-developed programs, such as participation by States in identifying The agency agrees that the rule may ‘‘Action Against Access,’’ ‘‘It’s the suitable candidates for commissioning have an incidental effect on an adult’s Law,’’ and ‘‘We Card,’’ to prevent sales ability to purchase cigarettes or to young people. Some would require 40 FDA Regulatory Procedures Manual, DHHS, PHS, Office of Regulatory Affairs, Office of smokeless tobacco, but FDA emphasizes retailers and their employees to be Enforcement, Division of Compliance Policy, that the rule’s benefits far outweigh any trained to comply with existing State Chapter 3, p. 45, August 1995. inconvenience to adults. FDA has and local laws. Several large retail Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44431 chains described the programs they (12) One comment argued that violation had been committed by the already have in place. cigarettes should be sold by prescription latter. Some comments asserted that the Other comments expressed skepticism only. Other comments opposing the rule agency cannot impose such vicarious about such programs and, therefore, predicted that the agency would require liability, under these comments’ strongly supported FDA’s rulemaking prescriptions. interpretation of United States v. activities. The agency declines to amend the Dotterweich, 320 U.S. 277 (1943), and The agency declines to rely solely on rule to require prescriptions. Such a United States v. Park, 421 U.S. 658 voluntary, manufacturer- or retailer- requirement would unduly affect adults (1975). One comment acknowledged developed programs to prevent sales to and retailers and, FDA expects that the that proposed § 897.10, when read young people. The agency is regulating more narrowly tailored provisions in literally, would not hold parties cigarettes and smokeless tobacco as subpart B of part 897 will adequately responsible for acts committed by other devices under the act. Voluntary restrict young people’s access to these parties, but nevertheless claimed that, programs cannot serve as a substitute for products. despite such language, FDA would hold such regulation and do not provide (13) One comment criticized the 1995 manufacturers, distributors, and many of the safeguards that the act proposed rule for not restricting where retailers liable for any action committed provides. cigarettes and smokeless tobacco may be by any party. sold. The comment said that pharmacies The agency believes that the As for retailer programs to train and health care facilities often sell these comments have misinterpreted § 897.10. employees not to sell cigarette and products and that such sales undermine Section 897.10 holds manufacturers, smokeless tobacco to young people, the credibility of health warnings distributors, and retailers responsible FDA believes that such training efforts related to these products. The comment for their own actions; it does not require will help retailers comply with their suggested that FDA prohibit any party to ensure that another party obligations under § 897.14. However, ‘‘inappropriate places’’ from selling complied with the regulations, nor does retailer training programs, alone, will these products. it hold a party responsible criminally or not be as effective as the rule’s FDA declines to amend the rule as civilly for actions that it did not commit comprehensive approach because such suggested by the comment. The agency or about which it had no responsibility training would not affect certain has no information or criteria that under the act and no knowledge. This activities (such as free samples and would permit it to determine whether is the most logical and straightforward advertising) that are used by or appeal certain places or types of establishments interpretation of § 897.10, and, as stated to young people. are not ‘‘appropriate’’ for selling earlier, the provision states that ‘‘each Similarly, voluntary, manufacturer- cigarettes and smokeless tobacco. manufacturer, distributor, and retailer is developed programs are not sufficient to responsible for ensuring that the prevent sales to young people. Such B. General Responsibilities of cigarettes and smokeless tobacco it programs purport to deter young people Manufacturers, Distributors, and manufactures, labels, advertises, from using cigarettes or smokeless Retailers (§ 897.10) packages * * * comply with all tobacco until they reach legal age, but Proposed § 897.10 would have applicable requirements under this often omit retail activities or impose no required each manufacturer, distributor, part’’ (emphasis added). The word ‘‘it’’ sanctions if a voluntary code or and retailer to be responsible for refers to the individual manufacturer, provision is violated. For example, one ensuring that the cigarettes or smokeless distributor, or retailer, while the word comment supported the rule, in part, tobacco that it ‘‘manufactures, labels, ‘‘applicable’’ signifies that a party, because a retailer gave the author, when advertises, packages, distributes, sells, depending on the circumstances, is he was 15 years old, and other children or otherwise holds for sale’’ comply subject only to those requirements for free cigarettes. A manufacturer- with the requirements in part 897. FDA which that party is responsible. This developed program might not be proposed this provision setting forth issue is discussed in greater detail later effective at curtailing such practices by these general responsibilities as part of in this section of the document. retailers, whereas the rule bars the agency’s comprehensive program to In determining which party may be distribution of free samples by reduce young people’s access to responsible for a regulatory violation, manufacturers, distributors, and cigarettes and smokeless tobacco. FDA will examine where and when the retailers. Through this provision FDA intended to violation occurred. For example, (11) One comment suggested ensure that these products, from the § 897.14(d), among other things, amending the rule to include time of their manufacture to the time of prohibits retailers from opening any advertisers. their purchase, comply with part 897 cigarette package and selling individual FDA declines to amend the rule as and that manufacturers, distributors, cigarettes. If a retailer, on its own suggested by the comment. The agency’s and retailers appreciate their roles, and initiative, opened a package and sold authority attaches to the product and carry out their legal responsibilities to single cigarettes, without the knowledge those responsible for its manufacture, reduce the accessibility and appeal of of a manufacturer or distributor, only distribution, or sale in interstate these products to young people. The the retailer would be responsible commerce. Advertisers do not have final rule retains § 897.10 without any because only the retailer engaged in control over the products and significant changes. actions that violated the requirements in presumably act at the direction of (14) Many comments interpreted this part. However, if the manufacturer manufacturers, distributors, and proposed § 897.10 as imposing strict or distributor supplied single cigarettes retailers. If an advertisement violated liability on manufacturers, distributors, to the retailer—contrary to § 897.16(b) the requirements of this part, the agency and retailers. Generally, these comments which establishes a minimum package would hold the appropriate interpreted the 1995 proposed rule as size for cigarettes—and the retailer sold manufacturer, distributor, or retailer making a party responsible for the single cigarettes, or if the responsible for the violative violations committed by another party, manufacturer or distributor knew or had advertisement. even if the former was unaware that the reason to know that the retailer sold 44432 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations single cigarettes and continued to liability on manufacturers or (18) Two comments would amend the provide cigarettes to the retailer, the distributors that the comments rule to exempt manufacturers that had manufacturer or distributor, as well as suggested it does. The Excessive Fines 1 or 2 percent of the cigarette or the retailer, would be subject to Clause of the Eighth Amendment states smokeless tobacco product market. One regulatory action. The manufacturer or that ‘‘excessive fines [shall not be] comment came from an association of distributor would have violated imposed.’’ Here, neither § 897.10 nor specialty tobacco companies that either § 897.16(b) and assisted in violating any other provision of the final rule manufacture or import specialty § 897.14(d), while the retailer would be imposes an excessive fine or any fine at cigarettes and other tobacco products. in violation of § 897.14(d). In sum, each all. Moreover, whether a fine is The comment claimed that specialty manufacturer, distributor, and retailer is excessive in a particular case requires a cigarettes account for a very small responsible for ensuring that its close analysis of the facts of that case. fraction (approximately 400 million products (whether it manufactures, (See, e.g., United States v. One Parcel cigarettes) of the total cigarettes market, labels, advertises, packages, distributes, Property Located at 427 and 429 Hall are sold at higher retail prices compared sells, or otherwise holds them for sale) Street, Montgomery, Montgomery to domestic cigarettes (from $1.75 for 10 comply with all requirements County, Alabama, 74 F.3d 1165, 1170– Indonesian cigarettes to $4.00 for 20 applicable to it and its products. As 73 (11th Cir. 1996) (adopting and German cigarettes), and are sold in such, § 897.10 does not create the applying proportionality test to in rem shops that young people normally do problems that the comments suggested civil forfeiture); United States v. not frequent. The comment also stated it does. Chandler, 36 F.3d 358, 365–66 (4th Cir. that the rule would have an adverse (15) Several comments objected to 1994) (adopting and applying three-part effect on foreign products (particularly proposed § 897.10 because it would instrumentality test to in rem civil products in packages containing less have each manufacturer, distributor, forfeiture) cert. denied, 115 S.Ct. 1792 than 20 cigarettes), that the companies and retailer responsible for ensuring (1995).) had little control over foreign compliance with the regulatory (17) A few comments implied that manufacturers, and that companies requirements in part 897. These manufacturers should be excluded from would go out of business or be adversely comments interpreted the provision as § 897.10, stating that retailers, rather affected by the rule. The comment having the affected industries, rather than manufacturers, should be sought an exemption either for firms or than Federal or State Governments, responsible for preventing sales to brands that have 1 percent or less of the determine compliance. One comment young people. total cigarette market in the United also asserted that the imposition of such The agency declines to amend the States. The comment explained that an responsibility on private persons is a rule to exclude manufacturers. The exemption would be equitable because, violation of the Due Process Clause of preamble to the 1995 proposed rule the comment asserted, there is no the Fifth Amendment, which prevents demonstrated how certain practices by evidence that speciality cigarettes unreasonable delegations of manufacturers, such as the distribution contribute to underage smoking, and governmental authority. Several of free samples, offer young people easy would also be consistent with an comments added that manufacturers, and inexpensive access to cigarettes and exemption granted by the Federal Trade distributors, and retailers should not smokeless tobacco. (See 60 FR 41314 at Commission (FTC) for rotating cigarette ‘‘spy’’ on each other to ensure 41326 (free samples).) FDA received label warnings and regulations by the compliance. One comment said that the several comments that reinforced these U.S. Department of Agriculture (USDA) rule would create a ‘‘hidden views, such as comments from a 12-year defining a ‘‘domestic manufacturer of enforcement tax.’’ old recounting how his classmate cigarettes’’ for assessing payments under FDA believes that the comments acquired free cigarettes from a the Agricultural Adjustment Act of objecting to § 897.10 have manufacturer, and a mother whose 14- 1938. misinterpreted its application. Section year old daughter and friends attributed The other comment came from a firm 897.10 does not make manufacturers, their cigarette use to free samples whose sales focused primarily on distributors, or retailers solely obtained from manufacturers. Thus, smokeless tobacco, with the remainder responsible for ensuring compliance manufacturers play a critical role in devoted to cigars and ‘‘smoking with the regulations nor does it alter or making cigarettes and smokeless .’’ The company said that it had affect any Federal or State enforcement tobacco accessible and appealing to approximately 1 percent of the mechanism. Section 897.10 is intended young people. smokeless tobacco market and is the to remind manufacturers, distributors, In addition, because cigarettes and sixth largest smokeless tobacco product and retailers that they are responsible smokeless tobacco are products subject manufacturer. The comment sought an for complying with the regulations that to the act, regulation of these products exemption for companies with market are applicable to them. FDA remains properly follows them from the time of shares under 2 percent because it primarily responsible, as it does for their manufacture to their sale to the claimed the rule would ‘‘sound the most FDA regulations, for determining consumer. Focusing solely on the sale of death knell’’ for small, family-owned whether parties comply with the these products to consumers would businesses. regulations. States, of course, remain deprive the agency of any ability to Both comments indicated that 80 to free to enforce applicable State laws address problems that may exist at the 90 percent of their sales occurred relating to these products. manufacturer or distributor level. For through the mail. (16) One comment asserted that example, if products were incorrectly The agency declines to accept the proposed § 897.10 would impose packaged or labeled, a rule that comments’ suggestions to create an vicarious liability in violation of the concentrated solely on retail sales might exemption based solely on market share. Eighth Amendment’s Excessive Fines permit FDA to restrict sales of those The agency believes that subjecting Clause. products, but might not permit FDA to similar or identical products to the same As previously discussed, § 897.10 require the manufacturer to package or statutory and regulatory standards is does not impose the sort of vicarious label those products correctly. both practical and fair to manufacturers Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44433 and consumers. A consumer should be § 860.3(i) (21 CFR 860.3(i)) (definition of provision states that a distributor would able to expect that similar or identical ‘‘generic type of device’’), using the be responsible for ensuring that the products made by different cumulative evidence from several cigarettes or smokeless tobacco that it manufacturers will be regulated in the manufacturers. Reclassification of one manufactures, labels, advertises, same fashion. Similarly, manufacturers product of a particular type results in packages, distributes, sells, or otherwise will not be unfairly advantaged or the reclassification of the entire group. holds for sale complies with all disadvantaged if they are all subject to (See 42 FR 46028, September 13, 1977; applicable requirements. For example, the same statutory and regulatory and 43 FR 32988 July 28, 1978.) The the reporting requirement in proposed requirements. For example, the final alternative would require FDA to § 897.40 was directed at manufacturers. rule prohibits the distribution of free classify individually each Consequently, distributors would not samples. This restriction applies manufacturer’s device, and to undertake have been required to submit reports to regardless of a manufacturer’s market the classification process whenever a FDA under § 897.40. (Moreover, as share and, aside from eliminating a free new manufacturer marketed a product discussed in section VIII. of this source of cigarettes and smokeless within an already identified device document, FDA has deleted § 897.40 tobacco that people use, also treats type. Thus, FDA applies the same and exempted distributors from the manufacturers equally. regulatory requirements to all devices registration and listing requirements in FDA is not persuaded by one within an identified device type that are part 807. Distributors are, however, comment’s suggestion that an substantially equivalent to one another. subject to other reporting requirements, exemption would be consistent with This approach is necessary to provide such as medical device distributor actions taken by other agencies. FTC’s similar regulatory treatment for reports under part 804.) However, if a exemption is based on statutory essentially identical products of distributor acts in a manner that is language at 15 U.S.C. 1333(c)(2)(A)(i) different manufacturers and distributors outside the definition of distributor in and is limited to changes in the label (42 FR 46028 at 46031; and 43 FR 32988 § 897.3, it may alter its regulatory status rotation sequence; in other words, the at 32989). and become subject to other provisions exemption does not relieve the Additionally, assuming that the rule in this part. For example, a distributor manufacturer from placing warning effectively restricts a young person’s who relabels cigarettes would, for those statements on its packages. USDA’s access to cigarettes and smokeless relabeled products, become a regulation pertaining to ‘‘domestic’’ tobacco, it is reasonable to assume that ‘‘manufacturer’’ under this rule and be manufacturers is based on statutory a young person would turn to subject to those provisions pertaining to language at 7 U.S.C. 1301(b)(17) as part alternative products, such as foreign manufacturers. Section 897.3 defines a of the Agricultural Adjustment Act of cigarettes that the comment would manufacturer, in part, as any person, 1938 that was designed, among other exempt. Consequently, the agency including any repacker and/or relabeler, things, to create an incentive for declines to exempt products with small who manufactures, fabricates, domestic manufacturers to use domestic market shares from the rule. assembles, processes, or labels finished tobacco leaf. Thus, neither the FTC nor (19) FDA received several comments cigarettes or smokeless tobacco. USDA statutes or regulations were from wholesalers or distributors arguing (20) Several comments would exempt intended to relieve foreign products that they should be exempt from the distributors from the rule because, the from substantive requirements or to 1995 proposed rule, particularly comments claimed, the 1995 proposed regulate foreign manufacturers. proposed § 897.10, because they are rule set forth little or no evidence to As for the comments’ assertions that unable to affect the actions of justify regulating distributors. their products are either not used by or manufacturers and retailers. Several FDA declines to exempt distributors accessible to young people, the agency comments asserted that wholesalers and from the rule. The agency reiterates that has amended the rule to permit specific distributors are ‘‘merely a conduit’’ for it is regulating cigarettes and smokeless modes of sale, including mail order transferring products from tobacco under its drug and device sales, that young people cannot or do manufacturers to retailers and have authority, and that, as it does for other not use. The agency did not amend the small staffs that would be unable to FDA regulated products, FDA’s rule rule, however, to exclude cigarettes and comply with all requirements in part follows the products from the time of smokeless tobacco or brands that young 897. According to these comments, a their manufacture to the time of their people do not appear to use or purchase. wholesaler or distributor would either sale. Wholesale or distribution It would be inappropriate to exempt a have to hire additional staff to ensure operations must be included in any particular brand or specialty product that products complied with all effective regulatory system because simply because a manufacturer claims applicable requirements or be without products can be contaminated, diverted young people do not purchase that sufficient staff to ensure that all into illegal channels, or otherwise product. (The agency also notes that the products supplied to all retailers adulterated or misbranded at the $1.75 price charged for 10 Indonesian complied with the regulations. Several wholesale or distribution level just as cigarettes is lower than the price comments added that requiring they can at the manufacturing and retail charged for some domestic brands and wholesalers and distributors to maintain levels. creating an exemption for a low cost records, submit reports to FDA, and be (21) Many comments asserted that, cigarette product in a ‘‘kiddie pack’’ size subject to inspection by FDA would rather than impose responsibilities on would be contrary to the rule’s waste the wholesaler’s or distributor’s manufacturers and distributors, FDA purpose.) resources and provide FDA with little or should limit the rule to requiring that Additionally, FDA traditionally no useful information. A minority retailers verify the age of persons classifies, as a group, device products expressed confusion as to their purchasing cigarettes and smokeless that are sufficiently similar so that they obligations if they relabel cigarettes or tobacco. These comments claimed that can be considered the same type of smokeless tobacco. no other regulatory provisions would be device for purposes of applying the The agency believes that the necessary if retailers, or their sales regulatory controls in the act (see comments misinterpret § 897.10. The clerks, verified the purchaser’s age. 44434 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

FDA declines to exclude comments, suggest that additional under 18 years old (except in specific, manufacturers and distributors from the measures are necessary to reduce a limited cases), or, if the firearm is not rule. As stated earlier in section IV.B. of young person’s access to these products. a shotgun or rifle, prohibits sales to this document, cigarettes and smokeless (23) Several comments from retailers individuals under 21 years of age (18 tobacco are products subject to claimed that the 1995 proposed rule U.S.C. 922(b)). regulation under the act, and, as a violated their ‘‘right’’ to sell products or Thus, there is no unfettered or result, the rule follows the products arrange their stores in any manner they unrestricted ‘‘right’’ to sell consumer from the time of their manufacture, wished. Many comments added that, if products. Instead, products are often through storage and distribution, to retailers are subject to the rule, many sold subject to conditions or product sale at the consumer level. retailers will lose sales and fees restrictions, including those based on Excluding manufacturers and associated with cigarettes and smokeless age, that are designed to protect the distributors would compromise FDA’s tobacco and could be forced to fire staff. integrity of the product, to protect users ability to ensure that these products are One comment further stated that this or other members of the public, or to not accessible or appealing to young would actually harm young people prevent the product from reaching people. Manufacturers engage in because the retailer would fire its certain groups of people. activities, such as advertising, labeling, newest staff, and such staff employees FDA also disagrees with those and distributing samples, that make are usually young people. Conversely, comments predicting that the rule will cigarettes and smokeless tobacco some comments claimed that, in order result in lower sales and fees and accessible and/or appealing to young to comply with the rule, retailers would compel retailers to lay off staff. Insofar people. Distributors channel products be obliged to hire additional staff. as retailers are concerned, the rule does from manufacturers to retailers, and so In contrast, FDA received two not affect sales to adults. It is intended the rule includes distributors to ensure, comments denying that retailers would to eliminate illegal sales to young among other things, that the products do lose slotting or promotional fees. (Some people. Thus, for a retailer to assert that not become adulterated or misbranded manufacturers pay retailers to display the rule will reduce its sales revenue so while held by distributors. their products (often referred to as much as to require staff reductions, (22) FDA received many comments ‘‘slotting fees’’) in a specific fashion or illegal sales would necessarily have to from retailers stating that FDA to display signs or other materials play a significant role in funding staff regulation was unnecessary because provided by the manufacturer.) One positions. retailers train their staffs to request comment, based on experience in an With respect to fees, the agency proof of age or have taken other steps to area in northern California where self- cannot determine whether prevent sales to young people. service displays were prohibited, stated manufacturers will discontinue paying The preamble to the 1995 proposed that retailers did not suffer significant slotting fees or other allowances to rule provided reasons for not relying on economic losses after the displays were retailers as a result of the rule. The retailer training programs alone. The banned. Another comment opined that preamble to the 1995 proposed rule did preamble to the 1995 proposed rule manufacturers would still have an estimate that industry promotional cited a report by 26 State attorneys incentive to offer slotting fees or allowances totaled approximately $1.6 general stating that industry training allowances to retailers to ensure billion in 1993, or $2,600 per retailer if films and retailers’ programs have not, advantageous placement of their the sum is evenly distributed among the on their own, prevented illegal sales to products behind the counter. estimated 600,000 retail outlets (60 FR young people and that, in some retail FDA disagrees with the comments 41314 at 41369). FDA does note, sectors, high employee turnover rates asserting an unrestricted ‘‘right’’ to sell however, that some comments complicated training efforts (60 FR products. Section 520(e) of the act (21 supported the agency’s position that 41314 at 41323). The preamble to the U.S.C. 360j(e)) states, in part, that the retailers will not suffer significant 1995 proposed rule also cited studies agency may require that a device be economic losses. One study cited in the showing that significant numbers of restricted to sale, distribution, or use preamble to the 1995 proposed rule young people are not asked to verify upon such conditions as the agency may stated that, ‘‘in the absence of their age when purchasing cigarettes or prescribe by regulation. Because FDA advertising and promotion outlets * ** smokeless tobacco and that, in some has determined that these products the cigarette industry may be expected cases, retail clerks even encouraged the should be regulated as restricted to provide greater incentives to retailers young person’s purchase by suggesting devices, the act authorizes FDA to to provide more and better shelf space cheaper brands or offering to make up impose controls on their sale and for their brands in order to provide the difference in the purchase price if distribution. The agency further notes availability to the buyer in the store’’ (60 the young person lacked sufficient that, in addition to restrictions FR 41314 at 41369). Thus, while some funds (60 FR 41314 at 41323). FDA authorized under the act, other manufacturers might stop paying received some comments that further consumer products are sold subject to slotting fees, others might continue illustrated the ease with which young various restrictions. For example, under paying those fees or even increase the people can purchase these products; for 23 U.S.C. 158(a)(1), the ‘‘national fees to obtain favorable placement of example, one comment reflected on the minimum drinking age’’ is 21 years, and their products behind the counter. author’s own practice, at age 11, of the Secretary of Transportation is Furthermore, as described in greater purchasing cigarettes by saying ‘‘They authorized to withhold certain highway detail in section IV.E.4.b. of this are for my Mom.’’ Thus, while training funds from States that have a lower document, FDA has amended the rule to retail clerks to request proof of age minimum age. Federal law expressly permit self-service displays (or, more should help curtail a young person’s prevents licensed importers, specifically, merchandisers) in facilities access to cigarettes and smokeless manufacturers, dealers, and collectors that are inaccessible to young people. tobacco, the reports and studies cited in from selling firearms and ammunition to As for those comments stating that the 1995 proposed rule, as well as the any individual that the licensee knows retailers would have to hire additional personal experiences reflected in some or has reasonable cause to believe to be staff, it is possible that some retailers Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44435 who have relied on modes of sale that free samples, should reduce the need to premises or facilities that employ only the rule will now prohibit or restrict place age restrictions on employees. adults. These changes are described in may need to hire additional staff. For The agency does note, however, that detail in the discussion of § 897.16 and example, if a retailer derived a in response to comments requesting that elsewhere in this document. substantial portion of its revenue from vending machines and self-service C. Additional Responsibilities of vending machines and those machines displays be permitted in ‘‘adult-only’’ Manufacturers (§ 897.12) would not be available under the rule, facilities, FDA has amended the final the retailer might decide to hire staff in rule to allow vending machines and 1. Removal of Manufacturer-Supplied or order to continue selling cigarettes or self-service displays in facilities that are Manufacturer-Owned Items That Do Not smokeless tobacco. However, the totally inaccessible to people under 18 Comply With the Regulations comments did not provide sufficient and employ no persons below age 18. Proposed § 897.12(a) would have information to enable FDA to determine This is to ensure that an ‘‘adults-only’’ required manufacturers, in addition to the number of retailers who might be facility is truly restricted to adults rather their other obligations under part 897, to affected or the extent to which they than to create an age restriction on remove, from each point of sale, ‘‘all might be affected. sellers. These changes to the rule are self-service displays, advertising, (24) A few comments challenged the described in greater detail elsewhere in labeling, and other manufacturer- validity of the 1995 proposed rule this document. supplied or manufacturer-owned items’’ because it did not impose The agency is aware that several local that do not comply with the responsibilities on young people who governments have statutes or requirements in part 897. In response to purchase cigarettes and smokeless regulations that establish minimum age comments, the agency has amended the tobacco. These comments claimed that requirements for persons who sell final rule to require the manufacturer to omitting young people from the rule, tobacco products. Because this rule does remove only those violative items that while requiring retailers to comply, was not contain a minimum age requirement the manufacturer owns. unfair, arbitrary, and capricious. One for persons who sell these products, (28) Many comments, including comment stated, ‘‘any effective public those statutes or regulations are not comments from manufacturers’ sales policy to restrict sales of tobacco preempted. The rule’s preemptive effect representatives and retailers, strongly products to minors must go beyond the on other State or local statutes or objected to this provision, particularly discouragement of promotion, regulations and federalism issues are as it would apply to self-service advertising and merchandising to discussed elsewhere in this document. displays. In general, the comments minors. It must be accompanied by (26) Several comments suggested that, claimed that retailers, rather than realistic penalties for minors who instead of issuing regulations, the manufacturers, own the self-service purchase and possess cigarettes and for Federal Government should transfer displays. The comments also expressed adults who purchase for them.’’ funds to States for use in preventing concern that manufacturers’ cigarette and smokeless tobacco sales to It would be inappropriate for FDA to representatives or retailers’ employees young people. might be physically harmed if a amend the rule to impose penalties or FDA must decline to accept the manufacturer’s representative attempted sanctions on young people who comments’ suggestion. Federal funding to remove a self-service display from a purchase or possess cigarettes or of State prevention efforts is beyond the retailer. Several comments also smokeless tobacco or adults who scope of the rule. The agency does interpreted proposed § 897.12(a) as purchase such products for young intend to work with State officials and requiring a manufacturer’s sales people. The main focus of the act is on cooperate in enforcement activities representative to remove self-service the introduction, shipment, holding, where appropriate and to the extent that displays supplied by another and sale of goods in interstate its resources permit. manufacturer; these comments said commerce. Thus, the actions of minors (27) Several comments suggested that removing a competitor’s self-service who purchase cigarettes and smokeless FDA amend the rule so that the display would be unethical and could tobacco are appropriately a matter for restrictions on the sale and distribution result in the sales representative being State or local law. of cigarettes and smokeless tobacco do barred from reentering the retail (25) One comment stated that FDA not apply to locations where young establishment in the future. should prohibit young people under 18 people do not enter or where entry is In contrast, a few comments years of age from selling tobacco restricted, such as bars, liquor stores, supported proposed § 897.12(a) because products. factories, and prisons. manufacturers provide the displays to The agency declines to amend the After consideration of these retailers and visit retailers often. One rule to place age restrictions on those comments, the agency has amended the comment added that the burden of who sell these products. FDA has little rule to allow certain retail practices to removing displays should not rest on evidence to suggest that manufacturers’, continue because those practices are not retailers alone, but added that retailers distributors’, or retailers’ young used by young people or are should remain ultimately responsible employees play a significant role in inaccessible to them. For example, the for displays they use or have on site. making cigarettes and smokeless final rule permits mail-order sales to This comment suggested that retailers tobacco accessible or appealing to young occur because the evidence does not be responsible for removing displays if people. Although some evidence establish that young people use mail- the manufacturer fails to do so. indicates that, in certain settings, a order sales to acquire these products. The agency agrees, in part, with the young employee might be less likely to The final rule also permits vending comments critical of the proposed check age or to challenge his or her machines and self-service displays provision and has amended § 897.12 to peers (as in situations where the young (merchandisers only) to be used in clarify that a manufacturer is employee distributed free samples (60 locations where young people cannot responsible for removing all self-service FR 41314 at 41326)), other provisions in enter, such as locations where proof of displays (which the final rule also this subpart, such as the elimination of age is required in order to enter the clarifies as referring to merchandisers), 44436 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations advertising, labeling, and other items knowledge by second corporation that Government employees, would not that it owns that do not comply with the defendant had contracted with to enjoy the same legal protections requirements in part 897. FDA has also manufacture, package, and distribute its accorded to the agency’s inspectors. The amended § 897.14 to clarify the cosmetic product), cert. denied, 332 comment also argued that FDA lacks obligation of retailers with respect to all U.S. 851 (1948); United States v. authority to require manufacturers, or other violative items in the retailer’s Articles of Drug, 601 F. Supp. 392 (D. any other party, to remove any materials establishment. These changes should Neb. 1984) (enjoining drug distributor that would violate the regulations. The eliminate potential conflicts between that induced its customers to pass off its comment asserted that the agency has manufacturers’ sales representatives and drugs as controlled substances), aff’d in no general recall authority and that the retailers. part, rev’d in part on other grounds, 825 recall authority in the act for devices Additionally, § 897.12 requires a F.2d 1238 (8th Cir. 1987); cf. Inwood requires the agency to find that a manufacturer to be responsible only for Lab., Inc. v. Ives Lab., Inc., 456 U.S. 844, reasonable probability of serious the removal of the items it owns. The 853–54 (1982) (manufacturer or adverse health consequences or death agency does not expect manufacturers to distributor who ‘‘intentionally induces exists and, when exercising that recall remove items owned by another another’’ to violate trademark law or authority, to provide an opportunity for manufacturer, but encourages who ‘‘continues to supply its product to a hearing. Thus, according to the manufacturers to inform another one whom it knows or has reason to comment, the 1995 proposed rule is manufacturer and FDA if another know’’ will violate trademark law is deficient because it makes no findings manufacturer’s items violate the itself responsible for violation).) And it and fails to provide for a hearing. requirements in part 897. However, the is a ‘‘settled doctrine[] of criminal law’’ The agency believes that the comment agency advises manufacturers who (Park, 421 U.S. at 669) that a person misinterprets the provision. Section know or have reason to know that a who knows or has reason to know that 897.12 would not ‘‘deputize’’ distributor or retailer is misbranding goods that he sells will be used manufacturers’ representatives nor that manufacturer’s products, or causing unlawfully may be criminally liable as confer any official responsibility on its products to violate these regulations aider and abettor under 18 U.S.C. 2; them. FDA intends to enforce the act or the act, to take action, such as Bacon v. United States, 127 F.2d 985, and regulations itself and, where discontinuing sales, incentives, and 987 (10th Cir. 1942) (discussing former appropriate, will consider supplies, to halt the violation. 18 U.S.C. 550, precursor to 18 U.S.C. commissioning State officials, under its Manufacturers might be held liable for 2(a))). authority in section 702(a) of the act, to subsequent violations by the distributor For example, a manufacturer or perform specific functions on FDA’s or retailer, if the manufacturer knew or distributor that continues to supply its behalf. Section 702(a) of the act does not should have known about the violation product to a retailer whom it knows or extend to commissioning private and continued to supply its product to has reason to know sells cigarettes or parties, and the agency has no intention such parties. smokeless tobacco to young people (or of commissioning manufacturers’ Liability, both criminal and civil, who breaks open packages and sells representatives. under the act is very broad. Section 301 single cigarettes) might be liable for FDA also disagrees with the of the act (21 U.S.C. 331) prohibits subsequent violations by that retailer. comment’s claim that FDA has no certain acts ‘‘and the causing thereof.’’ Likewise, a manufacturer who paid a authority to require manufacturers to United States v. Dotterweich, 320 U.S. retailer a fee for the retailer to use an remove materials that violate FDA 277 (1943), and United States v. Park, illegal self-service display in a store regulations. FDA is issuing this 421 U.S. 658 (1975) elaborate on the might be liable for the retailer’s provision, as well as part 897 generally, meaning of ‘‘causing’’ in section 301 of violation. under its authority under section 520(e) the act (see Park, 421 U.S. at 673). These These examples are, however, only by of the act, which expressly declares, in cases stand for the proposition that a way of illustration because, as the part, that the agency may, by regulation, corporate official can be held criminally Supreme Court stated in Dotterweich, require that a device be restricted to liable as having caused the corporation’s ‘‘[t]o attempt a formula embracing the sale, distribution, or use ‘‘upon such violations of the act of which he had no variety of conduct whereby persons may other conditions as the Secretary may knowledge, so long as he stood in a responsibly contribute in furthering a prescribe in such regulation.’’ Section ‘‘responsible relationship’’ to the transaction forbidden by an Act of 897.12, as amended, is a logical and violations (Id. at 672). Congress * * * would be mischievous necessary complement to the Under the act, ‘‘all who * * * have futility’’ (320 U.S. at 285). It added that, restrictions on the devices’ sale, ** * a responsible share in the ‘‘[i]n such matters the good sense of distribution, and use because it requires furtherance of the transaction which the prosecutors, the wise guidance of trial the manufacturer to assume statute outlaws’’ have caused the judges, and the ultimate judgment of responsibility for removing items that it violation and are subject to civil and juries must be trusted’’ (Id.). owns that do not comply with the criminal liability (Dotterweich, 320 U.S. (29) One comment challenged FDA’s restrictions. Furthermore, as the at 284). Indeed, a corporate employee authority to require manufacturers to Supreme Court stated in United States and the corporation itself can have a remove items that fail to comply with v. Park, 421 U.S. 658, 672 (1975), ‘‘the responsible share in the furtherance of the regulations. The comment explained act imposes not only a positive duty to a violation of the act committed by that FDA, rather than manufacturers, is seek out and remedy violations when another corporation or a person who is responsible for compliance activities they occur but also, and primarily, a not an employee of the corporation. and a manufacturer’s representative is duty to implement measures that will (See, e.g., United States v. Parfait not deputized or authorized to act on insure that violations will not occur.’’ Powder Puff Co., 163 F.2d 1008, 1009– the agency’s behalf. The comment The comment’s argument with respect 10 (7th Cir. 1947) (holding defendant added that sales representatives are not to the agency’s recall authority is also corporation criminally liable for trained to perform investigative or law misplaced. Section 897.12 applies in violations committed without its enforcement functions and, unlike situations where a manufacturer knows, Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44437 either acting on its own or on the basis establishment (60 FR 41314 at 41323). deliver materials, such as self-service of information supplied to it, that one of The preamble to the 1995 proposed rule displays and promotional materials, to its items does not comply with the also stated that this provision would not retailers. One comment even suggested regulations. Knowing that the item does impose a new responsibility or burden amending the rule to require not comply with the requirements in on companies that did not visit retailers manufacturers to enter into contracts part 897, the manufacturer is then as part of their ordinary business with retailers and distributors to comply obligated to remove the violative item. practice and, for those manufacturers with FDA regulations and to state that Notice of an opportunity for a hearing that would be expected to comply, failure to comply would result in or other due process considerations estimated that these visual inspections termination of the retailer’s or associated with recalls under section would take no more than 2 to 3 minutes distributor’s ability to obtain the 518 of the act (21 U.S.C. 360h) are per visit (60 FR 41314 at 41323 and manufacturer’s cigarettes or smokeless inapplicable because the manufacturer, 41365). Based on the comments tobacco. rather than the government, would be received in response to this proposal, After consideration of the comments, the principal party during this process, the agency has deleted § 897.12(b) from the agency has removed § 897.12(b). using information it has to act on its the final rule. FDA intends to examine this matter own items. In any case, section 518 of (30) Several comments opposed further and to develop a guidance the act applies to the recall of a device, proposed § 897.12(b). One comment describing how manufacturers may be not its advertising. argued that proposed § 897.12(b) is able to assist retailers to comply with FDA fully expects manufacturers to unconstitutional because it would hold this subpart. Possible options might comply with § 897.12. For example, if manufacturers vicariously liable for the include methods suggested by the the manufacturer provided advertising acts of others in violation of the Due comments, such as contractual that used colors and photographs, Process Clause, and would violate agreements between retailers and contrary to § 897.32, which requires Article I, Section 8 of the Constitution, manufacturers including provisions on black and white text only, the which implicitly reserves to States the compliance and the consequences of manufacturer is deemed to know that authority to raise militias. One comment noncompliance. the advertising does not comply with asserted that the number of D. Additional Responsibilities of § 897.32 and should remove that manufacturers’ representatives varies Retailers (§ 897.14) advertising. In this situation, where the among manufacturers and that there are manufacturer’s advertising clearly does too many retail establishments for those Proposed § 897.14 would have not comply with the regulations, representatives to inspect. The comment established additional responsibilities requiring FDA to provide notice and an added that any inspection would for retailers, stating that ‘‘[i]n addition opportunity for a hearing (as the require more than 3 minutes to be to the other requirements under this comment would apparently require) effective, so that conducting inspections part, each retailer is responsible for would simply waste FDA’s and the at each retailer would be labor intensive ensuring that all sales of cigarettes and manufacturer’s resources. and costly. Another comment, smokeless tobacco to any person (other FDA will take regulatory action notwithstanding the statement in the than a distributor or retailer)’’ comply against manufacturers who fail to preamble to the 1995 proposed rule that with specific, listed requirements. comply with this provision or any other the provision applied only to those FDA, on its own initiative, has applicable provision. The nature of the firms that visit retailers in the ordinary amended § 897.14 to delete the regulatory action will depend, in large course of business, asserted that its parenthetical text referring to a part, on the violation, but could range entire staff would be too small to visit distributor or retailer because the from issuance of a warning letter, to an all the retailers that it services. A small evidence does not establish that retailers injunction under section 302 of the act number of comments added that such sell these products to such parties, and (21 U.S.C. 332), the imposition of civil responsibilities would, in effect, if a retailer did sell these products to a penalties, criminal fines, and/or constitute a hidden ‘‘tax’’ on distributor or retailer, the retailer would imprisonment under section 303 of the manufacturers. be acting as a ‘‘distributor’’ as defined act (21 U.S.C. 333), and seizures under Other comments, many submitted by in § 897.3(c). section 304 of the act (21 U.S.C. 334). sales representatives, objected to FDA, also on its own initiative, has proposed § 897.12(b), stating that the amended § 897.14 to add a new 2. Visual Inspections by a representatives have no power over a paragraph (a) stating that, as one of the Manufacturer’s Representative at Each retailer’s actions and cannot take any listed requirements, ‘‘[n]o retailer may Point of Sale adverse action, such as discontinuing sell cigarettes or smokeless tobacco to Proposed § 897.12(b) would have supplies, to retailers who sell cigarettes any person younger than 18 years of required a manufacturer’s and smokeless tobacco to young people. age’’ and has renumbered proposed representatives to visually inspect each Some comments explained that, even if § 897.14(a) through (c) accordingly. The point of sale that they visit during the a sales representative could ask a new paragraph codifies a concept that normal course of business to ensure that distributor to stop supplying certain was present throughout the 1995 cigarettes and smokeless tobacco are retailers, the retailer could simply proposed rule, namely that retailers are ‘‘labeled, advertised, and distributed in switch distributors and continue to not to sell cigarettes or smokeless accordance with this part.’’ The obtain products. Other comments tobacco to young people under 18 years preamble to the 1995 proposed rule argued that the responsibility to prevent of age. indicated that manufacturers keep sales to young people rests solely with 1. Use of Photographic Identification to extremely detailed records about each the retailer. retailer and that some records noted In contrast, several comments Verify Age whether the retailer should be visited supported proposed § 897.12(b) because Under proposed § 897.14(a) (now weekly, biweekly, etc. and noted the sales representatives frequently visit renumbered as § 897.14(b)), each types of displays in the retailer’s retailers or because manufacturers retailer, or an employee of the retailer, 44438 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations would have been required to verify, by verify age, as opposed to a 95 percent FDA has, however, amended means of photographic identification illegal sales rate when no photographic proposed § 897.14(a) (now renumbered containing the bearer’s date of birth, that identification card is checked. as § 897.14(b)) to state that, ‘‘[e]xcept as no person purchasing or intending to In response to comments and changes otherwise provided in § 897.16(c)(2)(i) purchase cigarettes or smokeless to § 897.16 regarding mail order and and in paragraph (a)(2) of this section,’’ tobacco is younger than 18 years of age. vending machine sales and self-service a retailer shall ensure compliance with The preamble to the 1995 proposed displays in facilities that are the prohibition against sales to persons rule explained that studies indicate that inaccessible to children and under 18 by verifying the purchaser’s young people who purchase cigarettes adolescents, the final rule excepts the age. FDA made this amendment to and smokeless tobacco from stores are proof of age requirement under these correspond with the prohibition, in often not asked to verify their age. For limited circumstances. § 897.14(a), against sales to persons example, one study found that 67 (31) Several comments objected to under 18 and because, as discussed in percent of young people, whose mean making retailers responsible for their greater detail below, the final rule age was 15 years, were asked no employees’ actions. These comments permits sales from vending machines questions when they attempted to asserted that an employee’s failure to and self-service merchandisers that are purchase cigarettes. In some cases, retail verify a potential purchaser’s age or an inaccessible to young people and clerks even encouraged purchases by employee’s error should not subject the permits mail-order sales. These modes young people, suggesting less expensive retailer to any regulatory action. A few of sale are either secure from access by brands or offering to make up the comments faulted the 1995 proposed young people (by requiring age difference if he or she lacked sufficient rule for not holding sales clerks verification upon entrance to the funds (60 FR 41314 at 41323). The responsible or argued that the rule facility) or not used by them. The preamble to the 1995 proposed rule also would be ineffective because it would exception for paragraph (a)(2) noted that requiring proof of age to not alter a sales clerk’s behavior. complements another change to § 897.14 purchase cigarettes and smokeless (discussed in greater detail below) to not In contrast, many comments tobacco could reduce cigarette and require proof of age from persons over supported the requirements that hold smokeless tobacco use among young the age of 26. people (60 FR 41314 at 41323). retailers responsible for preventing FDA has also amended § 897.14(b) to Consequently, the 1995 proposed rule illegal sales. Indeed, one comment delete the words ‘‘intending to would have required retailers to verify suggested that there should be purchase.’’ The requirement that that persons who intend to purchase ‘‘significant penalt[ies] for sales to retailers verify the age of persons cigarettes or smokeless tobacco are persons under 18, including the loss of ‘‘purchasing the product’’ sufficiently legally entitled to do so. the opportunity to sell tobacco * * *.’’ accomplishes the provision’s goal of The preamble to the 1995 proposed Another comment stated that the rule reducing illegal sales. rule also indicated that a driver’s license should contain penalties for illegal (32) Several comments supported the or college identification card would be tobacco sales. use of identification cards to verify the acceptable forms of photographic The agency declines to amend the purchaser’s age. Some comments, identification, but the agency invited rule to relieve retailers from responding to a question in the comment on whether the final rule responsibility. Retailers, in general, are preamble to the 1995 proposed rule should contain more specific responsible for the acts of their asking whether the rule should specify requirements on the types of employees. (See United States v. Park, the types of identification that would identification (60 FR 41314 at 41323). 421 U.S. 658, 672 (1975).) Relieving comply with a proof-of-age requirement, FDA received many comments retailers from responsibility for their advocated using identification cards, supporting a proof of age requirement. employees’ actions would only invite passports, or other official documents These comments came from law abuse because retailers could continue establishing the bearer’s age issued by enforcement entities, drug abuse to sell products to young people and, if States, the Federal Government, or prevention groups, health care caught making such sales, could blame foreign governments. One comment professionals, medical societies, public their employees without suffering any recommended that States develop a health organizations, and even some adverse consequences themselves. To uniform coding system for identification adult smokers who agreed that a proof reflect its position that retailers are cards to permit retailers to read or to of age requirement will reduce young generally responsible for their scan identification cards quickly to people’s access to cigarettes and employees’ actions, FDA has amended verify a purchaser’s age. Other smokeless tobacco. One comment from § 897.14 to remove all references to ‘‘an comments advised against the use of a coalition of State attorneys general employee of the retailer.’’ Thus, § 897.14 college or school identification cards; said there ‘‘are many teenagers who look now refers to a ‘‘retailer’’ and makes no the comments noted that colleges and much older than they are, who can distinction for the retailer’s employees. schools have little incentive to design obtain tobacco products quite easily. As for the comment claiming the rule their identification cards to be When they are required to show age contains no penalties for illegal tobacco sufficiently tamper-proof. verification, they will not be mistaken sales, the agency believes that the In contrast, one comment stated that for an older age. Therefore, they will not comment misunderstands how the rule the agency should not ask for comment be permitted to acquire tobacco will operate. In general, FDA regulations on the type of identification card to products.’’ Another comment from a implement and interpret the agency’s require, arguing that the ‘‘degree of State public health department reported statutory obligations under the act, micromanagement implied by the that, based on data analyzed from the including various criminal and civil Agency’s invitation for such comment State’s own experience, illegal tobacco penalties. Thus, a regulation need not underscores the inappropriateness of purchases occur less than 5 percent of specify what penalties are attached to a federal action in this area.’’ the time when the retailer checks a violation because the act provides this FDA recognizes the comments’ photographic identification card to information. concern. However, the final rule does Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44439 not require a uniform coding system or of age from an individual who appears under the legal age (60 FR 41314 at a Federal, State, or local government youthful. 41323). These studies and reports identification card. However, due to concerns that, suggest that the final rule must require (33) FDA received several comments despite the language in the preamble to retailers to demand proof of age because that addressed when a retailer should the 1995 proposed rule, the rule would voluntary efforts are ineffective. inspect a purchaser’s photographic require age verification in all cases, the As for deferring to State laws and identification card. One comment agency has amended the rule to except regulations, FDA believes that State interpreted the provision as requiring from the age verification requirement efforts to require proof of age, and retailers to inspect visually the individuals who are over 26 years old. retailer compliance with such efforts, photographic identification card of The agency declines to amend the rule should increase and become more every purchaser, and said that this to require age verification if the effective due to section 1926 of the PHS would be unreasonable. The same purchaser appears to be 21, 25, 26, or 30 Act. This provision requires States to comment contended that retailers and years old. Determining a person’s age by enact and to enforce laws prohibiting their employees should be required to his or her physical appearance alone is manufacturers, retailers, or distributors demand proof of age only from a subjective determination, and so of tobacco products from selling or prospective purchasers who do not requiring age verification if a person distributing such products to persons appear to be over 18; this was the ‘‘looked’’ like he or she was a particular under age 18 in order to receive standard employed in Everett, WA, age would be difficult to administer and substance abuse prevention and which was cited in the preamble to the to enforce. By requiring age verification treatment block grants. However, State 1995 proposed rule. if a purchaser is 26 years old or younger, laws may differ, and so the final rule regardless of his or her appearance, the requires retailers to verify the age of In contrast, other comments retailer foregoes age verification at its purchasers. This will establish a supported age verification for all own risk. uniform, national requirement regarding tobacco sales. Some comments from The agency notes that using the proof of age and is consistent with the retailers indicated that some retailers higher age of 26 as the threshold for assertion of Federal authority over these check identification cards for all tobacco requiring proof of age should increase products under the act. sales, while many comments submitted the likelihood that illegal sales to young (35) Many comments pointed out that by retailers stated that they check people will not occur. Using a lower there is no penalty for parents who identification cards to verify the age of age, such as 18 (which is used in some allow underage children to smoke. purchasers who appear to be States) or 21, as the threshold for FDA believes that the vast majority of ‘‘underage.’’ Other comments suggested requiring proof of age may enable some adults and parents do not purchase that the regulation require visual young people to purchase cigarettes and tobacco products for young people. inspection of photographic smokeless tobacco, and, as a result, Parental actions are also beyond the identification cards for purchasers who cause a retailer to be in violation of this scope of FDA’s authority. However, it appear to be younger than 21, 25, 26, or subpart. should be noted that parental consent to 30 years of age. Such a requirement (34) Many comments, particularly a young person’s purchase of cigarettes appeared to be independently selected comments from retailers, supported the and smokeless tobacco cannot override to ensure that the purchaser met the age requirement for age verification but the requirements in § 897.14(a) requirement in the particular added that the requirement should be prohibiting sales to anyone under 18 jurisdiction. voluntary. Others said that State law or and in § 897.14(b) that each purchase is Contrary to the comment that regulations requiring age verification are subject to age verification. Thus, under interpreted the rule as requiring proof of adequate, and that, as a result, FDA this rule, a retailer must refuse to sell age in all transactions, the 1995 regulation is unnecessary. Other cigarettes or smokeless tobacco to any proposed rule would have given comments claimed FDA regulation young person who claims that he or she retailers some flexibility in deciding would add ‘‘red tape and paperwork’’ has ‘‘permission’’ to purchase such when to demand proof of age. The that would not reduce young people’s products for himself or herself or for an preamble to the 1995 proposed rule access to cigarettes and smokeless adult. cited studies and reports demonstrating tobacco and would instead ‘‘come at (36) One comment contended that the that few retailers request proof of age great cost to taxpayers.’’ photographic identification card from young people attempting to On the other hand, State attorneys requirement is invalid because it purchase cigarettes or smokeless general and other State and local exceeds FDA’s authority under section tobacco (60 FR 41314 at 41323). enforcement authorities commented that 520(e) of the act because it does not Consequently, proposed § 897.14(a) the Federal regulations requiring age purport to provide reasonable assurance (now renumbered as § 897.14(b)) would verification by inspection of of the safety and effectiveness of have required retailers to verify that photographic identification card will cigarettes. prospective purchasers are of legal age, complement and enhance their FDA disagrees with the comment. and the preamble to the 1995 proposed enforcement abilities. Section 520(e) of the act authorizes the rule suggested that retailers request FDA declines to delete an age agency to establish, by regulation, proof of age from anyone who does not verification requirement from the rule. conditions restricting the sale, appear to be at least 26 years old (60 FR The preamble to the 1995 proposed rule distribution, or use of a device if, 41314 at 41323). This suggestion was cited studies and reports to show that because of the device’s potentiality for similar to a recommendation made in a young people are often able to purchase harmful effect or the collateral measures report by 26 State attorneys general. The cigarettes and smokeless tobacco necessary to its use, the agency agency anticipated, for example, that without showing proof of age (60 FR determines that there cannot be a requiring proof of age from a senior 41314 at 41323). In one case, the young reasonable assurance of the device’s citizen would be unnecessary, but people were able to purchase cigarettes safety or effectiveness. A photographic strongly recommended requiring proof even when they admitted that they were identification card requirement is a 44440 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations condition of sale for these products and supportive of a Federal minimum age using, even though using the product is a collateral measure that is necessary to limit of at least 18. likely to lead to severe disability and the requirement that the products are (38) A major American medical premature death? not sold to anyone under the age of 18. association suggested amending The agency began by reviewing key (37) One comment contended that § 897.14(a) (now renumbered as data sources on the onset and course of proposed § 897.14(a) (now renumbered § 897.14(b)) to raise the minimum age of nicotine addiction. The National as § 897.14(b)) is precluded by section sale to 21. It noted that one State, Household Surveys on Drug Abuse 1926 of the PHS Act. The comment Pennsylvania, has set 21 as the sought to determine the age when individuals first tried a cigarette and the stated that this law established minimum age for the purchase of age when individuals first started Congress’ intent to allow States to enact cigarettes, and argued that prior to smoking daily—an important measure necessary programs to keep tobacco enactment of the national standard of of the progression toward addiction. products out of the hands of young age 21 for alcohol purchase, many States The survey asked questions of 30 to 39 people as a condition for receiving block had laws that allowed purchase at age year olds who had ever smoked daily. grant funding. According to the 18, but subsequently changed to 21 The average age of first trying a cigarette comment, there is no single best without hardship. was 14.5 years. 41 Eighty-two percent approach, and the FDA proposal Other comments advocated raising the had tried a cigarette before 18, 89 prevents States from emulating the minimum age to 19 years. Several percent before 19, 91 percent before 20, successful approach used in Woodridge, comments explained that many high and 98 percent before 25. 42 Daily IL. The comment stated that FDA may school students are 18 years old; thus, smoking began slightly later. Fifty-three not preempt State laws without making if FDA increased the minimum age to 19 percent began smoking daily before 18, a showing of clear and manifest years, it would be less likely that an underage high school student would be 71 percent before 19, 77 percent before congressional intent to authorize its 20, and 95 percent before 25. 43 preemption of those State laws. able to purchase or obtain cigarettes or smokeless tobacco, because raising the The agency reviewed the history The agency disagrees with the age to 19 would eliminate from the high underlying the theory of majority and comment. The preemption issues school environment peers who are the concept of adults making informed related to this rule (as well as the rule’s legally able to obtain nicotine- choices. Majority is defined in Black’s relationship to the regulations issued by containing tobacco products. In Law Dictionary as ‘‘the age at which, by the Substance Abuse and Mental Health addition, the agency received a law, a person is capable of being legally Services Administration (SAMHSA) considerable number of comments from responsible for all his or her acts * * *, implementing section 1926 of the PHS students, teachers, and even adult and is entitled to the management of his Act regarding the sale and distribution smokers, urging the agency to raise the or her own affairs and to the enjoyment 44 of tobacco products to individuals legal age to purchase cigarettes to 21, to of civic rights. * * *’’ The 26th under the age of 18 (the SAMHSA rule) be consistent with the legal age to Amendment to the United States are discussed in great detail in section purchase alcohol. Indeed, many Constitution provides those 18 years X. of this document. comments assumed that the legal age and above with the right to vote. Prior to the adoption of the 26th Amendment 2. Minimum Age was already 21 and urged the agency to retain this age limit. in 1971, the age of majority in almost Proposed § 897.14(a)(now renumbered In contrast, other comments every State was 21. Each State has the as § 897.14(b)), would have required supporting 18 as the minimum age for power to set its own age of majority and retailers to verify that persons buying purchasing cigarettes and smokeless since enactment of the 26th Amendment cigarettes or smokeless tobacco were not tobacco argued that, because most States most States have lowered the age of younger than 18 years of age. FDA already established 18 as the minimum majority from 21 to 18. received many comments supporting a age, FDA regulations did not need to The agency reviewed the reasons why Federal minimum age to purchase establish a minimum age. A few Congress chose 18 as the appropriate cigarettes and smokeless tobacco. Some comments, mostly from young people, age to vote. According to a Senate report on lowering the voter age, the 21 year comments suggested that enforcement of asked FDA to lower the legal age for age was believed to be derived by this provision would be as effective as purchasing cigarettes to below 18 years historical accident. Eighteen-year olds advertising limitations in controlling of age. bore many adult citizens’ underage smoking. In supporting the In order to make its decision on the responsibilities such as the ability to proposal, comments noted that while appropriate minimum age, the agency marry and raise a family, and serve in most teenage smokers do not plan to be weighed a variety of factors including the military. A lower voting age was smokers 5 years after they begin evidence on the onset of nicotine seen as benefiting society by bringing smoking, less than 10 percent of addiction and the history underlying the into the American political system the teenagers are able to quit within 5 years age of majority. FDA’s goal is to prevent idealism, concern, and energy of young of starting. Moreover, like their adult underage use of tobacco in order to people. (See ‘‘Lowering the Voting Age counterparts, 70 percent of high school preclude as many new cases of nicotine to 18,’’ S. Rept. 92–96, 92d Cong., 1st seniors who smoke would like to stop addiction as possible. The agency sess., p. 5, March 8, 1971.) smoking completely. Some comments considered minimum ages from 18 to While the justifications do not noted that the average age at which 21, because individuals are generally necessarily support establishing a teenage smokers first tried their first viewed as reaching adulthood in this minimum age of 18 for tobacco cigarette is 13 or 14 years, and by age age range. The agency faced the 18, many teens are smoking daily and question: At which age in this range are 41 1994 SGR, p. 67. smoking at a rate very near the adult most individuals able to make an 42 Id., p. 65. rate. Health-care professionals (nurses, informed decision to begin using a 43 Id. physicians, dentists, public health product that the overwhelming majority 44 Black’s Law Dictionary, edited by M. A. Black, officials, etc.) as a group were very of individuals will not be able to stop West Publishing Co., St. Paul, MN, p. 955, 1990. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44441 products, the agency declines to raise young people (60 FR 41314 at 41324). In on alternative measures such as the minimum age for several reasons. response to comments, the agency has increased supervision of displays or First, as stated in the preamble to the amended § 897.14(c) to allow for the use proof of age alone. The preamble to the 1995 proposed rule, all States prohibit of certain impersonal modes of sale, 1995 proposed rule cited reports and the sale of tobacco products to persons such as vending machines and self studies showing that young people can under the age of 18; currently only four service displays (merchandisers only), easily use impersonal modes of sale States prohibit cigarette sales to persons in facilities which are inaccessible to despite restrictions on their placement over 18 (60 FR 41314 at 41315). individuals under the age of 18 at any or the installation of devices to prevent Consequently, setting a national time. Additionally, as stated in section illegal sales. For example, for self- minimum age of 18 is consistent with IV.D.1. of this document, FDA has service displays, the Institute of most States. Second, selecting 18 as the deleted the reference to ‘‘an employee of Medicine (IOM) Report Growing Up minimum age is consistent with the age the retailer’’ because retailers are Tobacco Free, Preventing Nicotine Congress established under section 1926 generally responsible for their Addiction in Children and Youths of the PHS Act, which conditions a employees’ actions and has revised the (1994) referred to surveys in two State’s receipt of substance abuse grants text to correspond more closely with communities that found over 40 percent on State laws to prohibit any § 897.16(c). of daily smokers in grade school manufacturer, retailer, or distributor of (39) Several comments objected to shoplifted cigarettes (60 FR 41314 at tobacco products from selling or proposed § 897.14(b). One comment 41325). For vending machines, the distributing such products to any asserted that proposed § 897.14(b) (now preamble to the 1995 proposed rule individual under the age of 18. renumbered as § 897.14(c)) was cited several studies and reports FDA also declines to amend the rule unjustified, and arbitrary and capricious showing that young people were able to to eliminate a Federal minimum age and because it would apply to locations purchase cigarettes—despite laws instead rely on existing State laws. where young people are not permitted restricting the placement of those Establishing 18 as the national to enter and, in places where they can machines, or requiring the machines to minimum age will strengthen State and enter, would be unnecessary if retailers have a locking device to prevent sales to local enforcement, as discussed earlier. required proof of age from prospective young people (60 FR 41314 at 41324 FDA also declines to amend the rule cigarette and smokeless tobacco through 41325). to reduce the minimum age. Reducing purchasers. The comment stated that FDA also found that relying solely on the minimum age would undermine less restrictive alternatives, such as retailers to verify the purchaser’s age existing State laws and the rule’s increased supervision over self-service had limited effect on reducing young effectiveness because it would, in displays, exist. The comment further people’s access to cigarettes and essence, circumvent statutory and argued that FDA lacked support for this smokeless tobacco; retail clerks rarely regulatory protections by letting more provision, stating that, regardless of how asked young people to verify their age young people purchase these products. tobacco products are sold over-the- or even assisted in completing a Reducing the minimum age would also counter, the key party in the transaction purchase. Some retail sectors also be contrary to the evidence cited in the is the cashier. According to the suffered from high employee turnover preamble to the 1995 proposed rule, comment, requiring retail clerks to rates that undermined the effectiveness which shows that half of adults start comply with applicable minimum age of retailer programs to prevent illegal smoking daily before age 18. laws should be sufficient to prevent sales (60 FR 41314 at 41323). FDA does plan to monitor closely the illegal sales to young people, thereby Consequently, the agency believes that incidence of new cases of nicotine making the proposed provision the most effective approach towards addiction. If the evidence indicates that unnecessary. The comment, therefore, reducing young people’s access to the number of new cases of nicotine stated that the evidence did not support cigarettes and smokeless tobacco is a addiction does not significantly decline, a rule that would preclude State and sufficiently comprehensive set of access consistent with the agency’s stated goal local governments from relying on ‘‘less restrictions to prohibit most impersonal of a 50 percent reduction, but rather are drastic controls.’’ modes of sale, require retailers to verify merely delayed a year or two, FDA will In contrast, many comments agreed the consumer’s age, and make young consider whether increasing the that this provision would reduce a people’s access to these products more minimum age for purchase of nicotine- young person’s access to cigarettes and difficult. containing tobacco products would smokeless tobacco because it would The agency also reminds parties that further the goal of the rule. require potential purchasers to interact these products are restricted devices with retailers or would discourage because of their potentiality for harmful 3. Restrictions Against ‘‘Impersonal’’ young people from purchasing these effect. The final rule contains Modes of Sale products because they would have to restrictions that the agency believes are Proposed § 897.14(b) (now interact with a retailer and provide necessary in order to reduce the number renumbered as § 897.14(c)) would have proof of age. One comment stated that of children and adolescents who use required the retailer or an employee of the regulations establish a code of and become addicted to these products. the retailer to provide cigarettes or conduct for merchants, ensuring that Relying solely on retail clerks to verify smokeless tobacco to a purchaser they take practical steps to prevent age, increasing supervision over ‘‘without the assistance of any illegal sales of tobacco products to displays, or deferring to other less electronic or mechanical device (such as young people. One comment stated that restrictive alternatives would not, in a vending machine or remote-operated face-to-face transactions are the only comparison to the rule’s comprehensive machine).’’ The preamble to the 1995 way to assure that identification of approach, be sufficient to achieve that proposed rule stated that this provision under-age customers is checked. goal. would have the practical effect of FDA disagrees, in part, with the With respect to locations that are making access to cigarettes and comments that oppose this provision. entirely inaccessible to young people, smokeless tobacco more difficult for FDA declines to amend the rule to rely however, the agency has amended 44442 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

§ 897.16 to permit certain modes of sale, 4. Restrictions Against the Sale of cigarettes or smokeless tobacco are such as vending machines and self- Individual Cigarettes offered for sale, sold, or otherwise service displays (merchandisers only), Proposed § 897.14(c) (now distributed to consumers.’’ The in facilities where young people are not renumbered as § 897.14(d)) would have provision, therefore, focuses on two present, or permitted to enter, at any prohibited the retailer or an employee of distinct actions: (1) The retailer breaks time. These modes of sale do not the retailer from breaking or otherwise or opens a cigarette package or involve hand-to-hand transactions opening any cigarette package or smokeless tobacco product; and (2) the between the retailer and the purchaser. smokeless tobacco product to sell or retailer sells or distributes a portion of Consequently, FDA has made a distribute individual cigarettes or any the cigarette package or smokeless corresponding amendment to quantity of cigarette tobacco or of a tobacco product to a consumer. § 897.14(c) to require retailers to smokeless tobacco that is smaller than A literal reading of proposed personally provide cigarettes or the quantity in the unopened product. §§ 897.3(f) and 897.14(d) together would smokeless tobacco to purchasers In response to comments and for other prohibit a retailer from opening a carton ‘‘[e]xcept as otherwise provided in reasons discussed below, the agency has of cigarettes to sell a single package of § 897.16(c)(2)(ii) and revised the text to amended § 897.14(d) to prohibit 20 cigarettes. The agency did not intend correspond more closely with the retailers from breaking or otherwise to prohibit retailers from opening language in § 897.16(c)(1).’’ The opening ‘‘any cigarette or smokeless shipped quantities or bundles of amendments to § 897.16 are discussed tobacco package to sell or distribute cigarette packages or cartons or in greater detail below. individual cigarettes or a number of smokeless tobacco in order to break that unpackaged cigarettes that is smaller shipment down into ordinary packages, (40) A few comments questioned the than the quantity in the minimum cartons, or other standard product units. need for proposed § 897.14(b) (now cigarette package size defined in The agency has amended § 897.14(d), to renumbered as § 897.14(c)). These § 897.16(b), or any quantity of cigarette eliminate this unintended effect. The comments said that the rule would not tobacco or smokeless tobacco that is new language clarifies that retailers may prompt retailers to verify a prospective smaller than the smallest package open shipping boxes or cigarette cartons purchaser’s age because retailers who distributed by the manufacturer for to sell a pack of cigarettes or a sell cigarettes and smokeless tobacco to individual consumer use.’’ smokeless tobacco package. minors are already in violation of State Additionally, as stated in section IV.D.1. Additionally, FDA has modified the laws. of this document, FDA has deleted the introduction to § 897.14(d), changing FDA disagrees with the comments’ reference to ‘‘an employee of the ‘‘the retailer shall not’’ break or open assertion. FDA’s enforcement authority retailer’’ because the retailer is generally any cigarette or smokeless tobacco and the range of sanctions under the act responsible for its employee’s actions. package to ‘‘no retailer may’’ break or should give retailers additional (41) Several comments opposed open any package. This change is incentives to verify proof of age. Hence, proposed § 897.14(c) (now renumbered intended to simplify the text and does FDA believes that the weight of Federal as § 897.14(d)) in conjunction with not alter a retailer’s obligations under law and these regulations will prompt proposed § 897.10 (which would § 897.14(d). retailers to pay more attention to the establish general responsibilities for (42) One comment from a company opposed a restriction on the sale of consumer’s age. By way of analogy, the manufacturers, distributors, and single cigarettes because it had made a United States enjoys a very high rate of retailers). The comments said it would be unreasonable to expect retailers to substantial investment developing a compliance with prescription drug inspect all packages to assure vending machine that would sell single restrictions in part because a violation compliance with minimum package cigarettes that complied with applicable of the prescription requirement is requirement, as well as other labeling and tax laws. The comment actionable under Federal law. Similarly, requirements, and yet retailers would added that its machines are located in section 1926 of the PHS Act gives face significant penalties if they failed to areas that are frequented by or limited States, as a condition for receiving a comply. Other comments asked whether to adults and that there is a market for block grant for the prevention and retailers would be held liable for adults who wish to smoke only treatment of substance abuse, further opening shipping packages consisting of occasionally. incentive to ensure that illegal tobacco individual cigarette packages or cartons The restriction against the sale of sales to young people do not occur and and selling the individual packages or single cigarettes pertained to single that the illegal sales rate steadily cartons. cigarettes that are removed from decreases from 50 percent in fiscal year The comments misinterpreted the cigarette packages or cartons and sold 1994 (or fiscal year 1995 for some proposed provision. Section 897.14(d) on an individual basis. Thus, the States) to 20 percent 4 years later. States does not require retailers to police product described by the comment, a must also conduct annually a reasonable minimum package requirements, but prepackaged single cigarette that number of random, unannounced rather expressly states that the retailer complies with all applicable labeling inspections to ensure compliance with shall not break or otherwise open any and tax laws, does not appear to State law (see 61 FR 1492 at 1508, cigarette or smokeless tobacco package correspond to what is commonly known January 19, 1996). Section 1926 of the to sell or distribute individual cigarettes as a ‘‘loosie.’’ As for selling a packaged PHS Act and its implementing or number of cigarettes or any quantity single cigarette in a vending machine, regulations should also prompt States to of cigarettes or smokeless tobacco that is the final rule permits vending machines devote more attention to compliance smaller than the quantity in the to be used in certain locations that are efforts to prevent illegal sales to young unopened package. The confusion may entirely inaccessible to young people. people and, through the requirement for have stemmed from the definition of This comment, and corresponding random, unannounced inspections, ‘‘package.’’ Section 897.3(f) defines amendments to the rule, are discussed make retailers more aware of the need ‘‘package’’ as a ‘‘pack, box, carton, or in greater detail in section IV.E.4.a. of to verify the consumer’s age. other container * * * in which this document. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44443

(43) A small number of comments unannounced inspections and covering authorized to commission State officials opposed any restriction on the sale of administrative and enforcement costs to perform certain functions on behalf of single cigarettes, stating that such a (61 FR 1492 at 1495). FDA concurs with the agency. FDA may consider restriction would make purchases by the SAMHSA analysis and, because commissioning State officials, where adults more difficult or could actually licensure would be a State matter, will appropriate, if commissioned State work to the detriment of adults who are refrain from establishing a licensing officials would help ensure compliance trying to reduce their cigarette system for retailers. with these regulations. consumption by purchasing single As for fines and other sanctions, no (47) One comment would amend cigarettes. amendment to the rule is necessary. The § 897.14 to refer to ‘‘purchasing’’ and Most comments, however, supported act already establishes fines and other ‘‘obtaining’’ cigarettes or smokeless a prohibition against the sale of single sanctions for parties who violate the act. tobacco. The comment said this would cigarettes. In general, they agreed that For example, any restricted device that prevent young people from attempting eliminating single cigarettes would is sold, distributed, or used in violation to obtain cigarettes or smokeless tobacco make cigarette purchases more of regulations for that restricted device from retailers by claiming to act with a expensive for young people and, as a is misbranded under section 502(q) of parent’s permission or on behalf of a result, less likely. A number of State the act (21 U.S.C. 352(q)), and section parent or adult. attorneys general stated that this 301(a) of the act prohibits the The agency declines to amend the provision, in conjunction with others, introduction or delivery for introduction rule as suggested by the comment. As would assist States in enforcing into interstate commerce of a written, § 897.14 prohibits retailers from compliance with State laws. A few misbranded device. (Section 709 of the selling cigarettes or smokeless tobacco comments noted reports of single act creates a presumption that all to anyone under 18 and also requires cigarette sales occurring within their devices are in interstate commerce and retailers to verify the purchaser’s age. State or jurisdiction; one stated that ‘‘the section 304 allows seizure of These provisions do not make any problem of loosies is a very old story adulterated or misbranded devices even distinction or exception as to whether within the inner city,’’ while another in the absence of interstate commerce.) the person purchasing the products even claimed seeing young people wait Among other things, section 301(b) of claims to be purchasing the products for in line for free samples of single the act prohibits the misbranding of a an adult. In other words, even if a young cigarettes. device in interstate commerce, while person claimed to have a parent’s The agency declines to amend the section 301(c) of the act prohibits the permission or to be purchasing these rule to exclude single cigarettes. The receipt in interstate commerce of any products for an adult, § 897.14(a) still preamble to the 1995 proposed rule misbranded device. Additionally, any prohibits retailers from selling cigarettes cited evidence that a significant number person who violates section 301 of the or smokeless tobacco to that young of retailers are willing to sell single act is subject to injunctions under person, and § 897.14(b) requires the cigarettes to young people and are section 302 of the act and civil retailer to verify the purchaser’s age. sometimes more inclined to sell single penalties, fines and imprisonment (48) As mentioned earlier in the cigarettes to young people than to adults under section 303 of the act, while discussion for § 897.10, FDA has (60 FR 41314 at 41324). The comments section 304 of the act authorizes seizure amended the final rule to create a new supporting the rule reinforce the notion actions against misbranded devices § 897.14(e) to require each retailer to that single cigarettes appeal to young themselves without any need for proof remove or bring into compliance all self- people. of interstate commerce. service displays, advertising, labeling, While FDA is sensitive to the fact that (45) One comment argued that and other items at the retailer’s adults who wish to quit smoking may retailers should be required to keep establishment if those items do not wish to purchase single cigarettes to cigarette products from public view. comply with the requirements under reduce smoking, on balance, the agency FDA declines to amend the rule as this part. This amendment became believes that the benefits of eliminating suggested by the comment. The agency necessary because comments from single cigarette sales to young people believes that concealing these products manufacturers and retailers claimed that outweighs any possible detriment to from view would not significantly retailers owned the self-service displays adults. enhance the restrictions against access or that, once the manufacturer’s by young people and would instead representative gives an item to a retailer, 5. Additional Comments unduly impair an adult’s ability to the item becomes the retailer’s property. (44) Several comments suggested that determine what products and brands a Consequently, § 897.14(e) requires FDA license retailers and impose fines retailer is selling as well as the retailer’s retailers to remove or otherwise bring or other sanctions on retailers who sell ability to sell those products. into compliance items at the retailer’s cigarettes and smokeless tobacco to (46) One comment stated that § 897.14 establishment if those items do not young people. can only be enforced by routine comply with this subpart. This The agency declines to amend the compliance checks using underage provision essentially gives retailers rule to create a licensing system. FDA agents. The comment suggested that three options with respect to an item notes that SAMHSA confronted similar FDA negotiate with States to receive that violates the requirements in this comments when it proposed rules to information on violations of State laws rule: (1) If the item belongs to a implement section 1926 of the PHS Act and to use that information against manufacturer, the retailer could ask the and elected not to require a licensing retailers who fail to comply with manufacturer to remove the item, system (61 FR 1492 at 1495). The § 897.14. consistent with the manufacturer’s preamble to the SAMHSA rule indicated FDA intends to cooperate with State obligations under § 897.12; (2) the that States could use a licensing system governments to curtail illegal sales of retailer could convert the item to to identify retail outlets and enforce cigarettes and smokeless tobacco to another use or alter the item to make it State laws, with licensure fees and civil young people. Additionally, as stated comply with the regulations; or (3) the penalties funding the States’ random, earlier in this document, FDA is retailer could remove the item. 44444 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

E. Conditions of Manufacture, Sale, and that FDA has no evidence to support a FDA predicated its action on section Distribution (§ 897.16) conclusion that a tobacco product 520(e) of the act and therefore it is not bearing a nontobacco trade name would necessary to address the relevance of 1. Restrictions on Nontobacco Trade be especially appealing to young people; section 502(a). Names on Tobacco Products the comment explained that the brands FDA is not persuaded that small Proposed § 897.16 would have mentioned by FDA in the preamble to market shares for cigarette products established several important the 1995 proposed rule—Harley- bearing nontobacco trade names restrictions or conditions on the sale of Davidson, Cartier, and Yves St. undermines the need for § 897.16(a). cigarettes and smokeless tobacco. Laurent’s Ritz cigarettes—either have The preamble to the 1995 proposed rule Proposed § 897.16(a) would have very small market shares or are not sold demonstrated that young people use the prohibited the use of a trade or brand in the United States. most heavily advertised brands and that name for a nontobacco product as the In contrast, one comment said they can purchase cigarettes and trade or brand name for a tobacco § 897.16(a) is ‘‘essential to avoid the smokeless tobacco easily (60 FR 41314 product ‘‘except for tobacco products on same problems that occur with ‘image’ at 41323 through 41326, and 41332). which a trade or brand name of advertising.’’ The comment explained The brands cited in the preamble, nontobacco product was in use on that tobacco manufacturers have used Harley-Davidson, Cartier, and Yves St. January 1, 1995.’’ For example, Harley nontobacco trade names on tobacco Laurent’s Ritz, are not among the most Davidson cigarettes would be products to give the tobacco products an heavily advertised brands, and, ‘‘grandfathered’’ under this provision. ‘‘instant image.’’ according to the comment, two (Cartier The preamble to the 1995 proposed rule The point of this provision, like the and Ritz) are not sold in the United stated that the provision would be restrictions on advertising, is to ensure States. Thus, there is no reason to necessary to prevent the industry from that the restrictions on sale and expect these brands to be especially circumventing the purpose behind the distribution to children and adolescents appealing to or purchased by young rule (60 FR 41314 at 41324) by are not undermined by how the product people in the United States today. benefitting from the promotion of the is presented to the public. As detailed However, if the other provisions in this nontobacco items in ways that appeal to in subpart D of part 897, FDA is rule are effective, some manufacturers young people. FDA noted, however, that restricting the way cigarette and might try altering their advertising or several cigarette brands already used smokeless tobacco are advertised in marketing strategy in order to generate trade names that are normally order to eliminate those elements that product appeal; § 897.16(a) thus associated with nontobacco products resonate most strongly with the needs of eliminates this potentially significant and would exempt those brands from those under 18 to establish an avenue for making a product appeal to § 897.16. The final regulation remains appropriate image and to create a sense young people. essentially the same, but clarifies the of acceptance and belonging. The use of (51) A few comments noted that the agency’s intent by amending the nontobacco trade names has particular provision did not elaborate on what language to limit the exception to those appeal in the former regard. If a firm constitutes a ‘‘trade or brand name for product names ‘‘whose trade or brand could use a popular nontobacco product a nontobacco product.’’ One comment name was on both a tobacco product trade name and put it on a tobacco interpreted the terms as including any and a nontobacco product that were product, the firm could attempt to nontobacco product trade name used sold in the United States on January 1, exploit the imagery or consumer anywhere in the world and, as a result, 1995.’’ identification attached to the argued that the provision would impose (49) FDA received few comments on nontobacco product to make the tobacco an impossible burden on manufacturers this provision. The comments asserted appeal to young people. to conduct trademark searches. The that the 1995 proposed rule would effect For example, young people might comment added that manufacturers takings compensable under the Fifth purchase a particular nontobacco would not be able to conduct trade or Amendment. product that they perceive as brand names searches with certainty The agency disagrees with these symbolizing the adult sophistication or (because the 1995 proposed rule did not comments. The final rule does not sex appeal of its users; they might also confine itself to registered trademarks) violate the Fifth Amendment. This issue be inclined to purchase cigarettes and manufacturers would be subject to is discussed in greater detail in section bearing the same trade name if they regulatory action even if they XI. of this document. perceive that the cigarettes will enhance unknowingly used a trade or brand (50) Several comments on the use of their lifestyles in the same manner. name for a nontobacco product. nontobacco trade names on tobacco Section 897.16(a), therefore, eliminates In contrast, another comment noted products would delete proposed a potential loophole in the advertising that a brand name directory published § 897.16(a), arguing that the provision and labeling provisions. by the Tobacco Merchants Association will have no effect on cigarette or FDA also disagrees with the comment of the United States lists numerous smokeless tobacco use by young people, challenging FDA’s authority. Section brand names for both nontobacco and and that businesses should be free to 897.16(a) is authorized under section tobacco products. The comment decide how to advertise or sell their 520(e) of the act which permits FDA to suggested that there are a greater products. One comment challenged the restrict, by regulation, the sale, number of cigarette products whose agency’s authority to regulate distribution, or use of certain devices. brand names were the same as brand nontobacco trade names, stating that the Prohibiting firms from adopting names for nontobacco products than the act only permits the agency to take nontobacco product names that appeal three brands that FDA identified in the action against names that are false and to young people is a restriction on the preamble to the 1995 proposed rule. The misleading. According to this comment, product’s ‘‘sale.’’ The comment’s comment suggested that FDA amend the a nontobacco trade name that appeals to suggestion that FDA cannot rely on rule to limit eligible brand name ‘‘tie- young people does not become subject section 502(a) of the act reveals a ins’’ to those relating to both tobacco to the act. The comment further charged misunderstanding of FDA’s position. products and to nontobacco products Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44445 sold in the United States as of January trade or brand name for a cigarette or purchases because children would not 1, 1995. smokeless tobacco product. be able to afford full-sized packs as easily or as quickly as they might afford FDA agrees, in part, with the 2. Minimum Package Size comments. It would be unreasonable for ‘‘kiddie packs.’’ the regulation to encompass all possible Proposed § 897.16(b) would have The final rule retains 20 cigarettes as nontobacco product trade names, made 20 cigarettes the minimum the minimum package size. The agency regardless of their nationality or package size for cigarettes. The disagrees that this provision will be whether the trade name was a registered preamble to the 1995 proposed rule ineffective. The provisions in this trademark. Neither FDA nor explained that FDA selected 20 as the subpart are designed to: (1) Make young manufacturers would be able to ensure minimum number of cigarettes because people’s access to cigarettes and that a name was not used elsewhere. most cigarette packs in the United States smokeless tobacco more difficult by FDA intended that proposed § 897.16(a) contain 20 cigarettes and that restricting specific modes of access to would apply to trade names in use in establishing a minimum package size these products that young people use, the United States, and that the would preclude firms from and (2) make purchases by young exception for nontobacco product trade manufacturing so-called ‘‘kiddie packs.’’ people more difficult (by requiring proof names would apply only to product The preamble to the 1995 proposed rule of age, and other methods) and more trade names that were in use on both explained that ‘‘kiddie packs’’ usually expensive (by eliminating free samples tobacco and nontobacco products as of contain a small number of cigarettes, are and ‘‘kiddie packs’’). easier to conceal, and are less expensive January 1, 1995. Consequently, to clarify Additionally, while some tobacco than full-sized packs. The preamble to the rule, FDA has amended § 897.16(a) products, specifically the specialty the 1995 proposed rule also noted that, to restrict manufacturers to use of those tobacco products, may have been sold in based on studies or reports in other product names that were used on both smaller sizes, the benefits of eliminating countries, significant numbers of nontobacco and tobacco products in the ‘‘kiddie packs,’’ namely eliminating a children purchase ‘‘kiddie packs’’ (60 United States as of January 1, 1995. product size that is relatively FR 41314 at 41324). Thus, by inexpensive and appealing to young (52) One comment would amend establishing a minimum package size, people, outweigh any inconvenience to § 897.16(a) to state that, in addition to the 1995 proposed rule would have adults. being on the market as of January 1, essentially eliminated the manufacture, 1995, the cigarette brand had to have distribution, and sale of ‘‘kiddie packs.’’ FDA also declines to create an generated sales of at least 500 million The final rule provides a narrow exemption based on market share or cigarettes or 500 million grams of exception to the minimum package size claims that young people do not use a cigarette or smokeless tobacco in 1994. in response to a comment on vending particular type of cigarette; such The comment explained that this machines that sell certain packaged, exemptions would not treat amendment would eliminate a single cigarettes. manufacturers equally, would depart ‘‘loophole’’ because a product with (54) Several comments opposed from FDA’s traditional approach of ‘‘nominal sales volume could open up creating any minimum package size. A regulating devices as a class (see section large marketing holes for all sorts of minority disputed that the rule would IV.B. of this document), and would be product names.’’ be effective, stating that young people impractical because a firm’s compliance FDA declines to amend the provision will get cigarettes anyway or will simply with the rule could vary depending on as suggested by the comment. The final begin purchasing full-sized packs. One fluctuations in market share and use by rule, as amended, prohibits comment, submitted on behalf of young people. Moreover, even a small manufacturers from using a nontobacco specialty tobacco companies, suggested percentage of a market, such as 1 or 2 product trade or brand name as the exempting specialty tobacco products percent, could translate into a large trade or brand name for a cigarette or from the rule. The comment explained number of Americans; for example, 2 smokeless tobacco product. The sole that many specialty tobacco products percent of the approximately 50 million exception is for tobacco products whose are produced in package sizes smaller Americans who smoke would represent trade or brand name was on both than 20 cigarettes, ranging from 8 to 18 1 million people. Two percent of the nontobacco and tobacco products sold cigarettes, but that young people do not approximately 3 million children under in the United States as of January 1, purchase specialty tobacco products. age 18 who are regular smokers would 1995. FDA will construe this exception Consequently, the comment sought an represent 60,000 young people. narrowly such that the trade or brand exemption for specialty tobacco Furthermore, FDA declines to make name on the nontobacco product must products or for products with a very 10 cigarettes the minimum package size. be the same. For example, if the trade small market share. One comment The comment did not offer any name for a nontobacco product was asserted that small package sizes reduce justification for the lower figure, and the ‘‘Old Time Country Store,’’ a cigarette smoking by adults while another agency believes that a smaller package product called ‘‘Old Time’’ would not comment would amend the rule to size would be counterproductive qualify for the exception because the lower the minimum size to 10 cigarettes; because a 10-cigarette minimum size name is not identical to that for the neither comment offered any evidence would be tantamount to making a nontobacco product. to support their assertions. ‘‘kiddie pack’’ the minimum package (53) FDA, on its own initiative, has In contrast, many comments size for cigarettes. amended § 897.16(a) to replace the word supported proposed § 897.16(b). The (55) One comment supported the ‘‘may’’ with ‘‘shall.’’ This amendment is comments indicated that eliminating provision, but suggested that FDA intended to reinforce the notion that, ‘‘kiddie packs’’ is ‘‘essential to protect amend the rule to prevent the except as otherwise provided in youth’’ and described ‘‘kiddie packs’’ as development of ‘‘mini’’ cigarettes or § 897.16(a), manufacturers are an ‘‘obvious come-on that would appeal ‘‘short smokes.’’ The comment said such prohibited from using a trade or brand to kids.’’ Other comments said the products contain less tobacco so that name of a nontobacco product as the provision would reduce underage they can be sold at a lower price. 44446 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

The agency declines to amend the access to these products and, as a result, population-based probability sample by rule as suggested by the comment. protect them from those potential using a sample size that exceeded the Section 897.3(a) define a cigarette, in adverse health effects. required size for a simple random part, as any product that consists of any (58) One comment stated that the sample. The authors used a cross- roll of tobacco; it does not establish a agency lacks factual support for a sectional sample of 649 young people minimum quantity of tobacco. Thus, minimum package size, claiming that between the ages of 14 and 15. This while manufacturers can develop such a there is no evidence that young people number exceeded the 363 persons product, it would still be a cigarette buy such products or that ‘‘kiddie required for a simple random sample, under this rule and subject to all packs’’ are especially popular with based on an estimate that 40 percent of restrictions for cigarettes. young people. The comment claimed the 25,000 South Australian children (56) Two comments would amend the that the studies cited by FDA in the aged 14 to 15 years old would be minimum package size by increasing it preamble to the 1995 proposed rule are smokers and using 95 percent to 200 cigarettes or a carton of cigarettes. flawed due to small sample size. The confidence intervals of 35 to 45 percent, The comments explained that making comment disputed the results of those and exceeded the 567 person sample cartons the minimum package size studies, arguing that the studies did not size that would be obtained when the would further reduce access to show whether young people favored random sample size is multiplied by a cigarettes by young people because small package sizes because they are factor of 1.3 to allow for a clustered cartons would be more expensive than easily concealed—a reason identified by design and increased 20 percent to single packs and would be harder to FDA in the preamble to the 1995 allow for persons dropping out of the shoplift. The comment said that adults proposed rule—or because they are less survey. would not be adversely affected by such expensive. The comment added that Additionally, while the study did say a change because adults generally buy FDA’s rationale is further undermined that the sample of 14- and 15-year old cartons. by the fact that FDA has claimed both children was a ‘‘sample of The agency declines to make 200 that young people are price sensitive convenience,’’ that, alone, does not cigarettes or one carton the minimum and that they do not purchase make the study unreliable. Many studies ‘‘package’’ size. Eliminating cigarette inexpensive brands. According to the use a sample of convenience rather than packages would unduly affect those comment, it is not possible to have it a representative sample, and the adults who prefer to purchase cigarette both ways. application of a study’s results or packs rather than cartons due to limited Specifically, the comment questioned findings to a broader population funds or other reasons, and would the validity of the 1987 Australian study depends on the study’s methodology. unduly affect manufacturers, by Wilson. 45 The comment argued that The comment’s criticism of the distributors, and retailers because, at the the authors could not assure that the different selection methods lacks merit very least, they would need to revise subject population of 14- and 15-year because it neglects to consider the manufacturing practices or machines olds was representative and, because context for the selection method. The and/or revise or reconfigure product selection criteria for the adult subjects authors selected schools in order to storage practices and units to differed, the results from the adult obtain underage subjects; this selection accommodate only cartons. It is even population could not be compared to method precluded getting a possible that some adults might the results from the 14- to 15-year old representative sample of adults (because consume more cigarettes if the subjects. The comment disputed the they would not be in schools). For the minimum package size were increased study’s finding that young Australians adult subjects, selection was based on a to 200 cigarettes. favored smaller cigarette packages probability-based method of selection (57) One comment challenged the because the small packs were more instead of school affiliation. Both agency’s authority for proposed ‘‘concealable,’’ stating that the study did selection methods were scientifically § 897.16(b). The comment argued that not explain whether a pack containing valid. requiring a minimum package size 15 cigarettes was significantly smaller Moreover, two well-conducted studies exceeds FDA’s authority under the act than a pack containing 20 cigarettes. provide a reasonable basis for because it does not purport to provide The comment also criticized the study comparison, even between different reasonable assurance of the product’s for being unclear as to whether the populations. This is especially true for safety and effectiveness to potential researchers surveyed youth smokers the Wilson study because both the users. alone or young smokers and other adolescent and adult studies were FDA disagrees with the comment. youths to determine why young people performed under the auspices of the Section 520(e) of the act authorizes the purchased the 15-cigarette package, and South Australian Health Commission agency to impose restrictions on the it criticized FDA for not mentioning that and were drawn from the same sale, distribution, and use of a device. the third most popular reason for geographical area within 2 weeks of Establishing a minimum package size is purchasing 15-cigarette packs was each other. Thus, one can reasonably a restriction on the sale and distribution ‘‘reducing smoking.’’ assume that the studies were well of these devices and is reasonably FDA is not persuaded that the studies conducted and that comparisons related to assuring the product’s safety are unreliable. The comment’s between the adolescent and adult for those persons, namely young people, criticisms of the Wilson study do not groups were appropriate. whom this rule protects. Cigarettes and acknowledge that the study’s authors Finally, the comment’s criticism of smokeless tobacco either cause or are compensated for the lack of a Wilson’s findings is also misplaced. associated with serious adverse health Contrary to the comment’s assertion, the effects, and the evidence suggests that 45 Wilson, D. H., et al., ‘‘15’s: They Fit in issue is not whether 15-cigarette packs ‘‘kiddie packs’’ appeal to young people. Everywhere—Especially the School Bag: A Survey are smaller or more easily concealed of Purchases of Packets of 15 Cigarettes by 14 and Hence, establishing a minimum package 15 Year Olds in South Australia,’’ Supplement to than full-sized packs. Nor is the issue size that is larger than a ‘‘kiddie pack’’ Community Health Studies XI (1), pp. 16s–20s, whether underage smokers, as opposed should help reduce young people’s 1987. to underage smokers and other young Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44447 people, prefer 15-cigarette packs. schoolchildren refutes FDA’s statement the youngest children prefer smaller Instead, the issue is whether young that the price and ‘‘concealability’’ of cigarette packages. So, even if the Nova people, for whatever reason, favor and smaller packages appeal to young Scotia study used a small sample size, purchase smaller packs. The study people. The study found that 42 percent the study’s findings are consistent with indicated that over 90 percent of the of the children surveyed smoked the Australian study that surveyed young people surveyed preferred 15- cigarettes from 25-cigarette packages, 19,166 children. cigarette packs because they considered with the next most popular size being The agency also disagrees with the them to be less expensive, easier to 30-cigarette packages. Nearly 20 percent comment’s claim that the Nova Scotia conceal, or helpful to reduce smoking. smoked cigarettes from 15-cigarette study contradicts FDA’s view that This led the authors to state that, ‘‘if packages, and ‘‘preference for packets of young people purchase ‘‘kiddie packs’’ adolescents did not have available to this size showed a marked inverse due to their low price and small size. them these cheaper brands, or the price relationship with age, decreasing from The study did not examine specific was raised considerably, or packaging in 30% of 12-year-old school children to reasons for purchasing single cigarettes a way that is more appealing to 11% of 17-year-old school children.’’ 49 as opposed to adolescent budgets was prohibited then The study did not attribute the 15-, 20-, or 25-cigarette packages, and so the current popularity of 15’s would be popularity of the smaller package size to it would be inappropriate to draw any reduced considerably.’’ 46 lower price or concealability but merely conclusions based on different purchase (59) The same comment challenged a cited the Wilson study to say that young rates alone. In other words, the study by Hill. 47 The preamble to the people ‘‘presumably’’ prefer the smaller percentage of students who purchase a 1995 proposed rule cited this study to packages for those reasons. Yet, particular package size may offer little show that younger children (12-year regardless of the reason, the Hill study or no insight as to the reasons why a olds in the study) preferred 15-cigarette illustrates that a significant percentage student selected a particular package packages more than older children (17- of young people prefer smaller package size. year olds) and that older children sizes and that the percentage increases Other factors might also explain the preferred packages containing 25 in the younger age groups. low rate of single cigarette sales relative cigarettes. However, the comment (60) The same comment also to cigarette packages. Low price and interpreted the Hill study in a much criticized the Nova Scotia study. 50 FDA concealability might be important different manner, noting that, according cited this study to show that 49 percent factors in purchasing behavior, but they to the study, the youngest age group of tobacco users in the sixth grade may not be the controlling or sole experienced the greatest decline in purchased 15-cigarette packages. The factors behind a purchase. For example, smoking prevalence in the period comment criticized the Nova Scotia the preamble to the 1995 proposed rule following the introduction of the 15- study for the ‘‘absurdly small size of this stated, among other things, that single cigarette package. Thus, the comment population sample (37 students).’’ The cigarettes make children more willing to asserted that, ‘‘[t]his fact suggests that comment also criticized the Nova Scotia experiment with tobacco products (60 smaller packages are associated with study’s assertion that price and FR 41314 at 41324), and stated that less , rather than more.’’ concealability motivate young people to young people see or use tobacco The comment further stated that the purchase small cigarette packages. The products as a badge or method of researchers’ opinion that price and Nova Scotia study indicated that only 3 conveying or creating a certain image for ‘‘concealability’’ make smaller packages percent of the sixth grade students themselves (60 FR 41314 at 41329). A appealing to young people is surveyed (or one out of the 37 students) single cigarette, sold without a package, contradicted by the findings that purchased single cigarettes compared to is an ineffective ‘‘badge’’ compared to children in all age groups preferred 25- 11 percent of the twelfth grade students the more conspicuous cigarette pack. and 30-cigarette packages. (or 12 students out of the 123 surveyed). Additionally, very young children may FDA believes that the comment The comment argued that the Nova not opt for single cigarettes because misinterprets the study. While the study Scotia study showed that twelfth grade such products are typically purchased did indicate that the proportion of students ‘‘were four times as likely as from retailers that may question the Australian students, aged 12 to 17 years, the sixth-graders to purchase single children’s age. (See 60 FR 41314 at who smoked weekly declined from 1984 cigarettes’’ and that, ‘‘[i]f price and 41325 (very young children rely on to 1987 (with the greatest declines in the ‘concealability’ were the key factors for vending machines more often than older youngest age groups), the study did not young people, those in the youngest age children).) The Nova Scotia study, attribute the decline to the introduction group would surely be purchasing however, did not examine reasons for of a smaller cigarette package. Instead, single cigarettes, not 15’s’’. purchasing single cigarettes as opposed The comment misconstrues the the study attributed the decline to ‘‘the to purchasing 15-cigarette packages, and importance of the study. FDA cited this health education and promotional so the agency declines to draw any study to show that 49 percent of tobacco campaigns that were established in conclusions solely from different sales users in the sixth grade purchased 15- Australia during the period between the rates for single cigarettes compared to 48 cigarette packages, but the agency did surveys.’’ those for cigarette packages. not rely solely on the Nova Scotia study Similarly, a closer examination of the (61) One comment suggested as evidence that young people prefer study does not support the comment’s amending § 897.16(b) to prohibit small cigarette packages. Instead, the assertion that the popularity of larger manufacturers, distributors, and agency cited the Nova Scotia study and cigarette packages among Australian retailers from selling or causing to be the Hill study that surveyed 19,166 sold, distributing or causing to be 46 Australian schoolchildren to show that Id., p. 19s. distributed, ‘‘cigarettes unless contained 47 Hill, D. J., et al., ‘‘Tobacco and Alcohol Use in packages of at least 20 cigarettes.’’ Among Australian Secondary Schoolchildren in 49 Id., p. 126. 1987,’’ Medical Journal of Australia, vol. 152, pp. 50 ‘‘Students and Tobacco,’’ The Nova Scotia The comment said that the rule did not 124–130, 1990. Council on Smoking and Health Survey, Final prevent anyone other than retailers from 48 Id., p. 128. Report, March 1991. selling individual cigarettes. 44448 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

FDA believes the comment 3. Maximum Package Size a. Vending machines. The preamble to misinterpreted the rule. Section 897.3 The preamble to the 1995 proposed the 1995 proposed rule cited numerous defines a ‘‘retailer’’ as any person who rule also invited comment as to whether studies and surveys showing that sells cigarettes or smokeless tobacco to a maximum package size should be significant percentages of young people individuals for personal consumption. established. The preamble to the 1995 are able to purchase cigarettes from Thus, a manufacturer or distributor who proposed rule cited one study that vending machines, even in jurisdictions attempted to sell single cigarettes to a found that older Australian children that have laws restricting the placement consumer would, under the final rule, favored cigarette packs containing 25 of those machines or requiring the use be considered a ‘‘retailer’’ for purposes cigarettes (60 FR 41314 at 41324). of locking devices. In some cases, young of that transaction and would be in (64) Several comments offered people successfully bought cigarettes violation of the individual cigarette suggestions regarding a maximum from vending machines 100 percent of restriction in § 897.14. package size. One comment noted that the time (60 FR 41314 at 41324 through (62) One comment suggested packages containing 10 and 25 cigarettes 41325). Consequently, the agency amending the rule to create a minimum have been sold in the United States and elected to prohibit the use of vending package size for smokeless tobacco. The suggested that, when considering a machines rather than restrict their comment would make the minimum maximum package size, FDA should placement or require locking devices. package size for smokeless tobacco consider the attractiveness of the pack FDA’s proposal to eliminate the use of equivalent to 20 doses of nicotine, but and whether a larger pack would vending machines (§ 897.16(c)) it did not state what a dose would be. encourage increased consumption. The generated more comments than any comment added that one option would other provision aimed at reducing The agency agrees that a minimum be to limit sales to 200 units (or one children’s and adolescents’ access to package size for smokeless tobacco may carton). Another comment would make tobacco products; the agency received be helpful, but lacks sufficient 20 cigarettes the maximum package size, thousands of comments on this information to determine what that size but conceded that there is insufficient provision. While agreeing that children should be for the various forms of evidence to make a strong and adolescents should not use tobacco smokeless tobacco on the market. recommendation. products, comments submitted by adult Unlike cigarettes, which are generally In contrast, one comment stated that smokers, the tobacco industry, and sold in packages of 20, smokeless the agency has no authority or evidence vending machine owners and operators, tobacco comes in various forms and to justify creating a minimum package strenuously objected to the provision. sizes, and, with the possible exception size and so it lacks authority and Nearly all of the comments in of prepackaged forms, can be used in evidence to create a maximum package opposition stated that the provision quantities determined by the user. One size. would be unnecessary if State and local individual, for example, might place Based on the comments, there is jurisdictions enforced existing laws more chewing tobacco in his or her insufficient evidence to establish a prohibiting the sale of tobacco products mouth than another individual. maximum package size for cigarettes. to children and adolescents under the Consequently, absent more information, There is little experience in the United age of 18. the agency is unable to establish a States with package sizes greater than 20 By contrast, concerned adults, minimum package size for smokeless cigarettes. As a result, the final rule does parents, educators, State and local tobacco. not establish a maximum package size public health agencies, and medical (63) The agency, on its own initiative, for cigarettes. professionals overwhelmingly has amended § 897.16(b) (minimum supported the provision. In addition, cigarette package size) to add the 4. Impersonal Modes of Sale tens of thousands of school children introductory phrase, ‘‘Except as Proposed § 897.16(c) would have wrote letters asking that vending otherwise provided under this section.’’ permitted cigarettes and smokeless machines be eliminated. Nearly all This amendment became necessary tobacco to be sold only in a direct, face- comments in favor of the provision because, as discussed in greater detail in to-face exchange between the retailer, or pointed to the serious health risks that section IV.E.4.a. of this document, the the retailer’s employees, and the a lifetime of nicotine addiction poses to agency has concluded that vending consumer. Thus, the proposal would children and adolescents who begin to machine sales should be permitted in have prohibited the use of vending smoke, arguing that vending machines facilities that are inaccessible to young machines, self-service displays, mail- offer children and adolescents who people, and FDA is aware of at least one order sales, and mail-order redemption choose to begin to smoke easy access to type of vending machine that sells of coupons. Implicit in this provision, cigarettes. packaged, single cigarettes. The agency and in subpart B of part 897, is the (65) Several comments asserted that is aware of vending machines that notion that transactions involving the proposed restriction pertaining to dispense cartons, packages, and now restricted devices should involve a vending machines would effect takings packaged, single cigarettes and has sense of ‘‘formality’’ or gravity that compensable under the Fifth made an exception for packaged, single conveys to both the seller and the buyer Amendment. cigarettes due to their unique nature the seriousness of the transaction and of The agency disagrees with the (relatively high price compared to the products themselves. FDA has comments. As discussed in greater ‘‘loosies,’’ packaging in compliance with amended this provision in response to detail in the paragraph below, FDA has labeling and tax requirements, and sale comments. As discussed in section amended the final rule to permit only in adult locations). Additionally, IV.E.4.c. of this document, certain mail- vending machines in facilities that are FDA, on its own initiative, has revised order sales are now exempted from this inaccessible to young people at all the rule to state that no manufacturer, requirement, as are vending machines times. Additionally, given the character distributor, or retailer ‘‘may’’ sell (rather and self-service merchandisers in of this regulation and the lack of than ‘‘shall’’ sell) cigarette packages facilities not admitting individuals reasonable investment-backed containing less than 20 cigarettes. under the age of 18. expectations in personal property, its Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44449 economic impact, while potentially hundred and seven teenagers eliminating vending machines, use of significant for some persons, is not such participated in the 12-county survey by vending machines among children as to effect a taking. The agency entering stores under the supervision of between the ages of 13 and 17 years addresses Fifth Amendment issues in an adult and attempting to purchase would likely increase (60 FR 41314 at greater detail in section XI. of this cigarettes, and: 41325). Therefore, the agency has document. [k]ids were more successful attempting to concluded that the provision is an (66) Most comments submitted by buy cigarettes through vending machines important part of the overall scheme to adult smokers and nearly all of the [than through retail outlets], without any reduce children’s and adolescents’ comments submitted by the cigarette adults trying to stop them. Teens made 21 of access to cigarettes. 24 successful attempts to purchase cigarettes and vending machine industries stated through vending machines, an 88 percent (67) The agency received many that the provision would not effectively success rate. comments regarding the location of reduce children’s and adolescents’ Similarly, the manager of a youth vending machines. A trade association access to cigarettes. The comments tobacco prevention program in representing the cigarette industry argued that the proposed elimination of Washington State’s Department of stated that most vending machines are vending machines is not supported by Health commented that ‘‘[a] recent currently inaccessible to children and the evidence in the record, either survey in one Washington county found adolescents because they are located because the studies cited by FDA do not that youth can still purchase tobacco either in areas that are off-limits to measure children’s and adolescents’ from vending machines at a 75 percent young people, such as nightclubs or actual purchasing habits, or because the success rate.’’ The comment casinos, or in areas that young people percentage of children and adolescents recommended that all tobacco vending rarely frequent, such as industrial plants who reportedly buy cigarettes from machines be eliminated. and private offices. Thus, the comment vending machines is not significant. Finally, comments submitted by concluded, eliminating vending Finally, many adult smokers and some children, parents, and nonsmoking machines will not discourage youth parents argued that determined adults indicate that these groups believe smoking. teenagers will find a way to obtain tobacco vending machines are easily The vending machine industry and cigarettes whether or not vending accessible to children and adolescents. establishments that currently have machines are eliminated. One comment, typical of those vending machines unanimously On the other hand, almost all of the submitted by children, stated: ‘‘I opposed the provision. Some comments children, parents, adults who do not especially agree with getting rid of suggested that the agency specifically smoke, medical professionals, and vending machines. That, I think, is public interest groups commented that probably the most common way that allow vending machines in locations the provision would effectively reduce children get their cigarettes.’’ The where young people are not present. children’s access to cigarettes. These director of a public health center in One vending machine operator comments generally cited personal California submitted the results of a poll commented, ‘‘[m]any experience in concluding that vending indicating that 75 percent of vendors are small businessmen like machines provide an easy source of Californians support banning cigarette myself; 95 percent of our locations are cigarettes for many children who smoke. vending machines. in taverns and lounges, where no one For example, the executive director of a Vending machines certainly represent under 21 years old is allowed in.’’ Other public health education program wrote: one of the major ways that children comments argued that, even if retail ‘‘It is outrageous that we allow tobacco, currently obtain cigarettes. In addition purchases become increasingly difficult, a most addictive drug, to be sold to studies depicting how easily children vending machines in establishments through vending machines where and adolescents could purchase that are not open to the public should anyone can purchase it!’’ Comments cigarettes from vending machines, the not be eliminated because children and overwhelmingly concluded that the 1995 proposed rule cited surveys of adolescents cannot enter these places. elimination of vending machines, children’s actual purchasing behavior Both the cigarette and vending coupled with the other proposed access (60 FR 41314 at 41324 through 41325). machine industries argued that FDA’s and advertising restrictions and the Relying on both types of evidence, the conclusion, that children and proposed education campaign, would agency concluded that the provision adolescents can easily purchase effectively reduce the availability of would eliminate one of the primary cigarettes from vending machines even cigarettes to children. sources of cigarettes for at least 2 in ‘‘adult’’ locations, was based on Several comments analyzed currently percent of 17-year-old smokers and 22 flawed studies. Comments argued that available studies and concluded that percent of 13- to 17-year-old smokers. the sting operations, on which these ‘‘easy access to vending machines * ** Moreover, the agency finds that the studies were based, do not demonstrate enable[s] young people to obtain number of children and adolescents in where teenagers actually or usually go. cigarettes, and that high proportions of these two groups is substantial. One comment, submitted by an vending machine users are people under While the agency agrees that some association representing 1,700 vending 18.’’ Moreover, several comments in children and adolescents who are machine companies, argued that: ‘‘it is support of the provision cited their own determined to smoke may find or create highly questionable if minors might studies indicating the ease with which new ways of obtaining cigarettes, the have alone and without encouragement children and adolescents obtain removal of vending machines from sites entered taverns or bars in restaurants cigarettes from vending machines. For accessible to young people will just to purchase cigarettes without example, a coalition dedicated to eliminate what is currently a popular exemption from the district attorney’s preventing and reducing tobacco use and easy means of access to tobacco, office.’’ Moreover, these comments submitted its 1994 annual report, which especially for younger children. In argued, local sting operations do not included an article describing an addition, if other access restrictions are establish the national cigarette undercover buying survey, the largest of imposed, such as requiring customers to purchasing habits of children and its kind, conducted in Spring, 1994. One provide proof of age, without also adolescents. 44450 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

In contrast, a national public health that ‘‘[s]ome inspections of private clubs owner of the facility must ensure, by organization concluded that available and bars were not carried out because means of photographic identification or studies indicate that restricting the access to the outlet was blocked by a some other means, that no one under 18 location of vending machines is an doorman or security guard.’’ 52 FDA enters the facility. Thus, the rule would ineffective method of controlling sales finds that those establishments where permit a vending machine in an of tobacco to young people. Another people under the age of 18 are legally establishment only where persons under comment opposed to weakening the prohibited from entering and where a 18 are not present, or permitted to enter, provision characterized as unreliable system exists to ensure that children are at any time. FDA emphasizes that this the number of machines currently in prevented from entering, can, in fact, be narrowly drawn exemption ‘‘adult’’ locations. The comment sufficiently inaccessible to children that accommodates adults only in locations attacked as statistically unsound a the goals of the rule would not be where young people, in fact, have no vending machine industry survey that significantly advanced by prohibiting access at any time. For example, a concluded that 77 percent of all vending vending machines in those limited vending machine might be permitted in machines are in ‘‘adult locations.’’ locations. a facility that employs only adults and FDA has determined that cigarettes Other ‘‘adult’’ establishments prohibit where guards prevent any person under should not be dispensed to consumers children and adolescents from entering, 18 from entering. A vending machine from vending machines that are as a matter of establishment policy. For would not be permitted in a facility that accessible to children and adolescents. example, some private clubs do not employs only adults but also permits While young people’s actual current grant membership to persons under the employees to bring children to work. purchasing habits provide irrefutable age of 18 and require that members The agency further emphasizes that it is evidence of accessibility, available provide proof of membership before the exempt establishment’s evidence demonstrates that cigarette entering the club. Similarly, for responsibility to ensure that no one vending machines also are accessible to example, some industrial or under 18 is present, or permitted to children and adolescents even in manufacturing facilities not open to the enter the premises, at any time. locations that are not often or currently public may, for safety reasons, prohibit In addition, under § 897.16(c), a frequented by young people. FDA has the hiring of persons under the age of vending machine in an exempt determined that cigarette vending 18, and require that employees present establishment must be entirely machines should be eliminated from proof of employment upon entering the inaccessible to children. Thus, an locations that are accessible to children facility. FDA finds that these establishment must place the machine and adolescents, whether or not establishments, like some nightclubs or entirely inside the premises, beyond the children and adolescents currently use casinos, can be similarly inaccessible to point where persons are required to them. children and, if so, should be permitted present proof of age, membership, or While the IOM recommended that to make cigarette vending machines employment. Vending machines are vending machines be eliminated available to their adult members or prohibited from any public area in or altogether, it cautioned that, if partial employees. around the establishment, including, for bans were to be enacted, the definition Futhermore, an exemption for example, lobbies, parking lots, and of ‘‘adult’’ location must be narrowly vending machines located in areas entrances. drawn. where no person under 18 is present or FDA emphasizes that the final rule Youths do not now report ‘‘adult’’ permitted to enter is consistent with the exempts only establishments that are, in locations as major sources of tobacco, but ‘‘Prohibition of Cigarette Sales to Minors fact, inaccessible to young people at all there is evidence that minors can often easily in Federal Buildings and Lands Act’’ enter ‘‘adult’’ locations, and once inside, can times. FDA will monitor young people’s (Pub. L. 104–52, sec. 636). This access to cigarettes from vending easily buy tobacco products * * *. If partial particular statute, which became law on vending machine bans are to be effective, the machines in exempt establishments, statutes must define ‘‘adult’’ locations November 19, 1995, prohibits the sale of and, after 2 years, will assess whether carefully and narrowly. For example, the bar tobacco products in vending machines the vending machine exemption has area of a restaurant is not sufficiently located ‘‘in or around any Federal been effective. At that time, the agency inaccessible to minors to deter their building,’’ but the statute authorizes the finds that vending machines continue to purchases. * * * Many bars only restrict Administrator of the General Services be accessible to young people, FDA will access to alcohol; they do not restrict Administration (GSA) or the head of an propose further restrictions. entrance by age. Accordingly, if vending agency to exempt areas that prohibit the machine are permitted at all, they should be (68) Several comments suggested that, ‘‘presence of minors’’ (whom the statute rather than eliminate vending machines permitted only in locations to which minors defines as individuals under age 18). may not be admitted. 51 or restrict their location, FDA require Based on comments, FDA has See also 41 CFR 101–20.109(d) that they be supervised. These determined that some ‘‘adult’’ locations (Administrator of the GSA or agency comments would allow vending can be made sufficiently secure to head may designate areas where machines to be placed anywhere, even prevent young people’s access and that vending machine sales of tobacco in locations frequented by children and vending machines should remain products may occur ‘‘if the area adolescents, as long as the machines available to adults in these locations. prohibits minors’’); 61 FR 2121, January were supervised. For example, some establishments, such 25, 1996. FDA disagrees that supervising Consequently, § 897.16(c) exempts as nightclubs or casinos, require that vending machines would prevent illegal vending machines located in patrons present proof of age before they sales to children and adolescents. establishments that are totally are permitted to enter or post a guard at Comments opposed to the provision inaccessible to persons under 18. The the door to prohibit underage access. In offered no evidence that supervision of 1994, CDC analyzed 15 recent studies of vending machines would sufficiently 52 ‘‘Design of Inspection Surveys for Vendor children’s access to tobacco and noted Compliance with Restrictions on Tobacco Sales to impede a young person’s access to Minors,’’ Battelle, prepared for the CDC, OSH, p. 17, cigarettes. In fact, studies indicate that 51 IOM Report, p. 214. April 1994. young people are able to purchase Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44451 cigarettes even from vending machines other access restrictions would cause an reduce illegal tobacco sales while under the immediate vicinity and increase in illegal vending machine permitting the use of locking devices on control of employees. sales. cigarette vending machines. However, One study conducted in a State (69) Most comments submitted by the FDA notes that when the community requiring that vending machines be tobacco and vending machine industries implemented its tobacco ordinance in supervised demonstrated that youths recommended that, rather than May, 1989, the community had only six were able to purchase from 72 percent eliminate vending machines, FDA vending machines, and when the study of vending machines, in bars and should require that they be equipped was completed December, 1990, the taverns, within clear view of an with electronic locking devices (devices number of vending machines had employee. 53 Another report examining that render the machine inoperable until dropped to two. Moreover, despite the vending machine sales in New York activated by an employee) or token requirement of locking devices and City demonstrated that 11- and 12-year- mechanisms (which require consumers persistent compliance checks by law olds successfully purchased cigarettes to purchase tokens from an employee in enforcement, a child was able to from supposedly supervised vending order to use a vending machine). Either purchase cigarettes from one of the two machines in bars and taverns 100 method would require a face-to-face remaining vending machines in percent of the time. The study found transaction between the purchaser and December, 1990. 57 that children and adolescents ‘‘had no the retailer. Similarly, in 1990, Minnesota enacted more difficulty buying cigarettes from The cigarette and vending machine a law eliminating vending machines in vending machines in bars than they had industries commented that studies do public areas unless the machines were buying cigarettes from restaurants, pizza not support FDA’s conclusion that only operable by activation of an parlors, or video arcades. In all locking devices are ineffective. electronic switch or token and were instances, the barman and/or patrons Comments asserted that the studies under the direct supervision of a watched but did not intervene.’’ 54 failed to include vending machines responsible employee. One year after In other studies, employees helped fitted with locking devices in the law was passed, a study conducted children and adolescents to illegally traditionally adult locations or to in four cities found many machines had purchase cigarettes by providing change account for the lack of enforcement in not been fitted with the required devices for the cigarette vending machine 55 or the jurisdiction in which the study was and, of those fitted with the devices, suggesting that the children and conducted. In addition, several there was no significant reduction in adolescents go next door where comments pointed out that the tobacco purchase success. 58 cigarettes were cheaper. 56 sales ordinance in Woodridge, IL, where IOM reviewed the available evidence Additionally, each provision in illegal tobacco sales were reduced from and determined that locking devices do subpart B of part 897 is intended to 70 percent to less than 5 percent 2 years not effectively prevent youth access to eliminate a popular source of cigarettes later, included a locking device cigarette vending machines. IOM noted and smokeless tobacco for children. The requirement rather than a ban on that ‘‘although fewer cigarettes are sold vending machine restriction is intended cigarette vending machines. to youths than where vending machines to complement, and be reinforced by, On the other hand, one comment from are completely unrestricted, businesses the other restrictions. a public interest group strongly that installed locking devices on The preamble to the 1995 proposed supported FDA’s proposal to eliminate vending machines were still more likely rule cited studies indicating that the use vending machines altogether and urged to sell cigarettes to young people than of vending machines by adolescents is that FDA not permit the use of locking businesses that used over-the-counter greater in jurisdictions that have devices. The comment cited a survey, sales.’’ 59 stronger access restrictions (60 FR 41314 conducted by an association of public Finally, the Inspector General at 41325). Based on those studies and health officials in New Jersey, in which reported that Utah experienced limited comments that it received, FDA young people successfully purchased success with locking devices: concludes that decreasing the supply of cigarettes from supposedly locked Reportedly, clerks would simply activate tobacco products to children and vending machines in 11 of 15 attempts. the machine without checking the age of the adolescents by one means of access, The comment noted that ‘‘[i]n some purchaser. Since the locking devices require instances, the remote control device to employee participation, they are often not as such as restricting self-service displays, effective in busy places, such as bars or would cause an increased demand by operate the machine was sitting on top restaurants, where employees are more likely another means of access, such as of the machine to save store personnel to simply activate the machine. 60 cigarette vending machines. FDA the bother of having to press the FDA has not been persuaded that remains persuaded that, without switch.’’ vending machines equipped with eliminating cigarette vending machines FDA acknowledges that properly locking devices sufficiently guard accessible to children and adolescents, installed locking devices require that vending machine purchasers engage in 57 Jason, L. A., P. Y. Ji, M. D. Aneo, and S. H. 53 Cismoski, J., and M. Sheridan, ‘‘Availability of a face-to-face transaction, increasing the Birkhead, ‘‘Active Enforcement of Cigarette Control Cigarettes to Under-age Youth in Fond du Lac, likelihood that children would be Laws in the Prevention of Cigarette Sales to Wisconsin,’’ Wisconsin Medical Journal, vol. 92, prevented from purchasing cigarettes. Minors,’’ JAMA, vol. 266, No. 22, pp. 3159–3161, No. 11, pp. 626–630, 1993. December 11, 1991. 54 ‘‘Cigarette Vending Machines Sell Cigarettes to However, as explained in the preamble 58 Kotz, K., ‘‘An Evaluation of the Minnesota Law Children, 11–15 Years Old, 100% of the Time,’’ to the 1995 proposed rule, available to Restrict Youth Access to Tobacco,’’ presented to Smokefree Educational Services, Inc., October 1990. evidence indicates that the industry is the American Public Health Association (APHA) ‘‘Critics Target Vending Machines,’’ The Christian slow to install the locking devices, and 121st Annual Meeting, San Francisco, CA, October Science Monitor, p. 6, April 1990. that, after a short period, the locking 24–28, 1993. 55 59 Mead, R., ‘‘Teen Access to Cigarettes in Green devices are often disabled (60 FR 41314 IOM Report, p. 213. Bay, Wisconsin,’’ Wisconsin Medical Journal, pp. 60 ‘‘Youth Access to Cigarettes,’’ Department of 23–24, January, 1993. at 41324 through 41325). Health and Human Services (DHHS), Office of the 56 ‘‘Springfield Teen Tobacco Purchase Survey,’’ FDA agrees that the Woodridge, IL, Inspector General, Pub. No. OEI–02–90–02310, p. 9, Stop Teenage Addiction to Tobacco (STAT), 1993. community was able to dramatically May 1990. 44452 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations against children’s access to tobacco inconvenience them. Most adult and purpose of the study and were products. Comments provided no smokers stated that vending machines escorted by at least one adult. Some evidence, and FDA is not aware of any are closer than retail outlets to their adults waited outside the outlet for the studies, on whether law enforcement homes or places of work. Some adult young person while others went inside efforts affect children’s ability to access smokers stated that they would be to observe the child attempt the tobacco products through locked unable to purchase cigarettes late at purchase. In response to comments on vending machines. However, one study night if vending machines were the final rule on substance abuse examined the effect of law enforcement eliminated. Others indicated that prevention and treatment block grants efforts on illegal vending machine sales vending machines provide the only (suggesting that participating in sting in three comparable communities that means of obtaining their brand, or of operations could be detrimental to did not require locking devices. Despite obtaining cigarettes altogether. children and adolescents), DHHS the fact that merchants in one of the In contrast, while acknowledging that explained that ‘‘proper training and three communities received a letter adult smokers would be somewhat adult supervision can reduce any describing the State law and warning inconvenienced, comments in support potential risk of negative consequences them of the city’s intention to enforce of eliminating vending machines toward youth’’ (61 FR 1492 at 1494, the law, there was no significant pointed out that adult smokers would January 19, 1996). In addition, DHHS difference in the rate of illegal vending still be able to purchase their products offered States assistance in developing machine sales among the in retail transactions. Nearly all compliance testing procedures. 61 communities. comments in support of the provision, FDA is not persuaded that including comments from grade school Comments also provided no evidence participating in compliance testing that restricting the location of cigarette students, parents, and health entices children to smoke. The agency vending machines equipped with a professionals, said that the significant believes that, with proper training and locking device renders the machines reduction in children’s access to adult supervision, children and less accessible to children and cigarettes would outweigh any adolescents who participate in adolescents. FDA notes that, if locking inconvenience experienced by adult compliance testing will understand that devices were effective, the location of smokers. their role in this testing is to help the machine would be of no The agency is persuaded that the reduce teenage smoking by identifying consequence. Yet, as discussed in the provision would not unduly burden places that illegally sell tobacco preceding paragraphs, FDA is persuaded adult smokers, who could continue to products to children, and that, after that some establishments are entirely purchase cigarettes in retail identification and publicity or inaccessible to young people. transactions, and that the inconvenience enforcement action, these places will Accordingly, the final rule allows the some smokers would experience is a use of vending machines in those small burden when compared to the stop illegal sales. establishments without requiring that significant public health benefit of (72) Several adult smokers the machines be equipped with a reducing children’s and adolescents’ commented that the provision, either locking device. access to tobacco. alone or in conjunction with other FDA declines to grant an exception (71) A few comments questioned the provisions, would cause a decrease in for tokens in the absence of evidence propriety of using young people in tobacco consumption. To compensate that machines operated only by tokens ‘‘sting’’ operations to determine the for this loss, they argue, tobacco prevent children from obtaining level of compliance with existing laws companies will raise their prices and cigarettes. Several comments suggested, restricting the sale of tobacco products governments will increase taxes. rather than eliminate vending machines, to children. One comment suggested Overwhelmingly, adult smokers that FDA require either locking devices that these operations taught children commented that the price of a package or tokens. These comments focused on how and where to purchase cigarettes, of cigarettes is already unfairly high. locking devices, without offering any concluding that the operations ‘‘have The agency has narrowly tailored the evidence of the number of vending done more to increase smoking in our final regulations to prevent only young machines currently operating with youth than any tobacco company or people’s use of cigarettes and smokeless tokens, the extent to which tokens have advertisement could have.’’ tobacco. Because sales to children been tested in the marketplace, or FDA relied on several types of account for a small percentage of total whether the technology prevents evidence in proposing these regulations, tobacco sales, industry revenues will be children and adolescents from obtaining including teen surveys and peer- significantly diminished only after cigarettes from vending machines. FDA reviewed studies. Compliance testing many years have passed. Moreover, the is aware that three States whose laws involves sending underage children and long-term effect on product prices is restrict the use of vending machines adolescents into tobacco outlets to difficult to forecast because reduced permit the use of locking devices or attempt to purchase cigarettes or product demand could easily result in tokens. However, FDA is not aware of smokeless tobacco. This type of study price decreases. any evidence indicating that the use of provides reliable evidence of children’s (73) In contrast, one comment cited a tokens prevents young people’s access ability to illegally obtain tobacco 1995 survey in which three-quarters or to cigarettes from vending machines that products. more of those Californians polled 62 are otherwise accessible to children. A 1994 review of the design of supported increasing the tobacco tax by (70) The most common concern raised recent studies indicates children who 25 cents. Another comment suggested by adult smokers was that the participated in these studies received that an additional portion of excise elimination of vending machines would specific instructions about the method taxes be allocated to programs and to prenatal care, 61 Forster, J. L., M. Hourigan, and P. McGovern, 62 ‘‘Design of Inspections Surveys for Vendor ‘‘Availability of Cigarettes to Underage Youth in Compliance with Restrictions on Tobacco Sales to especially antismoking messages Three Communities,’’ Preventive Medicine, vol. 21, Minors,’’ Battelle, prepared for CDC, OSH, p. 14, targeted to pregnant women. Other No. 3, pp. 320–328, May 1992. April 1994. comments noted that increased prices Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44453 could serve to deter some children and officials believe that total bans are the explained that self-service displays adolescents from purchasing cigarettes. only way to prevent teens from using enable young people to quickly, easily, The agency cannot act on these cigarettes. 68 and independently obtain cigarettes and comments as it lacks the authority to FDA believes the provision on smokeless tobacco. FDA cited one report levy taxes or mandate prices. vending machines is consistent with the that reviewed surveys of grade school (74) One comment submitted by positions taken by the IOM, PHS, State students; the report found that over 40 cigarette manufacturers characterized as attorneys general, and the Inspector percent of the students who smoked misleading FDA’s claim that its General of DHHS. daily shoplifted cigarettes from self- proposal to eliminate vending machines (75) One comment suggested that the service displays (60 FR 41314 at 41325). is consistent with recommendations rule define ‘‘vending machine’’ to avoid The agency also cited one study from IOM, PHS, a working group of regulating machines that dispense showing that tobacco sales to young State attorneys general, and the cigarettes to salespersons rather than people dropped 40 to 80 percent after Inspector General of DHHS (60 FR customers. The comment described a enactment of ordinances prohibiting 41314 at 41325). FDA disagrees. IOM machine designed to limit theft and to self-service displays and requiring and PHS specifically recommended that control the inventory of cigarettes and vendor-assisted sales (60 FR 41314 at vending machines be eliminated. IOM other similarly packaged items in retail 41325). The proposed provision, advocated that less restrictive measures stores, principally supermarkets. The therefore, was intended to prevent be adopted only if shown to be machine requires that a computer young people from helping themselves effective, 63 while PHS cautioned that command be entered before it dispenses to these products and to increase the alternatives be examined carefully. 64 a package of cigarettes. The comment amount of interaction between the sales Moreover, PHS specifically noted that asserted that among the machine’s clerk and the underage customer. Utah found disabling devices to be benefits is its ability to exclude The preamble to the 1995 proposed ‘‘ineffectual in practice.’’ 65 customer access to cigarettes. rule also referred to the IOM Report FDA did not contemplate the type of The State attorneys general which stated that placing products out inventory machine described by the determined that ‘‘very young children of reach ‘‘reinforces the message that comment, and the provision, as drafted, rely heavily on vending machines as a tobacco products are not in the same would not include this type of machine. major source of tobacco products,’’ and class as candy or potato chips.’’ 69 Section 897.16(c) is intended, in part, to that ‘‘their use of these machines is In response to the comments, the difficult to police.’’ 66 Consequently, the eliminate mechanical devices that dispense cigarettes or smokeless tobacco agency has amended this section to group recommended that retail stores except certain self-service displays ‘‘remove cigarette vending machines to purchasers in locations that are accessible to children. FDA declines at (merchandisers) in facilities inaccessible from their premises and sell tobacco to persons under the age of 18. products only from the controlled this time to define ‘‘vending machine’’ settings recommended above.’’ 67 The so as to exclude from the rule (77) Several comments asserted that referenced controlled settings included mechanical devices developed in the the proposed restriction pertaining to the use of electronic price scanners to future, including those intended to aid self-service displays would effect prompt retail clerks to check a in preventing theft. takings compensable under the Fifth customer’s identification and to display (76) One comment opposed to the Amendment. the last acceptable date of birth, using provision interpreted it as prohibiting a The agency disagrees with the price scanner systems with tobacco vending machine that dispenses single comments. Given the character of the ‘‘locks,’’ and requiring tobacco products cigarettes, packaged separately in tubes, section, as modified in this final rule, to be kept behind sales counters. The each bearing the Surgeon General’s and the lack of reasonable investment- State attorneys general did acknowledge warning and in compliance with tax backed expectations in personal laws. The comment explained that in that, ‘‘at a minimum,’’ vending property, its economic impact, while some adult locations, such as cocktail machines should be modified to require potentially significant for some parties, lounges and casinos, many adults would tokens that could be purchased only is not such as to effect a taking. The like to purchase a single cigarette, and from a store manager or be programmed agency addresses Fifth Amendment that the person submitting the comment to operate only if a cashier activates a issues in greater detail in section XI.A. developed the machine to fill this remote switch, but their principal of this document. perceived gap in the marketplace. recommendation was the removal of (78) Several comments challenged The proposal did not contemplate the vending machines. FDA’s basis and authority for type of machine described by the While the Inspector General made no prohibiting self-service displays. The comment. Accordingly, § 897.16(c) has recommendation, his report noted that comments focused, in part, on the been amended to permit the sale of a 42 percent of State health department studies and reports cited by the agency. packaged, single cigarette in locations They argued that active enforcement of inaccessible to persons under the age of 63 IOM Report, p. 214. laws, rather than elimination of self- 18. This exception is restricted to 64 ‘‘Model Sale to Tobacco Products to Minors service displays, led to decreases in packaged, single cigarettes that comply Control Act, A Model Law Recommended for young people’s access to cigarettes and Adoption by States of Localities to Prevent the Sale with other applicable laws and smokeless tobacco. Other comments of Tobacco Products to Minors,’’ DHHS, p. 2, May regulations. disputed whether significant shoplifting 24, 1990. b. Self-service displays. Proposed 65 occurs from self-service displays. Id., p. 5. § 897.16(c) also would have prohibited 66 ‘‘No Sale: Youth Tobacco and Responsible According to these comments, FDA did the use of self-service displays. The Retailing Developing Responsible Retail Sales not provide any evidence to suggest that preamble to the 1995 proposed rule Practices and Legislation to Reduce Illegal Tobacco eliminating self-service displays is Sales to Minors, Findings and Recommendations of necessary to prevent shoplifting. a Working Group of State Attorneys General,’’ pp. 68 ‘‘Youth Access to Cigarettes,’’ DHHS, Office of 31–32, December 1994. the Inspector General, Pub. No. OEI–02–90–02310, 67 Id., p. 32. pp. 8–9, May 1990. 69 IOM Report, p. 215. 44454 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

One comment examined studies that FDA believes there is ample evidence justify a nationwide prohibition against FDA did not cite in the 1995 proposed to support a restriction on self-service self-service displays. rule and found one study estimating displays. The preamble to the 1995 The agency disagrees with these that less than 5 percent of the proposed rule cited surveys suggesting comments. The comments offered no adolescents surveyed had shoplifted that a significant percentage of children evidence to show that these cigarettes. Also, a number of comments and adolescents (40 percent in the two communities are so distinct or unique stated that, if shoplifting were truly a areas surveyed) shoplift cigarettes (60 from the remainder of the United States significant problem, retailers would FR 41314 at 41325), and at least one to require FDA to discount or to ignore have a financial interest in reducing comment reported an even higher their findings. To the contrary, FDA their losses and would remove self- percentage (50 percent). Although one received other comments from various service displays themselves. The comment from cigarette manufacturers parts of the nation supporting the rule, comments implied that shoplifting is suggested the shoplifting rate to be only and these comments often agreed that not a significant problem, and several 5 percent, FDA emphasizes that, even if young people shoplift these products claimed FDA’s rationale was one accepts the 5 percent figure, the from displays. inconsistent because, if young people numbers of young people engaging in FDA also notes that it does not require could purchase cigarettes and smokeless shoplifting can be very large. For clinical investigations for product tobacco easily from retailers, they would example, 5 percent of the estimated 3 approvals to be conducted on a national not have to steal them from self-service million young people who smoke scale. One important aspect of any displays. cigarettes daily equals 150,000 children study, whether it is submitted as part of In contrast, several comments and adolescents. Five percent of the an investigational product exemption, supported the prohibition on self- estimated 3 million smokeless tobacco marketing application, or rulemaking, is service displays, reiterating FDA’s product users under the age of 21 also whether the study is conducted and position that displays encourage equals 150,000 people. analyzed in a scientifically valid way shoplifting, and their absence increases These numbers may even be that permits the results to be the likelihood of age verification. For artificially low because they exclude the extrapolated to a broader population. In example, a drug addiction counselor number of young people who do not other words, the methodology and commented that teens do not want to go smoke or use smokeless tobacco daily, analysis are more important than where to the counter and ask for cigarettes and these numbers may be extremely the study was conducted. If the agency since there is a greater likelihood that low if the 40 or 50 percent shoplifting could only act after nationwide studies they will be asked to show their rates identified by the agency or by had been conducted, it would be unable identification and they might be other comments prove to be more to act or to respond promptly, even in embarrassed. One comment also accurate than the 5 percent rate cited by response to significant public health asserted that retailers get products for the cigarette manufacturers. problems or emergencies. displays at a discount, and such FDA also disagrees with those (80) Several comments questioned the discounts are, in effect, a subsidy for comments claiming that shoplifting is evidence supporting the proposed shoplifting. Another comment alleged not a significant problem. Generally, restriction on self-service displays. The that, in one area of the country, low- such comments asserted that the comments stated that FDA had no priced brands are put in displays and problem is not significant because, if it evidence to support the assertion that that retailers are compensated for any were, retailers would move self-service removing self-service displays will shoplifting losses. displays, and most have not done so. increase the likelihood of retail clerks Comments from other areas of the Such comments, however, misconstrue requesting proof of age. One comment country agreed that shoplifting occurs, the significance of the problem. The stated that the one document cited by sometimes at significant rates. One agency did not, and does not, claim that FDA (which compared smoking comment stated that a 1993 survey of individual retailers are suffering practices in five California counties 9th-grade students in one county significant shoplifting losses (although before and after the institution of revealed that 51 percent had shoplifted FDA did receive one comment ordinances prohibiting self-service cigarettes. Another comment, reflecting containing information showing that merchandising) 70 cannot be used to on experiences conducting retailer shoplifting losses at two stores justify a rule with nationwide compliance checks in three small towns, amounted to several thousands of application because the document, stated that its teenage volunteers dollars worth of cigarettes annually). which the comment correctly identified ‘‘commented on the ease with which Instead, FDA is stating that significant as a ‘‘position paper’’ rather than a they could have lifted cigarettes from numbers of young people shoplift these study, did not: (a) Indicate whether the free-standing displays.’’ A comment products. The distinction is critical. To ordinances contained other provisions describing practices in a rural part of the illustrate, if 1,000 retailers each lose 1 that would have led to enhanced country stated that theft was one cigarette package to shoplifting, each compliance with minimum age laws; method of acquiring smokeless tobacco, retailer might feel that the shoplifting and (b) disclose whether retailers were and that young people often began using rate, from its perspective, is told of the compliance testing operation such products at the age of 10, 11, or 12. insignificant. However, if 1,000 young before or after the fact, such that, had Other comments suggested an people acquire cigarettes by shoplifting, the retailers known, they would have additional reason for eliminating self- the shoplifting problem, from a public been more vigilant in ensuring service displays. These comments health perspective, then becomes much indicated that young people can easily more significant. 70 Kropp, R., ‘‘A Position Paper on Reducing pick up products from displays, leave (79) Several comments argued that the Tobacco Sales to Minors by Prohibiting the Sale of their money at the cashier’s desk, and studies cited by the agency, having been Tobacco Products by Means of Self-Service Merchandising and Requiring Only Vendor- leave the premises without being conducted at only two locations in the Assisted Tobacco Sales,’’ Stop Tobacco Access for challenged by a retailer or before the United States (Erie County, NY, and Minors Project (STAMP), North Bay Health retailer can request proof of age. Fond du Lac, WI), cannot be used to Resources Center, November 3, 1994. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44455 compliance regardless of how their samples) that will, both individually know that tobacco products are not like products were displayed. This comment and collectively, reduce young people’s candy or potato chips and that there is further asserted that the act of adopting access to cigarettes and smokeless no evidence to show that the statement the ordinances, and the penalties they tobacco. is true. A small number of comments contained, may have made retailers Similarly, FDA does not agree that the added that FDA’s rationale would force more vigilant in ensuring compliance document is flawed because retailers retailers to remove other ‘‘unhealthy’’ with minimum age laws than the were not informed of the compliance products (such as products containing restrictions in the ordinances testing operation before it was fat or cholesterol) from displays. themselves. Finally, the comment stated conducted. Alerting a retailer to an In contrast, a few comments agreed that the document was not a controlled upcoming compliance test would bias that self-service displays for cigarettes study and that there was no indication any results because the retailer would and smokeless tobacco convey an that it was not biased, was subjected to alter its behavior in order to ‘‘pass’’ the implied message that these products are peer review, or was even published in test. acceptable. One comment from a local a scientific journal. The comment stated Additionally, in drafting the 1995 government reported that young people that the document would not be proposed rule, FDA used the best often see tobacco products as being acceptable to FDA if it had been evidence available to it. The comments socially acceptable (or less harmful to submitted as proof of a product’s did not provide any studies to health) because they are openly effectiveness. contradict the cited document, and displayed. The comment noted that the Another comment echoed criticism of while some criticisms of the document local jurisdiction had restricted displays the document, stating that factors may be valid, such criticisms do not to being within 20 feet of the checkout besides the restriction on self-service require the agency to revoke the counter and in a direct line of sight, but displays could have reduced tobacco provision entirely. The document was expressed regret that it had not use by young people and so the not FDA’s sole basis for proposing to eliminated displays altogether. Other document does not support a restrict self-service displays. The comments noted that many retailers prohibition against self-service displays. preamble to the 1995 proposed rule display cigarettes next to candy, FDA acknowledges that the document indicated that such a restriction would baseball cards, and other items that omitted details regarding the author’s also reduce shoplifting, eliminate the appeal to children and adolescents. methodology and the ordinances in the ‘‘message’’ that displays send to young These comments concluded that it is 5 California counties and the 24 cities people, and increase interaction necessary to eliminate self-service covered in the document. The agency between retailers and their customers. displays so that young children do not disagrees, however, with the comments’ These other justifications, and the associate cigarettes with other products assertion that factors other than the comments pertaining to them, are that they find amusing or that adults restriction on self-service displays or discussed in greater detail in this give to children and adolescents as other features of the ordinances may document. treats. have been principally responsible for (81) Other comments objected to a The IOM Report advanced the theory decreasing tobacco use among young prohibition on self-service displays that young people see self-service people. Such comments overlook the because, according to these comments, displays as an implied message document’s statement that the the rule did not impose any sanctions regarding the acceptability or safety of ordinances were to ‘‘prohibit self- on young people or contain any cigarettes and smokeless tobacco. The service merchandising (display and provisions that would modify a young IOM report represents the informed sale) of tobacco products and point-of- person’s behavior so that he or she decisions, opinions, and sale tobacco promotional products and would not shoplift. Some comments recommendations of a body of experts, require only vendor-assisted sales of suggested that, instead of restricting the and so, with respect to this issue, the tobacco products and point-of-sale use of self-service displays, shoplifters agency disagrees with those comments tobacco promotional products in retail should be prosecuted, but these same that would have FDA dismiss the IOM’s stores.’’ 71 This statement suggests that comments also declared that State or opinion. the ordinances focused on restricting local government authorities usually FDA also disagrees with those self-service displays (or merchandisers) decline to prosecute young shoplifters. comments arguing that the agency and point-of-sale promotional products As stated earlier, it would be would have to eliminate self-service rather than other activities. inappropriate for FDA to amend the rule displays for potato chips, candy, and Other criticisms of the document are to impose penalties on young people other supposedly ‘‘unhealthy’’ products. inappropriate as well. For example, the who purchase or possess cigarettes or These food products do not present the comment claimed that other provisions smokeless tobacco. The main focus of same range or magnitude of adverse in the ordinances or other factors may the act is on the introduction, shipment, health effects or effects on the body to have contributed to the decline in holding and sale of goods in interstate warrant tighter restrictions on their sale, tobacco use in young people so that a commerce. Thus, whether young people distribution, or use. restriction on self-service displays, should be prosecuted for shoplifting, (83) Several comments challenged alone, may not have been a significant and the penalty for shoplifting are FDA’s claim that removing self-service factor in reducing tobacco use among appropriately matters for State or local displays would increase direct young people. This criticism, however, law. interaction between sales clerks and overlooks the fact that the rule’s (82) Several comments challenged the underage consumers. The comments restriction on self-service displays is statement in the preamble to the 1995 asserted that removing self-service also complemented by other provisions proposed rule that removing self-service displays will not prompt sales clerks to (such as requiring retailers to verify age displays would reinforce the message to check for proof of age and that FDA had and prohibiting distribution of free children that tobacco products are not no evidence to support this proposition. as acceptable as candy or potato chips. Other comments opposed any 71 Id., p. 3. The comments said that young people restriction on self-service displays 44456 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations because, they claimed, retail clerks, because they said eliminating self- (85) The preamble to the 1995 rather than self-service displays, are service displays would adversely affect proposed rule expressed a belief that responsible for sales to young people. If adult consumers or would be retailers, in order to comply with a retail clerks consistently demanded ‘‘inconvenient’’ because adults would prohibition on self-service displays, proof of age, these comments would not be able to purchase products could move displays behind a retail permit self-service displays to be used. quickly; see, handle, or choose counter or create an area that would be Other comments asserted that FDA products; or obtain information about a accessed only by the retailer’s has no reasonable basis to assume that product or a special promotion. A few employees. clerks will check for proof of age when comments asserted, without any Many comments rejected this notion, clerks already ignore State laws. supporting evidence, that self-service claiming that, due to space constraints, In contrast, a few comments agreed displays are not or cannot be used by many retailers would be unable to move that eliminating self-service displays young people, and, therefore, should not displays behind a counter and would be would increase interaction between be regulated. obliged to build areas where access clerks and underage consumers or deter Conversely, one comment supporting would be controlled. The comments young people from attempting to the provision recommended that FDA said such construction and remodeling purchase cigarettes or smokeless clarify or modify the term ‘‘self-service could be expensive and could force tobacco. One comment from a local displays’’ to distinguish self-service some retailers to scale back their board of health stated that it eliminated sales or merchandisers from advertising tobacco sales or abandon them self-service displays because its displays. completely; such actions would lead to evidence indicated that young people in The comments opposing the rule decreased sales by the retailer and the locality are less likely to purchase misinterpreted how it would apply. The trigger reductions in staff and in State or cigarettes if they have to request them final rule prohibits self-service displays local Government tax revenues. from retail clerks. Another comment from being in facilities that are One comment estimated that, for reflected on the author’s own accessible to young people. Eliminating convenience stores, the average experience as a child when she would self-service displays from such facilities remodeling cost would be as high as purchase cigarettes and said it is easy to simply means that a consumer will not $7,000 per store and noted that tobacco grab a cigarette package, leave money on be able to take physical possession of a purchases account for 28 percent of the counter, and simply leave a store product without the retailer’s assistance. convenience store sales. So, instead of before the sales clerk can react. Any inconvenience to an adult should eliminating self-service displays, some Section 897.14(b)(1) requires retailers be slight. For example, it is extremely comments advocated alternative to verify that persons purchasing unlikely that adults will suffer undue approaches. The alternatives included cigarettes or smokeless tobacco are not hardship or wait an unreasonable attaching electronic article surveillance under the age of 18. This provision, in amount of time if they must ask a retail tags to products (although the comment conjunction with the prohibition against clerk to hand a product to them. suggesting this alternative conceded that sales to anyone under 18 in § 897.14(a), Moreover, the provision does not new technology or assistance at the the restriction on self-service displays in prevent adults from seeing or choosing manufacturer’s level would be needed); § 897.16(c), the sanctions that are a product or from seeing or receiving ‘‘source tagging,’’ where random available under the act, and the information about a product; products packages contain an electronic tag so likelihood that State agencies will would remain visible, but they would be that would-be shoplifters would not devote more attention to illegal sales to behind a counter or in an area accessible know which packages were tagged and, young people as a result of section 1926 only to the retailer. as a result, would be less inclined to of the PHS Act should increase the Deleting self-service displays from the shoplift products; and requiring probability that retailers will verify the rule because adults wish to avoid displays to be within a certain distance age of prospective purchasers. contact with clerks would be of a cash register or the cashier’s line of Yet logically, removing self-service inappropriate as well. As a practical sight, supplemented by posting signs displays should increase interaction matter, adults who use self-service against underage sales and by training between retailers and potential displays would not be able to avoid all sales clerks. ‘‘Source tagging’’ would consumers because the retailer, under contact with a retailer because they require manufacturers, rather than this rule, must physically hand the presumably still interact with the retailers, to insert tags into packages. product to the consumer. While this retailer when they pay for the product. The alternatives identified by the action probably will take little time (the An important component of these comments appear to be less effective or preamble to the 1995 proposed rule and regulations is to eliminate those modes less practical than removing self-service to this final rule estimate that the of sale used by young people that do not displays from places that are accessible elimination of self-service displays require them to show proof of age or to young people. For example, would require 10 seconds of additional otherwise do not challenge a young surveillance tags and, to a lesser extent, labor time for many retail transactions), person to show that he or she is legally ‘‘source tagging’’ might deter nevertheless it increases the interaction entitled to purchase the product. shoplifting, but this would require all between the retailer and potential FDA does agree, however, that the manufacturers to agree to place such customers. Furthermore, by restricting rule should be clarified so that the tags in their products and would require self-service displays, the rule eliminates reference to displays in § 897.16(c) is retailers to install machines or gates to a young person’s ability to take a understood to cover self-service sales or detect those tags. More importantly, package of cigarettes or smokeless merchandisers rather than advertising comments from manufacturers did not tobacco, leave money on the counter, displays that contain no products and address the creation or use of such tags. and leave the retailer’s premises without has amended the rule accordingly. A ‘‘line-of-sight’’ or restricted-placement having to provide proof of age. However, advertising displays are alternative (requiring a display to be (84) Many comments opposed any restricted under the advertising within a certain distance of a retail restriction on self-service displays provisions in this rule. employee) would require no changes by Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44457 manufacturers and few changes by fees that are, at best, tangential to the because, according to these comments, retailers, yet the preamble to the 1995 sale of these products is an the prohibition would be ineffective. proposed rule cited studies where inappropriate basis for determining These comments stated that self-service similar requirements for vending whether this provision denies young displays do not entice young people to machines failed to prevent illegal sales people’s access to these products smoke, do not increase consumption of to young people (60 FR 41314 at 41325). effectively. Furthermore, FDA tobacco products, or are only used Employees might also be distracted or appreciates that such fees may be where retailers check the consumer’s blocked from seeing the displays, important to certain retailers, but, as age. Others stated that young people thereby reducing the effectiveness of stated earlier, the agency has no reason would get the products anyway, so there any ‘‘line-of-sight’’ or restricted to conclude that all manufacturers will was no need to prohibit the use of self- placement alternative. Furthermore, the discontinue those fees because of this service displays. alternatives would fail to eliminate the rule. The preamble to the 1995 proposed The preamble to the 1995 proposed implied message that self-service rule (see 60 FR 41314 at 41369) and one rule stated, among other things, that displays send regarding the comment cited experience in California young people shoplift products from acceptability or safety of these products. to show that retailers might not suffer displays (60 FR 41314 at 41325). Because FDA is unaware of any effective significant economic losses if self- Additionally, the preamble to the 1995 alternative, the agency declines to service displays are removed. proposed rule indicated that young amend the rule as suggested by the FDA reiterates that removing self- people will adjust or shift their comments. service displays from places that are purchasing behavior as certain avenues FDA has, however, amended the rule accessible to young people does not of obtaining these products are to permit self-service displays mean that cigarettes and smokeless eliminated. (See 60 FR 41314 at 41325 (merchandisers only) in facilities that tobacco must be hidden from public (citing different vending machine use are inaccessible to people under 18 at view. It simply means that retailers will rates depending on the access all times. The agency made this change be required to hand these products to restrictions used in the jurisdiction).) in response to comments stating that consumers. Presumably, if the products Given this evidence, it is reasonable to some facilities are inaccessible to young are moved behind the counter, assume that, as young people are people and so certain requirements, manufacturers still have an incentive to precluded from purchasing these such as restrictions against vending ensure that their products are products, they may be inclined to machines and self-service displays, strategically placed in order to attract acquire them by theft and other means. should not apply. This exception is adult consumers. Thus, when properly framed, the issue subject to the same restrictions as the (87) Several comments objected to a is not whether displays entice young exception on vending machine sales. restriction on self-service displays, people to smoke or to use smokeless (86) Many comments, particularly claiming that retailers have a ‘‘right’’ to tobacco (which FDA did not advance as from retailers, opposed eliminating self- advertise and sell products in their own the principal justification for the rule), service displays, stating that they derive establishments in any manner they but whether the agency should a significant portion of their revenue select. eliminate self-service displays as an from displays and slotting fees provided As mentioned in section IV.B. of this avenue that young people use to obtain by manufacturers. Several cited figures document earlier, section 520(e) of the these products. The agency concludes that were in the hundreds of thousands act states, in part, that the agency may that self service displays must be of dollars. The comments generally issue regulations to establish conditions eliminated from places that are stated that eliminating self-service on the sale, distribution, or use of a accessible to young people as part of the displays would decrease or eliminate a restricted device. Restrictions on general restriction against impersonal significant portion of their revenue and, cigarette and smokeless tobacco sales modes of sale. according to some, lead to layoffs or are appropriate given the potential (90) Several comments opposed prevent them from hiring young people. adverse health effects caused by or elimination of self-service displays Similarly, FDA received a few associated with the use of these because they claimed that retailers comments from firms that manufacture products and their accessibility and would be forced to hire additional staff. or sell displays. These comments stated appeal to young people. These comments contrasted sharply that the firms would lose significant (88) A few comments said that with the majority of comments from amounts of revenue or would be forced eliminating self-service displays will retailers who predicted that the loss of out of business if self-service displays make it difficult or impossible for self-service displays would compel were eliminated. marginal brands of cigarettes or them to lay off staff. One comment A few comments, however, disputed smokeless tobacco to compete against explained that a self-service display whether retailers would lose slotting established brands. frees the retailer’s staff to perform other fees. One comment explained that FDA reiterates that eliminating self- tasks. The other asserted that the rule manufacturers would continue to pay service displays from places that are would compel retailers to hire fees to ensure that their products would accessible to young people does not additional staff in order to sell these be placed in strategic locations behind mean that the products must be hidden products and that this would result in the counter, while another comment from view; it simply means that an ‘‘unfunded mandate’’ in violation of noted that many retailers in a northern consumers will not be able to take the Unfunded Mandates Reform Act. California region where self-service physical possession of the product The preambles to the 1995 proposed displays were eliminated did not lose without the retailer’s assistance. rule and to this final rule estimate that slotting fees. Consequently, all products will face the eliminating self-service displays would The agency declines to amend the same constraints, insofar as retailer require 10 seconds of additional labor rule because of the possible loss of space is concerned. time for many retail transactions slotting fees or other revenue from (89) Many comments would delete a involving cigarette cartons (60 FR 41314 manufacturers. The theoretical loss of prohibition against self service displays at 41367). The ‘‘Analysis of Impacts’’ 44458 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations discussion in section XV. of this comments stated that ‘‘mail-order sales the mail are clearly within the scope of document places the labor cost for this should be prohibited since the seller has FDA’s authority under that section. time at approximately 2.6 cents per obvious difficulties verifying the age of Additionally, FDA does not agree that carton. Thus, for a retailer to be the purchaser in selling where there is the PDMA or 39 U.S.C. 3001 prevents compelled to hire additional staff to no face-to-face encounter.’’ A comment the agency from acting on mail-orders. compensate for the loss of self-service from 26 State attorneys general stated The PDMA’s mail-order restrictions displays, cigarette and smokeless that ‘‘ending distribution of tobacco by represented a congressional response to tobacco product purchases would have mail-order * * * will greatly assist our a specific problem, namely the to account for a substantial number of efforts to enforce compliance with our diversion of adulterated prescription transactions. Some retailers may indeed state laws.’’ As a result of some drug products (including drug samples) feel that they need to hire additional comments discussed in detail below, into illegal markets. Here, the products staff, but the agency believes that the however, the final rule permits mail- in question are devices rather than rule’s benefits—reducing young order sales, except for redemption of prescription drugs, and the rule does people’s access to cigarettes and coupons and free samples. not purport to address the diversion of smokeless tobacco nationwide— (92) The agency received hundreds of adulterated cigarettes or smokeless outweigh the hiring and accompanying comments opposing the proposed tobacco or samples of those products. economic burdens that might be restriction against mail-order sales. Similarly, the Postal Service provision imposed on some retailers. Moreover, Many comments were submitted by (39 U.S.C. 3001) on ‘‘nonmailable because the final rule permits self- older smokers (senior citizens, retirees matter’’ does not preclude FDA from service displays (merchandisers only) in on fixed incomes, etc.) who identified issuing regulations pertaining to the facilities that are inaccessible to under themselves as pipe tobacco smokers distribution of a regulated device. The 18 people at all times, the final rule’s who purchased tobacco products provision simply states that certain impact on some retailers may be through the mail; most individuals items or types of items are nonmailable reduced. appeared to be clients from one tobacco and directs the United States Postal FDA also disagrees with the comment product supply house in Tennessee. Service (USPS), in certain situations, to claiming that the agency violated the These comments stated that young issue regulations (such as regulations Unfunded Mandates Reform Act. The people do not smoke pipe tobacco and pertaining to fragrance advertising preamble to the 1995 proposed rule added that they would like to continue samples). FDA interprets 39 U.S.C. contained a discussion of the Unfunded to purchase their pipe tobacco through 3001, therefore, as establishing certain Mandates Reform Act as well as the the mail. ‘‘nonmailable’’ items for USPS purposes estimated added labor costs in the rather than precluding FDA from The agency believes that the ‘‘Analysis of Impacts’’ (60 FR 41314 at regulating the sale and distribution of a comments misinterpreted the 1995 41367 and 41359 through 41372). device pursuant to its device authority. proposed rule. The preamble to the 1995 (91) One comment disputed FDA’s Nevertheless, as discussed in comment proposed rule stated that the rule did estimate that eliminating self-service 94 below, FDA has amended the rule to not apply to pipe tobacco or to cigars would result in 10 seconds of additional permit mail order sales, so the issue of because FDA has no evidence labor time for most retail transactions. the USPS restrictions on nonmailable demonstrating that pipe tobacco and The comment, however, did not provide matter is moot. cigars are drug delivery devices under any estimate of the time that would be (94) The agency received many the act or that young people use such required. comments from individuals who products to any significant degree (60 The agency did not receive any data contended that the proposed mail-order FR 41314 at 41322). to suggest that the additional labor time restriction is unwarranted because the would be greater or less than 10 (93) One comment asserted that the agency cited no studies to demonstrate seconds. While some transactions may proposed mail-order provision is that young people actually use the mail take more than 10 seconds, the agency unauthorized and contrary to law. to obtain cigarettes. One comment noted believes that the additional labor time According to the comment, neither that IOM acknowledges that ‘‘the extent will be so negligible that it will not be section 520 of the act nor any other of mail-order purchase of tobacco a significant burden on the retailer. provision of the act gives FDA the products by minors is not known.’’ c. Mail-order sales and mail-order authority to declare matter unmailable. According to the comment, the mail- redemption of coupons.—i. Mail-order The comment explained that, under the order restriction must be based on sales. Proposed § 897.16(c) would also Prescription Drug Marketing Act actual evidence that a substantial have prohibited the use of mail-order (PDMA), prescription drug samples may number of young people use the mail to sales and mail-order redemption of be sent through the mail to those purchase cigarettes and not based on coupons. The preamble to the 1995 authorized by law to obtain them. ‘‘theoretical purchasability.’’ proposed rule stated that mail-order Furthermore, the comment argued, Other comments stated that young sales and mail-order redemption of Congress has specifically determined people do not obtain cigarettes through coupons do not involve a face-to-face and legislated what products should not the mail because they do not possess transaction that would enable be sent through the mail (39 U.S.C. checks or credit cards to effectuate mail- verification of the consumer’s age. 3001(f) and (g) (Federal statute on order purchases. In addition, the The agency received thousands of ‘‘nonmailable matter’’)). comments questioned whether young comments on the proposed restriction The agency disagrees with the people are patient enough to wait against the mail-order sale of cigarettes comment. Section 520(e) of the act several weeks to obtain tobacco and smokeless tobacco. Comments expressly authorizes the agency to issue products. A few comments, including a supporting the proposed restriction regulations pertaining to the sale, comment from a mail-order firm, noted that it would make cigarettes and distribution, or use of a restricted contended that mail-order purchases smokeless tobacco more difficult for device. Restrictions on the sale or would be too expensive for young young people to obtain. Specifically, distribution of such a device through people, either because of the cost or the Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44459 minimum order sizes (which, according distribution of free samples through the distribution system uses the mail or to one comment, usually consists of mail. 72 other commercial carriers. This several pounds of tobacco). These FDA remains concerned, however, comment requested that FDA clarify comments opposed the proposed mail- that young people may turn to mail- that the proposed restriction on mail- order restriction on the basis that it order sales as the rule’s restrictions order sales pertained to mail-order sales would not effectively reduce young against other forms of access (such as to the ultimate user rather than to inter- people’s access to tobacco products and vending machines and retail stores) company transfers. would instead eliminate an adult’s become effective. Accordingly, FDA Proposed § 897.16(c) was intended to access to entirely legal tobacco strongly advises mail-order firms to take address sales and distributions to products. appropriate steps to prevent sales to consumers. Transactions and shipments young people and reminds mail-order Other comments from firms with a between manufacturers, distributors, firms that § 897.14(a) prohibits the sale and retailers, therefore, are not subject significant mail-order business stated of cigarettes and smokeless tobacco to that the elimination of mail-order sales to the restrictions on mail-order sales of anyone under age 18. The agency will cigarettes and smokeless tobacco. would force the firms to terminate staff monitor the sales of mail-order tobacco or go out of business. However, because the final rule permits products, and if FDA determines that mail-order sales, there is no need to The agency also received many young people are obtaining cigarettes or amend the rule to clarify this point. comments from adults opposing the smokeless tobacco through the mail, the (98) One comment supported the proposed mail-order restriction. These agency will take appropriate action to restriction against mail-order sales in comments stated that because mail- address the situation. part because, the comment claimed, order sales are highly preferable to (95) Several comments criticized the such sales permit the purchaser to avoid purchases in retail stores the products agency for failing to consider less taxes on these products (by purchasing sold through the mail are unavailable in restrictive alternatives. The comments the products from firms in States with stores or are less expensive than those noted that tobacco mail-order houses lower taxes). The comment also stated sold in stores. Other comments require payment by check or credit card. that eliminating these sales would help (including one from a prison inmate) Other comments would amend the rule Canadians because American mail-order said that because mail-order sales serve to require firms to maintain records firms are not subject to high Canadian those in rural or isolated areas, evidencing compliance with proof of taxes and can sell comparatively lower- eliminating mail-order sales would age requirements. Another comment cost cigarettes in Canada. The comment eliminate the principal or sole source of suggested a requirement for photocopies said this practice increases cigarette tobacco for those adults. of photographic identification cards, consumption in Canada and such as an identification with a drivers After carefully reviewing the undermines the health benefits resulting license number, for mail-order from high Canadian taxes. comments, the agency has decided to transactions. The issues raised by the comments are delete mail-order sales from § 897.16. As stated previously, FDA has beyond the scope of this rule and FDA’s The restriction was intended to amended the final rule to permit mail- authority. preclude young people from having easy order sales, but will monitor such sales access to cigarettes and smokeless to ensure that young people do not ii. Mail-order redemption of coupons. tobacco. However, there is inadequate obtain cigarettes or smokeless tobacco Proposed § 897.16(c) would have evidence demonstrating that young through the mail. The agency, therefore, prohibited mail-order redemption of people use mail-order sales to any strongly advises firms to take coupons. The preamble to the 1995 significant degree. This lack of evidence appropriate measures to prevent sales to proposed rule addressed mail-order may indicate that it is not relatively easy young people. redemption of coupons in conjunction for young people to purchase cigarettes (96) Several comments expressed with mail-order sales, and the and smokeless tobacco through the mail. concern about the financial well being restriction against mail-order redemption of coupons was meant to FDA also considered the impact of the of the USPS. These comments predicted apply only to coupons that a proposed mail-order restriction on that the USPS would lose income if prospective purchaser would send adults. The agency does not intend to tobacco products could no longer be through the mail (regardless of whether unreasonably interfere with an adult’s sent by mail. The comments predicted the prospective purchaser used the ability to obtain legally his or her that the USPS would be forced to raise USPS or a private carrier) to a firm to preferred tobacco products. postal rates to compensate, thus affecting product users and nonusers obtain cigarettes or smokeless tobacco. Consequently, FDA has amended alike. (99) Most comments on this issue § 897.16(c) to allow mail-order sales of As stated previously, the agency has mistakenly assumed that FDA was cigarettes and smokeless tobacco. The amended the rule to permit mail-order proposing to ban all direct mail agency emphasizes, however, that the sales to continue. However, FDA notes coupons. These comments contended final rule retains the restrictions against that speculative or theoretical impacts that direct mail coupons are redeemed the redemption of coupons and on the USPS are not an appropriate during face-to-face transactions at larger distribution of free samples through the basis for determining how or whether to retail establishments such as grocery mail. This amendment is consistent regulate a restricted device under the stores. For the most part, these with the IOM Report which act. comments suggested that young people recommended a suitably limited Federal (97) One comment representing the do not routinely use coupons to ban on the distribution of tobacco concerns of specialty tobacco products purchase tobacco products, noting that products through the mail as part of a noted that 90 percent of its the smaller, convenience stores where long-term access strategy and, at a manufacturer-distributor-retailer young people frequently obtain minimum, restrictions against the mail- cigarettes and smokeless tobacco often order redemption of coupons and the 72 IOM Report, pp. 108, 225–226. do not accept coupons. 44460 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

In contrast, FDA also received several at cultural or social events, peer represent, as a consortium of State comments supporting the proposal to pressure may lead some young people to attorneys general said, ‘‘sales and eliminate mail-order redemption of accept and to use the free samples (60 marketing practices that provide young cigarette and smokeless tobacco FR 41314 at 41326). people with the easiest access to coupons. For example, the attorney The preamble to the 1995 proposed tobacco.’’ general for a populous northeastern rule also cited surveys and reports The agency agrees that § 897.16(d) State commented that ‘‘[i]n another demonstrating that young people, will affect adults by effectively requiring operation conducted by my office earlier including elementary school children, them to purchase cigarettes and this year, 30 minors mailed in coupons can obtain free samples easily. Young smokeless tobacco rather than receive to obtain free samples of smokeless people were able to obtain free samples them free of charge. However, the tobacco products from United States despite industry-developed, voluntary comments opposing the elimination of Tobacco Company. Virtually all of the codes that supposedly restrict free samples did not offer any minors were provided with such free distribution of free samples to underage suggestions as to how to prevent free samples.’’ persons. The agency cited the IOM samples from reaching young people. In Proposed § 897.16(c)’s reference to Report which suggested that view of the evidence showing that mail-order redemption of coupons was distribution of free samples to young young people obtain free samples directed at the redemption of coupons people occurs because the samplers are despite any industry-imposed through the mail. The provision was not often placed in crowded places and restrictions or (in the case of at least one intended to prevent adults from operating under time constraints that comment) that they obtain free redeeming coupons at a point of sale or may limit their ability to request proof cigarettes from a retailer, the agency from receiving coupons through the of age. The IOM Report added that the concludes that the benefits of mail. FDA based this provision on the samplers are usually young themselves eliminating free samples as a source for IOM Report which, among other things, and, as a result, ‘‘may lack the young people outweigh the noted that value added promotions, psychological wherewithal to request inconvenience to adults. including coupons, constituted the proof of age and refuse solicitations FDA also disagrees with the largest market expenditure by the from those in their own peer group’’ (60 comments asserting that eliminating free tobacco industry in 1991, that coupons FR 41314 at 41326). samples adversely affects an adult’s are accessible to young people through (100) FDA received a few comments ability to choose products or otherwise direct mail campaigns, and that price- that opposed any restrictions on free violates adult ‘‘rights.’’ The final rule sensitive young people are attracted to samples, claiming that eliminating free does not alter an adult’s ability to select such schemes or may be increasingly samples would violate the ‘‘rights’’ of or purchase cigarettes and smokeless attracted to such schemes as their other adult consumers, reduce choices for tobacco. sources of tobacco products are adults, or deprive adults of the (101) Several comments submitted by restricted. 73 opportunity to save money. manufacturers or their representatives Comments supporting this provision In contrast, many comments opposed the prohibition against the confirmed the need for prohibiting mail- supported proposed § 897.16(d), distribution of free samples, stating that order redemption of coupons. These including several that opposed the manufacturers use free samples to comments reported incidents where one remainder of the rule but expressly introduce new products, to encourage or more young people obtained several supported a prohibition on the adult consumers to switch brands, or to packages of cigarettes or smokeless distribution of free samples. Several thank their adult consumers for their tobacco by sending in coupons (usually comments stated that young people can patronage. Others comments added that for free samples). Consequently, the easily obtain free samples; a few free samples do not encourage young final rule retains the restriction against comments, including two from 12-year people to smoke or to use smokeless mail-order redemption of coupons. FDA old students, mentioned that their tobacco or that eliminating free samples adds that, for purposes of this subpart, classmates were able to receive free would not reduce cigarette or smokeless ‘‘mail’’ is not confined to USPS delivery samples or reported that young people tobacco use by young people. but includes items shipped through were able to receive free samples The agency is eliminating free private carriers. without being asked to show proof of samples because they are an d. Free samples. Proposed § 897.16(d) age. One comment even reported that a inexpensive and easily accessible source would have prohibited manufacturers, young person was able to receive 4 of these products to young people and, distributors, and retailers from cigarette packages through the mail as when distributed at cultural or social distributing or causing to be distributed free samples, while another claimed to events, may increase social pressure on any free samples of cigarettes or have seen 12 cans of smokeless tobacco young people to accept and use free smokeless tobacco. The agency being given to teenagers. samples (60 FR 41314 at 41326). The proposed this restriction because free Another comment supported the preamble to the 1995 proposed rule samples are often distributed at ‘‘mass provision, based on the author’s own cited studies and reports to support the intercept locations,’’ such as street experience when he was 15 years old; agency’s views; those documents corners and shopping malls, and at a neighborhood grocer gave him and his contradict the comments’ claim that free events such as festivals, concerts, and friends free cigarettes ‘‘until we were samples do not encourage young people games. The preamble to the 1995 hooked’’ and then the grocer ‘‘had to use these products or affect use by proposed rule stated that free samples steady paying customers.’’ Other young people. represent a ‘‘risk-free and cost-free’’ way comments supported this provision for As for the rule’s impact on for young people to obtain and possibly the same reason that they supported manufacturers’ practices, the public use cigarettes or smokeless tobacco and eliminating single-cigarette sales and health benefits from eliminating free that, when free samples are distributed establishing a minimum package size: samples as an avenue that young people Such items encourage young people to use to obtain cigarettes and smokeless 73 Id. experiment with cigarettes or they tobacco outweigh any inconvenience to Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44461 manufacturers who will be obliged to FDA also declines to amend the rule restrict sampling activities without devise new ways to introduce new to allow ‘‘gifts.’’ Allowing ‘‘gifts’’ would setting any measurable performance products, to get adults to switch brands, enable parties to declare that their free goals. or to thank adult consumers. FDA samples were now ‘‘gifts’’ and therefore FDA disagrees with the comment believes that manufacturers will be able outside the rule and could lead to asserting that the agency has no to devise new approaches to promote disputes as to whether an item was a evidence to support a restriction on free new brands or to attract new adult prohibited ‘‘sample’’ or an allowable samples. The preamble to the 1995 customers that comply with these ‘‘gift.’’ However, the agency will proposed rule cited several reports and regulations. exercise discretion in interpreting and surveys showing that young people, (102) One comment expressed strong enforcing this rule. For example, a including elementary school children, opposition to proposed § 897.16(d). The manufacturer’s employee who sends obtain free samples easily (60 FR 41314 comment argued that FDA lacked cigarettes or smokeless tobacco to an at 41326). The agency also has no authority to ban free samples, especially adult relative to celebrate a birthday assurance that the revised cigarette when the agency would permit sales to would not be subject to regulatory industry code will be any more effective adults, and that the agency had no action under the free sample restriction than earlier versions. Moreover, as evidence to support a ban on free in § 897.16(c). mentioned earlier in this document, samples. The comment added that the (103) One comment stated that, FDA received comments stating that act did not extend to device samples notwithstanding the preamble to the young people continue to receive free and argued that Congress knows how to 1995 proposed rule, FDA has no samples of cigarettes and smokeless give FDA authority over samples, as evidence to support a restriction on the tobacco. The comments refute the claim evidenced by sampling provisions in the distribution of free samples. The that voluntary industry restrictions on PDMA. The comment further stated that comment stated that the rule sampling preclude the need for FDA the term ‘‘sample’’ was over-broad overestimated the prevalence of sample regulation of free samples. because it was not limited to products activities and that cigarette sampling Additionally, the rule offers several distributed in public settings for accounted for only 0.7 percent of the important advantages over voluntary promotional purposes; thus, the total spent on cigarette advertising and codes. The rule creates enforceable comment continued, any promotion in 1993. The comment also obligations which, if violated, may complimentary gift could be a ‘‘sample’’ said that FDA relied on an outdated subject the manufacturer, distributor, or under proposed § 897.16(d). version of the cigarette manufacturers’ retailer to sanctions under the act. These FDA disagrees with the comment. voluntary code. According to the sanctions, in turn, create an incentive Section 520(e) of the act states that the comment, the outdated code prohibited for regulated parties to adhere to the act agency may ‘‘require that a device be distribution of cigarette samples within and its implementing regulations. A restricted to sale, distribution, or use two blocks of any ‘‘center of youth voluntary code also applies only to the ** * upon such other conditions as the activities’’ and ‘‘required samplers to parties that accept the code or fall Secretary may prescribe by * ** demand proof of age in doubtful cases.’’ within the same industry; for example, regulation.’’ Restricting free samples is The revised code adds that ‘‘[s]ampling a voluntary manufacturers’ code might clearly a restriction on the product’s shall not be conducted in or on public not extend to distributors or to retailers, distribution. streets, sidewalks or parks, except in or, as the comment recognized, a As for the PDMA, the comment’s places that are open only to persons to voluntary cigarette manufacturers’ code claim that the PDMA’s sampling whom cigarettes lawfully may be sold.’’ might differ from a voluntary smokeless restrictions shows that Congress has not In contrast, two comments cautioned tobacco manufacturers’ code. authorized FDA to regulate device FDA against deferring to a voluntary Furthermore, a regulation creates samples (due to the absence of express code or relying on the industry. One uniform standards and policies for the language on device samples) fails to take comment stated that, in Maine, the same product. Those standards apply into account the fact that FDA’s industry agreed to submit reports on regardless of whether a firm is a member restricted device authority is broader sampling activities to the State in place of a voluntary organization. than its prescription drug authority. of legislation that would have curtailed Finally, the agency notes that, while Also, the comment fails to take into sampling activities, but the industry the comment said that ‘‘only 0.7 percent account the reasons behind enactment discontinued these reports as soon as of the total spent on cigarette of PDMA. PDMA was enacted not to State authorities stopped sending advertising and promotion’’ in 1993 give FDA new authority over reminders that the reports were due. went to cigarette sampling activities, prescription drug samples, but to curtail Another comment stated that, in this percentage still translates into a the illegal diversion of drugs, including Massachusetts, a lawsuit over sampling large sum. Cigarette advertising and samples, into the market. (See S. Rept. practices by a smokeless tobacco firm promotion expenditures, according to 100–303, 100th Cong., 2d sess. 2–3 ended in a settlement whereby the firm the same FTC report cited by the (1988).) Before PDMA was enacted, FDA would require photocopies of comment, were approximately $6 regulated prescription drug samples in identification cards for all mail-in billion in 1993. Thus, the seemingly the same manner as prescription drug requests for samples. The comment said small percentage devoted to cigarette products. Thus, PDMA is not intended that the settlement represented an sampling activities, when translated to give FDA new authority over improvement over requiring no proof of into dollars, represents $42 million. samples; instead, it reflects a age at all, but noted that the firm refused (104) Several comments supported the congressional decision to give FDA a to apply this practice outside the State prohibition against the distribution of comprehensive and explicit set of new and that the restriction did not apply to free samples, but suggested that FDA authority to prevent illegal diversions of other smokeless tobacco firms. The amend the rule to prevent distribution prescription drug products, including comment also claimed that firms often of cigarettes and smokeless tobacco at the diversion of prescription drug agree to restrict sampling activities only prices below their fair market value. samples to illegal markets. after adverse publicity or agree to One comment would define a product’s 44462 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations fair market value as the average retail that issuing notification orders under The agency has concluded that the price in the region. Another comment section 518 of the Federal Food, Drug, BATF requirement does not conflict would amend § 897.16(d) to prohibit and Cosmetic Act (the act) (21 U.S.C. with the act’s requirement that the label sales or distribution of cigarettes and 360h) would be the most practicable bear the established name of these smokeless tobacco ‘‘in return for and appropriate means of requiring products. The agency recognizes that nominal consideration.’’ tobacco manufacturers to inform young BATF regulations currently require The agency declines to amend the people of the unreasonable health risks. cigarette packages to include the word rule as suggested by comments. While Discussion of the comments received ‘‘cigarettes’’ on the package or on a label the comments have merit, FDA usually regarding this education provision is securely affixed to the package (27 CFR has no role in the prices charged for an included in section VII. of this 270.215). For smokeless tobacco and FDA-regulated product. Additionally, it document. chewing tobacco, BATF regulations would be difficult for FDA to monitor require the packages to include the A. Established Name (§ 897.24) fair market values for various products, words ‘‘snuff’’ or ‘‘chewing tobacco,’’ or and disputes would inevitably arise as Proposed § 897.24 would have alternatively, ‘‘Tax Class M’’ or ‘‘Tax to whether the ‘‘market’’ should cover a required that each cigarette or smokeless Class C,’’ respectively (27 CFR 270.216). broader or narrower geographic area, the tobacco product package, carton, box, or These terms also describe the data used to determine the fair market container of any kind that is offered for established name, as required in section value, and how compliance actions sale, sold, or otherwise distributed bear 502(e) of the act. would be affected by fluctuations in the whichever of the following established Many of the labeling provisions of the fair market value. Similar disputes names is appropriate: ‘‘Cigarettes,’’ act, including section 502(e)(2), are would arise regarding ‘‘nominal ‘‘Cigarette Tobacco,’’ ‘‘Loose Leaf intended to provide important basic consideration.’’ Furthermore, regardless Chewing Tobacco,’’ ‘‘Plug Chewing information to consumers and others of the price at which the product is sold, Tobacco,’’ ‘‘Twist Chewing Tobacco,’’ coming in contact with a regulated other provisions in this subpart should ‘‘Moist Snuff,’’ or ‘‘Dry Snuff.’’ product. In this case, the act requires deter or reduce access by young people. that the established or common name be e. Restrictions on labeling and The preamble to the 1995 proposed placed on the product’s label in a clear advertising. The agency on its own rule explained that this provision was way so that it is easily seen and initiative has added § 897.16(e) as a intended to implement section 502(e)(2) consumers can readily identify the point of clarification to the final rule. of the act (21 U.S.C. 352(e)(2)), which product. Congress provided an This provision states that ‘‘no states that a device shall be deemed exception only for cases where manufacturer, distributor, or retailer misbranded if its label fails to display compliance with this provision is may sell or distribute, or cause to be the established name for the device. ‘‘impracticable.’’ If a manufacturer sold or distributed, cigarettes or Section 502(e)(4) of the act, in turn, believes that it cannot comply with this smokeless tobacco with labels, labeling, explains that the ‘‘established name’’ for provision of the rule, the manufacturer or advertising not in compliance with a device is the applicable official name should consult with the agency to the restrictions in Subparts C and D of the device designated under section determine if it qualifies for an ** *.’’ The restrictions on labels, 508 of the act (21 U.S.C. 358), the impracticability exception under section advertising, and labeling in subparts C official title in a compendium if the 502(e)(2) of the act. and D of part 897 are authorized, in device is recognized in an official (2) One comment that supported the part, under section 520(e) of the act and compendium but has no official name, provision on established name are considered conditions of sale, or ‘‘any common or usual name of such recommended that, in addition to the distribution, and use. Therefore, device.’’ In this case, no official names established names set forth in the 1995 § 897.16(e) clarifies the statutory have been designated under section 508 proposed rule, little cigars and tobacco obligations of manufacturers, of the act, and no compendium provides sticks should also be listed as separate distributors, or retailers under this rule. an established name for these products. products with their own specific Consequently, § 897.24 proposed established names, ‘‘little cigars’’ and V. Label designating ‘‘cigarettes,’’ ‘‘cigarette ‘‘tobacco sticks’’ ‘‘in keeping with the In the 1995 proposed rule (60 FR tobacco,’’ and the common or usual manner and style of the established 41314, August 11, 1995), subpart C of names for smokeless tobacco (such as names to be used for smokeless tobacco part 897 was entitled ‘‘Labels and ‘‘moist snuff’’ or ‘‘loose leaf chewing products.’’ Educational Programs,’’ and contained tobacco’’) as established names for these One comment that opposed the two provisions. Proposed § 897.24, products. provision stated that since proposed would have required cigarette or (1) The agency received few § 897.3(a) would define ‘‘cigarettes’’ to smokeless tobacco packages to contain comments on proposed § 897.24. One include little cigars, the same package of the appropriate ‘‘established name’’ of comment that opposed the provision little cigars that must be labeled ‘‘small the product; the final rule retains that stated that it was unnecessary and cigars’’ or ‘‘little cigars’’ (under current provision and does not make any would produce anomalous results. The BATF regulations, 27 CFR 270.214(c) substantive changes to it. Proposed comment stated that, because cigarettes (1995)), would also have to carry the § 897.29 would have required are already required to be labeled established name of ‘‘cigarettes’’ under manufacturers to establish and maintain ‘‘cigarettes’’ under regulations adopted the proposed FDA regulation. The a national educational program to by the Bureau of Alcohol, Tobacco and comment argued that such a conflicting discourage children from using Firearms (BATF) under the Internal labeling requirement is absurd, and cigarettes and smokeless tobacco. Based Revenue Code (27 CFR 270.215 (1995)), would create confusion where none on issues raised by comments, proposed ‘‘Cigarettes’’ is already the common and now exists. § 897.29 has been deleted from the final usual name and, therefore, there is no The agency has modified the rule, and instead, the Food and Drug need to designate an ‘‘established definition of ‘‘cigarette’’ found in Administration (FDA) has determined name.’’ proposed § 897.3(a) to exclude little Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44463 cigars from the final rule. The agency The agency has considered extending statutes require the current Surgeon also advises that, to the best of its the requirements of § 897.30 (text only, General’s warnings on tobacco products knowledge, tobacco sticks currently are black on white background) to the and preempt any additional statements not sold in the United States. If tobacco package itself, but believes at this time relating to smoking or health from being sticks were to be marketed in this these measures are not necessary required on cigarette or smokeless country, the agency advises that such considering the comprehensive nature tobacco packages. The comment products would be subject to premarket of the regulatory scheme contained in asserted that a list of ingredients is not notification under section 510(k) of the this rule. Therefore, the agency is not a statement, and cannot be reasonably act (21 U.S.C. 360(k)) and 21 CFR part extending the requirements applicable construed as a statement relating to 807, and could be included under the to advertising and labeling to the smoking and health, because a established name of ‘‘cigarette tobacco,’’ package itself. statement expresses a point of view, and therefore do not need to be listed whereas an ingredient list does not. C. Ingredient Labeling as separate products at this time. One comment noted that the Cigarette The agency specifically requested and Smokeless Acts require B. Package Design comments on whether it should manufacturers to submit annually to the (3) Several comments noted that the implement recommendations from the Department of Health and Human 1995 proposed rule did not include any Ad Hoc Committee of the President’s Services (DHHS) a list of ingredients action to eliminate the use of the Cancer Panel, which recommended, added to tobacco products, and the tobacco product package itself to among other things, that the range of tar, statutes further require that the lists be influence children. A few comments nicotine, and carbon monoxide treated as confidential commercial or cited a March 1995 Canadian study, delivered by each product be trade secret information. (See 15 U.S.C. which found that package designs affect communicated to consumers. In 1335(a) and 15 U.S.C. 4403.) The the ability of teens to associate lifestyle addition, the Ad Hoc Committee comment stated that the confidentiality and personality imagery to specific recommended that smokers be informed provisions in both statutes bind the brands and detract from the health of ‘‘other hazardous smoke Secretary of DHHS with respect to trade message. 74 Another study found that constituents.’’ secrets, but do not restrict FDA’s the ‘‘badge’’ value of cigarette packages (4) The agency received several authority to require ingredient listing. for youths was decreased when the comments suggesting that tar and FDA agrees that accurate information packages were stripped of their unique nicotine delivery or yield information about the tar, nicotine, and carbon characteristics. 75 The comment should be disclosed on product monoxide delivery from a cigarette to suggested that the provisions of packages in order to assist consumers in the user would be useful information. proposed § 897.30, requiring text only making more informed decisions about FDA is aware of the Federal Trade with black text on a white background, the use of cigarettes. Some of these Commission’s (FTC’s) recent efforts to should be extended to cigarette comments also suggested that labels list develop a system to measure, more packages. One comment pointed out the toxins present in, or delivered from, accurately than the current test, the tar, that FDA has the authority to require cigarettes and state their effect, e.g., nicotine, and carbon monoxide plain packaging without violating the ‘‘known carcinogen.’’ delivered by cigarettes. FTC has Federal Cigarette Labeling and One comment stated that it cannot be announced that it will issue a report of Advertising Act (the Cigarette Act), 15 claimed that the ingredients are trade its findings regarding a new test method U.S.C. 1334(a), which prohibits secret information and, therefore, in the near future. FDA believes that it additional statements related to smoking cannot be disclosed, because the would be premature to require and health on cigarette packages. tobacco companies voluntarily released manufacturers to put any of this The agency agrees with the comments a list of ingredients to the public in information on tobacco product labels that cigarette package design and 1995. The comment noted that, under before FTC has issued its report and imagery are powerful tools that increase current case law, only items kept made recommendations on accurately the appeal of the product, especially to confidential qualify as trade secrets. measuring the delivery of tar, nicotine, young people. In the preamble to the (See Kewanee Oil v. Bicron Corp., 416 and carbon monoxide to product users. 1995 proposed rule the agency cited U.S. 470 (1974); Avtect Systems v. With regard to ingredients other than several studies demonstrating that Peiffer, 21 F.3d 568 (4th. Cir. 1994).) tar, nicotine, and carbon monoxide, the ‘‘[i]magery ties the products to a The comment noted further that because agency agrees that it has authority under positive visual image’’ (60 FR 41314 at companies can and do perform reverse the act to require labeling or listing of 41335). Another study showed that engineering on another company’s other substances present or delivered by ‘‘children and adolescents react more products, the ingredients are not trade cigarettes. (See section 502(r) of the act.) positively to advertising with pictures secret. The comment proposed that, at a The agency notes that there are and other depictions than to advertising minimum, FDA should designate a hundreds of ingredients added to or (or packaging) that contains only print partial list of previously disclosed delivered by cigarettes and smokeless or text’’ (60 FR 41314 at 41335). ingredients and require that the list be tobacco. Even if the agency were to included on package labels. Another require listing of only a ‘‘reasonable comment stated that only a reasonable number,’’ current methodologies are not 74 ‘‘When Packages Can Speak: Possible Impacts of Plain and Generic Packaging of Tobacco number of ingredients should be listed adequate to accurately identify and Products,’’ Health Minister of Canada, March 1995. on the label or in a package insert. quantify the added ingredients or the 75 Rootman, I., B. R. Flay, and D. Flay, ‘‘A Study One comment stated that ingredient constituents delivered by these on Youth Smoking, Plain Packaging Health listing is not barred by the Cigarette Act products. Moreover, at this time there is Warnings, Event Marketing and Price Reductions, or by the Comprehensive Smokeless not enough data to enable the agency to Key Findings,’’ A Joint Research Project by University of Toronto, University of Illinois, York Tobacco Health Education Act of 1986 determine what a ‘‘reasonable’’ number University, Ontario Tobacco Research Unit, (Smokeless Act). (See 15 U.S.C. 1331 et of ingredients would be or to determine Addiction Research Foundation, p. 7, 1995. seq. and 15 U.S.C. 4401 et seq.) These which ingredients should be listed and 44464 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations which should not. Therefore, the agency requirements in § 801.61 are also based E. Adequate Directions for Use and is not requiring the listing of ingredients on FDA labeling authorities including, Warnings Against Use (Section 502(f) of in the rule. but not limited to, section 502(a), (c), the act) As discussed in the preamble to the (e), (f), and (q) of the act, and not the (6) A few comments stated that FDA 1995 proposed rule, cigarettes and FPLA. failed to discuss or provide for adequate smokeless tobacco are subject to various Furthermore, section 1460 of the directions for use, as required in section pre-existing requirements in the statute FPLA contains ‘‘Savings provisions’’ (15 502(f) of the act. The comments stated and the regulations. The preamble U.S.C. 1460). The provisions state that that FDA’s silence on this issue is a tacit stated that such ‘‘regulations include the ‘‘Nothing contained in this Act [15 acknowledgment that the agency cannot general labeling requirements for U.S.C. 1451 et. seq.] shall be construed have jurisdiction over these products devices at part 801 (21 CFR part 801) to repeal, invalidate, or supersede because adequate directions for use (excluding § 801.62)’’ (60 FR 41314 at ** *(b) the Federal Food, Drug, and cannot be prepared for them. 41352). The parenthetical reference was Cosmetic Act [21 U.S.C. 301 et. seq.] The agency disagrees with these a typographical error because the 1995 ** *.’’ Thus, because FDA’s assertion comments. It does not logically follow proposed rule would have exempted of jurisdiction over these products is that because the agency was silent on such products from § 801.61, not under its statutory authority under the this issue, it does not have jurisdiction § 801.62 (60 FR 41314 at 41342). Section act, any conflict between the two over tobacco products. In fact, in the 801.62 states the requirements for statutes shall be resolved in favor of the preamble to the 1995 proposed rule, the ‘‘Declaration of net quantity of act. (See Jones v. Rath Packing, 430 U.S. agency cited one of the authorities for contents.’’ This provision requires that 519 (1977).) Consequently, section 1459 the labeling requirements for these the label of an over-the-counter device of the FPLA, which removes tobacco products as section 502 of the act. bear a declaration of the net quantity from the definition of ‘‘consumer According to section 502(f) of the act, and weight of the contents, e.g., ‘‘20 commodity,’’ and thus, removes it from a device shall be deemed misbranded: cigarettes.’’ The agency fully expects jurisdiction under the FPLA, is Unless its labeling bears (1) adequate manufacturers to comply with this superseded by FDA’s coverage of these directions for use; and (2) such adequate provision and, as discussed below, also products under the act. warnings against use in those pathological expects manufacturers to comply with As stated in the preamble to the 1995 conditions or by children where its use may § 801.61. be dangerous to health, or against unsafe proposed rule, manufacturers of dosage or methods or duration of D. Labeling for Intended Use cigarette and smokeless tobacco are administration or application, in such expected to comply with the general (5) The agency received comments manner and form, as are necessary for the labeling requirements in part 801 (60 FR suggesting that FDA require intended protection of users, except that where any 41314 at 41352). For purposes of requirement of clause (1) of this paragraph, use information on the package label of § 801.61, the ‘‘common name of the as applied to any drug or device, is not cigarettes and smokeless tobacco. device’’ is the established name as set necessary for the protection of the public Proposed § 801.61(d) would have forth in § 897.24. health, the Secretary shall promulgate exempted cigarettes and smokeless To more accurately reflect the regulations exempting such drug or device tobacco from the statement of identity from such requirement. and labeling for intended use permitted intended use of these For devices, ‘‘adequate directions for requirements of § 801.61. The comments products, the agency has modified the use’’ means ‘‘directions under which the stated that such information informs the statement of intended use set forth in layman can use a device safely and for public about the product’s intended use. the proposal. The agency proposed that the purposes for which it is intended’’ One comment supported proposed the intended use of these products be (§ 801.5). These regulations outline the § 801.61(d). described as a ‘‘nicotine delivery type of information which, if missing, Based on the comments received, the device.’’ Under this rule, these products may lead to a product being deemed to agency has reconsidered the matter and may be intended for use only by persons be misbranded. Such information concluded that it is appropriate to 18 years of age and older. Thus, a more includes conditions, purposes, and uses require that this information appear on accurate statement of the permitted for which the device is intended; the label. Consequently, the agency has intended use of these products is quantity of dose; frequency, duration, deleted § 801.61(d) from the final rule. ‘‘Nicotine Delivery Device For Persons time, route or method of administration; All over-the-counter devices are 18 or Older.’’ or preparation for use (§ 801.5). required to comply with § 801.61 and Further authority for this requirement The agency acknowledges that it is bear the ‘‘common name of the device stems from section 520(e)(2) of the act very difficult to establish adequate followed by an accurate statement of the (21 U.S.C. 360j(e)(2). This provision directions for use for cigarettes and principal intended action(s) of the states that: ‘‘The label of a restricted smokeless tobacco, primarily because of device’’ on the principal display panel device shall bear such appropriate the inherent nature of the products, of the package. (See § 801.61.) As over- statements of the restrictions required their addictiveness, the numerous the-counter devices, cigarettes and by a regulation under paragraph (1) as hazards associated with their use, and smokeless tobacco are legally required the Secretary may in such regulation because the behavior of each user (e.g., to comply with this provision. prescribe.’’ The statement of intended the depth of inhalation, the duration of In the 1995 proposed rule, the agency use, in essence, incorporates the puff, whether the filter holes are proposed to exempt these products statement of one of the principal covered, and length of time in mouth) because ‘‘section 801.61 stems, in part, restrictions FDA is imposing on these determines the amount of tar and from the Fair Packaging and Labeling products. nicotine delivered to the user from the Act (FPLA), and [t]obacco products are Accordingly, a provision has been device. exempt from the statute’s requirements’’ added to § 897.25 that codifies this Section 502(f) of the act provides for (60 FR 41314 at 41342). Further intended use statement and statement of an exemption for adequate directions for evaluation revealed that the restrictions for purposes of § 801.61. use if they are ‘‘not necessary for the Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44465 protection of the public health.’’ For particular. Section 201 of the act (21 VI. Advertising example, the agency has established U.S.C. 321), the ‘‘Definitions’’ section of A. Subpart D—Restrictions on exemptions from adequate directions for the act, describes the concept of Advertising and Labeling of Tobacco use where adequate directions for ‘‘misleading’’ in the context of labeling Products common uses of certain devices are and advertising. Section 201(n) of the known to the ordinary individual. (See act explicitly provides that, in Subpart D in part 897 contains the § 801.116.) Tobacco products have a determining whether the labeling of a restrictions for advertising and labeling very long history of use in this country, device is misleading, there shall be of cigarettes and smokeless tobacco. and they are one of the most readily taken into account not only Subpart D of part 897 in the Food and available consumer products on the representations or suggestions made in Drug Administration’s (FDA’s) August market today. Consequently, the way in the labeling, but also the extent to 11, 1995, proposed rule (60 FR 41314) which these products are used is which the labeling fails to reveal facts (the 1995 proposed rule) provoked some common knowledge. FDA believes that that are material in light of such of the strongest and most passionate the public health would not be representations or material with respect comments from both supporters and advanced by requiring adequate to the consequences that may result opponents of the proposed restrictions. directions for use. Accordingly, the from use of the device under the Many comments from the tobacco agency has added a provision to the conditions for use stated in the labeling industry, the advertising industry, final rule exempting cigarette and or under customary or usual conditions public interest groups, and individuals smokeless tobacco from the requirement of use. expressed major concerns about the of having adequate directions for use. These statutory provisions, combined legality, constitutionality, and wisdom Section 801.126, states, ‘‘Cigarette and with section 701(a) of the act (21 U.S.C. of the advertising restrictions in general smokeless tobacco as defined in part 371(a)), authorize FDA to issue a and about the underlying support for 897 of this chapter are exempt from regulation designed to ensure that individual sections of the 1995 section 502(f)(1) of the Federal, Food, persons using a medical device will proposed rule. Comments from the Drug, and Cosmetic Act.’’ receive information that is material with largest organization of psychologists in The agency has considered the respect to the consequences that may the world, public interest and health requirement in section 502(f)(2) of the result from use of the device under its groups, individual advertisers, and act that the labeling of a medical device labeled conditions. In the prescription individuals expressed strong support for must provide ‘‘adequate warnings drug context, this interpretation of the the legality and constitutionality of the against use * * * by children where its act and the agency’s authority to require proposal, provided information use may be dangerous to health.’’ In the patient labeling for prescription drug supporting various provisions of the agency’s view, the warnings mandated products have been upheld. (See proposal, and emphasized the necessity by the Cigarette Act (15 U.S.C. 1333) Pharmaceutical Manufacturers Assn. v. for comprehensive advertising and the Smokeless Act (15 U.S.C. 4402) FDA, 484 F.Supp. 1179 (D. Del. 1980) regulations. satisfy this requirement. Additionally, aff’d per curiam, 634 F.2d 106 (3rd Cir. The purpose of the advertising the Surgeon General’s warnings provide 1980).) regulations is to decrease young information warning against use in people’s use of tobacco products by Additionally, on several occasions, persons with certain conditions, i.e., ensuring that the restrictions on access the agency has required patient package pregnant women. Consequently, are not undermined by the product inserts for devices, and has specified cigarettes and smokeless tobacco are not appeal that advertising for these either the express language for the exempt from the statutory requirements products creates for young people. (See patient package insert or the type of under section 502(f)(2) of the act. Central Hudson Gas and Electric Corp. information to be included in the v. Public Serv. Comm’n of N.Y., 447 F. Package Inserts patient package insert. These devices U.S. 557, 569 (1980).) Proposed subpart (7) Several comments stated that FDA include hearing aids (§ 801.420), D of part 897 included a range of should require cigarette and smokeless intrauterine devices (§ 801.427), and restrictions that attempted to preserve tobacco packages to contain package menstrual tampons (§ 801.430). the informational components of inserts that contain health information The agency also agrees with the advertising and labeling which can and information about the chemicals comment that it is not prohibited from provide useful product information for added to cigarettes and smokeless requiring patient package inserts due to adult smokers, while eliminating the tobacco. One comment stated that FDA the preemption clauses in the Cigarette imagery and color that make advertising has statutory authority to require Act and the Smokeless Act. Each of the appealing and compelling to children package inserts under sections 502(a) clauses in these statutes specifically and adolescents under 18 years of age. and (q) and 520(e) of the act. Another prohibits requirements that statements Briefly, the 1995 proposed rule comment stated that the agency is not relating to smoking and health be placed included four provisions. Section preempted from requiring package on the package. Package inserts, by 897.30 would have defined those media inserts because sections 1334(a) and nature, are typically found in the in which labeling and advertising for 4406 of the Cigarette Act and the package. cigarettes or smokeless tobacco may Smokeless Act, respectively, preempt Although the agency believes that appear. In addition, it would prohibit statements related to health ‘‘on any package inserts for these products are outdoor advertising within 1,000 feet of package,’’ not in any package. authorized under the act and would elementary and secondary schools and FDA agrees with the comments that it provide useful information to users, playgrounds. Proposed § 897.32 would has statutory authority under the act to further evaluation would be needed to limit all advertising to black text on a require package inserts for these determine what specific information a white background. Advertising in any products. Under section 502(a) of the package insert would contain. publication that is read primarily by act, a device is misbranded if its Therefore, the agency is not requiring adults would be permitted to continue labeling is false or misleading in any them as part of this rule. to use imagery and color. Further, all 44466 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations cigarette and smokeless tobacco product unnecessary in light of the underlying relationship between tobacco advertisements would be required to requirements in sections 201(n), 502(a), advertising and tobacco use by young include the product’s established name and 502(q) (21 U.S.C. 321(n), 352(a), and people, and (2) a positive effect of and intended use, e.g., ‘‘Cigarettes—A 352(q)) of the Federal Food, Drug, and stringent advertising measures on Nicotine Delivery Device,’’ and cigarette Cosmetic Act (the act). smoking rates and on youth tobacco use. advertisements would be required to Section VI.B. of this document In arriving at this tentative finding, FDA include a brief statement, such as provides a general discussion of the relied heavily on the National Academy ‘‘About one out of three kids who rationale for including significant of Sciences Institute of Medicine’s become smokers will die from their advertising restrictions in the final (IOM’s) Report entitled Growing Up smoking.’’ Proposed § 897.34 would regulation, including a discussion in Tobacco Free, Preventing Nicotine prohibit the sale and distribution of response to comments concerning the Addiction in Children and Youths, nontobacco items, contests and games of theory of advertising and the Washington, DC 1994 (the IOM Report) chance, and sponsored events using any importance of color and imagery to and the Department of Health and indicia of product identification (e.g., advertising’s appeal, especially for Human Services’ (DHHS’) Center for brand name, logo, recognizable pattern young people. This section also Disease Control and Prevention’s of color). Finally, proposed § 897.36 provides a discussion of the effects of (CDC’s) Report entitled Preventing outlined those conditions under which advertising on young people, including Tobacco Use Among Young People, A the agency would find the advertising or expert opinion and research evidence Report of the Surgeon General (1994) labeling of any cigarette or smokeless provided by the American Psychological (1994 SGR). Both indicated that tobacco product to be false or Association. advertising was an important factor in misleading. Section VI.C. of this document young people’s tobacco use, and that In response to comments filed, FDA provides responses to questions raised restrictions on advertising must be part has modified the proposed regulations. about the constitutionality of the of any meaningful approach to reducing Briefly, some of the more substantive regulations. Section VI.D. of this smoking and smokeless tobacco use changes include: The definition of document includes a discussion of the among young people. In addition, FDA adult-oriented publications remains evidence that cigarettes and smokeless was careful to note that industry unchanged, but the preamble makes tobacco advertising plays a direct and statements and actions and examples of clear that the responsibility will be material role in young people’s youth oriented advertising and assigned specifically to the decisions to purchase and use these marketing campaigns lent support to the manufacturer, distributor, or retailer of products. This part also explains why agency’s findings. tobacco products that wishes to place restricting tobacco advertising will FDA’s review and consideration of the advertisements to gather and retain advance the Federal Government’s comments received has led the agency competent and reliable evidence that interest in preventing the use of tobacco to conclude that advertising plays a the readership of the publication meets products by young people, and provides material role in the decision by those the criteria for an adult-oriented responses to comments about the under 18 to use tobacco products. publication. Moreover, unrestricted evidence. Finally, section VI.E. of this 1. Advertising and Young People advertising, i.e., with color and imagery, document responds to comments may be displayed at facilities described concerning the factual evidence (1) Comments from the tobacco in § 897.16(c)(2)(ii) that may sell tobacco provided by FDA in support of its industry argued that FDA had simply from vending machines and self-service proposed regulation in a section-by- assumed that young people found provided that the advertising, e.g., section format, as well as to comments cigarette and smokeless tobacco posters and signs, must be displayed so claiming that each of these sections was advertising to be appealing, and that that they are not visible from outside the not narrowly tailored to minimize the there was no empirical evidence of how facility and are affixed to a wall or burden on commercial speech. 76 young people actually perceived the fixture in the facility. imagery displayed in cigarette and The revised intended use statement is B. The Need for Advertising Restrictions smokeless tobacco advertisements. The ‘‘Nicotine Delivery Device for Persons In the preamble to the proposed 1995 comments argued that the research cited 18 or Older,’’ and the agency will not rule, FDA tentatively asserted that a by the agency relates primarily to the require a brief statement other than the preponderance of the quantitative and role of imagery in brand choice Surgeon General’s warnings. qualitative studies of cigarette decisions. In addition, several As provided in the 1995 proposed advertising suggested: (1) A causal comments disputed FDA’s evidence that rule, the final rule states that any event young people are particularly sponsored by a manufacturer, 76 For the purposes of section VI. of this vulnerable to image-oriented distributor, or retailer of tobacco document, the agency will refer to advertising and advertisements. To respond to these products is to be sponsored only in the labeling merely as ‘‘advertising.’’ As the agency comments, it is necessary to describe pointed out in the preamble to the 1995 proposed corporate name. Teams and entries also rule, advertising and labeling often perform the the function of advertising and how it may be sponsored but only in the same function: to convey information about the affects young people. corporate name. The regulation includes product; to promote consumer awareness, interest, a. Function of advertising. Advertisers a ban on all brand-identified nontobacco and desire; to change or shape consumer attitudes use a mix of advertising and items, including those transactions and images about the product; and/or to promote promotional vehicles to call attention to good will for the product (60 FR 41314 at 41328). based upon proofs-of-purchase. Moreover, most court cases involving advertising do the product they are selling—to describe However, the proposed ban on contests not distinguish between the forms of advertising its properties, to convey its superiority and games has been deleted. Finally, the that FDA calls labeling and those referred to as over other products, and in some cases agency has decided to delete the advertising. When there is a need to distinguish to give it an allure above and beyond the between the two forms of promotion, for example, definition of false or misleading when labeling and advertising are subject to qualities of the product itself. (A red advertising and labeling from this final different statutory requirements, this document will convertible can be a mode of rule because it is duplicative and make clear what is being discussed. transportation; it can also tell people a Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44467 lot about who you are, or who you think The use of many different media is importance of color in advertising you are or want to be.) also important in advertising directed to becomes more salient when it is Advertising creates a matrix of children. An example of a successful considered that most consumer behavior attributes for a product or product multimedia approach directed to occurs in conditions of ‘‘low category and beliefs about the product children is the cigarette smoking involvement.’’ 83 Low involvement and its possessor. It can serve to convey prevention program conducted by Flynn conditions are those that occur when a images that are recalled later when an et al., in Vermont, New York, and reader skims a magazine advertisement event prompts the consumer to think Montana, and cited in the preamble to rather than carefully searching for an about a purchase. Consumers, as a the 1995 proposed rule. 80 This effort advertisement for information about general rule, overestimate the effect that combined school cigarette smoking price, taste, relative ‘‘safety’’ of the advertising has on the market in general, prevention programs with a mass media product, or product improvement. but they routinely underestimate its intervention featuring more than 50 A recent article in The European 84 effect upon them and their own different television and radio spots over described the importance of color: purchasing choices. 77 a 4-year period. Some communities [S]ecuring a brand colour is more As discussed in sections VI.B.1.b. and received the school cigarette smoking important than ever, particularly for VI.B.1.c. of this document, advertising prevention programs alone, and others companies chasing a youth market. The main that is diverse, image-laden, and received the school program in reason is the increasing use of fast and colorful can be particularly effective in combination with the mass media furious graphics in advertising and marketing attracting attention in a cluttered intervention. By the final year of the communications generally. ‘‘This makes advertising environment. Further, program, students exposed to both owning a colour more and more important. advertising that is repeated frequently school and mass media interventions You can keep changing the graphics, but the colour remains constant in the consumer’s and in as many different media as were 35 percent less likely to have smoked during the past week than mind.’’ Owning a colour also helps when possible is most likely to ensure that its sponsoring a sports event, for instance, ‘‘All message is received by the maximum students exposed only to the school Pepsi now has to do is put up lots of blue,’’ number of consumers. This trend program. Further, this preventive effect said Brant. 85 persisted for at least 2 years following toward the use of many media in a c. The importance of imagery. the completion of the program. 81 The coordinated effort to communicate an Imagery also enhances the ability of researchers attributed the effectiveness advertising message supports the need advertising to communicate more of their program in part to the fact that for a comprehensive approach to quickly in low involvement situations their intervention used a wide variety of mitigating the effects of tobacco and in quick exposure contexts. 78 messages and message styles over a advertising. Pictorial information is remembered significant period of time. Every presentation can add to and much better than verbal information, as Thus, all media collectively along build upon the imagery and appeal pictures perform a function of with the amount of exposure time to created for a product category or a ‘‘organizing’’ the qualities of the product particular brand. Print advertising, young people, can increase the effectiveness of the advertiser’s message. as depicted with an image. Generally, as direct mail, and outdoor advertising the pictures or images in an help to create an image of the brand For example, billboards near schools or playgrounds expose children to advertisement increase (both in number (and sometimes an image of the brand’s and the proportion of the advertisement user) and provide information about unavoidable advertising messages for a more prolonged period of time than occupied by the image), the price, taste, relative safety, and product advertisement is more likely to be developments for current or prospective billboards they pass on the highway. Further, sponsored events that typically recognized, and the brand name more users. William Campbell, Chief likely to be remembered. In most cases, Executive Officer of Philip Morris, last for 2 to 3 hours ensure that those attending the event or viewing it at pictorial or image advertising is a more explained the importance of linking the robust and flexible communications brand imagery in various media in home on television are exposed for a sustained period of time. medium and can be used to relationship to the success in marketing communicate with the functionally its Marlboro product: b. Color contributes. Color is an important component of advertising. It illiterate or the young person in a [W]e’ve managed to take what was hurry. 86 originally tunnel vision advertising and can be used to promote a ‘‘feeling’’ and positioning * * * into every kind of avenue a message—blue is cool, red is hot, * * *. For example, our auto racing activities green is menthol. Studies have shown Categories,’’ Journal of Marketing Research, vol. 17, pp. 294–306, 1980. are just another way to express the Marlboro that four-color advertisements 83 MacInnis, D. J., and L. L. Price, ‘‘The Role of positioning. Some would say the Marlboro significantly increase attention and Imagery in Information Processing: Review and Cup is different from Marlboro Country, but recall relative to two color or black- and Extensions,’’ Journal of Consumer Research, vol. 13, 79 it is absolutely consistent. white- advertisements. 82 Moreover, the pp. 473–491, 1987. 84 Short, D., ‘‘The Colour of Money,’’ The 77 Gunther, A. C., and E. Thorson, ‘‘Perceived 80 Flynn, B. S., J. K. Worden, R. H. Secker-Walker, European, p. 21, April 10, 1996. Persuasive Effects of Product Commercials and G. J. Badger, B. M. Geller, and M. C. Costanza, 85 Id. Brant was commenting on Pepsi’s decision Public Service Announcements: Third Person ‘‘Prevention of Cigarette Smoking Through Mass to change its brand color to blue. Effects in New Domains,’’ Communication Media Intervention and School Programs,’’ 86 Lutz, K. A., and R. J. Lutz, ‘‘Effects of Research, vol. 19, pp. 574–575, 1992. American Journal of Public Health, vol. 82, pp. Interactive Imagery on Learning: Applications to 78 Flynn, B. S., J. K. Worden, R. H. Secker-Walker, 827–834, 1992. Advertising,’’ Journal of Applied Psychology, vol. G. J. Badger, B. M. Geller, and M. C. Costanza, 81 Flynn, B. S., J. K. Worden, R. H. Secker-Walker, 62, pp. 493–498, 1977; Hendon, D. W., ‘‘How ‘‘Prevention of Cigarette Smoking Through Mass P. L. Pirie, G. J. Badger, and B. M. Geller, ‘‘Mass Mechanical Factors Affect Ad Perception,’’ Journal Media Intervention and School Programs,’’ Media Interventions for and School Interventions of Advertising Research, vol. 13, pp. 39–45, 1973; American Journal of Public Health, vol. 82, pp. for Cigarette Smoking Prevention: Effects Two Years See also Holbrook, M. B., and D. R. Lehmann, 827–834, 1992. After Completion,’’ American Journal of Public ‘‘Form Versus Content in Predicting Starch Scores,’’ 79 ‘‘Philip Morris Keeps Smoking—Campbell Sees Health, vol. 84, pp. 1148–1150, 1994. Journal of Advertising Research, vol. 20, pp. 53–62, Growth for Tobacco Unit in Declining Industry,’’ 82 Hanssens, D., and B. Weitz, ‘‘The Effectiveness 1980; Twedt, D. W., ‘‘A Multiple Factor Analysis of Advertising Age, p. 20, Nov. 19, 1990. of Industrial Print Advertisements Across Product Continued 44468 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

An executive from Griffin Bacal, one attention to and think about the factual advertisements—it essentially assumes of the largest advertising agencies in information) contained in cigarette and that children are influenced by New York, explained how visual smokeless tobacco advertising are advertising only insofar as it is filtered imagery scored with young people: relatively low, making young people through the experience of their peers. Pictures sell. Visuals count * * * even more susceptible to influence from This reasoning is both circular and those visuals that seemingly have nothing to peripheral cues such as color and illogical. However, the agency does do with the product sale. * * * [including imagery. concur with the comment’s view that locations, sets, props, wardrobe, colors, Finally, according to the comment children typically process tobacco numbers, sexes and ages of people in the ads] from the nation’s largest psychological * * * Kids want to be like each other. Group advertising via the peripheral route, that acceptance, and living the life of the gang, is association, children generally have less children are particularly susceptible to critical. * * * Similarly, kids define information-processing ability than the influence of others regarding the themselves by the product choices they make adults, and they are less able or less decision to start smoking or to use and share. Be sure your advertising makes willing to pay attention to the factual smokeless tobacco, and that perceived the ‘‘world’’ accessible and ‘‘invites’’ the information in the advertisements. This source credibility plays an important viewer to join. 87 comment stated that because any role. FDA maintains that the ‘‘source’’ of Evidence from social psychology and possible negative health consequences the persuasive message in tobacco marketing research shows image-based associated with using tobacco products advertising is frequently conveyed by advertising, such as that employed by are relatively far in the future for them, the imagery presented in the the cigarette and smokeless tobacco children are less motivated than adults advertisement. The same comment industry, is particularly effective with to carefully consider information such expressed this sentiment, stating young people, and that the information as tar and nicotine content or the ‘‘[s]ince the media consumer often does conveyed by imagery is likely to be Surgeon General’s warnings, which are not know the writer or broadcaster more significant to young people than contained in cigarette and smokeless personally, the consumer or receiver information conveyed by other means in tobacco advertising. Thus, the comment may attribute source credibility to the the advertisement. concludes, color and imagery in media themselves.’’ To the extent that According to the ‘‘elaboration- advertisements are important characters featured in tobacco likelihood model of persuasion,’’ components for young people. 89 advertising, such as Joe Camel, the persuasive communications, such as A communications researcher who Marlboro Man or the attractive models advertisements, can persuade people provided comments on FDA’s 1995 or race car heroes typically portrayed in either: (1) By the ‘‘central route,’’ or (2) proposed rule for the consolidated 88 such advertising appear credible and by the ‘‘peripheral route.’’ The central comment of the cigarette industry appealing, they are perceived as route refers to the process by which a asserted that the elaboration likelihood credible sources, and could influence person reads the messages or model was relevant to the way children children regarding the decision to information contained in the respond to tobacco advertising, but took smoke or to use smokeless tobacco advertisement and thinks carefully a somewhat different view than that products. about it and is influenced by the expressed above. Specifically, the strength of its arguments. The comment stated that children are most 2. Advertising and Adults peripheral route is a process in which likely to use the central route when they (2) Several comments from the individuals, particularly young people, are ego-involved in the subject of tobacco industry and the advertising are more likely to pay attention and be persuasion, and that ‘‘ego-involvement industry stated that cigarette and persuaded by peripheral cues such as generally comes from those subjects smokeless tobacco advertising plays an attractive models, color and scenery, which are salient to the groups with important economic role in tobacco which are unrelated to the primary parts which one is aligned - e.g. peers.’’ marketing. A comment from the tobacco of the message. Therefore, a young However, the comment also stated that industry stated that FDA proposed person, or anyone who is unmotivated because children would have no real restrictions would: (1) Substantially or unable to carefully consider the experiences surrounding the initiation impair advertising of tobacco to adults; arguments in a message, is likely to be of cigarette smoking, they would be (2) deprive adults of useful information persuaded via the peripheral route. likely to engage in peripheral about products and services such as In markets where most brands in a processing, and would rely on credible availability, price, and quality; (3) product category are similar (as is the sources, such as peers. The comment reduce the incentive and ability to case with cigarettes and smokeless contended, market improved products; and (4) tobacco products), most advertising The reason the elaboration likelihood deprive adult smokers of the benefits of provides little, if any, new information. model is relevant here is that the decision to competition to provide a broad range of Thus, peripheral cues (such as color and begin smoking cigarettes does not come out choices and to assure that tobacco imagery) take on added significance. of a set of fixed or habituated experiences products are provided at the lowest Moreover, according to the model, for personal to the decision maker. For that possible cost. Consequently, the children, the motivation and ability to reason this decision is likely to be one on which a person is particularly susceptible to comment said that the 1995 proposed ‘‘elaborate’’ upon the arguments (pay the influence of others, and therefore source rule would have a far greater adverse credibility becomes key. [Emphasis added]. impact on advertising to adults than on Advertising Readership,’’ Journal of Applied The agency is not convinced by the Psychology, vol. 36, pp. 207–215, 1952. advertising seen by young people. 87 Kurnit, P., ‘‘10 Tips From the Top Agency-Exec comment. This explanation does not One comment from an advertising Explains How Griffin Bacal Scores with Kids,’’ address children’s responses to tobacco agency argued that restrictions on the Advertising Age Supplement, pp. 19–20, February advertising of tobacco products would 10, 1992. 89 See also, Huang, D. P., D. Burton, H. L’Howe, ‘‘significantly erode the progress made 88 Petty, R. E., and J. T. Cacioppo, Communication and D. M. Sosin, ‘‘Black-White Differences in and Persuasion: Central and Peripheral Routes to Appeal of Cigarette Advertisements Among over the past 15 years in increasing the Attitude Change, Springer-Verlag, New York, p. 3, Adolescents,’’ Tobacco Control, vol. 1, pp. 249–255, quantity and variety of information 1986. 1992. readily available to the public.’’ This Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44469 progress, the comment reiterated, has decided that the public health benefits protect the health of young persons but benefited and continues to benefit the of reducing advertising’s ability to to ‘‘delegitimize’’ lawful adult conduct, public. create appeal for young people greatly to engage in ‘‘viewpoint Further, several comments argued that outweighs the tobacco companies’ discrimination,’’ and to run unfettered advertising is consistent with interest in unrestricted advertising to ‘‘roughshod’’ over the rights of cigarette our Nation’s belief in providing the adults. and smokeless tobacco companies. One broadest possible range of information The position argued by these comment said that it is outside the to individuals, so that they can exercise comments is essentially that industry realm of permissible exercise of informed judgment in their daily lives. has the right to communicate freely with governmental power to suppress speech For these reasons, the comment stated, its intended audience regardless of the for the purpose of instilling values that further restrictions on the advertising of impact its advertising has on the illegal the Federal Government believes are legal products would not be in the and vulnerable audience of children and appropriate. This comment also said public interest and should be opposed. adolescents. Other comments counter that the purpose of FDA’s rulemaking is FDA recognizes, as these comments this comment asserting that it is the to eliminate speech that conflicts with maintained, that imagery and color Government’s obligation to protect Government messages on smoking and make advertising appealing to adults, as children because of their special health. The comment noted that FDA’s well as to children, and that advertisers vulnerabilities, their lack of experience goal is to bring about the demise of consistently use these elements to make and knowledge, and their limited ability smoking as a social custom. However, a advertisements compelling and to make appropriate decisions regarding comment from a consumer group attention getting. Moreover, removal of behavior that will have lifelong health disagreed, saying instead that FDA’s color and imagery will make consequences. FDA believes its 1995 proposed rule was limited to advertising’s role in presenting obligation with respect to tobacco covering only those activities designed information to adults more difficult. products is to safeguard the health and to promote the sale of the product to However, as stated more fully in the safety of young people to ensure that young people and thus covered only preamble to the 1995 proposed rule, they do not begin a potentially lifelong commercial speech. FDA has attempted to tailor its addiction to products that cause so FDA has carefully considered these advertising restrictions as narrowly as much disease and premature death. comments and has taken the concerns possible consistent with its purpose of C. The Regulations Under the First that they expressed into account as it reducing young people’s attraction to Amendment developed this final rule. The agency and use of tobacco. Thus, rather than recognizes that its authority is limited banning all advertising, the proposed 1. Introduction by the act and the Constitution. Thus, it regulations retain the informational Under section 520(e) of the act (21 has scrutinized each of the conditions function of advertising by permitting U.S.C. 360j(e)), FDA included a number on advertising that it proposed in light text-only advertising while removing of proposed conditions in the 1995 of whether the condition advances the color and imagery from those proposed rule on how cigarettes and purposes of section 520(e) of the act or advertisements to which young people smokeless tobacco could be advertised some other section of the act, and are unavoidably exposed. as part of its proposed restrictions on whether the condition is consistent with FDA does not believe that these the sale of these products. The agency the First Amendment. restrictions should dramatically tentatively found that these conditions FDA’s primary concern is the public increase search costs for adult smokers are necessary to reduce the advertising’s health. Because of the potentiality for and smokeless tobacco users who are ability to create demand for these harmful effects on individuals under 18 actively looking for information on price products—that is, the desire to purchase from use of cigarettes and smokeless and new product innovations. Text-only them—among children and adolescents tobacco, FDA is adopting restrictions on advertising requires a high involvement under 18, for whom these products are advertising among other restrictions on on the part of the consumer but can not safe (60 FR 41314 at 41350). In the sale, distribution, and use of these realistically be expected to provide addition, FDA tentatively found that it products. These restrictions will mean sufficient information to carry the was necessary to include an industry- that it should be more difficult to sell message and also provide sufficient financed education program among these products to people under age 18, appeal to attract current smokers and these conditions. who currently purchase these products smokeless tobacco users. Some In proposing these measures, FDA in significant numbers. advertising for low-tar products relies recognized that they would have to pass The agency acknowledges that insofar on text-only or text with few pictures. muster under the protections of as these restrictions help reduce the sale If the information about product type communication extended by the First of tobacco products to young people, the is important and desired by adult Amendment to the United States restrictions will have an adverse effect tobacco users, it can and will be Constitution, in particular, under the on the cigarette and smokeless tobacco provided by text-only advertisements if protections extended to commercial companies. However, this fact does not the industry desires to make the speech (60 FR 41314 at 41353). Before mean that FDA is trying to bring about information available. As noted above, addressing the commercial speech the demise of the tobacco industry. The advertising for low-tar cigarettes is analysis, however, this section responds restrictions that FDA is adopting have generally high-involvement advertising to several comments which registered been tailored to help reduce tobacco at the present and therefore can be more fundamental complaints under the advertising’s ability to create an expected to survive in a text-only First Amendment about FDA’s proposed underage market for these products, environment. Nonetheless, the agency approach. while leaving open ample avenues for recognizes that it may be more difficult (3) Several comments, which were cigarette and smokeless tobacco for advertising, without imagery and from the tobacco and advertising companies to communicate to current color, to attract the attention of current industries, found in statements made by users 18 years of age or older about their tobacco users. However, the agency has FDA evidence of an intent not merely to products. As explained in detail in 44470 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations section VI.E. of this document, this is all impermissible in the realm of must assert a substantial interest in support that the First Amendment requires. noncommercial expression. (See Florida of its regulation; second, the government (4) Several comments argued that, in Bar v. Went For It, Inc., 115 S.Ct. 2371, must demonstrate that the restriction on the 1995 proposed rule, FDA had 2375 (1995).) commercial speech directly and materially understated the protection that advances that interest; and third, the However, in 44 Liquormart, Inc., three regulation must be ‘‘narrowly drawn’’ * * *. commercial speech is afforded under Justices stated: (115 S.Ct. at 2376 (citations omitted)) the First Amendment. These comments [w]hen a State entirely prohibits the FDA explained in the preamble to the dissemination of truthful, nonmisleading pointed out that advertisers and 1995 proposed rule why the restrictions commercial messages for reasons unrelated to consumers have powerful First on advertising that it was proposing met Amendment rights to send and receive the preservation of a fair bargaining process, there is far less reason to depart from the each requirement of the Central Hudson commercial messages. To support this test (60 FR 41314 at 41354 and 41356). point, one comment pointed out that the rigorous review that the First Amendment generally demands. The agency received a number of Supreme Court has recognized that the (116 S.Ct. at 1507) comments on its analysis—mostly from free flow of commercial information is This statement has no application to the tobacco industry, newspaper or ‘‘indispensable to proper allocation of the restrictions that FDA is imposing for magazine associations, and advertisers. resources in a free enterprise system.’’ two reasons. First, FDA is not entirely These comments argued that FDA’s (See Virginia State Bd. of Pharmacy v. prohibiting the dissemination of proposed restrictions failed under one Virginia Citizen’s Consumer Council, commercial messages about cigarettes or more elements of the Central Hudson Inc., 425 U.S. 748, 765 (1976).) The and smokeless tobacco. As explained in test. The agency also received comments comment also pointed out that the Court section VI.E. of this document, it is from a public interest group, which has went on to say that a ‘‘particular adopting carefully tailored restrictions the protection of commercial speech as consumer’s interest in the free flow of on the time, place, and manner in which one of its interests, and from a coalition commercial information * * * may be as such messages may be conveyed so that of major national health organizations. keen, if not keener by far, than his they are not used to undermine the Both of these comments argued that, in interest in the day’s most urgent restrictions on access by minors. virtually all respects, FDA’s proposed political debate’’ (Id. at 763). Second, the restrictions are related to restrictions satisfy the Central Hudson Another comment, however, citing the bargaining process. As explained in test. Ohralik v. Ohio State Bar Ass’n., 436 section II.C.3. of this document in the In the sections that follow, for each of U.S. 447 (1978), stated that there are discussion of section 520(e) of the act, the restrictions on advertising that the dangers inherent in a free-for-all the access restrictions, and the agency proposed, FDA will analyze the marketplace, and that, at times, vigilant concomitant restrictions on promotion case law that elucidates the applicable Government action is needed to protect of these products, derive from the fact standard, the information presented in the public from false, deceptive, or that, at least as a matter of law, minors comments, and all other available overbearing sales campaigns. are not competent to use these products. evidence and decide whether that In addition to the comments, the standard is met. However, before the agency has considered the Supreme ‘‘The protection available for particular commercial expression turns agency does so, it must first consider the Court’s recent decision in 44 preliminary inquiry under Went For It Liquormart, Inc. v. Rhode Island, 116 on the nature both of the expression and of the governmental interests served by and decide whether the First S.Ct. 1495 (1996), which was handed Amendment provides any protection to down after the rulemaking record was its regulation.’’ (See Central Hudson, 447 U.S. at 563.) FDA has weighed these the advertising that is restricted by this closed. The Court ruled unanimously final rule. that Rhode Island’s ban on all factors in deciding what restrictions on dissemination of price advertising for cigarette and smokeless tobacco 3. Is Cigarette and Smokeless Tobacco alcoholic beverages was violative of the advertising can appropriately be Advertising Misleading, or Does It First Amendment. No rationale for this included in this final rule. Relate to Unlawful Activity? judgment commanded a majority of the 2. The Central Hudson Test As stated earlier, the preliminary Court, however. Nonetheless, FDA inquiry under the Went for It case is The comments were unanimous in considered each part of the principal whether the commercial speech is agreeing that any restrictions the agency opinion, as well as the concurring misleading or relates to unlawful adopts on commercial speech will be opinions, in arriving at the decisions activity. FDA did not specifically assessed under the test first articulated that are set forth in this final rule. address this aspect of the Central by the Supreme Court in Central FDA in no way underestimates the Hudson analysis in its proposal (60 FR Hudson, 447 U.S. at 563–64. This test protection extended to commercial 41314 at 41354). Nonetheless, several was originally set out as a four-step speech by the First Amendment. FDA comments did. analysis in Central Hudson; however, in recognizes the important societal Many of the comments asserted that one recent case, Florida Bar v. Went For interests served by this type of speech the targeted speech concerns lawful It, Inc., the Supreme Court described the and has given full consideration to those conduct, and that, therefore, this aspect test as having three prongs after a interests in developing this final rule. of the Central Hudson analysis is preliminary determination is made, Nonetheless, it is also true, as the satisfied. One comment noted FDA’s although the matters to be considered agency stated in the 1995 proposed rule silence on this matter and said that remain unchanged: (60 FR 41314 at 41353 to 41354), that there is thus no suggestion that cigarette Under Central Hudson, the government the measure of protection that may freely regulate commercial speech that advertisements propose an illegal commercial speech receives is concerns unlawful activity or is misleading* transaction or urge youths to begin commensurate with its subordinate * *. Commercial speech that falls into neither smoking before it is lawful for them to position in the scale of First of these categories, * * * may be regulated do so. Amendment values, and it is subject to if the government satisfies a test consisting of Some comments argued, however, modes of regulation that might be three related prongs: first, the government that cigarette and smokeless tobacco Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44471 advertising is not entitled to First tobacco products before it is lawful for or not that is the advertiser’s intent. As Amendment protection because it is them to do so. 90 such, the protections of the First misleading, and it concerns unlawful The Supreme Court has repeatedly Amendment might not attach to such activity. These comments pointed out said that commercial speech ‘‘related advertising because it proposes an that it is unlawful in all 50 States to sell to’’ unlawful activity is not entitled to illegal transaction. (See Pittsburgh Press tobacco products to children under the First Amendment protection. (See 44 Co., 413 U.S. at 389; Zauderer v. Office age of 18. The comments said the Liquormart, Inc., 116 S.Ct. at 1505 n.7 of Disciplinary Counsel, 471 U.S. 626 evidence that FDA assembled in its (‘‘ By contrast, the First Amendment 638 (1985) (‘‘The States and the Federal 1995 proposal suggested that does not protect commercial speech Government are free to prevent the manufacturers of tobacco products are about unlawful activities.’’); Florida Bar dissemination of commercial speech aware that their advertising campaigns v. Went For It, 115 S.Ct. 2376 (‘‘Under that is false, deceptive, or misleading, * induce minors to experiment with Central Hudson, the government may * *, or that proposes an illegal tobacco products (citing 60 FR 41314 at freely regulate commercial speech that transaction * * *’’ (citations omitted)).) 41330–41331), and that much of the concerns unlawful activity or is Second, even if it is assumed, promotional efforts of the tobacco misleading’’); Bolger v. Youngs Drug arguendo, that cigarette and smokeless industry are geared toward an illegal Products Corp., 463 U.S. 60, 69 (1983) tobacco ads are not, for constitutional end—inducing minors to try to break (‘‘The State may also prohibit purposes, literal offers to sell to minors, the law by obtaining cigarettes and commercial speech related to illegal they nonetheless are ‘‘related to’’ an smokeless tobacco that may not legally behavior.’’); Central Hudson, 447 U.S. at unlawful activity. Whether it is the be sold or otherwise provided to them. 563–564 (‘‘The government may ban * * advertiser’s intent or not, as explained The comments also argued that * commercial speech related to illegal in sections VI.D.3. through VI.D.6. of governmental entities are entitled to activity.’’ (citations omitted)).) Tobacco this preamble, cigarette and smokeless broad discretion when regulating the advertising is ‘‘related to illegal tobacco advertising has a powerful promotion of legal products or activities activity’’ in two significant respects and appeal to children and adolescents that pose dangers to society (citing, e.g., thus, in fact, might not be protected under the age of 18 and through this United States v. Edge Broadcasting Co., speech. appeal, by means of the image that it 509 U.S. 418 (1993)). The comments First, tobacco ads, at least as a legal projects, it has an effect on a young argued that cigarette advertising is matter, propose a commercial person’s decision to use, and thus to designed to persuade minors that any transaction (see Virginia State Bd. of attempt to purchase, tobacco products. concerns about health hazards are Pharmacy v. Virginia Citizens Consumer Yet, as stated above, sale of tobacco misplaced or overstated, and that their Council, Inc., 425 U.S. 748, 762 (1976); products to minors is unlawful in all 50 peers are having fun because they Pittsburgh Press Co. v. Human Relations States, and the purchase, possession, or smoke. Com’n, 413 U.S. 376, 389 (1973)), that use of tobacco products by minors is Contrary positions were taken by is, to sell cigarettes and smokeless unlawful in a majority of States.92 Thus, several comments. One argued that the tobacco. In proposing these transactions, the appeal of tobacco advertising to fact that the sale of tobacco to minors is the advertisers do not differentiate minors is such that this type of illegal under State law does not remove between adult and minor purchasers. advertising can appropriately be viewed the constitutional protection for Because sales to minors are unlawful in as encouraging, and thus being ‘‘related 91 advertising to adults an otherwise every State, the undifferentiated offer to’’, illegal activity. As a result, it is lawful product (citing Dunagin v. City of to sell constitutes, at least in part, an arguable that, without more, FDA would Oxford, 718 F.2d 738, 743 (5th Cir. unlawful offer to sell. At the very least, be able to freely restrict such 1983) (en banc), cert. denied, 467 U.S. these advertisements are clearly advertising. 1259 (1984).) A second comment cited perceived by minors as offers or Nevertheless, the advertising also the conclusion of a respected researcher inducements to buy and use these relates to lawful activity—the sale of that: ‘‘the suggestion that advertising products. Millions of American children tobacco products to adults. messages are somehow working and adolescents act on these perceived Consequently, FDA may not have subliminally to twist children’s minds offers. It is estimated that each year unlimited discretion to regulate tobacco before they are old enough to know children and adolescents consume advertising. (See Dunagin v. City of better is a complete invention, for which between 516 million and 947 million Oxford, 718 F.2d at 743.) At the very there is no evidence whatever’’ (citing cigarette packages and 26 million least, however, FDA should be afforded McDonald, C., ‘‘Children, Smoking and containers of smokeless tobacco (60 FR discretion to do what it has tried to do Advertising: What Does the Research 41314 at 41315). Thus, in a practical in these regulations; that is, to Really Tell Us?,’’ 12 International sense, cigarette and smokeless tobacco distinguish advertising that ‘‘relates to’’ Journal Of Advertising 286 (1993)). advertising is proposing transactions commercial activity that, in substantial These comments also argued that given that are illegal (see Virginia State Board respects, is unlawful, the sale of tobacco the warnings that must appear in all of Pharmacy v. Virginia Citizens products to children, from advertising tobacco advertising, it could not be Council, Inc., 425 U.S. at 772), whether that does not. maintained that tobacco advertising is Significantly, the Supreme Court was 90 misleading. As explained more fully below, FDA finds confronted with a situation similar to unpersuasive the quote from McDonald because it FDA has carefully considered these does not address the means by which cigarette and this in United States v. Edge comments. They raise the fundamental smokeless tobacco product advertising influences Broadcasting. In Edge, the Supreme question of whether tobacco advertising minors’ decisions on whether to purchase and use Court upheld a Federal statute that is protected by the First Amendment. these products. Therefore, the agency turns to the prohibited advertising that ‘‘related to’’ This question cannot be disposed of legal issue raised by the comments. unlawful activity (broadcast of lottery 91 ‘‘State Laws on Tobacco Control—United based simply on the question of whether States, 1995,’’ Morbidity and Mortality Weekly advertising by a broadcaster licensed to such advertising explicitly urges young Report (MMWR), CDC, DHHS, vol. 44, No. ss–6, pp. people to begin purchasing or using 16–17, November 3, 1995. 92 Id. 44472 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations a State that does not allow lotteries), but through numerous private economic agency’s proposed restrictions, agreed not advertising that did not relate to decisions. It is a matter of public interest that with the agency that it has a substantial unlawful activity (broadcasting of those decisions, in the aggregate, be interest in protecting the health of lottery advertising by a broadcaster intelligent and well informed. To this end, individuals under 18 years of age. licensed to a State that allowed a the free flow of commercial information is (5) Two comments, however, said that indispensable. lottery.) 116 S.Ct. at 1505 (emphasis added), the interest asserted by FDA is Edge was recently cited with approval quoting Virginia Board of Pharmacy v. insufficient to justify the proposed by the plurality opinion in 44 Virginia Citizens Consumer Council. restrictions on speech. One of those Liquormart Inc., 116 S.Ct. at 1511. The restrictions that FDA is adopting comments said that smoking is a legal Justice Stevens (joined by Justices have virtually no effect on the core and widespread activity, and that there Thomas, Kennedy, and Ginsburg) informational function of commercial is no congressional policy against reasoned that the statute in Edge ‘‘was speech as described in 44 Liquormart, smoking. One comment said that while designed to regulate advertising about Inc. and Virginia Board of Pharmacy. the Government has a substantial an activity that had been deemed illegal Except for billboards within 1,000 feet interest in ensuring that tobacco in the jurisdiction in which the of schools and playgrounds, which, as products are used by adults only, FDA broadcaster was located.’’ He contrasted explained below, present special is not empowered to protect that the statute in Edge to the statute in 44 circumstances, FDA is not restricting interest. Liquormart which ‘‘targets information the ability of a manufacturer, FDA strongly disagrees with the latter about entirely lawful behavior’’ (Id.). distributor, or retailer to inform the comments. The Government’s interest in Thus, the Supreme Court has public about what they are selling, why the public health, and particularly in countenanced distinctions in how they are selling it, or the price of their the well-being of minors, is well- speech is regulated that are based on products or, for that matter, about the established. (See Action for Children’s whether the underlying conduct to characteristics of their products or about Television v. FCC, 58 F.3d 654, 661 which the speech relates is entirely any other aspect of what they sell. (D.C. Cir. 1995) and 60 FR 41314 at lawful or not. That is exactly the type FDA’s concerns are about the ability of 41354.) In fact, the Supreme Court has of distinction that FDA is drawing here. manufacturers to use images, color, and found that there is a compelling, not Thus, a credible argument can be peripheral presentations (such as merely a substantial, interest in made that advertising of cigarettes and sponsorship) in their advertising and protecting the physical and smokeless tobacco, at least to the extent promotion of their products to create psychological well-being of children, that it is related to sale of these products particular appeal for children and New York v. Ferber, 458 U.S. 747, 756– to children under 18, is not speech adolescents under 18. Thus, FDA has 57 (1982), and that the Government’s protected by the First Amendment, and designed the restrictions that it is interest in the well-being of youth and thus that the regulations that FDA is adopting to ensure that adults can in parents’ claim to authority in their adopting restricting such advertising are continue to be informed by the own household can justify the subject only to review under an information in tobacco advertising regulation of otherwise protected arbitrary or capricious standard. (See while restricting the noninformative expression, FCC v. Pacifica Foundation, Florida Bar v. Went For it, Inc., 115 S.Ct. aspects of advertising that appeal to 438 U.S. 726, 749 (1978). (See also at 2376.) However, FDA is not relying children and adolescents under the age Denver Area Educational solely on this analysis. Alternatively, of 18. The agency will explain how it Telecommunications Consortium v. FDA has assumed that a Central Hudson has achieved this end in the discussion FCC, 64 U.S.L.W. 4706 (in press) (June test, such as that applied in Edge—for that follows. 28, 1996).) products that relate to both lawful and As the agency has explained in unlawful transactions—would be 4. Is the Asserted Government Interest section II.B. and in the 1996 appropriate here. Therefore, a full Substantial? Jurisdictional Determination annexed analysis of these restrictions under Assuming that the Central Hudson hereto, cigarettes and smokeless tobacco Central Hudson follows. test applies, ‘‘[t]he State must assert a are drug delivery devices that are Before proceeding to the Central substantial interest to be achieved by subject to regulation as devices under Hudson analysis and considering the restrictions on commercial speech.’’ the act. Their use by children and comments that bear on it, FDA wants to (See Central Hudson, 447 U.S. at 564.) adolescents under 18 presents serious emphasize that, even if the First In the 1995 proposed rule, FDA stated risk to the health of this segment of the Amendment applies to tobacco that this prong of the Central Hudson population. For example, studies show advertising, the restrictions that the test was satisfied because the proposed that the age one begins smoking agency is adopting have very limited regulations serve the substantial influences the amount of smoking one impact on those attributes of Government interest of protecting the will engage in as an adult and will commercial speech that are protected by public health. FDA stated that the ultimately influence the smoker’s risk of the First Amendment. In 44 Liquormart, advertising restrictions will help to tobacco related morbidity and mortality Inc., a plurality of the Supreme Court reduce the use of cigarettes and (60 FR 41314 at 41317). In addition, the reemphasized that commercial speech is smokeless tobacco by those who are risk of oral cancer increases with protected solely because of the ‘‘the most vulnerable to addiction and, increased exposure to smokeless informational value: perhaps, the least capable of deciding tobacco products (60 FR 41314 at Advertising, however tasteless and whether to use the products. Decreased 41319). Thus, the health of children and excessive it sometimes may seem, is use of these products will reduce the adolescents is related to their use of nonetheless dissemination of information as to who is producing and selling what risk of tobacco-related illnesses and cigarettes and smokeless tobacco. product, for what reason, and at what price. deaths’’ (60 FR 41314 at 41354). FDA’s compelling interest in the So long as we preserve a predominantly free Most of the comments that FDA health and well-being of minors enterprise economy, the allocation of our received on this issue, even some from supports restrictions on cigarette and resources in large measure will be made those who otherwise opposed the smokeless tobacco advertising to ensure Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44473 that advertising does not undermine availability of products and services that FDA has no disagreement with these FDA’s restrictions on the sale of these were not only entirely legal but were comments with respect to individuals products. constitutionally protected because they and, in fact, finds these regulations One comment said that while FDA’s involved the exercise of a fundamental cannot fairly be characterized as articulated interest in protecting minors right (Id.). (The Court also struck down paternalistic with respect to that from harm clearly is substantial, this other provisions of the law that population group. These regulations do interest is not served by FDA’s prohibited distribution of contraceptives not prohibit the inclusion of any regulations. According to the comment, to anyone under the age of 16 and by information in advertising. They also do the only goal served directly by the anyone other than a licensed not impose the type of ban on accurate proposed regulations is that of pharmacist.) Cigarettes and smokeless commercial information that has delegitimatizing smoking. Two tobacco are neither lawful for all people characterized the limitations on comments said that under the guise of nor constitutionally protected. The sale commercial speech that the Supreme protecting adolescents and children, of these products to individuals under Court has branded as paternalistic. (See, FDA is trying to ‘‘‘save’ all Americans 18 is unlawful in every State (see also, e.g., 44 Liquormart, Inc., 116 S.Ct. at from the ‘evils’ of smoking.’’ Two 42 U.S.C. 300x–26), and possession, 1510; Virginia Bd of Pharmacy, 425 U.S. comments said that the agency is trying purchase, or use of at least some tobacco at 769–770.) to prevent cigarette advertising from products by this segment of the The agency acknowledges, however, presenting smoking in a positive light. population is unlawful in a majority of that in another respect, these regulations One comment, citing Carey v. States. 93 Moreover, there was no are paternalistic. These regulations are Population Services International, 431 credible suggestion in any of these specifically aimed at protecting children U.S. 678 (1977), said that the comments that the restrictions on the and adolescents under the age of 18 Government cannot restrict cigarette sale of these products infringe on the from the appeal of tobacco advertising. advertising because it legitimizes or exercise of a fundamental right. The agency finds however, that for it to favorably influences a young person’s be paternalistic with respect to children The Supreme Court in Carey made views toward tobacco products. and adolescents in no way offends the clear the limited coverage of its holding. FDA finds no merit in these First Amendment or Supreme Court (See 431 U.S. at 702, n. 29 (‘‘We do not comments. Advertisements for cigarette precedent. (See Denver Area have before us, and therefore express no and smokeless tobacco are not banned Communications Consortium, Inc. v. views on, state regulation of the time, by the restrictions that FDA is adopting. FCC, No. 95–124 (U.S. June 28, 1996) place, or manner of such commercial For example, the companies are free to slip op. at 25.) Nothing in 44 advertising based on these or other state use advertising in almost all media that Liquormart, Inc., for example, suggests interests.’’).) Thus, given the significant communicates to adults about the price, in any way that government may not be differences in the two situations, Carey taste, or joys of using their product, as paternalistic with respect to children does not limit FDA’s ability to adopt long as they do so using black-and- and adolescents under the age of 18. conditions on advertising that are white, text-only advertisements, or In fact, the Supreme Court has stated: designed to ensure that restrictions on using imagery and color in publications ‘‘* * * [T]he law has generally regarded sale to minors are not undermined. read primarily by adults. Thus, it is minors as having a lesser capability for simply not true that manufacturers will (6) Finally, a group of comments on making important decisions.’’ (See be prevented from presenting tobacco this first prong of the Central Hudson Carey v. Population Services use in a positive light or that they will test attacked FDA for being International, 431 U.S. at 693, n. 15.) be prevented from conveying truthful, paternalistic. These comments said that Given these facts—that most cigarette nonmisleading information in almost all a principal theme of commercial speech smokers smoke their first cigarette media. doctrine is a societal intolerance for before 18, that children and adolescents These regulations are intended, Government-enforced ignorance who use tobacco products quickly however, as explained in section VI.E. designed to ‘‘help’’ consumers who are become addicted to them before they of this document, to prevent not trusted by bureaucrats to evaluate reach the age of 18, that among smokers manufacturers from advertising their advertising for themselves. One aged 12 to 17 years, 70 percent regret tobacco products in a way that comment said that how to balance short- their decision to smoke, and 66 percent encourages underage individuals to term gratification against long-term risk state that they want to quit (60 FR purchase these products. They are is a uniquely personal analysis that is 41314)—the decision to smoke is among authorized by sections 520(e) and 502(q) best left to individual autonomy rather the most important that an individual of the act and are in no way inconsistent than Government censorship. The will make. Significantly, all 50 States with Carey v. Population Services comment said that people must be have prohibited sales of cigarettes to International. trusted to perceive their own best people under 18 years of age. These Carey involved a challenge to a law interests without Government regulations have been tailored to help that banned all advertisement of intervention in the information flow. ensure that individuals do not make a contraceptives. The Government argued These comments take on a particular decision on whether to smoke before that advertising contraceptives would significance in light of the plurality’s they are 18 and have a greater capacity legitimize sexual activity of young statement in 44 Liquormart, Inc. v. to understand the consequences of their children. The Supreme Court said that Rhode Island, 116 S.Ct. at 1508, that actions, and that they are not influenced this basis was not a justification for ‘‘[t]he First Amendment directs us to be to make this decision before that time by validating suppression of expression especially skeptical of regulations that advertising. At the same time, FDA has protected by the First Amendment (431 seek to keep people in the dark for what sought to ensure that the restrictions do U.S. at 701). the government perceives to be their not burden any more speech than is Carey is distinguishable from the own good.’’ necessary to accomplish this goal. Thus, present situation in several ways. The FDA’s purpose is not inconsistent with advertisements in that case stated the 93 Id. law, commercial speech doctrine, or the 44474 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations country’s precepts of individual not disclose any anecdotal evidence, either evidence, expert opinion, surveys and autonomy. from Florida or another State, that validates studies provide sufficient support for the Board’s suppositions. the inference that advertising does play D. Evidence Supporting FDA’s (Id.) a material role in children’s tobacco use. Advertising Restrictions In Rubin v. Coors, the Court struck In the 1995 proposed rule, FDA 1. Introduction down a section of the Federal Alcohol suggested that its judgment as to Administration Act (27 U.S.C. 201 et Having considered the preliminary whether the governmental interest seq.) that prohibited beer labels from involved was directly advanced by its inquiry and the first prong of the Central displaying alcohol content because the Hudson analysis, the agency turns to the actions was entitled to some deference. Government failed to demonstrate that ‘‘The Supreme Court has stated that, heart of this analysis, whether the this restriction would alleviate the restrictions on cigarette and smokeless when determining whether an action recited harm to a material degree. (See advances the governmental interest, it is tobacco advertising that FDA is 115 S.Ct. at 1592.) The Court imposing are in proportion to the willing to defer to the ‘common sense characterized the Government’s judgments’ of the regulatory agency as interest that it is seeking to advance. To regulatory scheme as ‘‘irrational’’ (Id.). meet its burden on this issue, FDA first long as they are not unreasonable’’ See also, Justice Stevens’ opinion in 44 (citing, Metromedia Inc. v. City of San must show that tobacco advertising Liquormart, 116 S.Ct. at 1509, 1510. (In plays a concrete role in the decision of Diego, 453 U.S. 490, 509 (1981) (60 FR striking down Rhode Island’s ban on 41314 at 41354)). minors to smoke, and that each specific price advertising for failure to Several comments took issue with this restriction on this advertising that it is demonstrate that the restrictions would suggestion. One comment said that FDA adopting will contribute to limiting its advance the State’s interest, Stevens, had mischaracterized Supreme Court effects and thus to protecting the health joined by Justices Kennedy, Ginsburg, jurisprudence, and two comments said of children and adolescents under the and Souter, found that while the record that courts will defer only to common age of 18. The extensive evidence in this ‘‘suggests that the price advertising ban sense judgments of legislatures. proceeding fully supports these may have some impact on the judgments. purchasing patterns of temperate FDA disagrees with those comments. 2. Do the Regulations Directly Advance drinkers of modest means * * * no In Florida Bar v. Went For It, Inc., the the Governmental Interest Asserted? evidence [has been presented] to suggest Supreme Court said that it had that its speech prohibition will permitted ‘‘litigants,’’ which it did not In Central Hudson, the Supreme significantly reduce market-wide limit to State legislatures, to justify Court said that any limitation on consumption.’’ Therefore, Stevens speech restrictions by ‘‘studies and commercial speech that the State stated that ‘‘[s]uch speculation certainly anecdotes pertaining to different locales imposes ‘‘must be designed carefully to does not suffice when the State takes altogether, * * * or even, in a case achieve the State’s goal’’ (447 U.S. at aim at accurate commercial information applying strict scrutiny, to justify 564). ‘‘* * * [T]he restriction must for paternalistic ends.’’) restrictions based solely on history, directly advance the State interest Thus, under the applicable case law, consensus, and ‘‘simple common sense involved; the regulation may not be to adopt the proposed restrictions on * * *’’ (115 S.Ct. at 2378). Thus, FDA’s sustained if it provides only ineffective cigarette and smokeless tobacco reliance on common sense (which, as or remote support for the government’s advertising, FDA must find that it can made clear in section VI.D.3. through purpose’’ (Id.). conclude from the available evidence VI.D.6. of this document, provides only The Supreme Court elaborated on that: (1) Advertising plays a material part of the basis for FDA’s findings) is what this aspect of the Central Hudson role in the process by which children justified. test requires in Edenfield v. Fane, 507 and adolescents decide to begin or to (7) One comment said that, rather U.S. 761, 770–771 (1993); continue to use these products; and (2) than giving FDA deference, courts It is well-established that ‘‘[t]he party review with special care any regulations seeking to uphold a restriction on Limitations on advertising will commercial speech carries the burden of contribute in a direct and material way that suppress commercial speech to justifying it.’’ * * * This burden is not to FDA’s efforts to ensure that the pursue a nonspeech-related policy. satisfied by mere speculation or conjecture; restrictions it is adopting on the sale FDA disagrees with this comment for rather, a governmental body seeking to and use of tobacco products to minors two reasons. First, these regulations do sustain a restriction on commercial speech are not undermined. not suppress commercial speech. While must demonstrate that the harms it recites are Contrary to what some comments they limit such speech, they leave open real and that its restriction will in fact asserted, it is not necessary for FDA to significant means of communication alleviate them to a material degree * * *. establish by empirical evidence that about these products. Second, this Without this requirement, a state could with advertising actually causes underage comment derives specifically from ease restrict commercial speech in the service individuals to smoke, or that the footnote 9 of Central Hudson, 447 U.S. of other objectives that could not themselves justify a burden on commercial expression. restrictions on advertising will directly at 566 (‘‘We review with special care In Edenfield, the Court struck down a result in individuals that are under 18 regulations that entirely suppress Florida ban on in-person solicitation by ceasing to use cigarettes or smokeless commercial speech in order to pursue a Certified Public Accountants (CPA’s) tobacco. It is not necessary in satisfying nonspeech-related policy.’’). In that because the State board failed to this prong of Central Hudson for the case, the Supreme Court found that demonstrate that the harm it recited was agency to prove conclusively that the control of demand for electricity was a real. correlation in fact (empirically) exists, speech-related policy (see 447 U.S. at It presents no studies that suggest personal or that the steps undertaken will 569). Similarly, the policy that FDA solicitation of prospective business clients by completely solve the problem. (See seeks to advance here, control of CPAs creates the dangers of fraud, United States v. Edge Broadcasting Co., demand for cigarettes and smokeless overreaching, or compromised independence 509 U.S. 418, 434–35.) Rather, the tobacco by minors, is a speech-related that the Board claims to fear. The record does agency must show that the available policy. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44475

(8) Finally, one comment said that social perceptions, such as assessments of protested that FDA used the phrase FDA claimed deference for its common smoking prevalence and the social improperly. However, regardless of the sense judgments to deflect attention acceptance experienced by smokers. firm’s protest, the agency finds that this from the lack of a factual basis for the The largest psychological association, phrase ‘‘friendly familiarity’’ accurately 1995 proposed rule. Two comments, in its comments, agreed and stated that describes the effect of massive research indicates that young people are however, stated that FDA has compiled marketing that uses a variety of media indeed exposed to substantial and a record on the problem that is more and saturates potential consumers with unavoidable advertising and extensive than any that existed in any information and imagery. Researchers of the cases in which the Supreme Court promotion, 94 even though they have been banned from radio and television. have found that ‘‘the ubiquitous display upheld restrictions on commercial of messages promoting tobacco use speech. Referencing numerous studies, this comment stated further that: clearly fosters an environment in which In the discussion that follows, FDA experimentation by youth is expected, if reviews the evidence on whether there is considerable evidence that young people are exposed to tobacco ads, that those not implicitly encouraged.’’ 98 cigarette and smokeless tobacco who smoke are especially likely to be aware advertising affects the decision by b. Evidence regarding young people’s of cigarette advertising, and that liking of exposure to, recall of, approval of, and minors to use these products, and cigarette advertising among young people is whether the restrictions on advertising predictive of smoking behavior * * *. response to advertising. Many studies that it is imposing will limit the effect The comment continued that have demonstrated that young people to a material degree. This review increasing one’s exposure to advertising are aware of, respond favorably to, and demonstrates that FDA’s judgment on and promotions creates persuasion, and are influenced by cigarette advertising. these issues is supported not only by that reducing that exposure will impede In the preamble to the 1995 proposed common sense but by studies, that process. 95 One study 96 found that rule, FDA presented a number of studies anecdotes, history, expert consensus even brief exposure to tobacco examining young people’s exposure to, documents, and empirical data. All of advertising can cause some young recall of, approval of, and response to this evidence provides support that people to have more favorable beliefs cigarette advertising. 99 Collectively, restrictions on the advertising of these about smokers. 97 these studies showed that children who products will directly advance the FDA did not cite the industry’s smoke are more likely to correctly Government’s interest in protecting the expenditures to indicate that the size of identify cigarette advertisements and health of children and adolescents the industry’s advertising budget was, in slogans in which the product names or under 18 years of age. and of itself, a problem, but rather to parts of the slogans have been removed 3. Is There Harm? Does Advertising show that the very size of the campaign, than are children who do not smoke, Affect the Decision by Young People to and the resultant ubiquity and and that exposure to and approval of Use Tobacco Products? unavoidability of the advertising in all cigarette advertising were positively media, created a climate that influences a. In general. In the preamble to the young people’s decisions about tobacco 98 Bonnie, R. J., and B. S. Lynch, ‘‘Time to Up the 1995 proposed rule, FDA stated that use. The ubiquity creates what FDA Ante in the War on Smoking,’’ Issues in Science perhaps the most compelling piece of referred to in the preamble to the and Technology, vol. 11, pp. 33–37, 1994. evidence supporting restrictions was proposed rule (60 FR 41314 at 41343), 99 Chapman, S., and B. Fitzgerald, ‘‘Brand that these products were among the as ‘‘friendly familiarity’’ that makes Preference and Advertising Recall in Adolescent most heavily advertised and widely Smokers: Some Implications for Health Promotion,’’ smoking and smokeless tobacco use American Journal of Public Health, vol. 72, pp. promoted products in America. The seem respectable to young people. In its 491–494, 1982; Aitken, P. P., and D. R. Eadie, agency cited the most recent Federal comments, the advertising agency that ‘‘Reinforcing Effects of Cigarette Advertising on Trade Commission (FTC) figures of coined this phrase in the 1960’s has Under-Age Smoking,’’ British Journal of Addiction, overall expenditures for 1993, that vol. 85, pp. 399–412, 1990; Goldstein, A. O., P. M. Fischer, J. W. Richards, and D. Creten, indicated that over $6.1 billion had been 94 Fischer, P. M., M. P. Schwartz, J. W. Richards, ‘‘Relationship Between High School Student spent by the cigarette and smokeless A. O. Goldstein, and T. H. Rojas, ‘‘Brand Logo Smoking and Recognition of Cigarette tobacco industries to promote their Recognition by Children Aged 3 to 6 years: Mickey Advertisements,’’ Journal of Pediatrics, vol. 110, pp. products in diverse media. These Mouse and Old Joe Camel,’’ Journal of the 488–491, 1987; Botvin, G. L., C. J. Goldberg, E. M. American Medical Association (JAMA), vol. 266, Botvin, and L. Dusenbury, ‘‘Smoking Behavior of include magazines, newspapers, pp. 3145–3148, 1991; Mizerski, R., K. Straughn, and outdoor advertising, point of purchase, Adolescents Exposed to Cigarette Advertising,’’ J. Feldman, ‘‘The Relationship Between Cartoon Public Health Reports, vol. 108, pp. 217–224, 1993; direct mail, in-store, dissemination of Trade Character Recognition and Product Category Klitzner, M., P. J. Gruenewald, and E. Bamberger, nontobacco items with brand Attitude in Young Children,’’ presented at ‘‘Cigarette Advertising and Adolescent identification, and sponsorship of Marketing and Public Policy Conference, 1994. Experimentation With Smoking,’’ British Journal of 95 For example, Lavidge, R. J., and G. A. Steiner, cultural and sporting events. Addiction, vol. 86, pp. 287–298, 1991; Aitken, P. P., ‘‘A Model for Predictive Measurements of D. R. Eadie, G. B. Hastings, and A. J. Haywood, (9) Several comments from the Advertising Effectiveness,’’ Journal of Marketing, ‘‘Predisposing Effects of Cigarette Advertising on tobacco industry and the advertising vol. 25, pp. 59–62, 1961; McGuire, W. J., Children’s Intentions to Smoke When Older,’’ industry criticized FDA’s reliance on ‘‘Persistence of the Resistance to Persuasion British Journal of Addiction, vol. 86, pp. 383–390, the immensity of advertising Induced by Various Types of Prior Belief Defenses,’’ 1991; O’Connell, D. L., H. M. Alexander, A. J. Journal of Abnormal and Social Psychology, vol. 64, expenditures that show that tobacco Dobson, D. M. Lloyd, G. R. Hardes, H. J. pp. 241–248, 1962. Springthorpe, and S. R. Leeder, ‘‘Cigarette Smoking products are heavily advertised. The 96 Pechmann, C., and S. Ratneshwar, ‘‘The Effects and Drug Use in Schoolchildren: II. Factors comments claimed that the size of the of Antismoking and Cigarette Advertising on Young Associated With Smoking,’’ International Journal of industry advertising budget is not Adolescents’ Perceptions of Peers who Smoke,’’ Epidemiology, vol. 10, pp. 223–231, 1981; evidence that it is effective in causing Journal of Consumer Research, vol. 21, pp. 236– Alexander, H. M., R. Calcott, A. J. Dobson, G. R. 251, 1994. Hardes, D. M. Lloyd, D. L. O’Connell, et al., young people to smoke.Conversely, one 97 See also, Hock, J., P. Gendall, and M. Stockdale, ‘‘Cigarette Smoking and Drug Use in comment concluded that: ‘‘Some Effects of Tobacco Sponsorship Schoolchildren: IV. Factors Associated With [h]ighly repetitious ad exposure likely Advertisements on Young Males,’’ International Changes in Smoking Behaviour,’’ International leads to judgment biases in both risk and Journal of Advertising, vol. 12, pp. 25–35, 1993. Journal of Epidemiology, vol. 12, pp. 59–66, 1983. 44476 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations related to smoking behavior and contributing, and therefore material, nonsmoking young people about the intentions to smoke. factor. prevalence, and therefore the (10) Several comments from the c. Evidence concerning acceptability, of smoking. tobacco industry and advertising groups overestimation of smoking prevalence. d. The effects of selected advertising were critical of these studies. The In the preamble to the 1995 proposed campaigns that were effective with comments argued that none of the rule, FDA cited numerous studies children. In the preamble to the 1995 studies demonstrated that recognition finding that children’s misperceptions proposed rule, FDA presented evidence of, exposure to, or approval of, cigarette about the prevalence of smoking are about two campaigns that appear to advertising caused the initiation of related to smoking initiation and the have been particularly effective with cigarette smoking; that smoking in fact progression to regular smoking. 102 children, and a historical analysis of engendered increased exposure to, Further, the evidence indicated that trends in U.S. smoking initiation among approval of and recognition of cigarette cigarette advertising plays a role in 10- to 20-year-olds from 1944 to advertising; and that the samples were leading young people to overestimate 1980. 103 inappropriate and not generalizable. the prevalence of smoking. FDA presented several studies finding One comment took issue with the way (11) Several comments criticized the that the ‘‘Joe Camel’’ campaign had a in which smoking transition was overestimation of smoking prevalence significant impact on underage smoking defined in the Aitken study cited by the studies presented by FDA in its 1995 in the United States, 104 and that a agency. 100 In addition, the same proposed rule. The most common humorous character for Embassy Regal comment questioned the use of self- criticism was that the cited studies did cigarettes named ‘‘Reg’’ was appealing reported measures of cigarette not demonstrate a causal relationship to children in the United Kingdom. 105 advertising exposure in several of the between either exposure to advertising FDA also cited a recent study that studies. or overestimation of smoking prevalence used data from the National Health FDA agrees that none of these studies and intentions to smoke. One comment Interview Survey to study trends in individually is sufficient to: (1) noted that some of the cited studies did smoking initiation among 10 to 20 year Establish that advertising has an effect not necessarily measure olds from 1944 through 1980. 106 The of directly causing minors to use ‘‘overestimation,’’ but instead simply study concluded that tobacco marketing tobacco products; (2) determine measured respondents’ perceptions of campaigns that targeted women resulted directionality—that is, did advertising smoking levels among their peers and in increased smoking uptake in young cause the observed effect, or are smokers adults. Another comment argued that women and girls, but not in adults more observant of advertising (the FDA ignored other variables (such as generally. 107 Klitzner, Aitken, et al., and Alexander whether or not one’s friends smoked) The Joe Camel Campaign—In the studies attempted to control for this that were predictive of smoking status preamble to the 1995 proposed rule, effect); or (3) define terms or disprove or intentions to smoke. the influence of peer pressure in It is true that some of the cited studies 103 Pierce, J. P., E. Gilpin, D. M. Burns, E. Whalen, smoking behavior. did not measure ‘‘overestimation’’ in the B. Rosbrook, D. Shopland, and M. Johnson, ‘‘Does Tobacco Advertising Target Young People to Start However, none of these defects is most literal sense but instead measured Smoking?’’ JAMA, vol. 266, pp. 3154–3158, 1991; sufficient to render it inappropriate for respondents’ perceptions of smoking Fischer, P. M., M. P. Schwartz, J. W. Richards, A. FDA to use the studies as evidence. The levels among peers and adults. O. Goldstein, and T. H. Rojas, ‘‘Brand Logo studies, in fact, present useful insight However, the perceived levels were still Recognition by Children Aged 3 to 6 Years: Mickey Mouse and Old Joe Camel,’’ JAMA, vol. 266, pp. into how advertising affects smoking uniformly higher among those who 3145–3148, 1991; Hastings, G. B., H. Ryan, P. Teer, behavior and when considered with smoked than among those who did not. and A. M. MacKintosh, ‘‘Cigarette Advertising and other studies provide sufficient support The importance of these studies is the Children’s Smoking: Why Reg was Withdrawn,’’ for the agency’s conclusions. For fact that they established differences in British Medical Journal, vol. 309, pp. 933–937, example, one study 101 stated that the 1994; Pierce, J. P., L. Lee, and E. A. Gilpin, perception between smoking and ‘‘Smoking Initiation by Adolescent Girls, 1944 results show that part of the process of through 1988: An Association with Targeted becoming a smoker is to adopt a 102 Chassin, L., C. C. Presson, S. J. Sherman, E. Advertising,’’ JAMA, vol. 271, pp. 608–611, 1991. preferred brand, which the advertising Corty, and R. W. Olshavsky, ‘‘Predicting the Onset 104 Fischer, P. M., M. P. Schwartz, J. W. Richards, and tobacco industries concede is of Cigarette Smoking in Adolescents: A A. O. Goldstein, and T. H. Rojas, ‘‘Brand Logo Longitudinal Study,’’ Journal of Applied Social affected by advertising. Moreover, these Recognition by Children Aged 3 to 6 Years: Mickey Psychology, vol. 14, pp. 224–243, 1984; Collins, L. Mouse and Old Joe the Camel,’’ JAMA, vol. 266, pp. studies clearly indicate that, at a M., S. Sussman, J. Mestel Rauch, C. W. Dent, C. A. 3145–3148, 1991; Pierce, J. P., E. Gilpin, D. M. minimum, advertising plays an Johnson, W. B. Hansen, and B. R. Flay, Burns, E. Whalen, E. Rosbrook, D. R. Shopland, and important role in developing an ‘‘Psychosocial Predictors of Young Adolescent M. Johnson, ‘‘Does Tobacco Advertising Target appealing and memorable image for Cigarette Smoking: A Sixteen-Month, Three-Wave Young People to Start Smoking?’’, JAMA, vol. 266, Longitudinal Study,’’ Journal of Applied Social pp. 3154–3158, 1991. brands. Finally, FDA recognizes that Psychology, vol. 17, pp. 554–573, 1987; Sussman, 105 Hastings, G. B., H. Ryan, P. Teer, and A. M. advertising may not be the most S., C. W. Dent, J. Mestel-Rauch, C. A. Johnson, W. MacKintosh, ‘‘Cigarette Advertising and Children’s important factor in a child’s decision to B. Hansen, and B. R. Flay, ‘‘Adolescent Smoking: Why Reg was Withdrawn,’’ British smoke; however, the studies cited by the Nonsmokers, Triers, and Regular Smokers’ Medical Journal, vol. 309, pp. 933–937, 1994. agency establish that it is a substantial, Estimates of Cigarette Smoking Prevalence: When 106 Pierce, J. P., L. Lee, and E. A. Gilpin, do Overestimations Occur and by Whom?,’’ Journal ‘‘Smoking Initiation by Adolescent Girls, 1944 of Applied Social Psychology, vol. 18, pp. 537–551, through 1988: An Association with Targeted 100 Aitken, P. P., D. R. Eadie, G. B. Hastings, and 1988; 1994 SGR, p. 192–195, citing Burton, et al., Advertising,’’ JAMA, vol. 271, pp. 608–611, 1994. A. J. Haywood, ‘‘Predisposing Effects of Cigarette The L.A./Finland Study; Sherman, S. J., C. C. 107 Id.; See also Pierce, J. P., and E. A. Gilpin, ‘‘A Advertising on Children’s Intentions to Smoke Presson, L. Chassin, E. Corty, and R. Olshavsky, Historical Analysis of Tobacco Marketing and When Older,’’ British Journal of Addiction, vol. 86, ‘‘The False Consensus Effect in Estimates of Uptake of Smoking by Youth in the United States: pp. 383–390, 1991. Smoking Prevalence: Underlying Mechanisms,’’ 1890–1977,’’ Health Psychology, vol. 14, pp. 500– 101 Chapman, S., and B. Fitzgerald, ‘‘Brand Personality and Social Psychology Bulletin, vol. 9, 508, 1995. Burns, D. M., L. Lee, J. W. Vaughn, Y. Preference and Advertising Recall in Adolescent pp. 197–207, 1983; Botvin, G. J., C. J. Goldberg, E. K. Chiu, and D. R. Shopland, ‘‘Rates of Smoking Smokers: Some Implications for Health Promotion,’’ M. Botvin, and L. Dusenbury, ‘‘Smoking Behavior Initiation Among Adolescents and Young Adults, American Journal of Public Health, vol. 72, pp. of Adolescents Exposed to Cigarette Advertising,’’ 1907–1981,’’ Tobacco Control, vol. 4, supp. 1, pp. 491–494, 1982. Public Health Reports, vol. 108, pp. 217–224, 1993. 52–58, 1995. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44477

FDA described R. J. Reynolds’ (RJR) use the most advertised brands across all between ages 10 and 17. 112 This survey of the cartoon Joe Camel as the respondent age groups. 108 found that 97 percent of those youths centerpiece of a very successful Several comments argued that the who recognized ‘‘Joe Camel’’ had campaign that sought to revitalize finding in the Fischer and Mizerski negative opinions about smoking. Camel cigarettes. The preamble to the studies that children recognize Joe Finally, these comments also stated 1995 proposed rule described two sets Camel did not necessarily indicate that that the Joe Camel campaign did not of studies. One set indicatedthat the they liked Joe Camel, let alone that they increase the smoking rates of minors. campaign was so pervasive and juvenile would be more likely to take up The comments cited to data from CDC’s that children as young as 3 to 6 years cigarette smoking. 109 For example, Office of Smoking and Health’s (OSH’s) study ‘‘1993 Teenage Attitudes and old, recognized the Joe Camel character some comments from the tobacco Practices Survey, Public Use Data Tape’’ and knew that he sold cigarettes. The industry discussed the Mizerski study (TAPS II) 113 that show that, contrary to other set of studies provided evidence funded by RJR and criticized FDA’s use of it. FDA, as noted above, had cited this FDA’s assertion and citation to data that the campaign had resulted in from Monitoring the Future, 114 there Camel’s share of the adolescent youth study in the 1995 proposed rule to show that 72 percent of 6 year olds and 52 has not been an increase in youth market rising from below 4 percent of smoking rates as a result of the Joe underage smokers to between 13 and 16 percent of children between the ages of 110 Camel campaign. percent in a short period of time (60 FR 3 and 6 could identify Joe Camel. This exceeded the recognition rates for Conversely, several comments from 41314 at 41333). professional associations and many Ronald McDonald, a character from private citizens supported FDA’s This description of the Camel frequently advertised on television. The tentative conclusion that some tobacco campaign produced over 200 comments comments, however, stated that the advertising campaigns—particularly Joe from the advertising, tobacco, legal and results of the study indicated that while Camel—are very effective with children. publications industries, members of recognition of the cartoon trade Some comments referred to the same legislative bodies, State and local characters and liking of the associated research evidence cited by FDA in the government officials and agencies, product each tended to increase with 1995 proposed rule. age, for Joe Camel, at every age, children health providers and organizations, It is not the agency’s position that the who recognized Joe Camel were more academics, and the general public. The recognition studies provide evidence of latter included many anecdotal likely to report disliking cigarettes than the effect of this campaign upon the references to children’s positive did children who did not recognize Joe smoking habits of children. The Henke reactions to the campaign, including Camel. study found that children age 6 and comments from parents, teachers, and Several comments also cited another younger do not smoke and uniformly children themselves. One comment, study by Henke (the Henke Study), 111 report that they dislike smoking. 115 from a State attorney general, stated that which found results suggesting that However, although young children ‘‘in 1993, after reviewing research even though recognition of brand usually dislike smoking, many of them documenting the extremely powerful advertising symbols increases with age, later do smoke. FDA’s point in using the effect R. J. Reynolds’ ‘Cool Joe Camel’ recognition does not necessarily recognition studies was that advertising ads have on children, I joined with 26 indicate favorable attitudes about a for Camel cigarettes was so pervasive other State Attorneys General in product. Although the children in the and appealing to young people that calling’’ for a ban on that campaign. study were generally able to recognize children saw the advertisements and Joe Camel, 97 percent of the assimilated them even though they were (12) The comments differed radically respondents reported that cigarettes too young to even think about smoking. in assessing the accuracy of FDA’s use were ‘‘bad for you,’’ and all but one of These studies provide important of Joe Camel as evidence of the effect of the minors stated that cigarettes were for evidence of the pervasiveness of tobacco a youth-oriented campaign. A number of adults. Several comments also advertising. comments stated that the Joe Camel mentioned a November 1993 Roper The Henke study (cited by comments campaign was neither directed toward survey of over 1,000 young people opposed to the 1995 proposed rule), children nor effective at reaching them, which reported that although and that FDA’s evidence did not 108 Pierce, J., et al., ‘‘Does Tobacco Advertising recognition of brand advertising support the agency’s position. The Target Young People to Start Smoking? Evidence symbols increases with age, recognition comments criticized the studies cited by from California,’’ JAMA, vol. 266, No. 22, p. 3154– does not necessarily indicate favorable 3158, 1991. FDA and referred to other studies that 109 Fischer, P. M., et al., ‘‘Brand Logo Recognition attitudes toward a product—is subject to they believed supported their by Children Aged 3 to 6 Years: Mickey Mouse and contention that the Joe Camel campaign Old Joe the Camel,’’ vol. 266, pp. 3145–3148, 1991; 112 Roper Starch, ‘‘Advertising Character and was not directed toward children. For Mizerski, R., ‘‘The Relationship Between Cartoon Slogan Survey,’’ pp. 16–17, November 1993 Trade Character Recognition and Product Category (conducted for R. J. Reynolds Tobacco Co.). example, one comment argued there Attitude in Young Children,’’ presented at 113 ‘‘1993 Teenage Attitudes and Practices Survey, was no evidence to suggest that brand ‘‘Marketing and Public Policy Conference,’’ May Public Use Data Tape,’’ CDC, OSH, p. 3, 1993 recognition had any influence on 13–14, 1994. (unpublished data). smoking initiation. This same comment 110 Independent research by Fischer found that 91 114 Johnston, L. D., P. M. O’Malley, and J. G. percent of 6 year-olds and 30 percent of 3 year-olds Bachman, National Survey Results on Drug Use also complained that the studies relied recognized Joe Camel. Fischer, P. M., J. W. from the Monitoring the Future Survey, 1975–1993: on by FDA were ungeneralizable and Schwartz, A. O. Goldstein, and T. H. Rojas, ‘‘Brand vol. I: Secondary School Students, Rockville, MD, were from medical journals, not Logo Recognition by Children Aged 3 to 6 Years: DHHS, Public Health Service (PHS), National marketing journals. Another comment Mickey Mouse and Old Joe the Camel,’’ JAMA, vol. Institutes of Health (NIH), National Institute on 266, pp. 3145–3148, 1991. Drug Abuse (NIDA), NIH Pub. No. 94–3809, 1994. argued that the Pierce study cited by the 111 Henke, L., ‘‘Young Children’s Perceptions of 115 Henke, L., ‘‘Young Children’s Perceptions of agency had demonstrated only that Cigarette Brand Advertising Symbols: Awareness, Cigarette Brand Advertising Symbols: Awareness, Camel and Marlboro were thought to be Affect and Target Market Identification,’’ Journal of Affect and Target Market Identification,’’ Journal of Advertising, in press. Advertising, in press. 44478 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations many of the same criticisms as those the intimidating presence of the product familiarity rates for the other leveled by the tobacco industry at interviewer. Further, the answers to characters. 117 studies cited by FDA, and in fact questions such as ‘‘Do you like this But perhaps the most interesting contains more serious flaws that suggest product or not like this product?,’’ and answers were those provided by the that its results should be interpreted ‘‘Is this product good for you or bad for children who responded that they knew with a great deal of caution. you?’’ can depend to a great extent on that Joe Camel sold cigarettes. In First, the sample employed in this the manner in which they are asked. response to the question, ‘‘[p]lease tell study was both inadequate to test the Overall, the small, nonrepresentative me the ways that you might have seen author’s hypotheses, and is sample, the excessive number of or heard about this character,’’ 51 nongeneralizable to other populations. questionable interviewers, and the percent said the information came from There were only 83 participants in the interview process itself all cast serious a billboard advertisement, 45 percent study; this sample is too small to allow doubt on the value of this study. said from an advertisement in a for adequate power to test the author’s Finally, as noted in the previous magazine, 32 percent said from an fine-grained hypotheses concerning age. paragraph, children almost uniformly advertisement in the store, and 22 In fact, the inadequate sample size led report that smoking is bad, but many of percent said on a tee shirt. A sizable the author to collapse the participants them will smoke in the future in part group said they had seen him on into three age groups for many analyses, due to the appeal created for the television (42 percent). On the other which meant that 3-year olds were product by advertising. hand, all the other characters were placed into the same group as children Additional studies—Two additional identified as having been on television who were 5-and-a-half years old. In studies on this issue of recognition were (88 percent to 100 percent). Recognition addition, participants all were recruited submitted to the docket. The first, an based upon billboard exposure for these from middle class neighborhoods in the article by Joel S. Dubow, 116 merely other characters was between 6 percent same ‘‘small coastal town’’ in Maine. commented on several general studies and 13 percent. Most were not Racial breakdowns were not presented, on recall of advertising. The result was recognized as having been on tee shirts. but it is likely, given the demographics that children and especially adolescents Clearly, cigarettes are marketed of upstate Maine, that whites were remember more about advertising than differently than most consumer overrepresented and African-Americans adults. (FDA agrees with the point that products; nonetheless, whatever the underrepresented. In addition, males advertising is more memorable to marketing mix used by the tobacco were overrepresented. At best, the children.) Further, all the industry, cigarette advertisements are clearly being seen and assimilated by sample represents the population of 3- advertisements tested, and those that those too young to be interested in or to to 8-year-old children in that small town children and adolescents remembered have started smoking. in Maine, but it is not even clear that so well, were either on television or A second type of study, provided this is the case. presented in a movie theater setting. evidence of the effect of this campaign Second, the interview process used to Children and adolescents are more collect data in the study, and even the on adolescent smoking rates. As noted, visually oriented than adults; they one comment disputed that there was a nature of the interviewers themselves, remember what they see on television. greatly limit the conclusions that may rise in young people’s smoking rates However, as noted, commercials for that corresponded to the introduction of be drawn from the study. The study cigarettes are not on television and so used six different interviewers, five of the Joe Camel campaign. The the high recognition rates of Joe Camel significance of this argument is that if whom were college undergraduates, and cannot be accounted for on that basis. one of whom was a child care smoking rates after the introduction of Thus, the study begs the same question the Joe Camel advertising campaign did professional. Each interviewer that is raised by the Mizerski study: participated in but a single training not rise, there is little reason to believe Where did those 3 to 6 year olds see the that the campaign caused young people session before collecting data. Further, cigarette advertisements they found so not all of the interviewers were blind to to take up smoking. This comment memorable? referred to its own analysis of smoking the hypotheses of the study. This is a The answer may be provided by the great concern, considering the very trends, which it stated were derived second recognition study submitted by from TAPS II 118 data and not from the subjective nature of the interview. It was RJR. One study was conducted by Roper not reported whether who the data in Monitoring the Future used by Starch in November 1993 for RJR and 119 interviewer was had significant effects FDA. tested young people’s recognition of FDA has provided a more detailed on the results of the study (and indeed advertising characters. The results of the sample size is probably too small to answer to this comment above. As that study show that Joe Camel was explained there, the agency finds this permit such an analysis), but it is recognized by 86 percent of all 10 to 17 unlikely that all six interviewers comment to be without merit. The year olds, in both aided and unaided Monitoring the Future study is the most conducted the interviews in precisely recall. The characters with greater the same way or elicited the same types consistent source of data available on recognition were all televised youth smoking rates. RJR’s expert, Dr. J. of responses from the participants. characters: the Energizer Bunny, Ronald The interview process itself appeared McDonald, the Keebler Elves, etc. 117 ‘‘Advertising Character and Slogan Survey,’’ to be highly biased and subjective in Recognition scores for those characters pp. 10, 12, 22–23. nature. It is not surprising that the were in the 97 percent to 100 percent 118 ‘‘Current Trends: Changes in the Cigarette children overwhelmingly reported that range. Of more interest, 95 percent of Brand Preferences of Adolescent Smokers—United cigarettes were ‘‘bad for you’’ and were those who recognized Joe Camel knew States, 1989–1993,’’ MMWR, CDC, vol. 43, pp. 577– 581, Aug 19, 1994. meant for adults, given that they were that he sold cigarettes, similar to the being interviewed face-to-face by adult 119 Johnston, L. D., P. M. O’Malley, and J. G. Bachman, National Survey Results on Drug Use strangers. Any potential differences 116 Dubow, J. S., ‘‘Advertising Recognition and from the Monitoring the Future Study, 1975–1993: attributable to recognition of cigarette Recall by Age-Including Teens,’’ Journal of Vol. I; Secondary School Students, DHHS, PHS, advertising were probably masked by Advertising Research, pp. 55–60, Sept/Oct 1995. NIH, NIDA, NIH Pub. No. 94–3809, 1994. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44479

Howard Beales, III, has referred to it as C–3547 (Consent Order, January 31, young adult smokers, aged 18 to 24. ‘‘[t]he most consistent data available’’ to 1995).) These comments stated that the Joe track the incidence of teen smoking over On the other hand, comments from Camel campaign was directed to adult time. 120 Moreover, Dr. Beales noted that two national health organizations smokers, specifically existing male other Government studies are alleged that the fact FTC concluded it Marlboro smokers aged 18 to 24. The ‘‘sporadic’’ and, by implication, cannot was unable to take action against Joe comments stated that the illustrated be relied upon to give an accurate Camel demonstrates that the FTC Act, as character Joe Camel was developed to picture of overall smoking trends. it is currently being interpreted by the reposition the brand by stressing images The Monitoring the Future Study Commission, is not sufficient to protect and characteristics, such as the ‘‘Smooth indicates that from 1987 to 1993, the 30- American youth from inappropriate Moves’’ image, which appeal to the day smoking rates and daily smoking tobacco advertising and that FDA, young adult, particularly male, rates for male high school seniors therefore, needs to take action under its Marlboro smoker. increased steadily, although with authority. Industry comments further stated that variations in some years. 121 During that The industry comments the company conducted no market same period, Camel’s share of the youth misapprehend FDA’s citation to the Joe research on nonsmokers, and that the market rose from below 4 percent to Camel campaign. As noted above, FDA campaign reached adult smokers aged around 13 percent (60 FR 41314 at cited to numerous studies that had been 18 to 24 years. One comment postulated 41330). performed by independent researchers that it is merely the cartoon form of Joe These data do not absolutely prove on children’s recognition of the main Camel that causes people to mistakenly that Camel advertising ‘‘caused’’ a rise character of a youth oriented advertising believe that Joe Camel is child-oriented. in youth smoking. However, they do campaign (60 FR 41314 at 41333). The It stated further that many adult provide further evidence that the Joe agency also cited to several documents products are advertised using illustrated Camel campaign had an effect on youth that it had obtained that indicated that characters, such as the Pink Panther for smoking rates. RJR may have intended for its Joe Camel fiberglass insulation, Garfield the Cat for (13) Comments from the tobacco campaign to appeal to and attract young a hotel chain, Mr. Clean for household industry maintained that FTC’s people (60 FR 41314 at 41330). FDA’s products, and the Peanuts characters for investigation, which failed to produce discussion of the marketing success of life insurance. Moreover, RJR stated that ‘‘evidence to support’’ FTC action the Joe Camel campaign is not intended it made efforts to ensure that the ad against RJR for the Joe Camel campaign, to suggest that FDA had found or copy and promotional activity for Joe should have been dispositive of the concluded that the Joe Camel campaign Camel would not appeal to minors. It issue. Therefore, the comments argued, violated any law, but that FDA had said that a skateboard promotion it is inappropriate for FDA to use the found in that success—tripling Camel’s proposed by an advertising agency was campaign as evidence that advertising share of the youth market—support for rejected by the company because it was causes children to start to smoke. The restricting such activities in the future assumed that skateboarding is comments maintained that the FTC through rulemaking. disproportionately engaged in by review included the same studies relied Moreover, FTC did not disagree with children and adolescents. Similarly, upon by FDA to condemn the Joe Camel FDA’s use of the campaign. In its marketing research included 25 to 34 campaign. comment to FDA on the 1995 proposed year olds ‘‘to serve as a safety check to Comments stated further that rule, FTC stated, ‘‘This decision [by FTC make sure that the concept appeal did Congress has vested jurisdiction in FTC to close the RJR investigation without not skew too young.’’ to prosecute unfair and deceptive issuing a complaint] does not contradict These comments further stated that advertising of tobacco products, and FDA’s conclusion.’’ FTC continued that Joe Camel advertisements were directed that it has sole jurisdiction in this area. its failure to initiate legal action did not to, and reached, the intended market. (See Federal Trade Commission Act (the ‘‘mean that cigarette and smokeless Examples of publications in which the FTC Act) (15 U.S.C. 41).) These tobacco advertising, in the aggregate, is Joe Camel advertisements were placed comments noted further that FTC has not one of a number of factors that are Cycle World, Penthouse, shown its ability to fulfill its ‘play[s] an important role in a youth’s Gentleman’s Quarterly, and Road and responsibilities in this area, citing two decision to use tobacco.’’’ 122 Track. Joe Camel’s share of 18 to 24 year recent consent agreements secured by (14) The other citation to the Joe olds increased by 6.9 percentage points, FTC. One was against RJR for Camel campaign (60 FR 41314 at 41330) from 3.2 in 1986, the year before Joe advertising that disputed some of the utilized RJR’s documents to illustrate Camel’s inception, to 10.1 by the end of health risks of smoking. (See In the the youth focus of one advertising 1994. The comment stated that Camel’s matter of R. J. Reynolds Tobacco campaign through use of the company’s and Marlboro’s growth came at the Company, 113 FTC 344 (1990).) The own documents. Some comments expense of other brands. These other was against American Tobacco received from the tobacco industry comments are consistent with the Company for allegedly misleading (including one from RJR), trade industry’s assertion that this is the statements about tar and nicotine associations, and some individuals whole point of cigarette advertising: to ratings. (See In the matter of The disagreed with this use and stated that encourage current smokers to buy the American Tobacco Company, Dkt. No. the Camel campaign was designed to, advertised brand either by switching and did in fact, attract the attention of brands or remaining loyal to their 120 Beales, J. H., ‘‘Teenage Smoking: Fact and existing brands. (This comment states Fiction,’’ The American Enterprise, vol. 21, March/ 122 FTC analyzed the complaint recommendation that because there is no evidence that April 1994. before it under its unfairness jurisdiction. An action smoking rates have risen among 121 Johnston, L. D., P. M. O’Malley, and J. G. is unfair if it causes substantial consumer injury, adolescents, there cannot be a reason to Bachman, National Survey Results on Drug Use without offsetting benefits to consumers or from the Monitoring the Future Study, 1975–1994, competition, which consumers cannot reasonably believe that Camel’s success among Vol. I: Secondary School Students, DHHS, PHS, avoid. (International Harvester, 194 FTC 949, 1070, adolescents came from new, as opposed NIH, NIDA, NIH Pub. No. 94–3809, 1995. 1984.) to existing, smokers. See section III.B. of 44480 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations this document for a refutation of the some period of time do the physiological then gives advice on the type of industry assertion that smoking rates ‘‘satisfactions’’ and habituation become advertising campaign that would appeal among adolescents are static.) apparent and needed. Indeed, the first to the presmoker group based on these In contrast, comments from health smoking experiences are often unpleasant reasons: until a tolerance for nicotine has been organizations and concerned citizens A. Group Identification—Pre-smokers learn developed. * * * [I]f we are to attract the stated that Joe Camel has been to smoke to identify with and participate in nonsmoker or presmoker, there is nothing in shared experiences of a group of associates. successful in attracting underage this type of product that he would currently smokers. These comments further stated If the majority of one’s closest associates understand or desire. We have deliberately smoke cigarettes, then there is strong the belief that the campaign was played down the role of nicotine, hence the psychological pressure, particularly on the intended to attract children, citing the nonsmoker has little or no knowledge of young person, to identify with the group, methods of advertising and promotion what satisfactions it may offer him and no follow the crowd, and avoid being out of employed as evidence of its intention to desire to try it. Instead, we somehow must phase with the group’s value system even appeal to children. For example, one convince him with wholly irrational reasons though, paradoxically the group value system comment stated: ‘‘* * * T-shirts and that he should try smoking, in the that may esteem individuality. This provides a he will for himself then discover the real large incentive to begin smoking. caps, like those marketed with ‘Joe ‘‘satisfactions’’ obtainable. 123 Camel’ are found in disproportionate In 1973, the same author reported in * * * * * numbers of children.’’ another memo, ‘‘Research Planning [The brand’s] promotion should emphasize FDA continues to believe that RJR Memorandum on Some Thought about togetherness, belonging and group documents do illustrate the creation of acceptance, while at the same time New Brands of Cigarettes for the Youth emphasizing individuality and ‘‘doing ones and execution of a decidedly youth- Market,’’ his thoughts on how to acquire oriented campaign. own thing.’’ a portion of the important youth market: B. Stress and Boredom Relief—The teens FDA finds that previously [W]e should simply recognize that many or and early twenties are periods of intense confidential RJR documents provide most of the ‘‘21 and under’’ group will psychological stress, restlessness and convincing evidence of the company’s inevitably become smokers, and offer them boredom. Many socially awkward situations intention to attract young smokers and an opportunity to use our are encountered. [the documents mentions so-called presmokers to its Camel brand. brands.Realistically, if our Company is to smoking gives you something to do with your These documents, identified as RJR survive and prosper, over the long-term we hands—find an etc.] marketing documents and submitted must get our share of the youth market. In my C. Self-Image Enhancement—The fragile, opinion this will require new brands tailored during the comment period, reflect a developing self-image of the young person to the youth market; I believe it unrealistic needs all of the support and enhancement it company policy that in order to grow to expect that existing brands identified with and ensure a profitable future, the can get. Smoking may appear to enhance that an over-thirty ’establishment’ market can self-image in a variety of ways. [Values company must develop new brands that ever become the ’in’ products with the youth mentioned in the document include would appeal to and capture a share of group. Thus we need new brands designed to adventurousness, adult image.] If one values the youth market. These young people be particularly attractive to the young certain characteristics in specific individuals were described as ‘‘presmokers’’ and smoker, while ideally at the same time being or types and those persons or types smoke, 124 ‘‘learners’’ in RJR marketing language appealing to all smokers. then if one also smokes he is psychologically and were identified as being 14 to 18 Mr. Teague then described the factors a little more like the valued image. This self- year olds. he thought must be taken into account image enhancement effect has traditionally While the documents concerning the in designing a brand that would attract been a strong promotional theme for cigarette Camel campaign (focus group reports, young people: brands and should continue to be etc.) submitted by RJR to the rulemaking Several things will go to make up any such emphasized. new ‘‘youth’’ brands, the most important of D. Experimentation—There is a strong docket do not identify the under-18 which may be the image and quality-which drive in most people, particularly the young, group as the company’s target, the are, of course, interrelated. The questions to try new things and experiences. This drive implication arises from the company- then are: What image? and What quality? no doubt leads many presmokers to submitted documents that the Camel Perhaps these questions may best be experiment with smoking, simply because it campaign was the logical outgrowth of approached by consideration of factors is there and they want to know more about the planning and forecasting contained influencing pre-smokers to try smoking, learn it. A new brand offering something novel and in the heretofore confidential marketing to smoke and become confirmed smokers. * different is likely to attract experimenters, documents. * * For the pre-smoker and ‘‘learner’’ the young and old, and if it offers an advantage In a 1972 memo entitled ‘‘Research physical effects of smoking are largely it is likely to retain those users. 126 Planning Memorandum on the Nature of unknown, unneeded, or actually quite In March 1976 R. J. Reynolds’ Research unpleasant or awkward. The expected or Department created a memo entitled, the Tobacco Business and the Crucial derived psychological effects are largely Role of Nicotine Therein,’’ the author, ‘‘Planning Assumptions and Forecast for responsible for influencing the pre-smoker to the Period 19**–1986 for R. J. Reynolds Claude Teague Jr., Assistant Director of try smoking, and provide sufficient Research and Development, wrote: motivation during the ‘‘learning’’ period to Tobacco Company.’’ Under a heading, [I]t may be well to consider another aspect keep the ‘‘learner’’ period going, despite the The Tobacco Industry and R. J. of our business; that * * * the factors which physical unpleasantness and awkwardness of Reynolds Tobacco Company— induce a presmoker or nonsmoker to become the period. * * * 125 subheading E. Products—the memo a habituated smoker. * * * He does not start Mr. Teague continues with some states: smoking to obtain undefined physiological reasons why young people smoke and The present large number of people in the gratifications or reliefs, and certainly he does 18–35 year old age group represents the not start to smoke to satisfy a nonexistent 123 Teague, C., Research Planning Memorandum greatest opportunity for long-term cigarette craving for nicotine. Rather, he appears to on the Nature of the Tobacco Business and the sales growth. Young people will continue to start to smoke for purely psychological Crucial Role of Nicotine Therein, pp. 4–5, 1972. become smokers at or above the present rates reasons—to emulate a valued image, to 124 Teague, C., Research Planning Memorandum during the projection period. The brands conform, to experiment, to defy, to be daring, on Some Thought About New Brands for Cigarettes which these beginning smokers accept and to have something to do with his hands, and for the Youth Market, p. 1, 1973. the like. Only after experiencing smoking for 125 Id., pp. 1–2. 126 Id., pp. 6–7. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44481

use will become the dominant brands in Documents submitted by RJR in its The YAS group also relates to future years. Evidence now available * * * comment detail its plans for developing excitement and fun, noted the White indicate[s] that the 14 to 18 year old group and promoting Joe Camel as the Paper: ‘‘Younger adults center their is an increasing segment of the smoking spokescharacter for the brand. In lives on having fun in every way population. RJR must soon establish a language reminiscent of the 1973 possible and at every time possible. successful new brand in this market if our position in the industry is to be maintained Teague memo, RJR reemphasized the Their definition of success is ‘enjoying over the long term. importance of the young adult smokers today’ which differentiates them from (Emphasis omitted.) 127 (which RJR nicknamed the ‘‘YAS’’)— older smokers. Advertising which By the mid to late 1980’s, RJR was noting that only 5 percent of smokers incorporates an ‘exciting’, ‘fun’, marketing its newly revitalized Camel start after age 24. 130 The paper noted ‘humorous’ theme provides a way for brand to ‘‘young adults’’ 18 to 20 years that 40 percent of the ‘‘virile’’ segment these smokers to ‘feel good’ about the old. According to an internal memo have made a brand choice at age 18— message.’’ cited in the Wall Street Journal, 128 the a brand to which they will be loyal for By 1988 RJR was testing its new ideas business plan for 1990 had a single- years or throughout their smoking about Camel. It described the results in minded focus on getting young adults, career. Thus, although this document a Marketing Research Report, entitled especially the 18 to 20 year olds, to describes the YAS as 18 to 24 year olds, Camel ‘‘Big Idea’’ Focus Groups— smoke Camels. The brand was to be the company’s interest appears to have Round II dated September 21, 1988, and refocused on young adult smokers, aged been with those younger than 18 who written by M. R. Bolger. The group was 18 to 24 with a strong emphasis on are in the process of selecting their first composed of male Marlboro smokers males 18 to 20. 129 brand, the 14 to 18 year olds described ages 18 to 34. Two groups were men 18 by Teague. to 20, two groups were 21 to 24, and one 127 An RJR spokesperson referred to these In addition, the problem, the White group was age 25 to 34 to serve as a documents and did not dispute their validity. (See Paper emphasized, was that Camel ‘‘safety check’’ to make sure the concept Levy, D., ‘‘RJR Memo Targeted Teen Market,’’ USA needed a facelift to make it relevant to did not skew too young. Various themes Today, p. 1D, October 6, 1995; ‘‘Report: Teen this YAS group. Research, they noted, were tested and one, ‘‘Smooth Moves,’’ Cigarettes Eyed,’’ AP Online, October 4, 1995.); Planning Assumptions and Forecast for the Period indicates that YAS see advertising as was received best by the younger 197*–1986 for R.J. Reynolds Tobacco Company, ‘‘younger adult oriented’’ when it is portion of the target—those that had Research Department, 1976. speaking directly to them. Therefore, fewer responsibilities, are single, and go 128 Freedman, A. M., and S. L. Huang, ‘‘Reynolds advertising needed to be developed to to parties. The focus groups also showed Marketing Strategy Sought to Get Young Adults to Smoke Camels,’’ Wall Street Journal, p. B10, col. 3, speak to the target audience, to appeal that premiums (nontobacco items) November 2, 1995. to the ‘‘hot buttons’’ of young people performed best among the younger 129 A 1984 strategic research document, authored such as to ‘‘escape into imagination.’’ portion of the group. Older smokers by Diane Burrows of R. J. Reynolds and entitled ‘‘Fantasy to these smokers can mean were more discerning and saw the items ‘‘Younger Adult Smokers: Strategies and imagining a place to escape to or an as being of little value to them. 131 Opportunities,’’ came to FDA’s attention as a result of its inclusion as an exhibit attached to a brief filed image of yourself that is better than What resulted from this research was by the State of Minnesota and Blue Cross in Ramsey reality.’’ the Joe Camel campaign, an unusually County District Court in litigation involving the successful effort, particularly with the seven tobacco companies. The document was also These ‘‘first brands’’ were identified as those group that RJR research documents described in numerous press accounts of the event which appeal to the 18-year-old smoker rather than discussed—the 14 to 18 year olds. Thus, (e.g., Phelps, D., and J. Hodges, ‘‘Suit: Kids were switchers ages 19–24. focus of Reynolds strategy. Documents filed in RJR appears to have used its research on The memo identifies additional factors that had state’s lawsuit against the tobacco industry show 18 to 20 year olds to its advantage with to be considered in this calculus: (1) Although 18- how R. J. Reynolds targeted young smokers as to 24-year-olds account for a very small part of the 14 to 18 year old group—a group critical to the industry’s future,’’ Star Tribune, 1A, market share, this age group represents the future who shares many of the same interests July 11, 1996; Worklan, P., ‘‘R. J. Reynolds Secret of a brand. Those young, brand loyal smokers who Report Targets Young Adult Market,’’ Chicago and ‘‘hot’’ buttons of the older group. now consume very few cigarettes, will consume Tribune, N19, July 11, 1996.) Although the agency These internal documents complement more cigarettes with age and generally remain loyal has not relied on this memo as part of the those cited in the preamble to the 1995 to this first brand, its brand family or to the justification for this rule, FDA is citing to it here proposed rule. In the preamble to the because it is relevant to the issues discussed. company; (2) Although young smokers are easier to switch than older smokers, a brand can not rely 1995 proposed rule, FDA described two The memo indicates that by 1984, R. J. exclusively on switching younger smokers to letters from RJR sales managers about Reynolds was beginning to conduct research on the produce a lasting brand equity—the major and most concepts detailed above that were developed during the placement of YAS [Camel] important share advantage available to a company the 1970’s. The memo describes the problem facing merchandise. Both letters stated that is to have a cigarette brand relevant to young people Reynolds at that time of declining market share and and accepted by them as their ‘‘first brand.’’ high school neighborhoods were a likely then proposed a solution: ‘‘RJR’s consistent policy location for YAS. RJR, in its comments is that smoking is a matter of free, informed, adult The reports’s recommendation was to research choice which the Company does not seek to and capitalize on the factors and strategies which to the proposed rule, stated that those influence. However, in order to plan our business, have been successful with youth brands of the past. two letters were mistakes. However, we must consider the effects those choices may This would require devoting substantial resources these latest documents rebut RJR’s have on the future of the Industry. Furthermore, if to identifying and tracking values, wants, and comment. The mistake made by the two media effectiveness relevant to younger people. we are to compete effectively, we must recognize sales representatives was in speaking the imperative to know and meet the wants of those Because of the sensitivity of this young market, the who are 18 and have already elected to smoke, as memo continued: ‘‘brand development/ too clearly of the company’s intention. well as those of older smokers (emphasis added).’’ management should encompass all aspects of the ‘‘Reg’’—The second campaign The memo recognizes several important facts: marketing mix and maintain a long term, single- reviewed by FDA was the ‘‘Reg’’ ‘‘The renewal of the market stems almost entirely minded focus to all elements-product, advertising, campaign used in the United Kingdom. name, packaging, media, promotion and from 18-year-old smokers. No more than 5% of One comment took issue with FDA’s smokers start after age 24.’’Moreover, the memo also distribution. (Emphasis omitted)’’ recognizes that: ‘‘[t]he brand loyalty of 18-year-old This must include, the memo stated, a careful claim that the ‘‘Reg’’ campaign was smokers far outweighs any tendency to switch with emphasis on the ‘‘imagery and product positives’’ age. Thus, the annual influx of 18-year-old smokers relevant to ‘‘younger adults.’’ 131 Bolger, M. R., ‘‘Camel ‘Big Idea’ Focus provides an effortless, momentum to successful 130 ‘‘White Paper,’’ Camel Advertising Groups—Round II,’’ Marketing Research Report, ‘first brands’.’’ Development, p. 1, undated. September 21, 1988. 44482 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations particularly effective with British of the comments from the tobacco The same comment also criticized the adolescents and argued that the study industry claimed that cigarette and study indicating that children who that FDA relied on was based on smokeless tobacco manufacturers smoke as few as one cigarette per week unreliable evidence and is not market their products solely to adults. can identify a preferred brand. In applicable to American adolescents. The They disputed the findings of studies, addition to pointing out that the study comment contended that there was no cited by FDA in the preamble to the did not demonstrate a causal evidence to show that liking the ‘‘Reg’’ 1995 proposed rule, examining relationship and that the sample was character caused children to smoke and advertising campaigns that had been not generalizable, the comment argued argued instead that children who particularly effective with children. In that: smoked came to like ‘‘Reg.’’ The addition, while the comments * * * other research has found that comment also argued that the acknowledged that younger smokers are adolescents smoke a smaller number of recognition task, described in the study, the intended targets for some cigarette different brands than do adults, [the was too suggestive and biased, and advertising, they argued that only researchers] tested only the correlation suggested that the young people were younger smokers of legal age were between adolescent smoking and advertising primed and pressured to say they had targeted. recognition. [The researcher] did not know In the preamble to the 1995 proposed which brands the adolescents in this study seen the advertisements during ‘‘games’’ smoked. [emphasis in original] that they say took place before the rule, FDA presented a number of studies Contrary to the comment, these recognition task. showing that youth cigarette brand studies are evidence that, when First, this comment is wrong. Games choices are related to advertising. 134 considered together, form a coherent were played during another portion of These studies showed that young people pattern that establishes the role that the study, not the one referenced. The smoke many fewer brands than adults, advertising plays in young people’s comment confused the quantitative and that their choices are directly smoking behavior. survey with the qualitative. Second, related to the amount and kind of The CDC study 138 provides evidence evidence from England about youth advertising. While 86 percent of youths of young people’s smoking choices. smoking habits is no less probative than who smoke choose the three most 135 Neither the fact that the data included evidence from the United States, as it advertised brands, the most 18-year-olds nor the question of provides insights into children’s commonly smoked cigarettes (39 directionality is sufficient to invalidate smoking behavior. percent) among adult smokers are Smoking Trends—A few comments brandless (i.e., private label, generics, or the study’s utility. While the data were critical of the study of trends in plain packaged products). 136 Another available for the study contained 18- the smoking initiation study, which study found that children who smoke as year-old use, there is little difference found a temporal relationship between few as one cigarette per week can between 17- and 18-year-old cigarette advertising targeted at women and identify a preferred brand. 137 use; certainly not enough to invalidate rising initiation rates among girls and One comment argued that the CDC the general finding that underage and 18-year-old smokers choose the three young women. 132 The principal study that found that most children most heavily advertised brands. The criticisms were that the authors failed to smoke the three most advertised brands issue of directionality of the results is examine the actual advertising showed only a correlation between no more important. The results showed campaigns in question, that FDA failed advertising expenditures and brand that young people chose cigarettes that to consider alternative explanations for preferences, and that the data did not are heavily advertised, not ones that are the study’s findings, and that the study’s even support this correlation cheap or low tar, etc. The CDC study, as measures were subjective and consistently. The comment noted that noted, did not prove causality—it was unreliable. the data on which these findings were In response, the agency reiterates that based included 18 year olds, who are of not intended to and it did not. it did not cite to this study, or any one legal age to smoke. The comment also The comment’s criticism of the study, study, as ‘‘proof’’ that advertising during contended that the data did not allow a which involved children who smoke as this period ‘‘caused’’ a rise in smoking determination of what came first: few as one cigarette a week, is not initiation. The study was provided as Changes in advertising expenditures or correct. The researchers did know the one example of targeted marketing being changes in brand preference brands that the adolescents in the study ‘‘associated’’ with increases in cigarette (directionality). smoked. ‘‘Fifty-two percent of all consumption among young people. 133 A students who had used cigarettes 134 logical inference to be drawn from the ‘‘Current Trends: Changes in the Cigarette identified a single preferred brand * * Brand Preferences of Adolescent Smokers—United *. One brand of cigarettes (Marlboro) cumulative effect of such studies is that States, 1989–1993,’’ MMWR, CDC, vol. 43, pp. 577– advertising does play a role in young 581, August 19, 1994; Goldstein, A. O., P. M. accounted for 76% of all preferred people’s smoking behavior. Fischer, J. W. Richards, and D. Creten, brands.’’ The study’s finding is e. Evidence that youth brand choices ‘‘Relationship Between High School Student consistent with every other study of Smoking and Recognition of Cigarette adolescent brand preference: Marlboro are related to advertising. Virtually all Advertisements,’’ Journal of Pediatrics, vol. 110, pp. 488–491, 1987. is the number one brand choice. 132 Pierce, J. P., L. Lee, and E. A. Gilpin, 135 ‘‘Current Trends: Changes in the Cigarette The effect of advertising on brand ‘‘Smoking Initiation by Adolescent Girls, 1944 Brand Preferences of Adolescent Smokers—United choice by young people is important. It through 1988, An Association with Targeted States, 1989–1993,’’ MMWR, CDC, vol. 43, pp. 577– shows that young people choose the Advertising,’’ JAMA, vol. 271, pp. 608–611, 1994. 581, August 19, 1994. imagery of the two or three most highly 133 136 A more sophisticated example of this type of Teinowitz, I., ‘‘Add RJR to List of Cig Price advertised brands to smoke, brands that time series analysis was published by the FTC to Cuts,’’ Advertising Age, pp. 3 and 46, April 26, show that health claims in food advertising could 1993. provide specific definitions of a user. have a beneficial effect upon people’s consumption 137 Goldstein, A. O., P. M. Fischer, J. W. Richards, of high fiber breakfast cereals. (Ippolito, P., and A. and D. Creten, ‘‘Relationship Between High School 138 ‘‘Current Trends: Changes in the Cigarette Mathios, Health Claims in Advertising and Student Smoking and Recognition of Cigarette Brand Preferences of Adolescent Smokers—United Labeling, A Study of the Cereal Market, Bureau of Advertisements,’’ Journal of Pediatrics, vol. 110, pp. States, 1989–1993,’’ MMWR, CDC, vol. 43, pp. 577– Economics Staff Report, FTC, August 1989.) 488–491, 1987. 581, August 19, 1994. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44483

The choice permits the user to adopt the opinions of the Canadian court are a Samuelson 140 to show that advertising image created by the brand. basis for rejecting actions and laws can increase the market demand for f. The Canada advertising case. A targeting lawful tobacco advertising, tobacco products. The study measured series of comments raises new issues particularly FDA proposed regulations. the effect on brand share and market not considered in the preamble to the Moreover, the comments said that the size of advertising for low and high-tar 1995 proposed rule. Canadian court concluded that the cigarettes. The results indicated that The September 1995 decision of the proposed prohibition on tobacco advertising for low tar cigarettes did Supreme Court of Canada on the advertising could not be sustained increase overall market size. Canadian Tobacco Products Control Act because it ‘‘failed the rational The study looked at the question of (TPCA), 139 enacted to regulate tobacco connection test’’ in that there was no the effect of advertising not from the advertising and promotion in Canada, causal connection ‘‘whether based on viewpoint of the consumer, but from the prompted several comments, primarily direct evidence or logic and reason’’ producer’s perspective—how much from the tobacco industry. The TPCA justifying the law (100 C.C.C. 3d. 449, should a firm invest in advertising in banned all tobacco advertising, Charter of Rights). order to maximize its profits. A restricted the promotion of tobacco In contrast, one comment suggested predicate assumption is that a products and required packaging to that the ruling on this case is consistent manufacturer would not invest in display prominent unattributed health with FDA’s emphasis on reducing image advertising if the cost did not produce messages and toxic constituent advertising directed towards young a return. This study also was conducted information. As soon as the TPCA was people. The comment stated that FDA’s by independent economists and enacted in 1988, the tobacco companies focus fits the Canadian court’s decision appeared in a peer reviewed journal. challenged the act as unconstitutional. and had the Canadian government Several comments criticized the study On September 21, 1995, the Supreme restricted image advertising rather than as an ‘‘ambitious failure.’’ The industry Court of Canada found that Parliament banning all advertising, it would have comments criticized the study on the had the criminal law power to legislate upheld the regulation. following grounds: The study regarding the advertising and promotion FDA does not find the decision of the inappropriately measures the level of of tobacco products, but that, based on Canadian court to be contrary to its advertising in messages and not in the record developed in the court below, findings. The Canadian court did expenditures, and the study had the restrictions on advertising and recognize that image or lifestyle inadequacies in some assumptions and promotion violated the tobacco advertising can affect overall in the data and these flaws thus call into companies’ freedom of expression consumption. Moreover, contrary to the question the study’s results. Moreover, guaranteed to all Canadians. Several of comment’s suggestion, the court the comments alleged that misallocation the key sections of the TPCA were specifically recognized that: ‘‘measures of advertising expenditures may have struck down by the Canadian Supreme * * * to prohibit advertising aimed at biased the results. The results of the Court. The Canadian court ruled that the children and adolescents * * * would be study show that advertising for low tar government had failed to demonstrate a reasonable impairment of the right to cigarettes had a beneficial effect on the that the restraints regarding advertising, free expression, given the important overall level of consumption, but that promotion, and labeling were objective and the legislative context’’ the same effect did not occur for high tar reasonable and justified restrictions on (100 C.C.C. 3d. 449). cigarette advertising. The comments freedom of expression. Finally, FDA has considered a much noted that young people do not The Canadian court also found that larger quantity of evidence than that consume low tar cigarettes, and the government had failed to which was before the Canadian court, therefore the results are irrelevant to a demonstrate that less intrusive including the evidence concerning discussion of youth smoking. Moreover, measures, falling short of a complete nontobacco item ownership by young the comments said that the results are restriction on advertising and people and the materials received not generalizable to all cigarette promotion, would be less effective in during the comment period. The latter advertising. Finally, the comments said protecting young people from included the heretofore confidential or that population growth may have inducements to use tobacco products. secret documents from RJR’s marketing accounted for the finding of a Further, the Canadian court found that department and also those concerning relationship between advertising and the government had failed to show that the results of RJR’s focus groups, which consumption. unattributed health messages were showed that interest in nontobacco The agency disagrees with the required to achieve its objective of items was highest among the young. criticisms of this study and finds reducing tobacco consumption. Finally, Thus, FDA considered a much fuller instead that it is persuasive evidence of the Canadian court decided that there record than that before the Canadian the effects of tobacco advertising for was no rational connection between court. Moreover, the comment period low-tar cigarettes on the overall market. prohibiting a tobacco product trademark provided the agency with additional In answer to the first criticism, the study on a nontobacco product and the evidence concerning various proposed used messages instead of expenditures objective of the TPCA. The decision left provisions. FDA’s final rule is thus as a measure of advertising in order to the advertising and promotion of based on a very complete and full increase the accuracy of the analysis. It tobacco products substantially record and its decisions are well is the messages actually seen by a unregulated in Canada. consumer, and not the amount spent by Because of some similarities between justified. g. Roberts and Samuelson. the company on advertising, that is the Canadian federal tobacco control Concerning the effect of advertising on more relevant in assessing the effect of strategy and FDA’s proposed regulation, consumption patterns, one study not advertising. If the cost of advertising some comments suggested that the considered by the court in Canada, but 140 Roberts, M. J., and L. Samuelson, ‘‘An 139 RJR-MacDonald, Inc. v. Canada (Attorney cited by FDA in the preamble to the Empirical Analysis of Dynamic, Nonprice General), S.Ct. of Canada, 100 C.C.C. 3d 449, Sept. 1995 proposed rule, was an econometric Competition in an Oligopolistic Industry,’’ Rand 21, 1995. analysis employed by Roberts and Journal of Economics, vol. 19, pp. 200–220, 1988. 44484 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations were to go up, and thus firms would should be equivalent to that of whites, tobacco by young men, whose use have to pay more for fewer messages, we because African-American young people became double that of men over 50. The would not expect to find a greater effect see as much or more cigarette preamble to the 1995 proposed rule on consumers, which was the effect advertising than do whites. However, attributed that increase to the concerted shown by the study. smoking rates for young African- advertising and marketing efforts of The second issue, that there were Americans are much lower than for UST. flaws in the study, is similarly not fatal. white young people. One comment As detailed more fully in the As noted in section VI.D.4.d. of this further indicated that African-American preamble to the 1995 proposed rule (60 document, each study utilizes the best young people’s decision to smoke may FR 41313 at 41331), officials at UST data and methods available at the time. be more responsive to peer influence held a marketing meeting in 1968 This may not be the perfect study, but and parental and community advice where, according to the Wall Street its flaws are minor and do not affect its than cigarette advertising. Journal, the vice-president for marketing usefulness. Moreover, one major It is unclear why African-American said, ‘‘We must sell the use of tobacco criticism was with the advertising young people do not use tobacco at the in the mouth and appeal to young variable and as noted more fully in same rate as white young people. It is people *** we hope to start a fad.’’ section VI.D.6.a. of this document data surely not that their parents smoke less; Another official attending the same on advertising expenditures are the smoking rate among African- meeting was quoted as saying, ‘‘We generally considered trade secrets by the American adults is 26 percent, almost were looking for new users-younger companies. Thus, independent the same rate as for white adults. 141 people who, by reputation, wouldn’t try researchers have to use whatever data Whatever may be the reason (and it is the old products.’’ are available, even if they are not unknown) for the lower smoking rates Later, Louis Bantle, the chairman of perfect. If the industry wanted to ensure among youth among that segment of the the board of UST, described the reason more complete studies, it could release population, it does not provide that so many young males use old data relevant to advertising sufficient evidence against advertising smokeless tobacco, ‘‘I think there are a expenditures. restrictions when other evidence shows lot of reasons, with one of them being Third, the comments complain that that advertising does affect children’s that it is very ‘macho;.’’ UST’s the focus of the study, low-tar decisions to use tobacco products. advertising utilized the themes that play advertising, limits the applicability of i. The evidence relating to smokeless well with ‘macho’ boys—rugged the results. However, the fact that this tobacco. A couple of comments argued masculine images—and utilized heros to study found that advertising for low-tar that FDA had presented insufficient this group—professional athletes. Bantle cigarettes increased the market is not a evidence regarding the effect of described the success of this program limitation that restricts the results to advertising on the decision to use thus: ‘‘In Texas today, a kid wouldn’t that one example. The importance of the smokeless tobacco. One joint comment dare to go to school, even if he doesn’t results is that the study shows that from the smokeless tobacco use the product, without a can in his advertising in this oligopolistic industry manufacturers stated: Levis.’’ can affect the market size. The purpose The studies cited by the agency regarding The UST program also utilized a cigarette advertisements and smoking are all promotional program that it called of dividing the market into high- and either highly flawed, biased, or simply do not low-tar advertising was an attempt to support the agency’s hypothesis. * * * Even ‘‘graduation strategy’’: isolate the effect of advertising for each more troubling—and from the standpoint of UST distributes free samples of low of the product classes. sustaining its legal obligation, a fatal flaw— nicotine-delivery brands of moist snuff and Fourth, the comments expressed is the agency’s audacity to propose a virtual instructs its representatives not to distribute concern about the possibility of ban on advertising for smokeless tobacco free samples of higher nicotine-delivery products without even deigning to build a brands. The low nicotine-delivery brands population growth as an intervening also have a disproportionate share of factor. Population growth should not case. The comment is correct that there is advertising relative to their market share. For have affected the results as growth example, in 1983, Skoal Bandits, a starter less evidence available regarding would have affected the high-tar market brand, accounted for 47 percent of UST’s as well as the low-tar market, a smokeless tobacco advertising practices advertising dollars, but accounted for only 2 consequence that did not occur. and smokeless tobacco use. percent of the market share by weight. In FDA concludes that this study Nevertheless, the record contains contrast, Copenhagen, the highest nicotine- presents excellent evidence of the effect sufficient evidence to provide a basis for delivery brand, had only 1 percent of the of advertising on consumption patterns applying the advertising restrictions in advertising expenditures, but 50 percent of and, that it would have provided quite the 1995 proposed rule to smokeless the market share. This advertising focus is products. In the preamble to the 1995 indicative of UST’s ‘‘graduation process’’ of supportive evidence before the Canada starting new smokeless tobacco product users court for advertising restrictions. proposed rule (60 FR 41314 at 41331), reference was made to the remarkably on low nicotine-delivery brands and having h. The African-American youth them graduate to higher nicotine-delivery market. Referring to the declining successful regeneration of the smokeless tobacco market by U.S. Tobacco (UST), brands as a method of recruiting new, African American youth tobacco market, younger users. the leading smokeless tobacco company, several comments argued that FDA’s (60 FR 41314 at 41331) tentative finding in the preamble to the in the 1980’s. In the 1970’s, the segment Therefore, the agency disagrees with of the population with the highest use 1995 proposed rule on the relationship the assertion that it has presented no of these products was over age 50, and between outdoor cigarette advertising evidence to support restricting young men were among the lowest. and tobacco consumption by young smokeless tobacco advertising. In fact, it Fifteen years later, there had been a people is incorrect. Comments said that finds the graduation strategy to be tenfold increase in the use of smokeless if cigarette advertising increases the strong evidence of the effectiveness of prevalence of smoking among young 141 ‘‘Cigarette Smoking Among Adults—United advertising in targeting young people to people, the percentage of African- States-, 1993,’’ MMWR, CDC, vol. 43, pp. 925–930, become new users and consistent with American young people who smoke 1994. and supported by the general Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44485

discussion, see sections VI.B. and VI.D. hope to convey a positive image. 146 adventure * * *.’’ 148 By adolescence, of this document. Based on these studies, the comment clothes, possessions, and ‘‘badge stated: ‘‘Image or impression products’’ such as cigarettes are used to 4. Why Young People Use Tobacco and management (Schlenker, 1980) has great define oneself and to control relations the Role of Advertising in That Process utility for young people as they struggle with others. 149 (15) Regardless of the evidence cited for social acceptance and autonomy Support for this view of the role of in section VI.D.3. of this document, (citations omitted).’’ tobacco advertising also comes from the tobacco industry: many comments argued that children Finally, the comment described the FDA turns a blind eye to the fact that the start to smoke and use smokeless developmental aspects of adolescents tobacco because of influences on them personal display of products with that are relevant to this issue: commercial logo—through dress and other other than advertising, primarily the With respect to developmental aspects of forms of expression—is a form of influence of their friends and peers. adolescence, there are two related factors that participation in American popular culture. It a. Why young people use tobacco. One make adolescents especially vulnerable to is a way to register a group identity to signal comment cited studies showing that being influenced by tobacco advertising. one’s place in the social fabric. young people who were most likely to First, adolescents are typically beginning to In addition to these comments, FDA has be smokers were those who were focus on peer group interactions more than the words of RJR’s research department particularly rebellious or prone to on family interactions (e.g., Brown et al., in a 1973 memo, detailed in section 1986), which they may likewise value to a far deviant behavior, 142 and said that it was VI.D.3.d. of this document, that chart a greater extent. Second, tobacco use counterintuitive that young people course for attracting the young constitutes a ‘‘temporal trap’’ (Messick and smoker. 150 fitting these profiles would want to McClelland, 1983) in the sense that the peer conform to what advertising portrayed On the basis of the evidence cited and group benefits of tobacco use are immediate, reviewed in section VI.D.3. of this as desirable. while the negative consequences in terms of document, the agency finds that the health outcomes are so far into the future that Conversely, many comments said that suggestion that it is impossible to cigarette advertising, like all advertising many adolescents, who often see themselves as invulnerable even in the present, would advertise in a way that would appeal to portrays highly attractive images. One rebellious nonconformist teenagers is comment stated that when young consider them to be irrelevant. Furthermore, the negative social consequences of tobacco people’s peers are also smoking, this can 148 Nichter, M., and E. Cartwright, ‘‘Saving the serve to personalize the images and use in adulthood (i.e., social stigmatization * * *) are also unimportant to adolescents at Children for the Tobacco Industry,’’ Medical make them relevant for their own lives, Anthropology Quarterly, vol. 5, pp. 236–256, 1991. the time they are making the decision to use 149 Stacey, B. G., ‘‘Economic Socialization in the and cause them to have favorable tobacco products. 147 impressions about their friends who Pre-Adult Years,’’ British Journal of Social smoke. 143 Stated differently, adolescence is a Psychology, vol. 21, pp. 159–173, 1982. time of ‘‘identity formation.’’ Young 150 A July 3, 1974 memo, authored by D. W. One comment argued further that people use the attractive imagery of Tredennick, of R. J. Reynolds’ Marketing Research children smoke because they hope to Department was submitted to the rulemaking advertising as a ‘‘window into the adult convey a positive self-image. 144 Hence, docket by the Attorney General of Mississippi in world.’’ They are ‘‘susceptible to the response to the reopening of the rulemaking record young people may be particularly images of romance, success, (61 FR 11349, March 20, 1996). Although the vulnerable to being influenced by the sophistication, popularity, and agency has not relied on the memo as part of the attractive images presented in cigarette justification for this rule, FDA is citing to it here and smokeless tobacco advertising. 145 because it is relevant to the issues discussed. The 146 Chassin, L., C. Presson, S. J. Sherman, E. memo was also reported in the press, see Schwartz, Specifically, the same comment cited Corty, and R. W. Olshavsky, ‘‘Self-Images and J., ‘‘R. J. Reynolds Marketing Memo Discusses numerous studies that indicate that Cigarette Smoking in Adolescence,’’ Personality Young Smokers’ Brand Image,’’ Washington Post, many young people smoke because they and Social Psychology Bulletin, vol. 7, pp. 670–676, A03, April 23, 1996. The memo asked and 1981; Barton, J., L. Chassin, C. C. Presson, and S. answered the question: ‘‘What causes smokers to J. Sherman, ‘‘Social Image Factors as Motivators of select their first brand of cigarettes?’’ The answers 142 Chassin, L., C. C. Presson, S. J. Sherman, E. Smoking Initiation in Early and Middle developed by Mr. Tredennick echos the concepts Corty, and R. W. Olshavsky, ‘‘Predicting the Onset Adolescence,’’ Child Development, pp. 1499–1511, discussed above. The memo hypothesized that: of Cigarette Smoking in Adolescents: A 1982; Belk, R. W., ‘‘Possessions and the Extended ‘‘[t]he causes of initial brand selection relate Longitudinal Study,’’ Journal of Applied Social Self,’’ Journal of Consumer Research, vol. 15, pp. directly to the reasons a young person smokes. The Psychology, vol. 14, pp. 224–243, 1984; Collins, L. 139–168, 1988; Belk, R. W., R. Mayer, and A. more closely a brand meets the psychological M., S. Sussman, J. Mestel Rauch, C. W. Dent, C. J. Driscoll, ‘‘Children’s Recognition of Consumption ’support’ needs (advertising or otherwise Johnson, W. B. Hansen, and B. R. Flay, Symbolism in Children’s Products,’’ Journal of communicated brand or physiological needs ‘‘Psychosocial Predictors of Young Adolescent Consumer Research, vol. 10, pp. 386–397, 1984; (product characteristics), the more likely it is that Cigarette Smoking: A Sixteen-Month, Three-Wave Brown, B. B., M. J. Lohr, and E. L. McClenahan, a given brand will be selected. (Emphasis added)’’ Longitudinal Study,’’ Journal of Applied Social ‘‘Early Adolescents’ Perceptions of Peer Pressure,’’ One important characteristic was associated with Psychology, vol. 17, pp. 554–573, 1987. vol. 6, pp. 139–154, 1986; Messick, P. M., and C. the user ‘‘image’’ associated with a brand. ‘‘To some 143 Pechmann, C., and S. J. Knight, ‘‘Cigarette C. McClelland, ‘‘Social Traps and Temporal Traps,’’ extent young smokers ’wear’ their cigarette and it Ads, Antismoking Ads and Peers: Why do Underage Personality and Social Psychology Bulletin, vol. 9, becomes an important part of the ’I’ they wish to Youth Smoke Cigarettes?’’ Advances in Consumer pp. 105–110, 1983; Levy, S. J., ‘‘Meanings in be, along with their clothing and the way they style Research, Association for Consumer Research, Advertising Stimuli,’’ Advertising and Consumer their hair.’’ The memo also recognized the edited by Corfman, K. P., and J. G. Lynch, eds., Psychology, Praeger, New York, pp. 214–226, 1986; importance of peer influence on a young person’s Provo, UT, vol. 23, pp. 267–268, 1996. Solomon, M. R., ‘‘The Role of Products as Social decisions about smoking and noted that: ‘‘It must 144 Chassin, L., C. Presson, S. J. Sherman, E. Stimuli: A Symbolic Interactionism Perspective,’’ also be true that influential young smokers (perhaps Corty, and R. W. Olshavsky, ‘‘Self-Images and Journal of Consumer Research, vol. 10, pp. 319– relatively few) have made brand selections based on Cigarette Smoking in Adolescence,’’ Personality 329, 1983. product characteristics or advertising and and Social Psychology Bulletin, vol. 7, pp. 670–676, 147 Brown, B. B., M. J. Lohr, and E. L. promotion communication. The fact that two 1981; Barton, J., L. Chassin, C. Presson, and S. J. McClenhanan, ‘‘Early Adolescents’ Perceptions of brands, Marlboro and Kool, have such dominant Sherman, ‘‘Social Image Factors as Motivators of Peer Pressure,’’ Journal of Early Adolescence, vol. shares among youths suggests the above hypothesis Smoking Initiation in Early and Middle 6, pp. 139–154, 1986; Messick, P. M., and C. C. * * *.’’ Tredennick noted further that both Marlboro Adolescence,’’ Child Development, pp. 1499–1511, McClelland, ‘‘Social Traps and Temporal Traps,’’ and Kool project imagery that is psychologically 1982. Personality and Social Psychology Bulletin, vol. 9, important to adolescents—the need for support and 145 Id. pp. 105–110, 1983. strength. 44486 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations without merit. Tobacco advertising youthful smoking and that analysis is expenditures for advertising outlays in plays directly to the factors that are flawed. 152 Dr. Beales appears to have any given region would have been central to adolescents as they decide performed tests using an ordered determined in advance by an whether to use tobacco products. Thus, logistic regression model to test for: (1) advertising agency and therefore would the available evidence clearly supports The effect of advertising on smoking more likely reflect smoking patterns a finding that advertising plays an behavior, using advertising already in existence. Had he wanted to important role in young people’s expenditures and young people’s view measure smoking behavior as a function tobacco use. of ‘‘most advertised brand’’ as measures; of Camel’s advertising, he should have b. Determinants of smoking. Several and (2) smoking behavior as a function modeled it longitudinally over time. comments from the advertising and of a number of psychosocial variables Since the regional advertising tobacco industries claimed that the and determinants. expenditures must have been obtained econometric studies performed for them First, a logistic model is only as good from a RJR data base, Beales clearly had by experts found that peers, parents, as the variables used. Thus, if a variable access to other sources of data within and siblings have the greatest influence is mispecified or imprecise, the model’s the company. He therefore should have on young peoples’ decision to start predictive capacity will be severely been able to acquire advertising smoking. compromised. The variable ‘‘most expenditures for the Camel brand before Citing an econometric analysis advertised brand’’ appears to be quite the introduction of Joe Camel and performed for RJR by Dr. J. H. Beales, on imprecise as a measure to capture the advertising expenditures for the period data concerning its Joe Camel effect of advertising. The most that this after Joe Camel’s appearance. This advertising campaign, one comment variable would capture would be the would have been a better test. argued that ‘‘minors balance the risks ability of the campaign to be seen and and rewards of smoking to decide remembered. It would not capture the Finally, Dr. Beales performed an whether or not to smoke, just as they appeal of the campaign, or the effect of analysis to determine the ‘‘true’’ would any other consumption decision. the campaign on consumers, nor could determinants of smoking. Dr. Beales’ The greater an individual minor it measure the ability of an advertising regression analysis utilized a series of perceives the net rewards of smoking, campaign to change or create consumer psychosocial characteristics and beliefs the more likely he or she will try action. In addition, it would not be about smoking. He found that the only smoking. Minors who perceive greater surprising to find that almost as many factor that failed to produce an net rewards of smoking are also likely nonsmoking young people as young association was advertising. First, as to smoke more intensively.’’ smokers found Camel (or Marlboro) to noted, there is no reason to believe that The comment further argued that an be the most advertised brands, since ‘‘most advertised brand’’ would perform analysis based upon this theoretical those advertising campaigns were quite as a useful surrogate for the effects of model by Dr. Beales found that neither ubiquitous at the time the data for this advertising. Therefore, regardless of the advertising nor advertising expenditures study were collected and were, in fact, value of the study, it is not good has an appreciable effect on young the most advertised brands. A variable evidence concerning the role of people’s perceptions of the benefits of that cannot discriminate between users advertising in young people’s smoking smoking and thus would have no and nonusers, because all had seen and decision. Second, the analysis indicates indirect effect on teenage smoking remembered the advertising, cannot be what is already known: certain beliefs decisions. 151 More specifically, the expected to produce useful predictive and life patterns can help predict who comments stated that the Beales’ studies results in a regression analysis of why may become a smoker. However, it does show that advertising expenditures for people, particularly young people, not measure what effect advertising can the particular brands that most smoke. have on a young person’s perception or teenagers smoke, Marlboro and Camel, Second, Dr. Beales attempted to beliefs. do not influence and are not associated determine whether differences in Additional concerns about the study with smoking decisions. Moreover, Dr. advertising expenditures would predict are similar to those that the tobacco Beales reported that the results of his smoking behavior. It appears, however, industry comments raised about studies studies indicate further that advertising that Dr. Beales did not look at this cited by FDA. The first concern is that did not have an indirect effect on question longitudinally—that is, he did several variables used in the model smoking behavior. Beales concluded not look at whether smoking rates measure the same impact. This that minors who had been exposed to varied as a function of advertising redundancy could create a more advertising did not identify the expenditures for Camel cigarettes before multicollinearity problem (i.e., two or perceived rewards of smoking— the Joe Camel campaign and after the more variables vary together but it is ‘‘smoking helps when bored,’’ ‘‘smoking campaign started. Instead, he appears to very difficult to determine which helps relax,’’ ‘‘smoking helps with have measured smoking rates as a variable influences the other). Moreover, stress,’’ and ‘‘smoking helps in social function of the differences in regional the redundancy may have caused situations,’’ in a greater number than advertising expenditures in California irrelevant variables to be included in the did those minors who reported less during one time period. It should not be regression equation. Both exposure. The comment concluded that surprising therefore that little if any multicollinearity and the inclusion of the failure of the 1993 Beales study to effect on smoking rates was found: (1) irrelevant variables can affect the find either direct or indirect effects from There is no reason to expect to find efficiency of the model’s estimates. The advertising on smoking behavior should significant changes in smoking behavior second concern is that the model used be conclusive. based on small regional variations in the study is questionable. The correct FDA does not agree. The 1993 Beales within one State in advertising model could well have been a double study presents only one analysis of expenditures, and (2) optimum hurdle model, i.e., modeling the 151 Dr. Beales used children’s designation of a 152 Beales, J. H., ‘‘Advertising and the decision to smoke first and then ‘‘most advertised brand’’ as a surrogate for the effect Determinants of Teenage Smoking Behavior,’’ p. 44, modeling the choice of what brand to of advertising. 1993. smoke, second. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44487

Finally, there is concern that the data example, they explained that they Moreover, of the 15 members of the for the impact of advertising specifically chose to collect data from IOM committee, 7 were expert in the expenditures and smoking behavior supermarkets because other ‘‘authors fields of behavioral sciences, including were incompatible and, thus, may have with access to full industry data 154 have psychology, psychiatry and public failed to find a relationship that did in recommended that the data interval [for policy, anthropology, and economics. fact exist. The teen smoking prevalence supermarket sales] should reflect the Similarly, the contributing authors to data were from a behavioral study, and inter-purchase time for cigarettes,’’ the 1994 SGR included experts in the measurement of advertising which in New Zealand is a week or less. economics, social research, marketing, expenditures was from regional Moreover, the authors found that and business administration. Finally, advertising expenditures, undoubtedly supermarket cigarette sales are more the comments submitted include maintained by the company. The consistent than other points of sales. additional empirical evidence, the smoking decision for a teenager may Hence there were fewer fluctuations in expert opinion of the American very well not have been influenced by the demand data for cigarettes. Psychological Association, 155 and the the amount of money spent but by the Moreover, in response to the second words of the tobacco industry itself, all number of messages he/she receives. comment, the authors did not assume of which are referred to in this The aggregate expenditures for that young people purchase document. advertising cannot measure the number downmarket cigarettes at a higher rate One comment criticized FDA’s of messages actually received by an than the general population, but that reliance on the IOM Report and the individual teen. people with lower income, which 1994 SGR as simply presenting Given the multitude of problems with includes young people, purchase these ‘‘selective reviews’’ of much of the same the design of the study and the choice brands more often. But more ‘‘dubious literature’’ reviewed by FDA. of variables, the study has limited importantly, the study found that it Another comment stated that FDA had capability for producing results that can takes only 2 years of advertising of this indiscriminately relied on studies cited adequately describe advertising effects downmarket brand to expand the teen in the 1994 SGR, none of which, the on smoking behavior. Moreover, this market by 4 percent, and this fact was comment claimed, was capable of study is but one of many and, whatever not disputed. determining whether advertising its value, it does not overwhelm the d. Other comments. Finally, several influences children to initiate smoking. Several comments appeared to place evidence that FDA has relied on. comments criticized the quality of the great importance on the fact that both c. Laugesen and Meads. In contrast to evidence cited by FDA in its preamble reports acknowledge that the the Beales’ study, FDA had cited a study to the 1995 proposed rule. One psychosocial and econometric research by Laugesen and Meads, entitled comment stated that FDA has relied too that they present do not prove that ‘‘Advertising, Price, Income and heavily on studies conducted by cigarette advertising causes young Publicity Effects on Weekly Cigarette physicians or others not familiar with people to begin smoking or to use Sales in New Zealand the art and science of persuasion. 153 smokeless tobacco. The IOM Report Supermarkets,’’ which provided Further, it asserted that most of the stated that, because of the nature of the evidence that increases in advertising evidence cited in support of the expenditures had an effect on youth research, it is not known for certain regulations had been published in whether youths already interested in smoking behavior including recruiting medical journals and not in peer new smokers and increasing the market smoking or smokeless tobacco become reviewed marketing journals. more attentive to advertisements for base. However, a review of the evidence One comment stated that data from these products or whether these presented belies that concern. First, supermarkets were unrepresentative, advertisements lead youths to become FDA relied on the research and expert both because of the percentage of sales more interested in these products. One opinion of consumer psychologists, from supermarkets in New Zealand comment argued that the ‘‘IOM’s business and marketing experts, (presumably not large), and because it is recognition of this weakness fatally economists and social science not known what percentage of sales to undermines its own and FDA’s researchers as well as medical experts. young people are made at supermarkets. arguments on the impact of advertising Moreover, FDA has relied on two Moreover, many conditions were not on smoking behavior.’’ Another outstanding reports issued in the past accounted for, including possible comment claimed that the IOM Report few years that specifically addressed the different pricing structures between acknowledges the lack of a causal issue of young people’s use of tobacco— retail outlets. relationship between advertising and the 1994 SGR and the IOM Report. Both The comments also criticized several smoking and acknowledges that the very commented extensively on the role that major assumptions they claim were econometric studies it cites are advertising plays in young people’s made in the study, for example, that unreliable to determine whether smoking behavior and use of smokeless young people purchase the less advertising contributes to youth tobacco and both recommended strongly expensive, down market brand. Finally, smoking behavior. The comment also that a comprehensive plan to attack the the comment criticizes the failure to stated that FDA misstates IOM’s problem of youth tobacco use include control for other variables (such as conclusion regarding evidence of a stringent advertising restrictions. rotating health warnings and new advertising restrictions). 155 The American Psychological Association 154 The authors themselves responded to The authors cited this study as an example of represents 132,000 members and affiliates and is one having access to full industry data. Leeflang, P. the largest organization of psychologists in the some of the concerns expressed. For S. H., and Reuiyl, ‘‘Advertising and Industry Sales: world. Its comment represents the organization’s An Empirical Study of the West German Cigarette ‘‘research-based recommendations’’ and reflects 153 Laugesen, M., and C. Meads, ‘‘Advertising, Market,’’ Journal of Marketing, vol. 49, p. 97, 1985; significant input from several relevant divisions Price, Income, and Publicity Effects on Weekly Laugesen, M., and C. Meads, ‘‘Advertising, Price, including the Division of Personality and Social Cigarette Sales in New Zealand Supermarkets,’’ Income, and Publicity Effects on Weekly Cigarette Psychology, the Division of Society for the British Journal of Addiction, vol. 86, pp. 83–89, Sales in New Zealand Supermarkets,’’ British Psychological Study of Social Issues, and the 1991. Journal of Addiction, vol. 86, pp. 83–89, 1991. Division of Consumer Psychology. 44488 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations causal relationship between advertising advertising plays a ‘‘mediated cigarette and smokeless tobacco and smoking initiation. Further, several relationship’’ to adolescent tobacco advertising does have such an effect. comments cited to a statement in the use. 159 The proper question is not, ‘‘Is While not all the evidence in the record 1994 SGR that ‘‘no longitudinal study of advertising the most important cause of supports this conclusion, there is more the direct relationship of cigarette youth initiation?’’ but rather, ‘‘does FDA than adequate evidence, that when advertising to smoking initiation has have a solid body of evidence considered together, supports a been reported in the literature.’’ 156 establishing that advertising encourages conclusion that advertising, with the However, these comments failed to young people’s tobacco use such that knowledge of the industry, does affect include the sentence immediately FDA could rationally restrict that the smoking behavior and tobacco use of preceding this quote: ‘‘Considered advertising?’’ The answer to this people under the age of 18. This together, these studies offer a question is ‘‘yes.’’ behavior includes the decision whether compelling argument for the mediated to start using cigarettes or smokeless 5. Has the Agency Met Its Burden? relationship of cigarette advertising and tobacco, whether to continue using or to adolescent smoking.’’ (16) Several comments from the increase ones consumption, when and Another comment in support of tobacco and advertising industries where it is proper to use tobacco, and advertising restrictions on tobacco criticized the agency for failing to whether to quit. This evidence includes: products argued that the present evidence that conclusively Expert opinion—The American multidisciplinary studies cited in the establishes a causal link between Psychological Association provided 1994 SGR supported the conclusion that advertising and young people’s expert opinion, with specific citation to marketing and advertising tobacco decisions to begin using cigarettes and numerous studies, to show that tobacco products do play a role in tobacco use smokeless tobacco. advertising plays directly to the factors among young people. The comment FDA disagrees that its burden is to that are central to children and suggested that this conclusion is conclusively prove by rigorous adolescents and thus plays an important consistent with the 1989 Surgeon empirical studies that advertising causes role in their decision to use tobacco. General’s conclusion that ‘‘the collective initial consumption of cigarettes and (See section VI.D.4.a. of this document; empirical, experiential, and logical smokeless tobacco. No single study is and 60 FR 41314 at 41329.) evidence makes it more likely than not capable of doing so. As one comment Advertising Theory—Basic advertising that advertising and promotional stated, it would in fact be practically and consumer psychology theory, activities do stimulate cigarette and ethically impossible to conduct statements from advertising experts, and consumption.’’ 157 Additionally, the such a study. Certainly no study general consumer testing show that comment supported the findings of the presented by industry or any other party advertising that is multi-media, that 1994 SGR that ‘‘cigarette advertising demonstrated that advertising does not uses color, and that employs more appears to increase young people’s risk cause the initial consumption of pictures, characters, or cartoons as of smoking’’ by conveying the cigarettes and smokeless tobacco. opposed to text is more robust and can impression that smoking has social Indeed, it should be noted that not one be better processed, understood and benefits and is far more common than study cited by FDA or submitted by remembered by children and it really is. 158 Moreover, this comment industry could conclusively adolescents, who have less information contended that the IOM’s conclusions demonstrate that any factor actually processing ability than adults. (See supported FDA’s tentative view that caused children to begin smoking or to section VI.B.1. and VI.B2. of this image advertising of tobacco products is use smokeless tobacco. This includes document.) tremendously appealing to young family and peer influences, which the Studies and Surveys—Studies show people. tobacco industry repeatedly cite as the that children are exposed to substantial As noted more fully in section VI.B. major determinants of youth smoking and unavoidable advertising, that of this document, FDA did rely heavily and smokeless tobacco use. As was exposure to tobacco advertising leads to on the two reports, and continues to suggested by a comment, however, even favorable beliefs about tobacco use, that find the reports persuasive evidence. when a young person’s decision to advertising plays a role in leading young They represent mainstream scientific smoke is strongly influenced by a friend people to overestimate the prevalence of consensus and are appropriately or parent, advertising reinforces the tobacco use, and that these factors are entitled to a great deal of deference. The decision and makes the young person related to young people’s tobacco agency notes that, in a different but not feel good about the decision and the initiation and use. (See sections entirely unrelated context, that of health ‘‘identity’’ thereby acquired. VI.D.3.a., VI.D.3.b., and VI.D.3.c. of this claims for food, Congress has said that It should also be noted that the document.) FDA would have to specifically justify apparent focus on the possible causal Empirical Studies—Studies any decision rejecting the conclusions role of cigarette and smokeless tobacco conducted on sales data have shown of a report from an authoritative advertising in young people’s initial that advertising did increase one scientific body of the United States. (See decision to smoke or to use smokeless segment of the tobacco market (low tar section 403(r)(4)(C) of the act (21 U.S.C. tobacco is overly narrow. Human cigarettes), that advertising in New 343(r)(4)(C)).) No justification for behavior cannot be modeled so Zealand had the effect of increasing rejecting the IOM’s conclusions exists simplistically. In point of fact, tobacco tobacco sales to young people, and that here. advertising has an effect on young a large multi-country survey showed Finally, the agency, like the 1994 SGR people’s tobacco use behavior if it that advertising tends to increase and IOM Report, finds that an adequate affects initiation, maintenance, or consumption of tobacco products. (See basis does exist to conclude that attempts at quitting. 60 FR 41314 at 41333 through 41334; The evidence that FDA has gathered sections VI.D.3.g., VI.D.4.c., and 156 1994 SGR, p. 188. in this proceeding establishes that VI.D.6.a. of this document) 157 1989 SGR, p. 517. Anecdotal Evidence, and Various 158 1994 SGR, p. 195. 159 Id., p. 188. Advertising Campaigns Successful with Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44489

Young People—Studies show that the referenced Supreme Court case, they already use tobacco, and thus it is not buying behavior of young people is ultimately have the same goal—to a proper subject for government influenced by advertising, that they induce people, in this case young regulation. The advertising agency for smoke the most advertised brands, that people, to purchase and use these the largest cigarette brand stated, children ages 3 to 6 can recognize a products. ‘‘[T]obacco advertising has as its cartoon character associated with Thus, the evidence in this proceeding intended audience existing smokers * * smoking at the same rate as they demonstrates that cigarette and * it is not the company’s desire that recognize Ronald McDonald, that smokeless tobacco advertising plays a children start to smoke.’’ various ad campaigns (Camel cigarettes, material role in the decision of children However, one comment questioned Reg cigarettes, products designed for and adolescents under the age of 18 to this and asked how cigarette advertising women, and smokeless tobacco engage in tobacco use behavior. It that has an impact upon adults can be advertising aimed at new users) that therefore establishes that the harm from assumed to leave unaffected a young appeared to be targeted to young people this advertising is real. viewer, smoker or otherwise. The same comment also cited the words of one did have an effect upon young people’s 6. The Efficacy of the Restrictions; retired Marlboro ad man: ‘‘I don’t know purchases and use of tobacco, and that Empirical Evidence Concerning any way of doing this (advertising young people report that they got their Advertising Restrictions information about a tobacco brand from cigarettes) that doesn’t tempt young billboards, magazines, in store The final aspect of the analysis under people to smoke.’’ 162 advertising and on teeshirts (60 FR the second prong of the Central Hudson Many comments from consumer 41314 at 41329 through 41334; and see test requires a showing by the agency groups, public health organizations and sections VI.D.3.d., VI.D.3.e., and that the restrictions that it seeks to numerous private individuals were VI.D.3.i. of this document). impose will alleviate the harm to a supportive of the agency’s position that Industry Statements—Statements in material degree. FDA finds, based upon the 1995 proposed rule will reduce documents created by R. J. Reynolds’ a review of all of the evidence and the underage smoking and use of smokeless researchers, by Philip Morris advertising comments received, that the restrictions tobacco. The comments cited evidence people, by executives of US Tobacco will, in fact, meet this test. from numerous sources such as and by people in and doing work for (17) Nearly all comments in government officials, university various Canadian tobacco companies opposition to advertising restrictions researchers, and antismoking advocates indicate that young people are an argued that the preponderance of the to demonstrate that restrictions on important and often crucial segment of empirical evidence supported a finding advertising would be effective. of no effect from advertising on young the tobacco market. For example, a comment from a Consensus Reports—The IOM and people. Some comments stated that, leading psychological association stated 1994 SGR concluded on the basis of an consequently, the advertising that research, common sense, and its exhaustive review of the evidence that restrictions are ‘‘unwarranted, expert opinion support that, if image- unjustified, unnecessary, [and] will not advertising affects young people’s oriented advertising and promotion are be effective in reducing underage perceptions of the pervasiveness, image, replaced with text-only advertising, it smoking.’’ Several comments, and function of smoking, that would reduce the advertiser’s ability to representing a variety of interest groups, misperceptions in these areas constitute suggest that tobacco users project a claimed that the ‘‘best available psychosocial risk factors for the desirable image, e.g., glamour, sexiness evidence’’ found that ‘‘peer pressure,’’ 163 initiation of tobacco use, and thus or maturity. ‘‘peer and family smoking behaviors’’ advertising appears to increase young FDA has concluded that restrictions and ‘‘young people’s perceptions of the people’s risk of tobacco use. on advertising and promotion are costs and benefits of smoking’’ are more Consequently, tobacco advertising necessary to reduce the appeal of important than advertising and works in a way that is roughly tobacco products to young people. Such promotion in encouraging young people analogous to the way the Supreme Court restrictions will protect the access to experiment with cigarettes and described how deceptive advertising restrictions that the agency is adopting smokeless tobacco. 160 Still others works (FTC v. Colgate - Palmolive Co., from being undermined and thereby the claimed that ‘‘being a girl,’’ ‘‘living with 380 U.S. 374 (1965)). The Supreme health of young people. To be effective, a single parent,’’ ‘‘having relatively less Court described how sellers use negative views about smoking,’’ ‘‘having 162 deceptive practices to break down the Daniels, D., Giants, Pygmies and Other no intention to stay in full-time Advertising People, Crain, Chicago, p. 245, 1974. resistance of the buying public (Id. at education after age 16,’’ and ‘‘thinking 163 Cohen, J. B., ‘‘Reconceptualizing Alcohol 389–90). Here, as the 1994 SGR, the they might be a smoker in the future,’’ Advertising Effects: A Consumer Psychology IOM report, and the comment of the Perspective,’’ The Effects of the Mass Media on the are key influencing factors for a young American Psychological Association Use and Abuse of Alcohol, Research Monograph, person to start smoking. 161 demonstrate, cigarette and smokeless No. 28, Bethesda, MD, NIH, 1995; Goldberg, M. W., The tobacco industry and the J. Madill-Marshall, G. J. Gorn, J. Liefeld, and H. tobacco companies use image and other advertising industry stated that their Vredenburg, ‘‘Two Experiments Assessing the advertising techniques to appeal to advertising is not directed at children Visual and Semantic Images Associated with adolescents’ need to belong and to and adolescents but to adults who Current and Plain (Generic) Cigarette Packaging,’’ appear to be adult, and thereby to break Advances in Consumer Research, edited by down their resistance to tobacco use. Corfman, K. P., and J. G. Lynch, Association for 160 Beales, J. H., ‘‘Advertising and the Consumer Research, Provo, UT, vol. 23, 1996; The advertising helps the companies to Determinants of Teenage Smoking Behavior,’’ vol. Pollay, R. W., and A. M. Lavack, ‘‘The Targeting of overcome the fact, as documents for R. 44, 1993. Youths by Cigarette Marketers: Archival Evidence J. Reynolds show, that there is no 161 McDonald, C., ‘‘Children, Smoking and on Trial,’’ Advances in Consumer Research, natural craving for nicotine. While the Advertising: What Does the Research Really Tell Association for Consumer Research, Provo, UT, vol. Us?’’, International Journal of Advertising, vol. 12, 20, pp. 266–271, 1993; Richins, M. L., ‘‘Social advertising techniques used by the pp. 279–287, 1993; Goddard, E., ‘‘Why Children Comparison and the Idealized Images of tobacco industry are quite different than Start Smoking,’’ British Journal of Addiction, vol. Advertising,’’ Journal of Consumer Research, vol. those used by the company in the 87, No. 1, pp. 17–25, 1992. 18, pp. 71–83, 1991. 44490 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations these restrictions must be car dealerships named More, Salem Organization (WHO). The two WHO comprehensive, that is, they must apply record stores and Salem and More surveys on the health behavior of to the many types of media currently concert and movie promotions to schoolchildren in four countries found used in a coordinated way to advertise advertise cigarettes in a country that has that smoking among schoolchildren is cigarettes and smokeless tobacco. banned cigarette advertising. FDA finds related to peer smoking behaviors and to FDA finds support for the need for that these comments provide strong the number of smokers in the family. 165 comprehensive regulation in the support for the need for the advertising More importantly, the comments said experiences of other countries which restrictions to be comprehensive and that the survey found ‘‘no systematic have enacted and put into place some apply to all advertising media to be differences’’ between the smoking form of restrictions on the advertising of effective. behavior of young people in countries tobacco. Some comments discussed the Two aspects of the evidence in this where tobacco advertising is completely experience in other countries in which proceeding are particularly persuasive restricted and in countries where it is tobacco advertising has been banned. in evidencing that restrictions on not. They asserted that the findings of These comments indicated that in advertising will directly advance the the WHO survey completely repudiate countries that have enacted restrictions agency’s goal of protecting the health of FDA’s assertion that advertising on advertising that were not children and adolescents under 18. The restrictions reduce tobacco consumption comprehensive, the industry was able to experience of other countries that have among young people. The comments continue advertising and portraying adopted advertising restrictions shows further argued that a followup survey attractive imagery in media left that when those restrictions are found that the prevalence of smoking uncovered by regulations. For example, enforced, they have resulted in among schoolchildren in countries with Canada, Finland, Great Britain, and reductions in the level of tobacco use. total tobacco advertising restrictions Australia enacted regulations of tobacco In addition, the courts themselves have was actually higher than countries with advertising that did not completely ban generally found that, as a matter of fewer restrictions. 166 or restrict all forms of advertising and common sense, reductions in However, the two surveys cited by promotion. In each of those instances, advertising have produced a reduction these comments did not compare the according to the comments, the tobacco in demand. While some comments tried percentage of young people who industry was able to take advantage of to distinguish these cases, FDA finds smoked before and after the loopholes in the system to continue to that they are relevant. implementation of tobacco advertising advertise to reach their target audience. A discussion of each of these aspects restrictions within countries. In order to Thus, in Canada the advertising ban, of the evidence follows: realistically measure the effect of which did not ban nontobacco items, a. International and cross country advertising restrictions, each country was accompanied by the increased use studies. FDA did not receive consistent must be looked at individually. For of nontobacco items that carried the comment on the international studies 164 example, country A, with a high rate of tobacco brand name as a mechanism for that it cited in the preamble to the 1995 smoking, cuts its smoking rate in half. continuing to advertise the tobacco proposed rule on the relationship This would be considered a major brand and its prior image. In Great between advertising restrictions and success for country A, but country A Britain, sophisticated colorful consumption. still may have a higher smoking rate advertisements appeared when the use (18) Several comments stated that than country B. Country B may not have of human figures in tobacco advertising advertising restrictions have not affected instituted any advertising restrictions was banned; in Australia, loopholes in tobacco product consumption, and because its smoking rate has always sports sponsorship provisions enabled further stated that, in fact, tobacco been low. Thus, comparing the rates of the industry to continue sports product consumption has increased in countries A and B would be like advertising. most countries with advertising and comparing apples and oranges. Another comment detailed numerous promotional restrictions. Studies that have looked at before and other examples of tobacco companies In contrast, other comments after data from individual countries continuing to advertise effectively in supported the findings of the same have reported downward trends in spite of a ban or restrictions on studies and stated that the studies smoking rates among young people following advertising restrictions. 167 advertising. For example, this comment support the conclusion that advertising For example, in Norway the percentage noted that after France banned all and promotional restrictions can be of 15-year old boys and the percentage cigarette advertising in magazines, effective in curbing smoking initiation of 15-year old girls who were daily Philip Morris set up a travel agency and among young people. smokers in 1975, before a restriction on advertised ‘‘Marlboro Country Travel’’ Several comments opposing the 1995 all forms of tobacco advertising and in French magazines (Thus, although proposed rule maintained that better promotion was put in place, was there was no longer any ‘‘cigarette surveys of the results of advertising advertising,’’ Philip Morris was able to restrictions abroad were done in 165 Aaro, L. E., B. Wold, L. Kannas, and M. continue using its western, cowboy conjunction with the World Health Rimpela, ‘‘Health Behavior in Schoolchildren: A theme in advertisements for a travel WHO Cross-National Survey,’’ Health Promotion, agency). The comment noted further 164 Smee, C., ‘‘Effect of Tobacco Advertising on vol. 1, pp. 17–33, May 1986. that in Europe, advertising for cigarettes Tobacco Consumption—A Discussion Document 166 Van Reek, J., H. Adriaanse, and L. Aaro, was replaced by advertisements, using Reviewing the Evidence,’’ Department of Health, ‘‘Smoking by Schoolchildren in Eleven European Economics, and Operational Research Division, Countries,’’ Proceedings of the 7th World the same imagery, for Camel and London, 1992; ‘‘Health or Tobacco—An End to Conference on Tobacco and Health, Duroton, B., Marlboro sports watches and Camel Tobacco Advertising and Promotion,’’ Toxic and K. Jamrozik, vol. 301, pp. 301–302, 1991. boots. In Malaysia, cigarette companies Substances Board (TSB), Wellington, New Zealand, 167 Bjartveit, K., ‘‘The Effect of an Advertising set up travel agencies called Marlboro, May 1989; Laugesen, M., and C. Meads, ‘‘Tobacco Ban—Who has the Burden of Proof,’’ National Advertising Restriction Price, Income and Tobacco Health Screening Service, Norway, 1994; Rimpela, Kent, and Peter Stuyvesant, clothing Consumption in OECD Countries, 1960–1986,’’ M., L. E. Aaro, and A. H. Rimpela, ‘‘The Effects of stores named Camel, jewelry stores British Journal of Addiction, vol. 86, pp. 1343– Tobacco Sales Promotion on Initiation of Smoking,’’ named for Benson and Hedges, luxury 1354, 1991. Scandinavian Journal of Social Medicine, 1994. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44491 approximately 23 percent and 28 cigarettes smoked may not fall even that showed the government’s actions percent, respectively. 168 According to though the percentage of the population did have an impact, although the extent the WHO followup survey, the that smokes has decreased. Moreover, has been more uneven than in Norway. percentage of 15- to 16-year old boys an analysis based on the number of Before the advertising restrictions, and the percentage of 15- to 16-year old cigarettes sold would not account for cigarette consumption was increasing at girls who were daily smokers in 1986– the success advertising restrictions the rate of 2.2 percent per year. In the 1987 was 16 percent and 17 percent, might have had with those not yet decade since the 1975 Finland respectively. 169 This represents success addicted to tobacco. The preaddicted advertising ban, the rate of increase has not only with the group that was group, mostly composed of children, been cut in half to a little over 1 percent prohibited from purchasing cigarettes, does not smoke as many cigarettes as do per year—a meaningful change but not those younger than 16, but also with a older addicted smokers. Therefore, any a decline. However, the greatest benefits group that could legally purchase success in stemming initiation rates have been for teenagers. In 1973, 26 cigarettes. These results also appear to would not show up for many years if percent of 16 to 18 year olds in indicate that the restrictions did not measured as fewer cigarettes consumed. secondary school smoked. By 1979, 2 simply move the onset of smoking to the Finally, Boddewyn and others have years after restrictions went into place, first legal year of purchase. claimed that the experience in Norway, this rate dropped to 14 percent. Since Comments from the tobacco industry Finland, and Sweden supports the view that time, the decrease has continued also relied upon research conducted by that advertising restrictions have been but has leveled off. In 1973, 19 percent J. J. Boddewyn, which has found results ineffective in reducing smoking rates. of 14-year old children in Finland contrary to those presented by FDA, to However, three reports 171 presented at smoked. By 1979, 2 years after the ban, argue that tobacco advertising bans have the World Conference of Tobacco and only 8 percent of 14-year old children not been a successful part of tobacco Health in Paris, France in October 1994 in Finland smoked, a decrease of over control policy. 170 Boddewyn’s research support the conclusion that advertising 50 percent. is directly contrary to many of the restrictions, if comprehensive and Moreover, a report by Rimpela 172 studies cited by FDA in support of its enforced, are effective in helping to provided a more complete explanation 1995 proposed rule and is also reduce the percentage of people who of the experience that Finland has had inconsistent with the best available data smoke, particularly young people not with its advertising restrictions. on smoking rates from the countries yet addicted to tobacco. Although the 1978 Finnish Tobacco Act studied. Bjartveit’s report presented the results banned cigarette advertisements in Boddewyn has used selective data on of the Norwegian experience after the youth magazines, it did not eliminate the total number of cigarettes sold in a implementation of the 1975 Norway the advertising of product-families or particular country as the basis for his advertising ban. In 1975, Norway the sponsorship of events. analysis and has used it to justify a banned all advertising of tobacco Consequently, the tobacco companies finding that, in those countries where products and prohibited the sale of found new means of sales promotion advertising bans have been introduced, tobacco to anyone under the age of 16. through image advertising in these two decreases in the total number of Norway also required warnings on venues. The author concluded that a cigarettes sold have not followed. packages, an educational program, and, promotional onslaught in these two Relying solely on the number of in 1980, a larger excise tax. The results forums undercut the so-called cigarettes sold in a country to measure of Norway’s actions belie Boddewyn’s advertising ban, and the weak the effects of government restrictions claims. First, the prevalence of smoking implementation of the legislation by fails to take into account the myriad of for boys and girls declined between health authorities caused the advertising influences that can affect cigarette 1975 and 1990. The percentage of daily restrictions to be less effective than they consumption and, thus, will not yield smokers aged 13 to 15 declined from 15 might have been with a total ban. The accurate results. percent to 9 percent for boys and from author contrasted these uneven results First, the overall number of cigarettes 17 percent to less than 10 percent for with the success of Norway’s total ban. sold in a country may be influenced by girls. Per-capita consumption for boys The study presents strong evidence factors other than the percentage of the and girls also declined. Between 1975 for the need for comprehensive population that smokes. For example, if and 1994, the overall sales of cigarettes advertising restrictions covering all the population of a country has risen, or and smoking tobacco per person among forms of advertising and promotion in if those who remained smokers were the 15 year olds has declined from over order to achieve the best results in heaviest smokers, the number of 2,000 grams of tobacco to less than reducing youth tobacco use. Finally, the 1,800 grams. restrictions imposed in Sweden have 168 Rimpela, M., L. E. Aaro, and A. H. Rimpela, In 1976, Finland banned some forms not been in effect long enough to ‘‘The Effects of Tobacco Sales Promotion on of tobacco advertising and promotion measure accurately. Initiation of Smoking,’’ Scandinavian Journal of and increased expenditures for health i. The British Health Department Social Medicine, vol. 49, pp. 1–23, 1994. education. While relatively little data Report. Several comments from the 169 Van Reek, J., H. Adriaanse, and L. Aaro, tobacco industry criticized the findings ‘‘Smoking by Schoolchildren in Eleven European are available on the smoking trends in Countries,’’ Proceedings of the 7th World Finland, one comment reported data of the British Health Department Report Conference on Tobacco and Health, Duroton, B., (Smee Report) that advertising increases and K. Jamrozik, vol. 301, pp. 301–302, 1991. 171 Bjartveit, K., ‘‘The Effect of an Advertising consumption of tobacco products, and 170 Boddewyn, J. J., ‘‘Tobacco Advertising Bans Ban—Who Has the Burden of Proof,’’ National that restrictions on advertising decrease and Consumption in 16 Countries,’’ International Health Screening Service, Oslo, Norway, October tobacco use beyond what would have Advertising Association, 1986; Boddewyn, J. J., 1994; Lund, K., ‘‘Tobacco Advertising and How to ‘‘Why do Juveniles Start Smoking?’’ Children’s Measure Its Effect on Smoking Behavior,’’ Tobacco occurred in the absence of Research Unit of London (CRU) Study, 1986; and Health, Slama, K., ed., Plenum Press, New Boddewyn, J. J., ‘‘Cigarette Advertising Bans and York, pp. 199–204, 1995; Rimpela, M., L. E. Aaro, 172 Rimpela, M., L. E. Aaro, and A. H. Rimpela, Smoking: The Flawed Policy Connection,’’ and A. H. Rimpela, ‘‘The Effects of Tobacco Sales ‘‘The Effects of Tobacco Sales Promotion on International Journal of Advertising, vol. 13, No. 4: Promotion on Initiation of Smoking,’’ Scandinavian Initiation of Smoking,’’ Scandinavian Journal of pp. 311–332, 1994. Journal of Social Medicine, vol. 49, pp. 1–23, 1994. Social Medicine, vol. 49, pp. 1–23, 1994. 44492 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations regulation. 173 The Smee Report warnings, health education, and sales fact that fewer people are starting to examined: (1) The relationship between restrictions. However, Smee reported smoke to show up in overall tobacco cigarette advertising, (2) the effects of that the share of reduction in tobacco consumption data.’’ partial and complete advertising bans consumption attributable to the ii. New Zealand Toxic Substances on tobacco consumption, and (3) the advertising ban ‘‘is likely to account for Board Study. Several comments gave results of cross-national studies. The the great majority of the effect.’’ Another considerable attention to the New study focused on countries for which comment expressed concern that Smee, Zealand Government Toxic Substances the most complete data exists—Norway, in reporting on the Canadian Board (‘‘TSB’’) Study which reviewed Finland, Canada, New Zealand, and the experience, failed to include income as the effect of advertising restrictions in United Kingdom. One reported result of an independent variable. The comment 33 countries. 174 The study concluded this analysis was that in all five stated that this could seriously bias the that there was a correlation between the countries, bans or restrictions on results because real income was falling degree of restrictions imposed in each cigarette advertising resulted in an in Canada at the time the advertising country and decline in tobacco use. aggregate decrease in cigarette ban went into effect. However, in the (20) Comments submitted by those consumption. initial Smee model, the income variable opposing the proposed regulations (19) The comments argued that the was included, and it did not explain the argued that the study lacked objectivity WHO study contradicts the findings of variation in tobacco consumption. In the because of methodological errors, this report regarding Norway, Finland, final model, Smee did not include the particularly in the collection, sorting and Canada, stating that the findings do income variable. However, removing the and selective use of data. The comments not indicate that advertising restrictions income variable did not significantly argued that these errors removed all affect consumption. Several comments change the estimated coefficient and probative value from the study. stated their belief that the author’s would not have biased the estimates Moreover, the comments noted that (Smee’s) ‘‘sweeping and unjustified’’ from the model. FDA’s use of the study illustrates its conclusions are based on ‘‘data Finally, all econometric studies are inconclusive nature. In addition, one collected over a short time period’’ and subject to limitations. As noted in comment asserted that the drop-offs in on a ‘‘limited and incomplete review of sections VI.D.4.d. and VI.D.5. of this consumption and the number of the available evidence’’. They also document, it would require controlled smokers may be related to events other argued that Smee’s reliance on existing studies to produce better results and it than legislated restrictions. studies linking advertising and is neither practical nor ethical to One comment argued that several consumption is misplaced. conduct such studies. Empirical studies cited by FDA in the preamble to Furthermore, the comments specifically research is always subject to the the 1995 proposed rule, including criticized the report’s use of several of criticism that some variables were Chetwynd and Harrison, do not support the reviewed studies, which, they claim, omitted, or that alternative the claimed relationship between did not apply rigorous statistical specifications would yield different advertising expenditures and analysis. Finally, the comments stated results. However, Smee collected many consumption because the studies have that the author’s model made no studies, and hence his compilation flawed data and fundamental allowances for the effect of externalities, includes many different specifications methodological errors. For instance, the such as health shocks (the Royal College of tobacco demand. Thus, although it is comment argued that, in the Laugesen of Physicians’ Report on Smoking in difficult to evaluate the causes of study on tobacco consumption in 23 1962, the Report of the Surgeon variations in each study, an analysis of Organization for Economic Cooperation General’s Panel on Smoking and Lung all the existing studies should yield and Development (OECD) countries Cancer in 1964, etc.). All the above more generalizable and robust results described below, 175 the qualitative comments maintained that the Smee than those of a single study. The variables used were not relevant to the Report should not be relied upon as question here is not whether each of the regression model and biased the results. evidence of the causal relationship studies has limitations, but to what Additionally, the comment criticized between advertising restrictions and extent those limitations impair the the authors of the study for ignoring teen smoking behavior. findings of the overall survey. Smee’s contradictory findings. FDA disagrees with the comments’ study represents the best attempt to date One comment suggested that the assessment and finds the Smee Report to compile the numerous studies on the findings in several smaller studies cited to be unbiased and useful as a effects of advertising restrictions on by FDA 176 do not indicate that comprehensive survey of the literature. tobacco use and to provide a coherent Upon examining the specific concerns analysis. His conclusion was that 174 ‘‘Health or Tobacco—An End to Tobacco expressed by the comments in restrictions on advertising did reduce Advertising and Promotion,’’ TSB, Wellington, New connection with specific country tobacco use. Zealand, May 1989. 175 analyses, FDA has found that the A comment in support of the findings Laugesen, M., and C. Meads, ‘‘Tobacco criticisms are without merit. For Advertising Restrictions, Price, Income, and of the Smee Report stated that this study Tobacco Consumption in OECD Countries, 1960– example, the comments stated that the was unbiased and performed by a 1986,’’ British Journal of Addiction, vol. 86, pp. reduction in tobacco consumption credible organization. The comment 1343–1354, 1991. found in Norway could be attributed to argued that advertising restrictions 176 Chetwynd, J., P. Coope, R. J. Brodie, and E. externalities, such as to enforcement of produced the decline in the percentage Wells, ‘‘Impact of Cigarette Advertising on other provisions of the antitobacco Aggregate Demand for Cigarettes in New Zealand,’’ of young people who smoke in the British Journal of Addiction, vol. 83, p. 409–414, legislation package, e.g., health countries studied. In response to the 1988; Harrison, R., J. Chetwynd, and R. J. Brodie, tobacco industry’s claim that the total ‘‘The Influence of Advertising on Tobacco 173 Smee, C., ‘‘Effect of Tobacco Advertising on number of cigarettes consumed Consumption: A Reply to Jackson and Ekelund,’’ Tobacco Consumption—A Discussion Document British Journal of Addiction, vol. 84, pp. 1251– Reviewing Evidence,’’ Department of Health, continued to rise in several countries, 1254, 1989; Raferty, J., ‘‘Advertising and Smoking— Economics, and Operational Research Division, the comment said that ‘‘it takes a A Smoldering Debate?’’, British Journal of London, p. 18, 1992. number of years for the impact of the Addiction, vol. 84, pp. 1241–1246, 1989. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44493 advertising affects consumption. The types of advertising restrictions (i.e., TV that the statement that it made in the comment argued that one of the ban versus warning on package). preamble is correct: analyses failed to account for common However, the rating scale accurately These studies provide insight into the trends resulting from the diffusion of reflects the level of restrictions in each effects of advertising on the general appeal of information about health risks. The country. The steps between the ratings and demand for cigarettes and smokeless comment further stated that Chetwynd in the scale may be smaller or larger tobacco products. They also provide used a model in his study that was more than the comments believe were evidence confirming advertising’s effect on consumption and the effectiveness of likely to indicate correlation than warranted, but the relative rankings advertising restrictions on reducing youth causation. The comment also asserted would remain the same regardless. smoking. that the model suffers from poor data Finally, several comments found fault (60 FR 41314 at 41333) and fails to take into account changing with the smaller studies cited by FDA, Based on the foregoing, FDA finds social mores. In addition, the comment including ones by Chetwynd and that the international experience argued that a comparable study Harrison. Contrary to the comments’ provides empirical evidence that (Boddewyn) has not shown a decrease assertions, the studies do include the restrictions on tobacco advertising, in cigarette consumption in areas that most relevant variables such as price, when given appropriate scope and when 177 restrict advertising. income and advertising expenditures. A fully implemented, will reduce cigarette Industry comments uniformly major complaint of the industry and smokeless tobacco use among criticized the TSB study. This study was regarding studies done abroad is that the children and adolescents under the age also criticized by the Canadian courts in advertising expenditures fail to be of 18. This experience provides strong the course of litigation over the validity totally inclusive. However, the solution evidence that the restrictions that FDA of Canada’s advertising restrictions, see to that problem lies with the industry in is imposing will directly advance its section VI.D.3.f. of this document. In most cases. Advertising expenditures interest in protecting the health of these response, the TSB published a are a closely guarded industry trade young people. 179 modification of the original study that secret, which the companies state b. Case law considering the effect of recognized that mistakes had been made cannot be released to the public because advertising and advertising restrictions in the initial report. The reissued report of their commercial sensitivity. upon tobacco use by young people. was entitled ‘‘A Reply to Tobacco However, the industry could release Virtually every court that has examined Industry Claims about Health or older relevant data that are no longer the issue has held that there is a direct Tobacco,’’ ISBN–0–477–04574–X sensitive for the purposes of connection between advertising and (hereinafter referred to as the Reply). investigation and study. Moreover, demand for the product advertised. For According to one comment from a researchers who have had access to example, in Central Hudson Gas and public interest group: industry data have not released their Electric, 447 U.S. at 569, the Supreme The Reply re-analyzed the data of the data sets for replication by other Court stated: ‘‘[T]he State’s interest in impact of advertising in a number of 180 research groups. energy conservation is directly countries based upon criticisms of the The final study criticized by the original report by the tobacco industry. Even advanced by the Commission order at industry, performed by Harrison, was issue here. There is an immediate after taking into account the criticisms of the written in response to earlier criticism tobacco industry, the New Zealand connection between advertising and by the industry about the Chetwynd government found strong empirical evidence demand for electricity.’’ See also of the link between tobacco advertising and study, and it therefore provided some Posadas de Puerto Rico v. Tourism Co. tobacco consumption. answers to the comments’ concerns. For of Puerto Rico, 478 U.S. at 341–342. In In addition to the issuance of the example, the comments fault Chetwynd United States v. Edge Broadcasting Co., Reply, Laugesen and Meads 178 retested for failing to take into account changing the Supreme Court carried its position the typology created by the TSB and social mores. Harrison stated that he in Central Hudson one step further: applied it to 22 OECD countries for a 15- retested Chetwynd’s model and found If there is an immediate connection year period. In the preamble to the 1995 that the model was structurally stable between advertising and demand, and the proposed rule, FDA referred to the through time in the long term. He also federal regulation decreases advertising, it Laugesen study as providing affirmation found that the long run analyses stands to reason that the policy of decreasing of the TSB’s analysis and conclusions, indicated that the impact of cigarette demand for gambling is correspondingly that, as a group, countries prohibiting advertising on consumption may be advanced. tobacco advertising in most or all media larger than was suggested in the original (509 U.S. 434) experienced more rapid percentage falls work. 181 Each circuit court that has considered in consumption than the group of After reviewing the studies provided the issue has also concluded that the countries that permitted promotion (60 by the comments and reevaluating the regulation of advertising is reasonably FR 41314 at 41334). studies relied upon in the preamble to aimed at reducing demand. (See, The industry comments’ major the 1995 proposed rule, FDA reaffirms Anheuser-Busch, Inc. v. Schmoke, 63 criticism of the Laugesen study is that F.3d 1305. 1314–15 (4th Cir 1995), the scale developed by Laugeson is 179 Even in the United States, only FTC has access vacated and remanded 64 U.S.L.W. to company expenditure data and it is prevented 3333 (May 20, 1996); Dunagin v. City of flawed. The comments criticized the from disclosing information concerning advertising amount of weight accorded to different expenditures except at the industry-agglomerated Oxford, Miss., 718 F.2d at 750 (‘‘[W]e level. hold that sufficient reason exists to 177 Boddewyn, J. J., ‘‘Tobacco Advertising Bans 180 Beales, J. H., ‘‘Advertising and the believe that advertising and and Consumption in 16 Countries,’’ International Determinants of Teenage Smoking Behavior,’’ p. 44, consumption are linked to justify the Advertising Association, 1986. 1993. ban, whether or not ’concrete scientific 178 Laugesen, M., and C. Meads, ‘‘Tobacco 181 Harrison, R., J. Chetwynd, and R. J. Brodie, evidence’ exists to that effect.’’); and Advertising Restriction, Price, Income, and Tobacco ‘‘The Influence of Advertising on Tobacco Consumption in OECD Countries, 1960–1986,’’ Consumption: A Reply to Jackson and Ekelund,’’ Oklahoma Telecasters Ass’n v. Crisp, British Journal of Addiction, vol. 86, pp. 1343– British Journal of Addiction, vol. 84, pp. 1251– 699 F.2d 490, 501 (10th Cir. 1983), rev’d 1354, 1991. 1254, 1989. on other grounds sub.nom. Capital 44494 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

Cities Cable, Inc. v. Crisp, 467 U.S. 691 loyalty and to induce current smokers to They must be influenced by peers, (1984)).) In Greater New Orleans switch brands. They stated that because parents, and advertising, either to join Broadcasting Ass’n v. United States, 69 consumers are already aware of the the market or to decline to enter. F.3d 1296, 1301 (5th Cir. 1995), the tobacco category, advertising does not The agency finds that regardless of court said: serve to inform potential consumers of whether marketers and their advertising They cannot seriously dispute that a the product and to entice them to agencies intentionally target children prohibition of advertising of casino gambling become a user. One comment likened and adolescents, young people are still directly advances the governmental interest tobacco to other mature products such affected by advertising. Children are not in discouraging such gambling and fulfills as soft drinks, deodorants, isolated from tobacco advertising’s the [second] Central Hudson prong. It is antiperspirants, and appliances. attractiveness or inducements. There is axiomatic that the purpose and effect of Moreover, this comment argued that no ‘‘magic curtain around children and advertising is to increase consumer demand. ‘‘[b]ecause FDA lacks marketing teenagers who seek to learn how to fit To counter the weight of this case expertise,’’ it has been misled by the into the adult world,’’ nor is there any law, comments that opposed FDA’s size of the industry’s advertising evidence to support a claim that young advertising restrictions made two expenditures and assumed, incorrectly, people are immune from advertising’s arguments. First, several comments from that this means that the industry is blandishments. 184 the tobacco and advertising industries attempting to expand its overall market. Comments asserting that tobacco argued that the agency cannot rely on Finally, several comments stated that advertising fails to increase the assumption of a link between there are no data that clearly prove that consumption for the tobacco market run advertising and demand that is advertising and promotion increase contrary to the views of one well-known embodied in these decisions and, citing demand in the tobacco market. advertising executive who stated: the Court’s more recent Coors decision, Other comments took the opposing I am always amused by the suggestion that contended that the agency’s evidentiary view and agreed with FDA’s assessment advertising, a function that has been shown record will be held to a higher standard that tobacco advertisements make to increase consumption of virtually every of proof. tobacco products more appealing to other product, somehow miraculously fails to However, as one comment correctly young people and affects tobacco use work for tobacco products. 185 noted, the Court in Coors wrote: among young people. Several comments Further, the view that advertising It is assuredly a matter of ‘common sense’ argued that the market for cigarettes and does not affect consumption is that a restriction on the advertising of a smokeless tobacco is not mature but is contradicted by industry experience, product characteristic will decrease the actually very dynamic. In addition to logic, and evidence. It does not appear extent to which consumers select a product credible that the industry spends more on the basis of that trait. brand switching and brand loyalty, they than $6 billion annually merely to (115 S.Ct. at 1592) Moreover, in 44 argued that tobacco marketing generates maintain brand share and to try to Liquormart, Inc., Justice Stevens quoted market expansion. The comment noted switch current smokers; this argument with apparent approval Central that there is substantial movement at the defies common sense. The economics of Hudson’s reliance on the ‘‘immediate margins with new customers entering this argument are strained—five connection’’ between ‘‘promotional the market, and many current customers manufacturers control almost 100 advertising’’ and demand (116 S.Ct. at trying to leave. percent of the market, and three of these 1506, quoting Central Hudson 447 U.S. FDA agrees with those comments that have approximately 90 percent of the at 569). Thus, the Supreme Court expressed the view that labeling the market. 186 continues to hold that there is a tobacco market as a ‘‘mature market’’ is The courts have also expressed connection between advertising and a simplistic denotation, which fails to skepticism about this argument. In demand, and FDA finds no merit to this recognize the movement into the market each day of new young smokers often Dunagin v. City of Oxford, Miss., the contention in the contrary argument in motivated in part by advertising. Even advertiser’s expert, a professor in the comments. sociology who specialized in The second argument that these ‘‘mature’’ markets must replenish their customer base as older consumers leave alcoholism, testified that advertising comments made is that because tobacco the market. In fact, approximately one merely affected brand loyalty and products constitute a ‘‘mature product’’ million new young smokers enter the market share, rather than increasing whose availability and qualities are tobacco market each year. These new overall consumption or consumption of widely known to consumers, the smokers are necessary to keep the individual consumers (718 F.2d at 748). purpose and function of cigarette mature market stable and to prevent The court rejected this argument: advertising is to build market share and decline. There is no evidence to suggest It is beyond our ability to understand why to maintain brand loyalty, not to that these new smokers are huge sums of money would be devoted to the stimulate demand. FDA considers these predestined 182 to enter the market. RJR promotion of sales of liquor without expected comments in depth in the following acknowledged this in one marketing section of this document. 184 memo, Cohen, J. B., ‘‘Charting a Public Policy for c. The function of advertising in the ‘‘[I]f we are to attract the nonsmoker or the Cigarettes,’’ Marketing and Advertising Regulation: ‘‘mature’’ market. Comments from the presmoker, there is nothing in this type of The Federal Trade Commission in the 1990’s, industry, advertisers, psychologists, and edited by Murphy, P. E., and W. L. Wilkie, product that he would currently understand University of Notre Dame Press, Notre Dame, IN, economists argued that although it may or desire. * * * Instead, we somehow must pp. 234–254 , 1990. be true that advertising generally serves convince him with wholly irrational reasons 185 Foote, E., ‘‘Advertising and Tobacco,’’ JAMA, 183 the function of increasing demand for a that he should try smoking.’’ vol. 245, pp. 1667–1668, 1981. product category, that truism does not 186 Weidner, D., ‘‘RJR Tobacco International Gets work for tobacco, which, they claim, is 182 Teague, C., Research Planning Memorandum New Chief,’’ Winston-Salem Journal, p. A1, Dec. 8, a mature market. on Some Thought about New Brands of Cigarettes 1995. (Philip Morris, 45 percent, Reynolds 27 for the Youth Market, 1973. percent.); Antunes, S., ‘‘B & W Harassed Workers,’’ (21) The comments argued that 183 Teague, C., Research Planning Memorandum Evening Standard, p. 47, Nov. 16, 1994. (After because tobacco is a mature product, on the Nature of the Tobacco Business and the Brown & Williamson acquired American Tobacco, advertising serves to reinforce brand Crucial Role of Nicotine Therein, 1972. it had 18 percent of the market.) Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44495 results, or continue without realized results. cigarettes. Although the advertising did Current smokers are faced with No doubt competitors want to retain and not increase the advertiser’s brand alternatives to smoking, including over- expand their share of the market, but what share, increased advertising for low tar the-counter and prescription drug businessperson stops short with competitive cigarettes caused the entire market for advertising for nicotine replacement comparisons? It is total sales, profits, that pay cigarettes to increase. 190 products and stop-smoking cures. The the advertisers and dollars go into advertising The ability of advertising to expand only if they produce sales. Money talks: it tobacco market thus has to convince the talks to the young and the old about what total demand for a particular class of presmoker or new smoker to switch counts in the marketplace of our society, and products through market segmentation from the nonuse category promoted by it talks here in support of Mississippi’s has also been demonstrated in other health professionals, public service concern. markets when the breakfast cereal announcements, and school messages, (718 F.2d at 749) industry first began making health to tobacco use. Also, it must constantly The court concluded: ‘‘We simply do claims for their products, such as those convince the addicted smoker not to not believe that the liquor industry regarding the cancer-prevention benefits leave the market by use of a competing spends a billion dollars a year on of dietary fiber. The creation of a new nicotine-delivery product, a nicotine advertising solely to acquire an added segment of the cereal market—healthy replacement source, or by other market share at the expense of cereal—through the use of advertising voluntary means. competitors’’ (718 F.2d at 750). The resulted in an increase in the overall Finally, even the industry same reasoning applies here. adult cereal market. Advertising caused acknowledges that young people are a (22) One comment discussed the an increase in aggregate demand by strategically important audience results of a recent study that the giving consumers a ‘‘new’’ product that because brand loyalty often develops 191 comment said had been accepted for met their needs, wants, and desires. during this period of trying cigarettes 187 Thus, advertising can serve an publication which found that less and becoming a smoker. In 1973, RJR’s important role in meeting and than 10 percent of adult smokers switch research and development officer wrote expanding desires in the marketplace. It brands each year, and that only 6.7 ‘‘Realistically, if our Company is to identifies consumers’ needs and desires percent switch companies. The survive and prosper over the long term, and then matches them with the commentary suggests that this amount we must get our share of the youth attributes of particular product of ‘‘real’’ brand switching would not market.’’ 194 And, as noted in the categories and brands. Advertising can justify $6.1 billion, an amount in annual preamble of the 1995 proposed rule, perform this function through its use of advertising and promotional these words reflect those uttered by the explicit claims or through imagery, code expenditures. Canadian sister company of the words, or psychosocial cues. And, in In addition to logic, there is empirical American tobacco company, Brown and doing so, it can both shift demand evidence that advertising can expand Williamson Tobacco Corp. demand in a so-called mature market across the entire product category and If the last ten years have taught us and in fact has done so in the cigarette create new demand. anything, it is that the industry is dominated market before. Smoking rates for teenage Moreover, the industry’s mature by the companies who respond most girls rose from 8.4 percent in 1968, market categorization assumes that the effectively to the needs of younger when major promotional campaigns first product category has no outside smokers. 195 targeted women, to 15.3 percent in competitors, i.e., that there is no other FDA finds that there is no merit to the 1974, by which time other tobacco product line that competes for the industry’s claim that because the companies had also begun marketing consumers’ attentions and dollars. For tobacco market is a mature market, 188 women’s brands. The same example, soft drinks are a mature advertising does not stimulate demand phenomenon was captured differently market, but more healthful drinks, such but only reallocates the existing market 189 in a recent study that tracked as milk, juices, or even water, can between companies. Not only is the initiation rates for girls and women over attempt to draw off part of the market. industry’s argument overly simplistic, a 40-year period. The study found that In addition, soft drinks can try to but, as shown, advertising plays an smoking initiation rates rose for girls expand their own market share as Coca important role in creating new under 18 during the period between Cola and later Pepsi did a number of 192 customers, including young people. 1967 and 1973 (women’s targeting years ago when they promoted cola FDA shares the incredulity expressed by period), even though initiation rates did for breakfast. the court in Dunagin, 718 F.2d at 750, Similarly, tobacco has competitors. not rise for women 18 and older. regarding this argument: ‘‘It is beyond New users or ‘‘presmokers,’’ as one RJR Finally, as detailed more fully in the our ability to understand’’ why an employee refers to them, 193 are faced preamble to the 1995 proposed rule (60 industry would spend billions a year not only with tobacco imagery but also FR 41314 at 41345), another study merely to acquire market share at the with antismoking health messages in looked at the effect of variations in expense of its competitors, when it has commercial media and in schools. advertising expenditures for low tar a much harder job of convincing young people to start a habit that is neither 187 Siegel, M., et al., ‘‘The Extent of Cigarette 190 Roberts, M. J., and L. Samuelson, ‘‘An Brand and Company Switching: Results from the Empirical Analysis of Dynamic, Nonprice easy to acquire nor pleasant. Adult Use-of-Tobacco Survey,’’ American Journal of Oligoplistic Industry,’’ Rand Journal of Economics, Consequently, FDA finds that the Preventive Medicine, vol. 12, No. 1, pp. 14–16, vol. 19, pp. 200–220, 1988. second prong of Central Hudson is 1996. 191 Ippolito, P., and A. Mathios, Health Claims in satisfied, i.e., the advertising restrictions 188 Botvin, G. J., C. J. Goldberg, E. M. Botvin, and Advertising and Labeling: A Study of the Cereal directly and materially advance the Market, p. 32, 1989. L. Dusenbury, ‘‘Smoking Behavior of Adolescents substantial state interest. Exposed to Cigarette Advertising,’’ Public Health 192 Dourado, P., ‘‘Breakfast Cola Takes on Reports, vol. 108, pp. 217, 222, 1993. America’s Coffee Giants,’’ The Independent, p. 28, 189 Pierce J. P., L. Lee, and E. A. Gilpin, ‘‘Smoking April 15, 1990. 194 Id. Initiation by Adolescent Girls, 1944 through 1988,’’ 193 Teague, C., Research Planning Memorandum 195 Overall Marketing Objectives-F88, 1988 Journal of the American Medical Association, vol. on Some Thoughts about New Brands of Cigarettes Imperial Tobacco Ltd. Marketing Plan, p. 6; 60 FR 271, No. 8, pp. 608–611, 1994. for the Youth Market, p. 1, 1973. 41314 at 41331. 44496 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

E. Provisions of the Final Rule interest sought to be served’’ (Board of said in the 1995 proposed rule, is a fit FDA selected each of the restrictions Trustees of State University of New York between the Government’s ends and the that it included in the 1995 proposed v. Fox, 492 U.S. 469, 480 (1989); (60 FR means chosen to accomplish those ends rule based on its tentative view that the 41314 at 41355). that is not necessarily perfect but (23) This statement by FDA provoked particular restriction is necessary to reasonable (492 U.S. at 480). The a significant amount of comment. providing a comprehensive response to Supreme Court reiterated this point in Several comments said that FDA had the appeal of tobacco advertising to Florida Bar v. Went For It, Inc., 115 S.Ct. mischaracterized its burden. These young people. Each proposed restriction at 2380 (citations omitted): comments argued that Fox did not With respect to this prong, the differences was intended to address an aspect of dilute the Central Hudson analysis, and between commercial speech and this advertising that contributes to its that any restriction on commercial noncommercial speech are manifest. In Fox, appeal. The agency tentatively speech must be narrowly tailored. One we made clear that the ‘‘least restrictive concluded that, together, these comment pointed out that, in Rubin v. means’’ test has no role in the commercial restrictions will ensure that advertising Coors, the Supreme Court made no speech context * * * ‘‘What our decisions is not used to undermine the access require,’’ instead, ‘‘is a ‘fit’ between the mention of reasonable fit. The comment restrictions that FDA proposed and thus legislature’s ends and the means chosen to stated that in Rubin v. Coors, the will help to protect the health of accomplish those ends,’’ a fit that is not Supreme Court said that Central children and adolescents under the age necessarily perfect, but reasonable; that Hudson requires that a valid restriction of 18. represents not necessarily the single best be no more extensive than necessary to In this section of the document, FDA disposition but one whose scope is ‘in serve the governmental interest (115 proportion to the interest served’ that will respond to comments on each S.Ct. at 1591). Finally, one comment employs not necessarily the least restrictive element of this comprehensive said that FDA was arguing that courts means but * * * a means narrowly tailored approach, including comments on have applied a rational basis standard to to achieve the desired objective. whether the regulations are legally restrictions on commercial speech, but Thus, FDA did not mischaracterize its supportable. A key question about the the comment stated that FDA was wrong burden in the 1995 proposed rule. agency’s approach is whether there is a because courts have rejected this notion. Moreover, in any event, FDA has reasonable fit between the agency’s In response to these comments, FDA narrowly tailored its provisions. interest and the means that it has has carefully evaluated the relevant case Before turning to the question of chosen to accomplish it; that is, between law. The agency does not agree that it whether there is a reasonable fit the agency’s interest and the specific mischaracterized its burden in the 1995 between FDA’s interest in the health of restrictions that it proposed. This proposed rule. children and the restrictions that FDA inquiry involves consideration of the It is true that in Rubin v. Coors the proposed on tobacco advertising, the restrictions under the third and final Supreme Court found that the agency wishes to make clear that, prong of Central Hudson. challenged statutory provision violated contrary to the claim of one comment, FDA will first consider comments that the First Amendment’s protection of it recognizes that courts have not raised general concerns about its commercial speech, at least in part, equated the reasonable fit test with approach under the third prong of because it was more extensive than rational basis review. (See, e.g., Florida Central Hudson. It will then consider necessary (115 S.Ct. at 1594). However, Bar v. Went For It, Inc.) FDA recognizes comments that raised concerns about the Court also stated that its inquiry that the reasonable fit test requires that specific restrictions under this aspect of under the last two steps of Central the Government goal be substantial, and Central Hudson as part of its discussion Hudson involves ‘‘a consideration of the that the cost of achieving that goal be of the comments on each restriction. ’fit’ between the legislature’s ends and carefully calculated. (See Board of 1. Are FDA’s Regulations Narrowly the means chosen to accomplish those Trustees of State University of New York Drawn? ends’’ (Id. at 1391 (quoting Posadas De v. Fox, 492 U.S. at 480.) It also Puerto Rico Associates v. Tourism Co. of recognizes that this test requires that the In the preamble to the 1995 proposed Puerto Rico, 478 U.S. at 341); (See also agency consider whether there are less rule, FDA stated that the regulations 44 Liquormart, Inc. v. Rhode Island, 116 burdensome alternatives to restrictions that it was proposing met the final S.Ct. at 1510 (‘‘As a result, even under on speech. prong of the Central Hudson test (60 FR the less than strict standard that Having already established that its 41314 at 41355). In Central Hudson, the generally applies in commercial speech goal is substantial (see section VI.C.4. of Supreme Court stated that the First cases, the state has failed to establish a this document), FDA will consider the Amendment mandates that speech reasonable fit between its abridgment of issues of the costs of the restrictions and restrictions be ‘‘narrowly drawn.’’ The speech and its temperance goal.’’)). alternatives to these restrictions in its Court continued: Moreover, the Court’s statement in analysis of the comments that follows. The regulatory technique may extend only as far as the interest it serves. The State Rubin v. Coors that a restriction on (24) Several comments argued that the cannot regulate speech that poses no danger commercial speech must be no broader restrictions on cigarette and smokeless to the asserted State interest, * * * nor can than necessary, which was cited by a tobacco advertising that FDA proposed it completely suppress information when comment, must be read in light of the are not narrowly tailored. One comment narrower restrictions on expression would Court’s discussion of this requirement said that the premise of the narrow serve its interest as well. in Board of Trustees of State University tailoring requirement is that commercial (447 U.S. at 565, n.7) FDA pointed out, of New York v. Fox, 492 U.S. at 476– speech is valuable, and that it may only however, that: ‘‘The Supreme Court has 481. In Fox, the Supreme Court be restricted when it is necessary to do made it clear that this prong does not concluded from its consideration of how so. Other comments argued that require a ‘least restrictive means test,’ this phrase has been used in its case law restrictions on speech must attack only but rather that there be a ‘reasonable fit’ and in the related case law on time, problem speech, and that FDA had between the government’s regulation place, and manner restrictions, that failed to prove that this is what the and the substantial governmental what is required, exactly as the agency proposed restrictions did. These Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44497 comments stated that FDA’s proposed to sponsor in the corporate name in restrictions would not only preclude restrictions are more extensive than order to engender good will, but speech that may be perceived by young necessary to achieve the agency’s preventing them from using the brand people, it would preclude speech that asserted interest, particularly because specific attractive imagery that is would be received by adults. The the agency had failed to show that the influential with young people. Finally, restrictions, these comments asserted, advertising restrictions will have any it is prohibiting the use of branded would deprive adults, who are legally effect on underage smoking. Some promotional items because it is the entitled to smoke, of their right to the comments argued that the restrictions young who find particular value in free flow of relevant commercial that FDA proposed were tantamount to these items. In each of these respects, information. Other comments, relying a ban because they will prevent the the agency has gone no further than it on several cases, said that the First advertiser’s message from reaching has found, based on the evidence, is Amendment does not countenance consumers. necessary to meet its ends. (See Dunagin wholesale censorship of speech for Other comments disagreed. These v. City of Oxford, Miss., 718 F.2d at adults under the guise of protecting comments said that FDA’s proposed 751.) children. Many comments, for example, action is narrowly tailored. They argued Under the restrictions that FDA is quoted a statement from Butler v. State that FDA had steered clear of imposing adopting, firms will remain free to of Michigan, 352 U.S. 380, 383 (1957) a categorical ban on tobacco advertising, disseminate advertising that performs (‘‘Surely, this is to burn the house to or even broad prophylactic rules. One all the informational functions that are roast the pig.’’) in support of this point. comment said that tailored prohibitions, protected by the First Amendment. One comment said that FDA’s purpose instead of all-out bans, are important They will be able to disseminate of reducing tobacco use by minors signposts indicating a measured information on what they are selling, for cannot support massive censorship response. what reason, and at what price. (See between tobacco advertisers and adults. FDA disagrees with the comments Virginia State Board of Pharmacy v. One comment, however, argued that that claimed that the restrictions were Virginia Citizens Consumer Council, FDA’s proposed restrictions are not narrowly tailored. The agency 425 U.S. 748, 765 (1976); Bates v. State narrowly tailored to the specific types of recognizes, as the Supreme Court said in Bar of Arizona, 433 U.S. 350, 364 advertising that are most effective with Zauderer v. Office of Disciplinary (1977).) Thus, the situation here is children. This comment said that these Counsel, 471 U.S. 626, 646 (1985), that analogous to that in Friedman v. Rogers, restrictions permit companies to it has the burden of distinguishing the 440 U.S. 1 (1979), where the Supreme continue marketing practices that do not harmless from the harmful. FDA has Court found that a restriction on the use appeal to children. met this burden. of optometrical trade names had only an FDA has considered the concerns The restrictions that FDA is adopting incidental effect on the content of expressed in the comments. First, FDA are not like those in Central Hudson, commercial speech. The Court said that does not agree that its interest is limited. which, even though the Public Service ‘‘the factual information associated with As discussed above, the agency’s Commission’s interest was limited to trade names may be communicated interest is compelling. Nonetheless, the energy conservation, reached all freely and explicitly to the public’’ (440 agency has tried very hard to tailor the promotional advertising, regardless of U.S. at 16). So, here, any information restrictions on advertising in this final the impact of the touted service on that firms wish to communicate to rule to focus them in order to limit the energy use. (See 447 U.S. at 570.) adults may still be communicated by appeal of advertising to the young and Rather, FDA’s restrictions are carefully use of words. Indeed, the tobacco ensure that the restrictions on access to crafted to focus on those media and industry has used text-only advertising cigarettes and smokeless tobacco will 196 aspects of advertising that children are successfully in the past. not be undermined, while at the same routinely exposed to and that the It may be true, as some of the time, minimizing their effect on adults. available evidence shows has the comments state and as the agency Given this approach, FDA’s restrictions greatest effect on youngsters, while recognized above, that it will be more differ significantly from those struck leaving the informational aspects of difficult for adult consumers to find down in Butler v. State of Michigan, advertising largely untouched. FDA is cigarette and smokeless tobacco where the Court overturned conviction not banning outdoor advertising; it is advertising without images and color, of a bookseller for selling a book to restricting it so that it does not but willingness to search for adults that contained some portions that unavoidably confront children when information is one of the things that might be objectionable to young people. they play. It is not banning print adults will do when they need In that case, the Supreme Court stated: We have before us legislation not advertising. It is restricting the use of information about price, quality, or product performance. Moreover, as reasonably restricted to the evil with which images and color, which are particularly discussed above, adult tobacco users are it is said to deal. The incidence of this appealing to children, in publications particularly interested in information on enactment is to reduce the adult population that have a large number of young price, ‘‘safer’’ cigarettes, and new of Michigan to only what is fit for children. readers under the age of 18 and in other (352 U.S. at 383) products, information that can be freely forms of advertising to which children This statement clearly does not conveyed under FDA’s regulations. are routinely exposed but permitting describe the situation under the (25) The effect of the proposed unrestricted advertising in adult restrictions FDA is adopting. Except for restrictions on cigarette and smokeless publications and adult venues. It is tobacco product manufacturers’ ability limits on images and colors, the restricting cigarette and smokeless to communicate with adults was the restrictions that FDA is adopting do not tobacco companies’ use of brand names subject of a number of comments. These limit what cigarette and smokeless and product identifications in comments argued that the proposed tobacco manufacturers, distributors, or sponsored events, but again in a way retailers may say. As stated above, they that reflects the agency’s concern about 196 As discussed more fully elsewhere, are free to put into words any children and adolescents under the age advertising for low-tar products is generally more nondeceptive message that they would of 18. That is, it is permitting companies reliant on text than on imagery. have communicated by color or image. 44498 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

FDA’s restrictions, as one comment the Supreme Court stated that: ‘‘Speech clearly distinguishes them from the stated, restrict only those advertising * * * cannot be suppressed solely to governmental efforts to protect minors techniques that have the most appeal. protect the young from ideas or images that have been struck down as sweeping Thus, contrary to the situation in Butler that a legislative body thinks unsuitable too broadly and as impinging on the v. Michigan, these restrictions are for them’’ (422 U.S. at 213). rights of adults. Under FDA’s reasonably restricted to the harms they Again, however, FDA is imposing restrictions, there will still be a free flow are intended to address. restrictions on the manner and, to a of information to adults and not massive Nor are the restrictions that FDA is limited extent, places in which censorship as some comments allege. imposing like the one struck down in cigarettes and smokeless tobacco are Thus, these comments do not provide a Bolger v. Youngs Drug Products Corp., advertised, not content restrictions. basis to conclude that FDA’s restrictions 463 U.S. 60 (1983), which was cited by Moreover, FDA is restricting fail the third prong of the Central several comments. In that case, a commercial speech, which, as stated in Hudson test. Federal statute prohibited the mailing of section VI.C.1. of this document, is (28) Several comments pointed out unsolicited advertisements for subject to a subordinate position in the that the Supreme Court has stated on contraceptives. The Postal Service scale of First Amendment values to the several occasions that regulations that sought to justify this restriction as noncommercial expressions involved in disregard numerous and obvious less aiding parents’ efforts to discuss birth Erznoznik. Thus, this case has no restrictive and more precise means of control with their children. While the application here. achieving the government’s asserted Court found this interest to be (27) Finally, a few comments cited objectives are not narrowly tailored. substantial, it found the restriction to be Project 80’s, Inc. v. City of Pocatello, 942 These comments suggested that there more extensive than the Constitution F.2d 635 (9th Cir. 1991), a case in which are several less restrictive alternatives to permits (463 U.S. at 73). The Supreme the U.S. Court of Appeals for the Ninth the restrictions on advertising that FDA Court struck down the restrictions, Circuit struck down ordinances that had proposed. One alternative pointed stating: ‘‘The level of discourse reaching prohibited door-to-door solicitation to by the comments was better the mailbox simply cannot be limited to because they restricted both wanted and enforcement of laws prohibiting sales to that which would be suitable for a unwanted solicitations. (See 942 F.2d at minors. The comments pointed out that sandbox’’ (Id. at 74). It is in this respect 638–639.) The municipalities sought to Congress passed legislation as part of that FDA’s restrictions differ from those defend these ordinances on the grounds the Alcohol, Drug Abuse, and Mental in Bolger. While FDA may limit the type that they did not prohibit in-home sales. Health Administration (ADAMHA) of color or imagery, or the use of However, the court said that residents Reorganization Act of 1992, that noncommunicative media, i.e., hats, who wanted to receive unwanted prohibits DHHS from providing block FDA’s restrictions do not limit the types solicitors had to post a ‘‘Solicitors grants for the prevention and treatment of information that can be disseminated, Welcome’’ sign, and that the of substance abuse unless the State except within 1,000 feet of schools and Government’s imposition of affirmative prohibits the sale and distribution of playgrounds. obligations on the residents’ First tobacco products to persons under 18. (26) Other comments cited Sable Amendment rights to receive speech is The comments said that FDA should Communications v. FCC, 492 U.S. 115 not permissible (Id. at 639). give this new law a chance to work (1989), in which the Supreme Court Presumably, the comments cited this before imposing restrictions on speech, struck down an outright ban on case as evidence that FDA’s restrictions particularly in light of the fact that indecent as well as obscene interstate on tobacco advertising sweep too DHHS itself said in its 1995 proposed commercial telephone messages. This broadly because they affect the rights of rule to implement this new law that case is not relevant here because FDA is both minors and adults to receive ‘‘[e]liminating virtually all sales [of not imposing an outright ban on speech. Again, however, the case is tobacco products] to minors does not cigarette and smokeless tobacco distinguishable. Under FDA’s even present particularly difficult advertising, 197 and because in contrast restrictions, adults will be able to enforcement problems’’ (see 58 FR to Congress’s failure to make findings continue to receive tobacco advertising 45156 at 45165, August 26, 1993). that would justify the ban in Sable, FDA without any obligation to take any The other alternative, according to the is fully explaining the basis for each of affirmative steps. They will have to look comments, that exists to the restrictions the restrictions that it is adopting here. a little harder because, to advance is an educational campaign that is Other comments cited Erznoznik v. FDA’s interest in protecting the health sponsored either by the Government or City of Jacksonville, 422 U.S. 205 (1975), of minors, advertisements will generally that is provided through voluntary in which the Supreme Court struck not have images or color, and such counter speech by the tobacco industry. down an ordinance that, to protect advertising will not be around schools The agency recognizes that the minors, made it illegal to exhibit a or playgrounds. However, the various opinions by the Justices in 44 motion picture visible from public advertising should otherwise continue Liquormart reiterate the need to streets in which female buttocks and to be available in newspapers, consider nonspeech restrictions. Justice bare breasts were shown. In doing so, magazines, and billboards and appear Stevens, speaking for himself and unrestricted in adult publications and Justices Kennedy, Ginsburg, and Souter 197 The Court specifically distinguished FCC v. venues. There is no indication in Project stated that the legislature ‘‘cannot Pacifica Foundation, 438 U.S. 726 (1978), because satisfy the requirement that its that case did not involve a total ban on broadcasting ’80, Inc. v. City of Pocatello, that the indecent material. The Court pointed out that the Ninth Circuit would find in such restriction on speech be no more FCC rule in that case sought to channel the indecent restrictions an undue burden under the extensive than necessary,’’ given that material to times of the day when children most First Amendment. alternative forms of regulation, such as likely would not be exposed to it (Sable This review of the case law shows taxation or limits on purchases that did Communications v. FCC, 492 U.S. at 127). FDA’s intention here is to impose a similar type of focused that FDA’s effort to tailor the restrictions not involve restrictions on speech, and tailored restriction on tobacco advertising to that it is adopting for cigarette and could achieve the goal of promoting limit the appeal of such advertising to children. smokeless tobacco advertising that temperance as well as, or better, than, Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44499 its ban. Moreover, Justice O’Connor in a and began to rise in 1991. Between 1991 Advertising, as explained in sections concurrence, joined by the Chief Justice, and 1995, the proportion of 8th and VI.B. and VI.D. of this document, plays and Justices Souter and Breyer stated: 10th graders who reported smoking in a role in the decision of children and The availability of less burdensome the 30 days before the survey had risen adolescents to use cigarettes and alternatives to reach the stated goal signals by one-third, to about 19 percent and 28 smokeless tobacco. As long as that the fit between the legislature’s ends and percent, respectively. Smoking among advertising continues to play that role, the means chosen to accomplish those ends high school seniors had increased by young people will be motivated to may be too imprecise to withstand First Amendment scrutiny. more than one-fifth since 1992, with obtain access to tobacco products and to (116 S.Ct. at 1521) 33.5 percent saying that they had attempt to circumvent any access (29) One comment, however, argued smoked in the 30 days before the restrictions. Thus, the restrictions on 198 that, for two reasons, there is no survey. Thus, past efforts involving speech are necessary to prevent plausible claim that FDA has age restrictions and warning messages advertising from undermining FDA’s disregarded reasonable alternatives. on packages and advertising have not proposed restrictions on access. First, First, the comment pointed out that the been sufficient to reduce the demand for the agency notes that the voluntary Federal Government has engaged in an tobacco by young people. The educational campaigns conducted by incremental effort for 30 years to strike restrictions on advertising are designed tobacco companies have not been the appropriate balance in regulating the to affect the demand. effective in reducing underage tobacco sale of tobacco products. This effort was Second, the agency proposed a use. This fact is evidenced by the successful in bringing down overall sufficiently comprehensive set of increase in prevalence of tobacco use smoking rates, but youth smoking rates regulatory restrictions to address the among young people. (See, e.g., 60 FR remained stable during the 1980’s and problem of tobacco use by young 41314 at 41315.) Second, the agency have recently begun to rise. Because people, to wit: (1) Provisions that finds that any educational campaign is previous measures have failed, the restrict and prevent sales of tobacco likely to be undermined if the young comment said, it was now appropriate products to young people; (2) provisions people to whom it is aimed continue to for FDA to take stricter action to reduce that reduce the appeal of tobacco be the target of advertising that fosters the use of tobacco products by minors. products for young people that is the perception that experimentation Second, the comment noted that a lack created by advertising and promotions; with tobacco by young people is of narrow tailoring often manifests itself and (3) a program to provide expected and accepted. in a restraint that is either grossly educational messages for young people The U.S. Court of Appeals for the underinclusive or overinclusive. The to help them resist tobacco use. Thus, Fifth Circuit considered a suggestion comment said that FDA had been the agency has not relied solely on similar to that of an educational neither here. regulations that have an impact upon campaign in Dunagin v. City of Oxford, In Florida Bar v. Went For It, Inc., 115 the speech of the tobacco industry but Miss. and found it not to be an S.Ct. at 2380, the Supreme Court made has included provisions to address the alternative to restrictions on advertising: clear that the question whether a activity itself. We do not believe that a less restrictive restriction on commercial speech is time, place, and manner restriction, such as Third, while it is true that better reasonably well-tailored turns, at least a disclaimer warning of the dangers of enforcement of laws restricting sales to in part, on the existence of ‘‘numerous alcohol, would be effective. The state’s and obvious less burdensome minors is complementary to FDA’s concern is not that the public is unaware of the dangers of alcohol * * * The concern alternatives to restrictions on approach, it does not eliminate the need for this action. As DHHS recognized in instead is that advertising will unduly commercial speech * * *.’’ (See 115 promote alcohol consumption despite known S.Ct. at 2380 (citing Cincinnati v. its final rule implementing the ADAMHA Reorganization Act of 1992, dangers. Discovery Network, Inc., 507 U.S. 410, (See 718 F.2d at 751; see also Posadas 418 n.13 (1993)).) FDA has considered DHHS’s action under that statute and FDA’s regulations both address the need de Puerto Rico Ass’n v. Tourism Co. of the alternatives suggested by the Puerto Rico, 478 U.S. at 344.) This is comments and finds that none of them to reduce minors’ access to tobacco products. FDA’s action, however, in exactly FDA’s concern about the effect is an appropriate alternative to the of advertising on underage tobacco use, restrictions that FDA is adopting. addition to reducing access, attempts, through the restrictions on advertising, and why an educational campaign, First, the Government has engaged in which may complement advertising a 30-year effort to eliminate young to reduce ‘‘the powerful appeal of tobacco products to children and restrictions, is not an alternative to people’s access to and use of tobacco them. products. The industry, through its adolescents’’ (61 FR 1492, January 19, 1996). 199 Thus, the agency concludes that there voluntary code and various education are no less burdensome alternatives to programs, has professed to be part of the 198 ‘‘Teen Smoking, Marijuana Use Increase restrictions on advertising. In this solution. However, tobacco can be easily Sharply, Study Shows; HHS Sees Alarming respect, this proceeding is obtained by young people (between 516 ‘Culturewide’ Change in Progress,’’ The Washington distinguishable from that considered in million and 947 million packs of Times, p. A2, December 16, 1995; quoting from Rubin v. Coors, which was cited by a cigarettes sold illegally per year to ‘‘Results from the 1995 Monitoring the Future number of the comments. In Rubin v. children (1992–1993) (60 FR 41314 at Survey,’’ National Institute on Drug Abuse Briefing for Donna E. Shalala, Ph.D., Secretary of Health and Coors, the Supreme Court pointed to the 41315)). Moreover, although adult Human Services, December 13, 1995. fact that the respondent cited several smoking rates have declined 199 It is true that in its August 25, 1993, proposal options that could advance the dramatically since the publication of the (58 FR 45156), DHHS stated, as the comments say, Government’s asserted interest in a first Surgeon General’s Report in 1964 that eliminating virtually all sales to minors does manner less intrusive to respondent’s (from over 42.4 percent in 1965 to 25 not present particularly difficult enforcement problems. This statement did not imply, however, First Amendment rights than the percent in 1993) (60 FR 41314 at 41317), that achieving this goal would be easy, nor did it young people’s smoking rates failed to reflect consideration of what ancillary measures rather, a statement of DHHS’ view that this goal decline during the decade of the 1980’s would be useful to help to achieve this goal. It was, could be achieved. 44500 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations statutory provision the Government had television. As described more fully in ‘‘because § 897.30(a)(1) would limit the adopted (115 S.Ct. at 1593). 200 Here, as section VI.E.8. of this document, in the media in which cigarettes may be in section VI.E. of this document, there case of auto racing, attendance by young ‘advertised,’ the definition of are none believed to be nearly as people is on the rise. ‘advertising’ as used by FDA is crucial; effective. yet the term is not defined in the 2. Section 897.30(a)—Permissible Forms In U.S. v. Edge Broadcasting Co., 509 proposed regulations.’’ of Labeling and Advertising U.S. 418, 430 (1993), the Supreme Court Moreover, they expressed concern said that ‘‘the requirement of narrow Proposed § 897.30(a) would have that the definition was so sweeping that tailoring is met if ‘the * * * regulation established the scope of permissible it could literally ‘‘include reports to promotes a substantial Government forms of labeling and advertising for shareholders or potential shareholders; interest that would be achieved less cigarettes and smokeless tobacco. communications among manufacturers, effectively absent the regulation,’ Proposed § 897.30(a)(1) would have wholesalers, distributors, and retailers; provided that it did not burden defined permissible forms of advertising or even communications to the news substantially more speech than as newspapers, magazines, periodicals, media insofar as they might be deemed necessary to further the government’s or other publications (whether periodic a ’commercial use.’’’ legitimate interests.’’ or limited distribution); billboards, Other comments requested that the FDA’s restrictions on cigarette and posters, placards; and nonpoint of sale agency clarify the definition to ban smokeless tobacco advertising clearly promotional material (including direct product placements in movies and meet this test. FDA’s restrictions mail). Proposed § 897.30(a)(2) would commercials shown in movie theaters. directly and materially advance its have defined permissible forms of Several comments stated that § 897.30 compelling interest in the health of labeling as point of sale promotional should be extended to include tobacco children and adolescents under the age material; audio and/or video formats product packages to reduce the means of of 18. The discussion of the lack of less delivered at a point of sale; and entries a child expressing affinity with the restrictive alternatives demonstrates that and teams in sponsored events. image associated with a particular the agency’s goals would be achieved In response to the comments, FDA has brand. One comment recommended less effectively in the absence of these revised § 897.30(a) so that it no longer tombstone packaging without an restrictions. Finally, as the discussion distinguishes between advertising and identifiable logo. on narrow tailoring and in the review of labeling, deletes teams and entries as The agency carefully considered the comments on each of the regulations permissible advertising, describes the whether it should attempt to define the on advertising that follows makes clear, procedure that FDA will follow when it term ‘‘advertising’’ more explicitly than FDA is restricting only those aspects of is informed by advertisers of their intent it did. ‘‘Advertising’’ as a term is advertising that have particular appeal to advertise in a medium not listed in constantly evolving, as new media and to the young. Thus, the agency has the regulation. new techniques of marketing emerge. crafted the advertising provisions with In addition, the first sentence of Although its boundaries are understood specificity to allow unrestricted § 897.30(a), which states that this (and were provided in the preamble to advertising in those venues that are not subpart does not apply to cigarette or the 1995 proposed rule), there is no one seen by or used by children and smokeless tobacco product package accepted definition. FTC is the Federal adolescents. Accordingly, publications labels, has been redesignated as agency with general responsibility for with adult readership and adult § 897.30(c). regulating most consumer advertising. establishments may have unlimited (30) Several comments were received Yet neither FTC nor any of its rules print advertising. Moreover, companies addressing the issue of permissible define the general term ‘‘advertising.’’ are free to offer nontobacco items and advertising outlets. Comments from the The agency agrees with the approach events in their corporate names or tobacco and advertising industries taken by FTC and continues to believe unbranded. Companies, thus, can opposed the 1995 proposed rule. These that the term ‘‘advertising’’ should not reward adult usage by providing these comments criticized the 1995 proposed be defined any more specifically. Thus, incentives but may not do so in a format rule for not defining the term FDA finds that the description of (with brand identification and imagery) ‘‘advertising’’ and called the 1995 advertising in the preamble to the 1995 which is appealing to young people. proposed rule unprecedented in the proposed rule is appropriate: However, the agency has been unable scope of its limitations on the forms of Labeling and advertising are used to determine additional areas for media, a violation of the First throughout this subpart to include all unrestricted advertising. Thus, other Amendment, a violation of the commercial uses of the brand name of a than adult establishments, such as bars, Administrative Procedure Act (APA), product (alone or in conjunction with other there are no areas at other retail and beyond FDA’s statutory authority. words), logo, symbol, motto, selling message, or any other indicia of product identification establishments that are not visible to Supporters of the 1995 proposed rule, similar or identical to that used for any brand young people. Billboards are ubiquitous including health and public interest of cigarette or smokeless tobacco product. and accessible to all ages. Nontobacco groups, stated that it is a reasonable However, labeling and advertising would items can be restricted to dissemination measure given the effect of advertising exclude package labels, which would be to adults, but they would still serve as on children and that it provides covered under proposed subpart C. walking billboards. Finally, there are no manufacturers with a wide variety of (60 FR 41314 at 41334) adult only sponsored events—children means for communicating with their The agency also agrees with are at the events or watching them on customers. Some supporting comments comments that state that it must provide urged that the prohibition of certain some context for the application of so 200 One alternative that the respondents in Rubin media, such as the Internet, be stated open ended a definition. For example, v. Coors advanced was prohibiting marketing efforts explicitly. comments contended that ‘‘commercial emphasizing high alcohol strength (115 S.Ct. at 1593.) What FDA is doing here is analogous to that Several comments from the tobacco use’’ could be interpreted to include alternative. It is restricting marketing efforts that industry expressed concern that FDA such items as trade advertising have particular appeal to the young. did not define the term ‘‘advertising’’ (communication between Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44501 manufacturers, wholesalers, agency does not intend to regulate a film regulations need to be amended. distributors, and retailers), shareholder producer’s artistic expression—i.e., Advertising in any new media will be reports, and possibly even what the producer chooses to display in subject to the text-only format communications with the news media. movies. requirement if it is a medium used by This was not FDA’s intent. This rule is The agency has decided not to young people. Therefore, FDA has a consumer based regulation; it is not include restrictions on tobacco product created a new § 897.30(a)(2) to reflect the intention of FDA to include purely packaging. The agency has attempted to this new process. business related communications. Thus, narrowly tailor this rule and therefore The agency believes this approach is noncommercial uses would not be has not included packaging restrictions reasonable and is fully consistent with affected. These would include such uses at this time. its statutory authority and with the First as unpaid press statements, signs on (31) Several comments from the Amendment. In Central Hudson Gas & factories noting locations, business advertising industry expressed concern Electric Co., 447 U.S. at 571, n.13, the cards, and stockholder reports. While that the wording of § 897.30(a)(1) would Supreme Court suggested that the Public many of these uses would be ordinary ban all advertising for tobacco products Service Commission might consider a and necessary business expenses, they that is not expressly permitted. If so, the system of previewing advertising would not be commercial uses in the comment states, the rule would be campaigns to ensure that they will not context of the rule’s restrictions on arbitrary and capricious because the defeat conservation policy. The Court tobacco advertising affecting minors’ agency did not present evidence that pointed out that ‘‘commercial speech is tobacco use. these unnamed advertising techniques such a sturdy brand of expression that Furthermore, the preamble to the influence young people. Another traditional prior restraint doctrine may 1995 proposed rule explained that the comment pointed out that the channels not apply to it’’ (Id.). Given the agency’s agency intends to permit advertising available to tobacco companies for significant interest in ensuring that the with imagery and color in publications communicating with adults already restrictions on access that it is imposing that are read primarily by adults. For have been severely restricted by are not undermined, FDA finds that the that reason, under § 897.32(a), Congress’ ban on television and radio requirement that firms consult with it advertisements in publications (whether advertising. before using a new advertising medium periodic or limited distribution) with In contrast, comments from is a limited means of regulating primarily adult readership are not organizations of health professionals commercial expression that is likely to restricted to a text-only format. Trade and a public interest group supported vindicate FDA’s public health interests. advertising in trade press publications the scope of permissible advertising. This approach will not prohibit the and trade show publications, trade One specific comment stated that, ‘‘The tobacco industry from advertising in catalogs, price sheets, and other media listed in § 897.30 provide new media but will protect young publications for wholesalers, manufacturers with a wide variety of people by giving the agency an distributors, and retailers that will not means for communicating with their opportunity to review the problems be seen by consumers, including customers.’’ presented by a new media and to design minors, are unaffected by the rule. The agency has determined that the new regulations or adapt current ones. Also, the agency does not believe that scope of the permissible outlets for (32) One comment from a public the term ‘‘advertising’’ needs to be tobacco advertising in the 1995 interest group concerned with electronic defined to clarify what is not a proposed rule is reasonable. The media urged FDA to explicitly prohibit permissible advertising outlet. The 1995 permissible forms are the known current tobacco advertising over the Internet, proposed rule clearly specifies what forums for tobacco labeling and Worldwide Web, and other on-line advertising outlets are included within advertising and account for the vast services and interactive media. The the regulation’s coverage. However, the majority of advertising expenditures. comment stated that children and agency has been persuaded to make While the format of much of current adolescents are increasingly using on- more clear its procedures for new or tobacco advertising is being restricted to line services with up to 4 million uncovered media. These procedures are a text-only format, almost all of the Americans under age 18 using, or with described in this section. current media outlets being used for access to, on-line services. The The agency does not agree with tobacco advertising will still be comment stated further that the comments that the rule needs to be permissible. Legal users will continue to interactive nature of the on-line services clarified regarding infomercials or be able to receive information about gives advertisements numerous advertorials (program length cigarettes and smokeless tobacco, in a advantages over traditional print commercials). Television infomercials text-only format in most cases, in advertisements. The comment are not allowed under the statutory virtually all the same media currently emphasized that a ban on tobacco broadcast ban, and magazine used for tobacco advertising. Moreover, advertising over these media is advertorials would be treated like any if an advertiser intends to use a new necessary because the text-only format other magazine advertising. The agency media outlet not included in the list of would not be as effective in reducing recognizes that commercial advertising permissible advertising, its the appeal of tobacco advertising to messages (videos) shown in a movie responsibility is to notify FDA and minors given the interactive nature of theater are not addressed by the 1995 provide the agency with information these media. proposed rule. If this becomes a desired about the media and the extent to which One comment from an organization of medium, the companies would need to the advertising is seen by young people. health professionals stated that one notify FDA 30 days prior to using a new FDA will review any submission and tobacco company advertises its mail- medium. Finally, product placements in make a determination whether order business through a Web site on movies, music videos, and television, if provisions of the final regulation the Internet and offers links to other not placed at the expense of a tobacco provide sufficient information for the tobacco-related sites. The comment manufacturer, distributor, or retailer, advertiser to know how to disseminate wondered why this type of would not be affected by this rule. The its advertising or whether the advertisement was not banned by FCC 44502 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations since the Internet operates over on-line media and the Internet in restrictions must be as comprehensive telephone lines, a form of electronic evaluating any requests to use these as possible. media that is regulated by FCC and from media. Any other statement about Based on all of the foregoing, FDA which cigarette advertising is banned. specific requirements for this new concludes that the comprehensive A few comments dealt with on-line media or any other media would listing of permissible advertising in advertising and recommended that the constitute speculation at this point. 201 § 897.30(a)(1) will directly and rule should limit format to black text on Section 897.30(a)(1) provides a materially advance the agency’s efforts a plain background, require advertisers comprehensive listing of the permissible to reduce consumption of tobacco to demonstrate that significant numbers forms of advertising and labeling. The products by children and adolescents of children do not access ad sites, evidence that FDA has gathered in this under the age of 18. require use of any available blocking proceeding establishes the need for and 3. Section 897.30(b)—Billboards technology, and define ‘‘conspicuous’’ importance of such a comprehensive and ‘‘prominent’’ as they pertain to listing. In addition to the general The agency proposed in § 897.30(b) to interactive media. evidence and support provided by prohibit outdoor advertising, including Some of these comments have expert opinion, advertising theory, but not limited to billboards, posters, or suggested that advertising of tobacco studies and surveys, empirical studies, placards, placed within 1,000 feet of any products in on-line media should be anecdotal evidence, industry public playground or playground in a banned under the Federal Cigarette statements, and two consensus reports public park, elementary school, or Labeling and Advertising Act’s (the (the IOM Report and the 1994 SGR) secondary school. FDA proposed this Cigarette Act) (15 U.S.C. 1331) and the described in section VI.D.5. of this provision because these are places Comprehensive Smokeless Tobacco document, FDA has found specific where children and adolescents spend a Health Education Act of 1996’s (the support for a comprehensive listing in: great deal of time and should therefore Smokeless Act) (15 U.S.C. 4401) Empirical Studies—Various economic be free of advertising for these products. prohibition of advertising on any media and econometric studies of international The agency tentatively concluded that subject to the jurisdiction of FCC. The and cross-country data show that this was a reasonable restriction and agency leaves the issue of jurisdiction restrictions on advertising and noted that the cigarette industry’s and the applicability of the broadcast promotional activities can result in a voluntary ‘‘Cigarette Advertising and ban to the Department of Justice, which decline in tobacco use (see section Promotion Code,’’ (the Code) revised in has the appropriate jurisdiction over the VI.D.6.a. of this document). 1990, contains a similar provision Cigarette Act, and to FTC, which has Country Experience—The experience concerning schools and playgrounds (60 along with the Department of Justice of countries, such as Norway and FR 41314 at 41334 through 41335). jurisdiction over the Smokeless Act. Finland, shows that comprehensive (33) FDA received over 2,500 Were these agencies not to take action advertising restrictions can positively comments concerning this part of the and were, tobacco advertising to affect the smoking rates of young people 1995 proposed rule. Comments continue in on-line media, then FDA is over time (see section VI.D.6.a. of this opposing this measure pointed out that available to meet with advertisers document). the tobacco industry has established a regarding their responsibility under the Advertising Theory—Each separate voluntary code similar to the proposed final rule. advertising media plays a critical role in provision with which advertisers The agency recognizes the growing shaping young people’s beliefs about already comply, and that therefore, importance and use of on-line media tobacco use, and ultimately their use of there is no reason to make this measure and the Internet for communications of tobacco products (see sections VI.D.3.a. mandatory. These comments also stated all sorts, including tobacco sales and through VI.D.3.e. of this document). that outdoor advertising does not target advertising. On-line media are not Therefore, regulation of advertising children and adolescents, and that included within the list of permissible must address each type of media. As parents, siblings, and friends have a outlets for tobacco advertising because will be described in the following much greater influence than billboards the agency does not have sufficient sections of the regulation, the and posters on a young person’s desire information on the technology to restrictions on each media are necessary to start smoking. Further, they stated include regulations in the final rule. to reduce the appeal of tobacco for that there is no evidence that this However, advertisers interested in young people and to prevent measure would reduce any teenager’s advertising on the Internet should notify unrestricted tobacco advertising from desire to smoke. the agency, after the rule is final, and undermining the regulation’s access Most comments supported this provide the agency with sufficient provisions. Moreover, as international provision, stating that children and information about use by young people experience indicates (see section VI.D.6. adolescents should not be subjected to so that the agency can make a proper of this document), when regulations that visual images promoting tobacco use determination. This notification is for are not comprehensive are around those areas where they attend discussion purposes only, and is not in implemented, tobacco money can school or play. The comments argued any way intended to imply, or create a migrate to unregulated advertising that children and adolescents want to be need for, prior approval. venues (e.g., if publications are like the attractive models in the The agency recognizes the concern prohibited, money expended on advertising, and, thus, the expressed by one comment that a text- sponsorship will increase) and can advertisements directly influence them only format, without additional undermine the force of the regulation. to start using tobacco. requirements, may not be as effective in Thus, in order to be effective, In the Federal Register of March 20, protecting young people from on-line 1996 (61 FR 11349), the agency advertising as it would be for print 201 In addition to the substantive changes, the reopened the comment period for the following changes in language have been made: (1) advertising because of the interactive Deletion of ‘‘only’’ in § 897.30(a)(1); (2) substitution August 1995 proposed rule to place on nature of on-line media. The agency of (a)(2) for (b) in 897.30; and (3) deletion of ‘‘and’’ the public record a memorandum that would consider the unique qualities of before ‘‘in point of sale’’ in § 897.30(a)(1). provided further explanation of the Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44503 agency’s proposal to ban outdoor swings; or (2) a field or area of (35) Several comments contended that advertising within 1,000 feet of schools unrestricted activity. The intent of the the regulation should specify that the and playgrounds. The document proposal was not to preclude outdoor 1,000-foot rule should be measured from provided an additional 30 days in advertising within 1,000 feet of any area the perimeter of the property to avoid which to comment on this new that would fall under this broad confusion. One comment asked that the information. The memorandum stated definition, but to preclude cigarette and provision be more clear as to what types that the agency was aware of the smokeless tobacco advertising around of schools would be included within the industry’s voluntary 500-foot ban on those areas where children and definition. advertising from schools and adolescents are likely to spend a lot of The agency agrees with the first playgrounds but also that it was time. Clearly, areas around schools with comment. The intent of the 1995 cognizant, based on the experience of its equipment such as swings and seesaws proposed rule was that the distance employees, that billboards can loom are areas where children are likely to would be measured from the perimeter large in the sight of children and play. Public parks for family of the school or playground. Any other adolescents at that distance and thus recreational purposes with play measurement could defeat the purpose would be able to capture their attention. equipment, and facilities for activities of the regulation. For example, The agency also noted that 1,000 feet is such as baseball or basketball are also measuring from the edge of a building about 3 blocks and that signage kept that areas where children and adolescents or from the center of a playground could far away from schools and playgrounds are likely to be present for hours at a allow outdoor advertising to be placed would not loom as large, if it would be time. closer to the perimeter where children visible at all. Moreover, the 1,000 feet However, private enterprises, such as may be assembled or playing. In will protect children as they travel to theme parks and recreational facilities, addition, for large schools or and from these locations. are not necessarily intended only for playgrounds, the outdoor advertising In response to the comments, FDA has children and adolescents. Those that could feasibly be near the perimeter of modified the provision to clarify the are, may require the presence of an the school or playground if the distance coverage of the provision. Thus, the adult for entry. There are usually is measured from somewhere other than final rule states that the 1,000-foot area entrance fees or required purchases for the perimeter. Therefore, to clarify the is to be measured from the perimeter of use of these areas. In addition, children intent of the provision, FDA is the playground or school. Moreover, a and adolescents may not be present in modifying § 897.30(b) to state that no definition of playground is included as these areas on any regular basis (e.g., an outdoor advertising may be placed well as an indication that the relevant annual visit to a theme park). Therefore, within 1,000 feet of the perimeter of any area of a playground in a larger public the agency will not include these areas playground, elementary school, or park is limited to the play area itself. in the regulation. Moreover, because all secondary school. Section 897.30(b) reads: outdoor advertising must be in black However, the agency does not believe No outdoor advertising for cigarettes or and white text, the agency sees no need that it needs to provide a definition of smokeless tobacco, including billboards, elementary and secondary schools, as posters, or placards, may be placed within to extend the prohibition beyond elementary and secondary schools and those terms, as commonly used, include 1,000 feet of the perimeter of any public all such schools (kindergarten through playground or playground area in a public public playgrounds at this time. 12th grade) whether public, private, or park (e.g., a public park with equipment such The concern expressed that a decision parochial. as swings and seesaws, baseball diamonds, or by private parties to build a playground (36) One comment stated that the basketball courts), elementary school, or could destroy the value of a billboard tobacco industry Code of Advertising secondary school. sign should no longer exist. Because the (34) Several comments asked FDA to Practices (the Code) applies to outdoor agency is limiting its definition of define what is meant by the term advertising on billboards, and that playground to those publicly owned ‘‘playground.’’ The comments stated § 897.30(b) applies to all outdoor playgrounds, any interested party could that the term could be construed to signage, including signage on the object to the establishment of the include literally any place of outdoor exterior of retail establishments that sell playground. recreation where children may play (i.e., tobacco, and conceivably even to a paved parking lot, a tennis court, or FDA is modifying § 897.30(b) to state advertising on buses, taxis, and other a city park), even places used primarily that outdoor advertising is prohibited vehicles that might venture within the by persons 18 years of age or older. One within 1,000 feet of the perimeter of any 1,000-foot zone. of the comments noted that the industry public playground or playground area in Another comment stated that FDA code refers to ‘‘children’s playgrounds’’ a public park (e.g., areas with should consider regulations that (i.e., playgrounds designed primarily for equipment such as swings and seesaws, eliminate tobacco advertising via use by children), but that § 897.30(b) baseball diamonds, basketball courts), traveling vans and trailers because refers to ‘‘any playground.’’ elementary school or secondary school. trailers and vans are mobile billboards Some comments suggested that the The agency concludes that this and can be strategically placed to gain term ‘‘playground’’ should include the modification in § 897.30(b) is adequate maximum exposure among young playgrounds of city parks, recreation to clarify the term ‘‘playground,’’ and people. facilities, theme parks (e.g., Disneyland), that a more specific definition for FDA agrees that § 897.30(b) applies to and national parks. ‘‘playground’’ is not necessary at this more forms of advertising media than The agency agrees that it needs to time. does the tobacco industry code (i.e., all clarify what is meant by the term The agency notes that the definition outdoor advertising, not just billboards). ‘‘playground.’’ A typical dictionary makes clear that, when an area is set FDA’s regulation restricts all outdoor definition of ‘‘playground’’ states that it aside for a playground within a public advertising of tobacco products, is: (1) An outdoor area set aside for park, the 1,000 feet is measured from including, but not limited to, billboards, recreation and play, especially one the perimeter of the play area and not posters, and placards. However, the having equipment such as seesaws and from the larger park. intent and purpose of § 897.30(b) is not 44504 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations to prohibit signage on taxis and buses Table 1a. and these venues should therefore be that are not located in, but may pass free of advertising for tobacco products. through, the school or play zone. Such 1-foot high 2-foot high The agency also finds that it cannot signage is usually temporary or transient letters letters address the comments’ concerns with obstructions. It would not be possible to and does not present the same concern 20/15 vision 917 feet 1,833 feet qualify a regulation to account for the of a permanent sign. 20/20 vision 687.8 feet 1,376 fact that trees may obstruct a sign when (37) Several comments questioned the they are in full bloom but not in winter, factual basis for the proposed ban on (38) Another comment reminded the or that children may be able to see outdoor advertising of cigarettes and agency that two separate laws passed by signage as streets wind or that face away smokeless tobacco within 1,000 feet of Congress had provided for a 1,000-foot from the school or playground as they schools and playgrounds and stated that zone around schools as a means to walk to and from school. The line that ‘‘employee’’ experience is not a protect youngsters from dangerous and the agency has drawn is narrowly sufficient basis. One comment argued unsafe behavior. The Controlled tailored (see Board of Trustees of State that FDA should give little weight to Substances Act (21 U.S.C. 860) provides University of New York v. Fox 492 U.S. employee experience in light of the fact additional penalties for anyone at 480) and consistent with how a that cigarette manufacturers submitted distributing or manufacturing drugs standard needs to be crafted for it to be expert testimony that children and within 1,000 feet of schools, enforceable. adolescents pay relatively little playgrounds, and universities, and 18 Finally, FDA finds that the expert attention to billboard advertising at any U.S.C. 922 prohibited possession of a testimony referred to in the industry firearm within 1,000 feet of schools. 202 distance. In addition, some comments comment that indicates that young Moreover, the comment contained argued that FDA’s analysis related people do not pay attention to scores of pictures of advertising solely to billboards, and that it had billboards is contradicted by other billboards and signs within 500 and evidence in the record. The Roper presented no evidence or analysis 1,000 feet of school and playgrounds as justifying a ban on store signage. Starch study mentioned in section well as statements by children VI.D.3.d. of this document, submitted by Finally, several comments stated that indicating that the signs are ubiquitous the agency failed to take into account RJR, reported that 51 percent of 10 to 17 and attractive. The pictures and year olds surveyed reported that they the ‘‘visibility’’ of the outdoor statements may only be anecdotal advertising. These comments suggested had seen or heard of Joe Camel from a evidence of the proliferation of tobacco billboard advertisement. For this reason, that any regulation must take into advertising near schools and FDA is not accepting the suggestion in account whether obstructions exist (e.g., playgrounds, but the number of children the comment. trees, winding roads, signage placed who provided pictures in such a short (39) A number of comments from the facing away from the prohibited area). period of time indicates that the tobacco and outdoor advertising The agency disagrees that it has not problem of advertising in proximity to industries stated that the tobacco provided an adequate basis for its schools and playgrounds is not isolated. industry had adopted a code in 1990, proposed regulation. In addition to the Moreover, the agency also disagrees which encouraged all billboard analysis provided by the agency in its that it has no basis for including other companies to establish and manage a March 20, 1996, Federal Register outdoor signage, including signs on program to prohibit alcohol and tobacco document, the agency received two stores, in the regulation. The agency advertisements within 500 feet of places comments during the comment period provided evidence in the administrative of worship and primary and secondary with evidence regarding this issue. A record and comments refer to schools. They noted that over 16,000 203 professor of biophysics and optometry evidence, which showed that in a billboards nationwide have been stated that he believed that there was a test area, those stores within 1,000 feet voluntarily identified as ‘‘off limits’’ for rational and quantitative basis for of schools had a significantly greater these categories of advertising. As a percentage of windows covered with deciding on a given distance if that consequence, the comments asserted tobacco signs than those further away. distance was to be based on the that Government action is unnecessary. Moreover, the two RJR memoranda by One of the comments stated that the visibility of words on a billboard. sales representatives, described in fact that members of an industry have Specifically, he stated that children and section VI.D.3.d. of this document, elected to submit to a code of adolescents typically have 20/15 visual mention the importance of supplying advertising practices does not make it acuity. Therefore, it is possible, using a stores near high schools with ‘‘young reasonable for the government to impose mathematical formula using a right- adult’’ material. mandatory advertising restrictions angled triangle and the definition of the This provides sufficient support for backed by criminal sanctions. It stated tangent trigonometric function to the agency’s concern with signage on that private parties may voluntarily take compute the distance at which words stores near schools. Young people are actions that the Constitution forbids the are visible. He computed the distances more likely to frequent stores near Government to mandate. The comment from which it would be possible to see schools, especially older adolescents, argued that few industries would risk both words 1 foot high and 2 feet high. any self-regulation if their decision to In addition, he computed the distances 202 Although this statute was overturned in do so might establish a predicate for for a ‘‘normal’’ visual acuity of 20/20. If United States v. Lopez, 115 S.Ct. 1624 (1995), as even greater Federal regulation. one were to average these numbers, the inappropriate under the Commerce Clause, the Conversely, several comments raised result would be approximately 1,200 congressional determination that 1,000 feet was an concerns about the voluntary code and appropriate distance was not disturbed. feet, which could be rounded to 1,000 cited numerous examples of violations 203 Rogers, T., E. C. Teighey, E. M. Tencoti, J. L. feet. Butler, and L. Weiner, ‘‘Community Mobilization to that continued after the sponsors and Reduce Point-of-Purchase Advertising of Tobacco,’’ the billboard companies had been Health Education Quarterly, 1995, in press. informed of the violations. One Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44505 comment stated that a survey found that from neighborhoods where children Finally, one comment from a public in California tobacco advertising is more live. Another comment stated the belief interest group warned that, the more prevalent at stores within 1,000 feet of that the ban on billboards should be at complex a rule is, the more difficult schools than at stores farther from least double the proposed 1,000 feet enforcement becomes. It stated that schools. The comment asserted that from schools, while others argued that spacing limitations, such as the statewide findings also revealed that outdoor advertising should be proposed 1,000-foot zone around there is more exterior store advertising prohibited completely. schools, begs a series of questions, for in areas where at least 30 percent of the These comments stressed the example: How is that distance neighborhood is 18 years old or importance of billboards and other measured, from what point to what younger, and that the advertisements are outdoor advertising in creating cigarette point. It stated that these questions placed near the candy or at a child’s eye brand awareness among children. For would make it virtually impossible for view (3 feet or below). example, one comment discussed the citizens to play an active role in The agency is aware that the Code of results of a survey conducted for enforcing this rule. The comment stated Advertising Practices has not been Advertising Age, which showed that 46 that without citizen participation, uniformly observed, as several percent of children 8 to 13 years old billboard control is extremely difficult, comments pointed out. Moreover, the said they most often saw cigarette and that this situation has, in fact, industry code is significantly less advertising on billboards, outpacing contributed to the industry’s disregard inclusive than the proposed regulation magazines. It stated that 34 percent of for local and State billboard control as it covers only billboard advertising children 14 to 18 years old cited laws. and not other forms of outdoor billboards as the predominant The agency finds that the comments, advertising such as posters and advertising medium for tobacco as well as the evidence spelled out in placards. These other forms are likely to products. 204 The comment stated the 1995 proposal, have provided ample be placed near retail establishments and further that all billboards, regardless of support to establish that outdoor in some cases, according to comments, placement, are seen by significant advertising has a significant impact on have appeared on school fences. The numbers of children, therefore, it clearly children and adolescents. While the agency finds that all outdoor advertising makes sense that, as a means to protect comments have presented significant must be included in the regulation in children from tobacco advertising, such evidence in support of a ban on all order to provide comprehensive advertisements should be prohibited outdoor advertising, the agency is not coverage. There is little difference from billboards and other outdoor convinced that a ban or a restriction on between a billboard and a large poster advertisements. The comment tobacco advertising of more than 1,000 to a child. Both are advertisements, and emphasized its point by quoting from feet would be appropriate. As discussed both are visible, so that children see the billboard industry’s own marketing elsewhere in this document, the agency them as they go to and from school and material (‘‘Outdoor: It’s not a medium, is requiring that all permissible outdoor play. it’s a large’’), ‘‘You can’t zap it. You advertising be in a black and white, text- In addition, the Code prohibits can’t ignore it * * * It asks little time, only, format. Therefore, some of the outdoor advertising only within 500 feet but leaves a long impression.’’ The concerns raised by the comments of schools, an area only a block or a comment stated that the same requesting a complete ban on outdoor block and a half from the school (there publication notes, ‘‘Outdoor is right up tobacco advertising or of expanding the are 10 to 12 city blocks to a mile). One there. Day and night. Lurking. Waiting ban are addressed by that provision. block will not provide sufficient for another ambush.’’ Moreover, the agency’s regulations are protection as it would not cover the an attempt to balance the rights of One tobacco company presented areas where many children congregate adults to receive information about a evidence of the effectiveness of with their friends. Moreover, a child’s legal product with its desire to protect billboards in bringing tobacco vision does not stop at one block from children from the unavoidable appeal of advertising to children. RJR, in its school. A prohibition of 1,000 feet will advertising. Thus, although the line comment on the 1995 proposed rule, as ensure the absence of signs for 2 to 3 could be drawn elsewhere, the agency stated in section VI.D.3.d. of this blocks from a school or playground finds that the 1,000 feet limitation document, attached a study conducted which can be seen from these locations should ensure adequate protection from for it to test children’s recognition of where children spend a significant visible advertising where children advertising characters and slogans amount of time each day. (Several spend a significant amount of time but (Roper Starch study). This study comments stated that FDA had misused will permit adults to get information. involved 1,117 children 10 to 17 years its math to calculate block distances in (41) One comment stated that FDA’s of age, with 86 percent of them its March 20, 1996, Federal Register action violated the APA because the recognizing Joe Camel using aided and document (61 FR 11349).) If the agency offered no evidence in support unaided recall. When asked where they misstatement caused any confusion, the of its claim that children spend a great had seen Joe Camel, 51 percent said on agency regrets it but does not believe deal of time in areas as far as 1,000 feet billboards. 205 That amount of recall that the one-half block difference from the places specified in § 897.30(b). shows that billboards represent a very undermined the rationale.) It added that the justification for text- effective advertising medium and belies (40) One series of comments only advertising undercuts FDA’s the industry’s assertion that billboards supported FDA’s 1995 proposal, stating justification for its 1,000-foot ban. are not an effective source of advertising that the restriction on billboards near Another comment stated that information for children. schools should not be compromised, nor although tobacco product advertising is the distance reduced. disseminated through a broad spectrum 204 A number of comments argued that Levin, G., ‘‘Poll Shows Camel Ads are of media, outdoor advertising is the only Effective With Kids; Preteens Best Recognize the proposed regulation did not go far Brand,’’ Advertising Age, p. 12, April 27, 1992. such medium that is subject to enough. One comment recommended 205 ‘‘Advertising Character and Slogan Survey,’’ additional specific prohibitions under excluding outdoor tobacco advertising pp. 10, 22. the 1995 proposed rule beyond the 44506 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations prohibitions applicable to all tobacco playgrounds ensure that children are a given municipality, there is no product advertising. It stated that the exposed to their messages for a commercial utility in a limited number record does not contain evidence that prolonged period of time. As the of outdoor advertising signs where the would establish either that these Supreme Court recognized in Packer location of the advertisement is dictated prohibited outdoor advertising signs are Corp. v. Utah, 285 U.S. 105, 110 (1934), by the 1,000-foot rule, rather than by viewed more often by minors than other billboards are seen without the exercise market demographics and vehicle advertising media, or that outdoor of choice or volition, and viewers have circulation. According to the comments, advertising in general has a greater the message thrust upon them by all the these latter factors are what actually impact on minors than other media. arts and devices that skill can produce. control billboard placement. It There is nothing, the comments argued, This is particularly true of billboards concluded that, as a practical matter, that indicates that the mandatory that are readily visible (i.e., within 1,000 FDA’s proposed outdoor advertising content restrictions and affirmative feet) when children play or study at a restrictions would eliminate billboards disclosure requirements imposed by the playground or school, places where by as a medium for tobacco advertising proposal would be less effective in design children spend a lot of time, or even in those jurisdictions where a outdoor advertising of tobacco products when children walk to and from a small number of such signs theoretically than when such an advertisement is school or playground. Confronted daily would be available. placed in a rock and roll magazine, or and unavoidably with the advertised FDA has carefully considered the in an exempt publication with 1 million message, even in text-only, a child gets possibility that its restrictions adolescent readers. a sense of familiarity, normalcy and effectively outlaw outdoor advertising One of the comments stated that acceptability of the message and the in most urban areas. The agency has because the text-only requirement itself product that is advertised. concluded, however, that if this is intended to render the advertising (42) Several comments stated that situation comes to pass, it would be a unattractive to young people, the placing a circle with a radius of 1,000 consequence of the density of additional ‘‘protection’’ offered by the feet drawn from the perimeter of each population in cities. FDA’s intent in 1,000-foot rule would be wholly school and playground would establish adopting § 897.30(b) is to restrict the gratuitous. a ‘‘forbidden zone’’ that would be at accessible and intrusive communication Several comments argued that there is least 2,000 feet in diameter (i.e., over of information about cigarettes and no proof that this additional area of ban one-third of a mile). They stated that in smokeless tobacco to children and will reduce any teenager’s desire to use many communities, this would be adolescents at school and at play. It was tobacco: a desire that has withstood the tantamount to a de facto ban, for there not to provide for distances that would ban of TV and radio advertisements and would be virtually no outdoor location have the effect of banning outdoor signs a massive educational program. The that could escape the rule’s prohibition. from urban areas. By limiting the comment stated that the 1,000-foot rule Several comments pointed out that restriction to 1,000 feet, FDA has tried seems particularly gratuitous in view of even if advertisers wanted to to make it no more extensive than the fact that it would ban advertising disseminate advertisements on necessary to achieve its intended end. that FDA, by virtue of its proposed text- billboards that complied with the FDA FDA has considered the cost of its only requirement, already has stripped proposal, there would be virtually no restriction but concludes that a of the features FDA deems make it locations where such outdoor narrower restriction would not appealing to young people. advertising signs could be located in adequately advance its purpose of FDA disagrees with these comments. some cities. They submitted results of protecting young people from The agency’s bases for the text-only computer assisted surveys of nine cities unavoidable advertising in settings in requirement for billboards and for the showing the areas where outdoor which they are essentially a captive 1,000-foot ban are reasonable and advertising of tobacco products would audience. supportable, and they are not in be allowed under the 1995 proposal. The 1,000-foot restriction on outdoor conflict. The text-only format The survey showed that outdoor tobacco advertising will serve to remove what requirement will reduce the appeal of advertising would be prohibited in 94 has been shown is an effective means cigarette and smokeless tobacco product percent and 78 percent of the respective for tobacco companies to communicate advertising to persons younger than 18 land mass of Manhattan and Boston with young people in a direct and years of age without affecting the under the proposal. The comment stated unavoidable manner. Eliminating such information conveyed to adults (60 FR that this range approximates the high billboards will thus mean eliminating a 41314 at 41335). It is an attempt to and low percentages that could be means by which the industry has narrowly tailor the restriction by anticipated in other metropolitan areas influenced young people to engage in balancing the need to restrict in the United States. Moreover, when it tobacco use behavior. Therefore, the advertising’s appeal to children with the correlated the data collected from the agency concludes that § 897.30(b) is a preservation of the informational study and other data regarding the necessary part of its effort to reduce function of advertising for adults. actual location of billboards, the underage use of tobacco products. The prohibition on outdoor comment found that, even under the Several comments from the tobacco advertising within 1,000 feet of schools most expansive view, not a single industry and from retailers pointed out and playgrounds is designed to address billboard in Manhattan (including the that § 897.30(b) would prevent retail a different problem. The concern is not commercial corridor of Times Square), establishments within the 1,000-foot the appeal of the advertising. If the and no more than 24 actual billboard zone from informing potential problem were only appeal, the 1,000- locations in the entire city of Boston, customers that tobacco (or particular foot restriction would not be necessary would be permitted to display tobacco brands thereof) are available for because the text-only requirement advertisements. purchase therein and at what prices. would eliminate this concern. The The comment stated further that even These comments stated that this concern is the nature of billboards if the rule permits a few locations where restriction not only would hurt the themselves. Billboards near schools and tobacco advertising would be allowed in retailers but would increase, in turn, the Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44507 search costs for adult smokers. The (43) A number of comments argued (44) A number of comments argued comments stated that retailers in the that the prohibition on tobacco that § 897.30(b) would violate the First small slivers of a city in which outdoor billboards within 1,000 feet of schools Amendment. These comments argued advertising would continue to be violates the Commerce Clause as that, given the requirement for black permitted would be afforded an unfair recently interpreted by the Supreme text-only on a white background, the competitive advantage. Court in United States v. Lopez, 115 restriction on billboards within 1,000 One comment added that convenience S.Ct. 1624 (1995). In Lopez, the feet of schools and playgrounds would stores located within 1,000 feet of a Supreme Court held that Congress not directly and materially advance a school or playground would not even be lacked the power under the Commerce substantial government interest. The able to put a small black on white Clause to criminalize the possession of comments also argued that the billboard placard on top of a gas pump that a gun within 1,000 feet of a school. One restriction could not be considered to be merely indicates the price of tobacco, comment argued that the Congress’s narrowly tailored. One comment from a but that a billboard across the street and commerce power only permits it to public interest group, however, argued located a little over 1,000 feet away from regulate, for example, the interstate that FDA’s proposal is fully the same school or playground could transit of advertisements, but that once constitutional because it is much more carry the brand name of a tobacco the advertisement is within a state, it is limited than the restrictions on product in black letters as tall as the private property and not subject to billboards upheld in Penn Advertising v. store’s front door. The comment urged regulation under the Commerce Clause. Mayor and City Council of Baltimore, 63 FDA to recognize this distinction. The agency disagrees. Under the F.3d 1318 (4th Cir. 1995) vacated, Commerce Clause, Congress may The agency acknowledges that some remanded 64 U.S.L.W. 3868 (U.S. July 1, ‘‘regulate those activities having a 1996), and Metromedia, Inc. v. San retailers may be prohibited from placing substantial relation to interstate advertising concerning tobacco products Diego, 453 U.S. 490 (1981). The commerce, * * *, i.e., those activities comment pointed out that in on or around their retail establishments, that substantially affect interstate while others, perhaps just across the Metromedia, Inc., the Supreme Court commerce.’’ (See Lopez, 115 S.Ct. at held that the City’s interest in traffic street, can. Any minimum distance that 1629-30 (citation omitted).) As the the agency establishes will preclude safety and aesthetics were sufficient to Supreme Court noted in Lopez, ‘‘the justify a ban on commercial outdoor some retailers from outdoor advertising possession of a gun in a local school at their retail establishments but not advertising (453 U.S. at 551, n. 23). zone is in no sense an economic activity Here, the comment said, the interest that others. However, FDA has determined that might, through repetition that it is necessary to keep outdoor FDA has asserted is more weighty. elsewhere, substantially affect any sort FDA disagrees with the comments advertising away from areas where of interstate commerce’’ (Id. at 1634; see children are likely to congregate daily. that argued that § 897.30(b) violates the also id. at 1640 (Kennedy, J., First Amendment. As explained, this FDA notes that the Supreme Court concurring)). As all advertising is cases that have considered restrictions restriction does advance FDA’s interest inherently commercial in that it beyond what is accomplished by the on speech have recognized that such proposes a sale, the placement of restrictions may not be perfectly text-only restriction. As explained in tobacco billboards in a local school zone sections VI.B. and VI.D. of this tailored, see, e.g., Board of Trustees of is economic activity that does State University of NY v. Fox, 492 U.S. document, the regular exposure of substantially affect interstate commerce children to tobacco advertising, even in at 479. Thus, while in a few instances because it affects the demand for there may be inequities created by the text-only form, builds a sense of tobacco and smokeless tobacco. That the familiarity and acceptability that, line FDA has drawn, because there is a advertisements are private property after reasonable fit, as explained in section reports and studies say, contributes transportation in interstate commerce materially to the decisions of young VI.E.1. of this document, between FDA’s does not alter this analysis. Indeed, ends and the restrictions that it is people to experiment with and use ‘‘[a]ctivities conducted within State tobacco products. Thus restrictions that adopting, these minor problems do not lines do not by this fact alone escape the doom FDA’s rule (Id. at 480). eliminate such exposure will eliminate sweep of the Commerce Clause. one factor that contributes to the process FDA’s prohibition on signage on Interstate commerce may be dependent by which children and adolescents stores within 1,000 feet of schools and upon them.’’ (See United States v. Rock decide to smoke or use smokeless playgrounds will advance the agency’s Royal Co-op., Inc., 307 U.S. 533, 569 tobacco and, consequently, will directly interest in protecting the health of (1939); see also Wickard v. Filburn, 317 advance FDA’s interest. children. Several of the studies U.S. 111, 127–28 (1942) (holding that, Moreover, the restriction that FDA is submitted with comments showed that under Commerce Clause, Congress adopting is narrowly tailored to advance there is more signage in and around could control farmer’s production of its interest. FDA’s concern is with the stores near schools and playgrounds wheat for home consumption because advertising that can be seen from than in stores generally. The ban on cumulative effect of such consumption schools and playgrounds, the place at outdoor advertising within 1,000 feet of by many farmers might alter supply and which children and adolescents spend a schools and playgrounds will ensure demand in interstate wheat market).) As significant amount of time each day. that signage near schools will be such, regulation of the placement of Three blocks or 1,000 feet is about the removed and thus minimize any sense billboards advertising tobacco products distance at which signs are readily of familiarity that would develop. does not violate the Commerce visible. Thus, FDA has restricted Clause. 206 Thus, even though the agency has outdoor advertising within this distance carefully considered these comments, it of schools and playgrounds. concludes that it is appropriate to 206 Moreover, cigarettes and smokeless tobacco products are nicotine delivery devices. Congress establish a minimum distance from plainly provided for medical devices to be federally shipment (section 304 of the act) (21 U.S.C. 334)) schools and playgrounds within which regulated as indicated by the provision allowing and by a presumption that devices are in interstate all outdoor advertising is prohibited. seizure of devices without proof of interstate commerce (section 709 of the act (21 U.S.C. 379)). 44508 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

The result of FDA’s restriction is that area in which to protect young people Many comments were received children will not be confronted with from drug dealing near schools and specifically addressing the text-only tobacco advertising as they study and playgrounds. proposal. That children and adolescents play, and thus there will be a Finally, the agency has tailored the should not use tobacco products was the corresponding reduction in the ability of ban as narrowly as possible by defining one point of agreement among them. tobacco advertisers to create the playgrounds narrowly and, as noted However, many comments from adult impression of acceptance and above, by restricting the area of the ban smokers and nonsmokers, retailers, familiarity that is influential with to that consistent with children’s visual tobacco farmers, elected officials, and youngsters. Consequently, there is a range. the tobacco, advertising, newspaper, reasonable fit between FDA’s interest in and magazine industries strongly protecting the health of children and the 4. Section 897.32(a)—Text-Only Format objected to the text-only requirement. restriction on outdoor advertising that it Under proposed § 897.32(a), cigarette Their major objections were that: (1) is adopting (see City of Cincinnati v. and smokeless tobacco product labeling Cigarette advertising does not cause Discovery Network, Inc., 507 U.S. at 416; and advertising, as described in young people to start smoking; (2) the Board of Trustees of State University of § 897.30(a) and (b), would be required to proposed advertising restrictions would New York v. Fox, 492 U.S. at 480). use black text on a white background violate the First Amendment; and (3) Thus, FDA concludes that, in and nothing else. The agency tentatively the restrictions would have the effect of fashioning the restriction on billboards, concluded that this text-only a virtual ban on cigarette advertising. it has fully met its obligations under the requirement would reduce the appeal of Some comments expressed the concern First Amendment. cigarette and smokeless tobacco product or suspicion that FDA was using this In summary, FDA finds that labeling and advertising to persons proposal, ostensibly directed at minors, § 897.30(b) will contribute in a direct younger than 18 years of age and as a pretext to try to ban cigarette and material way to reducing underage preserve advertising’s informative advertising generally. tobacco use. The evidence establishes aspects—that is, to provide useful In contrast, nearly three-quarters of that billboards are one of the most information to consumers legally able to the comments—mostly from parents, effective forms of advertising for young purchase these products. teenagers, public health officials, people, and that their elimination near In response to comments, the agency teachers, doctors, public interest groups, schools and playgrounds will directly has decided to permit another exception medical organizations, and some and materially advance FDA’s goals. to the requirement that all permissible individuals in the advertising Studies—A Roper Starch survey advertising appear in text-only. Thus, it business—supported the proposal for submitted by R. J. Reynolds found that has created an exception for advertising text-only advertisements. The major billboards were the most mentioned in adult facilities that meet the criteria reason presented for their support was source of information about Joe Camel of § 897.16(c)(2)(ii) provided the the need to eliminate the appeal for for children (see section VI.D.3.d. of this advertising is affixed to the wall or tobacco that the advertising creates document), and a study conducted for fixture in the facility and is not visible among children and adolescents. Some Advertising Age (April 27, 1992) from outside the facility. FDA has added supporters urged even stronger action discussed in this section showed that 46 this provision, as paragraph (a)(1) of such as a total ban on all tobacco percent of children 8 to 13 and 34 § 897.32 and renumbered the exception advertising. Some comments expressed percent of children 14 to 18 said that for adult publications as § 897.32(a)(2)(i) the opinion that even though the billboards are a predominant form of and (a)(2)(ii). proposed regulations may also affect advertising for tobacco. Several comments suggested that FDA adults, any resulting reductions in Advertising Theory—Billboards near should provide an appropriate smoking by adults would not schools and playgrounds give the child definition of ‘‘text-only’’ for permissible necessarily be bad. a sense of familiarity, normalcy, and audio and video advertising, specifically (45) A number of comments acceptability of the message on the static black text on a white background questioned the validity of the evidence product. Therefore, regulation of the with no music or sounds. Therefore, cited by FDA as support for the format and even the location of some proposed § 897.32 has been revised in proposal. Many of these comments came billboards and other outdoor signs consideration of comments received. A from groups representing the tobacco, within 1,000 feet of a school or new § 897.32(b) has been added to advertising, and publishing industries. playground, is essential. As discussed in provide guidance for audio/video These comments argued that there is no this section, comments submitted in this advertising. Proposed § 897.32(b) has evidence that advertising with color and rulemaking include photographs that been redesignated as (c), and proposed images encourages use of tobacco by evidence the intrusive effect of § 897.32(c) and (d) have been minors or that advertising converts billboards and signage around schools eliminated. New § 897.32(b) has been nonsmokers or nonchewers into and playgrounds. added to provide explicit format smokers or chewers. Moreover, these Evidence of Children’s Visual requirements for one form of other comments argued that there is no Range—Data provided by a professor of permissible advertising that had been evidence that limiting advertisements to biophysics and optometry, detailed in left out of the proposed regulation. 207 text-only is essential to reduce youth this section, support a finding that 1,000 smoking and that there is no evidence feet is an appropriate distance to remove 207 In addition to the substantive changes made to that black and white text will reduce signage that would be visible and § 897.32, the following changes in language have underage smoking. readable to students. been made: (1) Addition of ‘‘Except as In contrast, a number of supportive Congressional Finding—As detailed provided.* * * section,’’ to § 897.32(a); (2) addition comments stated that the evidence cited in this section, Congress mandated a of ‘‘any’’ to § 897.32(a); (3) amended language in § 897.32(a)(2) starting with ‘‘any publication’’ and by FDA, as well as studies published 1,000 foot drug free zone around schools ending with ‘‘an adult publication’’ and, in the last and playgrounds (Controlled Substances sentence, ‘‘an adult publication,’’; (4) two changes and ‘‘15 percent or less’’; and (5) deletion of Act (21 U.S.C. 860)) as an appropriate to § 897.32(a)(2)(i) ‘‘younger than 18 years of age’’ ‘‘labeling’’ from § 897.32(c). Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44509 since the proposal, demonstrate the and tobacco industries, stated that the that print advertising, no matter how special susceptibility of children and proposal will operate as a virtual ban on creative, will not be able to provide the adolescents to pictures, cartoons, most types of cigarette and smokeless attractive imagery that young people photographs, other graphic images and tobacco advertisements. These look for in advertising to explain the colors. comments argued that the text-only importance of a product to them, e.g., Specifically, many comments format requirement will eliminate what to wear, whom to hang out with, observed that the appearance of Joe tobacco companies’ ability to attract the how to look cool (see discussion of the Camel in traditional advertising forums attention of potential customers and to importance of color and imagery in the (magazines, billboards) attracts children convey brand messages and will render introduction to this section). and adolescents. One child wrote that advertising invisible to adults. Moreover, although the restriction to his father gave him two sports Therefore, tobacco advertisers would be text-only advertisements may tend to magazines. ‘‘There were eight smoking far less likely to advertise in the text- solidify market position, it will not give ads in them * * * the last one had two only format. Also, not having a clear any one company new competitive pictures of Joe Camel smoking. This can standard for when the text-only advantage over another since all attract kids to start smoking.’’ requirement applies (see also definition companies must play by the same rules. Studies cited in the preamble to the of adult publication) will cause tobacco Thus, the economic impact of the rule 1995 proposed rule and in section IV.B. advertisers to avoid more publications on the advertising business will be of this document, demonstrate the than may be necessary to ensure that mitigated by a shifting of resources to impact that images and colors, cartoons, they do not violate the rule. Many of create new advertising in compliance and pictures and other graphic material these comments also argued that with the rule and to advertising for have on children and adolescents. This advertising would become ineffective. other businesses (see section XV. of this does not mean that the same One comment said that advertising that document entitled ‘‘Analysis of characteristics of advertising do not passes unnoticed amounts to no Impacts’’ for more information). appeal to or affect adults. However, the advertising at all. This comment also The agency does not support a total effect of these techniques on children asserted that, as a result of the text-only ban on all tobacco advertising as was and adolescents is magnified because of proposal, no viable alternative channels suggested by a number of comments. their usual level of involvement in of communication would exist. The agency has been able to tailor the advertising as in everything else. 208 As Comments from the tobacco and restrictions that it is adopting, by detailed more fully in section VI.B. of advertising industry suggested that the requirements such as the text-only this document, children and adolescents advertising industry would suffer advertisements requirement, to respond to stimuli that interest them, revenue, profit, and job losses as a result eliminate the appeal of tobacco and that provides them with of the text-only format; employees advertising for children and adolescents information that is important. Young involved in graphics arts would while still allowing a means for people do not have the information especially be affected; and suppliers companies to communicate with adult processing skills that adults possess, providing services and products to tobacco users. The use of text-only will and as a result more often than not, the advertising agencies would also be mean that there can be continued information that is relevant to them adversely affected. advertising that is less likely to attract comes in the form of images and colors A number of comments supporting young people but that can convey rather than with a lot of words. This fact the proposal recommended a total ban information to adults. provides an explanation why 86 percent on all tobacco advertising. Many (47) Several comments stated that of children and adolescents smoke the comments stated that a ban on all limiting point of sale advertising to text- three most heavily advertised brands tobacco advertising and marketing only would effectively ban point of sale (all are promoted with attractive would be reasonable because the advertising and impair retailers’ ability imagery), even though they are generally tobacco industry will use any available to market tobacco products to adult price sensitive. 209 Adults buy generic loopholes to market tobacco products customers. products for price reasons or low tar and will test any partial ban. Many comments noted the places one brands for health concerns. 210 Tobacco companies will be able to sees (and placement of) Joe Camel at Advertising’s colorful images are not as continue advertising in most of the same point of sale, the nature of the items on relevant to them as cost. Given these forums in a text-only format. which his image appears, and his factors, FDA finds that the text-only Advertising with colors, pictures, and ubiquitousness in and around stores, as requirement will significantly reduce graphics will still be allowed in adult evidence of the intent of at least one the appeal of cigarette and smokeless publications. Tobacco advertisers will tobacco company to try to attract young tobacco advertising to young people and still be able to convey information to people. A physician commented that he: reduce its influence on them. adults about taste, price, and product recently was returning from an evening [of] (46) Many comments, especially from development using text-only helping to care for [a] patient who was dying the magazine, newspaper, advertising, advertising. Many current of emphysema [a lung ailment caused by advertisements for low tar cigarettes rely cigarette smoking]. I decided to stop at a convenience store * * * I was confronted 208 One such study tested the effect of different heavily on text formats. forms of advertising on children and found that with no less than 14 advertisements for they preferred pictures to text-only. (See Huang, P. The agency is not limiting fonts, font cigarettes. From the Camel Joe sign P., D. Burton, H. L’Howe, and D. M. Sosin, ‘‘Black- styles, or size of type because it believes beckoning in the parking lot * * * a White Differences in Appeal of Cigarette that the tobacco industry and its customer is bombarded with ads urging them Advertisements Among Adolescents,’’ Tobacco advertising firms can use their creativity to buy cigarettes. Control, vol. 1, pp. 249–255; 1992.) with a variety of print formats to Another comment stated that 209 ‘‘Changes in the Cigarette Brand Preferences of produce text-only advertising that will ‘‘advertisements on convenience store Adolescent Smokers—United States, 1989–1993,’’ in MMWR, CDC, DHHS, vol. 43, pp. 577–581, 1994. effectively communicate their messages, doors are placed well below adult eye- 210 Teinowitz, I., ‘‘Add RJR to List of Cig Price including brand messages, to adults. level and features such popular Cuts,’’ Advertising Age, pp. 3, 46, April 26, 1993. However, the agency is also convinced advertising cartoons as Joe and 44510 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

Josephine Camel. It seems counter- 1995 proposed rule, would destroy his while protecting children from the intuitive to assume that such advertising business: effects of advertising. is intended for adults.’’ Another It offends me as a good American running Although direct mail catalog comment stated, ‘‘Tobacco companies a clean, honest business that a cadre of advertising will be less interesting, sales say they do not want to entice our bureaucrats in Washington, DC would should only be minimally affected. As propose a rule that could ruin my life’s work. children to smoke, then why are Joe the final rule does not include a Camel ads above the candy counters?’’ FDA has given no more thought to the impact on my business than I might give to swatting prohibition on mail-order sales, the only One comment noted that at a major a mosquito. restriction will be the text-only format. retailer near the commenter’s A supportive comment stated that the In addition, this should be less of an neighborhood, Joe Camel posters are impediment than a total ban to small right behind an exhibit of pogs, a tobacco industry has made increasing use of direct mail promotions, including mail order company owners such as the popular children’s collectible toy. commenter. Manufacturers and retailers are not contests, questionnaires, coupons, This compromise represents the prohibited from promoting tobacco offers, and even birthday cards. It stated agency’s attempt to narrowly tailor its products at the retail level. Adult that no company can be certain its rule. Based on comments received from consumers looking for price and mailing lists do not include minors. In the industry, most mail-order customers product information about cigarettes a 1993 survey of 12 to 17 year olds, 7.6 purchase tobacco products for price, and smokeless tobacco will be able to percent indicated they had received convenience, and uniqueness and to find that information by searching even mail personally addressed to them from stockpile a long term supply. The without the images to attract them. Text- a tobacco company. This could project agency believes that creative and only point of sale advertising, like out to 1.6 million persons aged 12 to 17. effective advertising for adults can be magazines or billboards, will be This comment noted that a major designed in the text-only format for effective in communicating this tobacco company sent free packs of catalogs, especially for catalogs targeted information. Thus, FDA is not banning cigarettes to people on its mailing list as to consumers purchasing tobacco point of sale advertising. a holiday present ‘‘from the Camel products for these reasons. Therefore, While text-only point of sale family’’ and has not changed its practice FDA is not exempting direct mail advertising can be effective with adults, despite the fact that as many as 1.6 promotion of tobacco products from the it will have less allure and be less million 12 to 17 year olds could be on text-only requirement. appealing to children and adolescents. tobacco company mailing lists. Children and adolescents, who are less Direct mail is a high involvement (49) One comment suggested that FDA willing to process print information in medium, that is, it requires the recipient create an exception for direct mail a leisurely setting (such as reading a to study the text in order to get the similar to that for publications. The magazine), will not find textual material central message. In those circumstances, comment said that direct marketers can appealing in the momentary time setting text-only can be effective with target mailings so that children and of a retail purchase. recipients who have an interest in the adolescents are protected to, at the very (48) A comment from an advertising offer. There is less of a need to attract least, the same degree that the industry association stated that: a consumer’s attention with a direct regulations provide for the publishing ** * FDA’s prohibition on all direct mail mail promotion, including a catalog, industry. promotion of tobacco products except for than with a point of sale or magazine FDA has considered this request but ‘‘tombstone’’ messages * * * is even more advertisement. A consumer opening a finds that it cannot grant it. The agency onerous than that imposed on publications, direct mail promotion he/she is based the threshold for publications on since at least some publications will be interested in is in a high-involvement the ground that publications with youth permitted to carry non-tombstone mode and is prepared to read the readership of less than 15 percent are advertising. The disparate treatment of direct enclosed material and catalog. Although mail exposes the real purpose of the FDA to not of interest to young people and thus the material may be more easily ignored, censor messages to adults, because that would be unlikely to be read by them. medium by definition can be addressed to a current tobacco users who want to buy The same cannot be said of direct mail specific audience, i.e., adults, with little risk by direct mail can get the information advertisements that come addressed of inadvertent viewing by minors. from textual material. with the child’s name on it. (As This comment also noted that this form Mailings in text-only to current explained in this section, surveys show of direct advertising is not insignificant customers and to other adult smokers that a significant portion of tobacco to the industry and given the small are permitted under the rule. On the direct mail advertising is sent directly to likelihood of youth access to it, should other hand, if a direct mail promotion individuals under the age of 18.) The not be severely restricted. The comment or catalog is seen by a child, the text- appearance of the child’s name in the noted that total industry spending on only format would make it much less address will cause the child to look at direct mail advertising was $33 million appealing and less interesting. This is the advertisement and thus will cause in 1993. especially important since there is the message to be thrust on the child in Some comments from mail-order evidence that as many as 1.6 million a manner similar to messages on firms noted that the text-only children aged 12 to 17 receive direct billboards or point of purchase (see requirement would adversely affect mail tobacco promotions. Thus, text- Packer Corp. v. Utah, 285 U.S. 105, 110 catalogs for tobacco and related only direct mail is important to (1934)). Thus, direct mail advertising is products, making them less appealing accomplish the purpose of this more similar in nature to billboards and and less effective for marketing to adult rulemaking. Moreover, contrary to being point of purchase advertising than are smokers. One comment from the owner censorship, as some comments stated, publications. Consequently, as with the of a small (55 employees) tobacco the text-only format for direct mail will former types of advertising, FDA has products manufacturing business said allow advertisers to send adults an concluded that to reduce the appeal of the text-only requirement for its catalog, encyclopedia of information about any direct mail advertising to those along with several other aspects of the aspect of smoking or tobacco products youngsters who view it, it is appropriate Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44511 to require that this type of advertising be comments from the advertising industry effective in their placement of in the text-only format. argued that tobacco companies would advertising. Tobacco companies will (50) A few comments said that in the use the savings from doing less still be able to advertise in virtually all same way the agency attempted to carve advertising to reduce the price of the same forums they use now, but out an exception for publications with cigarettes, which would increase companies may gain competitive primarily adult readers, it should permit demand especially among young people advantages by developing new a similar exception for advertising in who are price sensitive. Other marketing techniques aimed at adults bars, clubs, etc., with customers over 21 comments from the tobacco industry that are within the rules. All industries years of age. argued that the requirement would have to adapt to changing competitive The agency agrees with these reduce competition, which could lead to circumstances, whether caused by comments. The agency recognizes the higher prices for adult consumers. This government regulations, demanded by need to precisely tailor its regulations conflict points out the speculative, and the public, self-imposed as in and thus, has created an exception for therefore unconvincing, nature of the professional sports, affected by advertising in adult only (18 years of age claims that the restrictions will be international competition and changing and older) facilities permitted to sell counterproductive. technologies, or in reaction to changes tobacco products from vending Also, despite concerns expressed by in consumer preferences. Creative machines and self-service under the tobacco industry and others that the companies can succeed by adapting § 897.16(c)(2)(ii). These facilities, which text-only format would make the better than their competitors within the are required to ensure that no one under Surgeon General’s health warning less new framework. the age of 18 is present, or permitted to effective, there is evidence from the Additionally, these advertising enter, the facility at any time, may focus groups conducted by the agency restrictions could make it more difficult display permissible advertising, i.e., that this warning is not very effective for a new competitive tobacco company with color and imagery, provided that with young people now. 211 The text- to be formed and to enter the market. the advertising is not visible from only format will not interfere with the But, there are much greater barriers to outside the facility and is affixed to a ability of the Surgeon General’s warning entry for a new firm in terms of the wall or fixture within the facility. These to warn adults of the health hazards of nature of the tobacco business, capital conditions will ensure that the smoking. This format will, however, requirements, and the existing large advertising does not become a surrogate reduce the appeal to young people that firms already in the business. for outdoor advertising and is not advertising creates and therefore will Nevertheless, to the extent that the carried from the facility. lessen the need for the warning for regulations do produce anticompetitive (51) The agency received some young people. effects, these are outweighed by the comments from opponents and The agency has considered the public health benefits of the rule. supporters of the 1995 proposed rule concern of some comments that the text- Finally, information on new products that stated that this provision might be only format will be so unlike most and on product innovations need not be counterproductive and result in advertising that young people will be ‘‘stamped out.’’ This kind of information increased demand for cigarettes and attracted to it. Whatever attraction the can be conveyed in the text-only format. smokeless tobacco by minors. One novelty has for young people, the One example of a new product that the comment from an association of agency has concluded that it should be tobacco industry claims might not have advertising agencies stated that a less than the attraction of the current been developed if this rule had been in reduction in spending on cigarette imagery in tobacco advertising. effect is the low tar cigarette. Yet advertising, resulting from the proposal, (52) A number of comments, advertising for low tar brands tends to could make cigarettes less expensive especially from the tobacco industry, use much more text than regular brands and increase demand for these products. expressed concern about the 1995 because the information is factual and proposed rule’s adverse impact on In contrast, another comment from a specific. Therefore, the agency competition. Many comments stated tobacco company stated that reduced continues to find the text-only that advertising is critical to competition due to the text-only requirement to be an appropriately competition, brand choice, and product restrictions could lead to price increases tailored remedy. innovation. Comments from the tobacco for some brands which would harm the (53) Comments offered differing views industry stated that the primary adult purchasers of those brands. on the function of advertising. Some purposes of its advertising are to Some comments stated that the health stated that imagery is necessary to promote brand competition and to warnings in cigarette advertising would attract and hold the attention of adult maintain brand loyalty. Many of these become less effective in the proposed smokers in order to convey useful comments argued that the text-only text-only format. This consequence information about the product and to format would stamp out competition could result in fewer people giving up effectively differentiate brands, while and freeze market shares. Some smoking because of information in the others saw images as being too comments also stated that the 1995 health warnings. Some comments appealing to children. These latter proposed rule would serve as a barrier argued that the text-only format might comments argued that FDA’s rule is to new and improved products and actually attract more attention from product innovation, especially to seeking to regulate only the presentation minors because these advertisements products like lower tar cigarettes. of the advertising that attracts children would be so different from most Although all firms will be subject to (the imagery), not its content. advertising. the same rules, some firms may still One small business owner said the The agency finds that, on balance, the gain an advantage by dominant market proposed ban on imagery would make evidence does not support a conclusion position or by being more creative in established advertising logos with that the text-only requirement will be their text-only advertising or more pictures worthless, not just for the major counterproductive. This finding is based tobacco companies but also for small in part on the contradictory comments 211 Focus group report in administrative record, firms in tobacco related businesses. regarding the price of cigarettes. Some December 1, 1995, 60 FR 61670. Others stated that the 1995 proposed 44512 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations rule is not strong enough. One comment music tapes, similar to one distributed images in advertising increases tobacco said that FDA is mistaken in asserting by RJR with music by ‘‘The Hard Pack.’’ use among young people. that the black and white text format This would, the comment stated, FDA has fully addressed this removes imagery and emotive content provide aural imagery for young people. assertion. The available evidence from the advertisement. It said that the The agency agrees that it should demonstrates that pictures and colors regulation should also limit the type provide more specific guidance for have particular appeal to children and styles, font sizes, and shapes of borders permissible audio and video media and adolescents under 18 years of age, and and letters. that this guidance should be a logical that they are more important to The agency continues to believe that application of the text-only requirement. underage individuals than other aspects it has created an appropriately tailored Therefore, the agency has amended of the advertisement. 213 Young people remedy. The tobacco and advertising § 897.32 to add a new paragraph (b), pay attention to peripheral cues in an industries argue that FDA’s ban on which requires text-only black and advertisement, such as the models that imagery and color is overinclusive and white text in video advertising, which appear in them, color, and scenery, and not narrowly tailored. FDA disagrees, should be static, and text-only, no it is these components that tobacco however. The restriction on the use of music, in audio advertisements. advertisers use to create the images that images and color preserves (55) Several comments challenged are so important to people under the age informational advertising because of its FDA’s proposal to limit most advertising of 18. Thus, the restriction on images utility to adults while eliminating the to the use of the text-only, black print and colors will have a particular effect aspects of advertising that are most on white background format on the on the appeal of advertisements to attractive to young people. The agency grounds that this limitation would young people and make these is regulating only the manner in which violate the First Amendment. These advertisements a significantly less effective means of communicating to advertising is presented, not the comments relied most heavily on three this group. information contained in it. Also, the cases: Zauderer v. Office of Disciplinary (56) Several comments also argued agency is allowing imagery in Counsel, 471 U.S. 626 (1985), in which that FDA’s restriction on the use of advertising in adult publications. the Supreme Court struck down a colors and images is not narrowly There is undoubtedly an impact on restriction on the use of pictures in tailored, pointing to the fact that the businesses that have established logos, attorney advertising; Shapero v. agency proposed to eliminate the use of pictures, and other graphics associated Kentucky Bar Association, 486 U.S. 466 all visual images and graphic designs in with their businesses or products. (1988), in which the Supreme Court However, all businesses are subject to cigarette and smokeless tobacco held that the State may not restrict advertisements. the same requirements, and thus no one lawyer solicitations to those least likely business should receive any competitive These comments misinterpret the to be read by the recipient; and In re R. rule. FDA has not restricted all use of advantage. M. J., 455 U.S. 191 (1984), a case in The agency does not agree with color and images. FDA has provided which the Court struck down a that these mechanisms may continue to comments recommending restrictions requirement that lawyers use a fixed on type styles, fonts, etc. Such a be used in publications with primarily format in their advertising. One adult readership and in adult-only restriction on advertising is, given the comment, however, argued that FDA’s currently available evidence, more establishments. The agency has restriction is fully consistent with the endeavored to restrict as little speech as restrictive than necessary. Text-only First Amendment. advertising should be sufficient to possible. FDA has found, however, that In Zauderer v. Office of Disciplinary it could not limit the appeal of cigarette reduce the appeal of advertising based Counsel, 471 U.S. at 647, the Supreme on imagery to children and adolescents, and smokeless tobacco advertising to Court said that ‘‘the burden is on the the young if it did not restrict the use however creatively the text is displayed. State to present a substantial The agency concludes that the of image and color. governmental interest justifying the Each of the cases relied upon by the elimination of imagery and color restriction * * * and to demonstrate directly and materially advances its comments is fundamentally that the restriction vindicates that distinguishable from the current interest in protecting the health of interest through [narrowly tailored] young people by making tobacco situation. In each of these cases, the means.’’ 212 FDA will apply this test body seeking to restrict the advertising advertising much less appealing to them here. and, therefore, it makes it less likely that in question failed to present any As explained in section VI.C.4. of this they will be influenced to use tobacco evidence that the restriction was document, FDA has not merely a products. addressing an actual harm (see substantial, but a compelling, interest in (54) Several comments requested that Zauderer, 471 U.S. at 648–649; Shapero, the health of minors. It is this interest FDA provide specific regulation for 486 U.S. at 479–80; (see also Florida Bar that led it to propose the restriction on audio and video formats. Specifically, v. Went For It, Inc., 115 S.Ct. at 2378 the use of images and color in cigarette the comments requested that audio be (‘‘Finally, the State in Shapero and smokeless tobacco advertising. confined to a text-only format assembled no evidence attempting to appropriate for audio (words) Several comments argued, however, demonstrate any actual harm caused by unaccompanied by music or sound and that the restriction on images and color targeted direct mail.’’); In re R. M. J., 455 that video be limited to black text on a do not further FDA’s interest. These U.S. at 206). Here, in contrast, the white background only. Restrictions, comments argued that there is no record fully establishes the reality of the such as these, the comments continued, evidence that the use of color and harm, and that FDA’s interest will be would apply the spirit of the text-only directly and materially advanced by the format to these media. Finally, one 212 Zauderer actually states ‘‘* * * through the least restrictive available means.’’ However, in 213 See, e.g., Petty, R. E., and J. T. Cacioppo, comment expressed the concern that Board of Trustees of State University of N.Y. v. Fox, Communication and Persuasion: Central and without these restrictions, tobacco 492 U.S. at 479–481, the Court clarified this phrase Peripheral Routes to Attitude Change, Springer- companies might create and disseminate as requiring narrowly tailored means. Verlag, New York, 1986. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44513 restriction on colors and images. For tobacco for young people. One study by fewer than 2 million people under these reasons, FDA finds no merit to published in Advertising Age (April 27, the age of 18, whichever method these comments. 1992), found that 46 percent of children ensures the fewest young readers. The In summary, FDA finds that the 8 to 13 years old and 34 percent of agency defined the readership of a evidence amassed during this children 14 to 18 cited billboards as the publication as the total number of investigation and provided by predominant advertising medium for people that read any given copy of that comments provides ample support for tobacco products (see section VI.E.3. of publication and stated in the preamble its requirement that all forms of this document). The Starch Survey that it should be measured according to advertising that children see and are conducted for R.J. Reynolds found that industry standards and, at a minimum, exposed to can have an effect upon their 51 percent of children 10 to 17 who by asking a nationally projectable attitudes about tobacco use. recognized Joe Camel as a tobacco survey of people what publications they The empirical studies and surveys, mascot, reported seeing him on read or looked at during any given time. expert opinion, anecdotal evidence, billboards (see section VI.D.3.d. of this The preamble to the 1995 proposed rule industry statements, and consensus document). noted that a reader is one who said that report described in section VI.D.5. of Cross-Country and International he or she read the last issue of a this document implicate advertising as Studies—Studies described evidence publication. The 1995 proposed rule an important source of information for that regulations that are stringent and provided that before disseminating young people’s attitudes about, and use comprehensive will have a greater advertising containing images and of, tobacco products. This evidence impact on overall tobacco use and colors, it would be the company’s shows that any regulation that hopes to young people’s use than weaker or less obligation to establish that the be successful must be comprehensive comprehensive ones (see section publication meets the criteria for a and include some type of restriction VI.D.6.a. of this document). The text- primarily adult readership. upon all forms of advertising and only requirement, while not as stringent Numerous comments were received promotions. FDA’s regulation provides as a ban, will accomplish its purpose by the agency regarding the exception restrictions that will contribute directly while preserving the informational from the text-only requirement for adult and materially to that end but that are function of advertising. publications and the definition of an tailored as narrowly as possible. Except Finally, the regulation is narrowly adult publication. Comments from the in the limited case of outdoor tailored. It permits adult publications newspaper, magazine, and advertising advertising within 1,000 feet of schools, and adult locations to display industries were particularly critical of no informational advertising will be advertising with images and colors. The the readership thresholds chosen for the disturbed. However, those aspects of agency has attempted to define these definition of an adult publication and advertising that have particular appeal venues with as much precision as were especially concerned about to young people will be banned. possible but recognizes that there may whether there would be any reliable and Color and Imagery—Color and be some difficulties in application. It, practical way to determine readership imagery are necessary ingredients for therefore, has made it clear that it will levels for most publications. Many advertising in conditions of ‘‘low work with the industry to try to comments from individuals who involvement,’’ such as occurs when establish as clear rules as possible. In- supported the text-only requirement skimming a magazine or seeing a store, outdoor, and direct mail saw this exception as a possible billboard (see sections VI.B.1.b. and advertising do not lend themselves to loophole for the tobacco industry to VI.B.1 c. of this document). such tailoring. Nonetheless, the agency escape the text-only restrictions. FDA’s restriction will eliminate the is confident that adults seeking In a notice published in the Federal color and imagery but will permit information about products can be Register of March 20, 1996 (61 FR information to be communicated. This adequately informed at time of purchase 11349), the agency reopened the requirement is as important for in-store or by mail order catalogue using text- comment period to place on the public advertising, billboards, and direct mail, only. record a memorandum that provided as it is for traditional publications. As further explanation of the agency’s discussed in this section, young people 5. Section 897.32(a)—Definition of proposal to exempt publications with get their information and product ‘‘Adult Publication’’ primarily adult readership from the text- imagery from all these sources: (1) Point only requirement. The document The preamble to the 1995 proposed of sale advertising confronts young provided an additional 30 days to rule explained that the agency was people when they go to make a comment on this new information. The interested in permitting advertising in purchase. The imagery is as large as life memorandum stated that the agency had publications that are read primarily by and presents the child with an selected the 85 percent per 2-million adults to continue to use imagery and enticement at the time when purchase is threshold based on the public color. For that reason, under proposed immediately available. It can as perception that certain magazines are § 897.32(a), advertisements in effectively impart information to adults likely to be of interest to young people publications with primarily adult with words. (2) Direct mail can under the age of 18. The agency readership would not be restricted to a frequently wind up in the hands of a extrapolated from the readership text-only format. The agency proposed young person or be addressed percentages for those publications to the to define such publications as those: (1) personally to the child or adolescent. proposed threshold levels. Data Whose readers age 18 or older constitute One study found that 7.6 percent of supporting this line had been placed in 85 percent or more of the publication’s children 12 to 17 years questioned had the administrative record for the total readership, 214 or (2) that are read received mail personally addressed to proposed rule (vol. 105, document 1550) them from a tobacco company (1.6 214 This portion of the definition was edited in and additional readership data was million teens). the final rule to make the two provisions parallel. Billboards—Billboards provide a Thus, § 897.32(a)(2)(i) now reads, ‘‘whose readers or less of the total readership as measured by major source of information about younger than 18 years of age constitute 15 percent competent and reliable survey evidence.’’ 44514 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations provided during the comment period. allowed whatsoever in publications percent), Car and Driver (18.3 percent), The agency noted additionally that at with youth readership, and adult Motor Trend (22.1), and Road & Track some point the number of underage publications should have text-only (20.6 percent) and in the following readers is so great that the publication tobacco advertisements. This comment general circulation magazines: Rolling can no longer be considered to be of no also said that the agency should monitor Stone (18.5 percent), Vogue (18 interest to those under 18, regardless of this exception to ensure that tobacco percent), Mademoiselle (19.7 percent), the percentage of the readership. The companies don’t increase advertising in and Glamour (17.1 percent). 216 The agency selected 2,000,000 as that national adult publications that are agency’s judgment is based on common level. 215 widely read by the entire family public perception that these are the (57) Some comments objected to the including children and adolescents and types of magazines that young people proposed readership thresholds, calling to be wary of tobacco companies under the age of 18 will find of interest them arbitrary and stating that FDA creating their own adult publications and read. Thus, based on public provided no basis, no rational saturated with tobacco advertising. perceptions and inductively given the justification, and no evidence for them. Other comments supporting the nature of the magazines involved, FDA One tobacco industry comment stated proposal stated that some degree of finds a 15 percent cut-off to be that it used an FTC methodology based overinclusiveness is acceptable and appropriate. on readership and the number of pages expected because of the difficulties in The 2 million number is justified of advertising to conclude that fine-tuning any regulation. Other based upon the agency’s concern for magazines with greater readership by comments saw any exception for any young people. The agency finds that at minors tend to have less cigarette publications as a potential loophole that some point, the number of underage advertising than other publications. could be used by tobacco companies to readers is so great that the magazine can Some comments also objected to the continue using imagery in advertising. no longer be considered to not be of 2 million minor readers threshold They said that experience in other interest to children and adolescents because it would subject some adult- countries with tobacco advertising under 18 years of age. This threshold oriented magazines to the tombstone restrictions showed that ‘‘the tobacco would require text-only advertising in a format even though their percentage of industry used all of its creativity to publication like People, where the minor readers is very low. One manipulate the system to take advantage percentage of readers who are minors is comment cited the following examples of whatever opportunities were still only 7.8 percent, but where the number and readership figures: People Magazine available to reach their target audience, of readers under 18 years of age is (3,020,000 minors: 7.8 percent of all particularly young, impressionable 3,020,000. Publications like Time, readers) and Better Homes and Gardens individuals.’’ Newsweek, Family Circle, and Popular (2,042,000 minors: 5.5 percent of all The comments received, especially Mechanics, however, would not be readers); Time (1,972,000 minors; 7.66 from the magazine and newspaper subject to the text-only format under percent of all readers) and Newsweek industries, made clear that both defining either threshold; based on how these (1,911,000 minors; 8.01 percent of all an adult publication and determining publications are affected, FDA readers) are also close to the threshold. whether a particular publication meets concludes that, on balance, the 217 In addition, some comments suggested the definition are difficult issues. thresholds are reasonable. The that FDA’s explanation that 2,000,000 is However, while these comments were agency’s concern is not with the a large number is not adequate basis for helpful in pointing out the difficulty of ‘‘intended’’ audience of the publication regulation. defining an adult publication, they did because there is no magic curtain Some comments stated that the not offer any realistic alternative between the interests of young adults proposed thresholds were unfair to the definition in terms of a readership-by- and adolescents. The agency’s concern up to 85 percent, or more in some cases, minors threshold. Because of the is to protect children from the appeal of of a publication’s readers who were concern about tobacco use by children advertising that they cannot avoid. adults. ‘‘Such a regulation is and adolescents, which was voiced by Fifteen percent youth readership or 2 inconsistent with the principle that the virtually all comments pro or con, the million young readers narrowly government may not ’reduce the adult agency believes it has sufficient addresses this concern. population * * * to reading only what evidence to justify a text-only The agency does not agree with is fit for children.’’’ comments that the rule should be made requirement. However, the agency’s In contrast, comments supporting the more restrictive by, for example, concern is with advertising that affects proposal stated that just because the line allowing only text-only advertising in minors and with tailoring the (i.e., thresholds) could be drawn adult publications and no advertising at restrictions in this final rule to burden differently was not important as long as all in other publications. The text-only as little speech as possible. Therefore, FDA can rationally explain why it drew format will reduce the appeal of tobacco FDA concludes that an exception from the line where it did. One comment advertising to young people while the text-only requirement for suggested that FDA should require the allowing communication of important publications that are read primarily by text-only format in the 10 most read information to adults. The agency will adults is still reasonable and feasible. magazines by young people in addition continue to monitor the effect on young The agency has decided to retain the to the present proposal. Some comments people of text-only advertising as well exception for adult publications and to recommended requiring the text-only as the exception created for adult retain the readership thresholds in this format for advertisements in all publications and will consider taking final rule. The 15 percent young readers publications. any additional action that is threshold is reasonable based on One comment stated that no tobacco appropriate. readership data submitted with advertising, even text-only, should be comments. The 15 percent threshold 216 Barents Group, LLC, citing Publishers 215 See section XV. of this document, Analysis of would require text-only advertising in Information Bureau and Mediamark Research, Inc., Impacts, for a discussion of publications that would the following sports and racing pp. 53–54. be affected. magazines: Sports Illustrated (18 217 Id. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44515

Finally, the agency finds no basis to useful criticism, it is especially explained the basis for the proposed the comments’ concern that the important for the agency to identify and threshold. regulations will reduce the reading level make available technical studies and The legislative history of the APA of adults to those of children. The data that it has employed in reaching states that agency notice must be agency has crafted the exception for the decisions to propose particular sufficient to fairly apprise interested adult publications specifically to rules.’’ The agency fully complied with parties of the issues involved, so that minimize the effect of the regulations on this expectation by including the data they may present responsive data or adults. Moreover, text-only, or the that it had reviewed in the material that arguments thereto (S. Doc. 248, 79th absence of color and imagery, will have it made publicly available. Thus, the Cong., 2d sess. 200 (1946)). The notice significantly less impact on adults than agency finds the claims in the must disclose in detail the thinking that on young people. As discussed more comments summarized here to be has animated the form of the proposed fully in the introduction to this section, without any basis in fact. rule and the data on which that rule is based. (See Home Box Office, Inc. v. adults generally have more capacity to (59) Several comments asserted that FCC, 567 F.2d 9 (D.C. Cir. 1977).) In engage in high involvement search than the memorandum added to the record in Connecticut Light & Power v. Nuclear do young people. Furthermore, full the March 20, 1996, Federal Register Reg. Com’n, 673 F.2d at 530, the court information will be available to them in document did not provide a reasoned held that a notice of proposed the text format. The First Amendment explanation for the threshold that FDA rulemaking should provide an accurate demands no more. had proposed. Several comments argued picture of the agency’s reasoning, so that (58) Several comments recognized that there is no principle in, or interested persons may comment that FDA made the March 20, 1996, discernible from, the memorandum that Federal Register document and the meaningfully on the proposed rule. leads to the choice of 15 percent, as The March 20, 1996, Federal Register associated data in the record publicly opposed to 49 percent, as the ceiling for available to meet its obligation under document and the associated data in the the percentage of underage readers a record clearly meet this standard. As the APA to provide interested parties publication could have and still be with an opportunity to comment stated in this section, FDA made clear considered primarily adult. One that its tentative judgment was based on meaningfully on the proposed rule. comment said that FDA’s reasoning was These comments stated, however, that a review of available data (from Simons circular. Other comments said that FDA Market Research) on the readership one of the memoranda, dated March 11, had pointed to no facts in the March 20, 1996, placed on the public record by the profiles of various publications. By 1996, Federal Register document or the dividing the publications based on Federal Register document makes clear attendant memorandum that supports that FDA had readership numbers in whether, in the FDA employees’ its judgment. These comments stated experience, the publications were mind when it developed the proposal, that FDA merely applied an arbitrarily but that the agency had failed to publicly perceived as being of interest to chosen 15 percent figure to readership minors or not and then examining disclose those numbers to the public. data and concluded that it had hit the The comments said that these numbers readership information on each right number. Some comments publication, FDA employees found that are neither reflected in the questioned why a publication with 84 memorandum added to the record in the the publications that were viewed as percent adult readership was being of interest to young people had March 20, 1996, Federal Register problematic, while a publication with document nor the administrative record readerships that included individuals 86 percent adult readership was not. Of under the age of 18 at a level of 15 that FDA has made publicly available. all the comments that criticized FDA’s The comments said that the percent or higher. FDA also found that proposed threshold, only one provided the information on additional memorandum in question refers to any alternative. This comment cited the readership numbers that were in publications that it received during the tobacco industry’s voluntary Cigarette comment period produced results that comments submitted by the tobacco Advertising and Promotion Code, industry, and thus these numbers could were consistent with the pattern that Advertising 1(a), which prohibits 218 not have been the numbers that FDA emerged from its initial review. advertising in publications directed Thus, FDA’s reasoning is not circular. considered in developing its proposal. primarily to those under 21 years of age. FDA based the threshold on its tentative The comments said that FDA’s failure to finding, from the work that its disclose this information rendered the In contrast to the foregoing comments, employees had done, that the proceeding arbitrary and capricious. which were from the tobacco and publications viewed as of interest to These comments are in error. FDA advertising industries, a comment from young people had readerships that were placed the information that it relied a coalition of groups concerned about more than 15 percent under 18. upon in developing the tentative 15- smoking and health stated that the Significantly, while the comments of the percent threshold on public display at agency’s tentative judgment was tobacco and advertising industry approximately the time that it published unbiased, reasonable, and narrowly disagreed with the basis for the the proposed rule. The data appear at tailored to meet FDA’s stated goal of proposed threshold in various ways, pages 95T030074–75 of the limiting the specific forms of advertising none presented any data showing that administrative record (vol. 105, number that have the greatest impact on publications with a youth readership of 1550). (The numbers are similar but not children to those publications that do 15 percent or more are not viewed by identical to those supplied by the not have a regular heavy readership of consumers as of interest to young industry.) As one comment pointed out, children. people. in Connecticut Light and Power Co. v. FDA has carefully reviewed these It is important to keep in mind that Nuclear Reg Com’n., 673 F.2d 525, 530 comments. Based on this review, FDA the purpose of the threshold is to ensure (D.C. Cir.), cert. denied 459 U.S. 835 first considered whether its March 20, (1982), the United States Court of 1996, Federal Register document and 218 See memorandum of March 11, 1996, added Appeals for the District of Columbia the memorandum added to the record to the administrative record in the March 20, 1996, Circuit stated, ‘‘In order to allow for under that notice had adequately Federal Register. 44516 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations that no more speech than necessary is employees made in arriving at the the definition of an adult publication. burdened by FDA’s restriction on proposed threshold. Some comments said that current data advertising. Given that FDA wants to Some may assert that it is mere and methodology to determine youth ensure that its restriction is as narrowly coincidence that the two approaches readership, while adequate for tailored as possible, in response to the produce the same result. FDA disagrees. marketing purposes, are totally criticisms in the comments, FDA The congruence of the two approaches, inadequate to justify their use as considered whether there was a more the FDA employee anecdotal search and measuring devices for the imposition of appropriate basis on which to craft the the use of the census data, is attributable criminal or civil liability on the exercise restriction. Unfortunately, the to the basic validity of the premise of First Amendment rights. These comments criticizing the proposal were underlying FDA’s initial approach. comments noted that the vast majority not helpful. The only suggested Magazines have reputations as to the of magazines do not subscribe to either alternative to the proposed threshold audiences to which they appeal, and adult or youth surveys. Two comments that they put forward was the provision those reputations are generally earned stated that only about 2 percent of all in the Code. This provision is based on the nature of their contents. magazines participate in the two major inadequate on its face, however, because Thus, contrary to the assertions in some adult audience surveys. One comment it is based on a minimum age of 21, of the comments, the 15 percent stated that participation in the youth rather than 18, which is the minimum threshold is well-supported and readership surveys, Simmons’s STARS provided in the laws of all the States appropriate. and MediaMark Research Inc.’s (MRI’s) and section 1926 of the PHS Act. As for the question as to why a TEENMARK, is even more limited, just Moreover, the comment that suggested publication with 84 percent adult over one-half of one percent of all this alternative gave no indication of readership would be problematic, while magazines. how the age group to which a a publication with 86 percent adult One comment noted that to comply publication is primarily directed would readership would not, the agency turns with the 1995 proposed rule, be determined. to the case law on narrow tailoring, publications must identify readers of all which is, as stated in section VI.E. of ages but that current audience As a matter of common sense, FDA this document, what this exercise is measurement systems do not provide focused on the percentage of readers about. In Board of Trustees of State this comprehensive coverage especially under the age of 18 in the general University of N.Y. v. Fox, the Supreme for readers younger than 12 years of age. population and on comparing that Court stated: Another comment noted that since the percentage to the percentage of readers In sum, while we have insisted that ‘‘the survey organizations do not survey under 18 years of age for a particular free flow of commercial information is individuals on college campuses, in the publication. Certain conclusions can valuable enough to justify would-be armed services, or in institutional logically be drawn on the basis of such regulators the costs of distinguishing * ** settings, adult readership would be a comparison. If the percentage of young the harmless from the harmful,’’ * * * we underestimated. Several comments readers of a publication is greater than have not gone so far as to impose upon them noted the difficulty in determining the burden of demonstrating that the the percentage of young people in the readership data for any one issue of a general population, the publication can distinguishment is 100% complete, or that the manner of restriction is absolutely the magazine. Another comment noted that be viewed as having particular appeal to multi-issue advertisements would be a young readers. A publication with a least severe that will achieve the desired end. What our decisions require is a ‘‘fit between problem for publications right around youth readership percentage that is the legislature’s ends and the means to the threshold if the publication crosses approximately equal to the percentage accomplish those ends,’’ * * * —a fit that is back and forth. of young people in the general not necessarily perfect but reasonable * * *. Several comments noted that the population can be viewed as one of (492 U.S. at 480 (citations omitted)) survey organizations would have to general appeal, including appeal to FDA has done its best to distinguish make substantial methodological young readers. A publication with a publications that are likely to be read by changes to the surveys to meet the 1995 lower percentage of young readers than children and adolescents from those proposed rule’s standard. One comment in the general population, however, that are not. FDA finds that, if its said that some problems would include would obviously be one of limited restriction on advertising is to be adding magazines to the surveys, and appeal to young people, and thus one meaningful, it must be based on a line dealing with unreliable results. Another that could appropriately be considered that is enforceable. While only 2 comment asked who would decide the of interest primarily to adults. percentage points separate a publication research design for the surveys since Given the logic of this approach, FDA with 84 percent adult readership from different research methodologies could turned to the U.S. census. What the one with 86 percent (although those 2 be competent and reliable yet result in agency found is that young people percentage points can mean a difference different conclusions. Another comment between the ages of 5 and 17 constitute of tens of thousands of youngsters), the said that it could be prohibitively approximately 15 percent of the U.S. underrepresentation of underage readers expensive to increase audience samples population. 219 Since this percentage is in the readership of the latter to create a legally enforceable standard, the same as the one that FDA used in publication establishes its limited and that changes to audience developing the proposal, this approach appeal to young readers, and thus that measurement procedures could fully supports the approach that FDA it is less likely to be read by them. undermine the usefulness of the surveys proposed. (Although 5 and 6 year olds For the foregoing reasons, FDA is for their designed marketing may not be reading magazines, utilizing adopting the 15-percent threshold. information purpose. this age group builds in a margin for (60) Comments from an association of One supporting comment from an error.) It ratifies the judgments that FDA magazine publishers and others association of addiction specialists expressed a number of concerns about stated that ‘‘the agency should require 219 U.S. Bureau of the Census, Population Paper the adequacy of current data for the industry to monitor with surveys of Listing 21, 1994. determining whether a publication met ad recall (correlated with tobacco use Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44517 and intention to use patterns) among the Second, either of the two of only 6.5 or 7 percent). 220 Also, adults population under age 18 years to help methodologies can be used to measure are more likely to subscribe for their the agency understand the extent to readership. In addition, the agency has families, thereby creating an which image-based messages continue modified § 897.32(a)(1) and (a)(2) to underestimation of youth exposure. to reach the young.’’ make clear that any other competent (61) Several comments assumed that One comment pointed out that it and reliable private sector survey the purpose of the March 20, 1996, would be virtually impossible to evidence may be used. A tobacco Federal Register document was to determine a legally enforceable standard company may use one of the two major justify the restriction on advertising for the 15 percent youth readership customary and reasonable readership format that the agency had proposed for threshold since there is substantial surveys (such as MRI and Simmons). other than adult-oriented publications. variation in audience estimates between The agency does not believe that there These comments argued that explaining survey organizations and over time. is only one acceptable methodology. how the agency arrived at the 15 percent Several comments noted that FDA’s The agency is willing to accept the and 2 million readership thresholds definition of a reader is not consistent standard methodology currently used by does not approach the factual with the definition used by Simmons MRI and Simmons as evidence. justification necessary to restrict First and MRI. Moreover, the agency is willing to use Amendment freedoms. Some comments suggested that a the age range of 12 to 17, which appears Other comments asserted that FDA’s more realistic measure of who reads a to be the current standard for defining assumption that certain magazines were publication would be who subscribes to youth, in determining youth readership. of interest to those under 18, as the it. Other comments opposed this If a particular publication is not starting point in arriving at the 15 alternative stating that the key criteria currently covered by one of the major percent threshold, shows that the limits should be regular readership, not paid surveys, it is the tobacco company’s were content based. These comments subscribers. One comment said that responsibility to develop the readership argued that basing restrictions on ‘‘[t]his alteration of the proposed data necessary to justify a decision to content violated the First Amendment. exemption would destroy the intent and advertise in that publication. The The comments misunderstood FDA’s purpose of the advertising limitation.’’ company could request a survey by one purpose in proposing, and in adopting, Several comments said that the of the major survey firms, or it could the 15 percent and 2 million under 18 proposal would violate due process by develop an acceptable alternative. In readership thresholds and of the punishing publishers or advertisers who either case, the agency will be available memoranda added to the public record are unable to determine whether their to work with the company. The in the March 20, 1996, Federal Register conduct violates the law because the company will always have the document that indicated how the survey data are not sufficiently alternative to advertise in any agency tentatively arrived at those comprehensive and reliable. Several publication in the text-only format. thresholds. As discussed in section comments, including one from an The agency also acknowledges the VI.D. of this document, the evidence in association of newspaper publishers, difficulty in determining the youth this proceeding establishes the effect of expressed concern about who would readership for any particular issue of a cigarette and smokeless tobacco determine readership. One comment publication. Thus, data from a survey advertising on those under 18 years of asked whether a newspaper would be for the most recent issues of a age. This evidence fully justifies FDA’s subject to criminal liability based on publication can serve as proof of decision to restrict the advertising for readership data it supplies, and whether readership for comparable upcoming these products. the responsibility for ascertaining issues unless a particular upcoming However, in imposing such a whether a publication qualifies as an issue is being targeted at younger restriction on commercial speech, FDA adult publication would be on those readers. The survey schedule used by has an obligation to ensure that the running the advertisements. restriction is no more broad than The agency recognizes the limitations the major survey organizations would be acceptable to the agency. A tobacco necessary to serve the agency’s of current readership data and the substantial interests (Board of Trustees difficulties of using current readership company could utilize a more frequent survey schedule if it believed the of State University of N.Y. v. Fox, 492 surveys to meet the requirements of this U.S. at 476). The purpose of the rule. However, the agency concludes readership had changed in its favor. A rolling average of a certain number of memorandum was to document FDA’s that the exception from the text-only efforts to tailor the restriction to ensure format for adult publications is feasible issues could be used, for example, to determine youth readership. The that it did not restrict advertising in as well as reasonable. First of all, the those publications that were not likely burden of proof for determining youth problem of multi-issue contracts for advertising could be solved by a survey to be read by children or adolescents readership is placed by the rule on the and thus were not likely to have an tobacco company doing the advertising, for a comparable period of time (e.g., winter months) preceding the contract. effect on the group that FDA is trying to not on the publication or the advertising protect. Consequently, contrary to the The agency is willing to accept the agency. Under § 897.32(a)(2), the claims of the first group of comments, definitions of a reader that are tobacco company will need to be able to the agency’s goal in the memorandum customarily used by the major survey demonstrate that a publication in which was not to justify a restriction on First organizations. The agency does not it is running an advertisement with Amendment freedoms but to explain agree that using subscribers to a images and colors meets the definition how it sought to ensure, and why its publication in lieu of readers is a better of an adult publication. Therefore, only tentative decision was that, the limits it measure. Many children who read a the tobacco company will be subject to proposed to place on the coverage of the any penalties for improperly placing publication will not be listed as subscribers (for example, Sports advertisements, even if it used data 220 Interview on ‘‘The News Hour With Jim provided by the publication as part of Illustrated has a youth readership of 18 Lehrer,’’ Public Broadcasting Systems, May 16, its determination. to 20 percent but a youth subscriber rate 1996. 44518 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations restriction are reasonable (see Id. at youthful than Popular Mechanics; Soap a publication’s decisions regarding its 480). Opera Weekly has a 3 percent more target audience and editorial content, On the other hand, other comments youthful readership than Soap Opera and these are likely to change for a that opposed FDA’s proposed restriction Digest; and there is a 9 percent bigger variety of reasons. Those publications on format said that the threshold would youth audience for Outdoor Life than for affected by this regulation will have to have different impacts on similar Field and Stream. These differences are adjust just as they would if a major publications. One comment provided not minor or meaningless and advertiser reduced its advertising. the following examples of publications demonstrate that, although the 15 Under the rule, all publications could that would be considered ‘‘youth percent threshold is not perfect, it will still accept text-only advertising. The oriented’’ or primarily adult under the serve, as it was designed to, protect cigarette and smokeless tobacco 15 percent threshold (the comment those under 18. TV Guide and industries are capable of designing their argued that the effects of the 2 million Cosmopolitan are not excluded advertising to be attractive to adult readership threshold were not relevant although, as mass distribution readers (see section VI.E.4. of this to the rationality of the 15 percent magazines the percentage of young document). Thus, it seems as likely that threshold): readers is less than 15 percent, because the effects of the rule in these areas will they attract over 2 million young be minimal and will be far outweighed Table 1b.ÐExamples of Publications readers—a number of young people too by the overall benefits of reducing youth large to ignore. 221 smoking. The effect of the rule on prices Youth Oriented Publi- Primarily Adult Ori- (62) Many comments, especially from and jobs in the magazine and newspaper cations ented Publications the magazine and newspaper industries, industries is addressed in the section on expressed concerns about the impact of the economic impact of the rule. Popular Science ...... Popular Mechanics this proposal on their way of doing Soap Opera Weekly Soap Opera Digest (63) Several comments argued that Outdoor Life ...... Field and Stream business. One comment stated that the FDA’s restrictions on the format of Cable Guide ...... TV Guide proposed text-only format would advertising, and the standard that it Mademoiselle ...... Cosmopolitan provide financial disincentives for proposed for deciding whether a magazines and newspapers to attract publication has a predominantly adult The positions taken by these young readers, especially if the readership, interfere with the rights of comments makes clear that the publication were near the borderline of newspapers and magazines to decide thresholds were not content based. If the being required to use the text-only what to print. One comment said that thresholds were content based, then format. This comment suggested that the some publications will not want to give publications that have similar content provision would affect editorial and up revenue from tobacco advertising. would be subject to the same restriction. content decisions regarding young Therefore, the comment continued, They are not. The reason they are not is readers. these publications will base decisions that FDA’s goal in arriving at the Some comments noted that about editorial content on how thresholds was to ensure that cigarette newspapers have been struggling to appealing a particular story would be to and smokeless tobacco advertisements attract young readers raised on readers under the age of 18. Because of that are likely to be seen by children television, but that success in doing this the impact of the restrictions on and adolescents are the kinds of might cause the loss of significant editorial content, the comment advertisements that are likely to appeal tobacco advertising revenue. One concluded, they should be subject to to them. The agency’s only way of newspaper industry association strict scrutiny rather than the more judging the likelihood that an comment stated that the rule would limited scrutiny given to commercial advertisement that appears in a discourage newspaper programs speech. publication will be seen by those under promoting youth reading and literacy. FDA finds no merit to this argument. the age of 18 is by considering the Some comments stated that the loss of A similar argument was made in readership profile of that publication. advertising revenue could cause Pittsburgh Press Co. v. Pittsburgh Com’n Thus, the agency has tailored the publications to decrease content and on Human Relations, 413 U.S. 376 threshold to either reflect the percentage increase prices. Some comments (1973). The newspaper company in that of readership that are under 18 years of thought the result of these effects of the case, which involved a First rule would be losses in jobs in the age or to ensure that publications with Amendment challenge to a municipal newspaper and magazine industries. an extensive youth readership are ordinance that prohibited a newspaper The agency is not sure what impact covered. from carrying gender-designated the exception for adult publications will The comments that complained about advertising for nonexempt job have on incentives for magazines and the differing impact of FDA’s threshold opportunities, argued that the focus of newspapers to attract young readers, on on similar publications, given the the case must be on the exercise of editorial content, and on youth literacy purpose of the threshold, serve to editorial judgment by the newspaper programs. The comments that raised underline its significance. The rather than on the commercial nature of these issues mostly speculated about information submitted by the comments these effects and did not provide any the ads in question. shows that there are significant The Supreme Court rejected this data as to how many of the thousands differences in the readership of similar argument. The Court said that under of newspapers and magazines in the publications and thus in the likelihood some circumstances, at least, a United States carry tobacco advertising, that the material contained in these newspaper’s editorial judgments in or on what portion of their total publications will be seen by young connection with an advertisement take advertising revenue comes from tobacco people. The treatment of publications on the character of the advertisement. In companies. Many business factors affect under the agency’s restriction reflects those cases, ‘‘[t]he scope of the the latter fact, not the former. 221 Barents Group, LLC, citing Publishing newspaper’s First Amendment Popular Science magazine has a Information Bureau and Mediamark Research, Inc., protection may be affected by the readership that is 6 percent more pp. 53–54. content of the advertisement’’ Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44519

(Pittsburgh Press Co., 413 U.S. at 386). product, followed by the words ‘‘A section 502(r)(2) of the act to require a The Court said that, at least under some Nicotine-Delivery Device.’’ brief statement of intended use for all circumstances, a commercial The preamble to the 1995 proposed restricted devices. advertisement remains commercial in rule explained that section 502(r)(1) of Additionally, it is within FDA’s the hands of the media (Id. at 387). The the act requires, for any restricted primary jurisdiction and expertise to Court found that nothing about the device, that all advertising or other determine a device’s intended use. FDA decision to accept a commercial descriptive printed material contain a has decades of experience evaluating advertisement for placement in a true statement of the device’s the intended uses of FDA-regulated gender-designated column lifts the established name. Under section products, including restricted devices, newspaper’s actions from the category 502(r)(2) of the act, a restricted device prescription and over-the-counter drugs, of commercial speech. The Court said is misbranded unless all advertising biological products, and dietary that the ad was in practical effect a contains ‘‘a brief statement of the supplements through its review and commercial statement (Id. at 387–88; see intended uses of the device.’’ The approval process for those products. also United States v. Hunter, 459 F.2d agency explained in the preamble to the As described in the 1996 205, 212 (4th Cir. 1972) (‘‘But it has 1995 proposed rule that it is necessary Jurisdictional Determination annexed been held that a newspaper will not be to require that the product’s established hereto, the available evidence insulated from the otherwise valid name and intended uses be placed on demonstrates that manufacturers intend regulation of economic activity merely all advertising, under section 520(e) of to affect the structure and function of because it also engages in the act, as a measure that affirmatively the body by delivering constitutionally protected dissemination identifies the products to persons pharmacologically active doses of of ideas’’)). reading the advertising (the other brief nicotine to the consumer. Although the statement requirements under section agency proposed that the intended use Here, the question that is raised is 502(r)(2) of the act are discussed in include the language ‘‘Nicotine Delivery whether or not a publication will decide section IV.E.6.b. of this document). Device,’’ the agency has determined, to put itself in a position of being able The agency did not receive any based on the comments received, that a to accept an advertisement that is comments on the ‘‘established name’’ more accurate statement of the intended particularly appealing to individuals provision and has thus codified the use would provide more value to under 18 years of age or not. Nothing provision in the final rule as § 897.32(c). consumers. Because cigarettes and about this judgment distinguishes it The agency has modified the ‘‘intended smokeless tobacco products can legally from the commercial speech itself. use’’ provision in this final rule to be sold only to those persons 18 years Because nothing about FDA’s require that cigarette and smokeless of age and older, the agency believes the restrictions would prevent the tobacco advertising contain the intended use statement should reflect publication from carrying a cigarette or statement ‘‘A Nicotine-Delivery Device the target population for which the smokeless tobacco advertisement no for Persons 18 or Older.’’ For clarity, the product is intended. Often, the intended matter what judgment the publication agency has referenced subpart D use statement for a drug or device makes, essentially the editorial generally rather than § 897.30(a) includes the patient population by judgment comes down to the question of specifically. As stated in the 1995 whom the product may be used. what will be the format of the proposed rule, the established name Accordingly, the intended use statement advertisement that it will carry. This requirement applies to both tobacco and has been revised to require the judgment clearly comes within the smokeless tobacco. following language on all category of commercial speech, and (64) Several comments opposed the advertisements for cigarette and FDA has fully justified its regulation of proposed ‘‘intended use’’ provision. smokeless tobacco: ‘‘A Nicotine- commercial speech under the Central One tobacco industry comment stated Delivery Device For Persons 18 or Hudson test. that FDA’s proposal is not authorized Older.’’ 6. Advertising—§ 897.32 Requirements under section 502(r) of the act because: b. Section 897.32(d) Brief statement. for Disclosure of Important Information (1) The ‘‘intended use’’ of tobacco Proposed § 897.32(c) and (d) would products is for smoking taste and have required that each manufacturer, a. Established name and intended pleasure, not a ‘‘nicotine delivery distributor, and retailer of cigarettes use—§ 897.32(c). Proposed § 897.32(b) device;’’ (2) the ‘‘intended use’’ include in all advertising, but not (now renumbered as § 897.32(c)) provision of the act does not require that labeling, a brief statement, printed in provided that each manufacturer, manufacturers list all information black text on a white background that distributor, and retailer (of tobacco and related to all purposes for which a drug was readable, clear, conspicuous, smokeless tobacco) advertising or is intended; and (3) FDA is not free to prominent, and contiguous to the causing to be advertised, disseminating prescribe an ‘‘intended use’’ of its own Surgeon General’s warning. Because the or causing to be disseminated, invention. The comment also argued Smokeless Act preempts other advertising, but not labeling, permitted that FDA’s statement, which statements about tobacco use and health under § 897.30(a), shall include, as communicates only that a cigarette in advertising, the 1995 proposed rule provided in section 502(r) of the act, the yields nicotine, is not a statement of stated that the provision only applied to product’s established name and a ‘‘intended use’’ and is of no value to cigarettes (and not smokeless tobacco). statement of its intended use as follows: consumers who obtain more complete The 1995 proposed rule provided one ‘‘Tobacco—A Nicotine Delivery nicotine information that cigarette brief statement as an example (‘‘ABOUT Device,’’ ‘‘Cigarette Tobacco—A manufacturers already provide in 1 OUT OF 3 KIDS WHO BECOME Nicotine-Delivery Device,’’ or ‘‘Loose advertising. SMOKERS WILL DIE FROM THEIR Leaf Chewing Tobacco,’’ ‘‘Plug Chewing The agency disagrees with the SMOKING’’) (60 FR 41314 at 41338). Tobacco,’’ ‘‘Twist Chewing Tobacco,’’ comments stating that it is not free to The agency requested comment on what ‘‘Moist Snuff’’ or ‘‘Dry Snuff,’’ prescribe an intended use. As discussed other information should be included in whichever is appropriate for the in this section, the agency is required by the brief statements concerning relevant 44520 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations warnings, precautions, side effects, and emphysema, may complicate The comment miscomprehends the contraindications and on how best to pregnancies, and contain carbon purpose of the brief statement, which is ensure that the statement will be clear, monoxide; smoking by pregnant women to provide information about the risks conspicuous, and prominently may result in fetal injury, premature and benefits regarding the product. This displayed. The agency also requested birth and low birth weight; and quitting provision is not intended to serve, on its comment on whether it should require reduces serious risks. own, as a mechanism to provide a listing of the component parts or The agency has also considered the reasonable assurance of safety for these ingredients of these restricted devices. fact that there is a heightened public products. The preamble to the 1995 proposed awareness by adults of the addictiveness (66) One comment argued that even if rule explained that the agency was of cigarettes, as well as the serious FDA could validly require a brief proposing to require this brief statement health effects that can result from their statement for tobacco as an exercise of under section 502(r)(2) of the act. The use. Much of this awareness stems from: its statutory authority, the imposition of preamble stated that the act specifically (1) The publicity of the numerous a warning requirement as part of the excludes labeling from the requirements Surgeon General’s reports that have brief statement is invalid because in section 502(r) of the act. The 1995 issued in the last few decades, (2) the advertisements for tobacco are already proposed rule stated that the agency campaigns supported by health groups required to bear the Surgeon General’s would specify the design, content, and and State and local governments, as warning under 15 U.S.C. 1333(a)(2) and format of the brief statements, in part well as (3) the attention generated by the (a)(3). In addition, the comment stated based on focus groups with young agency’s investigation of these products. that FDA is not authorized to require people, to ensure that the information that the information be presented ‘‘in a Under the current circumstances, the would be communicated effectively to lurid fashion to achieve an ulterior agency has determined that the current young people. purpose’’ or as ‘‘a threat intended to Surgeon General’s warnings, which The agency received numerous scare people,’’ and that the warning must be in virtually all advertisements, comments on this brief statement, and information is meant only for the contain the type of important health about half of the comments supported purposes of enabling the physician or information required under section the provision and half opposed it. Most patient to make a rational risk/benefit 502(r) of the act. Accordingly, the of the comments that supported the judgment. agency has determined that brief statement requirement Another comment argued that the advertisements that contain the current recommended other information to be contention that the Surgeon General’s Surgeon General’s warnings meet included in the brief statement, and warning is ‘‘ineffective’’ is without section 502(r) of the act. offered suggestions on how best to merit. The agency agrees that the ensure that the statement will be clear, Finally, because the agency has current Surgeon General’s warnings conspicuous, and prominently determined that the Surgeon General’s contain the type of important health displayed. warnings are adequate, and those information that advertisements must During the comment period, FDA warnings must be displayed in a format contain under section 502(r)(2) of the performed extensive focus group testing prescribed by law, there is no longer any act. Accordingly, the agency has on the brief statement to evaluate the need for proposed § 897.32(d), which determined that advertisements that content and various formats for the brief required that the brief statement be contain the current Surgeon General’s statement to determine if the readable, clear, conspicuous, prominent, warnings sufficiently meet the brief information would be communicated and contiguous to the Surgeon General’s statement requirement of the act. effectively to young people. Those warning. (67) One comment stated that the brief results were placed on the public record (65) One comment argued that the statement provision would ‘‘cause so and made available for comment, 1 proposed warning requirement for much visual clutter in tobacco month prior to the close of the comment tobacco is not a warning, nor is it part advertising as to render effective period. FDA received a few comments of a brief statement, as those terms are communication nearly impossible.’’ on the focus group results from the used in section 502(r) of the act. The Another comment stated that FDA tobacco industry and concerned comment stated that because FDA will be unable to justify the economic individuals. proposes to allow tobacco to be burdens on communication with adults The final rule does not specify a marketed as devices subject only to that are created by the brief statement particular statement to be placed in all general controls, one of which is the requirement because, in order to include cigarette advertisements, as proposed in brief statement provision, then the all the mandated statements, advertisers § 897.32(c), nor does it require the brief ‘‘brief statement’’ must be capable of would be required to purchase statement to be targeted to young providing, with other general controls, additional space and thus would have to people. Rather, the agency has ‘‘reasonable assurance of the safety and reduce, because of budgetary pressures, concluded that the current Surgeon effectiveness’’ of tobacco under the act. the number of advertisements they General’s warnings contain important The comment argued that because FDA could place. health information, concerning the risks regards tobacco as having ‘‘dangerous Because the agency has determined related to the use of cigarettes, of the health consequences’’ (60 FR 41314 at that the current Surgeon General’s sort required under section 502(r) of the 41349), and does not believe that warnings will be sufficient as a brief act and, consequently, has decided not tobacco can be ‘‘safe and effective’’ for statement, the issue raised by these to require a specific, different statement. anyone, then FDA’s proposed ‘‘brief comments is no longer pertinent. Specifically, the Surgeon General’s statement’’ provision is not within the (68) Several comments which warnings currently required to be scope of the act. The comment stated supported the 1995 proposed rule included in cigarette advertisements that the only warning that is consistent suggested alternative statements and and on cigarette packages contain the with FDA’s view would be one that submitted recommended language for following information: Cigarettes cause warned against anyone using the device the brief statement. Many comments lung cancer, heart disease and at all. suggested specific types of information Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44521 for inclusion in the brief statement. around the brief statement and statements required by § 897.32(c) and Several comments provided suggested other graphic enhancements the Surgeon General’s warnings. Thus, recommendations on how the statement to make the information in the brief because the final rule is not based on could be ‘‘clear and conspicuous.’’ One statement more noticeable. the focus group results, the agency need comment stated that messages must be The agency recognizes that there are not address the previous comments carefully pretested on members of the several ways to communicate the concerning the focus group results. target audience to ensure that labels: (1) requirement for ‘‘relevant warnings, 7. Section 897.34(a) and (b)— Attract attention; (2) are personally precautions, side effects, and Promotions, Nontobacco Items, and relevant; and (3) do not elicit contraindications’’ set forth in section Contests and Games of Chance psychological reactance, i.e., behaviors 502(r) of the act. In this case, however, directly counter to those desired due to the agency has determined that the The agency proposed in § 897.34(a) to irritation, rebellion, or current Surgeon General’s warnings are prohibit the sale or distribution of all misinterpretation. The comment sufficient as at least one way of nontobacco items that are identified recommended that messages be varied complying with section 502(r) of the act. with a cigarette or smokeless tobacco periodically to ensure that they remain In addition, the agency appreciates the product brand name or other identifying attention-getting and pertinent. numerous suggestions on how to make characteristic. FDA stated in the 1995 Several comments recommended that the brief statement readable, clear, proposal that this requirement is the rule be more specific in what is conspicuous, and prominent. However, intended to reach such items as tee meant by ‘‘readable, clear, conspicuous, since no additional information will be shirts, caps, and sporting goods and prominent’’ by giving either a detailed required at this time, and the format for other items bearing tobacco brand set of format specifications of the the Surgeon General’s warnings is names or other indicia of product lettering and background or by giving a determined by law, the agency has identification (60 FR 41314 at 41336). set of performance criteria. One deleted proposed § 897.32(d). As discussed in the preamble to the comment enclosed an unpublished (69) One comment stated that FDA’s 1995 proposed rule (60 FR 41314 at review on warnings, which attempt to gather information through 41336), a Gallup survey found that recommended that warnings should the focus group studies about about one-half of adolescent smokers, attract attention of the target audience adolescents’ perceptions of the and one-quarter of all nonsmokers, own by using high contrast and color; adequacy of the Surgeon General’s at least one promotional item. The IOM separating warnings from other warnings for use in designing its own found that this form of advertising is information; considering size (relative to additional warning underscores the particularly effective with young other information in the display) and direct conflict between the Cigarette Act people. Young people have relatively location (since people tend to scan left and the proposed regulation. little disposable income, so promotions to right and top to bottom warnings This comment has misinterpreted the are appealing because they represent a should be located near the top or to the purpose and the results of the focus means of ‘‘getting something for left, depending on the overall design of group testing. FDA’s focus groups were nothing.’’ In many cases, the items—tee the display); and by using signal words intended to explore how adolescents shirts, caps, and sporting goods—are to capture attention, such as perceive various messages. The Surgeon particularly attractive to young people. ‘‘CAUTION,’’ OR ‘‘WARNING,’’ General’s warnings, as well as other Some items, when used or worn by pictorials, rotational warnings to avoid warnings, were tested with the focus young people, also create a new habituation, and auditory warnings. In groups merely to serve as a basis for advertising medium—the ‘‘walking addition, the review stated that reactions to messages that currently billboard’’—which can come into warnings should describe the hazard, exist in the public domain. schools or other locations where without ‘‘overwarning,’’ and describe (70) FDA received few comments advertising is usually prohibited (60 FR the nature of the injury, illness or concerning the focus group results. In 41314 at 41336). Moreover, this form of property damage that could result from general, these comments questioned the advertising has grown in importance the hazard. The review recommended validity and usefulness of focus groups. over the last 20 years. The portion of that written warnings should be Further, some comments asserted that annual expenditures of the cigarette organized with an attention getting icon the warnings preferred by the young industry devoted to these promotions and signal word at the top, then hazard people in the focus groups may have rose from 2.1 percent in 1975 to 8.5 information, then instructions. Finally, unintended consequences. percent in 1980. 222 the review recommended that warnings As discussed in this section, the focus On the basis of the evidence before it, should instruct about appropriate and groups tested a variety of specific brief the agency tentatively concluded that inappropriate behaviors, motivate statements that were intended to be the ban on nontobacco items was people to comply, be as brief as directed towards young people. necessary to eliminate the something- possible, and should last and be However, the agency has decided that for-nothing appeal of these items, as available as long as needed. the final rule will not specify a well as to prevent wearers or users of One comment recommended that the particular brief statement, but will these items from becoming image-laden relevant warnings, precautions, side accept the current Surgeon General’s walking advertisements. effects, and contraindications be in a warnings as sufficient. Moreover, FDA proposed in § 897.34(b) to language understandable and appealing section 502(r) of the act does not require prohibit all proof of purchase to even the youngest potential tobacco that the brief statement be directed to transactions of nontobacco items as well user. Several comments recommended young people, but rather that it provide as all lotteries, contests, and games of that a minimum size should be required, ‘‘a brief statement of the intended uses chance associated with a tobacco expressed as a percentage of the of the device and relevant warnings, purchase. The agency stated that, advertisement (e.g., 25 percent of the precautions, side effects, and because contests and lotteries are advertisement). Several comments contraindications.’’ This function is recommended that a border be placed adequately filled by the intended use 222 IOM Report, p. 109. 44522 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations usually conducted through the mail, it authority under the act. The comments Another comment pointed out that was not able to devise regulations that addressed a number and variety of legal the Public Citizen case provides ample would reduce a young person’s access to issues. One comment stated that FDA legal precedent not only for the contests or lotteries. has no authority to ban the items and conclusion that promotional materials (71) FDA received a substantial services covered by § 897.34(a). It stated are advertising, but also that they have number of comments concerning the that items and services (e.g., travel a direct impact on a minor’s tobacco 1995 proposed rule to prohibit these agencies) bearing indicia of tobacco use. The court, relying on evidence promotional activities. Comments product identification are not foods, compiled by the FTC, found that ‘‘in the opposing these provisions argued that drugs, cosmetics, or devices as defined case of adolescents, utilitarian items tobacco companies should be allowed to in the act and, therefore, are outside the might be among the most effective forms advertise in a fair manner however they agency’s jurisdiction. of promotion’’ (869 F.2d at 1549 n. 15). wish. Many comments from individuals Another comment stated that In addition, the lower court provided an stated that they like the ‘‘freebies.’’ They nontobacco items cannot be regulated as additional rationale for restriction based contended that the agency does not have advertising in the way FDA proposes upon the items’ longevity and authority to regulate the clothes people because: (a) The 1995 proposed rule durability. wear or to ban contests and promotional extends to goods and services provided [P]rinted advertising is customarily quickly activities that are only available to to product users in connection with read (if at all) and discarded (as, of course, adults. A number of comments from cigarette purchases, most of which are are product packages) by typical consumers. individuals stated that what they did not displayed or disseminated to the ‘‘Utilitarian objects,’’ on the other hand with their lives was their business. general public, and thus do not ** * are retained, precisely because they Comments also objected to the constitute advertising (see Marcyan v. continue to have utility. They are also likely to be made of durable substances: fabric, agency’s proposed ban on contests and Nissen Corp., 578 F. Supp. 485, 507 plastic, glass, or metal. They may be around games of chance. These comments (N.D. Ind. 1982), aff’d sub nom. Marcyan v. Marcy Gymnasium Equip. for years. And each use of them brings a new stated that existing laws and regulations reminder of the sponsor and his product already provide a sufficient regulatory Co., 725 F.2d 687 (7th Cir. 1983)); and *** framework. (b) many of the types of items covered (688 F. Supp. 667, 680 (D.D.C. 1988), The majority of comments, however, by § 897.34(a) are promotional items but aff’d, 869 F.2d 1541 (D.C. Cir. 1989)) supported these provisions and stated not advertising (e.g., a logo-bearing mug The agency finds that the reasoning in given away or sold by a manufacturer is that children and adolescents should the Public Citizen case is persuasive and not an advertisement). not be ‘‘walking billboards.’’ Moreover, compels the conclusion that branded One comment, which favored the these comments argued that even nontobacco items are advertising. It also provision, provided support for the though young people cannot participate finds that young people acquire and use classification of promotional items as in the contests, they can easily get these products. advertising. The comment referenced caught up in the excitement of Moreover, the agency finds nothing in Public Citizen v. FTC, 869 F.2d 1541 at promotional activities. Comments the Marcyan v. Nissan Corp. case is to 1556 (D.C. Cir. 1989), in which the U.S. declared that prohibiting tobacco the contrary. In relevant parts, that case product-related gifts, items, contests, Court of Appeals for the D.C. Circuit held that the Smokeless Act involved an endorsement that appeared and games of chance will break the in the front of a users’ manual. The enticing connection between sports and requirement that ‘‘advertisements’’ carry health warnings ‘‘plainly covers court held that this endorsement did not tobacco use. constitute ‘‘advertising’’ because it is The agency agrees with the comments utilitarian items [nontobacco items] that are distributed for promotional not ‘‘distributed to the general public for that said that existing laws and the purpose of promoting plaintiffs’ regulations of lotteries, contests, and purposes.’’ FTC defined utilitarian objects as items that are sold or given or products: it is a user’s manual and is games of chance are sufficient. First, provided to a purchaser of the there appears to be little evidence about caused to be sold or given by any manufacturer, packager, or importer to defendants’ equipment together with the these practices and young people’s equipment in order to describe its participation in them. Secondly, current consumers for their personal use and that display the brand name, logo, or proper use’’ (578 F.2d at 507). laws prohibit all games of chance and Promotional items are distributed or the like that are advertised on a product selling message of any tobacco product (16 CFR 307.3n). FDA’s interpretation of sold to the general public. They are label or that are conditioned on the sale what is covered by § 897.34(a) and (b) is festooned with the product’s brand of the product. Therefore, participation, consistent with this definition. The name or identification, and they are if any, by minors is not necessarily comment also stated that as a result of intended to remind the user and others related to a purchase. Third, any that court case, FTC’s smokeless tobacco who see the item about the product. As promotional material associated with rules now require that utilitarian items the court in Public Citizen found, ‘‘each the advertising of the games, which is of promoting smokeless tobacco bear use of them brings a new reminder of primary concern, will be required to specific health warnings required of all the sponsor and his product’’ (688 F. appear in text-only format. Therefore, smokeless tobacco advertising (16 CFR Supp. at 670). Therefore, the comments’ the agency has modified this section to 307.9). 223 suggestion that these advertising items delete the ban on these practices. In are beyond FDA’s jurisdiction is plainly addition, the agency has modified 223 The FTC comment also indicated that wrong. § 897.34(a) to clarify that responsibility although nontobacco items are ‘‘advertising’’ under (73) One comment, which had argued for complying with this provision rests the Smokeless Act, a different legislative history that promotional items were not drugs with the manufacturer and the exempts these items from the Cigarette Act. The or devices nor were they advertising, distributor of imported tobacco, but not comment stated that the definition of advertising under the Cigarette Act is understood to exempt objected as well to FDA’s alternative other distributors or retailers. utilitarian items because of legislative history (72) Comments differed on whether expressly stating Congress’s intent to preserve the by the tobacco industry in 1972 and 1981 (Public proposed § 897.34(a) is beyond FDA’s arrangement under consent agreements entered into Citizen, 869 F.2d at 1555). Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44523 categorization of these items as labeling. consumption, or that its removal will attractive imagery and prizes that are The comment stated that nontobacco reduce youth tobacco use. intrinsically interesting to adolescents. items could constitute ‘‘labeling’’ only if Consequently, they argue, banning the Other comments stated that these there were a ‘‘textual relationship’’ use of tobacco brand names on promotions are particularly effective between them and the product (Kordel nontobacco products will fail to achieve with young people, who have less v. United States, 335 U.S. 345, 350 FDA’s goal of curbing teen smoking. disposable income. The items are a way (1948)). The comment argued further One comment maintained that people, for young people to get something for that items that provide no more including those under age 18, do not nothing and provide added incentive for substantive information than a brand wear these items in order to advertise young people to purchase tobacco name, logo, or recognizable color or anything or to be ‘‘walking billboards.’’ products. One comment that supported pattern of colors simply do not explain Rather, according to this comment, they this provision stated that these items the use of the product, and therefore do wear them to make a public statement, can become ‘‘walking billboards,’’ that not constitute labeling. The comment because they find the items aesthetically can come into schools and other places concluded that if the items are not pleasing, or for other reasons. Moreover, where tobacco advertising is generally advertising or labeling, FDA would not the comment argued, FDA has no prohibited. have authority to take the actions authority to regulate the attire of adults, Another comment stated that the ban required by this provision. school students, or anyone else. serves as an important corollary to the The agency agrees that these In addition, the comment argued, the advertising restrictions, specifically, it promotional items are neither devices goal of these programs is to reinforce argued that the impact of removing nor drugs; however, this fact is not brand loyalty among existing customers. tobacco product advertisements from relevant to the agency’s authority to Their purpose is to expand market share minors’ magazines would surely be proscribe their use. As explained earlier among existing smokers, not to induce reduced if minors themselves continued in this document, FDA has authority to nonsmokers to start smoking. These wearing the advertisements on their impose restrictions on the access to and programs are, by their very nature, heads and bodies. The comment promotion of devices under section aimed at people who already are asserted that there is a correlation 520(e) of the act, and this authority smokers, that is, the merchandise is between participation in a promotion provides the basis for restrictions on provided only to consumers who have and susceptibility to tobacco use. advertising, including those that FDA is accumulated and submitted significant b. Studies and evidence. One imposing on promotional items. FDA numbers of proofs of purchase. No one comment referenced a new study 224 also derives authority for these would be persuaded to start smoking by that found that participation in tobacco restrictions from section 502 of the act. a cents-off coupon or by the offer of a company promotions by 12 to 17 year Likewise, it is not relevant in this free cigarette , but a smoker might olds is more predictive of susceptibility instance whether the items are be tempted by the offer. The comment to use tobacco products than smoking described as advertising or labeling. The argued that in the hard fought battles for by those close to the individual. The agency has the authority to restrict them market share among cigarette measure of ‘‘participation’’ was the because they promote the use of companies, discounts and premiums possession of a catalog, the ownership restricted devices, cigarettes and represent a way to promote and retain of any promotional item, or the saving smokeless tobacco, by young people and brand loyalty and to weaken loyalty to of coupons that could be redeemed for thus undercut the restrictions on access competitors’ brands. promotional items. The study found that to these products that FDA has imposed. Some comments bolstered their catalog ownership was the most Therefore, FDA has authority to regulate arguments with a citation to the common form of participation in how these promotional items are used decision of the Supreme Court of tobacco company promotions. A comment that opposed this by manufacturers, distributors, and Canada, which, they claimed, provision argued that FDA had cited no retailers of the restricted devices. invalidated a similar ban. The Canadian (74) Many comments challenged court concluded that there was no direct credible studies that demonstrate either that these items are especially appealing FDA’s evidentiary basis for this or indirect evidence of any causal to young people, or that possessing provision. Those opposing the provision connection between the objective of these items causes young people to start made the point that promotional items decreasing tobacco consumption and smoking or to smoke more. It stated that do not cause young people to use the absolute prohibition on the use of a although FDA relied on a study by Dr. tobacco, and that banning them will not tobacco trademark on articles other than John Slade 225 that reported that there is reduce tobacco use. These comments tobacco products. These comments an association between participating in fall into two categories: Those that rely argued that FDA should follow the promotions and a person’s susceptibility on theoretical or policy arguments and Canadian judgment (see section VI.D.3.f. to tobacco use, FDA did not describe the those that provide or criticize studies or of this document for a complete study thoroughly. The comment stated other evidence. discussion of this case). that the notion of susceptibility is itself a. Theoretical or policy On the other hand, one comment problematic. It stated that even if this considerations. Several comments stated that U.S. and international study is taken at face value, it does not argued generally that it is well- experience provide substantial support support FDA’s conclusions. While the documented that the significant factors for a ban. It stated that in the United study reported that 83.5 percent of associated with regular underage States, nontobacco items were heavily tobacco use are peer pressure and used by RJR to market its Camel tobacco 224 Evans, N., et al., ‘‘Influence of by friends, older siblings and to young people. Marketing and Exposure to Smokers on Adolescent parents. They noted that FDA cited no In addition, one comment that Susceptibility to Smoking,’’ Journal of the National evidence that the use of a tobacco supported FDA’s action stated that Cancer Institute, vol. 87, pp. 1538–1545, 1995. 225 Slade, J., et al., ‘‘Teenagers Participate in trademark on a nontobacco product, young people participate to a marked Tobacco Promotions,’’ presented at the 9th World such as a lighter or jacket, has any extent in tobacco company promotions. Conference on Tobacco and Health, October 10–14, impact on underage tobacco It noted that these promotions all use 1994. 44524 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations respondents age 12 to 17 were aware of agency recognizes that the tobacco corporate logo is an ‘‘indicium of at least one tobacco company industry has exploited loopholes in product identification’’ covered by the promotion, it also reported that only partial bans of advertising to move its restrictions in § 897.34. The comment 10.6 percent of respondents owned a imagery to different media. When stated that promotional items are a nontobacco promotional item. These advertising has been banned or severely small but important part of its numbers, the comment asserted, do not restricted, the attractive imagery can be advertising and promotional activity, support the theory that nontobacco and has been replicated on nontobacco and these items allow its customers to items are appealing to youth or have a items that go anywhere, are seen feel like a part of an extended family. It discernible impact on youth smoking everywhere, and are permanent, would be unfair, the comment argued, rates. durable, and unavoidable. By as well as harmful to the company, if Moreover, the comment took transferring the imagery to nontobacco FDA were to determine that a corporate exception with Dr. Slade’s finding that items, the companies have ‘‘thwarted’’ logo may not be used on promotional 25.6 percent of 12 to 13 year olds and the attempts to reduce the appeal of items. 42.7 percent of 16 to 17 year olds tobacco products to children. One comment stated that the total participate in promotional programs In addition, items, unlike merchandising and ban in § 897.34(a) is such as Camel Cash or Marlboro miles. advertisements in publications and on unreasonably broad in scope. It stated The comment stated: billboards, have little informational that it virtually limits all the reason for these apparently high value. They exist solely to entertain, and merchandising, because all colors or percentages is clear from the most cursory to provide a badge that, as the Tobacco patterns of colors are associated with analysis of the data * * * [I]n this Institute asserted, allows the wearer to some brand or another of tobacco supposedly random survey, fully 45.7 make a statement about his ‘‘social product. The comment stated that the percent of the households of 12–13 year olds group’’ for all to see. But because proposed regulation is so confusingly interviewed had someone at home who smoked (37.9 percent in households of 16– tobacco is not a normal consumer vague that one could argue that a 17 year olds), and yet, in reality only 25 product, it should not be treated like a ‘‘distributor’’ would be prohibited from percent of the American public—half the rate frivolity. Advertising that seeks to using the color red in any event for any of the population relied upon by Dr. Slade— increase a person’s identification with product category, brand, or corporation smoke. [Thus], the unrepresentative sample and enjoyment of an addictive deadly because Marlboro brand tobacco population Dr. Slade employed created a habit has the ability, particularly among products utilize the color red. significant bias, which distorts the results of young people, to undermine the Another comment stated that because this survey and renders them entirely restriction on access that FDA is the definitions of ‘‘cigarette’’ and unreliable. imposing. For these reasons, the agency ‘‘smokeless tobacco product’’ are Finally, one comment stated that the continues to find sufficient evidence to limited to tobacco products with primary basis for the provision appeared support a ban on these items. nicotine, the agency should consider the 226 to be data that allegedly show that 44 Finally, regarding the unpublished possibility that a tobacco company percent of teenage smokers and 27 paper by Dr. Slade, the comment has could market a nicotine-free brand percent of teenage nonsmokers have confused the household smoking rate extension of a cigarette or a smokeless received nontobacco promotional items. with the overall population smoking tobacco product and advertise this The comment stated that the study is rate. The smoking rate per household product free of restrictions. The irrelevant because it drew no conclusion can be as high as twice the overall adult comment stated that the advertising for as to the significance of the number, nor smoking rate. For example, if the such a product could have carryover did it indicate how the teenagers smoking rate for adults were 25 percent value for the nicotine containing received the items. and assuming two adults per household versions of the product thereby In response, the agency concludes and only one of the pair smokes, then undermining the intent of the that the evidence presents a compelling the household smoking rate could be as regulations. case to prohibit the sale and distribution high as double that of the individual The agency agrees that it needs to of all nontobacco items that are rate. Therefore the range of possible clarify the scope of § 897.34(a). The identified with a cigarette or smokeless household smoking rates would be 25 regulation covers any item with indicia tobacco product brand name or other percent to 50 percent, with 44 percent of the brand identity. If the corporate identifying characteristic. The evidence being quite plausible. logo is not an indicium of a brand establishes that these nontobacco items Lastly, the comments that state that identity, its use would not be prohibited are readily available to young people peer pressure and smoking by friends in nontobacco labeling or advertising. and are attractive and appealing to them and family are significant factors in On the other hand, if a corporate logo with as many as 40 to 50 percent of influencing a young person’s tobacco includes an identifiable brand name or young smokers having at least one item use, rather than promotional items, fail image, it must comply with the (60 FR 41314 at 41336). The imagery to recognize that if a young person is restrictions. Any other position would and the item itself create a badge influenced by what a peer says about permit a company to evade the intent of product for the young person and tobacco use, he or she will also likely be this regulation by using a corporate logo permit him/her the means to portray influenced by that same peer wearing a to continue to display brand imagery. identification. tobacco promotional item. For example, RJR may continue to sell FDA has shown that tobacco (75) One comment from a small or distribute hats and tee shirts with the advertising plays out over many media, smokeless tobacco company expressed name ‘‘R. J. Reynolds’’ on them, but not and that any media can effectively carry concern because much of the packaging the name ‘‘Camel.’’ Nor can it put the the advertising message. Moreover, the used for its products also bears its Camel inside the Reynolds logo. The corporate logo. Moreover, several of its agency, therefore, has amended 226 ‘‘Teenage Attitudes and Behavior Concerning Tobacco—Report of the Findings,’’ the George H. brand names include words in its § 897.34(a) to state that the indicia of Gallup International Institute, Princeton, NJ, p. 59, corporate logo. Thus, the comment product identification cannot be September 1992. argues that FDA might find that its identical or similar to, or identifiable Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44525 with those used ‘‘for any brand of § 897.34(a) are designed to do, they The IOM Report pointed out that the ciagarettes or smokeless tobacco’’. share all the characteristics of the ubiquity of nontobacco items conveys In addition, it is not the agency’s pamphlets that the Supreme Court in the impression that tobacco use is the intention to ban the use of registered or Bolger v. Youngs Drug Products Corp., norm. 230 As stated in section VI.D.3.c. recognizable colors for all advertising. 463 U.S. 60, 66–67 (1983), found to be of this document, this impression, that Only the owner or user of the brand commercial speech. Consequently, FDA tobacco use is widespread and accepted, identification is prohibited from using may regulate the nontobacco items as fosters experimentation with tobacco that color or pattern of colors in a commercial speech, as long as its and smokeless tobacco by young people. manner so as to advertise tobacco or regulation passes muster under the This fact led the IOM to recommend smokeless tobacco. For example, Philip Central Hudson test (see 463 U.S. at 68). that the use of tobacco product logos on Morris would be prohibited from using (77) Some comments challenged the nontobacco items be prohibited. 231 The the distinctive red, black, and white constitutionality of the prohibition on IOM said that this and several other pattern of colors which identify the use of a cigarette or smokeless related steps (including requiring the Marlboro, but neither RJR nor Joe’s tobacco brand logo on nontobacco use of the text-only format) were Garage would be prohibited by the products under the Central Hudson test. necessary to eliminate those features of regulations from using those colors. The comments argued that the advertising that tend to encourage Finally, in response to the last prohibition does not directly advance tobacco use by children and youths. comment, the agency has restricted the FDA’s interest because the prohibition Thus, the prohibition on the use of coverage of this regulation to is unrelated to the goal of protecting these logos will directly advance FDA’s promotions of cigarettes and smokeless children. The comments also argued interest. The IOM’s recommendation tobacco products containing nicotine. It that the prohibition is not narrowly provides significant evidence of this has no evidence justifying a broader tailored because it is not limited to fact. coverage of the regulation to nicotine- children and not limited to products free products at this time. However, a that are particularly attractive to Second, even though FDA is company could not give a nontobacco children. prohibiting the use of brand logos on product (a nicotine free product) a Several comments disagreed and nontobacco items, this restriction meets tobacco brand name. This is exactly argued that the prohibition is a the requirement of narrow tailoring. The what this section of the final rule constitutionally permissible restriction Supreme Court has held that a ban may forbids. on speech. One of these comments satisfy this requirement if the agency’s (76) Several comments argued that pointed to the finding in the IOM’s judgment is that it is ‘‘perhaps the only § 897.34(a) constituted a restriction on Report Growing Up Tobacco Free of the effective approach’’ (Board of Trustees symbolic expression that cannot be effectiveness of this type of advertising of the State of N.Y. v. Fox, 492 U.S. at characterized as commercial speech. with young people. The comment said 479). In this case, FDA has determined The comments argued that these items that FDA would therefore be justified in that a ban of these items is necessary for do not propose a commercial prohibiting its use. several reasons. The appeal of transaction. One comment argued that FDA has carefully considered these something for nothing items for in Cohen v. California, 403 U.S. 15 comments. The agency concludes that youngsters is great, and the extent of the (1971), the Supreme Court recognized the prohibition on the use of a cigarette appeal makes it virtually impossible to that otherwise objectionable words or smokeless tobacco brand logo on distinguish among items, as suggested worn on a jacket are fully protected nontobacco items is a permissible by one comment. As the IOM pointed speech. restriction under the First Amendment. out, these items, when worn or used by FDA finds no merit to these First, this restriction will directly children, are capable of penetrating comments. Section 897.34(a) on its face advance FDA’s interest in protecting the areas of a child’s world that might be is limited only to manufacturers and to health of people under 18 years of age. off-limits to other forms of distributors of imported cigarettes or In Public Citizen v. FTC, 869 F.2d at advertising. 232 Because they penetrate smokeless tobacco. It does not limit the 1549 n. 15, the Court of Appeals for the the young persons’ world, they are very rights of individuals to express D.C. Circuit recognized that the effective in creating the sense that themselves by wearing an article of nontobacco ‘‘utilitarian items might be tobacco use is widely accepted, which, clothing that bears a picture of a among the most effective forms of as stated in section VI.D.3.c. of this cigarette or a logo. 227 What it does limit promotion with respect to adolescents.’’ document, is extremely important to is the ability of manufacturers and some This judgment is consistent with much children and adolescents. These items distributors of tobacco and smokeless of the other evidence in the act like a badge that marks an individual tobacco to do what is the essence of as a member of a group, another commercial speech—to take actions to administrative record. A 1992 Gallup attribute that makes them particularly call public attention to the products survey found that 44 percent of all attractive for young people. There is no whose logo the items bear, so as to adolescent smokers and 27 percent of way to limit the distribution of these arouse a desire to buy those products. adolescent nonsmokers owned at least items to adults only. The industry (See Public Citizen v. FTC, 869 F.2d at one promotional item from a tobacco 228 claims that it already is taking sufficient 1554.) Because this is what the company. Testing by RJR in 1988 action to ensure that only adults get nontobacco items that are the subject of found that nontobacco items performed best among young adults. 229 these items 233 but as the evidence 227 The fact that individuals would be free to 230 make their own articles of clothing with brand 228 ‘‘Teenage Attitudes and Behavior Concerning IOM Report, p. 110. names of tobacco products on them does not make Tobacco—Report of the Findings,’’ The George H. 231 Id., p. 133. the regulations fatally underinclusive. (See U.S. v. Gallup International Institute, Princeton, NJ, pp. 17, 232 Id., p. 110. Edge Broadcasting Co., 509 U.S. 434 (‘‘Accordingly, 59, September 1992. 233 The Cigarette Advertising and Promotion the Government may be said to advance its purpose 229 Bolger, M. R., Marketing Research Report, Code, subscribed to by the major cigarette by substantially reducing lottery advertising, even entitled Camel ‘‘Big Idea’’ Focus Groups-Round II, manufacturers, contains three provisions that where it is not wholly eradicated.’’).) September 21, 1988. Continued 44526 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations indicates, a substantial number of young avoiding the problem identified with One comment that supported FDA’s people have them. As noted in this the comment and making it possible for proposal stated that smokeless tobacco section, almost one-half of young grocers to sell Beechnut baby food and makers circumvent the FTC regulation smokers and one-quarter of nonsmokers Beechnut tobacco products. that covers the use of brand names of have one or more items. Moreover, even (79) Several comments stated that smokeless tobacco products on were items to be distributed to adults § 897.34(a) would unlawfully constrain promotional items such as caps and tee- only, this would not prevent the wearers the separate and distinct activity of shirts. For instance, rather than stop from becoming walking advertisements trademark diversification in connection making such items, U.S. Tobacco has that would continue to display the with products that are unrelated to the registered Skoal Bandit Racing, Skoal— attractive imagery. marketing of tobacco products by Copenhagen Pro Rodeo, and Skoal For all these reasons, FDA finds that cigarette manufacturers. One comment Music as service marks and places these all nontobacco items that bear cigarette contended that general bans on the names on many of the items it offers the or smokeless tobacco brand logos are licensing of brand logos pertaining to public, thereby evading FTC’s capable of playing a significant role in tobacco products are incompatible with regulation. The comment stated that this a young person’s decision to engage in long-established principles of experience demonstrates the need for tobacco use. Because no distinction international trademark law. The regulations of this sort to be among these products is apparent, and comment asserted that the use of such comprehensive. no way of limiting their availability to trademarks in a nontobacco context is The comment stated further that there adults is possible, FDA finds that the not an indirect means of advertising or may be other relatively easy ways most direct and effective means of promoting tobacco products. The around § 897.34(a). It stated that if the controlling their appeal to adolescents comment stated further that it is an rights to a brand name were transferred and children under the age of 18 is to increasingly common practice in many to an entity that was not a manufacturer, prohibit manufacturers, distributors, industries to ‘‘spin off’’ new products by distributor, or retailer that this separate and retailers of tobacco products from marketing them under a trademark that entity could then license back the use of distributing or selling them. has acquired some cachet or represents the brand name to the tobacco company (78) One comment opposed quality. It stated that such licensed and proceed to market, license, § 897.34(a) because the comment argued products are not marketed in an effort distribute, or sell other goods and that the provision would impose to sell the ‘‘root’’ product, rather, the services using that same brand name. restrictions on an otherwise lawful use trademark has some ‘‘detachable’’ The comment stated that one way to of trademarks. It stated that § 897.34(a) qualities that help build demand for the close this loophole would be to require would prohibit the right of any licensed goods. It stated that the same manufacturers to own the trademarks trademark owner to use a trademark for is true of marketing a nontobacco and the rights to all associated symbols the sole reason that the trademark is product under the trademark of a for each brand they produce. used by another party on tobacco tobacco product. FDA disagrees with these comments products. The comment stated that FDA cannot agree with the comments’ and believes that the concerns § 897.34(a) also would prevent large claims. While the agency recognizes that expressed are misplaced. Section distributors and retailers, who handle a the use of these trademarks on hats and 897.34(a) prohibits all use of the Skoal wide variety of both tobacco and tee shirts promotes the underlying brand name on nontobacco items, nontobacco products, from distributing tobacco product by continuing the whether used alone, i.e., ‘‘SKOAL,’’ or or selling any product which happened extensive imaging in these venues. with other words, such as ‘‘Skoal Racing to bear the same or similar mark as that Moreover, as the court in Public Citizen, Bandit.’’ In addition, the provision used on a tobacco product. The 869 F.2d at 1549, n. 15, recognized, forbids not just the use of the brand comment stated that, for example, branded nontobacco items might be the name, logo, etc. by the manufacturer but grocery markets could not stock or sell most effective type of promotion to also the marketing, licensing, Beechnut baby food or chewing gum young people. Therefore, failure to distributing, selling of them, or the because Beechnut also is used as a include this form of advertising and causing of any of those activities; thus, trademark for chewing tobacco even promotion in the regulation, would effectively preventing the type of though the manufacturers are two weaken considerably FDA’s efforts to license-transfer arrangement described different companies with the same reduce the appeal of these products to in the comment. name. It stated that the Lanham Act (15 young people under 18, and would (80) Several comments stated that U.S.C. 1051 (1996)) would, and in fact undermine the agency’s access FDA cannot ban contests and lotteries does, permit such identically branded restrictions. under section 520(e) of the act, because products to coexist in the marketplace The agency also disagrees with the they are not devices. Moreover, the because of the absence of any likelihood comment’s suggestion that § 897.34(a) comments stated that existing laws and that these products would be associated effects a taking (or deprivation of a regulations provide adequate protection or confused with each other. property right) by prohibiting the use of and to the extent that the participation FDA recognizes that § 897.34(a) as tobacco trademarks to market of minors in these activities is a problem proposed created unintended confusion nontobacco products. Section 897.34(a) the States already have ample power to and therefore will amend the provision clearly relates to commercial speech and regulate them. to clarify the agency’s meaning. Changes the comment is merely attempting to In addition, a comment stated that have been made that are intended to cloak commercial messages with the FDA offered no evidence, or citation to clarify § 897.34(a) so that retailers and issues of registrability and value of well- studies, that contests, lotteries, or games distributors of domestic tobacco known trademarks. As discussed in involving tobacco products have products are not included, thus section XI. of this document, the agency particular appeal to adolescents. has determined that this regulation does Moreover, the comment stated, that any address the necessity of preventing anyone under not effect a taking compensable under inability to quantify participation by the age of 21 from getting promotional items. the Fifth Amendment. youth does not mean that the agency Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44527 can ban an entire form of promotion to product purchase (18 U.S.C. 1302–1307, section, found that tee shirts were a adults. 1341 (1995)). Given these existing significant source of information about One comment pointed out that, by Federal requirements, the agency has tobacco for some young people and that law, customers wishing to participate in concluded that there is no need to add these items performed best among games of chance or similar promotional FDA regulations. Therefore, § 897.34(b) young people. activities must be adults. The comment has been modified to delete the A ban on this type of advertising will stated that banning such activity bears provision concerning lotteries and prevent the ‘‘something for nothing no relationship to achieving FDA’s games of chance but to continue to the appeal’’ of give aways and proofs of stated purpose. The sole effect of FDA’s prohibition of gifts and proof of purchase and will eliminate the walking ban would be to unjustly impair the purchase acquisitions. billboard, who can enter schools and relationship between tobacco It must be understood, however, that other locations where advertising is manufacturers, retailers, and their adult advertising for games, lotteries, or inappropriate. Thus, FDA concludes customers. contests may not contain any indicia of that the restriction it is adopting on this One comment stated that the agency product identification other than black type of promotional material will should not prohibit all use of contests text on a white background, since the directly advance FDA’s efforts to or games of chance by the tobacco advertisement for a contest in the name substantially reduce consumption of industry because regulations already of a tobacco brand, or identifiable as a tobacco products by children and exist and are enforced by the Bureau of tobacco brand, is restricted to text-only adolescents under 18. Alcohol, Tobacco, and Firearms (BATF). format as required in § 897.32(a). The 8. Section 897.34(c)—Sponsorship of Another comment stated that the agency points out that, as part of the Events proposed rule misunderstands the review of the regulation that it plans to nature of such activities, misrepresents undertake in 2 years, FDA intends to Proposed § 897.34(c) provided that the appeal of promotions, and assumes consider the effect of games of chance ‘‘no manufacturer, distributor, or retailer without proof that promotions induce and lotteries on young people and shall sponsor or cause to be sponsored young people to smoke. It stated that determine whether additional any athletic, musical, artistic or other promotional activities are not regulations are necessary. social or cultural event, in the brand undertaken to encourage people, young Based on the evidence amassed name, logo, motto, selling message, or old, to smoke, but rather to introduce during its investigation, and the surveys recognizable color or pattern of colors, existing smokers to the brand being described in the preamble to the 1995 or any other indicia of a product promoted and to provide them with proposed rule (60 FR 41314 at 41336) identification similar or identical to incentives to choose that brand over and submitted during the comment those used for tobacco or smokeless others. Moreover, participation in such period, FDA has concluded that tobacco products.’’ Proposed § 897.34(c) games is expressly limited to smokers nontobacco items (identified with a would have permitted a manufacturer, who are 21 years of age or older. tobacco brand), either sold, given away, distributor, or retailer to sponsor or Conversely, one comment provided or provided for proof of purchase are an cause to be sponsored any athletic, support for the 1995 proposed rule. It instrumental form of advertising in musical, artistic or other social or stated that, while it is unlikely that affecting young people’s attitudes cultural event in the name of the anyone under 18 years of age actually towards and use of tobacco. Moreover, corporation that manufactures the has ever received any of the major banning this form of advertising is tobacco product, provided that both the prizes or offers from the give-aways, the essential to reduce tobacco consumption registered corporate name and the award of prizes is not the point of these by young people. This form of corporation were in existence before marketing tools. It stated that the advertising has grown in importance January 1, 1995. consumer’s participation in the fantasy over the last 20 years. As discussed in The preamble to the 1995 proposed of the prize in association with the this section, expenditures rose from 2.1 rule explained that sponsorship by brand being promoted is the reason percent in 1975 to 8.5 percent in 1980 cigarette and smokeless tobacco these contests are used. (60 FR 41314). companies associates tobacco use with FDA has been persuaded by the Studies—A Gallup survey found that exciting, glamorous, or fun events such comments to modify § 897.34(b) about one-half of young smokers and as car racing and rodeos, and provides regarding lotteries and games of chance one quarter of all non-smokers, own at an opportunity for ‘‘embedded in connection with nontobacco items. least one promotional item (60 FR 41314 advertising’’ that actively creates a Federal law already prohibits ‘‘any at 41336). Another study, detailed more ‘‘friendly familiarity’’ between tobacco certificate, coupon, or other device fully in this section, found that and sports enthusiasts, many of whom purporting to be or to represent a ticket, participation in tobacco company are children and adolescents. The chance, share, or an interest in, or promotions (owning an item, collecting preamble to the 1995 proposed rule dependent on, the event of a lottery to coupons for gifts, or having a catalogue) cited several studies that demonstrate be contained in, attached to, or stamped, by 12 to 17 year olds is more predictive the impact of sponsorship on consumer marked, written, or printed on any of susceptibility to use of tobacco attitudes (60 FR 41314 at 41337 through package of tobacco products’’ (26 U.S.C. products than smoking by those close to 41338). The proposed restriction was 5723(C)). BATF has issued regulations the individual. Another study, by Slade, intended to break the link between enforcing this provision (27 CFR found that 25.6 percent of 12 to 13 year tobacco company-sponsored events and 270.311). olds and 42.7 percent of 16 to 17 year use of tobacco and reduce the ‘‘friendly In addition, although no Federal olds participate in promotional familiarity’’ that sponsorship generates agency has issued specific restrictions programs such as Camel Cash and for a brand. on games of chance and lotteries in Marlboro miles (60 FR 41314 at 41336). (81) FDA received a substantial connection with advertising of tobacco Evidence Provided by Industry number of comments concerning the products, Federal and State law prohibit Members—Two separate studies done agency’s 1995 proposal on sponsorship, games, contests, and lotteries if based on for R.J. Reynolds, and described in this including comments submitted by the 44528 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations tobacco industry, motorsport industry, One comment added that motorsport In NASCAR we found a great kids’ advertising agencies, adult smokers, events are not seen by ‘‘significant’’ business. I was astounded by their medical professionals, public interest numbers of children under the print information, statistics and demographics groups, and racecar drivers. media standard proposed by FDA (i.e., regarding kids. [Fred Siebert, president of Approximately 300,000 individuals Hanna-Barbera, Inc., explaining why the the ‘‘15 percent/2 million benchmark’’). company is sponsoring a cartoon race car to submitted a form letter that was The comment argued that: appear in NASCAR races emblazoned with produced by 1 tobacco manufacturer. [o]n the one hand, the agency concedes Fred Flintstone and other cartoons on the The form letter inaccurately referred to that image advertising is permissible in hood.] After reviewing the 1995 NASCAR the 1995 proposal as a ‘‘ban on tobacco publications with a primarily adult season, we concluded that a sizable number sponsorship of events including readership because ‘‘the effect of such of attendees at NASCAR events were families concerts, State fairs and consumer advertising on young people would be with kids ages 6–11. Yet we felt NASCAR nominal,’’ but on the other hand, it attempts promotions’’ whereas the agency was not specifically serving that audience. to measure the impact of cigarette brand [Gary Bechtel, owner Diamond Ridge proposed to permit tobacco company sponsorships * * * by using statistics on the sponsorship of all events to continue as Motorsports, who will field a NASCAR car viewing audience of sponsored motorsport and team named Cartoon Network Wacky long as they are in the corporate name. events without recognizing that these figures Racing.] 234 Other comments submitted by the demonstrate the fact that the vast majority of * * * * * tobacco industry, adult smokers, and viewers of such events are adults. We looked at NASCAR and saw how motorsport industry strongly objected to The comment stated that: quickly it was growing nationally and the the provision. In contrast, those [I]n fact, the 64.05 million underage fact that so many families go to the races it comments submitted by public interest viewers of the 354 motorsport broadcasts seemed like a natural fit. 235 groups, medical professionals, and some studied represents only 7 percent of the total Moreover, the agency finds that 64.05 racecar drivers strongly supported the viewing audience of these broadcasts. This million underage viewers (or 180,806 averages out to 180,806 underage viewers per provision. underage viewers per event) is clearly event. These figures are far below the 15 not ‘‘insignificant.’’ As discussed in the In response to comments, the agency percent and two million readership preamble to the 1995 proposed rule, the has modified this provision to prohibit benchmarks that are permitted for image all sponsored entries and teams using advertising in print media. ‘‘Sponsor’s Report,’’ which estimated the brand name in addition to the * * * the value of all product exposure for prohibitions that were proposed. The comment also stated that FDA most U.S. automobile races, found that Moreover, the final rule clarifies that the made no attempt to measure the 354 motorsport broadcasts ‘‘had a total corporate entity that can sponsor events, percentage of adolescents in the live viewing audience of 915 million people, teams and entries must not only be gate of sponsored events, and that of whom 64 million were children and registered but that the registration must industry estimates indicate that the adolescents.’’ The preamble to the 1995 be in active use in the United States, overwhelming percentage of fans proposed rule stated: ‘‘the impact of and the corporate name cannot include attending motorsport events are adults. sponsoring televised events such as any indicia of product identification One comment stated that the price of these automobile races is perhaps most ‘‘that are identical or similar to, or a typical ticket to a stock car race event apparent when one realizes that over 10 identifiable with, those used for any is expensive enough to preclude adults million people attended these events, brand of cigarettes or smokeless from taking their children to events and while 90 times that number viewed tobacco.’’ to preclude children themselves from them on television’’ (60 FR 41314 at (82) Several comments addressed the attending these events. 41337). In addition, recent news issue of whether young people attend, Other comments supported the accounts indicate that televising of races or even see, sponsorship events. Some provision, stating that tennis has increased both in volume and comments opposed the provision, tournaments, sports car, motorcycle and diversity. For example, television can arguing that sponsored events (such as powerboat racing, and rodeos all are often support three major races in 1 day. motorsport events and seniors golf aimed at sports enthusiasts, many of The two cable ESPN channels had 150 tournaments) are created for and whom are children or teenagers, and hours of auto racing programming in attended by adult smokers, and that that rock concerts and country music May, 1996, including 95 hours of live there is no credible evidence that these festivals are ‘‘magnets’’ for adolescents. races, time trials, qualifying and 236 events are targeted at, created for, One comment stated that: practice laps. attended by, or even seen by significant [it] is also no coincidence that when the The effect of sponsored events on the numbers of children and adolescents. tobacco industry sponsors events where the young people who attend or see these One comment stated that ‘‘contrary to audience is almost entirely educated adults, events is enormous. Advertising affects FDA’s assertions,’’ the industry takes the sponsorship is in the name of the young people’s opinion of tobacco special steps to ensure that material corporation (i.e., art exhibits, modern dance products, first, by creating attractive and companies), but when the event fits the distributed at events is not attractive to exciting images that can serve as a psychological image the tobacco industry ‘‘badge’’ or identification, second, by minors. One comment stated that needs to attract adolescents, the sponsorship utilizing multiple and prolonged ‘‘[r]ecent industry studies demonstrate is in the name of the brand most likely to exposure in a variety of media, thereby that the overwhelming majority of fans appeal to those children (Virginia Slims, at motorsports events are adults,’’ and Marlboro, Winston, Skoal Bandit). 234 ‘‘Diamond Ridge Motorsports and Hanna- that ‘‘for example, 97 percent of The agency, which acknowledges the Barbera, Inc., to form Wacky Racing Team Changing NASCAR Winston Cup Series race comments’ reports on the number of Face of NASCAR; Deal Launches Cartoon Network attendees are 18 years of age and older young people at events, did not receive Consumer Branding Initiative,’’ Business Wire, [and] [m]ore than 90 percent of NHRA any data to support or refute these November 10, 1995. 235 Winston Drag Racing Series attendees numbers. However, recent reports in the ‘‘Automobile Racing’s Widening Appeal Gets the Flintstones in Sponsor Table,’’ The Times are 21 years old and older.’’ The press indicate that the number of young Union, p. B11, March 30, 1996. underlying studies were not, however, people attending these events may be 236 Moore, S., ‘‘Ladies and Gentlemen, Start Your cited or attached to the comment. growing. Televisions,’’ Washington Post, May 26, 1996. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44529 creating an impression of prevalence may momentarily glance at sponsor. However- if I DID drink already, I and normalcy about tobacco use, and advertisements if they are interesting or may switch brands to support my driver. All finally, by associating the product with eye-catching, and as a result, the the advertising in the world will not sway me varied positive events and images. The exposure, if any, to one particular (or most-intelligent people) to do something I wouldn’t do anyway. sponsorship of events by tobacco advertisement may be brief (the average In contrast, several comments labeled companies uniquely achieves all three time spent viewing an advertisement is the 1995 proposed rule a ‘‘reasonable objectives. Sponsorship creates an about 9 seconds 238). However, young measure’’ and stated that ‘‘the evidence association between the exciting, people who attend sponsorship events cited by FDA in support of this proposal glamorous or fun event with the or view them on television are is substantial and entirely consistent sponsoring entity. Whether at the live unavoidably bombarded with posters, with the best available evidence.’’ One gate, or on television, young people will signs, hats, t-shirts, cars, and the like, comment supported FDA’s sponsorship repeatedly see and begin to associate the linked with a fun, exciting, or restrictions because sponsorship event, which they are enjoying, with the glamorous event that they enjoy for a heightens product visibility, molds imagery and appeal of the product. All prolonged period of time. Often, consumer attitudes, links the product of the attendant concerns of hero celebrities participating in these events with a particular lifestyle, and thus worship of the sports figures and are wearing clothes and hats bearing the increases sales. glamorization of the product by brand name and attractive imagery, and One comment commended FDA for identification with the event are young people come to associate athletes drawing a ‘‘reasonable line—one that present, whether there are thousands or who they admire with tobacco products. allows tobacco companies to continue to hundreds of thousands of young people The amount of time viewed and the sponsor events and therefore to reap the in attendance. Race car drivers are positive association with the event are corporate good will that flows from extremely popular with young people incalculable as persuasive messages. sponsorship, but compels the and often are looked up to as heroes. Thus, the agency rejects the idea of companies to jettison the hard-sell According to one promoter of NASCAR setting a minimum attendance threshold message that now typifies these events.’’ properties, ‘‘We’ve found that boys look for brand name advertising. Several comments stated that the to NASCAR drivers the same way they (83) FDA received many comments events sponsored by tobacco companies do to heroes, such as firemen, addressing its use of the concept of have a direct and powerful impact on policemen, professional fighters, or ‘‘friendly familiarity’’ in connection young people because they are fun, 237 astronauts.’’ with tobacco sponsorship of events. exciting, and glamorous, and events Furthermore, sponsorship events Several comments stated that FDA such as tennis tournaments (Virginia present a prolonged period of time in misunderstood the theory, 239 arguing Slims), sports car (NASCAR), which to expose the audience, including that sponsorships and promotions do motorcycles and powerboat racing, young people, to the imagery. not cause young people to smoke, and rodeos, rock concerts, and country Sponsorship events do not provide that FDA has failed to meet its burden music festivals are aimed at sports and people with a momentary glimpse at the of demonstrating that a ban of such music enthusiasts, including children or imagery, but from 1 to 2 or 3 hours of activities will result in any decrease in teenagers. The comment stated that constant attractive imagery. The underage smoking. In fact, according to when minors view these events, either audience has more than enough time to this comment, the studies demonstrate in-person or on the television, they are: associate the images of the sporting that young people are most familiar ‘‘inundated with images of the event or the concert with the product. with the brands of tobacco that are most brandname or product logo (which are The agency agrees that there may be heavily advertised. pasted on uniforms, vehicles, signs and some events (such as seniors golf One comment asserted that since virtually every surface imaginable), tournaments) that are primarily motorsport advertising and promotion creating a direct and compelling attended by adult audiences. The comprises a small percentage of overall association between the product and an agency also does not claim that all tobacco advertising (on the order of 4 or enjoyable event.’’ sponsorship events are attended 5 percent of total tobacco advertising), The comment stated that children and primarily by young people, but that the there is little support for the conclusion young adults are particularly vulnerable exposure (which includes television that tobacco sponsorship of motorsports to this sort of product advertising, broadcasts) of young people to has any significant effect on the rate of because adolescence is the time of life sponsored events is substantial. Even if youth smoking. during which identities are shaped. The a small percentage of young people One comment from a 26-year old ex- comment further stated that there is attend certain sponsorship events, the smoker (who began smoking at age 10, ample evidence that demonstrates that amount of television exposure that and smoked for 13 years) and NASCAR the sponsorship of events leads to strong young people receive is substantial. racing fan stated: associations between the event and the In addition, the agency recognizes [M]y favorite driver is sponsored by a beer brandname, that in turn influences the that numbers or percentages of the company. I don’t drink and I’m not going to purchasing decisions of minors. audience less than 18 may be lower than start because my favorite driver has that One comment stated that Virginia the threshold established for ‘‘adult’’ Slims’ sponsorship of tennis was vital to publications. However, the type of 238 Fischer, P., J. Richards, and E. Berman, ‘‘Recall the image advertising Philip Morris exposure in these two media are and Eye Tracking Study of Adolescents Viewing Tobacco Advertisements,’’ JAMA, vol. 261, pp. 84– used to sell Virginia Slims tobacco to dramatically different. Young people 89, 1989. adolescent girls, and that Marlboro reading or flipping through a magazine 239 The comment stated that ‘‘[t]he need to sponsorship of racing events is no less establish a ‘friendly familiarity’ with a brand name effective with adolescent boys. The 237 Williams, S., ‘‘NASCAR Races into Kid’s is not about deciding to smoke * * * nor about comment stated that sports sponsorship Licensing, National Association for Stockcar Auto deciding to use a commodity at all—the decision to Racing Seeking Promotional Appeal and Other make a category purchase within a mature product has a secondary impact because ‘‘[the Products,’’ Children’s Business, vol. 9, No. 7, p. 28, category is ALREADY made before advertising athletes who participate in the July 1, 1994. affects the brand choice within the category.’’ sponsored event, whether they be race 44530 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations car drivers or tennis players, become However, taken together, the effect of sufficiently high to preclude adults from walking advertisements and role each advertising exposure is magnified taking their children to see them. In fact, models.’’ The comment stated that ‘‘[a]s beyond each discrete exposure, to create some motorsport events allow children reflected by the Industry’s own Code, the impression that cigarette and to attend free of charge or offer discount everyone agrees that athletes should not smokeless tobacco use is widespread tickets for children. 242 endorse tobacco products because of her and widely accepted. These (86) One comment stated that the potential impact on children, but being impressions, as stated in section study performed by Aitken, et al. 243 (the a spokesperson for the Virginia Slims IV.D.3.c. of this document, are very Aitken study) did not attempt to gauge Tennis Tournament, NASCAR racing, influential to children and adolescents. whether exposure to tobacco-sponsored etcetera is no less effective.’’ (84) Several comments criticized in events or teams engendered favorable The agency finds that the evidence detail the studies relied on by FDA to feelings for tobacco products in the regarding the effect of advertising and show the effect that sponsorship has on surveyed young people and stated that sponsorship on children’s smoking young people. the study only addressed the effect of behavior is persuasive and more than One comment stated that the studies factors such as sex, age, and sufficient to justify this regulation. The relied on by FDA (40 FR 41331 and socioeconomic status on awareness of preamble to the 1995 proposed rule 41332) do not provide scientifically cigarette sponsorships. The comment described the available evidence and valid support for the conclusion that also stated that the Aitken study did not explained why the agency is regulating there is a causal relationship between test the effect of sponsorship activities sponsored events. The evidence the promotional and sponsorship in this country, and that FDA ignores demonstrates that sponsorship of activities banned under § 897.34(c) and the fact that tobacco companies sponsor sporting events by tobacco companies the problem of underage smoking. a wider variety of more popular sports can lead young people to associate The agency proposed to regulate in the United Kingdom, such as brand names with certain life styles or sponsored events based upon its ‘‘snooker, cricket and darts.’’ Finally, activities and can affect their purchasing tentative finding that the best evidence the comment accused FDA of ‘‘selective decisions (60 FR 41314 at 41336 supported such regulation. Although the reading,’’ citing FDA’s omission of a through 41338). The industry, in its comments argued that the studies are statement made by the authors when comments, has questioned the relevance inadequate, the comments offered no discussing past studies that even though of the evidence but has failed to new evidence to suggest that the minors may be aware of the demonstrate that FDA’s tentative views conclusions are invalid. sponsorships, ‘‘[t]his of course does not were wrong (the industry’s criticisms of (85) One comment argued that mean that cigarette advertising plays a the individual studies are described although the conclusion reached by an part in inducing children to start below). unpublished paper by John Slade 241 is smoking.’’ The comment also criticized Sponsorship events actively create an that 7 percent of the viewing audiences the author of the study for stating that association between tobacco and event for NASCAR races are youths, the even though very few of the primary enthusiasts. People under the age of 18 NASCAR Demographics brochure states schoolchildren named John Player are still forming attitudes and beliefs that ‘‘NASCAR records of the age of Special or Marlboro as being associated about tobacco use, see smoking and persons who attend motorsport events with racing, ‘‘[t]his suggests that smokeless tobacco use as a coping show that only 3 percent are youths.’’ linkages or associations between brand mechanism, a gauge of maturity, a way The comment stated that this does not names (or their visual cues) and exciting to enter a new peer group, or as a means constitute a principled basis for sports are often unconscious, or at the to display independence (60 FR 41314 outlawing tobacco company very least, not readily retrieved by at 41329). This final rule is intended to sponsorship of these races even if every consciousness (Aitken et al., p. 209).’’ break the link between tobacco brand- other assumption FDA makes about the The comment claims ‘‘[t]hat sponsored events and images and use of impact of event sponsorship were true. astonishingly biased hypothesis was not tobacco by young people. In addition, The agency disagrees with the tested by any questions that attempted the tobacco industry itself has comments on the paper by Dr. Slade. to probe the ‘‘unconscious’’ or the recognized the vulnerability of young Slade’s paper established that these ‘‘consciousness’’ of the interviewees.’’ people to advertising featuring sports events are attended by and seen by a The agency disagrees with the heroes and other celebrities. In its 1994 large number of young people. The comment’s criticism of the Aitken Code, the cigarette industry promised study measured its stated objective, it study. This study conducted in the that ‘‘No sports or celebrity testimonials establishes the important fact that United Kingdom demonstrated that shall be used or those of others who children are being unavoidably exposed primary schoolchildren who said that would have special appeal to persons over and over again to attractive and they intended to smoke when they were under 21 years of age.’’ 240 The impact appealing images associated with older tended to be more favorably of tobacco’s association with the race tobacco products at NASCAR events. disposed to cigarette advertising. driver, the car, or the event is no less The study establishes that young people Moreover, Aitken’s comment that this powerful and no less persuasive. are present at events where a popular 242 Finally, although motorsport sport is associated with tobacco on See, e.g., Rosewater, A., ‘‘Retirement is no Drag for Prudhomme,’’ Plain Dealer, p. 7D, June 4, advertising comprises only a small signs, cars, people, etc. The agency also disagrees with the 1996; ‘‘Fun Book 96/ This Spectator Sport: Easy percent of overall tobacco advertising, comment that suggested that the price of Over,’’ Newsday, p. 80, May 19, 1996; Schmiedel, its effect, like that of magazines, or hats M., ‘‘Motor Sports World Motorcycle Trials in tickets to motorsport events was and tee shirts, is cumulative. Each Exeter Next Weekend,’’ The Providence Journal- separate advertising venue, in and of Bulletin, p. 13D, May 19, 1996. 241 60 FR 41314 at 41337, n. 225; citing Slade, J., 243 60 FR 41314 at 41337, n. 226; citing Aitken, itself, does not produce the entire effect. ‘‘Tobacco Product Advertising During Motorsports P. P., D. S. Leathar, and S. I. Squair, ‘‘Children’s Broadcasts: A Quantitative Assessment,’’ Awareness of Cigarette Brand Sponsorship of Sports 240 Cigarette Advertising and Promotion Code, presentation at the 9th World Conference on and Games in the UK,’’ Health Education Research, 1990. Tobacco and Health, October 10–14, 1994. Theory and Practice, vol. 1, pp. 203–211, 1986. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44531 study did not mean that advertising match, and that the child viewership of also disagrees with the comment’s plays a part in inducing children to start NASCAR is ‘‘* * * significantly more assertion that FDA overstated the smoking‘‘ is an accurate statement of the limited, at most, even by Slade’s findings of the study. The agency study. The purpose of the study was to number, to 7 percent.’’ specifically acknowledged in the examine the effect of sponsorship on The agency disagrees with the preamble to the 1995 proposed rule that children’s awareness of tobacco comment’s criticism of the Ledworth exposure to the particular advertisement sponsorship and brand name study. The Ledworth study did not affect overall attitudes toward identification with that sport, not on demonstrates the power of association smoking (60 FR 41314 at 41338). their smoking behavior. This fact is not between an event and brand awareness Moreover, the agency disagrees with a flaw but a description of the study among young people. The study is the comment regarding brand design and the study’s limitations. The evidence of the important link formed preferences of smokers. As the study study, however, is quite useful in by that association. authors noted, the study primarily showing the effect of sponsored events (88) One comment stated that the focused on nonsmokers. Thus, the fact on young people’s awareness of brands. study performed by Hock et al. 245 (the that there were few smokers in the study In addition, the comment selectively Hock study), which showed that makes it more difficult to find quoted a portion of the Aitken study nonsmoking boys who saw a tobacco significant effects on smokers. In (regarding linkages), while ignoring the sponsorship advertisement had a addition, the authors note more than reason the statement was made. The diminished concern that tobacco hurt once that the effects of sponsorship author of the study made this statement sports performance, ‘‘has no real appear to be primarily on nonsmokers. in the context of the finding that relevance to the issue of event The important point of this study and whereas only 9 percent of the primary sponsorship and suffers from obvious, the others cited by the agency is that schoolchildren named John Player significant methodological flaws.’’ The sponsorship of events helps create a Special or Marlboro as sponsoring or comment explained that the video positive association between the event being associated with racing cars, 47 viewed by one of the groups contained and the tobacco company. The child percent of primary schoolchildren chose an advertisement promoting a cigarette relates the event to the product and this John Player Special or Marlboro as being company’s sponsorship of a sporting contributes to the perception that liked by ‘‘someone who likes excitement event and thus reports the effect of a tobacco use is acceptable and not and fast racing cars.’’ The authors also particular advertisement, not the effects dangerous. This attitude helps an found that linkages or associations of the types of sponsorships at issue environment that fosters between cigarette brand names (or their here. The comment also stated that experimentation with tobacco products. visual cues) and exciting sponsored American tobacco companies are not Finally, the comment asserted that sports can be elicited by simple permitted to advertise sponsorships in FDA’s reliance on the two-page advertisements, even among children this fashion under 15 U.S.C. 1335 (the memorandum from Nigel Gray 246 is who do not have a critical awareness of television advertising ban). The ‘‘not only disingenuous, but the purpose of commercial sponsorship. comment argued that the portion of the demonstrates that FDA has not This type of linkage is the primary conclusion quoted by FDA overstates evaluated the data on which it purports issue, rather than whether such the results of the flawed research to rely.’’ The comment stated that ‘‘the information is ‘‘conscious’’ or because the authors themselves statistics cited in this study lack any ‘‘unconscious’’ in nature. emphasized that ‘‘nonsmokers’’’ general explanation or support.’’ The comment (87) One comment stated that the attitudes to smoking were not also states that ‘‘[the conclusions stated study performed by Ledworth 244 (the significantly affected by exposure to in the memorandum are at odds with Ledworth study), which found that even sponsorship events. Finally, the those in the studies by Aitken and Hock a fairly brief exposure to tobacco comment argued that, among the group cited by FDA.’’ The comment stated that sponsored sporting events on television of smokers, the authors reported that the author cited a ‘‘Western Australian may increase children’s brand exposure to the sponsorship survey’’ that found that 65 percent of 10 awareness, failed to control for other advertisement did not affect the to 11 year olds surveyed believed that sources of information that could result smokers’ brand choices, and that the tobacco sponsorship of sports is in brand awareness (i.e., if a family authors cautioned that ‘‘these findings advertising for tobacco, whereas the member smokes), and that even the do not, in themselves, constitute a case Aitken study ‘‘found that only 4 percent author of the study stated that further for legislation.’’ of 10 to 11 year olds identified investigation needed to be done to The agency disagrees with the advertising as a component of sports determine whether tobacco sports comment’s criticism of the Hock study. sponsorships by tobacco companies.’’ sponsorship persuades children to Although the advertisement used in the The comment also argued that the study smoke. The comment also stated that Hock study may have been different by Hock found no effect of the FDA cannot extrapolate the study than advertisements that appear in the sponsorship advertisement on brand results to the United States because the United States, and only a single choice, whereas the memorandum by study was based on foreign sponsorship advertisement was tested, these factors Gray revealed that sponsorship did and viewership practices, which differ alone do not render the author’s effect brand choice. significantly from those in this country. conclusions invalid. Again, most The agency recognizes that there are The comment stated that the differences importantly, the study provides problems with the two-page are highlighted by the fact that 74 evidence that brand sponsorship memorandum from Nigel Gray because percent of the surveyed children produces awareness of the product and the data on which it was based have not watched at least part of the snooker the brand in young viewers. The agency been made available. Therefore, the

244 60 FR 41314 at 41338, n. 227; citing Ledworth, 245 Hock, J., P. Gendall, and M. Stockdale, ‘‘Some 246 60 FR 41314 at 41338, n. 228; citing F., ‘‘Does Tobacco Sports Sponsorship on Effects of Tobacco Sponsorship Advertisements on memorandum from Gray, N., (Anti-Cancer Council Television Act as Advertising to Children,’’ Health Young Males,’’ International Journal of Advertising, of Victoria), to all members of the Federal Education Journal, vol. 43, no. 4, 1984. vol. 12, pp. 25–35, January 1993. Parliament, December 15, 1989. 44532 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations agency has placed no weight on its from ‘sponsored events,’ so that tobacco business of conducting objective, findings and does not rely on it in the product brand names cannot be used as statistically sound studies on the effects final rule. the name of a professional sports team.’’ of sponsorship. Thus, the comment On the other hand, the memorandum The comment stated that the term asserted, FDA has not cited any cannot be used to diminish the ‘‘entries’’ is ambiguous because, for scientific study supporting the theory usefulness of the other studies that have example, a race car competing in a that sponsorship is advertising. been cited. A careful reading of the data sponsored race would qualify as an The comment argued that the position presented by the Aitken study reveals ‘‘entry’’ under the proposed rule, ‘‘but that sponsorship and advertising are one that indeed 17 percent of 10 to 11 year would the Company X Choir be and the same is inconsistent with olds identified advertising as a considered an ‘entry’ when it appears in pronouncements from Congress and component of sports sponsorship by a sponsored concert?’’ from the FTC. The comment argued that tobacco companies. While it is true, as The agency has carefully considered both Congress and the FTC have the comment indicated, that 4 percent the comments and has decided to delete recognized that advertising includes mentioned only the advertising ‘‘entries and teams in sponsored events’’ messages about product attributes or component, the comment has from the list of permissible advertising appealing visual imagery, and the use of overlooked the fact that an additional 13 media in § 897.30(a) and to specifically a brand name to identify an event percent of 10 to 11 year olds mentioned include teams and entries within the includes neither. The comment asserted both advertising and economic scope of the ban on sponsored events. that ‘‘nothing in the [FTC]’s findings components. The agency is persuaded that sponsored suggests a rationale that would apply to In summary, these studies provide teams and entries, such as cars: (1) the mere display of a logo, trademark, or ample support that brand name sports Create the same associations with sports other product identifier when divorced sponsorship produces, for young figures and other ‘‘heroes,’’ (2) create a from a selling message.’’ The comment people, memorable associations linkage between a tobacco product and asserted that Congress has never between the sport and the tobacco an enjoyable and exciting event when classified sponsorship of events using product and brand name. As shown in they appear as part of an event, (3) are brand names as advertising, and that the section VI.B.1. of this document, young displayed for a significant period of few times it has addressed this issue, people pay attention to and rely on time. They have the same potential to Congress has issued laws that peripheral cues such as the color and create images and influence children distinguish advertising from other forms the imagery of advertising for some of and adolescents as does sponsorship of of promotion that do not have the same their information about products. events, and (4) are able to leave the impact as advertising. Tobacco sponsorship creates powerful event and be seen at fairs and malls and The comment referred to an FTC images of fun and excitement to add to other places frequented by young order In the Matter of Lorillard Tobacco, that ‘‘information’’ mix. people. 80 FTC 455, 457 (1972), which the (89) FDA had proposed that entries, The agency appreciates the comment argues defines ‘‘advertising’’ such as racing cars, or events or teams comment’s suggestions that color and to include only those practices that that participate in events be permitted imagery are as problematic as the brand typically contain a selling message; and to display a brand name in a black and name but advises that the comment has United States v. R.J. Reynolds Tobacco white text only format. Thus, although misinterpreted the 1995 proposed rule. Company, No. 76-Civ-814 (JMC) (SDNY the Skoal 500 would be prohibited, the Proposed § 897.34(c) stated that 1981), which the comment argued Skoal Bandit racing car could sponsorship would be prohibited in confirms the Government’s view that participate in a race event. ‘‘the brand name, logo, motto, selling the selling message in advertising, not Several comments supported the message, recognizable color or pattern of the mere display of a logo, was the focus provision’s requirement for teams and colors, or any other indicia of a product of its concern. entries but recommended that the identification similar or identical to agency go further to restrict labeling on those used for tobacco or smokeless In addition, the comment argued that entries and teams in sponsored events. tobacco products.’’ Thus, a car another Federal agency agrees with this One comment, which was submitted by sponsored by Philip Morris may not be interpretation. The comment stated that a ‘‘participant in motorsport events,’’ named after the Marlboro brand nor be the FCC, expressly permits ‘‘logos or stated that ‘‘even when the Marlboro painted in the distinctive tri-color logograms’’ as long as such name, for example, is removed from a pattern. announcements do not contain racing car body, the distinctive color (90) Some comments addressed the ‘‘comparative or qualitative scheme still sends the Marlboro issue of whether sponsorship is descriptions, price information, calls to message, loud and clear.’’ advertising. One comment argued that action, or inducements to buy, sell, rent One comment stated that ‘‘under the the International Events Group’s (IEG) or lease.’’ rationale applied to the regulation on ‘‘IEG Complete Guide to Sponsorship’’ In contrast, some comments event sponsorship, * * * FDA would be states that sponsorship is not supported the assertion that justified in restricting tobacco advertising, and that the guide explains sponsorship is very effective companies from entry and team that advertising involves the delivery of advertising. One comment included in sponsorship.’’ The comment messages about specific product its appendices the transcript of an ABC recommended that FDA ‘‘limit the scope attributes, while sponsorship merely News Day One story broadcast August of the terms ‘entries’ and ’sponsored shapes the consumer’s image of the 10, 1995, that reported on the events,’ for the breadth of possible brand. Moreover, to the extent the IEG commercial value of sponsorship. The entries and possible events is is identifying sponsorship as comment also included a recent story in enormous.’’ The comment stated that for advertising, the comment asserted that Winston Cup Scene (October 19, 1995) instance, professional sporting events the IEG guide is a publication by an which describes the advertising value such as football, basketball, baseball, organization that depends on sponsored that sponsors expect to receive from and hockey games, should be excluded events for its existence, and is not in the their sponsorships. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44533

Contrary to the comments cited, the ‘‘any action to call attention to a product the industry’s ability to sponsor events FTC asserted, in its comment, that so as to arouse a desire to buy.’’ and garner the good will that flows from sponsorship is advertising, citing its The agency finds for all these reasons such sponsorship.’’ 1992 consent order involving the that sponsorship can be regulated as FDA concludes that sponsorship of Pinkerton Tobacco Co., (Consent Order) advertising under the act. events and sponsored teams and events C–3364 (1992). (91) Several comments argued that is an advertising medium that is The comment also stated that in 1995, FDA does not have the authority to effective in influencing young people’s the Department of Justice announced restrict sponsorship events. One decision to engage in smoking behavior consent decrees resolving allegations comment stated that FDA has no and tobacco use. that Philip Morris, Inc., and the owners authority to regulate cigarette As explained in this section, the of Madison Square Garden in New York advertising to ‘‘break the link’’ between agency has authority to restrict City violated the Cigarette Act’s ban sponsored events and use of tobacco, advertising of restricted devices like prohibiting advertising for tobacco on and reduce the ‘‘friendly familiarity’’ tobacco and smokeless tobacco under television and other media regulated by that sponsorships generate among young sections 520(e) and 502(q) of the act. As FCC through the display of cigarette people. The comment stated that FDA the studies described in this section 247 brand names and logos at live sporting can prohibit only false or misleading demonstrate, sponsorship associates the events that were broadcast on television restricted device advertising and cannot advertised brand with the event and (United States v. Madison Square prohibit advertising that simply links a thus shapes the image of the brand and Garden, L. P., No. 95–2228 (S.D.N.Y., name to a product. One comment stated the individual’s image of tobacco use. April 7, 1995); United States v. Philip that it is difficult to understand how the Sponsorship of rodeos and car racing, Morris, Inc., No. 95–1077 (D.D.C. June 6, sponsorship of the IndyCar Marlboro for example, associates the product with 1995)). The consent decrees prohibit 500 or the National Hot Rod Association events where risks are high but socially Philip Morris and Madison Square Winston Drag Racing Series, approved and are taken by individuals Garden from placing cigarette promotional activities that would be who brave the odds. 248 This type of advertising in places regularly in the prohibited under the 1995 proposed situation fits in very well with the image camera’s focus where they might be rule, involve the ‘‘misbranding’’ of concerns of adolescent males described seen on television. tobacco products. in section VI.D.4.a. of this document. The agency finds that sponsorship is Several comments addressed the issue Youths who attend the sponsored advertising within the scope of this of whether FDA’s proposed ban on event are directly and unavoidably regulation. The claim by the comments brand name sponsorship violates the confronted with messages for the that the Lorillard and Reynolds Tobacco First Amendment. Several comments sponsoring product. This exposure consent orders demonstrate that the FTC argued that the proposed restrictions on creates a sense of familiarity and does not find sponsorship to be advertising and promotional activities acceptance similar to that created by advertising is incorrect. The two cited are overly broad and violate the First billboards near schools and cases are consent orders that did not Amendment because the 1995 proposed playgrounds. provide a definition of advertising but rule would prohibit virtually all forms In addition, the sponsored events are limited the coverage of the consent of tobacco sponsorship and advertising televised. As a result of this fact, order to the specific types of advertising at motorsport events, and FDA made no through mention of the sponsor and mentioned in the order. The two orders attempt to limit the restrictions to camera shots that pan the place where clearly excluded categories of obvious advertisements directed at minors. One the event is held, awareness of the advertising from the coverage of the comment argued that the provision brand is created, along with the order (see, e.g., point of sale would not directly and materially associations described above. Given these factors, a restriction on advertisements less than 36 square advance the government’s interest, sponsorship will be effective in limiting inches). because there is no reasonable basis for the influences on children and Although the agency acknowledges asserting that sponsorship causes youth adolescents to use tobacco products and that the ‘‘IEG Complete Guide to tobacco use. The comment stated that thus in protecting their health. Sponsorship’’ (IEG guide) states that FDA did not attempt to differentiate Moreover, there is a reasonable fit sponsorship is not advertising, IEG is between those events that attract between the restriction and FDA’s creating a semantical distinction children and adolescents and those that interest. The restriction focuses on the between one form of advertising attract adults. Thus, according to the use of the brand because of the (traditional media advertising) from comment, a ban on tobacco sponsorship association between the brand and other types of advertising (e.g., of an event that few or no children or tobacco use. 249 By building associations promotional items, sponsorship). The adolescents attend will not directly and with the brand, sponsorship and the IEG guide states that ‘‘[w]hat materially advance a reduction in advertising displayed at the event sponsorship generally accomplishes underage tobacco use. creates a desirable image for young better [emphasis added] than In contrast, one comment which people that contributes to a positive advertising is establishing qualitative supported the provision stated that feeling about the product that sponsors attributes, such as shaping consumers’ sponsored events have a direct and image of a brand, increasing favorability powerful impact on young people, and 247 See e.g., Aitken, P. P., D. S. Leathar, and S. ratings, and generating awareness.’’ In thus there is a ‘‘reasonable fit’’ under I. Squair, ‘‘Children’s Awareness of Cigarette Brand addition, the IEG guide states that the final two prongs of the Central Sponsorship of Sports and Games in the U.K.,’’ sponsorship is more effective than Hudson test. The comment argued that Health Education Research, vol. 1, pp. 203–211, advertising in increasing ‘‘propensity to the 1995 proposed rule is narrowly 1986. 248 purchase.’’ This latter description of tailored because ‘‘FDA has selected the IOM Report, p. 112. 249 Hock, J., P. Gendall, and M. Stockdale, ‘‘Some sponsorship falls within the courts approach that best effectuates its goal of Effects of Tobacco Sponsorship Advertisements on definition of advertising in Public reducing tobacco consumption by Young Males,’’ International Journal of Advertising, Citizen v. FTC, 869 F.2d at 1554, as minors, without needlessly restricting vol. 12, No. 1, January 1993. 44534 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations the event. This positive image not only a firm can be substantial.’’ The preamble had a brand name or product provides a brand that the young person to the 1995 proposed rule cited two identification within it. might select but also adds to the young studies which discussed the impact of Finally, a comment stated that there person’s positive feelings about using sponsoring televised events and are many other existing brand names the product. It is the creation of this concluded that: that are also corporate names, such as association that FDA will prevent by [t]he impact of sponsoring televised events ‘‘Rothmans’’ and ‘‘Sampoerna’’ (a brand restricting sponsorship. such as these automobile races is perhaps of clove cigarette () imported from FDA is not aware of any way to limit most apparent when one realizes that over 10 Indonesia) that are manufactured the restriction to events that are million people attended these events, while overseas. This comment argued that 90 times that number viewed them on attended by young people. However, television. non-U.S. corporate names must also be FDA has no desire to restrict (60 FR 41314 at 41337) included in the final rules proscription. manufacturers’ abilities to contribute to By restricting brand name The agency recognizes the concern the community by sponsoring athletic, sponsorship of events, the final rule will expressed by the comments. As stated in cultural, or other events. Thus, the eliminate those brand name sponsored the preamble to the 1995 proposed rule, agency has narrowly tailored the events that continue to permit tobacco the requirement that the corporation be restriction on sponsorship to use of product brand names to appear on in existence on January 1, 1995, is brand identification because it presents television. intended to prevent manufacturers from the harm that FDA is trying to eliminate. (93) Several comments expressed circumventing this restriction by For these reasons, FDA concludes that concern that the 1995 proposed rule was incorporating separately each brand that its restrictions on sponsorship are not sufficiently inclusive; specifically, it they manufacture for use in sponsorship consistent with its legal authority and did not prohibit the incorporation of an (60 FR 41314 at 41336). The comments with the First Amendment. event in a brand name by someone other have suggested that manufacturers may (92) Several comments (including one than the tobacco company and did not circumvent this restriction by the use of from a participant in motorsport events) explicitly ban the use of the name of a shadow entities, many of which have argued that allowing tobacco companies foreign tobacco company in U.S. sport already been incorporated under to place brand names and logos at events. Some comments stated that tobacco brand names in other countries highly visible locations during restricting sponsorship of entertainment (or have been incorporated as events). broadcast sporting events has afforded and sporting events to corporate name The agency agrees that the proposed tobacco companies the opportunity to only for corporate sponsors that had restrictions do not prevent this type of circumvent the Cigarette Act, which been in existence prior to January 1, circumvention. prohibited broadcast advertising of 1995, ‘‘leaves open many shadow Thus, in response to the comments’ cigarettes. One comment stated that entities incorporated under tobacco suggestions, the agency has modified tobacco companies receive millions of brand names because tobacco the proposed regulations to reflect that dollars of free brand name television transnationals have been creating these the registered corporate name and and radio exposure during these events front groups for years to escape corporation must have been in existence and use messages in these promotion restrictions in other and registered in the United States and advertisements that are particularly countries.’’ have been in active use in this country effective with children. One comment One comment stated that Canada, before January 1, 1995. Thus, FDA has stated that ‘‘the degree to which after it had banned brand name modified § 897.34(c) to state: ‘‘Nothing sponsoring events gives tobacco sponsorship, found that industry used in this paragraph prevents a companies television time is new ‘‘corporations’’ such as Camel manufacturer, distributor, or retailer staggering,’’ and ‘‘[j]ust in the televising Racing PLC to continue sponsoring in a from sponsoring or causing to be of the Indiana 500 [sic], Marlboro brand name. Thus, the comments sponsored any athletic, musical, artistic, received almost 31⁄2 hours of television recommended that the regulation ensure or other social or cultural event, or team exposure and 146 mentions of its brand that corporate sponsorship of events be or entry, in the name of the corporation name.’’ The comment cited cases where allowed only if the corporate name is which manufactures the tobacco Congress and the courts have already the name of the manufacturing entity product, provided that both the recognized and upheld the importance and that the name has no similarity to corporate name and the corporation and the constitutionality of keeping a brand name of any of that were registered, and in use in the tobacco advertising off the airwaves manufacturer’s tobacco products. United States prior to January 1, 1995, (Capital Broadcasting Co. v. Mitchell, Several comments expressed concern ** *.’’ This provision makes clear that 333 F. Supp. 582 (D.D.C. 1971), aff’d sub about a recent trend among U.S. manufacturers are free to sponsor events nom. Capital Broadcasting Co. v. Acting manufacturers to develop brands that in their corporate name but contains Attorney General, 405 U.S. 1000 (1972)), are made by a corporate entity. For language that will prevent the type of and concluded that a reviewing court example, one comment stated that RJR circumvention of the restriction that would likely sustain the provision has developed a series of brands with an was posited by the comments. regarding event sponsorship simply art deco style of pack design and is The agency also agrees with the because it has become a pervasive tool selling them through a wholly owned comments that suggest that used by the tobacco industry to evade subsidiary named Moonlight Tobacco. manufacturers may also attempt to the restriction on television advertising. Another comment stated that Philip circumvent this restriction by placing The agency finds that there is Morris has been test marketing a brand within the corporate name or logo adequate support for its ban on brand called ‘‘Dave’s,’’ which it produces elements of brand identification such as name sponsorship of events. As stated through a boutique company named names (Smokin’ Joe), colors (the tricolor in the preamble to the 1995 proposed ‘‘Dave’s Tobacco Company.’’ These decoration), etc. Tobacco products can rule and in response to an earlier comments stated that the agency should be promoted using more than just the comment, ‘‘[t]he amount and financial amend the 1995 proposed rule to brand name. In fact, the name may be value of television exposure gained by prohibit any corporate name or logo that less important than the attractive Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44535 imagery, recognizable colors and of entertainment and sporting events.’’ camp out for days trying to get into the patterns of colors (Marlboro), characters The form letter also stated that ‘‘If FDA events, and that the recent Formula One and heroes (Joe Camel racecar drivers) gets control of tobacco and bans tobacco European Grand Prix was run in cold all of which provide the user with a sponsorships, ticket prices could rise as miserable, weather with packed stands and desired image. A yellow motorcross bike well. And there might be fewer events. not a single cigarette logo in sight. with a head of a Camel conveys the All this adds up to consumers being the The comment stated that ‘‘I hope image of Joe Camel without the name of big losers.’’ [FDA] will look out for the rest of us and the product. Therefore, it is necessary in One comment stated ‘‘I oppose any stand firm in favor of a ban on tobacco order to break the link between the attempt by President or FDA to deny advertising at all sporting events.’’ event and the product to restrict the RJR the right to sponsor the Winston One comment stated that ‘‘many of images in addition to the name. Thus, Cup Racing Series!’’ One comment the millions of dollars spent on these FDA has modified § 897.34(c) so that it stated ‘‘[b]y banning the sponsorship of promotions are available to the cigarette concludes with the following statement: NASCAR, the races won’t get any industry only because 3,000 children ‘‘* * * and that the corporate name does money, and if they have to stop racing, start smoking each day,’’ and ‘‘[t]his not include any brand name (alone or in that will make me mad, and I am too old situation can be viewed as an industry conjunction with any other word), logo, to be getting mad—75 years [old].’’ demanding a bounty of 3,000 lives per symbol, motto, selling message, recognizable day in exchange for its financial support color or pattern of colors, or any other indicia One comment stated that because of the potential loss of economic support, of the sports, music, and other of product identification identical or similar entertainment appealing to children and to, or identifiable with, those used for any many events will not be viable if cigarette company sponsorship is no youth.’’ brand of cigarettes or smokeless tobacco One comment stated that: products. longer available. Several comments the abundance of other sponsors indicates The agency also recognizes that at argued that FDA’s proposed ban on that auto racing would not fail if tobacco some time in the future, corporate sponsorship, promotional programs, and products are not allowed to be event entities may be formed to sell tobacco contests would eliminate events enjoyed sponsors and if teams sponsored by tobacco products, which are new to the tobacco primarily by adults. One comment products are restricted to black and white business and in no way associated with stated that ‘‘[w]e believe that we and uniform and car designs. Similar fears were current manufacturers. Should those millions of other middle class fans like expressed when cigarette commercials were entities desire to sponsor events, they us, will no longer be able to afford the banned from electronic media, but they would be precluded by the language of NASCAR we love.’’ One comment stated proved groundless. § 897.34(c) from doing so. The agency that the provision ‘‘will adversely affect The comment stated that sponsors do envisions that such entities could the economy of the tobacco industry not make a sport such as auto racing or petition the agency, under 21 CFR part and that affects many people in many rodeo popular because auto racing and 10, for an exemption from this States, not just the racing industry and rodeo are ‘‘compelling, popular provision. communities.’’ spectator sports in their own right.’’ The (94) One comment stated that FDA’s One comment stated that the loss of comment stated that ‘‘popular sports proposed ban on brand-name sponsorship revenue to race track attract sponsors who want to advertise.’’ sponsorship is an unjustified limitation owners, operators, and promoters would The comment stated that ‘‘[t]he on the right of private individuals to negatively affect the motorsports Olympics would remain a select their own sponsors. industry because racing fans will suffer sporting event without Coca-Cola or This comment has misinterpreted the in the form of increased ticket prices or Kodak’’ and ‘‘NASCAR stock car racing 1995 proposed rule. The rule does not decreased services at motorsports is among the most popular spectator limit the ‘‘right’’ of private individuals events, and increased ticket prices will sports to thrive.’’ The comment stated to select sponsors. Individuals are free decrease attendance at race events, that ‘‘the audience is not there because to select any sponsor they choose. The forcing racetrack operators to cut jobs of tobacco: tobacco is there because of rule, however, prohibits the event from and other employee benefits, further the audience.’’ including any brand name, logo, depressing the economies of hundreds The agency advises that the concerns symbols, motto, selling message, or any of communities around the nation. The expressed by some of these comments other indicia of product identification comment also stated that since have misinterpreted the rule. The rule similar or identical to those used for any motorsports injects hundreds of does not ‘‘prohibit tobacco company brand of cigarette or smokeless tobacco. millions of dollars into local and sponsorship of entertainment and However, the final rule does not prevent regional economies, particularly in rural sporting events’’ or ‘‘ban tobacco corporate sponsors that were in and suburban communities that have sponsorships, promotional programs, existence and registered in the United been the hardest hit by recession and and contests.’’ The rule prohibits a States before January 1, 1995, from job losses, FDA’s proposed regulation sponsored event from being identified advertising in their registered corporate would have a substantial impact on with a cigarette or smokeless tobacco names. local and regional economies across the product brand name or any other (95) Several comments stated that country and hurt the future of cigarette or smokeless tobacco brand sponsorship restrictions would have a motorsports. identifying characteristic. All athletic, negative impact on sports events. In contrast, one comment that musical, artistic, or other social or Approximately 300,000 copies of one supported the proposal was from a cultural events would be permitted to be form letter were submitted as ‘‘dedicated car racer,’’ and stated that sponsored in the name of the tobacco comments. All included the statement: ‘‘the truth is that car racing will do just company as long as the other conditions ‘‘I am 21 years of age or older and fine without tying its wonderful image in § 897.34(c) are met. oppose the new regulations proposed by to the interest of the cancer promoters.’’ In addition, the tobacco industry the Food and Drug Administration The comment stated that: accounts for only 4 percent of all (Docket No. 95N–0253) that would in Europe where racing cars run without sponsored events. This rule does not prohibit tobacco company sponsorship any cigarette advertising whatsoever, people prohibit the other 96 percent of 44536 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations nontobacco forms of sponsorship (60 FR provide evidence that sponsored events concerning prescription drug 41314 at 41337). Thus, even if the of all types are attended, and seen on advertising provide great specificity as restriction on sponsorship of tobacco television, by a substantial number of to what constitutes violative advertising products resulted in a decrease of young people, and that the effect of the (part 202 (21 CFR part 202)) but that this tobacco company sponsored events, the exposure is to increase brand awareness same degree of specificity is not events will still exist through the and association between the brand and practical in the case of a widely used support of the nontobacco forms of the event. This attitude contributes to a consumer product like tobacco because sponsorship. The agency agrees with the sense of friendly familiarity about the advertising for it contains an comment that ‘‘auto racing would not tobacco use and a perception that unlimited variety of claims that make fail if tobacco products are not allowed tobacco use is acceptable and common categorization difficult. Therefore, the to be event sponsors.’’ Thus, restricting place. agency tentatively concluded that it tobacco product brand name Surveys on attendance and TV would provide general guidance for the sponsorship clearly will not ‘‘ban all audience, described further in this types of advertising claims that will be sponsorship events.’’ section, establish that attendance by considered violative, rather than to Finally, recent news stories quote children at events and viewership by attempt to identify every possible type persons knowledgeable about car racing children and adolescents on television of false and misleading claim (60 FR saying racing would survive without are significant. The preamble to the 41314 at 41339 and 41340). tobacco sponsorship, for example, one proposed rule used the number 64 (96) Several comments objected to quote: ‘‘If this happened 10 years ago, it million as an annual approximation of various portions of the definition, for underage viewers of motorsport events would have been crushing to the racing example the phrases ‘‘omits important in addition to those at the event (60 FR industry. Now people are lining up to information’’ and ‘‘lacks fair balance.’’ 250 41314 at 41337). In addition, newspaper take Winston’s place.’’ They asserted that the phrases expand articles detailed in this section describe In conclusion, FDA finds that the definition of what constitutes the increasing importance of young sponsorship of events (such as car races, ‘‘misleading’’ advertising, are subjective, people to sponsored events as a growing tennis matches, and rodeos) and entries and make compliance burdensome part of the live audience. Moreover, in those events (race cars and drivers, because the phrases are not defined. although less data is available on other tennis players) can have a profound Moreover, the comment complained types of sponsored events, comments effect on young people’s attitude about that neither ‘‘fair balance’’ nor received by the agency in response to and use of tobacco by providing ‘‘substantial evidence’’ were the proposed rule, and described further multiple and prolonged exposure to the appropriately included in the definition in this section, state that many children brand name and logo in a variety of of false and misleading. media, thereby creating an impression and teenagers watch tennis, motorcycle Additionally, the comments argued of prevalence and normalcy about and powerboat racing, and rodeos on that laws regarding false and misleading tobacco use (see section VI.D.3.c. of this television and attend and watch on advertising are well established, and document), by associating the product television rock concerts and country that false and misleading advertising is with varied positive events, images, and music festivals. subject to the jurisdiction of the FTC. heroes, and by creating attractive and Finally, the agency has tailored the The comment stated that it was, exciting images that can serve as a restriction narrowly. The agency therefore, inappropriate for FDA to ‘‘badge’’ or an identification (see section recognizes the importance of corporate establish vague and overreaching VI.D.4.a. of this document). The sponsorship in engendering goodwill for parameters of ‘‘unfair and deceptive’’ industry itself recognizes the concern a company with its customers and in advertising. that sports figures as endorsers can providing support to sports, the arts, create problems of hero worship and and music. Therefore, the agency has One comment stated that what emulation; its Code promises not to crafted the regulation to not interfere ‘‘information’’ is important is employ sports or celebrity testimonials with this aspect of sponsorship but has undefined. It stated that there is always or those of others ‘‘who would have merely denied the companies the right information that someone may consider special appeal to persons under 21 years to use brand and product identification, ‘‘important’’ (e.g., price, availability, of age.’’ Sponsorship creates no less of which are most appealing to young freshness, taste research), and that it an association than an endorsement. people. would be unreasonable to allow FDA, or any regulatory organization or entity, to Moreover, FDA finds that restrictions on 9. Proposed § 897.36—False or review tobacco advertising in the sponsorship identified with a tobacco Misleading Statements brand are necessary to reduce tobacco capacity of determining information that use by young people. These findings are The agency proposed in § 897.36 that should have been included. This based on studies and recent reports that labeling or advertising of any cigarette comment argued that the legal the number of young people who attend or smokeless tobacco product: precedent defining deceptive these events or see them on television is false or misleading if the labeling or advertising is already established and advertising contains any express or implied should not be changed by FDA. is significant and growing. false, deceptive, or misleading statement, Studies—Four different studies, one omits important information, lacks fair One comment stated that by each by Slade, Aitken, Ledworth, and balance, or lacks substantial evidence to introducing the word ‘‘important’’ into Hock (60 FR 41314 at 41337 and 41338) support any claims made of the product. the proposed standard for misbranding and described further in this section, This provision would have explicitly of tobacco, FDA has impermissibly gone implemented sections 201(n), 501(a) (21 beyond the ‘‘materiality’’ test for 250 Quoting Ardy Arani, a director of the Atlanta- U.S.C. 351), and 502(q)(1) of the act. misbranding set forth by Congress in based Championship Group, a sports marketing Section 897.36 was meant to be section 201(n) of the act, acted agency in Jacobsen, G., ‘‘Mass Merchandisers Jostle With Tobacco Companies to Cash in on the Auto illustrative rather than exhaustive. arbitrarily and capriciously, and Racing Craze,’’ The New York Times, p. D71, The agency stated in the 1995 proposed a new standard that is February 21, 1996. proposed rule that its regulations unconstitutionally vague. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44537

One comment stated that FDA also Because cigarette and smokeless tobacco Virginia Citizens Consumer Council, proposes that labeling or advertising advertising remains subject to regulatory Inc., 425 U.S. 748 (1976). Since 1976, would be false or misleading if it ‘‘lacks action if it is false or misleading in any the Court has decided numerous cases, fair balance.’’ It stated that FDA has particular, FDA has decided to delete most recently Rubin v. Coors, Florida obviously borrowed this concept from § 897.36 from the final rule. Bar v. Went For It, Inc., and 44 the prescription drug regulations (97) Some comments supporting Liquormart Inc. v. Rhode Island, that (§ 202.1(e)(5)(ii)), but it is inapplicable proposed § 897.36 recommended that address the level of protection afforded to tobacco. The comment stated that, specific restrictions be placed on commercial speech by the First first, the ‘‘fair balance’’ requirement for advertising that emphasizes tar and Amendment. FDA has followed that drugs is based not on the section 502 nicotine levels and implies a weight case law in its development of this final ‘‘false or misleading’’ prohibition but benefit to tobacco products. rule. Therefore, FDA has developed this rather on section 502(n)(3), which Other comments suggested requiring final rule in accordance with the requires that prescription drug the disclosure of ingredients. These applicable law. advertising contain a ‘‘true statement’’ comments argued that consumers do not (99) A comment filed by an relating to ‘‘side effects, know the ingredients of these products association of advertising agencies contraindications, and effectiveness.’’ or the functions that these ingredients warned that the proposed regulations The comment stated that, second, as serve. It added that consumers do not ‘‘establish a dangerous precedent that the drug regulation makes clear, the know the doses of nicotine and other could open the floodgates to dramatic ‘‘fair balance’’ required is between critical materials that they ingest with government intrusion into the process of information about a product’s these products. The comment stated that communication * * * and [are] a therapeutic benefits and information terms such as ‘‘light’’ and ‘‘low tar’’ dangerous blueprint for government about its adverse effects when used. It have little meaning in view of the censorship of other kinds of stated that because no therapeutic tendency of consumers to smoke advertising.’’ The comment expressed claims are made for tobacco, the ‘‘fair cigarettes differently depending upon concern that regulations of advertising balance’’ concept is simply the way nicotine delivery has been for tobacco products will permit, in fact inapplicable. engineered. A comment from a tobacco will encourage, the future regulation of One comment, however, stated that, company opposed disclosure of other ‘‘controversial products.’’ under this regulation, advertising for ingredients fearing loss of valuable trade Tobacco products are not cigarettes and smokeless tobacco will be secret information. ‘‘controversial’’ products as these considered false or misleading if it The agency has decided that these comments contend. They represent the ‘‘omits important information.’’ It stated comments fall outside the scope of this single most preventable cause of death that this is a reasonable rule, and that rulemaking. The agency did not propose in the United States (1989 Report to the it should be part of the final rule, but labeling or advertising restrictions Surgeon General at p. i). Not only is the it is one that may be difficult for concerning the levels of tar, nicotine, or harm caused by tobacco use real (the manufacturers to comply with absent other components of cigarettes or comment refers to ‘‘imagined harm’’), guidance from FDA. smokeless tobacco, or perceived benefits but the product that produces the FDA has been persuaded that the of tobacco products, only that labeling disease and death is addictive. proposed general guidance in proposed or advertising not be false or misleading. Moreover, tobacco use begins among § 897.36 on what might constitute false It did not receive comments sufficient to young people, who may be able to and misleading advertising has created warrant restrictions addressing these describe the risks of tobacco use, but unintended confusion. Under section issues. Consequently, advertising and who do not personalize that risk to 502(a) and (q)(1) of the act, any labeling claims will be evaluated on a themselves. These young people begin restricted device is misbranded if its case by case basis for compliance with to use tobacco before they can advertising or labeling is false or sections 201(n), 502(a), (q), and (r), adequately weigh the consequences of misleading in any particular. Section 510(j) (21 U.S.C. 360(j)), and 520(e) of use and thus, become addicted and 201(n) of the act states that: the act. Therefore, FDA is not modifying subject to the real long term harms If an article is alleged to be misbranded caused by tobacco use. That is why all because the labeling or advertising is part 897 to address these concerns at misleading, then in determining whether the this time. 50 States and the District of Columbia outlaw the sale of tobacco products to labeling or advertising is misleading there F. Additional First Amendment Issues shall be taken into account (among other those under 18 years of age. Finally, as things) not only representations made or Finally, several general issues were discussed in section VI.D. of this suggested by statement, word, design, device, raised by commenters concerning the document, advertising does affect young or any combination thereof, but also the nature of the protection afforded people’s decision to use tobacco extent to which the labeling or advertising commercial speech by the First products in a significant and material fails to reveal facts material in the light of Amendment. way. This is not an ‘‘assertion’’ made such representations or material with respect (98) One comment argued that the out of whole cloth but a reality. Thus, to consequences which may result from the original understanding of the First use of the article to which the labeling or regulation of tobacco advertising may advertising relates under the conditions of Amendment was that truthful set a precedent for future government use prescribed in the labeling or advertising commercial messages are fully action, but it sets a high threshold for thereof or under such conditions of use as are protected. such regulation. customary or usual. In response to this comment, FDA The Supreme Court has granted ample After review of the applicable points out that the Supreme Court took protection to commercial speech, but provisions of the act concerning labeling the position that the First Amendment the Court has also stressed, nothing in and advertising, the agency has does not protect commercial speech (see the First Amendment prevents the determined that those provisions are Valentine v. Chrestensen, 316 U.S. 52 Government from ensuring ‘‘that the adequate and that the definition in (1942)), until it repudiated that position stream of commercial information flows proposed § 897.36 is unnecessary. in Virginia State Bd. of Pharmacy v. cleanly as well as freely.’’ (See Edenfield 44538 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations v. Fane, 506 U.S. 761, 768.) One agency has used section 518(a)’s misinterpreted a study by Simonich 251 comment noted: ‘‘This concern takes on separate, affirmative grant of statutory (the Simonich study), cited in the special force where, as here, crucial authority on a number of occasions to preamble to the 1995 proposed rule to public health concerns are implicated, compel medical device manufacturers to demonstrate that the media campaign and where a particularly powerful seller provide notice to users or potential conducted under the Fairness Doctrine ** * has used its virtually limitless users of their products about risks (FD) reduced cigarette consumption by resources to saturate the marketplace presented by their use or misuse. 6.2 percent (60 FR 41314 at 41327). The with its promotional messages.’’ The agency believes that, with respect comment concluded that the data from The Government’s interest in to cigarettes and smokeless tobacco, it the Simonich study indicated that the protecting the health of children and could make the findings required by overall effect of the Fairness Doctrine teenagers through measures designed to section 518(a) of the act and so could was merely a 0.4 percent decline in per prevent them from beginning a lifetime order tobacco manufacturers to notify capita consumption. of addiction and disease is of the young people about the substantial FDA disagrees with the industry’s highest order and is sufficient health risks that tobacco products interpretation of the Simonich study. justification for the restrictions finalized present in a form appropriate to The agency believes that the Simonich here. eliminate the risk. That is, the agency study results, correctly interpreted, indicate that the FD education campaign VII. Education Campaign believes that it could find that cigarettes and smokeless tobacco present an reduced per capita cigarette In the Federal Register of August 11, unreasonable risk of substantial harm to consumption an average of 4.5 252 1995 (60 FR 41314), the Food and Drug the public health, that notification is percent, that is, a 4.5 percent Administration (FDA) proposed to necessary to eliminate this risk, and that reduction in consumption over the require that tobacco companies establish no more practicable means is available period of time over which the FD was a national education program, using under the act. in effect for entire quarters. Thus, the television as its predominant medium, FD education campaign did play an The agency has concluded, therefore, to discourage children and adolescents important role in reducing per capita that it will not require an education from using cigarettes and smokeless cigarette consumption. campaign as part of this tobacco rule. tobacco (the 1995 proposed rule). The (2) Comments also questioned the The agency intends, however, to send agency received more than 1,500 effectiveness of education programs letters that indicate that the agency comments concerning the program, cited by the agency. The tobacco believes that it could make the statutory nearly three-quarters of which favored industry’s comment argued that findings necessary to issue notification going forward with it. The comments California’s $26 million multi-year orders under section 518(a) of the act to raised many issues concerning the media campaign actually confirmed that cigarette and smokeless tobacco program as proposed, including whether televised education campaigns do not manufacturers. As section 518(a) of the the proposed funding would be either influence youth smoking. Further, the act requires, these consultation letters equitable or sufficient, whether comment stated that it was not possible will offer tobacco companies an industry’s level of involvement would to say what impact, if any, a national opportunity to consult with the agency jeopardize its effectiveness, whether media campaign’s introduction or about the necessity for, and specific current industry educational programs termination had on consumption in requirements of, any notification orders are sufficient, about the design of the Greece because Greece’s educational before the agency issues any orders to educational programs, the television and radio advertising the companies. manufacturer’s obligations to carry them campaign was only one element of an out, the agency’s statutory authority to Because the education campaign will overall education campaign. require an education campaign under not be a requirement of this final rule, With regard to the California media section 520(e) of the Federal Food, Drug, the agency need not respond to the campaign, FDA notes that this campaign and Cosmetic Act (the act)(21 U.S.C. many comments that it received was directed to adults, not young 360j(e)), and the constitutionality of the concerning the proposed campaign. people. Moreover, the media campaign campaign as proposed. Nevertheless, because the agency was countered by increased per capita The agency has reexamined its intends to pursue implementation of an spending by the tobacco industry in the statutory authority for requiring an education campaign using the types of imagery-based advertising that influences children and adolescents. education campaign and believes that notification provision of section 518(a) Therefore, the agency would have section 518(a) of the act (21 U.S.C. of the act, the agency will respond expected the media campaign to have 360h(a)) is more appropriate and briefly to comments that questioned the had a greater negative impact on tobacco practicable than the restricted device effectiveness and design of the proposed use by adults than by children and authority in section 520(e) of the act education campaign. (1) The agency received comments under which FDA had proposed the 251 questioning the effectiveness of other Simonich, W. L., ‘‘Government Antismoking education campaign. Under section Policies,’’ Peter Lang Publishing, Inc., 1991. 518(a) of the act, if the agency finds that educational campaigns and the agency’s 252 Simonich modeled the effect of the FD as: % a device presents an unreasonable risk use of these campaigns to support the ∆ Consumption = -0.063(Xt + .46416Xt-1 + 2 3 of substantial harm to the public health, position that a national educational .46416 Xt-2 + .46416 Xt-3) where Xt represents that notification is necessary to campaign would be effective in helping antismoking advertising expenditures in quarter t reduce tobacco use among young and -0.063 is the coefficient for the FD stock eliminate this risk, and that no more variable obtained from the analysis (Id., p. 153). practicable means is available under the people. Comments from the tobacco FDA used Simonich’s model and his ‘‘Estimated act, then, after consultation with device industry argued that studies cited by Fairness Doctrine Real Advertising Expenditure per manufacturers, the agency may issue a FDA are scientifically flawed and Capita 14+’’ data series (Id., pp. 250, and 259-260) therefore that the agency overstated the to calculate the quarterly percent reduction in per notification order that requires them to capita cigarette consumption from March 1967 notify the appropriate persons in a form likely effects of the provision. One through April 1970. The average percent reduction appropriate to eliminate the risk. The industry comment argued that FDA in consumption for this period was 4.5 percent. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44539 adolescents. FDA continues to believe VIII. Additional Regulatory relates to the safety or effectiveness of the that California’s efforts indicate that Requirements device or to any other matter included in a education campaigns, over time, can requirement applicable to the device under Subpart E of part 897 in the Food and this Act. counter and reduce the impact of Drug Administration’s (FDA’s) August prosmoking efforts. Proposed § 897.42 was also intended to 11, 1995, proposed rule (60 FR 41314) recognize that many States and local Further, while the comment correctly would have consisted of three governments have enacted innovative notes that Greece’s national effort to provisions: § 897.40 would have and effective laws and regulations reduce smoking included posters, required manufacturers to submit pertaining to cigarettes and smokeless booklets, and similar educational certain reports and would have required tobacco and to encourage further materials distributed through schools, manufacturers, distributors, and activity in these areas (60 FR 41314 at health centers, and other channels, the retailers to make records available to 41340). primary and most significant element of FDA upon inspection; § 897.42 would In proposed § 897.44 Additional its program consisted of antismoking have instructed manufacturers, Regulatory Measures, FDA recognized messages broadcast on television and distributors, and retailers to comply that many different factors influence a radio. FDA continues to believe the with any more stringent State or local young person’s decision to start Greek experience indicates, as stated in requirements relating to the sale, smoking or to use smokeless tobacco the preamble to the 1995 proposed rule, distribution, labeling, advertising, or use and that the affected industries have of cigarettes and smokeless tobacco and that intensive education and media historically shown their ability to find would have notified State and local messages about the health risks new ways of promoting their products governments how to request an advisory associated with tobacco use can be whenever restrictions were imposed (60 opinion concerning the preemptive effective. FR 41314 at 41341). Consequently, to effect of part 897 on any particular State guard against the possibility that its (3) Many comments from the tobacco or local requirement; and § 897.44 comprehensive regulations might be and media industries and from adult would have required the agency to take circumvented and to give firms an smokers argued that an education additional regulatory measures if, 7 incentive to take appropriate actions to campaign is unnecessary because years after the date of publication of the discourage cigarette and smokeless cigarette manufacturers, individually final rule, the percentage of people tobacco sales to people under 18, the and through the Tobacco Institute, have under age 18 who smoke cigarettes had agency proposed to require additional undertaken voluntarily a variety of not decreased by 50 percent since 1994 regulatory measures if the outcome- educational programs aimed at and/or the percentage of males under 18 based objectives specified in proposed discouraging underage smoking, and who use smokeless tobacco had not § 897.44 were not met. because antismoking lessons are taught decreased by 50 percent since 1994. In response to comments and upon in schools. Proposed § 897.40 Records and further examination of existing statutory Reports, would have implemented and regulatory requirements, the agency By contrast, other comments sections 510(j) and 704(a) of the act (21 questioned industry’s commitment to has deleted §§ 897.40, 897.42, and U.S.C. 360(j) and 374(a)) with respect to 897.44 from the final rule. reduce underage use of tobacco cigarettes and smokeless tobacco. § 897.40—Records and Reports products. For example, several Section 510(j) of the act requires the Proposed § 897.40(a) would have comments emphasized that a voluntary submission of labels, labeling, and a required each manufacturer to submit, program run by industry in the mid representative sampling of advertising on an annual basis, copies of all labels 1980’s failed to acknowledge that to FDA, and section 704(a) of the act (or a representative sample of labels if tobacco is addictive or causes disease. gives the agency inspection authority, the labels would be similar for multiple which also includes the authority to FDA agrees with comments that the products), copies of all labeling, and a examine records, files, papers, tobacco industry has failed to include in representative sample of advertising. its voluntary youth educational processes, controls, and facilities: bearing on whether * * * restricted Proposed § 897.40(b) would have programs important information, such provided an address for such materials. as the addictive nature of tobacco and devices which are adulterated or misbranded within the meaning of this Act, or which may (1) The agency received a number of the association between tobacco use and not be manufactured, introduced into comments from distributors, disease. FDA further agrees that this interstate commerce, or sold, or offered for wholesalers, and retailers stating that it lack of complete information about sale by reason of any provision of this Act, would be too costly and time- tobacco products makes it necessary to have been or are being manufactured, consuming, and thus too burdensome require that messages about the risks of processed, packed, transported, or held in for small businesses to submit the tobacco use be directed to children and any such place, or otherwise bearing on information required by proposed adolescents. The recently observed violation of this Act. § 897.40(a) and further, that the Proposed § 897.42 Preemption of State decline in the proportion of youth who information collected would not be and Local Requirements and Requests see smoking as dangerous, despite the useful in prohibiting young people from for Advisory Opinions, was intended to widespread dissemination through using tobacco products. reflect the preemption provision in schools of information about the health These comments misread proposed section 521(a) of the act (21 U.S.C. hazards associated with tobacco use, § 897.40(a) by interpreting the section to 360k(a)); that section states, in relevant supports the need for an immediate apply to distributors of tobacco part, that: response to this problem. Moreover, products. By its terms, this provision no State or political subdivision of a State recent evidence suggests that school- may establish or continue in effect with only applied to manufacturers of based education programs most respect to a device intended for human use cigarettes and smokeless tobacco. FDA effectively reduce underage smoking any requirement--(1) which is different from, agrees with the comments that it is when used in conjunction with media or in addition to, any requirement applicable unnecessary for the agency to receive messages. under this Act to the device, and (2) which labels, labeling, and a representative 44540 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations sampling of advertising for cigarettes (2) A comment from the country’s 897.40(c), as proposed, is therefore and smokeless tobacco handled by largest association of health unnecessary, since FDA retains the distributors. In order to clarify this point professionals supported proposed records, reports, and inspection further, FDA has deleted proposed § 897.40, but suggested that FDA expand authority with respect to cigarettes and § 897.40(a) and (b), and is explicitly the reporting requirements to have each smokeless tobacco that it has with exempting distributors of cigarettes and manufacturer monitor brand-specific respect to other restricted devices. This smokeless tobacco from the registration uptake by children and adolescents. The authority is found, for example, in requirement in section 510 of the act. comment suggested that these data sections 510, 519, 702, 703, and 704 of Exempting distributors from the could be used to supplement the act (21 U.S.C. 360, 360i, 372, 373, registration requirement results in their information from the Monitoring the and 374). In particular, section 704 of exemption from the record submission Future project and other surveys that do the act explicitly authorizes the agency requirements in section 510(j) of the act. not currently contain brand-specific to inspect records regarding restricted The agency has amended the existing data. The comment also stated that cigar devices, including records and reports device registration and listing and loose-leaf tobacco manufacturers (and the related research) required regulations in part 807 by adding a new should be required to monitor and under section 519 of the act, shipment provision, at § 807.65(j), to reflect this report on use of their products by data, and data as to the qualifications of exemption. people under 18. technical and professional personnel FDA is authorized, under section The agency declines to accept the performing functions subject to the act, 510(g)(4) of the act, to exempt persons comment’s suggestions. FDA believes it except that such inspections may not from the requirement of registering is not necessary to obtain such data at extend to financial, sales, pricing, or under section 510 of the act. The agency this time. Rather, it is more appropriate other personnel and research data. agrees with the comments discussed to allow the provisions of the final rule Warrantless inspections of drug and above that stated that reporting by to become effective and to monitor the device manufacturers authorized by distributors would be too burdensome effectiveness of the program before section 704 of the act are ‘‘reasonable’’ and would not result in any useful considering the addition of new and therefore consistent with the Fourth information. FDA believes that it will requirements. FDA also notes that it is Amendment, in part because section receive all the information it needs from not asserting jurisdiction over cigars; 704 delineates the scope of inspections manufacturers, who are required to list cigar manufacturers are not subject to with respect to prescription drugs and information with FDA under section the requirements of this rule. restricted devices. (See United States v. 510 of the act. Further, there was Proposed § 897.40(c) would have Jamieson-McKames Pharmaceuticals, virtually no public comment supporting required manufacturers, distributors, 651 F.2d 532, 538 and n.9 (8th Cir.), a registration and listing requirement for and retailers to make records and other cert. denied, 455 U.S. 1016 (1981).) distributors. Based on these information available to FDA inspectors In particular, section 704 of the act considerations, FDA finds that it is for purposes of inspection, review, meets the test established by the appropriate to exempt distributors of copying, or any other use related to the Supreme Court, and cited in the cigarettes and smokeless tobacco, as enforcement of the act. comment, that is applied to scrutinize defined in § 897.3(c), from the (3) An industry comment argued that administrative subpoenas under the registration requirement in section 510 proposed § 897.40(c)—which required Fourth Amendment’s proscription of of the act as originally proposed because manufacturers, distributors, and unreasonable searches and seizures and compliance with section 510 of the act retailers to ‘‘make all records and other the Fifth Amendment’s Due Process by distributors ‘‘is not necessary for the information collected under this part Clause: ‘‘the inquiry is within the protection of the public health.’’ and all records and other information authority of the agency, the demand is related to the events and persons not too indefinite and the information A comment from the cigarette identified in such records’’ available to sought is reasonably relevant’’ (Morton industry argued that § 897.40(a) was FDA officials—so exceeds FDA’s Salt, 338 U.S. at 652 (regarding order inconsistent with the recordkeeping authority that it fails the test set out in requiring report about compliance with requirements in part 807 (21 CFR part United States v. Morton Salt Co., 338 earlier agency order); see also EEOC v. 807) (the device registration and listing U.S. 632, 652 (1950), and, therefore, Shell Oil Co., 466 U.S. 54, 72 n.26 regulations) by requiring annual violates the Fourth and Fifth (1984) (citing Morton Salt regarding submissions. A comment from a public Amendments to the Constitution. The administrative subpeona); Reich v. health organization supported proposed comment argued that § 897.40(c) may Montana Sulphur and Chem. Co., 32 § 897.40, and stated that the reporting require the release, for example, of F.3d 440, 448 (9th Cir. 1994) (same), requirements were the same as those marketing strategies, sales figures, cert. denied, 115 S.Ct 1355 (1995); faced by other manufacturers of drug profits, personnel data, and proprietary Resolution Trust Corp. v. Walde, 18 delivery devices. information. F.3d 943, 946 (D.C. Cir. 1994) (same)). Cigarette and smokeless tobacco FDA disagrees with this comment, but The comment stressed that § 897.40(c) manufacturers are required to register nevertheless, the agency has deleted as proposed failed to satisfy the first and list under section 510 of the act. § 897.40(c). Part 897 does not add part of the Morton Salt test because the Upon consideration of the industry records requirements beyond those act does not grant FDA authority to comment, the agency believes it is more applicable to devices generally under regulate tobacco products and because appropriate for manufacturers to comply existing regulations, e.g., part 803 (21 Congress has repeatedly refused to give with the existing device registration and CFR part 803) (medical device FDA such authority. As discussed in listing requirements in part 807 than to reporting), part 804 (21 CFR part 804) detail in the 1996 Jurisdictional create new requirements in this (medical device distributor reporting), Determination annexed hereto, FDA is regulation. Therefore, as stated earlier, part 807 (registration and listing), and extending jurisdiction over tobacco FDA has deleted proposed § 897.40(a) part 820 (21 CFR part 820) (good products by a lawful application of the and (b) from the rule. manufacturing practice). Section act. Moreover, the records, reports, and Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44541 inspection provisions in sections 510, smokeless tobacco from part 807. Thus, § 897.42—Preemption of State and Local 519, 702, 703, and, in particular, section distributors are only expected to comply Requirements and Requests for 704 of the act, clearly specify the with the medical device distributor Advisory Opinions agency’s authority to inspect regarding reporting requirements in part 804. (5) FDA received several comments restricted devices, including records Retailers have no recordkeeping or that opposed proposed § 897.42, and reports required pursuant to section reporting requirements under part 897. claiming that it was inconsistent with 519 of the act. An inspection of records Notwithstanding these changes to the the process for requesting exemptions from manufacturers, distributors, or rule, FDA believes that the comments from the preemption requirement in retailers regarding tobacco products— misunderstand the purpose of section 521 of the act. The agency also which are restricted devices and which recordkeeping and reporting. The received some comments supporting pursuant to this rule are subject to the records and reports that were described proposed § 897.42 precisely because it reporting requirements of parts 803 and in the 1995 proposed rule were never would have recognized and would have 804—is therefore ‘‘within the authority intended to have a direct role in preserved more stringent State and local of the agency’’ as required by the reducing illegal sales to children and requirements. Supreme Court in Morton Salt (338 U.S. adolescents. Neither were they intended After careful consideration and closer at 652). Moreover, because sections 704 to divert distributor or retailer staff to review of the act, the agency has deleted and 519 of the act define the scope of ministerial functions or to intrude into proposed § 897.42 from the rule. This such requests, by their terms, such business activities. To the contrary, issue is addressed in greater detail in requests would meet the second and records and reports can help firms and section X. of this document. third parts of the Morton Salt test, since FDA ensure compliance with the Under § 897.44 of the 1995 proposed they would not be ‘‘too indefinite and regulations. For manufacturers, rule, FDA would have established goals the information sought [would be] distributors, and retailers, records and of a 50-percent reduction in cigarette reasonably relevant’’ to enforcement of reports demonstrate whether they have use by individuals under the age of 18 the provisions of part 897 (Id.). complied with a particular requirement. years; a 50-percent reduction in Even in the absence of proposed Records are especially valuable in this smokeless tobacco use by males under § 897.40(c), manufacturers, distributors, respect because FDA’s enforcement the age of 18 years; and no increase in and retailers of cigarettes and smokeless strategy relies heavily on site smokeless tobacco use by females under tobacco are subject to the same records inspections to determine whether a the age of 18 years. The agency stated access and inspection requirements as party has complied with a statutory or it would take additional regulatory are any manufacturers, distributors, and regulatory requirement, and records can measures if these goals were not met 7 retailers of restricted medical devices. show or help an agency inspector years after the publication date of the As discussed in this section, these determine whether a firm has a good final rule. requirements are fully consistent with compliance history. Firms that have FDA derived its outcome-based goals the Fourth and Fifth Amendments. good compliance histories usually are from the ‘‘Healthy People 2000’’ (4) Several comments from inspected less frequently than others, objectives. ‘‘Healthy People 2000’’ sets distributors and retailers asserted that whereas firms with poor compliance national health promotion and disease the recordkeeping requirements in histories may be inspected more prevention objectives for Americans. proposed § 897.40(c) would be frequently or more rigorously. The report was a joint effort by the U.S. expensive and especially hard on small Public Health Service (PHS), the businesses. A few comments also Inspections have other important Institute of Medicine (IOM) at the claimed that proposed § 897.40(c) benefits for firms. Inspections can reveal National Academy of Sciences (NAS), would not affect sales to children and areas where firms can improve their almost 300 national membership adolescents, but would instead result in operations. Inspections also apply to organizations such as the American lost business as distributors or retailers firms equally, regardless of their size, so Medical Association (AMA), the would have to take the time to prepare firms that manufacture, distribute, or American Academy of Pediatrics (AAP), and to maintain records. A small sell the same or similar products meet and the Blue Cross and Blue Shield number of comments simply opposed the same conditions or requirements. Association, and all State health proposed § 897.40(c) without providing Furthermore, inspections, and FDA departments. ‘‘Healthy People 2000’’ any reason or said it was ‘‘offensive,’’ enforcement generally, give consumers established a basic goal to reduce by ‘‘intrusive,’’ or would not produce any greater assurance in the products they half the initiation of cigarette smoking useful information during an inspection. purchase because those products are by children and youth by the year 2000. As stated previously in this section, held to the same standards or The agency proposed measuring FDA has revised the rule to delete requirements. progress toward the stated goals by use § 897.40(c) entirely. The agency believes For FDA, records and reports can of an objective, scientifically valid, and that the existing reporting requirements provide information on current industry generally accepted survey, such as the in other regulations (such as part 803 for practices and trends, help identify Monitoring the Future Project (MTFP). medical device reporting (as amended potential problems in a regulatory MTFP, funded by the National Institute by this rule), part 804 for medical device program or in a firm’s or industry’s on Drug Abuse (NIDA) and distributor reporting (as amended by practice, and even conserve agency administered by the Institute for Social this rule), part 807 for registration and resources by letting the agency Research at the University of Michigan, listing (as amended, to exclude concentrate its inspection efforts on has collected data on daily smoking by distributors of cigarettes and smokeless firms with poor compliance histories. 12th graders every year since 1976 and tobacco), and part 820 for good Thus, for these reasons, FDA on smokeless tobacco use by 12th manufacturing practices) make disagrees with those comments graders for the years 1986 to 1989 and proposed § 897.40(c) unnecessary. The suggesting that recordkeeping and 1992 to 1995. agency has also amended the rule to reporting requirements or FDA The agency did not include any exempt distributors of cigarettes and inspections will have no useful purpose. specific additional requirements in the 44542 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

1995 proposed rule, but stated that FDA measures at the time that the final rule product availability limited to black and would propose specific additional is published would be unreasonable white text only; (2) prohibiting all point measures when it publishes a final rule because it would not permit a flexible of purchase advertising; (3) eliminating and invited public comment on what response to future circumstances. It direct mail marketing for cigarettes and additional requirements should be argued, for example, that the same smokeless tobacco; (4) prohibiting all considered. additional regulatory measures outdoor advertising; (5) prohibiting The agency received a number of ‘‘apparently would be triggered at the advertising in publications marketed to comments arguing that the agency specified date regardless of whether the youths, and possibly revising the should wait until it knows specifically reduction in the next 7 years is 49.8 definition of ‘‘adult publications’’; and what progress has been made toward the percent or 2 percent.’’ (6) outlawing all marketing of cigarettes goals before proposing additional Several comments in support of the and smokeless tobacco. One comment regulatory measures. This approach provision also advocated greater recommended plain packaging of would allow the agency to identify flexibility, but for different reasons. cigarettes, and one suggested specific barriers to achieving the goals Because of the serious adverse health broadening the proposed education and to tailor any additional effects linked to the use of tobacco program. requirements to these barriers. Other products, these comments urged the Comments also proposed additional comments argued that FDA must agency not to wait 7 years to evaluate sales restrictions on tobacco products, provide the public an opportunity to progress and institute corrective including stringent licensing comment on specific additional measures. Instead, they recommended requirements, increasing the age of sale regulatory measures before they would interim or ongoing review of to 19, and selling cigarettes in cartons take effect. FDA has decided that there compliance with the regulations and only. is merit to these comments. At this time, progress toward achieving the goals. FDA rejects the comments suggesting therefore, the agency is not proposing FDA agrees it is useful to put in place that the agency intends to eventually additional regulatory measures beyond a system that will allow flexibility in ban all tobacco products, as the agency the restrictions in this regulation and responding to future circumstances. has repeatedly stated that such an the requirements under section 518 of Therefore, the agency has decided to outcome is not the appropriate public the Federal Food, Drug, and Cosmetic review on an ongoing basis the health response under the act. FDA is Act (the act) (21 U.S.C. 360h). The effectiveness of specific provisions. It not proposing the additional restrictions agency instead plans to monitor will rely on data from the MTFP and on advertising or access suggested in the industry compliance with the agency’s other surveys recognized as using sound comments because FDA does not requirements as well as the progress methodology to help measure anticipate at this time that these made toward meeting the stated goals of compliance with the provisions, detect additional measures will be required. reducing the use of tobacco products by loopholes, and evaluate progress in IX. Implementation Dates individuals under the age of 18 within achieving the goals. This will permit 7 years. In the event that additional FDA to identify problem areas in a The Food and Drug Administration measures are necessary to achieve the timely manner and seek public (FDA) has concluded that the provisions goals, the agency retains the authority to comment on whether additional of this rule should become effective 1 propose and issue additional regulatory measures should be considered. year after its date of publication in the requirements in a future rulemaking (7) Some comments objected to any Federal Register, with three exceptions. proceeding. further restrictions. Others argued A 6-month effective date is established FDA received approximately 60 specifically against further advertising for the requirements in § 897.14(a) and individual comments related to this restrictions, saying it is illogical to (b) prohibiting retailers from selling provision, about evenly divided in impose such additional measures cigarettes or smokeless tobacco to support and opposition. Opposition without first considering and attacking persons under age 18 and requiring came primarily from the tobacco other causes for continued smoking retailers to check photographic manufacturing and advertising among youth. A few comments were identification of young purchasers for industries and from tobacco retailers. concerned that the proposed provision proof of age. The requirement in Comments from several State legislators would inevitably result in a complete § 897.34(c) prohibiting sponsorships also opposed additional measures, as ban of all tobacco products, with a few using cigarette or smokeless tobacco did one from a State department of of those charging that this was FDA’s brand names or other indicia of product agriculture. Some comments maintained true intent. identification will be effective 2 years the provision was invalid and One comment objected to the agency from the date of publication of this final unconstitutional; others objected that announcing as part of a final rule rule. Finally, manufacturers will be ‘‘when regulations fail, the answer is not specific measures it will impose, rather required to comply with the registration more regulations.’’ than simply propose, some time in the and listing requirements in part 807, Support for the measure came from future, maintaining that ‘‘ * * * the and the good manufacturing practice national health organizations, State agency will have failed to provide requirements in part 820, 2 years from health departments, and individuals meaningful notice and opportunity to the date of publication of this final rule. who identified themselves as parents, comment.’’ Although the agency specifically public health professionals, educators, Many comments supported additional requested comment on when the various and former smokers. Supporters stressed regulatory measures, if needed, to provisions in the proposed rule should the importance of effective measures to achieve the desired reductions in become effective, FDA received improve the health of current and future tobacco use by young people. Some relatively few comments on this subject. generations. advocated further restrictions on (1) One comment that opposed the (6) One comment opposing the advertising, including: (1) Eliminating rule argued that FDA should give proposed provision contended that all tobacco product advertising except industry an opportunity in a hearing to imposing additional regulatory for point-of-purchase announcements of challenge the ‘‘factual underpinnings’’ Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44543 of the rule before proceeding to the implementation of a very important requirements, found in part 807. The implementation. In contrast, a part of the regulation. agency recognizes that manufacturers supporting comment strongly favored (2) As for the recommendation by one are not accustomed to complying with immediate action to implement the rule, comment that the advertising and these recordkeeping and reporting and a second comment stated that labeling provisions of the rule become requirements and will require postponing implementation by even a effective 6 months after the final rule is additional time in which to develop year ‘‘means that another 500,000 young issued, FDA believes that this period of appropriate compliance procedures. people will become regular users of time is not consistent with the agency’s Therefore, FDA is granting tobacco products.’’ Another supporting policy of allowing sufficient time for manufacturers 2 years from the date of comment recommended that the affected entities to learn about and publication of this final rule to begin effective date for provisions that comply with new regulatory complying with the requirements under prohibit sales to persons under 18 be no requirements. Instead, based on its own part 807. The same reasoning has led more than 90 days from the date the experience and that of other the agency to allow manufacturers the final regulations are issued, and that the Government agencies in regulating same 2-year-period to prepare before effective date for provisions affecting product advertising and labeling, FDA they are required to comply with the advertising and labeling be 6 months has arrived at a period of 1 year from the good manufacturing practice from the date the final regulations are date of publication of this final rule in requirements in part 820. issued. the Federal Register for manufacturers, Finally, the agency is also excepting FDA is not persuaded that a hearing distributors, and retailers to meet most from the 1-year implementation period is needed on the ‘‘factual of the requirements of the rule. In underpinnings’’ of the rule. In the reaching this conclusion, FDA has taken the prohibitions in § 897.34 (c) of preamble to the 1995 proposed rule, the into consideration the time needed to sponsorship using cigarette or agency provided its rationale and comply with all the requirements of the smokeless tobacco brand names or other evidentiary basis for each provision of rule, including time for designing new indicia of product identification. The the regulation; interested persons have labeling and advertising, for printing or agency recognizes that sponsorship of had a full opportunity to submit their filming these new materials, for affixing events is often arranged well in advance comments and any factual supporting new product labels and disseminating and that some event promoters may be data for the agency to consider. Informal new advertising materials, and for using disadvantaged if they are not allowed notice and comment rulemaking does up existing inventories of products, adequate time to replace tobacco not require more. Moreover, the agency supplies of promotional materials, and sponsors who elect to cease sponsoring believes that there would be little to coupons that do not comply with the the event, rather than switch to their gain from holding such a hearing, and new requirements. corporate name. Accordingly, this final that this step would needlessly delay Examples of activities that will rule provides that § 897.34(c) will implementation of the final rule. Full become violative and must cease 1 year become effective 2 years from the date responses to the challenges made by this from the date of publication of this rule of publication of this final rule. and other comments on the factual bases in the Federal Register include vending X. Relationship Between the Rule and for the rule are provided in this machine sales of cigarettes and Other Federal and State Laws document. smokeless tobacco and sales from self- Because FDA has found that service displays (except in the narrowly- This section of the document thousands of children purchase defined locations that are exempted), discusses issues concerning the cigarettes every day, the agency agrees sales of single cigarettes from opened relationship between this rule and other with the supporting comments that packages (‘‘loosies’’), sales of packages Federal and State laws. More restrictions on such sales should be put with fewer than 20 cigarettes, mail-order specifically, sections X.A. and X.B. of into effect as soon as possible. FDA redemption of coupons for tobacco this document analyze comments that recognizes, however, that the States also products, distribution of free tobacco addressed the potential effect upon this have laws restricting youth access to samples, and the sale or distribution of rule of other Federal statutes that tobacco products, some of which may be nontobacco items showing the brand contain express provisions that restrict preempted under section 521 of the act name (alone or in conjunction with any some areas of Federal regulation of by this final regulation. The agency other word), logo, symbol, motto, selling tobacco products. Section X.C. of this intends to allow sufficient time for message, recognizable color or pattern document analyzes comments that applications for exemption from or colors, or any other indicia of product raised the issue of whether this rule preemption to be requested, considered identification identical or similar to, or conflicts with the congressional purpose by the agency, and acted upon. identifiable with, those used for any behind the current regulatory scheme Therefore, FDA has determined that brand of cigarettes or smokeless tobacco. for tobacco products. Section X.D. of § 897.14(a) and (b), which prohibit the Examples of additional requirements this document analyzes comments that sale of tobacco products to individuals that must be met 1 year from the date addressed the issue of whether Congress under the age of 18 and require retailers of publication include all advertising intended for the current regulatory to examine a photographic requirements (except as noted below), scheme for tobacco products to be identification to ensure that the and the requirement that manufacturers exclusive, such that this rule might be purchaser is at least 18 years of age, and not use a trade or brand name of a foreclosed. Finally, sections X.E. and is basic to the goals of this final rule, nontobacco product on a cigarette or X.F. of this document analyze will become effective 6 months from the smokeless tobacco product except as comments that addressed the date of publication of this final rule in specified in § 897.16(a). preemptive effect under the Federal the Federal Register. This should allow The agency is excepting from the 1- Food, Drug, and Cosmetic Act (the act) adequate time for the agency to process year implementation period the that the Food and Drug Administration’s the applications for exemption from requirement that manufacturers comply (FDA’s) regulation of tobacco products preemption while not unduly delaying with the existing registration and listing as drug delivery devices will have upon 44544 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

State and local requirements and upon agency is implementing under § 897.24. 270.215 does not run afoul of 15 U.S.C. State product liability claims. The established name requirement is 1334 because it does not relate to applicable to all devices regulated under smoking and health, the established A. The Federal Cigarette Labeling and the act, and it serves merely to aid name requirement under § 897.24 is Advertising Act consumers in the identification of the also not precluded. (1) A number of comments argued product. Further guidance on the scope of that FDA’s August 11, 1995, proposed The second type of information that preclusion under the Cigarette Act can rule (60 FR 41314) (the 1995 proposed the final rule requires on cigarette be found in the legislative history and rule) is precluded by section 5 of the packages is the statement of intended purpose behind the Cigarette Act. The Federal Cigarette Labeling and use and age restriction required under history and purpose make clear that Advertising Act (the Cigarette Act (15 § 897.25. This statement informs Congress intended 15 U.S.C. 1334 to U.S.C. 1334)). Other comments consumers about the products’ intended preclude only those ‘‘statements’’ that expressed the opposite view, stating that uses and that the products may not be constituted warning or cautionary 15 U.S.C. 1334 did not preclude the sold to persons under the age of 18. statements on cigarette packages. (See 1995 proposed rule. Some of the Neither the established name nor the Cipollone v. Liggett Group, Inc., 112 S. comments that found no preclusion statement of intended use and age Ct. 2608, 2618–19 (1992) (finding that noted that the scope of 15 U.S.C. 1334 restriction is ‘‘relat[ed] to smoking and ‘‘no statement relating to smoking and is narrow, and applies only to cigarette health.’’ Any indirect relationship these health’’ language in 1965 version of the packages, thereby allowing for requirements might have to smoking Cigarette Act referred to the sort of regulation of cigarette advertising and and health is incidental and would be warning provided for in section 4 of that promotion as contemplated by the 1995 too ‘‘tenuous, remote, or peripheral’’ to statute).) 253 (See also H. Rept. 449, 89th proposed rule. After considering all of trigger preclusion under 15 U.S.C. Cong., 1st sess. (1965), reprinted in 1965 the comments, FDA has concluded that 1334(a). (See District of Columbia v. U.S. Code Cong. & Admin. News 2350, none of the rule’s provisions, as Greater Washington Bd. of Trade, 113 S. 2350 (the Cigarette Act prohibits ‘‘the embodied in the final rule, is expressly Ct. 580, 583 n.1 (1992) (‘‘Pre-emption requirement of any other caution precluded by the Cigarette Act. The does not occur * * * if the [law at statement on the labeling of cigarettes following analysis explains this issue] has only a ‘tenuous, remote, or under laws administered by any conclusion. peripheral’ connection with [the subject Federal, State, or local authority’’).) The Cigarette Act contains the to which preemption is applicable], as Clearly, neither § 897.24 nor § 897.25 following provisions pertaining to is the case with many laws of general is a warning or cautionary statement of regulation of cigarettes: applicability’’) (citations omitted).) To the type Congress intended to preclude (a) No statement relating to smoking and find otherwise could render the limiting under 15 U.S.C. 1334. Accordingly, the health, other than the statement required by language of 15 U.S.C. 1334(a) requirements under these sections of the [15 U.S.C. 1333], shall be required on any meaningless. (See New York State final rule are not foreclosed by the cigarette package. Conference of Blue Cross & Blue Shield Cigarette Act. (b) No requirement or prohibition based on Plans v. Travelers Ins. Co., 115 S. Ct. smoking and health shall be imposed under B. The Comprehensive Smokeless State law with respect to the advertising or 1671, 1677 (1995) (finding that overly Tobacco Health Education Act broad construction of the phrase ‘‘relate promotion of any cigarettes the packages of (2) Several comments noted that the to’’ ‘‘would * * * read Congress’s which are labeled in conformity with the 1995 proposed rule would prohibit words of limitation as mere sham, and provisions of this chapter. advertisements for smokeless tobacco [would] read the presumption against (15 U.S.C. 1334 (emphasis added)) from appearing in certain locations and 15 U.S.C. 1334(b) is expressly limited pre-emption out of the law whenever media. One comment stated that any to requirements or prohibitions imposed Congress speaks to the matter with prohibition on advertising under the under State law, that relate to generality’’).) 1995 proposed rule amounts to a advertising or promotion of cigarettes. The agency notes that the established ‘‘compelled absence of advertising,’’ and Thus, 15 U.S.C. 1334(b) is inapplicable name requirement under § 897.24 is is as much a ‘‘statement relating to the to FDA’s regulation under part 897 and analogous to requirements imposed by use of smokeless tobacco and health’’ as does not foreclose FDA from regulating the Bureau of Alcohol, Tobacco and is an explicit message requirement. cigarette advertising or promotion. Firearms (BATF) on cigarette packages. Thus, the comment asserted that such 15 U.S.C. 1334(a), which applies to Under 26 U.S.C. 5723(b), ‘‘[e]very restrictions are expressly precluded by statements on the cigarette package, package of tobacco products * * * shall the Comprehensive Smokeless Tobacco extends to both Federal and State ** * bear the marks, labels, and Health Education Act (the Smokeless regulation. However, the scope of 15 notices, if any, that the Secretary by Act). U.S.C. 1334(a) is narrow, precluding regulation prescribes.’’ Under this Federal and State regulation of statutory provision, BATF has issued 253 Some of the comments take issue with FDA’s cigarettes only to the extent that such regulations requiring, for instance, that application of Federal-State preemption law, regulation would require any statement ‘‘[e]very package of cigarettes shall pointing out that the Supremacy Clause and Tenth (other than the statement required by 15 ** * have adequately imprinted Amendment upon which this law is based have no U.S.C. 1333) ‘‘relating to smoking and thereon, or on a label securely affixed application in determining the relationship between thereto, the designation ‘cigarettes’, the different Federal statutes. FDA is fully aware that health’’ to appear on the cigarette Federal-State preemption law, as well as those cases package. quantity of such product contained such as Cipollone that apply it, do not directly There are two types of information therein, and the classification for tax govern the present situation concerning preclusion that the final rule requires on cigarette purposes, i.e., for small cigarettes, either of Federal regulations by Federal law. However, the packages. The first is the ‘‘established ‘small’ or ‘Class A’, and for large principles contained in Federal-State preemption law provide some general guidance for determining name,’’ such as ‘‘Cigarettes,’’ which is cigarettes, either ‘large’ or ‘Class B’.’’ the scope of preclusion intended by Congress, required by section 502(e)(2) of the act (See 27 CFR 270.215.) In the same way regardless of whether that preclusion is directed at (21 U.S.C. 352(e)(2)), and which the that the requirement under 27 CFR State or Federal law. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44545

Another comment stated that FDA’s Section 897.25 mandates, in part, that C. Conflict With Congressional Purpose proposed restrictions on the advertising packages of smokeless tobacco bear a Behind Current Regulatory Scheme For of smokeless tobacco are foreclosed statement of the products’ intended uses Tobacco Products because they directly affect such and age restriction. Section 897.32(c) A number of comments asserted that advertising in a manner that is ‘‘so requires that advertising for smokeless the 1995 proposed rule conflicts with nearly identical’’ ‘‘in purpose and tobacco include the products’ other Federal statutes that regulate effect’’ to the advertising requirements established names and statements of tobacco products. These comments mandated by the Smokeless Act that their intended uses. (See section focused on three specific statutes: The they fall within that statute’s express 502(r)(1) and (r)(2) of the act.) Cigarette Act, the Smokeless Act, and prohibition of any other Federal For reasons similar to those discussed the Public Health Service Act (the PHS ‘‘statement’’ related to smoking and Act) health. In contrast, some comments with regard to the Cigarette Act, none of stated the position that the 1995 the statements required under §§ 897.24, 1. The Cigarette Act and The Smokeless proposed rule is not expressly 897.25, and 897.32(c) are precluded Act under 15 U.S.C. 4406(a). (See section precluded by the Smokeless Act. (3) A number of comments argued X.A. of this document.) First, the After considering all comments, FDA that the 1995 proposed rule would required statements do not directly has concluded that none of the 1995 conflict with, and would nullify, some proposed rule’s provisions, with one ‘‘relat[e] to the use of smokeless tobacco of the congressional objectives behind exception, is expressly precluded by the and health.’’ Second, the required the Cigarette Act and the Smokeless Act. Smokeless Act. The following analysis statements are not ‘‘statements’’ of the Based on the alleged conflict, some of explains this conclusion. sort precluded by 15 U.S.C. 4406(a) the comments asserted that the general The Smokeless Act contains the because they do not convey any type of provisions of the act must give way to following provision pertaining to cautionary message or warning of the the specific provisions of the Cigarette regulation of smokeless tobacco: sort Congress intended to foreclose. Act and the Smokeless Act. No statement relating to the use of Accordingly, the statements are not FDA disagrees. As explained in smokeless tobacco and health, other than the precluded by 15 U.S.C. 4406(a). sections X.A. and X.B. of this document, statements required by [15 U.S.C. 4402], shall FDA regulation of tobacco products be required by any Federal agency to appear Proposed § 897.36 would have on any package or in any advertisement declared the labeling or advertising of under the authority of the act does not (unless the advertisement is an outdoor cigarettes and smokeless tobacco to be conflict with the Cigarette Act or the billboard advertisement) of a smokeless false or misleading if it contained ‘‘any Smokeless Act, and thus such regulation tobacco product. express or implied false, deceptive, or is clearly capable of coexisting with (15 U.S.C. 4406(a) (emphasis added)) misleading statement, omit[ted] these statutes. (See Connecticut 15 U.S.C. 4406(a) precludes only important information, lack[ed] fair National Bank v. Germain, 112 S. Ct. ‘‘statement[s].’’ Most requirements balance, or lack[ed] substantial evidence 1146, 1149 (1992) (‘‘so long as there is under the final rule, such as those that to support any claims made for the no ‘positive repugnancy’ between two limit the locations or media in which product.’’ Upon review of the comments laws, a court must give effect to both’’) smokeless tobacco may be advertised, and reconsideration of this provision, (citation omitted); Morton v. Mancari, do not constitute ‘‘statements’’ within FDA believes that, in some instances, 417 U.S. 535, 551 (1974) (‘‘The courts the meaning of 15 U.S.C. 4406(a). (See manufacturers of smokeless tobacco are not at liberty to pick and choose Banzhaf v. Federal Communications might have been required under FDA’s among congressional enactments, and Commission, 405 F.2d 1082 (D.C. Cir. proposed rule to incorporate a statement when two statutes are capable of 1968) (holding that the FCC ruling was relating to the use of smokeless tobacco coexistence, it is the duty of the courts, not precluded by the Cigarette Act and health on the package or in the absent a clearly expressed congressional because the ruling did not require advertising of a smokeless tobacco intention to the contrary, to regard each inclusion of any ‘‘statement * * * in product in order to correct an omission as effective’’).) the advertising of any cigarettes’’), cert. of important information or a lack of fair The comments asserted a number of denied, 396 U.S. 842 (1969).) Thus, balance. Similarly, cigarette areas in which the 1995 proposed rule would allegedly conflict with Federal those sections of the final rule that limit manufacturers might have been required law and congressional intent: the location or media in which to include a statement relating to (4) Numerous comments argued that smokeless tobacco may be advertised, as smoking and health on the cigarette the 1995 proposed rule is precluded well as other requirements in the final package. Such requirements would be because Congress, through enactment of rule that do not actually mandate an precluded under the Smokeless Act or affirmative statement, are not expressly the Cigarette Act and the Smokeless Act, the Cigarette Act. Thus, FDA has precluded by the Smokeless Act. intended to foreclose all Federal omitted § 897.36 from the final rule. Only three sections of the final rule agencies other than the Federal Trade actually require inclusion of a The agency notes, however, that Commission (FTC) and the Federal ‘‘statement’’ on the packaging or in the tobacco products, like other products Communications Commission (FCC) advertising of smokeless tobacco. These regulated under the act, are still subject from regulating the labeling and sections are §§ 897.24, 897.25, and to section 502(a) of the act, which advertising of tobacco products. Some of 897.32(c). In addition, proposed provides, in part, that a device shall be the comments criticized the 1995 § 897.36, which is being omitted from deemed to be misbranded ‘‘[i]f its proposed rule, asserting that it would the final rule for reasons discussed later labeling is false or misleading in any cause tobacco product manufacturers to in this section, would have required particular.’’ Any requirement imposed be held to separate and conflicting such a statement. under section 502(a) of the act upon standards of conduct by different As with cigarettes, § 897.24 requires tobacco products is limited, however, to agencies, thus conflicting with that packages of smokeless tobacco bear the extent that it is precluded by the congressional intent to prevent ‘‘diverse, the products’ established names. Smokeless Act or the Cigarette Act. nonuniform, and confusing cigarette 44546 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations labeling and advertising regulations.’’ do not foreclose ‘‘separate’’ Federal (6) Some comments asserted that As a specific example of potential requirements, other than cautionary FDA’s proposed restrictions on certain separate and conflicting Federal health-based statements as discussed in advertising for tobacco products are at standards, some of the comments noted sections X.A. and X.B. of this document. odds with congressional intent to allow that proposed § 897.34 would Although the final rule imposes the continued use of advertising for completely prohibit the use of some requirements on tobacco product these products in conjunction with the promotional items that are exempted by manufacturers, these requirements do statutorily required warnings. FTC from the congressionally mandated not conflict with the Cigarette Act or the FDA disagrees. As discussed in warning under the Cigarette Act. Smokeless Act and, consequently, are sections X.A. and X.B. of this document, FDA disagrees with these comments. not precluded by those statutes. preclusion of Federal regulation of When Congress enacted the Cigarette Moreover, that FTC might allow certain advertising for tobacco products is very Act and the Smokeless Act, it very actions under its statutory mandate does narrow in scope and does not carefully considered the proper scope of not preclude FDA from prohibiting such encompass FDA’s final rule. Moreover, preclusion applicable to Federal actions under a different statutory as one court has noted: agencies in the regulation of tobacco mandate. (See New York Shipping Ass’n [T]here is no anomaly if conduct privileged under one statute is nonetheless condemned products. The express terms of 15 U.S.C. v. Federal Maritime Comm’n, 854 F.2d 1334(a) and 15 U.S.C. 4406(a) clearly by another; we expect persons in a complex 1338, 1367 (D.C. Cir. 1988) (‘‘there is no regulatory state to conform their behavior to reflect the full scope of preclusion of anomaly if conduct privileged under the dictates of many laws, each serving its Federal agencies intended by Congress. one statute is nonetheless condemned own special purpose. Had Congress believed more by another’’), cert. denied, 488 U.S. (New York Shipping Ass’n, 854 F.2d at preclusion to be necessary, it could have 1041 (1989).) 1367) easily expanded the express scope of 15 Thus, the mere fact that certain U.S.C. 1334(a) and 15 U.S.C. 4406(a). (5) Some of the comments asserted that Congress intended that the sole advertising for tobacco products is (See Banzhaf, 405 F.2d at 1089 (Had permitted under the current regulatory Congress intended to foreclose other health-based restraints that were to be imposed on the commerce of tobacco scheme for those products does not types of Federal regulation, ‘‘it might preclude FDA from placing restrictions reasonably be expected to have said so products were to be those provided in the Cigarette Act and the Smokeless Act. on such advertising. directly—especially where it was (7) Some comments alleged that the careful to include a section entitled FDA disagrees with this assertion. 1995 proposed rule would conflict with ‘Preemption’ specifically forbidding First, FDA clearly may exercise legal Federal law and congressional intent designated types of regulatory action’’); authority to regulate tobacco products because it would have an impact on the Central Bank of Denver v. First when the evidence establishes that the commerce of tobacco products. Interstate Bank, 114 S. Ct. 1439, 1448 products have intended uses that fall FDA disagrees. Any proscriptive (1994) (Congress knows how to enact within the act’s definition of a ‘‘drug.’’ regulation of tobacco products legislation expressly).) Indeed, Congress Indeed, the agency has done so in inevitably imposes economic burdens took this very approach with respect to several instances. (See, e.g., United upon commerce of those products. the scope of preemption applicable to States v. 354 Bulk Cartons * * * Trim Thus, following the comments’ line of States under the Cigarette Act when it Reducing-Aid Cigarettes, 178 F. Supp. argument, all proscriptive regulation of drafted 15 U.S.C. 1334(b) in a broad 847, 851 (D.N.J. 1959) (cigarettes cigarettes is foreclosed by the Cigarette manner to encompass ‘‘requirement[s]’’ claimed to reduce weight were drugs Act and the Smokeless Act. As and ‘‘prohibition[s].’’ because they were intended to affect the explained in this section, however, by The discrepancy in Congress’ choice structure or function of the body); enacting 15 U.S.C. 1334(a) and 15 U.S.C. of words with regard to the scope of 15 United States v. 46 Cartons, More or 4406(a), Congress chose the proper level U.S.C. 1334(a) and (b) is significant in Less, Containing Fairfax Cigarettes, 113 of limitation on Federal regulations that its implications. By not including F. Supp. 336, 338–39 (D.N.J. 1953) it concluded was necessary to protect ‘‘requirement or prohibition’’ in 15 (cigarettes claimed to prevent the commerce of tobacco products from U.S.C. 1334(a) and expressly foreclosing respiratory diseases were drugs because being unduly economically burdened. only ‘‘statements’’ relating to smoking they were intended to treat or prevent Because requirements contained in the and health, Congress clearly intended to disease).) Moreover, the comments’ final rule are not precluded under those narrowly limit the scope of foreclosure assertion that health-based constraints provisions, the fact that the of regulation applicable to Federal can be imposed upon tobacco products requirements will have economic agencies. (See Brown v. Gardner, 115 S. only under the Cigarette Act and the consequences upon the commerce of Ct. 552, 556 (1994) (‘‘‘[w]here Congress Smokeless Act necessarily leads to the tobacco does not mean those includes particular language in one erroneous conclusion that much Federal requirements are foreclosed. section of a statute but omits it in and State regulation, such as health- (8) One comment argued that the 1995 another section of the same Act, it is based workplace smoking restrictions proposed rule is precluded because generally presumed that Congress acts and health-based age limits on access, is Congress could not have intended for intentionally and purposely in the foreclosed. As other comments any agency to have the authority to disparate inclusion or exclusion’’’) recognized, Congress obviously did not prohibit the sale of cigarettes. The (citation omitted).) In a similar fashion, intend for such broad preclusion to be comment derived this ‘‘intent’’ from Congress demonstrated an intent to the case. (See Banzhaf, 405 F.2d at 1089 pieces of legislation enacted by restrict the scope of Federal preclusion (finding that ‘‘[n]othing in the [Cigarette Congress that provide for the regulation under 15 U.S.C. 4406(a) by narrowly Act] indicates that Congress had any of specific aspects of cigarettes but do tailoring the language of that subsection. intent at all with respect to other types not prohibit their sale. Thus, given the narrow scope of 15 of regulation by other agencies—much FDA disagrees. Enactment of U.S.C. 1334(a) and 15 U.S.C. 4406(a), less that it specifically meant to legislation giving other agencies the Cigarette Act and the Smokeless Act foreclose all such regulation’’).) authority over particular aspects of Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44547 cigarettes means only that Congress has of section 1926 of the PHS Act. (See 61 Congress has spoken to a particular decided to take those particular actions; FR 1492, January 19, 1996.) issue and whether congressional intent it does not imply that Congress has (10) One comment asserted that the in regard to that issue is clear. (Kofa v. determined that other Federal regulation 1995 proposed rule is precluded by INS, 60 F.3d 1084, 1088 (4th Cir. 1995); is prohibited. Congress can implement section 1926 of the PHS Act because, Metropolitan Stevedore Co. v. Rambo, policy in only one way: passage of a bill ‘‘in the legislative process that led to 115 S. Ct. 2144, 2147 (1995).) Under the by the House and the Senate that is enactment of [section 1926], Congress act, FDA has jurisdiction over products either signed by the President or considered and rejected a variety of that are intended to address disease or approved by an overridden veto. (INS v. specific requirements of the very type to affect the structure or any function of Chadha, 462 U.S. 919, 954–58 (1983); that FDA now proposes.’’ The Supreme the body. (See section 201(g) and (h) of Central Bank, 114 S. Ct. at 1453.) Court, however, has made clear that the act, 21 U.S.C. 321(g) and (h); 60 FR Because Congress has not adopted any courts are ‘‘‘reluctant to draw inferences 41314 at 41463.) Thus, the relevant legislation that specifically prohibits from Congress’ failure to act.’’’ (Brecht language of the act—‘‘intended to affect FDA from regulating tobacco products, v. Abrahamson, 113 S. Ct. 1710, 1719 the structure or any function of the the final rule is not precluded. (1993) (citations omitted).) The mere body’’—does not on its face exclude In summary, FDA’s final rule has been fact that Congress, in enacting section tobacco products. narrowly tailored so that it does not 1926 of the PHS Act, did not Congress is able to exclude and has conflict with the existing statutory incorporate requirements of the type excluded specific products, including scheme governing tobacco products, and FDA is now imposing in no way tobacco products, from a statute’s reach the final rule is not precluded. precludes FDA’s final rule which was when it wishes to do so. For example, issued under the agency’s regulatory Congress has expressly excluded other 2. The PHS Act authority under the act. products from FDA’s jurisdiction under Section 1926 of the PHS Act the act. (See, e.g., section 201(i) of the conditions a State’s receipt of the full D. Occupation of the Field act (21 U.S.C. 321(i)) (excluding ‘‘soap’’ amount of Federal block grants (to be (11) Numerous comments asserted from definition of ‘‘cosmetic’’); section used for prevention and treatment of that the 1995 proposed rule is impliedly 201(s) of the act (excluding ‘‘color substance abuse) upon the recipient precluded by the comprehensiveness of additive’’ from definition of ‘‘food State having in effect a law that makes existing legislation relating to regulation additive’’).) Moreover, Congress has it ‘‘unlawful for any manufacturer, of tobacco products. Several comments expressly excluded tobacco products retailer, or distributor of tobacco argued that Congress has specifically from the reach of other regulatory products to sell or distribute any such reserved the power to regulate tobacco statutes. (See, e.g., 15 U.S.C. product to any individual under the age for itself, and thereby has occupied the 2052(a)(1)(B) (Consumer Product Safety of 18’’ (42 U.S.C. 300x-26(a)(1)). field. A number of comments asserted Act); 15 U.S.C. 1261(f)(2) (Federal (9) Some of the comments argued that that the present system of congressional Hazardous Substances Act); 15 U.S.C. section 1926 of the PHS Act control over tobacco products precludes 2602(2)(B)(iii) (Toxic Substances demonstrates an intent on the part of FDA regulation absent a new mandate Control Act); 21 U.S.C. 802(6) Congress to preserve, and encourage from Congress. (Controlled Substances Act); 15 U.S.C. enforcement of, State youth access FDA disagrees with these comments. 1459(a)(1) (Fair Packaging and Labeling restrictions. The comments asserted that The statutes enacted by Congress for Act).) Indeed, tobacco is excluded from because FDA regulation of youth access regulation of tobacco products do not the definition of ‘‘dietary supplement’’ to tobacco products would have a amount to a comprehensive scheme. under the act, but no similar exclusion preemptive effect upon some State Rather, they address only a few specific appears in the definition of ‘‘drug’’ or regulation in this area, the 1995 aspects relating to regulation of tobacco ‘‘device.’’ See section 201(g), (h), and (ff) proposed rule conflicts with this products. Moreover, even if Congress’ of the act (21 U.S.C. 321(g), (h), and (ff)). congressional intent. Accordingly, actions in this area were The absence of an express exclusion for argued the comments, section 1926 of ‘‘comprehensive,’’ Congress clearly did tobacco products from the act’s the PHS Act precludes FDA from not intend for regulation under the definitions of ‘‘drug’’ and ‘‘device’’ regulating youth access. Cigarette Act and the Smokeless Act to eviscerates the contention that Congress While FDA agrees that section 1926 of be exclusive. (See Banzhaf, 405 F.2d at clearly intended to preclude FDA from the PHS Act indicates a congressional 1089 (finding that Congress did not regulating tobacco products. intent to encourage States to establish intend to foreclose Federal regulation of Second, as recognized by some age limits on the purchase of tobacco cigarettes outside the narrow scope of comments, the fact that statutes such as products, neither the statute’s language preclusion contemplated by the the Cigarette Act and the Smokeless Act nor its legislative history prohibits Cigarette Act).) As explained in greater delegate some regulatory authority over Federal regulation of youth access. The detail in sections X.A., X.B., and X.C. of tobacco products to other Federal restrictions in the final rule regarding this document, the statutes that the agencies does not preclude FDA’s rule. the sale and distribution of tobacco comments cite, whether viewed Numerous Federal agencies have products do not conflict with section individually or collectively, do not overlapping and complementary 1926 of the PHS Act, and, in fact, preclude FDA from regulating tobacco jurisdiction that arises from their facilitate the end result that Congress products. differing missions and expertise. (See, sought—reducing youth smoking—by First, as some comments noted, e.g., Rueth v. EPA, 13 F.3d 227, 228 (7th ‘‘reducing the appeal of cigarettes and Congress has not taken action to exclude Cir. 1993) (EPA and Army Corps of smokeless tobacco to, and limiting from FDA’s jurisdiction tobacco Engineers have concurrent jurisdiction access by, persons under 18 years of products that fall within the act’s under the Clean Water Act); Public age.’’ (See 60 FR 41314 at 41321.) definitions of ‘‘drug’’ and ‘‘device.’’ The Utility Dist. No. 1 v. Bonneville Power Accordingly, FDA’s regulation of youth face of the statute is the first place that Admin., 947 F.2d 386, 395 (9th Cir. access is not precluded by the existence a court must look to determine whether 1991) (FERC has concurrent jurisdiction 44548 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations with other Federal agencies as well as requirements. The comment argued that cooperation with, and continued States over hydroelectric projects), cert. the proposed exclusion from reliance upon, innovative and denied, 112 S. Ct. 1759 (1992); United preemption would cause uniform aggressive State and local enforcement Packinghouse, Food and Allied Workers Federal standards to become displaced efforts is essential. Int’l Union v. NLRB, 416 F.2d 1126, by diverse State and local requirements. FDA believes the requirements it is 1133–34 n.11 (D.C. Cir.) (NLRB and Another comment asserted that, by establishing in this final rule set an EEOC have concurrent jurisdiction over allowing more stringent State and local appropriate floor for regulation of youth racial discrimination claims), cert. requirements, proposed § 897.42 was at access to tobacco products but do not, denied, 396 U.S. 903 (1969).) As odds with the act because Congress did as a policy matter, reflect a judgment discussed in section X.C. of this not intend for FDA’s device regulations that more stringent State or local document, the fact that several agencies to be minimum standards; rather, it requirements are inappropriate. For are already charged with regulating intended for those regulations to be the example, FDA chose 18 as the age below certain aspects of tobacco does not governing standards unless local which cigarettes and smokeless tobacco preclude FDA from asserting circumstances justified an exception. may not be marketed to children and jurisdiction for different purposes. (See Finally, one comment pointed out adolescents. This choice reflected a Banzhaf, 405 F.2d at 1089 (‘‘Nothing in that the 1995 proposed rule would finding that all but four States have a the [Cigarette Act] indicates that permit only those State and local comparable restriction which addresses Congress had any intent at all with requirements that are at least as the most vulnerable population. respect to other types of regulation by ‘‘stringent’’ as the requirements imposed However, many comments argued that a other agencies—much less that it under FDA’s rule. The comment higher age would be more effective. specifically meant to foreclose all such asserted that FDA may not preempt any While FDA has decided not to establish regulation’’).) State laws, however, without first an age above 18 in the final rule, the In conclusion, FDA’s final rule is not showing a ‘‘clear and manifest agency may, under the exemption precluded by the existing regulatory congressional intent’’ to authorize process established under section 521(b) scheme for tobacco products. preemption of those State laws. of the act, defer to those States that As a preliminary matter, two points of conclude that a higher age is more E. Preemption of State and Local clarification are necessary. First, effective and that apply for an Requirements Under Section 521(a) of proposed § 897.42 would not have exemption. the Act caused State and local laws to become In implementing section 521 of the Under proposed § 897.42, State or Federal requirements, as one of the act, FDA has historically interpreted local requirements that are more comments anticipated. Rather, the 1995 that provision narrowly and found it to stringent than, and do not conflict with, proposed rule would have allowed State have preemptive effect only for those requirements imposed under FDA’s and local laws to remain in force subject State and local requirements that in fact final rule would not have been solely to State or local enforcement. clearly impose specific requirements preempted under section 521 of the act Second, proposed § 897.42 would not with respect to specific devices that are (21 U.S.C. 360k). have ‘‘resuscitated’’ State and local laws manifestly in addition to analogous (12) Several comments supported the that would otherwise be preempted by Federal requirements. (See § 808.1(d) intended exclusion from preemption the Cigarette Act or the Smokeless Act, (21 CFR 808.1(d)).) Moreover, section under proposed § 897.42, noting that it as some of the comments anticipated. 521 of the act ‘‘does not preempt State is essential that State and local officials Instead, the exclusion from preemption or local requirements that are equal to, retain the ability to enact and enforce in proposed § 897.42 would have or substantially identical to, laws which they believe are most applied only to preemption under requirements imposed by or under the effective when actively enforced at the section 521 of the act. act’’ (§ 808.1(d)(2)). local level. Upon consideration of all of the The agency’s assertion of jurisdiction In contrast, several comments took comments relating to proposed § 897.42, over tobacco products does not preclude issue with the proposed exclusion and the agency recognizes that significant any State or local requirements other asserted that regulation of tobacco concerns have been raised with regard than those expressly preempted by products by FDA as drug delivery to the validity of FDA’s proposed section 521(a) of the act. Moreover, devices would result in the preemption preemption exclusion for all more consistent with FDA’s interpretation of of State and local laws. The comments stringent State and local legislative section 521(a) of the act, only a limited characterized the ‘‘blanket’’ exclusion enactments. Most notably, the agency number of State and local requirements from preemption under proposed concurs that the notice and comment are preempted and even those may § 897.42 as being at odds with the process of the current rulemaking does qualify for exemption from preemption statutory preemption established by not provide the type of opportunity for under section 521(b) of the act. section 521(a) of the act and with the an oral hearing contemplated under Examples of State and local laws FDA exemption procedures established by section 521(b) of the act. In light of this believes are preempted, consistent with section 521(b) and by FDA’s regulations. concern, FDA has deleted proposed its longstanding approach to Several comments argued that § 897.42. implementing section 521 of the act, are proposed § 897.42 would conflict with The agency’s 1995 proposed rule to the following: congressional intent behind the act. One exclude all more stringent State and • More stringent age restrictions—Three comment noted that preemption under local requirements from any preemptive States restrict cigarette sales to anyone section 521(a) of the act was intended to effect under this rule was based on a under 19 years of age, and one State has establish national uniformity in medical recognition of the pioneering and 21 years as the minimum age. These device regulation, protecting such continuing role in the area of regulation restrictions are preempted because they products from onerous burdens on of youth access to tobacco products that are more stringent than the final rule, interstate commerce created by a States have played, particularly certain which prohibits sales only to patchwork of State and local active tobacco-control States. Federal individuals under age 18. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44549

• Restrictions on the distribution of free displays are preempted to the extent age for persons selling tobacco products. samples of tobacco products— that they are different from, or in These restrictions are not preempted Approximately 40 States, the District of addition to, the final rule, which allows because the final rule does not establish Columbia, and many local governments free-standing displays but restricts the specific counterpart regulations or other restrict the distribution of free samples location, format, and content of such specific requirements relating to age of tobacco products. For example, displays. restrictions on persons who sell tobacco Nebraska bans samples, coupons, and • Requirements relating to identification products. rebate offers for smokeless tobacco. checks for purposes of age verification— • Tobacco excise taxes—All 50 States Oklahoma and several other States Requirements relating to identification and the District of Columbia have excise prohibit the free distribution of tobacco checks for purposes of age verification taxes on cigarettes, and 42 States have to individuals under 18 and within 500 are preempted to the extent that they are excise taxes on smokeless tobacco. feet of schools, playgrounds, or other different from, or in addition to, the These excise taxes are not preempted locations used primarily by individuals final rule, which requires identification because they are not ‘‘requirements under 18. Approximately 12 States checks for anyone under the age of 26. applicable to a device’’ within the restrict where free samples may be Examples of State or local laws or meaning of section 521(a) of the act. distributed. These restrictions are regulations that are not preempted (See § 808.1(d)(8).) preempted to the extent that they are include: • Access-control mechanism different from, or in addition to, the • Equivalent age restrictions—Most requirements for vending machines— final rule, which prohibits any States establish 18 years as the Approximately six States and some distribution of free samples. minimum age for purchasing cigarettes local governments require access- • Restrictions on placement of vending or smokeless tobacco. These restrictions control mechanisms on vending machines—Most States, the District of are not preempted because they are machines, such as locking devices or Columbia, and several local equal to, or substantially identical to, token acceptors. These requirements are governments impose restrictions on the requirements imposed under the final not preempted because the final rule placement of vending machines. These rule. (See § 808.1(d)(2).) does not establish specific counterpart restrictions are preempted to the extent • Restrictions on the sale or distribution regulations or other specific that they are different from, or in of tobacco products—Several local requirements relating to access-control addition to, the final rule, which governments restrict the locations (such mechanisms for vending machines. • prohibits the use of vending machines as public parks, public buildings, etc.) at Posting of signs—Approximately 24 except in certain locations and under which tobacco products may be sold or States have statutes requiring certain certain conditions. distributed. These restrictions are not parties to post signs at vending • Restrictions on outdoor advertising— preempted because the final rule does machines stating that sales to underage Restrictions on outdoor advertising are not establish specific counterpart persons are prohibited. One State preempted to the extent that they are regulations or other specific requires owners or operators of vending different from, or in addition to, the requirements relating to the locations at machines to post signs warning of the final rule, which restricts the location, which tobacco products may be sold or dangers of cigarette use during format, and content of such advertising. distributed. pregnancy. In addition, many local For example, Ordinance 307, which was • Restrictions on smoking in public governments require that signs be enacted by the Mayor and City Council places—Approximately 48 states, the posted in areas in which smoking is of Baltimore, MD, prohibits the District of Columbia, and many local prohibited by law. These requirements placement of any sign that ‘‘advertises governments have some restrictions on are not preempted because the final rule cigarettes in a publicly visible location,’’ smoking in public places. These does not establish specific counterpart i.e., on ‘‘outdoor billboards, sides of restrictions are not preempted because regulations or other specific building[s], and free standing the final rule does not establish specific requirements relating to the posting of signs. signboards.’’ This ordinance was upheld counterpart regulations or other specific • License requirements—Some local by the Fourth Circuit in the face of a requirements relating to restrictions on governments impose license challenge based on preemption under smoking in public places. requirements upon retailers of tobacco the Cigarette Act and on First • Penalties on underage persons who products. These requirements are not Amendment grounds. (See Penn purchase tobacco products—These preempted because they are not Advertising of Baltimore, Inc. v. Mayor penalties are not preempted because the ‘‘requirements applicable to a device’’ and City Council of Baltimore, 63 F.3d final rule does not establish specific within the meaning of section 521(a) of 1318 (4th Cir. 1995), vacated and counterpart regulations or other specific the act. (Cf. § 808.1(d)(3).) remanded, 116 S. Ct. 2574 (1996).) requirements relating to penalties on The examples set forth above reflect Subsequently, the Supreme Court underage persons who purchase tobacco the types of State or local requirements vacated judgment in Penn Advertising products. • of which the agency is currently and remanded the case to the United Prohibition on use or possession of aware. 254 There may be other State or States Court of Appeals for the Fourth tobacco products by underage persons— local requirements pertaining to Circuit for further consideration in light These prohibitions are not preempted cigarettes and smokeless tobacco. With of 44 Liquormart, Inc. v. Rhode Island, because the final rule does not establish regard to particular State or local 116 S. Ct. 1697 (1996). If Ordinance 307 specific counterpart regulations or other requirements that are not described is ultimately upheld in its present form, specific requirements relating to above, any State, political subdivision, it will be preempted under section 521 prohibitions on the use or possession of or other interested party may, in of the act to the extent that it is different tobacco products by underage persons. accordance with § 808.5 (21 CFR 808.5), from, or in addition to, the final rule. • Age restrictions on persons who sell • Prohibitions and restrictions relating tobacco products—Some local 254 State Legislated Actions on Tobacco Issues, to free-standing displays—Prohibitions governments have statutes or Coalition on Smoking OR Health, Bartelt, J., ed., and restrictions relating to free-standing regulations that establish a minimum December 31, 1995. 44550 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations request an advisory opinion from the preempted if FDA asserts jurisdiction cultural events and of valuable tobacco agency as to whether such State or local over tobacco products as drug delivery trademarks. Comments argued that requirements are preempted. devices. § 897.16(a) effects a taking of State and local requirements that are Based on FDA’s understanding of the intellectual property because it preempted by the requirements of FDA’s theories of recovery advanced in prohibits the use of nontobacco final rule may be exempted from tobacco product liability cases, and the trademarks (with grandfathered preemption in accordance with section nature of the Federal requirements being exceptions) to market tobacco products. 521(b) of the act and its implementing established in the final rule, FDA does Several comments argued that regulation, part 808 (21 CFR part 808). not expect any of these Federal § 897.16(c) effects a taking of vending Section 521(b) of the act and part 808 requirements to preempt any tort claims machines and self-service displays, as provide that FDA may, by regulation relating to tobacco products. The well as contractual rights to place issued after notice and an opportunity following analysis explains this tobacco vending machines on other for an oral hearing, exempt a State or conclusion. people’s property. Comments argued local device requirement from The Supreme Court recently held that that the requirement that advertising use preemption under such conditions as the scope of preemption under section only black text on white background in the Commissioner of Food and Drugs 521(a) with regard to State product § 897.32(a) effects a taking because (the Commissioner), may prescribe if the liability claims is very narrow. Indeed, nonconforming signs—for buses and on requirement is: (1) More stringent than a plurality of the Court noted that ‘‘few, billboards, for example—will have to be Federal requirements applicable to the if any, common-law duties have been destroyed, as would tobacco device under the act; or (2) required by pre-empted by [section 521(a)].’’ advertisements on billboards and signs compelling local conditions, and Medtronic, Inc. v. Lohr, 64 U.S.L.W. within 1,000 feet of schools and public compliance with the State or local 4625, 4634 (U.S. June 26, 1996) (Nos. playgrounds under § 897.30(b). requirement would not cause the device 95–754 and 95–886) (plurality opinion). Comments also argued that the to be in violation of any requirement Preemption occurs ‘‘only where a proposed ban on mail-order sales of applicable under the act. particular state requirement threatens to tobacco products would effect a taking By a separate document to be interfere with a specific federal of mail-order businesses. Mail-order published in the Federal Register, FDA interest.’’ Medtronic, 64 U.S.L.W. at sales, however, are not prohibited under will be informing all State and local 4634. Thus, State requirements of the final rule. Many retailers argued that governments that they may submit ‘‘general applicability’’ such as State the prohibition of self-service displays applications to exempt from preemption product liability claims are not and the corresponding requirement that under section 521(b) of the act those preempted, except where they have ‘‘the tobacco products be shelved behind State and local requirements pertaining effect of establishing a substantive sales counters violate the Fifth to cigarettes and smokeless tobacco that requirement for a specific device’’ that Amendment. are preempted by the final rule. A State is ‘‘different from, or in addition to,’’ a The Food and Drug Administration or local requirement will be exempted specific requirement imposed under the (FDA) disagrees that any of these from preemption under section 521(b) of act (§ 808.1(d); Medtronic, 64 U.S.L.W. provisions effects a taking in violation the act if the State or local requirement: at 4633–34). Moreover, Federal of the Fifth Amendment. meets the exemption requirements requirements must be ‘‘applicable to the In its final form, § 897.16(a) prohibits established under that section and is device’’ in question, and they preempt manufacturers from using the trade or consistent with the goals in the final State product liability claims only if the brand name of a nontobacco product as rule. Exemptions from preemption that Federal requirements are ‘‘specific the trade or brand name of a cigarette or FDA grants apply only to preemption counterpart regulations’’ or ‘‘specific’’ to smokeless tobacco product, with the under section 521 of the act. a ‘‘particular device’’ (§ 808.1(d); exception of those names on both Because the issues raised by these Medtronic, 64 U.S.L.W. at 4634). tobacco and nontobacco products that applications for exemption will be In summary, FDA is aware of no tort were sold in the United States on similar or related, the Commissioner has claims against tobacco products that January 1, 1995. In its final form, determined that it would be will be preempted by the Federal § 897.16(c) prohibits the use of vending advantageous for all concerned to requirements being established in the machines and self-service displays to propose a single regulation granting or final rule. sell cigarettes and smokeless tobacco, denying exemptions for each particular XI. Miscellaneous Constitutional Issues except that vending machines State or local requirement, and, if (including those that sell packaged, A. Takings Under the Fifth Amendment necessary, to hold a single hearing single cigarettes) and self-service covering all applications for exemption (1) Several industry, retail, and displays may be used to sell these from preemption for requirements individual comments argued that parts tobacco products in adult-only pertaining to cigarettes and smokeless of the regulations effect takings establishments. (As proposed in the tobacco. Although each application will compensable under the Fifth 1995 proposed rule, § 897.16(c) would be considered as part of a single Amendment’s Takings Clause (the have prohibited their use entirely.) proceeding, each individual application Takings Clause), which provides that In its final form, § 897.30(b) prohibits will be evaluated on its merits and the ‘‘private property [shall not] be taken for tobacco product advertisements within circumstances applicable to the public use, without just compensation.’’ 1,000 feet of a public playground or a particular submitting jurisdiction. For example, comments argued that secondary or elementary school. In its proposed § 897.34 will restrict or even final form, § 897.32(a) permits only F. Preemption of State Product Liability prohibit tobacco manufacturers’ use of advertising that uses black text on a Claims Under Section 521(a) of the Act their trademarks and copyrighted white background (except in adult (13) Several comments asserted that, property, or that it will deprive industry publications and in facilities where under section 521(a) of the act, State members both of the goodwill generated persons under 18 are not present or product liability claims would be by their sponsorship of sports and permitted). In its final form, § 897.34(a) Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44551 prohibits the sale of nontobacco items or owner of the secret protects his interest is on the protection of consumers, not the services that bear the brand names or from disclosure to others,’’ (that is, it is protection of producers as an incentive to other indicia of identification for property only insofar as others are product innovation. cigarettes or smokeless tobacco. In its excluded from its use) and that it has (Bonito Boats, Inc. v. Thunder Craft final form, § 897.34(c) prohibits the ‘‘many of the characteristics of more Boats, Inc., 489 U.S. 141, 157 (1989)) sponsorship of athletic, musical, tangible forms of property’’—for When associated with goodwill, cultural, or other social or cultural example, trade secret information is trademarks also share—with trade secret events in the brand names or other assignable, it can form the res of a trust, information and copyrights—the indicia of identification for cigarettes or and it passes to a trustee in bankruptcy features of more tangible property. For smokeless tobacco. (Ruckelshaus, 467 U.S. at 1002). example, the Lanham Act (15 U.S.C. A takings analysis begins with a Vending machine owners may have 1053 et seq.) allows assignment of a determination of what interest a person contracts that give them exclusive rights trademark only ‘‘with the goodwill of has in the thing that is allegedly taken— to sell tobacco products at a particular the business in which the mark is used in this case, in vending machines and location. These contract rights would or with that part of the goodwill of the self-service displays, copyrighted typically be assignable, they may form business connected with the use of and material, and trademarks and the res of a trust (see, e.g., Wadsworth symbolized by the mark’’ (15 U.S.C. goodwill—and whether that interest v. Bank of California, 777 P.2d 975, 978 1060). Indeed, when Congress amended ‘‘can be considered property for the (Or. Ct. App. 1989)), and rights of action the Lanham Act in 1988 to allow intent- purposes of the Taking Clause of the based upon them can become part of a to-use applications for registration of Fifth Amendment.’’ (See Ruckelshaus v. bankruptcy estate (e.g., In re Ryerson, trademarks, it prohibited assignment of Monsanto Co., 467 U.S. 986, 1001 739 F.2d 1423, 1425 (9th Cir. 1984)). such applications to be ‘‘consistent with (1984).) If a cognizable property interest (See also U.C.C. 9–106.) Such vending the principle that a mark may be validly is identified, the Supreme Court has machine owners’ contracts may assigned only with the business or developed three factors for courts to therefore create contract rights that goodwill attached to the use of the consider in assessing whether a would be compensable property under mark’’ (S. Rept. 515, 100th Cong., 2d regulatory taking has occurred: (1) The the Takings Clause. sess. 31 (1988), reprinted in 1988 character of the governmental action; (2) Material can be copyrighted if it is an U.S.C.C.A.N. 5577, 5593–5594). its economic impact; and (3) its original work of authorship—such as Owners of trademarks also have rights interference with reasonable written, musical, pictorial, or graphic of exclusive use of marks—that is, investment-backed expectations (Id. at work—that is fixed in a tangible against infringement—because ‘‘[b]y 1005). medium of expression from which the applying a trademark to goods produced work can be reproduced (17 U.S.C. by one other than the trademark’s 1. The Interests at Issue 102(a)). By Federal statute a copyright is owner, the infringer deprives the owner Some of the interests affected by the assignable (17 U.S.C. 201), and there are of the goodwill which he spent energy, final rule—vending machines, self- rights to exclusive use (17 U.S.C. 106), time, and money to obtain’’ (Inwood service displays, and existing subject to certain limitations (17 U.S.C. Laboratories, Inc. v. Ives Laboratories, nonconforming advertising on signs and 107–20) and enforceable through Inc., 456 U.S. 844, 854 n.14 (1982)). billboards, for example—is tangible infringement actions (e.g., 17 U.S.C. ‘‘Registration bestows upon the owner property, whereas contract rights, 501). A copyright can form the res of a of the mark the limited right to protect trademarks and goodwill, and trust (Bartok v. Boosey & Hawkes, Inc., his goodwill from possible harm by copyrighted material (e.g., the 523 F.2d 941, 948 (2d Cir. 1975)) and it those uses of another as may engender nonconforming copyrighted material on can become property of an estate in a belief in the mind of the public that signs and billboards) affected by these bankruptcy (United States v. Inslaw, the product identified by the infringing provisions are intangible property Inc., 932 F.2d 1467, 1471 (D.C. Cir. mark is made or sponsored by the owner interests. 1991), cert. denied, 502 U.S. 1048 of the mark’’ (Societe Comptoir de Tangible personal property—such as (1992)). Sharing many of the L’Industrie Cotonniere Etablissements vending machines, self-service displays, characteristics of more tangible Boussac v. Alexander’s Dep’t Stores, and signs and billboards advertising property, a copyright is also Inc., 299 F.2d 33, 36 (2d Cir. 1962)). tobacco products—is property for compensable property under the Like trade secret information, a purposes of the Takings Clause (see Takings Clause. trademark can be the res of a trust (see United States v. General Motors Corp., Trademarks are words, names, Coca-Cola Bottling Co. v. Coca-Cola Co., 323 U.S. 373, 383–84 (1945)), although symbols, devices, or combinations 988 F.2d 414, 430–432 (3d Cir. 1993)) personal commercial property is thereof that a person uses, or intends to and it can pass to the trustee in afforded less protection than real use and has applied to register, to bankruptcy (Inslaw, 932 F.2d at 1471). property under the Takings Clause (see, identify or distinguish his or her goods The agency notes that a trademark e.g., Lucas v. South Carolina Coastal from others on the market and to itself, unaccompanied by goodwill, Council, 112 S. Ct. 2886, 2899 (1992)). identify their source (15 U.S.C. 1127). lacks these characteristics of property. Intangible interests may be The primary purpose of trademarks is to The agency therefore believes that a compensable under the Takings Clause protect consumers by preventing trademark itself is not property as well. For example, in Ruckelshaus, deceitful marketing of one product or cognizable under the Takings Clause. the Supreme Court determined that service as another. As the Supreme Based on the foregoing analysis, trade secret information—which is Court has stated, however, the agency believes that a [t]he law of unfair competition has its roots intangible—was property compensable in the common-law tort of deceit: its general trademark and the accompanying under the Takings Clause. The Court concern is with protecting consumers from goodwill together are property noted that the extent of the property confusion as to source. While that concern cognizable under the Takings Clause. right in trade secret information ‘‘is may result in the creation of ‘‘quasi-property These conclusions are consonant with defined by the extent to which the rights’’ in communicative symbols, the focus the recognition that a trademark has 44552 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations value as property for the owner ‘‘only in regulation allows no goodwill to inure characterized as a physical invasion by the sense that a man’s right to the to the benefit of the owner. the Government (e.g., United States v. continued enjoyment of his trade For purposes of the following analysis Causby, 328 U.S. 256, 261–62 (1946) reputation and the good will that flows of whether the regulations effect a (characterizing Government’s use of from it, free from unwarranted taking, the agency assumes that flight path just over property as physical interference by others, is a property copyrighted material, the interests in invasion)) than when the interference is right, for the protection of which a trademarks and associated goodwill, caused by a regulatory program that trademark is an instrumentality’’ contracts, self-service displays, vending ‘‘adjust[s] the benefits and burdens of (Hanover Star Milling Co. v. Metcalf, machines, and tobacco advertising on economic life to promote the common 240 U.S. 403, 413 (1916); see also S. signs and billboards are property good’’ (Penn Central, 438 U.S. at 124). Rept. 1333, 79th Cong., 2d sess. (1946), interests that may be compensable Courts have accorded particular reprinted in 1946 U.S. Code Cong. & under the Takings Clause if taken. deference to governmental action taken Admin. News 1274, 1277 (‘‘the 2. The Takings Analysis to protect the public interest in health, protection of trade-marks is merely safety, and welfare. (See Keystone protection to goodwill’’)). [W]hat constitutes a ‘‘taking’’ for purposes Bituminous Coal Ass’n v. DeBenedictis, Nevertheless, this conclusion must be of the Fifth Amendment has proved to be a 480 U.S. 470, 488 (1987); Penn Central, reconciled with Supreme Court problem of considerable difficulty. While this 438 U.S. at 125–26; Atlas Corp. v. Court has recognized that the ‘‘Fifth precedent on takings of goodwill. In Amendment’s guarantee * * * [is] designed United States, 895 F.2d 745, 757–58 particular, the comments cited Kimball to bar Government from forcing some people (Fed. Cir.), cert. denied, 498 U.S. 811 Laundry Co. v. United States, 338 U.S. alone to bear public burdens which, in all (1990).) In addition, the Supreme Court 1 (1949), for the proposition that the fairness and justice, should be borne by the has repeatedly rejected compensation Takings Clause requires compensation public as a whole,’’ this Court, quite simply, claims when the Government has for a regulatory taking of goodwill. The has been unable to develop any ‘‘set formula’’ regulated in order to prevent harmful general rule is that the Takings Clause for determining when ‘‘justice and fairness’’ activity: does not require compensation for require that economic injuries caused by The power which the States have of goodwill when the Government takes a public action be compensated by the prohibiting such use by individuals of their place of business because the business’s government, rather than remain property as will be prejudicial to the health, disproportionately concentrated on a few goodwill may be transferred to a new the morals, or the safety of the public, is persons. not—and, consistently with the existence and place of business (338 U.S. at 11–12 and (Penn Central Transp. Co. v. City of New 15; see also General Motors, 323 U.S. at safety of organized society, cannot be— York, 438 U.S. 104, 123–24 (1978) burdened with the condition that the State 379 (when Government permanently (citation omitted) (alterations and must compensate such individual owners for takes land, ‘‘compensation for that deletions in original); Ruckelshaus, 467 pecuniary losses they may sustain, by reason interest does not include * * * [even] U.S. at 1005) of their not being permitted, by noxious use the loss of goodwill which inheres in Still, the Supreme Court has identified of their property, to inflict injury upon the the location of the land’’)). In Kimball, three factors for courts to consider in community. however, the Court allowed assessing whether a regulatory taking (Mugler v. Kansas, 123 U.S. 623, 669 compensation for loss of a laundry has occurred: (1) The character of the (1887) (holding that State law business’s goodwill, or going-concern governmental action; (2) its economic prohibiting manufacture or sale of value, incident to the physical taking of impact; and (3) its interference with alcohol effected no taking of brewery the laundry. It did so because the reasonable investment-backed even though law entirely destroyed Government intended to operate the expectations (Ruckelshaus, 467 U.S. at brewery’s beneficial use); see also laundry temporarily during wartime, 1005; Penn Central, 438 U.S. at 124). Keystone, 480 U.S. 470 (1987) (no taking after which the laundry would revert to The force of any one of these factors by law prohibiting mining of coal); the business; the business could not may be ‘‘so overwhelming * * * that it Goldblatt v. Town of Hempstead, 369 invest in a new laundry because it disposes of the taking question’’ U.S. 590 (1962) (no taking effected by would someday be the owner of two (Ruckelshaus, 467 U.S. at 1005 (finding regulation that closed gravel pit); Miller laundries, neither of which it could then interference with reasonable v. Schoene, 276 U.S. 272 (1928) (no operate profitably (338 U.S. at 14–15). investment-backed expectations by use taking effected by State-ordered felling The Court therefore likened the of trade secret information in pesticide of cedar trees); Hadacheck v. Sebastian, situation to those in which the approval process to be decisive)). So, for 239 U.S. 394 (1915) (no taking effected Government takes a utility with the example, if the economic impact is to by ordinance prohibiting operation of intention of operating it itself; the going- rob real property of ‘‘all economically brickyard in residential area); Reinman concern value of the utility is taken in beneficial uses,’’ the regulation effects a v. City of Little Rock, 237 U.S. 171 those cases and is therefore taking (Lucas, 505 U.S. at 1019 (1915) (no taking effected by ordinance compensable (Id. at 12–13). (emphasis in original); see also id. at prohibiting stable in residential area); Kimball and General Motors therefore 1027–1028 (limiting holding to real Powell v. Pennsylvania, 127 U.S. 678 indicate that goodwill is compensable property)). When examined in light of (1888) (no taking effected by law under the Takings Clause only when no these three factors, FDA’s proposed preventing manufacture of margarine)). business remains after a taking to whose regulations do not effect a compensable First, the final rule’s interference with benefit the goodwill may inure. (See taking under the Fifth Amendment of property interests cannot be also District of Columbia v. 13 Parcels the Constitution. characterized as a physical invasion of of Land, 534 F.2d 337, 349 & n.7 (D.C. property. The final rule prohibits some Cir. 1976).) With respect to goodwill 3. The Character of the Governmental uses of some types of property, but the associated with a trademark, use of Action Government is neither using nor which is limited by a regulation, these With respect to the first factor, courts acquiring property under the regulations cases indicate that the property interest are more likely to find a taking when the (Penn Central, 438 U.S. at 128). For may be compensable only if the interference with property can be example, certain uses of vending Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44553 machines, self-service displays, and trademarks used on tobacco products in prohibited or curtailed, other uses will signs and billboards are prohibited, but the United States on January 1, 1995). remain once the final rule takes effect. the Government is itself neither using These regulations substantially That is, under § 897.16(a), nontobacco nor acquiring them. The same is true of advance, and are rationally related to, trademarks may not be used to market the intangible property at issue, FDA’s legitimate interest in promoting tobacco products (with the exception of contracts, copyrights, and trademarks the public health and reducing harm by trademarks that had such uses before and the associated goodwill: The agency limiting both youth access to tobacco January 1, 1995) and so they may lose is prohibiting certain uses—indeed, all products and, as discussed in the the (speculative) value of such licensing uses of tobacco trademarks on context of the First Amendment, their arrangements, but they retain the vast nontobacco items, including when promotion to youth. (See Keystone, 480 bulk of their value as trademarks for the tobacco companies have also registered U.S. at 485; see also Pace Resources, product or brand for which they were the tobacco mark as a mark for Inc. v. Shrewsbury Township, 808 F.2d originally developed, and they retain nontobacco products or services—but 1023, 1030 (3d Cir.) (‘‘[T]he the value of their potential use to market the Government is not itself using these governmental action is entitled to a all legal, nontobacco products. Under contract rights, copyrights, or presumption that it does advance the §§ 897.30(b) and 897.32(a), some trademarks (and thereby tobacco public interest.’’), cert. denied, 482 U.S. copyrighted advertising material that companies’ goodwill). It ‘‘has taken 906 (1987).) Moreover, they are directed appears on billboards or signs within nothing for its own use’’ (Connolly v. at stopping activity that is illegal in 1,000 feet of a school or playground or Pension Benefit Guar. Corp., 475 U.S. every State: Sales of tobacco products to that is not black text/white background 211, 224 (1986)). those under the age of 18 (Keystone, 480 may be rendered useless when the rule U.S. at 492 n.22). This factor of the becomes effective (the copyrighted Second, these final regulations seek to takings analysis indicates that these design itself may be used in other promote the public health by limiting regulations effect no takings. venues, such as adult publications or in access to tobacco products by adult-only establishments). Under 4. The Economic Impact of the consumers in the age group most likely § 897.34(a), tobacco product brand Governmental Action to become addicted to them: Those names and logos may be used only to under the age of 18. The regulations are The second factor to consider is the market tobacco products; they therefore intended to help reduce significantly economic impact of the governmental lose the value of any use on nontobacco the harms that use of tobacco products action. ‘‘There is no fixed formula to products and, under § 897.34(c), they among this age group causes. They do determine how much diminution in lose the value of any use to sponsor so by prohibiting the sale of tobacco market value is allowable without the events when the rule becomes effective. products to persons under the age of 18; fifth amendment coming into play’’ By and large, however, tobacco that is, the regulations require modes of (Florida Rock Indus., Inc. v. United copyrights and trademarks will retain sale through which the retailer can States, 791 F.2d 893, 901 (Fed. Cir. significant, economically viable uses verify the age of the purchaser or to 1986), cert. denied, 479 U.S. 1053 when the rule becomes effective. which only those 18 or over will have (1987)). It is clear, however, that a Tobacco companies have, however, access. In particular, the final rule regulation’s economic impact may be registered some of their tobacco permits vending machines and self- great without rising to the level of a trademarks (e.g., Skoal Bandit on a race service displays and accompanying taking. (See Pace Resources, 808 F.2d at car as an entertainment service mark, advertising only in places to which 1031 (citing Hadacheck v. Sebastian, Marlboro on tennis caps), or marks that young people do not have access. 239 U.S. 394 (1915)) (no taking even incorporate a tobacco trademark (e.g., The final regulations also limit given reduction in value from $800,000 The Marlboro Country Store on, for promotion of tobacco products to to $60,000); Village of Euclid v. Ambler example, hats and boots; Skoal Pro persons under the age of 18. They do so Realty Co., 272 U.S. 365 (1926) (no Rodeo promoting and sponsoring by prohibiting certain venues for taking despite 75 percent diminution in rodeos; Winston West promoting and tobacco advertising, namely, within value).) Mere denial of the most sponsoring auto racing events), as marks 1,000 feet of schools and public profitable or beneficial use of property for nontobacco products, services, or playgrounds. They also require black does not require a finding that a taking events. Under § 897.34, all use of these text/white background advertisements has occurred. (See Florida Rock, 791 registered nontobacco marks will be in remaining venues with the exception F.2d at 901; see also Andrus v. Allard, prohibited when the rule becomes of adult newspapers, magazines, 444 U.S. 51, 66 (1979).) Rather, courts effective. With respect to these periodicals, and other publications, and look for drastic interference with a registered nontobacco trademarks, and in adult-only establishments. They also property’s possible uses. (See Pace indeed with respect to all tobacco prohibit use of tobacco trademarks on Resources, 808 F.2d at 1031.) company trademarks, their associated nontobacco products and in the In assessing whether a regulation goodwill will remain with the tobacco sponsorship of events. As a effects a taking, the Supreme Court has companies and will inure to their consequence, use of tobacco industry considered whether the regulation benefit in the sale of tobacco products. trademarks, copyrights, and advertising denies an owner the ‘‘economically Accordingly, this factor of the takings techniques is limited, although not viable use’’ of his property. (See, e.g., analysis indicates that the final rule ended. Nonconforming signs and Keystone, 480 U.S. at 499.) Courts focus effects no taking of these interests. billboards will be prohibited, thereby on the remaining uses permitted and the Section 897.16(c) prohibits the use of reducing the remaining useful life of residual value of the property. (See Pace tobacco product vending machines and those currently in use when the Resources, 808 F.2d at 1031.) self-service displays except in adult- regulations become effective. Use of Although certain uses of copyrights only establishments (where graphic nontobacco trademarks is limited only and copyrighted material developed by advertisements will also be permitted). by prohibiting their use on tobacco tobacco companies and of tobacco and This restricted use may limit the products (except for nontobacco nontobacco trademarks will be number of venues in which these 44554 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations vending machines and self-service 5. Interference with Reasonable (1989).) For example, on at least two displays may be used and may exclude Investment-backed Expectations occasions a tobacco industry venues where their use is most The final factor to consider is whether representative testified before Congress profitable. The value of vending a company has a reasonable investment- that pending legislation would, like machines and self-service displays may backed expectation in continuing to use several previous legislative proposals, therefore drop. But diminutions in the property at issue, whether it be effectively ban advertisements for property value do not establish a taking. vending machines, self-service displays, tobacco products (‘‘Tobacco Control and (See Penn Central, 438 U.S. at 131.) nonconforming signs and billboards, Marketing: Hearings on H. Rept. 5041 Indeed, ‘‘[g]overnment hardly could go copyrighted material, or trademarks and Before the Subcommittee on Health and on if to some extent values incident to goodwill. To be reasonable, expectations the Environment of the House property could not be diminished must take into account the power of the Committee on Energy and Commerce,’’ without paying for every such change in State to regulate in the public interest. 101st Cong., 2d sess. 491–494 (1990) the general law’’ (Pennsylvania Coal Co. (See Pace Resources, 808 F.2d at 1033.) (statement of Charles O. Whitley on v. Mahon, 260 U.S. 393, 413 (1922)). Reasonable expectations must also take behalf of The Tobacco Institute); Vending machines and self-service into account the regulatory ‘‘Tobacco Issues: Hearings on H. Rept. displays may have to be moved from environment, including the 1250 Before the Subcomm. on Transp. currently legal venues to adult-only foreseeability of changes in the and Hazardous Materials of the House establishments or to warehouses, or they regulatory scheme. ‘‘In an industry that Comm. on Energy and Commerce,’’ may need to be retrofitted for use with long has been the focus of great public 101st Cong., 1st sess. 302 (1989) other products if retrofitting is possible. concern and significant government (statement of Charles O. Whitley on Although compliance may require regulation,’’ Monsanto, 467 U.S. at 1008, behalf of The Tobacco Institute)), vending machine and self-service the possibility is substantial that there making for far more restrictive limits on display owners to spend money, will be additional regulatory advertisements and promotion than ‘‘[r]equiring money to be spent is not a requirements. ‘‘Those who do business those imposed by this rule. Given these taking of property’’ (Atlas Corp., 895 in the regulated field cannot object if the facts, a reasonable person should have F.2d at 756 (discussing regulatory legislative scheme is buttressed by expected the possibility of regulations requirement that mining corporations subsequent amendments to achieve the such as these. In addition, when sales to reclaim uranium and thorium tailings legislative end’’ (Connolly, 475 U.S. at young people are illegal, investments in and decommission mills)). Finally, if 227 (citation omitted)). Given a long promotions designed to appeal to young there are not sufficient numbers of history of Government regulation of an people cannot be considered reasonable adult-only establishments, some industry, its members are ‘‘on notice (see discussion of R. J. Reynolds’ use of vending machines and self-service that [they] might be subjected to promotional materials in the Joe Camel displays may have no economically different regulatory burdens over time’’ Campaign in section VI. of this viable use because of the final (California Hous. Sec., Inc. v. United document). In any case, once the agency regulation, but a regulation that makes States, 959 F.2d 955, 959 (Fed. Cir.), gave notice of its proposed rulemaking personal commercial property cert. denied, 506 U.S. 916 (1992)). with respect to tobacco, tobacco ‘‘economically worthless’’ does not Commerce in tobacco products has manufacturers, distributors, and effect a per se taking, as it would with been regulated for years on the Federal, retailers had notice that certain real property. (See Lucas, 505 U.S. at State, and local levels. For example, investments were risky, and they will 1027–1028.) Contracts to offer States first began restricting tobacco enjoy the economic benefit of those exclusively tobacco products in vending sales to minors, distribution of free investments and of investments that machines at nonadult-only samples, and vending machine sales in they had previously made until the rule establishments may also become the 1970’s. By 1994 all 50 States is finally effective. ‘‘economically worthless’’ once the prohibited tobacco sales to young As discussed in section IV. of this regulation becomes effective. Likewise, people, 38 States restricted the document, the number of tobacco although §§ 897.32(a) and 897.30(b) may distribution of free tobacco products, product vending machines fell by half shorten the useful life of advertising and 28 States imposed restrictions on between 1988 and 1993 and, since 1990, materials on placards and billboards vending machine sales (‘‘State virtually no new tobacco product that are not black text/white background Legislated Actions on Tobacco Issues,’’ vending machines have been or that are near schools and playgrounds Coalition on Smoking OR Health manufactured (60 FR 41314 at 41325); (albeit with a grace period of at least the (Washington, DC 1994)). Tobacco because the market in tobacco product delayed effective date) and such manufacturers as well as distributors vending machines is declining, materials may be ‘‘economically and retailers who have chosen to investment-backed expectations in both worthless’’ as a result, this does not distribute or sell tobacco products have vending machines and vending machine effect a taking per se. therefore had reasonable notice that the contracts are not reasonable. Moreover, In summary, examination of the regulatory scheme to limit use of many self-service displays were given to economic impact factor of the takings tobacco products by minors might retailers by tobacco manufacturers (see analysis suggests that the regulations, change. 60 FR 41314 at 41323); to that extent, when they finally become effective, will Moreover, the particular restrictions the retailers have no investment-backed effect no takings of trademarks and on access and on promotion adopted in expectation in them. goodwill, copyrights, and many vending these regulations, or variations thereof, Finally, the Supreme Court has stated machines and self-service displays. It have been proposed or considered for that it is unreasonable to have high leaves open the possibility, however, several years by Government bodies, investment-backed expectations in that the rule may effect a taking of some including Congress, the States, and personal property: vending machines and contracts, and of public health agencies. (See, e.g., H. [I]n the case of personal property, by some self-service displays and of Rept. 5041, 101st Cong., 2d sess. (1990); reason of the State’s traditionally high degree nonconforming signs and billboards. H. Rept. 1250, 101st Cong., 1st sess. of control over commercial dealings, [the Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44555 property owner] ought to be aware of the prevents companies from entering a New York v. Ferber, 458 U.S. 747, 757– possibility that new regulation might even completely legal business using their 58 and n.9 (1982).) Moreover, because render his property economically worthless own trade names but provided no they limit trade and brand name uses (at least if the property’s only economically further explanation of its reasoning; that enhance the appeal and promote productive use is sale or manufacture for sale). FDA therefore understands it to suggest the use of cigarettes and smokeless (Lucas, 505 U.S. at 1027–1028) that these provisions classify companies tobacco to young people, the provisions Since all of the property at issue as either tobacco or nontobacco are rationally related to this interest and here—vending machines, self-service companies, that this classification are a rational way to reduce addiction displays, the advertising material on violates equal protection, and that these to tobacco products and the health signs and billboards, contract rights, provisions violate due process in that consequences that follow. they infringe on property interests in copyrights, and trademarks and C. Procedural Due Process Under the trade names by prohibiting companies associated goodwill—is personal Fifth Amendment property, there can be no reasonable from entering legal businesses using investment-backed expectation that their own trade names. Another (3) An industry comment asserted that regulation will not render them comment echoed this latter point and the regulation of tobacco manufacturers’ economically worthless. Consideration argued that the agency was denying use of their copyrights and trademarks of this factor of the takings analysis tobacco companies due process because affects a property interest so as to indicates that the final rule effects no it has no authority to prohibit the lawful require an adjudication; put another takings of any property. use of tobacco trademarks on other way, the comment argued that use of products. rulemaking to adopt a regulation 6. Summary The agency disagrees with these effecting these property interests With respect to trademarks and comments. The Fifth Amendment Due violates the Fifth Amendment Due goodwill and copyrights, the three Process Clause states that ‘‘[n]o person Process Clause, which states that ‘‘[n]o factors in a takings analysis indicate that shall * * * be deprived of life, liberty, person shall * * * be deprived of life, these regulations will effect no takings. or property, without due process of liberty, or property, without due process Only the economic impact of the rule on law.’’ Under due process as applied to of law.’’ advertising materials on signs and economic regulation, ‘‘[i]t is enough that The agency disagrees. The agency has billboards and on some vending there is an evil at hand for correction, issued this final rule under its machines and related contract rights and that it might be thought that the ‘‘authority to promulgate regulations for and some self-service displays leaves particular legislative measure was a the efficient enforcement of the Act’’ open the possibility that a taking may rational way to correct it’’ (Williamson under section 701(a) of the Federal occur, but the impossibility of v. Lee Optical of Oklahoma, Inc., 348 Food, Drug, and Cosmetic Act (the act) reasonable investment-backed U.S. 483, 488 (1955)). (The agency has (21 U.S.C. 371(a)) and its authority expectations with respect to personal addressed why it has the statutory under section 520(e) of the act (21 property used for sale strongly counters authority to issue this rule in section II. U.S.C. 360j(e)) to issue regulations to this factor, as stated by the Supreme of this document.) restrict the sale, distribution, or use of Court in Lucas, as does the harm- The Fourteenth Amendment’s Equal a device. The agency issues such prevention character of this regulation. Protection Clause states that ‘‘[n]o State regulations under the rulemaking Analysis of the three factors considered shall * * * deny to any person the procedures established by the together shows that these final equal protection of the laws.’’ By its Administrative Procedure Act (APA) in regulations do not effect a taking of terms, the Fourteenth Amendment does 5 U.S.C. 553 and its own regulations in vending machines, self-service displays, not apply to action by the Federal part 10 (21 CFR part 10), in particular signs and billboards advertising tobacco Government, as it is directed at the § 10.40. Neither the act, the APA, nor products, contract rights, or copyrights States. But the Supreme Court has held the agency’s regulations require a and trademarks and goodwill. The that the Fifth Amendment’s Due Process hearing for a rulemaking under sections agency concludes that the comments Clause includes an equal protection 701(a) and 520(e) of the act. that argued that the regulation effects component equivalent to the Fourteenth The comment nevertheless contended takings are, for the above-stated reasons, Amendment’s Equal Protection Clause. that due process requires that tobacco unpersuasive. (See Bolling v. Sharpe, 347 U.S. 497 manufacturers be provided the (1954); see also Buckley v. Valeo, 424 opportunity for a formal hearing (i.e., B. Substantive Due Process, Equal U.S. 1, 93 (1976) (per curiam) (‘‘Equal more than just an opportunity to Protection, and Restrictions on Use of protection analysis in the Fifth provide written comments). A formal Trade Names Amendment area is the same as that hearing is required, according to the (2) Comments argued that § 897.16(a) under the Fourteenth Amendment’’).) comment, because FDA is asserting (which restricts the use of nontobacco Under equal protection review, an jurisdiction over cigarettes and trade or brand names as the trade or economic regulation is valid as long as smokeless tobacco based upon a brand name of cigarettes or smokeless the classification that it makes is determination of the intent of all tobacco) and § 897.34(a) (which ‘‘rationally related to a legitimate state tobacco manufacturers, but it is relying prohibits the marketing of nontobacco interest’’ (City of New Orleans v. Dukes, on evidence of intent with regard to items and services that bear tobacco 427 U.S. 297, 303 (1976)). only a subset of tobacco manufacturers. brand names and other symbols of Sections 897.16(a) and 897.34(a) As discussed in the 1996 cigarettes and smokeless tobacco) easily pass muster under the Jurisdictional Determination annexed violate the Due Process Clause of the requirements of both due process and hereto, the evidence shows that Fifth Amendment to the Constitution equal protection. FDA’s interest in the cigarettes and smokeless tobacco are and the Equal Protection Clause of the health and well-being of children and highly addictive, cause other Fourteenth Amendment. One comment adolescents is certainly legitimate psychoactive effects (such as relaxation asserted that each of these provisions (indeed, it is a compelling interest). (See and stimulation), and affect weight 44556 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations regulation, and that these effects are ‘exceptionally affected, in each case and opportunity for comment provided widely accepted in the scientific upon individual grounds’’’ (Id. at 542 in this rulemaking are all that fairness community. Based on this evidence, it (quoting United States v. Florida East and due process require here. And, as is foreseeable to any reasonable Coast Ry., 410 U.S. 224, 242–245 discussed in greater detail in section manufacturer that consumers will use (1973))). XII. of this document, this rulemaking such products for their addictive, By this test, due process does not meets all the requirements of the APA psychoactive, and other require that the agency provide tobacco for informal rulemaking. pharmacological effects. The evidence manufacturers with a hearing. Simply XII. Procedural Issues also shows that actual consumer use of put, the agency is not making ‘‘a quasi- these products for their pharmacological judicial determination by which a very A. Introduction effects is predominant and, in fact, small number of persons are The Food and Drug Administration nearly exclusive. Based on this evidence exceptionally affected, in each case (FDA) went to great lengths to involve of the foreseeable and actual consumer upon individual grounds’’ (Vermont the public in this proceeding. On use of these products for their Yankee, 435 U.S. at 542 (quotations February 25, 1994, David A. Kessler, pharmacological effects, the agency has omitted)). The final rule at issue here Commissioner of Food and Drugs (the concluded that all cigarette and prospectively limits the sale and Commissioner) wrote to Scott Ballin, smokeless tobacco manufacturers promotion of cigarettes and smokeless chairman of the Coalition on Smoking ‘‘intend’’ their products to affect the tobacco to individuals under the age of OR Health, regarding the possibility of structure or function of the body, and 18; it imposes conditions on all FDA regulation of cigarettes in response that these products are, therefore, manufacturers, distributors, and to certain petitions that had been filed nicotine delivery devices under the act. retailers of tobacco products and will with the agency. The Commissioner In addition, the agency collected affect the access to tobacco products of explained: evidence of the tobacco industry’s millions of individuals under the age of [T]he agency has examined the current statements, actions, and research 18. The final rule is therefore ‘‘an data and information on the effects of demonstrating awareness of the agency statement of general * ** nicotine in cigarettes * * *. Evidence addictive and other pharmacological applicability and future effect designed brought to our attention is accumulating that effects of these products, the industry’s to implement, interpret, or prescribe law suggests that cigarette manufacturers may knowledge that consumers use these or policy’’ (5 U.S.C. 551(4)); in other intend that their products contain nicotine to satisfy an addiction on the part of some of products for these effects, and the words, it is a rule under the APA, and their customers * * *. This evidence * * * industry’s deliberate manipulation of the agency followed APA rulemaking in suggests that cigarette vendors intend the levels of nicotine in these products to formulating it (5 U.S.C. 551(5)). Like the obvious—that many people buy cigarettes to ensure that adequate amounts of nuclear fuel cycle rulemaking in satisfy their nicotine addiction. Should the nicotine are delivered to consumers. Vermont Yankee, 435 U.S. at 528–530, agency make this finding based on an These internal documents are further and the rulemaking about ambient air appropriate record or be able to prove these evidence in support of the conclusion quality standards for lead in Lead Indus. facts in court, it would have a legal basis on that cigarette and smokeless tobacco Ass’n v. Environmental Protection which to regulate these products * * *. manufacturers intend their products to Agency, 647 F.2d 1130, 1136–1144 (D.C. In the months that followed, the be drug delivery devices, but they are Cir.), cert. denied, 449 U.S. 1042 (1980), Commissioner testified twice before not necessary for that conclusion. The this process is ‘‘a rulemaking Congress regarding the accumulating agency, therefore, has not inferred the proceeding in its purest form,’’ and not evidence relating to the intended use of 255 intent of one company based a ‘‘quasi-judicial determination’’ to cigarettes. That testimony was exclusively on the internal documents which due process requirements beyond extensive and detailed. of another. Moreover, assuming that the requirements of the APA might In July and August of that year, FDA copyrights and trademarks are property apply. (See Vermont Yankee, 435 U.S. at Associate Commissioner for Regulatory protected by the Fifth Amendment’s 542 n.16; Lead Indus. Ass’n, 647 F.2d at Affairs, Ronald G. Chesemore wrote to Due Process Clause, due process does 1171 n.119.) the major cigarette and smokeless not require that FDA provide tobacco In any case, manufacturers have had tobacco companies requesting all manufacturers with a hearing beyond ample opportunity during the comment documents relating to ‘‘all research on the opportunity for notice and comment period for this rulemaking to submit nicotine * * *, including their that it has already provided. The evidence—including other internal pharmacological effects, and all Supreme Court has stated that the APA tobacco industry documents or documents relevant to the nicotine’’ in established ‘‘the maximum procedural affidavits from their employees—that their products. On August 1, 1994, FDA held a Drug Abuse Advisory Committee requirements’’ that the courts can contradicts any evidence, including meeting that was fully open to the impose upon agencies in conducting internal tobacco industry documents, public on the subject of the abuse rulemaking procedures and that the that the agency has placed in the potential of nicotine. circumstances in which courts may administrative record. And they have On August 11, 1995, FDA provided require additional procedures, ‘‘if they submitted voluminous comments with the public with an extensive Federal exist, are extremely rare’’ (Vermont supporting documentation to the Register document setting forth its Yankee Nuclear Power Corp. v. Natural agency. The manufacturers have Resources Defense Council, 435 U.S. therefore been ‘‘afforded a meaningful 255 Statement by the Commissioner on Nicotine- 519, 524 (1978)). The Court further opportunity to be heard and to Containing Cigarettes, before the Subcommittee on stated that due process may ‘‘in some controvert the evidence. Fairness Health and the Environment, Committee on Energy circumstances’’ require ‘‘additional demands no more’’ (Lead Indus. Ass’n, and Commerce, U.S. House of Representatives (Mar. procedures’’ beyond those required by 647 F.2d at 1170 (quotations omitted)). 25, 1994); Statement by the Commissioner on the Control and Manipulation of Nicotine in Cigarettes, the APA ‘‘when an agency is making a In summary, due process does not before the Subcommittee on Health and the ‘quasi-judicial’ determination by which require that FDA provide manufacturers Environment, Committee on Energy and Commerce, a very small number of persons are with an adjudicative hearing. The notice U.S. House of Representatives (June 21, 1994). Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44557 rationale for proposing to restrict the proceeding a report of these findings FDA concealed certain issues in order to sale of cigarettes and smokeless tobacco and approximately 1,500 pages of deny the public the right to participate in a 60 page discussion supported by supporting documentation. Second, in in the rulemaking process. Finally, at 442 endnotes (the 1995 proposed rule) the Federal Register of March 20, 1996 least one interested person maintained (60 FR 41314 to 41375). The agency (61 FR 11349), the agency published that the comment period for the 1995 carefully documented each of the notice of an additional 30 day comment proposed rule was so short as to be essential propositions offered in support period limited to specific documents the arbitrary and capricious. of its reasoning. Indeed, most of the 442 agency added to the proposed As the discussion that follows in this endnotes in the 1995 proposed rule rulemaking docket, and to the docket in section of the document demonstrates, contain multiple authorities for the support of the agency’s analysis of its the agency’s notice, the public agency’s position and, in all cases, the jurisdiction (61 FR 11419). These availability of the information the agency provided the reader with materials consisted of two declarations agency relied upon at the notice stage of specific page references to the numerous and a report from three former tobacco this proceeding, and the opportunity for studies, reports, and industry industry employees, as well as FDA comment, went well beyond the documents on which it relied. memoranda to the record regarding requirements of the APA, well beyond In the same issue of the Federal adult publications and billboards. what is required by case law construing Register in a document entitled In addition, the agency has added to the APA, and well beyond the agency’s ‘‘Analysis Regarding The Food and Drug the final record of this proceeding a own procedural requirements for Administration’s Jurisdiction Over comparatively small number of informal rulemaking. Nicotine-Containing Cigarettes and documents that expand upon or confirm B. Adequacy of the Record Smokeless Tobacco Products,’’ FDA also information made available in the 1995 provided an analysis of the agency’s proposed rule or the 1995 Jurisdictional (2) Several industry comments authority to assert jurisdiction over Analysis, or that address alleged complained about the adequacy of the cigarettes and smokeless tobacco based deficiencies in the agency’s initial record in support of the 1995 proposed on the evidence before the agency at record. rule. They contended that the agency that time (the 1995 Jurisdictional The administrative record now also violated the APA, 5 U.S.C. 553(b) and Analysis) (60 FR 41453 to 41787). In the includes the comments received from (c), and the Due Process Clause of the text of the 1995 Jurisdictional Analysis, the public. The agency received over Fifth Amendment to the Constitution, the agency supported its reasoning with 700,000 comments, some directed to the by failing to disclose all of the appropriate citations to case law, 1995 Jurisdictional Analysis, some information the agency ‘‘considered or 256 statutes, and regulations. In addition, directed to the 1995 proposed rule, and relied upon in the proceeding.’’ In the 1995 Jurisdictional Analysis was many with overlapping discussions. particular, these comments complained supported by over 600 footnotes, each of Though many comments consisted of that the public was deprived of the which provided the factual context for form letters, the agency received over opportunity to comment meaningfully the agency’s legal position. 95,000 distinct or unique sets of because, according to these comments, On August 16, 1995, the agency comments. Five major cigarette the agency relied on confidential placed on public display some 20,000 manufacturers jointly submitted 2,000 documents and on substantial amounts pages of materials that it cited in the pages of comments and 45,000 pages of of undisclosed data. One comment went 1995 proposed rule and in the 1995 exhibits. The major smokeless tobacco so far as to claim that ‘‘a substantial Jurisdictional Analysis. With the manufacturers jointly submitted 474 portion’’ of the material FDA relied exception of three documents, which pages of comments and 3,372 pages of upon was not made available for public the agency referenced only in the 1995 exhibits. The initial comment period scrutiny. Jurisdictional Analysis, the agency remained open for 144 days. The record in support of the 1995 made available to the public all of the (1) Despite the agency’s extraordinary proposed rule provided the public not materials on which it was relying on as efforts to involve the public in this only with a ‘‘reasonable opportunity’’ of that time for support. proceeding, FDA received several for comment, but with an extraordinary On September 29, 1995, the agency comments regarding the procedures the opportunity to examine the agency’s supplemented the administrative record agency followed in providing notice of position. The claim that the agency by putting on public display the 1995 proposed rule and in withheld ‘‘a substantial portion’’ of the approximately 13,000 documents publishing the 1995 Jurisdictional materials on which it relied is simply comprising some 190,000 pages of Analysis. Some of these comments unfounded. factual and analytical materials the complained that the agency designated 1. The Administrative Record agency considered in the course of certain documents in the administrative In an informal rulemaking issuing the 1995 proposed rule and the record as ‘‘confidential,’’ and that the proceeding, the APA itself requires only 1995 Jurisdictional Analysis. Although shielding of these documents denied the that the ‘‘notice of proposed rule it was under no legal obligation to do so, public a meaningful opportunity to making’’ include a statement of the the agency made these additional participate in the rulemaking process. time, place, and nature of the materials available because of the One of these comments also contended proceeding, ‘‘reference to the legal importance of this proceeding. that FDA refused to disclose certain The agency also made two other nonconfidential information on which 256 Because the APA in this context provides the significant additions to the public the agency had relied. Some comments public at least as much protection as the Due record. On December 1, 1995, the also argued that FDA failed to set forth Process Clause of the Constitution, the agency will agency announced the findings of focus a balanced view of the issues presented address these procedural objections solely under group studies concerning possible brief by the 1995 proposed rule, thereby the APA. See Forester v. Consumer Prod. Safety Comm’n, 559 F.2d 774, 787 (D.C. Cir. 1977); Ass’n statements to be included on all rendering the notice inadequate and of Nat’l Advertisers, Inc., v. Federal Trade Comm’n, cigarette advertising (60 FR 61670), and ‘‘misleading’’ under the Administrative 627 F.2d 1151, 1166 (D.C. Cir. 1979), cert. denied, added to the record for the rulemaking Procedure Act (the APA). In their view, 447 U.S. 921 (1980). 44558 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations authority under which the rule is Commission amending a contract Analysis. Moreover, the agency proposed,’’ and ‘‘either the terms or between two competitors, the court provided over 1,000 endnotes and substance of the proposed rule or a found that the Commission had made footnotes directing readers to each and description of the subjects and issues ‘‘critical findings’’ on the basis of data every document, including every study, involved’’ (5 U.S.C. 553(b)). The APA, which was neither identified in its Government report, journal article, thus, does not expressly require decision nor included in the industry document, and agency record disclosure of the information on which administrative record. Rather, the on which FDA relied to support the the agency relies in proposing a Commission based its decision on 1995 proposed rule and the 1995 regulation. ‘‘reliable data reposing in the files of the Jurisdictional Analysis. Nevertheless, courts have implied Commission’’ (584 F.2d at 533). The Out of all this material, the only under the APA a requirement that an reviewing court simply had no idea of nonpublic materials on which the agency give notice of the information on the factors or data on which the agency relied were two confidential which it actually relies to support a Commission had relied (Id.). documents 257 and two lines of text the proposed rule, and make that Thus, at best, the case law requires agency redacted from a document the information available to the extent it is agencies to disclose studies and data 258 not readily accessible to the public. (See actually relied upon by the agency. Even agency placed on the public record. Davis, K. and R. Pierce, Jr., then, the cases that have struck down The agency relied on this material only Administrative Law Treatise, vol. 3, agency rulemaking are generally in the context of the agency’s 1995 section 7.3 at 305–09 (3d ed. 1994) confined to instances in which the Jurisdictional Analysis. None of these (discussing one of the seminal cases on agency provided woefully inadequate documents is pivotal to the analysis of disclosure of data relied on to support information to the public or failed to jurisdiction in that none provides the a rulemaking proceeding, Portland disclose a critical piece of information. sole or principal basis for the agency’s Cement Ass’n v. Ruckelshaus, 486 F.2d (See, e.g., Kennecott Corp. v. conclusion that cigarettes and smokeless 375 (D.C. Cir. 1973), cert. denied, 417 Environmental Protection Agency, 684 tobacco are drug delivery devices under U.S. 921 (1974)).) No court, however, F.2d 1007, 1018–19 (D.C. Cir. 1982) the Federal Food, Drug, and Cosmetic has required the degree of public (agency acted arbitrarily and Act (the act). Further, as discussed in disclosure at the notice stage of a capriciously when it failed to include in the 1996 Jurisdictional Determination rulemaking proceeding that FDA the public docket during the comment annexed hereto, the decision to keep undertook here. period any documents supporting a these materials confidential did not in Indeed, the primary cases cited by the particular proposed regulation); any way undermine the quality of the comments, namely, Portland Cement compare Personal Watercraft Indus. public participation in this proceeding. Ass’n, supra, United States v. Nova Ass’n v. Department of Commerce, 48 In sum, the procedures the agency Scotia Food Products Corp., 568 F.2d F.3d 540, 544–45 (D.C. Cir. 1995) (while followed in assembling a public record 240 (2d Cir. 1977), and United States agency must disclose information in this proceeding simply are not in line Lines, Inc. v. Federal Maritime Comm’n, critical to its decision to regulate a with the facts described in cases like 584 F.2d 519 (D.C. Cir. 1978), address particular activity, absent prejudice an Portland Cement, Nova Scotia Food agency conduct that bears little agency may rely on studies developed Products, and United States Lines. resemblance to FDA’s efforts in this after close of comment period that are proceeding. While FDA has provided a not critical to the underlying proposal).) 257 The two confidential documents the agency remarkable degree of factual support Finally, FDA’s own procedural directly referenced are the 1991 Handbook on Leaf Blending and Product Development (Confidential and procedural openness, these cases regulations require that the agency Document 75) and the unredacted summary of involved instances in which agencies include with the notice of proposed notes of FDA trip visits (Confidential Document 74). provided the public with no information rulemaking, among other things, The summary was compiled from notes and whatsoever or otherwise excluded a ‘‘references to all information on which handouts that are also designated as confidential study that was critical to the the Commissioner relies for the proposal (Confidential Documents 69, 70, 71, 72, and 73). The agency views the summary as a stand-alone administrative proceeding. In Portland * * *’’ (§ 10.40(b)(vii) (21 CFR document to the extent it distills a large volume of Cement, the Environmental Protection 10.40(b)(vii)) (emphasis added); see 21 disparate handwritten notes and handouts. Also, Agency altogether failed to provide the CFR 10.3 (defining the term the agency cited only to the summary itself. public an opportunity to comment on ‘‘administrative record’’ to mean the Nevertheless, even if the summary were counted as five documents rather than one, the agency at most the test results and procedures on which materials on which the agency ‘‘relies to relied on six confidential documents. The agency’s the agency relied as the critical’’ basis support the action’’). Thus, even under basis for relying on these documents in the 1995 for the emission control level adopted the agency’s own procedural Jurisdictional Analysis is discussed in detail in the by the agency. That is, the agency set regulations, FDA is required—when it 1996 Jurisdictional Determination, annexed hereto. very specific pollution control limits, initiates informal rulemaking—to 258 On page 255 of the 1995 Jurisdictional but failed to make public until after the supply the public only with the Analysis (60 FR 41453, 41716), the agency redacted several lines of text along with a footnote that close of the comment period the details materials the agency is relying upon to identified the sources for the redacted text. The of crucial tests relied upon to determine support the proposed action. footnote consisted of references to two sources, both these limits (486 F.2d at 392). Here, the materials the agency relied of which appeared on the agency’s public docket for In Nova Scotia Food Prods., ‘‘all the on are the materials the agency cited in the 1995 Jurisdictional Analysis: J. E. Kiefer, scientific research was collected by the the 1995 proposed rule and the 1995 ‘‘Cigarette Filters for Altering the Nicotine Content of Smoke’’ (Report No. 71 5003 7), Tennesee agency, and none of it was disclosed to Jurisdictional Analysis. Not only did the Eastman Co., pp. 1–2; August 18, 1971, and J. G. interested parties as the material upon agency provide these materials to the Curran, Jr., and E. G. Miller, ‘‘Factors Influencing which the proposed rule would be public, but it also provided the roughly the Elution of High Boiling Components of Cigarette fashioned’’ (568 F.2d at 251) (emphasis 190,000 pages of factual and analytical Smoke from Filters,’’ Beitr. Tabakforsch, pp. 5 and 67, 1969. The Kiefer document appeared on the added). And in United States Lines, materials the agency considered but did public docket with certain trade secret information where a common carrier challenged an not rely upon in either the 1995 redacted from the document. The Curran document order of the Federal Maritime proposed rule or the 1995 Jurisdictional was made available to the public in full. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44559

2. The Agency’s Use of Confidential 1976) (only the basic data ‘‘upon which of these documents. 261 A thorough Documents the agency relied in formulating the discussion of these three documents, a. Confidential documents on which regulation’’ must be published for and the agency’s basis for relying on the agency did not rely. The agency public comment), cert. denied, 430 U.S. them to support its analysis of placed in a confidential docket 75 930 (1977); K. Davis, Administrative jurisdiction, is provided in section VI. of documents from the approximately Law Treatise, section 7.3 at 307 (3d ed. the 1996 Jurisdictional Determination, 210,000 pages of materials the agency 1994) (‘‘If an agency does not attempt to annexed hereto. made available at the opening of this support its final rule by reference to an 3. The Claim that FDA Relied on proceeding. The agency identified each undisclosed study, it seems apparent ‘‘Unknown’’ Undisclosed Data of these 75 documents for the public in that the agency was not required to make the study available to potential an index filed on September 29, 1995, (3) An association representing the on the public docket. (See 60 FR 66981 commentators.’’).) The agency went well beyond existing requirements to make tobacco industry also claimed that the at 66982, December 27, 1995.) Of these agency withheld certain data and 75 documents, 73 were not even relied publicly available thousands of additional documents for public calculations used to construct a series of upon by the agency to support either the charts showing that nicotine and tar 1995 proposed rule or the 1995 review—in recognition of the levels in smoke have risen steadily from Jurisdictional Analysis. uniqueness and public importance of 1982 to 1991. (See 60 FR 41453 at 41728 Sixty-one of these 73 confidential this proceeding. This effort by the documents consisted either of agency should not be used now as a to 41731.) These charts appeared only in commercial information and trade basis for suggesting that the agency was the context of the agency’s 1995 secrets that the industry urged FDA to required to publish all information that Jurisdictional Analysis. A thorough keep confidential (Confidential it had on hand. discussion of how the agency constructed these charts, and on what Documents 1–12, 16–21, and 62–73), or Finally, at the close of this rulemaking data the agency relied, is provided in unpublished manuscripts for which the proceeding and with the publication of agency lacked the authors’ permission, the annexed 1996 Jurisdictional sections II. and VI. of the 1996 as of September 29, 1995, to make them Determination, the agency will Jurisdictional Determination, annexed available for widespread dissemination supplement the public docket with hereto. (Confidential Documents 22–52). The copies of those confidential items for remaining 12 documents were either which the agency previously lacked 261 One comment noted that the agency relied in the 1995 proposed rule on undisclosed information proprietary reports and other permission to publish, but for which copyrighted information—such as gathered from former industry sales representatives permission has now been granted. Most and managers. (See 60 FR 41314 at 41323.) The financial reports generated by Dun and of the unpublished manuscripts in the reference in the rule to interviews with former sales Bradstreet—which the agency lacked confidential docket—none of which representatives and managers appears in the permission to reprint (Confidential were relied upon by the agency to discussion of proposed § 897.12 Additional Responsibilities of Manufacturers. The agency used Documents 13–15, and 53–58), or support the rule—will be available confidential documents that supported a the information gathered from these individuals to through this addition to the public support the proposition that manufacturers direct pending new drug application record. their sales representatives to police retailers’ (Confidential Documents 59–61). cigarette and smokeless tobacco displays. Again, the agency did not rely on any b. Confidential documents on which Accordingly, the agency proposed to require sales of these 73 documents as support for the the agency relied. In support of the 1995 representatives to be responsible for removing 1995 proposed rule. Therefore, the Jurisdictional Analysis, FDA relied on violative visual displays and advertising used in only 2 of the 75 documents designated retail outlets. In light of comments received, the agency was not even required to include agency has decided to revise § 897.12 to eliminate these documents in the administrative as confidential: A summary of notes this requirement. Because manufacturer sales record of the notice of proposed taken by FDA investigators during site representatives will no longer be held responsible rulemaking. (See 21 CFR 10.40(b)(vii).) visits to manufacturing plants run by for maintaining retailers’ fixtures, the agency’s It likewise follows that because the Brown and Williamson, Philip Morris, reliance on the interviews in the 1995 proposed and R. J. Reynolds (Confidential rule, and the issue of whether the agency should agency did not rely upon these have made more information on this matter documents, the decision to protect them Document 74); and a 1991 Brown and available to the public, is moot. Davis, K. C., and cannot be said to have unfairly Williamson handbook on leaf blending R. J. Pierce, Jr., Administrative Law Treatise, vol. 1, interfered with the public’s ability to and product development (Confidential section 7.3 at p. 307 (3d ed. 1994) (‘‘If an agency Document 75). 259 In addition, the does not attempt to support its final rule by question the agency’s rationale for the reference to an undisclosed study, it seems rule. (See Mid-Tex Electric Coop., Inc. v. agency relied in its 1995 Jurisdictional apparent that the agency was not required to make Federal Energy Regulatory Comm’n, 773 Analysis on two lines of text that were the study available to potential commentators’’). F.2d 327, 344 (D.C. Cir. 1985) (agency’s redacted from a document that appeared Finally, as the agency explained in its December 27, failure to disclose two studies was on the public docket. 260 The 1995 1995, Federal Register notice, the agency has not proposed rule itself did not rely on any made such information available to the public ‘‘manifestly harmless’’ because the because of the need to protect the identity of agency did not rely on the studies to individuals who came forward during the agency’s support any finding or conclusion); 259 The agency did not acknowledge ownership of investigation and who might not otherwise have Conference of State Bank Supervisors v. the handbook in the 1995 Jurisdictional Analysis, come forward (see 60 FR 66981, 66982). As or in the September 29, 1995, index to the Office of Thrift Supervision, 792 F. discussed in section VI. of the 1996 Jurisdictional administrative record. However, in a set of Determination, FDA believes there are Supp. 837, 843 (D.D.C. 1992) (there is comments filed by Brown & Williamson, the circumstances in which an agency may rely on no violation of the APA’s notice company itself acknowledged publicly its confidential information in a rulemaking requirements where the agency has ownership of the handbook. (See Brown & proceeding, and that there are ways in which an declined to disclose materials on which Williamson Tobacco Corp., Comment (Jan. 2, 1996), agency may present such information in order to pp. 37–38). preserve the public’s right to a reasonable it did not rely in proposing the rule); 260 Kiefer, J. E., ‘‘Cigarette Filters for Altering the opportunity to participate in the proceeding (60 FR B.F. Goodrich Co. v. Department of Nicotine Content of Smoke,’’ Tennessee Eastman 66981). The agency, however, has not relied on any Transp., 541 F.2d 1178, 1184 (6th Cir. Co., Report No.71 5003 7, pp. 1–2, August 18, 1971. such material in this final rulemaking. 44560 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

4. The Claim that FDA Failed to Include subject of additional comments’’ issues involved’’ (5 U.S.C. 553(b)(2) and in the Record New Drug Application (Community Nutrition Inst. v. Block, (b)(3)). FDA’s own regulations require (NDA) Data on Which it Relied 749 F.2d 50, at 58). Accordingly, the that a notice of proposed rulemaking (4) One comment claimed that the agency has cited in this preamble and in include ‘‘a preamble that summarizes agency relied on studies in seven NDA’s the 1996 Jurisdictional Determination the proposal and the facts and policy for the proposition that a high annexed hereto, a small amount of underlying it, * * * all information on proportion of smokers are addicted to information that is needed to respond which the Commissioner relies for the nicotine, but failed to make adequate fully to the comments or that otherwise proposal, * * * and cites the authority disclosure of these NDA’s. In particular, supplements the information contained under which the regulation is this comment stated that the agency in or filed with the 1995 proposed rule. proposed’’ (21 CFR 10.40(b)(vii)). Under case law construing section failed to include any information in the These documents include published 553 of the APA, notice of informal public docket for NDA 18–612 scientific articles, reference texts, letters rulemaking must be ‘‘sufficiently (Nicorette gum, 2 milligrams (mg)) and to tobacco industry counsel, an abstract descriptive of the ’subjects and issues NDA 20–385 (Nicotine nasal spray), and that the tobacco industry asked to involved’ so that interested parties may included only summaries for five other include in the record, three publicly offer informed criticism and comments’’ NDA’s the agency cited. To the extent released tobacco company documents, (Ethyl Corp. v. Environmental Protection the agency relied on any of these NDA’s, Congressional hearing transcripts, and Agency, 541 F.2d 1, 48 (D.C. Cir.) (en it did so only in the context of the 1995 newspaper articles. The agency has banc), cert. denied 426 U.S. 941 (1976)). Jurisdictional Analysis. A placed this cited information in the Notice is sufficient under the APA ‘‘if it comprehensive discussion of the administrative record. affords interested parties a reasonable agency’s reliance on this material is C. Adequacy of the Notice opportunity to participate in the provided in section VI. of the 1996 (5) Two industry comments argued rulemaking process’’ (Forester, 559 F.2d Jurisdictional Determination, annexed that the public’s participation in the at 787; accord State of South Carolina hereto. rulemaking process has been frustrated ex rel. Tindal v. Block, 717 F.2d 874, 5. The Agency’s Reliance in the Final because the agency presented a ‘‘one- 885 (4th Cir. 1983), cert. denied, 465 U. Rulemaking on New Materials sided’’ view in its 1995 notice of S. 1080 (1984)). And, insofar as the 1995 proposed rulemaking. They claimed that In an FDA informal rulemaking proposed rule relied on a technical FDA failed to satisfy the APA’s notice proceeding, the final administrative study or specific data essential to an requirement for informal rulemaking record must contain the proposed rule, understanding of the rule, the notice because the agency neither disclosed including all information that the should have disclosed this information nor discussed the supposedly ‘‘large Commissioner identifies or files with to the extent needed to allow for body’’ of information that is the proposal, all comments received on ‘‘meaningful commentary’’ (Connecticut ‘‘inconsistent with, or otherwise not the proposal, including all information Light and Power Co. v. Nuclear supportive of, the proposed rule.’’ submitted as part of the comments, and Regulatory Comm’n, 673 F.2d 525, 530– Further, the agency did not, in their the notice issuing the final regulation, 31 (D.C. Cir.), cert. denied, 459 U. S. 835 view, provide a ‘‘reasoned explanation’’ including all information that the (1982)). for departing from past precedent on the Commissioner identifies or files with In this instance, the 1995 proposed issue of whether FDA should regulate the final regulation (§ 10.40(g)). An rule met both the APA’s notice all cigarettes and smokeless tobacco. agency may rely on information and requirements (as interpreted by These comments provided no legal data that were not included at the prevailing case law), as well as FDA’s authority to support the proposition proposal stage that expands on or own procedural requirements. The that, at the notice stage of a proceeding, confirms information in the proposal or agency by any standard ‘‘fulfilled its the agency is required to anticipate all addresses alleged deficiencies in the obligation to make its views known to challenges to its reasoning, and must preexisting data, provided that no the public in a concrete and focused attempt to answer those challenges. prejudice is shown. 262 Otherwise, form so as to make criticism or Rather, at the notice stage of a ‘‘[r]ulemaking proceedings would never formulation of alternatives possible’’ rulemaking proceeding, the agency’s end if an agency’s response to (Air Transport Ass’n of America v. Civil obligation is to include sufficient detail comments must always be made the Aeronautics Board, 732 F.2d 219, 225 on the content of the rule, and on the (D.C. Cir. 1984) (quoting Home Box 262 See, e.g., Personal Watercraft v. Department of basis in law and fact for the rule, to Office, Inc., 567 F.2d at 36)). allow for meaningful and informed Commerce, 48 F.3d 540, 544 (D.C. Cir. 1995) 1. The Agency Provided Adequate (‘‘Agencies may develop additional information in comment. (See American Medical Ass’n response to public comments and rely on that v. Reno, 57 F.3d 1129, 1132 (D.C. Cir. Notice of the Key Legal and Factual information without starting anew unless prejudice 1995); Home Box Office, Inc. v. Federal Issues is shown.’’); Solite Corp. v. Environmental Protection Agency, 952 F.2d 473, 484 (D.C. Cir. Communications Comm’n, 567 F.2d 9, Although the APA’s notice 1991) (‘‘[C]onsistent with the APA, an agency may 35–36 (D.C. Cir.), cert. denied, 434 U.S. requirements could have been met by a use ‘supplementary’ data, unavailable during the 829 (1977).) far briefer presentation, the agency notice and comment period, that expands on and More specifically, in an informal chose to supply the public with a notice confirms information contained in the proposed rulemaking proceeding, the APA that explored in full the wide range of rulemaking and addresses alleged deficiencies in the preexisting data, so long as no prejudice is requires public notice of an agency’s factual and legal issues presented. In shown.’’); Community Nutrition Inst. v. Block, 749 intention to issue a regulation (5 U.S.C. doing so, the agency discussed the most F.2d 50, 57–58 (D.C. Cir. 1984) (agency may rely on 553(b)). The notice must include significant issues that the two industry information that ‘‘expanded on and confirmed’’ ‘‘reference to the legal authority under comments claimed were missing from information in the 1995 proposed rule and addressed alleged deficiencies in the record); see which the rule is proposed,’’ and ‘‘either the notice. also Davis, K. C. and R. J. Pierce, Jr., Administrative the terms or substance of the proposed (6) The comments contended that the Law Treatise, section 7.3 (3d ed. 1994). rule or a description of the subjects and agency failed to discuss past instances Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44561 in which it declined to exercise Mr. Chairman, we now have cause to somehow deprived the public of fair jurisdiction over cigarettes and reconsider this historical view. * * * This notice. smokeless tobacco, including FDA’s question arises today because of an Again, to satisfy the APA’s notice response to a 1977 citizen petition. One accumulation of information in recent requirement, the agency must specify comment in particular insisted that such months and years. In my testimony today, I with particularity the legal authority on will describe some of that information. a discussion would have alerted the which its proposal is based (K. C. Davis public to the idea that Congress enacted (Appendix 7 at 1–2 (footnote omitted)) & R. J. Pierce, Jr., Administrative Law preemptive legislation in reliance on This testimony, like the reference to the Treatise (vol. 1, 3d ed. 1994) section 7.3 ASH decision, adequately put the public at 299). Notice must be ‘‘informative’’ FDA’s past pronouncements, legislation 264 which the comments argue bars FDA on notice of FDA’s past position. and must ‘‘fairly apprise’’ interested from regulating these products. Nor does FDA agree with the persons (Id. at 299 and 300). The agency The agency acknowledged in the 1995 comment’s argument that Congress, in need not, however, unravel for the Jurisdictional Analysis, published in reliance on past FDA pronouncements, public each and every theoretical step in conjunction with the 1995 proposed enacted legislation precluding FDA the analysis. (See Chemical Waste rule, that it has in the past refrained from regulating tobacco products under Management, Inc. v. Environmental from exercising jurisdiction generally the act. As discussed in detail in Protection Agency, 869 F.2d 1526, 1535 over all cigarettes and smokeless sections IV. and V. of the annexed 1996 (D.C. Cir. 1989) (even where agency tobacco (unless claims were made for Jurisdictional Determination, the agency statement in notice of rulemaking the product) (60 FR 41453 at 41482 n. has never categorically disclaimed assumes rather than invites comments 5). Among other things, the agency jurisdiction over tobacco products and on an issue, notice is sufficient if it referred readers to the published Congress has never expressly forbidden provides interested parties ‘‘with a clear decision in Action on Smoking and FDA from asserting jurisdiction over indication of the agency’s intended Health [ASH] v. Harris, 655 F.2d 236 these products. The agency has no course of action * * *.’’); Center for (D.C. Cir. 1980). That decision affirmative obligation to posit in its Auto Safety v. Peck, 751 F.2d 1336, discussed, and indeed arose from, the notice of proposed rulemaking 1361 (D.C. Cir. 1985) (‘‘It is simply not 1977 citizen petition which, as one arguments it believes are legally infirm. the case, however, that all of the comment claimed, the agency (Cf. Florida Power and Light Co. v. essential postulates for an agency rule ‘‘conscientiously avoid[ed]’’ in order to United States, 846 F.2d 765, 771 (D.C. must be contained in the record.’’)). ‘‘mislead[]’’ the public. Not only does Cir. 1988), cert. denied, 490 U.S. 1045 Nevertheless, the agency provided the the ASH opinion discuss the petition (1989).) public a detailed explanation of why it and the agency’s position at that time Two tobacco industry comments also regards cigarettes and smokeless tobacco with respect to exercising jurisdiction claimed that the agency unfairly as drug/device combination products, generally over cigarettes, it also recounts underplayed the complexity of issues and why it believes the device for the reader the agency’s historical such as ‘‘intended use,’’ product provisions of the act may, and should, position on the issue (Id. at 237–241). categorization, regulatory authority over be used to regulate these products. The Moreover, the agency placed in the combination products, and the agency set forth its rationale for administrative record copies of applicability of the medical device regulating these products as devices in documents in which FDA declined to provisions of the act to cigarettes and both the August 11, 1995, proposed rule exercise jurisdiction, including FDA’s smokeless tobacco. Instead, one of these (see 60 FR 41314 at 41348 to 41350) and response to ASH’s 1977 citizen comments asserted that all the agency again in the August 11, 1995 petition. 263 had done was publish ‘‘a tendentious Jurisdictional Analysis (see 60 FR 41453 In addition, the agency attached as anti-tobacco, pro-FDA-regulation at 41521 to 41525). Further, the agency part of an appendix to its 1995 manifesto’’ and, as such, the agency’s identified the precise statutory Jurisdictional Analysis copies of the notice was ‘‘fraudulent.’’ The agency provisions under which it proposed to Commissioner’s testimony before the disagrees with this characterization. regulate these products (see 60 FR House Subcommittee on Health and the More to the point, the agency disagrees 41314 at 41346 to 41352, and 41372). Environment of the Committee on with the argument that the agency The agency also put the public on Energy and Commerce on March 25, notice, by referencing the Intercenter 1994 (Appendix 7). At the outset, the 264 As discussed in section IV. of the 1996 Agreement between the Center for Drug Commissioner stated: Jurisdictional Determination, the agency’s decision Evaluation and Research and the Center not to include a prolonged discussion of past Although FDA has long recognized that the agency decisions is based on the fact that the for Devices and Radiological Health, nicotine in tobacco products produces drug- agency is now operating under a different set of that preloaded drug delivery systems are like effects, we never stepped in to regulate facts. The agency did not commit a procedural error often regulated using the drug most tobacco products as drugs. One of the by failing to chronicle exhaustively decisions it authorities under the act. The agency obstacles has been a legal one. A product is made in a factually distinguishable context. adequately explained—for notice Moreover, one of the comments faulted the agency subject to regulation as a drug based purposes—why in this instance it primarily on its intended use. * * * With for failing to give notice of the ‘‘several’’ citizen proposed a different approach (60 FR certain exceptions, we have not had petitions filed since 1977 that requested that the agency regulate cigarettes. In fact, the agency 41314 at 41348 to 41350). sufficient evidence of such intent with regard incorporated by reference into the opening docket to nicotine in tobacco products. * ** With respect to the application of the for the 1995 Jurisdictional Analysis all significant concept of ‘‘intended use,’’ the lengthy dockets opened since the conclusion of the ASH 263 Letter from D. Kennedy (FDA) to J. Banzhaf litigation that relate to the agency’s jurisdiction over discussion in Part II of the 1995 (ASH) of Dec. 5, 1977, (denial of 1977 petition); cigarettes and other nicotine delivery systems. The Jurisdictional Analysis provided the Letter from J. E. Goyan (FDA) to J. Banzhaf (ASH) index the agency provided to the public on public with full disclosure of the of Nov. 25, 1980; Public Health Cigarette September 29, 1995, in conjunction with the public agency’s rationale for regulating Amendments of 1971, Hearings Before the display of the administrative record (as of that Consumer Subcommittee of the Committee on date), included a description of nine dockets the cigarettes and smokeless tobacco based Commerce, U.S. Senate, 92d Cong., 2d sess., pp. agency incorporated by reference into the record on the ‘‘intended use’’ of these products. 239–246. supporting the 1995 Jurisdictional Analysis. The core facts and precedents on which 44562 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations the agency relied were displayed in a that its position was subject to debate products, and did not distinguish those manner the agency believes invited and to solicit comments on the issue. decisions from its present position. One maximum public scrutiny. The agency The United States Court of Appeals for of these comments likewise asserted even provided the public with 11 the District of Columbia rejected this that the agency was required to include different examples (9 from the 1980’s argument because EPA had provided in the administrative record each and and 1990’s) of the application of the notice of its intended course and every document ‘‘that formed the basis intended use concept to the because the agency in fact received for, or was an expression or reflection determination of whether a product, numerous comments on the issue (869 of, FDA’s consistent position over more absent express claims, may be regulated F.2d at 1535). (See also Shell Oil Co. v. than 80 years that it does not have as a drug or a device (60 FR 41453 at EPA, 950 F.2d 741, 757 (D.C. Cir. 1991) jurisdiction to regulate cigarettes.’’ The 41527 to 41531). This level of (recognition of a certain issue in absence of this material, according to explanation more than satisfied the comments may be used to infer that the comment, demonstrates that the notice requirements of the APA as adequate notice of the issue was given); agency failed to consider ‘‘obviously interpreted by the relevant case law. Haralson v. Federal Home Loan Bank relevant’’ contrary information in Finally, the quantity and quality of Board, 678 F. Supp. 925, 926 (D.D.C. proposing to regulate these products. comments the agency received on the 1987) (same).) The authorities cited in the comments 1995 proposed rule and the 1995 As in cases such as Chemical Waste at best require that, by the close of an Jurisdictional Analysis suggest that, in Management, the comments FDA administrative proceeding, the agency fact, the public was adequately notified received demonstrate that there is no must provide a ‘‘reasoned explanation’’ of the relevant issues. The agency serious claim to be made that the agency to the extent the agency has departed received more comments in this has concealed issues from the public. from a prior formal position. (See, e.g., proceeding than it has ever received on Interested persons representing both RKO Gen., Inc. v. FCC, 670 F.2d 215 any other subject, with over 700,000 sides in this controversial proceeding (D.C. Cir. 1980) cert. denied, 456 U.S. comments (including form letters) and commented on the very issues the 927 (1982) (challenge to final order of over 95,000 distinct or unique sets of agency supposedly underplayed in its Federal Communications Commission comments. More important, the agency notice of proposed rulemaking. 267 denying renewal of television license); received hundreds of pages of The comments that challenge the Baltimore and Annapolis R. R. v. comments on the very issues the agency adequacy of the agency’s notice confuse Washington Metro. Area Transit is said to have hidden from the public. the merits of the issue with procedure. Comm’n, 642 F.2d 1365 (D.C. Cir. 1980) Indeed, the two industry comments who The supposed deficiencies in FDA’s (challenge to final order of transit complained most vigorously about the legal reasoning, and the supposed commission); Greyhound Corp. v. ICC, supposed deficiencies in the agency’s failure to discuss contrary authorities, 551 F.2d 414 (D.C. Cir. 1977) (challenge notice of proposed rulemaking raise substantive issues to be resolved to final decision of the labor board); themselves filed volumes of comments during the comment and response-to- International Union, United Auto on the issues they claim the agency comment phase of the proceeding. The Workers v. NLRB, 459 F.2d 1329 (D.C. concealed. 265 Even the comments of possibility that some of the agency’s Cir. 1972) (challenge to final decision of interested nonindustry persons legal conclusions may be subject to labor board); see also Motor Vehicle evidenced fair notice of the agency’s debate does not render the notice Mfrs. Assoc. v. State Farm Mutual Auto reasoning for applying the device inadequate. (See Chemical Waste Ins., 463 U.S. 29, 43 (1983) (challenge to provisions of the act to cigarettes and Management, Inc., 869 F.2d at 1535; final rule rescinding passive restraint smokeless tobacco. 266 Natural Resources Defense Council, Inc. seatbelt requirement contained in a In Chemical Waste Management, the v. Hodel, 618 F. Supp. 848, 864–65 (E.D. Department of Transportation plaintiff complained that the Cal. 1985).) standard).) None of these cases, which Environmental Protection Agency’s 2. The Agency Provided a ‘‘Reasoned involved challenges to final agency (EPA) notice of proposed rulemaking Explanation’’ for its Current Position orders and final rules, holds that at the treated a certain controversial issue ‘‘as notice stage of a proceeding, when an an accomplished fact’’ (869 F.2d at Several tobacco industry comments agency is proposing to depart from a 1535). Like two of the comments here, also claimed that the agency violated prior position, the agency must provide the plaintiff in Chemical Waste the APA’s notice provisions by failing to a comprehensive ‘‘reasoned Management argued that the APA include a ‘‘reasoned explanation’’ for explanation.’’ required the agency to highlight the fact departing from past precedent on the The agency nevertheless agrees that issue of whether to regulate all the rulemaking proceeding, taken as a 265 See, e.g., Joint Comments of the Smokeless cigarettes and smokeless tobacco. In whole, should clearly and rationally Tobacco Manufacturers, Comment (January 2, their view, the 1995 proposed rule and justify changes in existing policies. 1996), at 43 to 73 (discussing the agency’s historical the 1995 Jurisdictional Analysis were Thus, FDA included in its notice of position on agency jurisdiction over tobacco procedurally infirm because the agency products), at 99–258 (discussing the agency’s proposed rulemaking and 1995 application of the concept of intended use to did not adequately explain its basis for Jurisdictional Analysis ample reference tobacco products), and at 259–307 (analyzing the past decisions not to regulate these to its prior policy and a more than agency’s position that cigarettes and smokeless ample discussion of the agency’s tobacco are combination products that may be 267 The agency also received a comment rationale for changing its policy. Indeed, regulated as restricted devices); Joint Comments of criticizing the agency for failing to discuss the June Cigarette Manufacturers at, among other places, Vol. 1994 Federal Trade Commission’s (FTC) decision the very intent of the 1995 Jurisdictional I (discussing FDA’s historical position on regarding the ‘‘Joe Camel’’ advertising campaign. In Analysis, and the 622 footnotes jurisdiction), Vol. II (discussing the concept of section VI. of this document, the agency discusses supporting the analysis, was to provide intended use), and Vol. V (discussing the regulation the FTC’s decision, showing that the FTC’s decision the public with a full view of the of cigarettes as medical devices). in 1994 with respect to the ‘‘Joe Camel’’ campaign 266 See, e.g., Public Citizen Litigation Group, was neither relevant to, nor contradicted, FDA’s evidence that supports the need for the comment (January 2, 1996); American Heart discussion of the campaign in the 1995 proposed agency to take a different approach to Association, comment (December 26, 1995). rule. the regulation of these products. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44563

As FDA made clear at the outset of its products (absent express claims). For there is no statutory requirement 1995 Jurisdictional Analysis, its example, the agency incorporated by concerning how many days an agency decision to propose to regulate these reference into the administrative record must allow, nor is there a requirement products, when in the past it chose not supporting the 1995 Jurisdictional that an agency must extend the period to (except where claims were made), is Analysis all significant dockets opened at the request of an interested person. based on the fact that ‘‘[t]he quality, since the conclusion of the 1977 ASH (See Phillips Petroleum Co. v. EPA, 803 quantity, and scope of the evidence litigation that relate to the agency’s F.2d 545, 559 (10th Cir. 1986).) available to FDA today is far greater jurisdiction over these products. In FDA’s own regulations generally than any other time when FDA has addition, the agency included in the afford the public 60 days to comment on considered regulation of cigarettes and record in support of its 1995 a proposed rule, unless the smokeless products.’’ (60 FR 41453 at Jurisdictional Analysis its response to Commissioner shortens or lengthens the 41464, n. 1.) Footnote 5 of the 1995 the original ASH citizen petition. The period for good cause (21 CFR Jurisdictional Analysis, in particular, response to the ASH petition outlines in 10.40(b)(2)). Executive Order 12889 made clear that: (1) The agency in the detail the ‘‘contrary’’ view the agency implementing the North American Free past had declined to exercise allegedly concealed, including full Trade Agreement prescribes a minimum jurisdiction generally over these discussions of the agency’s enforcement comment period of 75 days on certain products; and (2) the reason for taking history with respect to tobacco products proposed rules, except when good cause a different position today is that the and the agency’s significant past is shown for a shorter comment period. evidence before the agency regarding pronouncements on the subject. In any (See 58 FR 69681, December 30, 1993.) the intended use of these products ‘‘has case, the tobacco industry itself, through Here, the agency provided the public changed dramatically.’’ (60 FR 41453 at its comments, has introduced many of with 144 days from the publication of 41482, n. 5). In addition, the agency the agency’s earlier statements into the the notice, 139 days from the release of repeatedly stated that its analysis was administrative record for this the documents the agency cited in based on ‘‘evidence now available to the proceeding. Thus, unlike the facts support of the rule and the 1995 agency’’ (60 FR 41453 at 41464), presented in cases such as Public Jurisdictional Analysis (on August 16, ‘‘current evidence’’ (60 FR 41466), Citizen v. Heckler, 653 F. Supp. 1229 1995), and 95 days from the release of evidence accumulated since 1980 (60 (D.D.C. 1986) or Walter O. Boswell the materials the agency considered but FR 41482, n. 5), and evidence that has Memorial Hospital v. Heckler, 749 F.2d did not directly rely upon (on emerged since 1980 or was not widely 788 (D.C. Cir. 1984), as referenced in the September 29, 1995). Thus, even when known until recently (60 FR 41453 at comment, the administrative record for counting from the date the agency 41483 to 41484, and 41539). this proceeding already contains the released additional documents of no Neither the APA nor the case law ‘‘adverse’’ information claimed to be direct relevance to the 1995 proposed cited in the comments requires an lacking, by virtue of the agency’s rule, the agency provided much more agency to provide a thorough ‘‘reasoned inclusion of documents in the record time for comment on the notice of explanation’’ for departing from and the comments received by the proposed rulemaking than its precedent at the notice stage of a agency. regulations, or the Executive Order, proceeding. Rather, the APA at best require. requires that the agency give notice of D. Adequacy of the Comment Period Further, on March 20, 1996, the its proposal to take a different position FDA received at least one comment Federal Register published a notice or view, and give enough information to urging that the comment period was providing an additional 30-day allow the public a reasonable unreasonably short in light of the comment period limited to specific opportunity to comment. Not until the complexity of the proposed rule, the documents the agency added to the close of the proceeding, after public number of materials the agency put on proposed rulemaking docket (see 61 FR comment has been received, must the public display, and the possible impact 11349, March 20, 1996) and to the agency ensure that it has provided a of the rule on the tobacco industry. This docket in support of the agency’s ‘‘reasoned explanation.’’ The agency comment argued that the agency acted analysis of its jurisdiction (see 61 FR believes in this instance that its arbitrarily and capriciously in deciding 11419, March 20, 1996). Although the discussion at the notice stage met the to ‘‘limit’’ the comment period to 144 agency expressly limited the scope of standard that courts ordinarily do not days from the publication of the August the matters on which interested persons impose until the close of an 11, 1995, proposal and 95 days from the could comment, the March 20, 1996, administrative proceeding. Nonetheless, public release of the documents FDA action did provide the public with yet the agency has provided a detailed considered but did not rely upon. another 30 days on which to comment discussion of the legal and factual bases Far from having ‘‘limited’’ the on issues related to such core subjects for taking its current position in section comment period, FDA provided more as the manipulation of the nicotine IV. of the 1996 Jurisdictional than twice as much time for comment content of cigarettes and smokeless Determination, annexed hereto. as the agency’s regulations require. (See tobacco. The March 20, 1996, action Finally, the agency does not agree that 60 FR 53560, October 16, 1995 also reopened the comment period with it was required to include in the record, (extending comment period for the respect to the record in support of the at the notice stage of the proceeding, proposed rule); 60 FR 53620, October agency’s proposal to regulate the each and every prior agency ‘‘decision, 16, 1995 (extending comment period on advertising of these products in ‘‘adult statement, and finding.’’ Rather, the Jurisdictional Analysis).) publications’’ and billboard advertising. agency appropriately included in the The APA requires only that an agency The agency is not persuaded that any record enough documentation to give ‘‘give interested persons an opportunity interested person has been unfairly the public notice of the agency’s prior to participate in the rule making prejudiced by the length of the comment position, and notice of the agency’s through submission of written data, period. First, FDA considers requests to prior reasoning for declining to exercise views, or arguments * * *.’’ (5 U.S.C. extend the comment period on a case- jurisdiction generally over these 553(c).) This is all the APA requires; by-case basis. Here, on the one hand, the 44564 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations authors of the comment (the Tobacco XIII. Executive Orders sponsorships by cigarette or smokeless Institute together with five major tobacco manufacturers. A. Executive Order 12606: The Family tobacco companies) presented in their The agency disagrees with the request for additional time no Executive Order 12606 (E.O. 12606) comments. FDA reiterates that the rule compelling reasons to extend the period directs Federal agencies to determine does not affect sales to adults. It is (such as a new, material study). On the whether policies and regulations may narrowly drawn to reduce young other hand, FDA is faced with a matter have a significant impact on family people’s access to cigarettes and raising serious public health concerns. formation, maintenance, and general smokeless tobacco and to reduce the For those reasons, the agency denied the well-being. The preamble to the 1995 appeal of those products to young request to extend the period for as long proposed rule stated that the rule would people. In short, the rule is intended to as had been requested (see 60 FR have ‘‘no potential negative impact on prevent illegal sales to young people, 53560). family formation, maintenance, and and the agency has no evidence to Second, each of the five tobacco general well-being.’’ Specifically, the suggest that a significant number of companies who submitted this joint Food and Drug Administration (FDA) families depend on such sales. comment complaining about the length said that the rule would not affect FDA also notes that the final rule, as of the comment period also filed suit family stability or marital commitments, amended, permits vending machines in against FDA 1 day before the Federal would not have a significant impact on facilities that are inaccessible to young Register published FDA’s notice of family earnings, and would not impede people and also permits sponsorships proposed rulemaking. The timing parental authority and rights in the under certain restrictions. These appears to indicate that these firms had education, nurture, or supervision of changes to the rule should reduce the been preparing to respond to an FDA children. To the contrary, the preamble potential economic impact on families proposal to regulate cigarettes and to the 1995 proposed rule said that the dependent on vending machine smokeless tobacco for some time. In any rule would ‘‘help the significant earnings or sponsorships or enable them case, they were able, jointly, to submit majority of American families that seek to adjust their affairs to maintain family 2,000 pages of comments and 45,000 to discourage their children from using earnings. pages of exhibits within the time cigarettes and smokeless tobacco’’ (2) Several comments said that the allotted for commenting on the because ‘‘[t]he pervasive promotion and rule interferes with parents’ ability to Jurisdictional Analysis and the easy availability of these products * ** raise their children, but did not proposed rule. Their submissions far severely hinder the individual family elaborate on how the rule supposedly outweigh any others. The agency, from carrying out this function by itself’’ interfered in child-rearing. therefore, is not persuaded that these (60 FR 41314 at 41356). The agency disagrees with the interested persons suffered prejudice as In the Federal Register of August 11, comments. The rule does not direct a result of FDA’s allowing twice as 1995, the preamble to the proposed rule parents to educate or raise their children much time as the agency’s regulations (60 FR 41314) (the 1995 proposed rule) in any particular manner and, insofar as require. (See Conference of State Bank also stated that, under section 1(g) of the adults are concerned, does not regulate Supervisors v. Office of Thrift Executive Order (which instructs the use of cigarettes or smokeless Supervision, 792 F. Supp. 837, 844 agencies to ask about a rule’s ‘‘message’’ tobacco by adults. It does reduce both (D.D.C. 1992) (in light of the comments to young people concerning their their access and appeal to young people received, court declined to find that 30- behavior, their personal responsibility, and, as a result, should help those day comment period was insufficient to and societal norms), the rule would parents who are trying to prevent their allow opportunity for meaningful public ‘‘help reduce the conflict between the children from becoming regular users of participation); Phillips Petroleum Co., anti-smoking messages issued by these products. Thus, the rule does not 803 F.2d at 559 (citing cases in which Federal and State authorities and the interfere with parental authority or the courts have upheld notice periods of 45 pro-tobacco messages seen in manner in which parents educate, days or less).) advertising’’ that are attractive to nurture, or supervise their children. FDA, therefore, reiterates that the rule In sum, the agency believes it children. This would enable young people ‘‘to understand how prevalent does not have a negative impact on provided ample additional time for family formation, maintenance, and comments—nearly 90 days more than is tobacco use is in society and also appreciate how their decisions general well-being and is consistent provided for in the agency’s own with Executive Order 12606. procedural regulation. Given that it regarding cigarette and smokeless received over 95,000 distinct sets of tobacco use can affect their health’’ (60 B. Executive Order 12612: Federalism FR 41314 at 41356). comments, the agency is not persuaded Executive Order 12612 (E.O. 12612) that the length of the comment period In the 1995 proposed rule, FDA requires Federal agencies to carefully unfairly hampered the quality of the invited comments and suggestions on examine regulatory actions to determine public debate on this matter. the rule’s effect on the family. if they have a significant impact on the FDA received several comments that E. Conclusion States, on the relationship between the disagreed with FDA’s analysis. States and the Federal government, and Because of the importance of the (1) One comment said that the rule on the distribution of power and issues involved in this proceeding, the would have a significant economic responsibilities among the various agency compiled the most extensive effect on family earnings through levels of government. E.O. 12612 directs administrative record in support of a increased costs (in order to comply with Federal agencies that are formulating proposed rulemaking in its history. FDA the rule) or the possible loss of jobs. and implementing policies to be guided employed procedures that exceeded all Another comment said that the rule by certain federalism principles, such as legal requirements in giving the public would destroy some family businesses, encouraging a ‘‘healthy diversity in the a reasonable opportunity to participate especially those dependent on vending public policies adopted by the people of in this matter. machines selling cigarettes or on the several States according to their own Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44565 conditions, needs, and desires’’ (section politically accountable by their from 516 million to 947 million 2 of E.O. 12612). constituents. packages (Id.). Although most segments Although § 897.42 of the 1995 Some comments asserted that the of the American adult population have proposed rule would have excluded 1995 proposed rule would prevent decreased their use of cigarettes, from preemption under section 521 of States from experimenting with or smoking among young people has the act more stringent State and local trying different local approaches to recently begun to rise (60 FR 41314 at requirements that do not conflict with reduce the accessibility and appeal of 41315). With regard to smokeless requirements imposed under FDA’s cigarettes and smokeless tobacco tobacco, similar statistics demonstrate final rule, FDA has deleted § 897.42 products. Some of these comments the extent of the problem in this area— from the final rule because of significant argued that their State laws were either an estimated 1 million adolescent males concerns with regard to the validity of adequate or superior to the 1995 use smokeless tobacco (60 FR 41314). that section’s proposed preemption proposed rule, citing, for example, State These figures clearly demonstrate a exclusion. See discussion in section X. vending machine restrictions, State laws serious problem which exists at a of this document. Thus, under the prohibiting distribution of tobacco national level. The health effects express provisions of section 521(a) of products to minors, and State proof-of- associated with cigarettes and smokeless the act, FDA regulation of cigarettes and age requirements. Moreover, some tobacco are well established and have smokeless tobacco as nicotine-delivery comments argued that FDA has failed to national social and health implications devices will result in preemption of show that youth access to, and use of, that warrant Federal attention. State and local requirements governing tobacco products is a national (rather As discussed in section X. of this the sale and distribution of cigarettes than State) concern warranting Federal document, FDA believes the and smokeless tobacco when such action. requirements it is establishing in this requirements are different from, or in In contrast, several comments from final rule set an appropriate floor for addition to, the requirements under State departments of health and State regulation of youth access to tobacco FDA’s final rule. attorneys general noted that tobacco products but do not, as a policy matter, FDA received many comments on the regulation is not solely a State issue. reflect a judgement that more stringent 1995 proposed rule regarding its Moreover, some of the comments State or local requirements are possible impact on State and local supported the rule for its potential inappropriate. Indeed, State and local governments. Most comments came impact on public health and on illegal governments may apply for exemption from individual State legislators in over sales of tobacco products to young from preemption under section 521(b) of 15 States (often using the same text or people. the act with regard to State and local paragraphs). FDA also received FDA recognizes the pioneering and requirements governing the sale and comments from United States Senators continuing role in the area of regulation distribution of cigarettes and smokeless and Representatives, four State of youth access to tobacco products that tobacco. A State or local requirement governors, three lieutenant governors, as States have played, particularly certain will be exempted from preemption well as a number of State and local active tobacco-control States. Federal under section 521(b) of the act if the health departments, substance abuse cooperation with, and continued State or local requirement: meets the programs, and law enforcement reliance upon, innovative and exemption requirements established agencies. In addition, FDA received aggressive State and local enforcement under that section, and is consistent comments from industry trade efforts is essential. with the goals in the final rule. The associations and individual retailers. As explicitly recognized in E.O. availability of exemptions from After careful consideration of these 12612, however, Federal action limiting preemption established under section comments, FDA has assessed the rule’s the discretion of State and local 521(b) of the act enables State and local impact on the States, on the relationship governments is appropriate ‘‘where governments to preserve or enact more between the States and the Federal constitutional authority for the action is stringent requirements governing the government, and on the distribution of clear and certain and the national sale and distribution of cigarettes and power and responsibilities among the activity is necessitated by the presence smokeless tobacco. various levels of government. As of a problem of national scope’’ (section (4) Several comments asserted that discussed below in this section, the 3(b) of E.O. 12612). The final rule meets States should be free to decide how to agency concludes that the preemptive both of these conditions. First, the allocate their resources, including effects of the final rule are consistent constitutional authority for the final rule decisions as to whether any resources with E.O. 12612. is clearly rooted in the act which was should be spent on tobacco control. (3) Many comments, including several enacted by Congress under the authority Other comments expressed concern as from legislators, expressed opposition to of the Commerce Clause of the to the rule’s possible impact on State the 1995 proposed rule on the grounds Constitution, art. I, section 8, cl. 3. resources, explaining that States lacked that the rule adversely affected State Second, youth access to cigarettes and resources to enforce the rule or sovereignty by infringing on States’ smokeless tobacco is a problem of predicting that FDA would lack rights to regulate tobacco products, to national scope that necessitates the sufficient resources to enforce the rule protect their citizens, and to regulate provisions established by the final rule. and, as a result, would have States businesses within the State. Some As discussed in the preamble to the handle enforcement matters. comments from State legislators 1995 proposed rule, approximately 3 FDA believes that these concerns are criticized the rule, interpreting it as a million children under the age of 18 are unfounded. First, because FDA is statement that the State are ‘‘unable to daily smokers (60 FR 41314 at 41317). responsible for enforcing this rule, the care for [their] own children,’’ while Moreover, every day, approximately rule should not require the expenditure other comments said that legislators, not another 3,000 young people become of State resources for its enforcement. FDA, should address issues affecting regular smokers (Id.). Children annually Second, with regard to State tobacco private citizens because legislators are consume hundreds of millions of control, State and local governments elected officials who can be held cigarettes, with the estimates ranging will retain flexibility to choose the 44566 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations appropriate allocation of their resources Amendment in planning and carrying stated that some items, such as vending in this area through the availability of out governmental actions so they do not machines, self-service displays, and exemptions from preemption under result in the imposition of unanticipated nontobacco items, could be adapted to section 521(b) of the act. or undue additional burdens on the other uses. The preamble to the 1995 (5) Several comments also expressed public fisc’’ (Section 3(a)). Section 3(c) proposed rule also found that the rule strong concern regarding the rule’s of the order states that actions taken to substantially advanced the purpose of possible impact on the State economies, protect the public health and safety protecting the public health and that the particularly with respect to farmers, ‘‘should be undertaken only in response restrictions were not disproportionate to manufacturers, distributors, and to real and substantial threats to public the extent to which the use of the retailers. A detailed analysis of the health and safety, be designed to private property contributed to the rule’s economic impact can be found in advance significantly the health and public health risk (60 FR 41314 at 41357 section XV. of this document. safety purpose, and be no greater than through 41359). FDA also invited Section 3(d)(3) of E.O. 12612 directs is necessary to achieve the health and interested persons to submit Federal departments and agencies to safety purpose.’’ Additionally, section information to enable the agency to consult with appropriate officials and 4(d) of E.O. 12630 requires, as a determine the potential cost to the organizations representing the States in prerequisite to any proposed action Government if a court found that the developing those standards. Similarly, regulating private property use for the actions described in the 1995 proposed section 4(d) of E.O. 12612 instructs protection of public health and safety, rule constituted a taking. Federal departments and agencies to each agency to: (1) Clearly identify the The final rule, as amended, prohibits consult, to the extent practicable, with public health or safety risk created by the use of a trade name of a nontobacco State officials and organizations when the private property use that is the item for any tobacco product, restricts the Federal department or agency subject of the proposed action; (2) the placement of vending machines and ‘‘foresees the possibility of a conflict establish that the proposed action self-service displays, restricts outdoor between State law and federally substantially advances the purpose of advertising from being placed within protected interests within its area of protecting the public health and safety 1,000 feet of any elementary or regulatory responsibility.’’ Moreover, against the identified risk; (3) establish, secondary school or playground, section 4(e) of E.O. 12612 requires to the extent possible, that the prohibits all brand identifiable Federal departments and agencies to restrictions imposed on private property nontobacco items, such as hats and tee- ‘‘provide all affected States notice and are not disproportionate to the extent to shirts and requires established names on an opportunity for appropriate which the use contributes to the overall labels, labeling, and/or advertising, and participation in the proceedings’’ when risk; and (4) estimate, to the extent places certain restrictions on the Federal department or agency possible, the potential cost to the sponsorship. Thus, the final rule, in proposes to act through rulemaking to Government should a court later many respects, is more lenient than the preempt State law. determine that the action constitutes a 1995 proposed rule. For example, the The proposed rule published in the taking. 1995 proposed rule would have Federal Register of August 11, 1995, The agency, in the preamble to the eliminated the use of vending machines; notified States and local governments of 1995 proposed rule, considered whether the final rule permits vending machine the Federal interest in regulating the the rule would result in a ‘‘taking’’ of sales to occur in locations that are sale and distribution of cigarettes and private property and concluded that, inaccessible to young people. The 1995 smokeless tobacco in order to protect while some requirements might affect proposed rule would have eliminated children and adolescents. FDA, through private property, the rule did not result mail-order sales; the final rule permits the comment period on the proposed in a ‘‘taking’’ of that property. (See 60 such sales to continue. So, given that rule, gave State and local governments FR 41314 at 41357 through 41359.) In the 1995 proposed rule did not result in notice and an opportunity to participate brief, the preamble to the 1995 proposed a ‘‘taking,’’ the final rule, being more in the rulemaking process, as required rule noted that the proposal would lenient than the 1995 proposed rule, by E.O. 12612. This final rule, as well prohibit the use of a nontobacco product also should not result in a ‘‘taking.’’ as the exemption document, which trade name on a tobacco product, Nevertheless, FDA received several appears elsewhere in this issue of the eliminate vending machines and self- comments asserting that the rule would Federal Register, provide additional service displays, restrict outdoor effect a ‘‘taking’’ of private property. notice to State and local governments. advertising from being placed within Most comments did not assign a specific Further opportunity for participation is 1,000 feet of any elementary or monetary value to the private property provided by the availability of secondary school or playground, which they felt would be ‘‘taken’’ or, exemptions from preemption set forth in prohibit all brand identifiable instead, gave values or figures section 521(b) of the act. nontobacco items (such as hats and tee- applicable to the entire industry rather In conclusion, FDA has determined shirts), and require established names than values or figures that would apply that the preemptive effects of the final and a brief statement on labels, labeling, to the market (which, in this case, rule are consistent with E.O. 12612. and/or advertising. Sponsorship, under would be sales to people under age 18) the 1995 proposed rule, would be affected by the rule. C. Executive Order 12630: limited to the corporate name. The (6) Several comments, particularly Governmental Actions and Interference preamble to the 1995 proposed rule from retailers, claimed that the 1995 with Constitutionally Protected Property explained that the rule did not result in proposed rule’s restrictions on self- Rights a ‘‘taking’’ because the rule would not service displays constituted a ‘‘taking.’’ Executive Order 12630 (E. O. 12630) require the Government to physically A few comments explained that, for self- directs Federal agencies to ‘‘be sensitive invade or occupy private property and service displays, requiring the displays to, anticipate, and account for, the would not deny all economically viable to be moved behind the counter would obligations imposed by the Just uses of property. For example, the be analogous to a Government requiring Compensation Clause of the Fifth preamble to the 1995 proposed rule also an easement on real property and, as a Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44567 result, would violate the Fifth those vending machines that cannot be Government would be effectively Amendment. FDA also received a small moved, may compel the vending required to ‘‘regulate by purchase’’ (60 number of comments from firms that machine owner to convert the machine FR 41314 at 41358 (citing Andrus v. manufacture displays; these firms to other uses, if possible, the final rule’s Allard, 444 U.S. 51, 65 (1979)). Here, the argued that the rule would essentially restrictions do not constitute a taking. agency is not directing retailers to force them out of business and represent Reductions in personal property’s value, terminate staff, taking revenue a ‘‘taking’’ of the business. even prohibitions on all economically belonging to retailers, or ending FDA disagrees with the comments. viable uses, and financial expenditures sponsored events. It is only issuing The final rule, as amended, permits self- to comply with a regulatory requirement regulations to reduce illegal cigarette service displays (merchandisers only) in do not necessarily establish a taking. and smokeless tobacco to young people facilities that are totally inaccessible to (8) Several comments asserted that the and the appeal of such products to young people. Thus, in those facilities rule would reduce sales or tax revenues, young people. Retailers would still where merchandisers will be permitted, prompt companies to terminate receive revenues from legal sales to the rule will not require the employees, or suspend sponsorship of adults; sponsorships in the corporate merchandisers to be removed, and firms events, thereby depriving States of name could occur. that manufacture merchandisers will revenues associated with those Other cases support the notion that continue to have a market for their sponsored events or eliminating the lawful regulatory action does not merchandisers. event itself. For example, one State constitute a taking merely because the Retailers might be able to avoid or legislator claimed that the rule would Government action diminishes the value reduce the rule’s impact on some adversely affect automobile racing of private property, reduces profits, or merchandisers if those merchandisers events in the State, leading to a loss of prevents the most beneficial use of could be adapted to other uses. For 8 million dollars in revenue and property (see Carlin Communications, example, a merchandiser that consisted adversely affecting the State’s tourism Inc. v. Federal Communications of bare shelves could be used to display department. Another State legislator Comm’n, 837 F.2d 546, 557–558 n. 5 (2d products other than cigarettes and asserted that the rule’s sponsorship Cir.), cert. denied, 488 U.S. 924 (1988) smokeless tobacco. Other merchandisers restrictions would end rodeo events in (FCC regulation of ‘‘dial-a-porn’’ could be moved and, as a result, would the State. services to protect minors did not retain their utility; for example, a FDA disagrees with the comments. constitute a taking); Galloway Farms, counter display that stands near a cash While the rule’s economic impacts may Inc. v. United States, 834 F.2d 998 (Fed. register could be moved behind the be significant, those impacts do not Cir. 1987) (trade embargo, while closing counter and still be used for cigarettes necessarily result in a taking. For off certain markets, did not eliminate all and smokeless tobacco. example, the final rule does not require economic value so no taking occurred); Additionally, as explained in greater firms to terminate employees or to stop Minnesota Ass’n of Health Care detail in section XI. of this document, sponsoring events. In fact, the final rule Facilities, Inc. v. Minnesota Dep’t of reductions in personal property’s value, expressly permits sponsorships in the Public Welfare, 742 F.2d 442, 446 (8th even prohibitions on all economically corporate name. The concerns expressed Cir. 1984), cert. denied, 469 U.S. 1215 viable uses, and financial expenditures by the comments are also speculative (1985) (nursing home’s decision to to comply with a regulatory requirement and, to the extent that they do occur, participate in Medicaid program was do not necessarily establish a taking. would result from decisions made by voluntary and so a statute pertaining to (7) Several comments asserted that the third parties rather than by FDA. The Medicaid rates did not constitute a rule would eliminate the use of vending Fifth Amendment requires just taking); Carruth v. United States, 627 machines. In the preamble to the 1995 compensation for a governmental taking F.2d 1068, 1081 (Ct. Cl. 1980) proposed rule, FDA cited an article from of private property; it does not require (regulation affecting contaminated a vending machine publication to compensation for the consequential peanuts, while reducing their value, did suggest that vending machines could be damages resulting from the exercise of not constitute a taking); Warner-Lambert converted to sell other products and so, a lawful Government regulation on that Co. v. Federal Trade Comm’n, 562 F.2d while the 1995 proposed rule would property. 749, 759 n. 45 (D.C. Cir. 1977), cert. prohibit the use of vending machines for Indeed, as noted in the preamble to denied, 435 U.S. 950 (1978) (FTC order cigarettes and smokeless tobacco, the the 1995 proposed rule, courts have requiring corrective advertising did not ability to convert a vending machine to generally required either a physical constitute a taking)). other uses reduced the likelihood of a invasion of the property or a denial of Furthermore, courts have generally ‘‘taking’’ (60 FR 41314 at 41358). all economically beneficial or declined to require compensation for However, FDA received several productive use of the property and the loss of contracts that could not be comments explaining that some examined the degree to which the completed following the enactment of a cigarette vending machines, particularly governmental action serves the public new statute or regulation or action by older models, cannot be adapted to good, the economic impact of that the Government and have not required other uses so that the 1995 proposed action, and whether the action has compensation for the loss of future or rule would destroy the value of those interfered with ‘‘reasonable investment- anticipated profits. In Omnia older vending machines. backed expectations’’ (60 FR 41314 at Commercial Co. v. United States, 261 As discussed earlier in this document, 41357 through 41358). The preamble to U.S. 502 (1923), the Supreme Court had the final rule permits vending machines the 1995 proposed rule noted that to decide whether the Government’s in facilities that are totally inaccessible deprivation of the most beneficial use of acquisition of a steel company’s entire to young people. While this may limit property does not constitute a taking production of steel plate constituted a the number of places where vending and that Government regulation often taking of a firm’s contract for a large machines may be used, may exclude involves adjustment of rights for the quantity of steel plate from the same vending machines from places where public good. If every Government steel company. The Court wrote that, they were used most profitably, or, for regulation resulted in a taking, then the ‘‘There are many laws and governmental 44568 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations operations which injuriously affect the received that would affect the agency’s economic impacts, whether benefits or value of or destroy property—for previous determination that this action burdens, a report prepared by the example, restrictions upon the height or has no significant impact on the human Barents Group and presented as Volume character of buildings, destruction of environment, and that neither an 11 of the Tobacco Institute submission diseased cattle, trees, etc., to prevent environmental assessment nor an provided a comprehensive critique of contagion—but for which no remedy is environmental impact statement is the methodology, assumptions, and cost afforded. Contracts in this respect do required. estimates presented in FDA’s preliminary economic analysis and not differ from other kinds of property’’ XV. Analysis of Impacts (Id. at pp. 508 through 509). The Court developed alternative estimates of reviewed earlier decisions and stated A. Introduction and Summary regulatory costs. Other comments that: The Food and Drug Administration addressed selected economic issues. The conclusion to be drawn * * * is, that (FDA) has examined the impacts of the FDA carefully examined and evaluated for consequential loss or injury resulting final rule under Executive Order 12866, the reasoning and data presented in from lawful governmental action, the law under the Regulatory Flexibility Act (5 these comments, accepted those that affords no remedy. The character of the were persuasive, and presents this power exercised is not material. * * * If, U.S.C. 601–612), and under the Unfunded Mandates Reform Act of 1995 revised analysis of the final rule. under any power, a contract or other property In its preliminary analysis, FDA based is taken for public use, the Government is (Pub. L. 104–4). Executive Order 12866 the benefits of the 1995 proposed rule liable; but, if injured or destroyed by lawful directs agencies to assess all costs and action, without a taking, the Government is benefits of available regulatory on a finding that compliance could help not liable. alternatives and, when regulation is to achieve the Department’s ‘‘Healthy (Id. at p. 510) necessary, to select regulatory People 2000’’ goal of reducing underage The Court held that while the approaches that maximize net benefits tobacco use by one-half. Comments Government took the steel, it did not (including potential economic, received in response to the proposal take the contract itself and that environmental, public health and safety, have reinforced the agency’s conviction ‘‘[f]rustration and appropriation are and other advantages; and distributive that this goal can be realized, although essentially different things’’ (Id. at p. impacts and equity). If a rule has a it will require the active support and 513). (See also Louisville & Nashville significant economic impact on a participation of State and local R.R. Co. v. Mottley, 219 U.S. 467, 484 substantial number of small entities, the governments and civic and community (1911); NL Industries, Inc. v. United Regulatory Flexibility Act requires organizations, as well as manufacturers States, 839 F.2d 1578, 1579 (Fed. Cir.), agencies to analyze regulatory options and retail dispensers of tobacco cert. denied, 488 U.S. 820 (1988) that would minimize any significant products. In the Federal Register of (‘‘frustration of a business by loss of a impact of such rule on small entities. January 19, 1996 (61 FR 1492), the customer was not a taking’’); Carruth, Section 202 of the Unfunded Mandates Substance Abuse and Mental Health 627 F.2d at 1081 (‘‘[I]n cases where Reform Act requires that agencies Services Administration (SAMHSA) there has been no direct appropriation prepare an assessment of anticipated issued a regulation governing a program of property by governmental agencies, costs and benefits before proposing any of State-operated enforcement activities consequential damages resulting from rule that may result in an expenditure to restrict the sale or distribution of the exercise of lawful regulations are not by State, local and tribal governments, tobacco products to individuals under compensable takings within the in the aggregate, or by the private sector, the age of 18. SAMHSA predicted that purview of the Fifth Amendment’’).) of $100,000,000 (adjusted annually for its rule would cut the rate of underage Thus, FDA disagrees with the inflation) in any year. Section 205 of the tobacco consumption by between one- comments suggesting that the rule will Unfunded Mandates Reform Act also tenth and one-third. FDA can not result in a taking of jobs or future requires that the agency identify and separately quantify the incremental revenues associated with sponsored consider a reasonable number of benefits of the respective agency events. regulatory alternatives and from those programs, due to the substantial (9) Several comments said that the alternatives select the least costly, most interdependencies and uncertainties 1995 proposed rule’s restrictions on the cost-effective, or least burdensome regarding future compliance with these use of trade names constitute a taking of alternative that achieves the objective of rules; but finds that its final rule and the trade names or the goodwill associated the rule. The following analysis, in SAMHSA regulation are fully with a tradename or asserted that one conjunction with the remainder of this complementary and, working together, has a ‘‘right’’ to use a brand name in any preamble, demonstrates that this rule is will produce results that would more manner. consistent with the principles set forth than equal the sum of their independent As discussed in section XI. of this in the Executive Order and in these two efforts. document, the agency disagrees that any statutes. Each year, an estimated 1 million provision in this rule effects a taking of FDA published its preliminary adolescents under the age of 18 begin to trademarks and goodwill. economic analysis in the preamble to its smoke cigarettes. The Centers for 1995 proposed regulation. In response, Disease Control and Prevention (CDC) XIV. Environmental Impact the agency received thousands of estimate that approximately one in three In the Federal Register of August 11, comments raising economic issues or of these adolescents will die of smoking- 1995 (60 FR 41314), the preamble to the concerns. Representatives of affected related diseases, and FDA has proposed rule stated that FDA had industry sectors emphasized burdens in concluded that this projection provides determined under § 25.24(a)(8), (a)(11), excess of those estimated in the the best estimate of the excess fatality and (e)(6) that the proposed action was preliminary economic analysis. Other rate. FDA finds that even overly of a type that does not individually or comments stressed the considerable conservative projections indicate that cumulatively have a significant impact economic value of the expected public achieving the ‘‘Healthy People 2000’’ on the human environment. No new health benefits. Although few comments goal of reducing underage tobacco use information or comments have been provided quantifiable data on projected by one-half would prevent well over Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44569

60,000 early deaths, gaining over willingness-to-pay values for averting onset of smoking for only 1/20 of the 1 900,000 future life-years for each year’s premature fatalities. (Because of the million adolescents who become new cohort of teenagers who would long periods involved, a 7 percent smokers each year would provide otherwise begin to smoke. The monetary discount rate reduces the total benefits annual benefits valued at from $2.8 to value of these health benefits (at a 3 to about $9.2 to $10.4 billion per year). $4.3 billion a year. In addition, although percent discount rate) is estimated to If the agency’s goal were exceeded, FDA has not quantified the benefits of total $28 to $43 billion per year and these benefits would be even larger. reducing the number of serious illnesses includes $2.6 billion in medical cost Moreover, if even a fraction of the goal attributable to the use of smokeless savings, $900 million in productivity were achieved, the benefits would tobacco by youngsters under the age of gains from reduced morbidity, and substantially outweigh the costs of the 18, the agency is convinced that these $24.6 to $39.7 billion per year in rule. As shown in Table 1c, halting the benefits also will be substantial. TABLE 1c.ÐANNUAL ILLNESS-RELATED BENEFITS OF ALTERNATIVE EFFECTIVENESS RATES (UNDISCOUNTED LIVES AND LIFE-YEARS; 3% DISCOUNT RATE FOR MONETARY VALUES)1

Mortality-Related Will- Total Benefits Fewer Teen- Morbidity-Re- ingness-to-Pay agers who Smoking Re- Life-Years Medical lated Produc- Fraction of Teenage will Smoke lated Deaths Savings Cohort Deterred 3 Saved (No.) tivity Savings Life-Yrs. Deaths Low High as Adults Averted (No.) ($bils.) ($bils.) Saved Averted ($bils.) ($bils.) (No.) ($bils.) ($bils.)

1/22 250,000 60,200 905,300 2.6 0.9 24.6 39.7 28.1 43.2 1/3 167,000 40,100 603,600 1.8 0.6 16.4 26.4 18.7 28.8 1/5 100,000 24,100 362,100 1.1 0.4 9.8 15.9 11.2 17.3 1/10 50,000 12,000 181,100 0.5 0.2 4.9 7.9 5.6 8.6 1/20 25,000 6,000 90,500 0.3 0.1 2.5 4.0 2.8 4.3 1 Totals may not add due to rounding. 2 Estimate used in analysis. 3 Assumes 50% of adolescents who are deterred from smoking continue to refrain as adults.

In its evaluation of the economic costs (see Table 2). Manufacturers of ultimately share the costs of removal impact on industry, FDA also includes tobacco products will incur one-time and replacement. FDA’s cost estimates those costs that might be attributable to costs ranging from $78 million to $91 assume that manufacturers will pay for the SAMHSA program, as the rules of million, primarily for removing most removal and installation activities both agencies work collectively to prohibited point-of-sale promotional and retailers will pay for most reduce youth access to tobacco items and self-service displays, and for replacement items. (If, in fact, retailers products. As a result, the overall changing package labels. As the assume most removal responsibilities, estimated compliance costs of the rules responsibility for removing the the estimated manufacturer costs fall by range from $174 million to $187 million prohibited point-of-sale promotional about $47 million). in one-time costs and from $149 million and display items resides with the to $185 million in annual operating owner, manufacturers and retailers may 44570 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

TABLE 2.ÐCOSTS OF FDA AND SAMHSA REGULATIONS ($ mils.)1

Requirements By Sector One-Time Costs Annual Operating Costs

Tobacco Manufacturers 78±91 2 Point-of-Sale Advertising 30 Self-Service Ban 40 Label Changes 4±17 Paperwork Requirements 1.2 Training 1.5 0.2 Readership Surveys 2 1

Retail Establishments 96 78 Training 34 20 I.D. Checks 43 Self-Service Ban 57 11 Point-of-Sale Advertising 5 Vending Machines 3.5

Consumers 41±50 I.D. Checks 41±50

Government 28±55 States (SAMHSA) 25±50 FDA 3±5

TOTAL 174±187 149±185 1 Assumes manufacturers remove prohibited retail display. If retailers bear full burden, manufacturer one-time costs fall by about $47 million and retailer one-time costs rise by about $17 million. Advertising restrictions are considered under distributional effects. Excludes costs of short- term resource dislocation and educational programs.

Retail establishments will incur an addition, a number of commercial increased profits ultimately end up in the estimated $96 million in one-time costs. sectors will experience costs for short- hands of the companies’ owners About $57 million of these costs are due term dislocations of current business (shareholders) either as direct payouts or as to the self-service restriction, primarily activities. Neither FDA nor any of the investments on their behalf in other lines of for replacing display cases and other industry comments on the agency’s business. In general, these profits are proposal projected the magnitude of ultimately recycled into increased functional promotional items. (If consumption and investment by the owners retailers rather than manufacturers these costs, but they would be mitigated of the companies. remove the prohibited point-of-sale for those businesses that anticipate the Similarly, the anticipated slow but advertising and display items, the adjustments in long-term business persistent decline in tobacco product estimated retailer costs rise by about $17 plans. sales revenues are not societal costs, million). The retail sector will also incur In addition to the costs described previously, the rule will create because the dollars not spent on about $78 million in annual costs. In tobacco-related items will be spent on addition to new labor costs attributable significant distributional and transitional effects. Some industry other goods or services. to the self-service restrictions, both the Nevertheless, FDA is aware that many FDA and SAMHSA rules impose costs comments asserted that FDA had neglected the cost of lost sales revenues tobacco-related industry sectors will be for training employees to verify adversely affected by this rule. Tobacco customer ages, for routinely checking in its preliminary economic analysis and one industry study estimated these manufacturers and suppliers will face I.D.’s of young purchasers, and for increasingly smaller sales, because foregoing profits due to reduced ‘‘Illustrative Costs’’ at from $1.3 billion to $3.3 billion per year. In fact, FDA had reduced tobacco consumption by youth vending machine sales. Consumers will will lead, over time, to reduced tobacco bear costs of up to $50 million annually considered these sector-specific revenue reductions, but described the impacts as consumption by adults. The impact of for incurring some delay in checkout this trend on industry revenues, lines. Finally, enforcement of these distributional effects, rather than as net societal costs. For example, any lost however, will be extremely gradual, rules may cost the FDA from $3 million requiring over a decade to reach an to $5 million per year and State sales experienced by suppliers of advertising were considered annual decrease of even 4 percent. Also, governments from $25 million to $50 if State and Federal excise tax rates on million per year for administering distributional impacts, because dollars not spent on advertising will not be lost tobacco products remain at current various SAMHSA enforcement levels, tax revenues would decrease programs. to the U.S. economy, but will be spent on other goods and services. As slowly over time, falling by about $231 FDA could not, however, quantify acknowledged by the authors of one of million and $196 million, respectively, every regulatory cost. For example, the the economic impact analyses by the 10th year following compliance agency may require certain tobacco commissioned by the tobacco with the regulation. manufacturers to broadcast educational manufacturing industry: Tobacco manufacturers spent $6.2 messages under the agency’s * * * when tobacco product billion on advertising, promotional, and notification process. Cost estimates for manufacturers decrease their advertising marketing programs in 1993, and about these activities will be developed in expenditures, the money not spent translates 30 percent may be substantially altered parallel with the program elements. In into increased profits for the industry. The to reflect the various ‘‘text only’’ Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44571 restrictions or other prohibitions. If related death responsible for the loss of particular age is reached. These limits tobacco companies choose to reduce up to 15 life-years. 268 should, however, be set according to the age advertising and promotional activities In its guidelines for the preparation of at which individuals are believed to be due to the FDA restrictions, the sectors Economic Impact Analyses, OMB asks capable of making reasonable long-term affected would include advertising that Federal regulatory agencies decisions regarding their welfare, rather than some arbitrary date independent of the agencies and communications media, determine whether a market failure choice context. The emerging consensus of owners of retail and outdoor advertising exists and if so, whether that market smoking restriction policies has focused age space, and recipients of corporate failure could be resolved by measures 18 as the minimum age for the purchase of brand-name sponsorships (especially other than Federal regulation. The basis cigarettes. 271 auto racing). These businesses would for this request derives from standard FDA concludes, therefore, that even if need to attract new revenues to economic welfare theory, which by some children do make rational choices, maintain current levels of profitability. assuming that each individual is the the agency’s regulatory determinations Similarly, vending machine operators best judge of his/her own welfare, must reflect the societal conviction that will need to find substitute products to concludes that perfectly competitive children under the age of legal consent replace up to 3 percent of their sales private markets provide the most cannot be assumed to act in their own revenues. efficient use of societal resources. best interest. 272 In summary, FDA finds that Accordingly, the lack of perfectly In particular, FDA finds that the compliance with this rule will bring competitive private markets (market pervasiveness and imagery used in significant health benefits to the U.S. failure) is frequently used to justify the industry advertising and promotional population. The rule will also exact need for Government intervention. programs often obscure adolescent long-term revenue losses on the tobacco Common causes of such market failures perceptions of the significance of the industry and short-term costs on various include monopoly power, inadequate associated health risks and the strength affiliated industry sectors. With regard information, and market externalities or of the addictive power of tobacco to small businesses, many near-term spillover effects. products. Section VI. of this document impacts will be small or transitory, but While FDA agrees that various describes numerous studies on the some business will be adversely elements of market failure are relevant shortcomings of the risk perceptions affected. For a small retail convenience to the problem of teenage use and held by children. Health economist store not currently complying with this tobacco addiction, the agency also Victor R. Fuchs describes the typical rule, the additional first year costs could believes that this regulatory action sequence: average $400. For those convenience would be justified even in the absence There is considerable evidence that the stores that already check customer of a traditional market failure. As noted [time discount] rate falls as children mature. identification, these costs average $137, previously, the implications of the Infants and young children tend to live very largely to relocate tobacco product market failure logic are rooted in a basic much for the present; the prospect of displays. Moreover, the rule will not premise of the standard economic something only a week in the future usually produce significant economic problems welfare model—that each individual is has little influence over their behavior. As at the national level, as the long-term the best judge of his/her own welfare. children get older their time horizons displacement within tobacco-related lengthen, but once adult status is reached FDA, however, is convinced that this there seems to be little correlation between sectors will be offset by increased principle does not apply to children and time discount and age. 273 output in other areas. Thus, under the adolescents. Even steadfast defenders of Thus, although most youngsters Unfunded Mandates Act, FDA individual choice acknowledge the acknowledge the existence of tobacco- concludes that the substantial benefits difficulty of applying the ‘‘market related health risks, the agency finds of this regulation will greatly exceed the failure’’ criterion to non adults. that the abridged time horizons of youth compliance costs that it imposes on the Littlechild, for example, adds a footnote make them exceptionally vulnerable to U.S. economy. In addition, the agency to the title of his chapter on ‘‘Smoking the powerful imagery advanced through 269 has considered other alternatives and and Market Failure’’ to note that targeted industry advertising and determined that the current rule is the ‘‘[t]he economic analysis of market promotional campaigns. In effect, these least burdensome and most cost- failure deals with choice by adults.’’ conditions constitute an implicit market 270 effective alternative that would meet the Although both Beales and Viscusi failure not adequately remedied by objectives of this rule. find that young persons balance risks existing government action. B. Statement of Need for Action and rewards in making decisions on Moreover, the agency does not view whether or not to smoke, Viscusi these results as inconsistent with the The need for action stems from the explains that: growing economic literature based on agency’s determination to ameliorate the [n]evertheless, there are some classes of the Becker and Murphy models of enormous toll on the public health that choices that have major consequences, and ‘‘rational addiction.’’ 274 Although is directly attributable to the for that reason society may wish to reserve several empirical studies have consumption by adolescents of the privilege of making these choices until a cigarettes and smokeless tobacco. 271 Viscusi, W. K., ‘‘Smoking: Making the Risky According to the nation’s most 268 Statement of Clyde Behney and Maria Hewitt on Smoking-Related Deaths and Financial Costs: Decision,’’ Oxford University Press, New York, p. knowledgeable health experts, tobacco Office of Technology Assessment Estimates for 1990 149, 1992. use is the most important preventable Before the Senate Finance Committee, pp. 1–2, 272 Goodin, R. E., ‘‘No Smoking: The Ethical cause of morbidity and premature April 28, 1994. Issues,’’ University of Chicago Press, pp. 30–32, mortality in the United States, 269 Littlechild, S. C., ‘‘Smoking and Market 1989. accounting each year for over 400,000 Failure,’’ in ‘‘Smoking and Society: Toward a More 273 Fuchs, V. R., ‘‘How We Live,’’ Harvard deaths (approximately 20 percent of all Balanced Assessment,’’ edited by R. D. Tollison, University Press, Cambridge, MA, pp. 228–229, Lexington Books, p. 271, 1986. 1983.+ deaths). Moreover, these morbidity and 270 Beales III, J. Howard, ‘‘Advertising and the 274 Becker, G. S., and K. M. Murphy, ‘‘A Theory mortality burdens do not spare middle Determinants of Teenage Smoking Behavior,’’ p. 44, of Rational Addiction,’’ Journal of Political aged adults—with the average smoking- 1993. Economy, vol. 96, No. 4, pp. 675–700, 1988. 44572 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations demonstrated that, for the general estimates ignored external costs the CDC estimated the 1993 smoking- population, cigarette consumption is associated with lives lost due to passive attributable costs for medical care, ‘‘rationally addictive’’ in the sense that smoking, perinatal deaths due to alone, at $50 billion. 281 Unfortunately, current consumption is affected by both smoking during pregnancy, and deaths these prevalence-based studies do not past and future consumption, 275 and injuries caused by smoking-related answer many of the most important Chaloupka notes that this ‘‘rationality’’ fires, the authors concluded that there is questions related to changes in does not hold for younger or less no net externality, because the sum of regulatory policy, because they present educated persons, for whom past but all smoking-related externalities is the aggregate cost of smoking-related not future consumption maintains a probably less than the added payments illness in a single year, rather than the significant effect on current imposed on smokers through current lifetime cost of illness for an individual consumption. He concludes, ‘‘[t]he Federal and State cigarette excise taxes. smoker. As noted in the 1992 Report of strong effects of past consumption and A Congressional Research Service the Surgeon General, most prevalence- weak effects of future consumption Report to Congress concurred with the based studies fail to consider issues among younger or less educated study’s conclusion, 278 although many concerning ‘‘the economic impact of individuals support the a priori uncertainties remain regarding the decreased prevalence of cigarette expectation that these groups behave potential magnitude of the omitted cost smoking, the length of time before myopically.’’ 276 elements. economic effects are realized, the FDA’s justification of this regulation C. Regulatory Benefits economic benefits of not smoking, and relies on the total costs associated with a comparison of the lifetime illness childhood addiction to tobacco, rather 1. Prevalence-Based Studies costs of smokers with those of than on the external or spillover costs to The benefits of the regulation include nonsmokers.’’ 282 In effect, although nonusers. Nevertheless, a further market the costs that would be avoided by these studies are designed to measure failure would exist if the use of tobacco reducing the adverse health effects the smoking-related draw on societal imposed such costs on nonusers. Many associated with the consumption of resources, they are not well-suited for studies have attempted to calculate the tobacco products. Most research on the analyzing the consequences of societal costs of smoking, but few have costs of smoking-related illness has regulation-induced changes in smoking addressed these externalities. The most concentrated on the medical costs and behavior. detailed research on the issue of productivity losses associated with the 2. FDA’s Methodology whether smokers pay their own way is prevalence of death and illness in a 277 the 1991 study by Manning, et al., given year. These prevalence-based An alternative methodology, termed which develops estimates of the present studies typically measure three incidence-based research, compares the value of the lifetime external costs components: (1) The contribution of lifetime survival probabilities and attributable to smoking. This study smoking to annual levels of illness and expenditure patterns for smokers and examines differences in costs of death, (2) the direct costs of providing nonsmokers. As this approach models collectively financed programs for extra medical care, and (3) the indirect the individual life-cycle consequences smokers and nonsmokers, while costs, or earnings foregone due to of tobacco consumption, FDA relied on simultaneously controlling for other smoking-related illness or death. 279 these incidence-based studies for its personal characteristics that could affect In a recent statement, the former U.S. original analysis of the proposed rule to these costs (e.g., age, sex, income, Office of Technology Assessment (OTA) value the beneficial effects of the rule education, and other health habits, etc.). declared that ‘‘the greatest ’costs’ of over the lifetime of each new cohort of The authors found that nonsmokers smoking are immeasurable insofar as potential smokers. The methodology subsidize smokers’ medical care, but they are related to dying prematurely incorporates the following steps: smokers (who die at earlier ages) and living with debilitating smoking- • A projection of the extent to which the subsidize nonsmokers’ pensions. On related chronic illness with attendant rule will reduce the incidence, or the balance, they calculated that, before poor quality of life.’’ Nonetheless, OTA annual number, of new adolescent users accounting for excise taxes, smoking calculated that in 1990 the national cost of tobacco products; creates net external costs of about $0.15 of smoking-related illness and death • A projection of the extent to which the per pack of cigarettes in 1986 dollars amounted to $68 billion and included reduced rates of adolescent tobacco ($0.33 per pack adjusted to 1995 dollars $20.8 billion in direct health care costs, consumption will translate to reduced by the medical services price index). $6.9 billion in indirect morbidity costs, rates of lifetime tobacco consumption; While acknowledging that these and $40.3 billion in lost future earnings • A projection of the extent to which the from premature death. 280 More recently, reduced rates of lifetime tobacco 275 Becker, G. S., M. Grossman, and K. M. consumption will decrease the number Murphy, ‘‘An Empirical Analysis of Cigarette 278 Gravelle, J. G., and D. Zimmerman, ‘‘CRS of premature deaths and lost life-years; Addiction,’’ The American Economic Review, vol. Report for Congress: Cigarette Taxes to Fund Health 84, No. 3, pp. 396–418, June 1994; Chaloupka, F., Care Reform: An Economic Analysis,’’ and ‘‘Rational Addictive Behavior and Cigarette Congressional Research Service, p. 1, March 8, • An exploration of various means of Smoking,’’ Journal of Political Economy, vol. 99, 1994. estimating the monetary value of the No. 4, pp. 722–742, 1991; Keeler, T. E., T. W. Hu, 279 See ‘‘Smoking and Health in the Americas: A expected health improvements. P. G. Barnett, and W. G. Manning, ‘‘Taxation, 1992 Report of the Surgeon General in collaboration Regulation, and Addiction: A Demand Function for with the Pan American Health Organization,’’ Cigarettes Based on Time-Series Evidence,’’ Journal Department of Health and Human Services (DHHS), Office of Technology Assessment Estimates for 1990 of Health Economics, vol. 12, pp. 1–18, 1993. Public Health Service (PHS), CDC, National Center Before the Senate Finance Committee, p. 2, April 276 Chaloupka, F., ‘‘Rational Addictive Behavior for Chronic Disease Prevention and Health 28, 1994. and Cigarette Smoking,’’ Journal of Political Promotion (NCCDPHP), Office on Smoking and 281 ‘‘Medical-Care Expenditures Attributable to Economy, vol. 99, No. 4, p. 740, 1991. Health (OSH), pp. 105–112, 1992, (hereinafter Cigarette Smoking—United States, 1993,’’ in 277 Manning, W. G., E. B. Keeler, J. P. Newhouse, referred to as ‘‘1992 SGR’’) for a full summary of Morbidity and Mortality Weekly Reports (MMWR), E. M. Sloss, and J. Wasserman, ‘‘The Costs of Poor these methodologies and findings. CDC, DHHS, vol. 43, No. 26, pp. 469–472, July 8, Health Habits, A RAND Study,’’ Harvard University 280 Statement of Clyde Behney and Maria Hewitt 1994. Press, Cambridge, MA, 1991. on Smoking-Related Deaths and Financial Costs: 282 1992 SGR, p. 111. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44573

The annual benefits of the 1995 Advertising and promotional programs designed to discourage proposed rule were measured as the restrictions will augment these efforts to youthful tobacco consumption could present value of the lifetime benefits limit the attractiveness of tobacco reasonably achieve the ‘‘Healthy People gained by those youngsters, who in the products to underage consumers. As 2000’’ goal of halting the onset of absence of the proposed regulation, discussed in detail in section VI. of this smoking for at least half, or 500,000, of would have become new smokers. Upon document, no one study has definitively the 1,000,000 youngsters who presently review of the public comments, FDA quantified the precise impact of start to smoke each year. In the Federal found none that would persuade the advertising or of advertising restrictions. Register of January 19, 1996 (61 FR agency to revise its projections. In Nevertheless, much of the relevant 1492) SAMHSA published a regulation general, the relevant comments research indicates that advertising governing a program of State-operated expressed no objection to the basic restrictions will reduce consumer enforcement activities that would methodology or model, but some demand. For example, according to the restrict the sale or distribution of disputed the accuracy of the specific 1989 report of the Surgeon General, tobacco products to individuals under data estimates. The following ‘‘The most comprehensive review of 18 years of age. SAMHSA had originally paragraphs describe the FDA both the direct and indirect mechanisms estimated that its program would reduce assumptions that underlie these benefit concluded that the collective empirical, tobacco consumption by youth and estimates and present the agency’s experiential, and logical evidence makes children by from one-third to two- response to the applicable public it more likely than not that advertising thirds, but subsequently determined comments. and promotional activities do stimulate that reductions of between one-tenth cigarette consumption.’’ 284 Similarly, and one-third would be ‘‘more realistic 3. Reduced Incidence of New Young after a careful examination of available given the uncertainties implicit in Smokers studies, Clive Smee, Chief Economic varying levels of State enforcement and FDA’s preliminary analysis assumed Adviser to the United Kingdom the absence of meaningful controls on Department of Health determined that, 287 that 1 million youngsters become new tobacco advertising and promotion.’’ ‘‘the balance of evidence thus supports smokers each year. One trade While strongly supporting the objectives the conclusion that advertising does association comment questioned this of the SAMHSA program, FDA finds have a positive effect on figure, asserting that the relevant studies that achieving the ‘‘Healthy People consumption.’’ 285 A detailed evaluation included individuals over the age of 18. 2000’’ goal will demand a full arsenal of of the effects of advertising on youth However, the 1985 National Health controls to complement and fortify the consumption of tobacco products is Interview Survey reported 1.08 million new State inspectional programs, provided in section VI. of this 20-year old smokers, and the Combined including restrictions on industry document. advertising and promotions and quite National Health Interview Surveys for In Northern California, 24 cities and 1987–1988 found that 92 percent of 20- possibly educational messages to unincorporated areas in 5 counties counter the influence of ongoing year old smokers had started smoking adopted local youth tobacco access by age 18. Taking 92 percent of 1.08 marketing activities. ordinances that prohibit self-service Numerous public comments to the million yields 993,600 new underage merchandising and point-of-sale tobacco smokers per year. This figure is 1995 proposal addressed the issue of the promotional products in retail stores. effectiveness of the regulation. Many supported by parallel estimates of the Survey measures of the impact of these SAMHSA. Based on data from the 1994 argued that tobacco advertising does not ordinances by the Stop Tobacco Access increase tobacco use, or that the National Household Survey on Drug for Minor Project (STAMP) found that, Abuse, SAMHSA estimated that 1.29 enforcement of existing or forthcoming on average, tobacco sales to minors State laws, alone, could accomplish million persons under age 20 became 286 dropped by 40 to 80 percent. reasonable goals. In contrast, many daily smokers in 1993, and that 1.1 In its analysis of the 1995 proposed others supported a comprehensive million of these persons were under the rule, FDA argued that, while regulation, contending that only age of 18. As a result, FDA retains quantitative estimates of the vigorous enforcement of new confidence in its original estimate of 1 effectiveness of its regulation cannot be restrictions would bring significant million new smokers per year. made with certainty, comprehensive results. As outlined earlier in the The regulation targets youngsters by preamble in this document, FDA has Association (JAMA), vol. 266, No. 22, p. 3159, restricting youth access to tobacco determined, based on a full examination products and by limiting advertising December 11, 1991. 284 of the evidence, that the combined effect activities that affect adolescents. Several DHHS, ‘‘Reducing the Health Consequences of Smoking: 25 Years of Progress,’’ A Report of the of the regulations (restricting advertising communities have demonstrated that Surgeon General, U.S. Department of Health and and promotion, prohibiting self-service access restrictions are extremely Human Services, Public Health Service, Centers for sales, providing new labeling Disease Control, National Center for Chronic effective when vigorously applied at the information, and imposing age local level. Woodridge, IL, for example, Disease Prevention and Health Promotion, Office on Smoking and Health, DHHS publication No. (CDC) verification obligations) and educational achieved a compliance rate of over 95 89–8411, p. 517, 1989 (the 1989 SGR). programs will significantly diminish the percent. Moreover, 2 years after that law 285 Leaney, K., ‘‘Effect of Tobacco Advertising on allure as well as the access to tobacco was enacted, a survey of 12- to 14-year- Tobacco Consumption: A Discussion Document products by youth. The agency Reviewing the Evidence,’’ Economics and old students indicated that overall acknowledges the imposing size of the smoking rates were down by over 50 Operational Research Division, Department of Health, London, p. 22, October 1992. required effort, but is confident that its percent (over 2/3 for regular 286 Kropp, R., ‘‘A Position Paper on Reducing 283 goals are reasonable and presents smokers). Tobacco Sales to Minors by Prohibiting the Sale of regulatory benefits based on the Tobacco Products by Means of Self-Service presumption that the ‘‘Healthy People 283 Jason, L. A., P. Y. Ji, M. D. Anes, and S. H. Merchandising and Requiring only Vendor-Assisted Birkhead, ‘‘Active Enforcement of Cigarette Control Tobacco Sales,’’ North Bay Health Resources 2000’’ goals will be met. Laws in the Prevention of Cigarette Sales to Center, Stop Tobacco Access to Minors Program Minors,’’ The Journal of the Amercian Medical (STAMP), Petaluma, CA, p. 4, November 3, 1994. 287 61 FR 1502, January 19, 1996. 44574 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

FDA agrees, however, that these between 17 and 40 percent for Accordingly, FDA calculates the annual projections are uncertain and therefore youngsters under 18 years of age. benefits from the lifetime health gains also presents estimates of benefits at 4. Reduced Number of Adult Smokers associated with preventing 250,000 effectiveness levels that are adolescents from ever smoking as an considerably smaller. The agency The major beneficiaries of the rule are adult. Further, in response to comments conducted this exercise not because its those individuals who would otherwise that challenge this estimate, FDA estimates are excessively speculative or begin using tobacco early in life and presents sensitivity analysis showing arbitrary, as suggested by one comment, who, accordingly, are unlikely to start results using a wide range of alternative but because sensitivity analyses are part using tobacco products as an adult. rates. of generally accepted ‘‘best practice’’ for Evidence suggests that this percentage the conduct of cost-benefit analysis and will be high, as over half of adult 5. Lives Saved are recommended by OMB guidance. smokers had become daily cigarette smokers before the age of 18. Moreover, Based largely on data from Peto, et al., These results demonstrate that even if who found that about half of all the rule were only modestly effective in the 1994 Surgeon General’s Report indicates that 82 percent of persons adolescents who continue to smoke reducing tobacco use, it yields regularly throughout their lives will justifiable benefits. (aged 30 to 39) who ever smoked daily began to smoke before the age of 18. eventually die from a smoking-related One comment urged the agency to That report concludes that ‘‘if disease, 289 CDC estimates that about demonstrate the effectiveness of tobacco adolescents can be kept tobacco-free, one in three adolescent smokers will die marketing restrictions over and above most will never start using tobacco.’’ 288 prematurely. 290 Although the CDC those for access restrictions or public Although some comments disagreed projection provides the best estimate of information campaigns. FDA is unable with that conclusion, FDA believes that this excess fatality rate, it does not to forecast the independent results of the Surgeon General’s Report is correct. provide a distribution of the smoking- each regulatory provision, due to the Nonetheless, to account for the related fatalities over time. high degree of interdependence among possibility that some would-be smokers Consequently, FDA derived this the various requirements, but notes that who are prevented from smoking until distribution by comparing age-specific SAMHSA concluded that its access they are age 18 may eventually start differences in the probability of survival restrictions, alone, would reduce smoking as adults, FDA uses the more for smokers and nonsmokers. The underage tobacco consumption by one- conservative assumption that these rules probability of survival data for the tenth to one-third. If so, accomplishing will lead to a tobacco free adult life for agency’s estimate are derived from the the ‘‘Healthy People 2000’’ goal implies only one-half of the estimated 500,000 American Cancer Society’s Cancer that the FDA rule would generate youngsters who will be deterred from Prevention Study II, as shown in Table incremental tobacco use reductions of starting to smoke each year. 3. TABLE 3.ÐPROBABILITY OF SURVIVAL BY AGE, SEX, AND SMOKING STATUS (Probabilities of a 17-year-old surviving to age shown)

Female All Age (Years) Male Neversmokers Male All Smokers Female Neversmokers Smokers

35 1 1 1 1 45 0.986 0.966 0.988 0.984 55 0.951 0.893 0.962 0.939 65 0.867 0.733 0.901 0.831 75 0.689 0.466 0.760 0.630 85 0.336 0.159 0.453 0.289 Source: Thomas Hodgson, ``Cigarette Smoking and Lifetime Medical Expenditures,'' The Milbank Quarterly, vol. 70, No. 1, 1992, p. 91. Based on data from the American Cancer Society's Cancer Prevention Study II.

FDA initially multiplied differences smoking, because it arbitrarily assumes not account for all potentially in the probabilities of death for smokers that the smoking-related risks for confounding variables, such as alcohol versus nonsmokers within each 10-year females will continue to be smaller than consumption or other lifestyle period by the number of smokers for males, even though female smoking differences, FDA further adjusted the remaining at the start of each 10-year patterns are presently comparable to mortality estimate to 24 percent to period. Assuming an equal number of those of males. Nevertheless, FDA used reflect findings by Manning et al., that males and females, the excess deaths this model to support its proposed such nontobacco versus tobacco lifestyle among smokers in all age groups totaled regulation and maintains the calculation factors may account for 13 percent of almost 28 percent of the 250,000 cohort. to demonstrate the robustness of the excess medical care expenditures. Thus, FDA recognizes that this methodology results. Moreover, because some the benefits projections presented below probably understates the current risk of comments suggested that these data may conservatively rely on the probabilities

288 1994 SGR, pp. 5 and 65. 290 Memorandum from Michael P. Eriksen (CDC) National Mortality Followback Survey, CDC, OSH; 289 Peto, R., A. D. Lopez, J. Boreham, M. Thun, to Catherine Lorraine (FDA) August 7, 1995 and Peto, R., A. D. Lopez, J. Boreham, M. Thun, and C. and C. Heath, Jr., ‘‘Mortality from Smoking in CDC Fact Sheet; citing Pierce, J. P., M. C. Fiore, T. Heath, ‘‘Mortality from Smoking in Developed E. Novotny, E. J. Hatziandreu, and R. M. Davis, Developing Countries, 1950–2000,’’ Oxford Countries, 1950–2000: Indirect Estimates from ‘‘Trends in Cigarette Smoking in the United States: national Vital Statistics,’’ Oxford University Press, University Press, p. A10, 1994. Indirect estimates Projections to the Year 2000,’’ JAMA, vol. 261, pp. Oxford, 1994. from national vital statistics. 61–65, 1989; Unpublished data from the 1986 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44575 shown in Table 3, corrected by the 13 per life saved. 293 The present value of per new smoker to $10,590 in 1994 percent lifestyle influence adjustment. these additional life-years equates to dollars. Thus, those 1,000,000 young In sum, they indicate that achieving the 211,391 life-years annually. people under the age of 18, who ‘‘Healthy People 2000’’ performance currently become new smokers each 7. Monetized Benefits of Reduced year, are responsible for excess lifetime goal will prevent about 60,200 smoking- Tobacco Use related fatalities among each year’s medical costs measured at a present cohort of potential new smokers. There is no fully appropriate means of value of $10.6 billion (1,000,000 x assigning a dollar figure to represent the The economic assessment of health- $10,590). Because FDA projects that attendant benefits of averting thousands achieving the ‘‘Healthy People 2000’’ related variables requires discounting of tobacco-induced illnesses and the value of future events to make them goals will prevent 250,000 of these fatalities. However, to quantify individuals from smoking as adults, the commensurate with the value of present important components of the expected medical cost savings are estimated at events. For this analysis, a 3 percent economic gains, FDA developed $2.6 billion per year. discount rate is used to calculate the estimates of the value of the reduced present value of the projections. (This medical costs and the increased worker 9. Reduced Morbidity Costs rate was recommended by the Panel on productivity that will result from fewer An important cost of tobacco-related Cost-Effectiveness in Health and tobacco-related illnesses. In addition, illness is the value of the economic Medicine, a nonfederal since productivity measures do not output that is lost while individuals are multidisciplinary group of experts in adequately address the avoidance of unable to work. Thus, any future cost-effectiveness analysis, convened by premature death, FDA adopted a reduction in such lost work days the Office of the Assistant Secretary for willingness-to-pay approach to value contributes to the economic benefits of 291 Health in 1993. Since the Office of the benefits of reduced tobacco-related the regulation. Several studies have Management and Budget (OMB) fatalities. calculated prevalence-based estimates of Circular A–94 recommends the use of 7 8. Reduced Medical Costs U.S. productivity losses due to smoking- percent as a base case, FDA presents related morbidity, but FDA knows of no summary estimates below for discount On average, at any given age, smokers incidence-based estimates. Hodgson, rates of both 3 percent and 7 percent.) incur higher medical costs than however, has shown that, in certain On the assumption that it would be nonsmokers. However, nonsmokers live situations, incidence measures can be roughly 20 years for each year’s cohort longer and therefore continue to incur derived from available prevalence of new adults to reach the midpoint of medical costs over more years. Several measures. For example, he demonstrates the 35 to 45 age bracket and 60 years to analysts have reported conflicting that in a steady-state model the only reach the 75 to 85 age bracket, these estimates of the net outcome of these difference between prevalence and calculations indicate that the present factors, but the most recent research is incidence-based costs is due to value of these benefits equate to 15,863 the incidence-based study by discounting. 296 Accordingly, FDA has 294 lives per year. Hodgson, who found that lifetime adopted Hodgson’s method to develop a medical costs for male smokers were 32 6. Life-Years Saved rough approximation of incidence-based percent higher than for male costs from an available prevalence- The number of life-years that will be neversmokers and lifetime medical costs based estimate of morbidity costs. saved by preventing each year’s cohort for female smokers were 24 percent Rice, et al., 297 found that lost wages of 250,000 adolescents from acquiring a higher than for female neversmokers. due to tobacco-related work absences in smoking addiction was calculated from Hodgson determined that the present the United States amounted to $9.3 the same age-specific survival value of the lifetime excess costs were billion in 1984. This equates to $12.3 about $9,400 in 1990 dollars (future differences between smokers and billion in 1994 dollars when adjusted by costs discounted at 3 percent). 295 As nonsmokers. In each 10-year life span, the percentage change in average noted earlier, the incidence-based study the number of years lived for each employee earnings since 1984. Although by Manning, et al., implies that about 13 cohort of persons who would have been FDA does not have a precise estimate of percent of the excess medical costs were smokers but who were deterred was the life-cycle timing of these morbidity attributable to factors other than compared to the number of years that effects, the relevant latency periods smoking. Accounting for this reduction would have been lived by that same would certainly be shorter than for and adjusting by the consumer price cohort if they had been smokers. The mortality effects. Thus, to account for index for medical care raises the present difference between these two measures the deferred manifestation of smoking- value of Hodgson’s excess medical cost is the life-years saved for that 10-year related morbidity effects, FDA assumed 292 that they would occur over a time period. Deducting the 13-percent 293 The calculation procedure probably lifestyle adjustment indicates that, over understates total life-years saved, because it misses horizon equal to 80 percent of that the full lifetime of each cohort, the smoking related-fatalities that occur within the previously measured for mortality regulations will gain an estimated same 10-year age interval. However, because more effects. Although one comment 905,000 life-years, which translates to of these misses involve fatalities that, if avoided, mistakenly assumed that FDA had made would add few life-years, the resulting 15-year no adjustment for lifestyle differentials almost 4 years per smoker and 15 years average life-years saved may be high. FDA’s benefit estimates, however, remain understated because between smokers and nonsmokers, in 291 Gold, M. R., J. E. Siegel, L. B. Russell, and M. they are based on total life-years saved, not average fact, these estimates were further C. Weinstein, ‘‘Cost-effectiveness in Health and life-years saved. Medicine,’’ Oxford University Press, p. 232, 1996. 294 Hodgson, T. A., ‘‘Cigarette Smoking and 296 Hodgson, T. A., ‘‘Annual Costs of Illness 292 For each 10-year age interval, the number of Lifetime Medical Expenditures,’’ The Milbank Versus Lifetime Costs of Illness and Implications of life-years is calculated as the number of people in Quarterly, vol. 70, No. 1, p. 97, 1992. (Based on data Structural Change,’’ Drug Information Journal, vol. each cohort (250,000) times the probability of from the American Cancer Society’s Cancer 22, No. 3, p. 329, 1988. surviving until the end of that age interval times 10 Prevention Study II). 297 Rice, D. P., et al., ‘‘The Economic Costs of the years of life, plus the number expected to die in that 295 Id. (Using the average of the male and female Health Effects of Smoking, 1984,’’ The Milbank interval times an assumed 5 years of life. totals). Quarterly, vol. 64, No. 4, p. 526, 1986. 44576 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations reduced by 13 percent to reflect the is intuitively appealing because it places One comment denied the existence of Manning, et al., findings. Finally, a greater value on the avoidance of any association between fires and because the long-term decline in death at a younger than at an older age cigarette consumption. FDA smoking prevalence has exceeded the and is the traditional means of assessing acknowledges that the relationship may growth in population, FDA reduced the the cost-effectiveness of medical be nonlinear, but finds the asserted lack incidence-based costs by another 20 interventions. Nevertheless, there have of a positive correlation implausible. percent. At a 3 percent discount rate, been few attempts to determine the This comment further stated that this methodology implies that the appropriate value of a life-year saved. residential fires caused by smoking and incidence-based cost of smoking-related OMB suggests several methodologies, deaths from residential fires caused by morbidity, or the present value of the including annualizing with an smoking decreased from 1983 to 1992 future costs to 1 year’s cohort of appropriate discount rate the estimated by 39 percent and 40 percent, 1,000,000 new smokers, is about $3.5 value of a statistical life over the average respectively, or about 5.5 percent billion. Thus, the estimated annual expected life-years remaining. For annually. Accounting for this trend morbidity-related savings associated example, at a 3-percent discount rate, a would lower FDA’s fire cost estimate to with preventing 250,000 new youths per $2.5 million value per statistical life for a present value savings of $145 million year from smoking as adults is estimated an individual with 35 years of at about $879 million. for the value of lives saved and $17 remaining life-expectancy converts to million for the value of averted property 10. Benefits of Reduced Mortality Rates about $116,500 per life year. Since damage, totaling $162 million annually achieving the agency’s goals were over a 40-year period. Even these From a societal welfare perspective, estimated to save 211,391 discounted estimated savings significantly OMB guidance advises that the best life-years annually, this calculation underestimate the potential benefits, means of valuing benefits of reduced yields annual benefits of $24.6 billion. fatalities is to measure the affected however, because they exclude both group’s willingness-to-pay to avoid fatal FDA notes that even these values nonfatal injuries and the need for risks. Unfortunately, the specific understate the full value of the health temporary housing. willingness-to-pay of smokers is impact, because they fail to quantify any unknown, because institutional reduction in either the adverse effects 12. Smokeless Tobacco attributable to or the arrangements in the markets for medical The Smokeless Tobacco Council, Inc., infant and child fatalities caused by care obscure direct measurement remarked that FDA had not attempted to 298 mothers’ smoking. Moreover, these techniques. Nevertheless, many measure the benefits that would result studies have examined the public’s totals may not capture the heavy toll of from the decreased use of smokeless willingness-to-pay to avoid other kinds psychic loss to surviving family tobacco products by underage youths. of life-threatening risks, especially members, or the corresponding The introduction to the 1995 proposed workplace and transportation hazards. economic losses among family members regulation, however, explained that the An EPA-supported study 299 found that for the mental health care of grief- most empirical results support a range related depression and other conditions use of smokeless tobacco causes severe of $1.6 to $8.5 million (in 1986 dollars) that often follow the premature death of health effects. While data are not per statistical life saved, which middle aged adults. 301 available on age-specific differences in translates to $2.2 to $11.6 million in the probability of survival for smokeless 11. Reduced Fire Costs 1994 dollars. However, the uncertainty tobacco users as compared to nonusers, the 1994 Surgeon General Report surrounding such estimates is Every year lighted tobacco products indicates that the ‘‘primary health substantial. Moreover, Viscusi has are responsible for starting fires which consequences during adolescence shown that smokers, on average, may be cause millions of dollars in property include leukoplakia, gum recession, willing to accept greater risks than damage and thousands of casualties. In nicotine addiction, and increased risk of nonsmokers. For example, smokers may 1992, fires started by lighted tobacco becoming a cigarette smoker. accept about one-half the average products caused 1,075 deaths and $318 Leukoplakia and/or gum recession occur compensation paid to face on-the-job- million in direct property damage. 302 A 300 injury risks. FDA therefore has reduction in the number of smokers, in 40 to 60 percent of smokeless tobacco 303 conservatively used $2.5 million per and the corresponding number of users.’’ Oral leukoplakias have a 5- statistical life, which is towards the low cigarettes smoked, will result in a drop percent chance of becoming 304 end of the research findings, to estimate in the number of future fires. In the malignancies in 5 years. Cancers of society’s willingness-to-pay to avert a 1995 proposal, FDA estimated that if the the nasal cavity, pharynx, larynx, fatal smoking-related illness. Thus, the number of fires falls by the same esophagus, stomach, urinary tract and annual benefits of avoiding the percentage as the expected reduction in pancreas have also been linked to discounted number of 15,863 premature cigarette sales, this implies present smokeless tobacco use. 305 Other effects fatalities would be $39.7 billion. value savings of $203 million for the include discoloration of teeth, An alternative method of measuring value of lives saved and $24 million for periodontal disease and excessive tooth willingness-to-pay is to calculate a value 306 the value of averted property damage, wear and decay. One study of female for each life-year saved. This approach totaling $227 million annually over a snuff users showed that it increased 40-year period. one’s risk of developing oral and 298 Schelling, T. C., ‘‘Economics and Cigarettes,’’ Preventive Medicine, vol. 15, pp. 549–560, 1986. 303 299 Fisher, A., L. G. Chestnut, and D. M. Violette, 301 Harris, M., ‘‘The Loss That is Forever The 1994 SGR, p.39. ‘‘The Value of Reducing Risks of Death: A Note on Lifelong Impact of the Early Death of a Mother or 304 Id. New Evidence,’’ Journal of Policy Analysis and Father,’’ Penguin Books, 1995. 305 Goolsby, M. J., ‘‘Smokeless Tobacco: The Management, vol. 8, No. 1, pp. 88–100, 1989. 302 Miller, A. L., ‘‘The U.S. Smoking-Material Fire Health Consequences of Snuff and Chewing 300 Viscusi, W. K., ‘‘Fatal Tradeoffs: Public and Problem Through 1992: The Role of Lighted Tobacco’’, Nurse Practitioner, vol. 17, No. 1, p. 31, Private Responsibilities for Risk,’’ Oxford Tobacco Products in Fire,’’ National Fire Protection January 1992. University Press, p. 24, 1992. Association, p. 2, 1994. 306 Id. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44577 pharyngeal cancer between 1.5 to 4.2 associated with mothers’ smoking. deficient for not including these lost times. 307 Moreover, while FDA believes these revenues in its cost-benefit assessment, If the provisions pertaining to effectiveness projections are plausible, FDA finds that the revenue losses smokeless tobacco are as effective as much lower rates still yield impressive suggested by these comments do not those pertaining to cigarettes, the rule results. Table 1c of this section meet the previous definition of will prevent about 36,500 youths from summarizes the disease-related health ‘‘opportunity cost;’’ because they fail to becoming adult users of smokeless benefits and illustrates that youth provide the changes in net costs that are tobacco. This projection assumes that deterrence rates as small as 1/20, which necessary to estimate producer surplus, the number of underage users will would prevent the adult addiction of at conventionally defined as sales minus decrease by 50 percent and one-half of least 25,000 of each year’s cohort of variable costs. This rule will affect those youths will remain nonusers after 1,000,000 new adolescent smokers, producer surplus in several industries reaching 18 years of age. The estimate would provide annual benefit values and only net changes in these surplus’ also assumes that the ratio of new measured in the billions of dollars. are social costs. Calculating such underage users to total underage users Moreover, the higher risk estimates changes would require a multi-market parallels that of cigarette users (i.e., suggested by Peto, et al., could model of economic changes over many approximately one-third) and that about significantly increase these values. In years. Such general equilibrium models 440,000 youths under the age of 18 are addition, while FDA could not quantify have not been used by Federal agencies current users of smokeless tobacco the benefits that will result from the for regulatory analyses, are not products. 308 projected decline in the use of specifically recommended by the OMB Leukoplakia and/or gum recession are smokeless tobacco, they would be guidance, and would be impractical to estimated to occur in 40 to 60 percent considerable. use, especially where major markets are of smokeless users. 309 If even 50 dominated by few firms. D. Regulatory Costs percent of these cases were caused by The most comprehensive critique of smokeless tobacco use, the previous A recently issued guideline for FDA’s preliminary economic analysis assumptions imply that these conducting economic analysis of was prepared by the Barents Group, regulations will prevent from 7,300 to Federal regulations, prepared under the economic consultants to the Tobacco 11,000 cases of leukoplakia and/or gum auspices of OMB, states that: Institute. While the Barents Group recessions per year. Although FDA can [T]he preferred measure of cost is the developed independent estimates of not estimate the number of oral or other ‘‘opportunity cost’’ of the resources used or economic costs, in many instances its cancers prevented, the realized number the benefits foregone as a result of the methodology was consistent with FDA’s regulatory action. Opportunity costs include, will be substantial. analysis of its 1995 proposal. Often, but are not limited to, private-sector 13. Summary of Benefits compliance costs and government however, the Barents Group had access administrative costs. Opportunity costs also to more recent data, or to additional The discussion above demonstrates include losses in consumers’ or producers’ data provided by the affected industries. the formidable magnitude of the surpluses, discomfort or inconvenience, and FDA’s revised cost estimates rely economic benefits available from loss of time * * *. An important, but extensively on these new data, but as smoking reduction efforts. As described, sometimes difficult, problem in cost described below, the agency’s final cost FDA forecasts annual net medical cost estimation is to distinguish between real estimates are far smaller than those savings of $2.6 billion and annual costs and transfer payments. Transfer presented by the Barents Group. morbidity-related productivity savings payments are not social costs but rather are of $900 million. From a willingness-to- payments that reflect a redistribution of 1. Number of Affected Retail pay perspective, the annual benefits of wealth. While transfers should not be Establishments reduced smoking-related disease included in the [Economic Analyses’] A critical variable underlying the estimates of the benefits and costs of a mortality range from $24.6 to $39.7 agency’s cost estimates is the number of billion. As a result, the value of the regulation, they may be important for describing the distributional effects of a retail outlets currently selling over-the- annual disease-related benefits of regulation. 310 counter (OTC) tobacco products. A achieving the ‘‘Healthy People 2000’’ Accordingly, FDA finds that the final major confounding factor is that the U.S. goal is projected to range from $28.1 to rule will impose new cost burdens on Census publishes product line data only $43.2 billion. (Following Hodgson, this manufacturers, retailers, consumers, and for establishments with payroll. For its analysis uses a 3-percent discount rate. Government regulators of tobacco original estimate of the number of retail A 7-percent rate reduces these benefits products. In addition, certain industry establishments selling tobacco products, to a range of $9.2 to $10.4 billion). sectors will experience lost sales and FDA relied on 1987 Census data to These totals do not include the benefits employment, but these revenue losses count the number of affected payroll expected from fewer fires (over $160 will be at least partly offset by gains to establishments and very conservatively million annually), reduced passive other sectors, as discussed in the included every nonpayroll smoking, or infant death and morbidity ‘‘Distributional Effects’’ section of this establishment in those categories that document. 311 While a number of traditionally sell tobacco products 307 Winn, D. M., W. J. Blot, C. M. Shy, L. W. (general merchandise stores, grocery Pickle, A. Toledo, and J. F. Fraumeni, ‘‘Snuff industry comments argued that the Dipping and Oral Cancer Among Women in the agency’s preliminary analysis was stores, service stations, eating and Southern United States,’’ The New England Journal drinking places, drug stores, and liquor of Medicine, vol. 304, No. 13, pp. 745–749, Table 310 Economic Analysis of Federal Regulations stores). FDA estimated that the number 2, March 26, 1981. Under Executive Order 12866, January 11, 1996. of establishments selling tobacco 308 Estimates of youth smokeless usage vary. This Prepared by interagency group convened by OMB products OTC included 275,000 payroll projection relies on a conservative estimate of total and co-chaired by a Member of the Council of establishments and 215,000 nonpayroll youth (ages 12–17) usage calculated from data in Economic Advisers. the Statistical Abstract of the U.S. 1995, 115th 311 This analysis evaluates the regulation establishments, for a total of 490,000 edition, Tables 16 and 218. following the Kaldor-Hicks criteria for societal retail establishments. To account for all 309 1994 SGR, p.39. welfare maximization. other business categories that might sell 44578 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

OTC tobacco products, FDA estimated a clear and not documented in their the regulated tobacco product to total upper bound range of 600,000 appendix on methodology. Noting that purchasers. In its original analysis, FDA establishments. FDA did not know how FDA had estimated an upper bound of explained that the proposed ban on self- many locations currently served by 600,000 establishments selling OTC service displays would affect many cigarette vending machines would tobacco products, they assumed the retail stores selling tobacco products, convert to OTC operations following existence of an additional 100,000 to although shoplifting concerns had implementation of the regulation, but 200,000 nonretail establishments, such already caused a large number of these estimated the number at 100,000, raising as operations within manufacturing or stores to place tobacco products in areas the upper bound total to 700,000 future service businesses, that sell OTC not directly accessible to customers. establishments. tobacco products. Finally, the Barents Those retailers that discontinued self- Group accepted FDA’s estimate that FDA still has no definitive estimate of service displays typically modified their about 100,000 current vending machine stores by either: (1) Placing tobacco the number of retail outlets selling locations would convert to OTC sales tobacco products. For their economic products behind or above store cashiers for tobacco products and proposed total or in locked cases located within close analysis, the Barents Group used 1992 lower and upper bound estimates of reach of store cashiers, (2) placing U.S. Census estimates for the number of from 500,000 to 700,000 establishments. tobacco products behind only one or affected retail establishments with For this final economic analysis, FDA two checkout lines, similar to the ‘‘cash payroll, but adopted an alternative adopts the apparent mid-point of the methodology to estimate the number of Barents Group’s forecast of the number only’’ or ‘‘less than 10 items’’ lines affected establishments without payroll. of establishments that will sell tobacco commonly found in supermarkets, (3) The Barents Group subdivided retail products, or about 500,000 current dispensing tobacco products from a businesses into 10 categories: General establishments and a total of 600,000 controlled area of the store, where store merchandise stores, supermarket/ future establishments. FDA estimates by employees also conduct other grocery stores, convenience stores business category are displayed in Table administrative or customer-service without gas, convenience stores with 4 and follow closely the methodology tasks, or (4) installing a signaling gas, service stations, eating presented by the Barents Group, except system, whereby assigned store clerks places, drinking places, drug and for slight adjustments to eliminate bring requested tobacco products to proprietary stores, specialty tobacco nonstore outlets. Because Census data individual checkout stations. Each stores, and miscellaneous retail stores. on the number of establishments store’s physical configuration dictates Within each category, the Barents Group without payroll were not reported the most cost-effective approach, but at assumed that the percentage of separately for convenience stores, least one regional survey found that nonpayroll establishments selling convenience stores with gas, or retail outlets readily complied with tobacco products would be the same as specialty tobacco stores, these outlets comparable local ordinances without the percentage of payroll establishments are counted with the higher level outlet architectural remodeling or substantial selling tobacco products. As a result, categories. refitting of checkout counters or store they concluded that the number of retail aisles. 312 payroll establishments selling tobacco 2. Removing Self-Service and Other Prohibited Retail Displays products OTC is approximately 283,000, 312 Kropp, R., ‘‘A Position Paper on Reducing and the number of retail nonpayroll The 1995 proposed regulation Tobacco Sales to Minors by Prohibiting the Sale of establishments selling tobacco products restricted all point of purchase Tobacco Products by Means of Self-Service OTC is about 107,000, for a total of advertising to ‘‘text only’’ and banned Merchandising and Requiring only Vendor-Assisted 390,000 retail outlets. The Barents the use of all self-service displays by Tobacco Sales,’’ North Bay Health Resources Group’s subsequent calculations are less requiring vendors to physically provide Center, Stop Tobacco Access for Minors Project (STAMP), Petaluma, CA, p. 5, November 3, 1994. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44579 1,477 ) 21,924 29,400 51,913 16,081 30,875 69,874 45,539 15,057 k ( 507,918 125,778 100,000 (6) the-Counter Estimated Total of Establishments Selling Tobacco Products Over- ± ± ± ) j ( 9,807 5,336 1,829 7,581 3,065 54,538 44,879 127,035 (5) Tobacco Products Estimated Number of Retail Establishments without Payroll Selling ) ) ) ) ) ) i f h h g h ( ( ( ( ( ( ± ± ± 3,031 27,733 14,248 96,538 757,254 97,061 28,010 490,633 (4) Payroll Total Number of Retail Establishments without 1,477 12,117 29,400 51,913 10,745 71,240 11,992 29,046 24,995 37,958 280,883 (3) Products Number of Retail Establishments with Payroll Selling Tobacco 3.17% 9.15% 56.19% 53.21% 60.33% 35.01% 95.62% 91.02% 19.24% 100.00% (2) Products Establishments with Percentage of Retail Payroll Selling Tobacco ) ) ) ) ) ± ± ± ± ± c a e b d ( ( ( ( ( 1,477 34,606 30,748 55,848 48,142 71,336 57,033 1,076,991 126,785 273,256 377,760 (1) Payroll Number of Retail Establishments with TABLE 4.ÐESTIMATED NUMBER OF ESTABLISHMENTS CURRENTLY SELLING TOBACCO PRODUCTS OVER-THE-COUNTER Kind of Business with Gas Stores General Merchandise Supermarket/Grocery Convenience Stores Convenience Stores Service Stations Eating Places Drinking Places Drug Stores Tobacco Stores Miscellaneous Retail (a) Category contains food stores (SIC 54) with payroll, excluding convenience 541 pt) and food/gasoline pt). (b) Category contains convenience food/gasoline stores (SIC 541 pt) and gasoline/convenience food 554 pt). (c) Category excludes gasoline/convenience food stores (SIC 554 pt). (d) Category contains eating and drinking places (SIC 58), excluding 5813). (e) Category contains miscellaneous retail stores (SIC 59 ex. 591), excluding nonstore retailers 596) and tobacco stands 5993). (f) 1992 Nonemployer Statistics Series only provides data on variety and miscellaneous general merchandise establishments without payroll. (g) 1992 Nonemployer Statistics Series only provides data on grocery stores, retail bakeries, and other food stores without payroll. (h) 1992 Nonemployer Statistics Series does not provide data on establishments without payroll for these categories. (i) Category contains miscellaneous retail stores (SIC 59 ex. 591), excluding nonstore retailers 596). (j) Column (2) times (4). (k) Column (3) plus (5). Source: Columns (1)±(4) from U.S. Census of Retail Trade Merchandise Line Sales and Nonemployer Statistics Series; (5) (6) projections according to Barents Group LLC Retail Establishments: Other Establishments Total Appendix I methodology. 44580 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

Because prevailing business practice protocol checklist at 88 establishments however, reveal that one store is for tobacco manufacturers to assist randomly selected in 5 general regions supposedly possessed 71 racks, two and even pay for most product display of the United States. The individual stores 50 racks, and the remaining three equipment, 313 FDA had assumed that display items were grouped into 41 stores 41, 32, and 10 racks, respectively. manufacturers would share with discrete item categories and a lengthy Even a casual review of these data retailers any expense of relocating discussion of the methodology and suggests that individual hand-held displays and that the majority of the results are presented as a Technical shopping baskets rather than basket costs would be to relocate self-service Appendix to the Barents Group’s racks were counted. Indeed, an FDA displays for cartons. FDA estimated one- comments. contractor visited the five Washington, time costs of $22 million to be shared b. The Barents Groups’s DC area outlets in which A. T. Kearney by manufacturers and retailers and miscalculations. To evaluate these observed the largest number of racks additional annual operating costs of $14 results, FDA carefully reviewed the A. and found scores of plastic hand-held million to be incurred by retailers (all in T. Kearney survey data and the Barents baskets adorned with simple advertising 1994 dollars). In stark contrast, the Group’s extrapolation procedures and stickers, but only a few basket racks. 314 Barents Group projected one-time costs attempted to replicate the aggregate Although the advertising on these of from $558 to $780 million in 1996 estimates. In doing so, numerous plastic baskets could easily be removed dollars ($520 to $728 million in current computational discrepancies were or covered, or new plastic baskets dollars), with 62 percent attributed to identified. For example, in calculating purchased quite inexpensively, the the replacement of display items by retailer time costs, the Barents Group Barents Group’s calculations retailers and the remaining 38 percent to intended to use an estimated retail inadvertently assumed that a manufacturers due to ‘‘time costs employee wage of $9.51, but in fact used distribution services contractor would involved in removing banned display the estimated wage for a manufacturer’s be hired to remove each plastic hand- and promotional items, whether the sales representative of $25.70. (See held shopping basket at a fee of $45 work would be performed directly by a Appendix Table ‘‘Initial Compliance apiece and that a retailer would spend manufacturer’s employee or Effort Costs per Retail Store.’’) Also, the 30 minutes plus an additional $89 subcontracted out to a display Barents Group’s calculations relied on replacement fee for each plastic hand- distributor.’’ As explained below, FDA incorrectly transposed data for the held shopping basket in its possession. finds that many aspects of the Barents average number of disposable displays Thus, the estimated cost attributed to Group’s estimates are seriously flawed. per store and miscalculated compliance each hand-held basket was $138 and the Nevertheless, the agency has adopted effort costs for five of the seven types of cost for just the one outlet reporting 71 the basic framework of that analysis and business. Further, A. T. Kearney shopping baskets totaled $9,850. its revised estimates reflect the Barents reported that only one-third of the Extrapolating to each outlet category, Group’s methodology and data, unless lighted signs and clocks would need to the A. T. Kearney results implied that specifically modified as discussed be replaced by retailers, but the Barents removing and replacing plastic hand- below. Group’s calculations assumed that all held baskets would cost, on average, a. The Barents Group’s methodology. would be replaced. Finally, A. T. over $1,300 for each supermarket/ The Barents Group’s cost projections Kearney reported that retailers would grocery store and $300 for each were based on estimates of an average not replace most promotional posters, convenience store in the United States. outlet cost for each of seven outlet signs and displays, but the Barents Its projected costs for removing and categories. Each average outlet cost was Group’s calculations assigned each $85 replacing the hand-held shopping multiplied by the total number of in replacement costs. Correcting these baskets in all supermarket/grocery outlets of that category in the United errors reduces the Barents Group’s low stores in the United States ranged from States to produce national cost and high cost estimates by $77 and $108 $163 million to $229 million. For all estimates. The actual outlet cost data million, respectively. were collected by A. T. Kearney, Inc., Even more important, in aggregating outlet types, costs for these hand-held still another business consulting firm. the unit costs for ‘‘Compliance Activity baskets were estimated at $194 to $271 The Barents Group explained that: No. 19—Remove and replace interior million, or 43 percent of the national [O]ur estimates are based on a compliance newsstands and shopping basket racks point-of-sale costs estimated by the audit study conducted especially for this and baskets and shopping carts,’’ A. T. Barents Group. purpose by A. T. Kearney, Inc. A. T. Kearney Kearney committed a major error that Based on site visits, FDA modified performed an in-depth study of the actions Kearney’s field data for the correct and efforts that would be required of tobacco dominates the aggregated cost totals. In manufacturers’ representatives, of point-of- discussing the costs for this item, A. T. number of shopping basket racks in the sale display item distributors, and of tobacco Kearney focused on the need to replace Washington, DC area establishments. retailers in order to bring stores into shopping basket racks, which ‘‘* ** Furthermore, FDA contractors compliance with the proposed regulations. are free-standing units and contain determined that the hand-held shopping Detailed surveys were conducted of seven about 20 shopping baskets, that also baskets could easily be modified by a categories of retail outlets in five U.S. contain the name or logo of the cigarette marketing representative, who would metropolitan areas, for a total of 88 retail manufacturer.’’ Although it seems take, at most, 5 minutes to affix new outlets. Surveyors performed a detailed probable that the logos or brand names stickers on each basket or rack. For a inventory of the many types of tobacco affixed to these items could be either rack of 20 baskets, this task was product displays and promotional materials which are currently found in stores. The removed or obscured, the survey data estimated to take a total of 105 minutes, surveyors noted which items would need to indicate that six supermarket/grocery plus about $42 for stickers. These be modified or replaced. stores, three convenience stores, two adjustments reduce the Barents Group’s A. T. Kearney reportedly completed a tobacco stores and one convenience estimated one-time costs by $180 to comprehensive on site compliance store with gas would replace shopping $252 million. basket racks. The detailed survey data 313 Id. for supermarket/grocery stores, 314 Buck, E., ‘‘Site Visit Report,’’ April 24, 1996. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44581

c. The Barents Group’s extrapolation Merchandise Stores. These 10 outlets, FDA’s fundamental concern is not procedure. The Barents Group which include three K-Mart and two with the Barents Group’s estimate of contributed still another bias by their Wal-Mart stores, averaged over 84,000 500,000 to 700,000 affected method of extrapolating these survey square feet of space, with the smallest establishments (although the upper results to the assumed range of 500,000 store measuring 40,000 square feet. The bound of this estimate should be to 700,000 retail establishments. A. T. U.S. Census reports only 12,117 such 600,000, because there would be no Kearney surveyed stores in only seven establishments with payroll. The display relocation costs for the business categories: General Barents Group’s proportional additional 100,000 outlets assumed to Merchandise, Supermarket/Grocery, adjustment automatically expanded this be established at existing vending Tobacco Specialty, Convenience Store outlet type count to between 21,299 and machine locations), but with the without Gas, Convenience Store with 29,818. (See Barents Group’s Appendix allocation of the small establishments Gas, Service Station, and Drug Store. To Table.) Thus, to generate a national among the largest business categories represent all affected outlets, the estimate of costs, the Barents Group surveyed by A. T. Kearney. To offset Barents Group apportioned the full applied the cost per establishment for this bias, FDA reallocated the number of upper and lower bounds for their its sample of very large general establishments in the business estimated number of establishments merchandise stores to roughly double categories used to extrapolate the outlet (500,000 and 700,000) among 10 the number reported in the U.S. Census cost estimates. As shown, in Table 5, business categories ‘‘based on the for such establishments with payroll. FDA takes the number of establishments fractions they represent in the Census This methodology inappropriately bases in the first two business categories— sample of with-payroll retail stores the per outlet cost for thousands of General Merchandise and Supermarket/ selling tobacco products.’’ (Eating small nonpayroll and nonretail outlets Grocery stores—directly from the U.S. Places, Drinking Places, and on the per outlet cost reported for very Census number of establishments with Miscellaneous Retailers were added for large general merchandise stores. payroll, because there would be very this outlet allocation, but were assigned few nonpayroll or nonretail no costs because they are not ‘‘* * * the The identical problem holds for the establishments equivalent to those types of retail outlets where the vast Barents Group’s projection of the A. T. surveyed. For outlet extrapolation majority (more than 90 percent) of Kearney survey sample of 27 purposes, FDA assigns its estimated tobacco product sales occur and where Supermarket/Grocery stores. Although number of nonpayroll establishments in promotional items are most prevalent.’’ this sample includes a few moderately these two business categories to the That is, the Barents Group used a sized establishments (1 less than 1,000 Convenience Store category, on the proportional adjustment to raise each square feet and 4 less than 5,000 square assumption that this category is most establishment category count so that the feet), 21 of the establishments exceed representative of the small lower and upper bound totals sum to 10,000 square feet and the average sized establishments excluded from the 500,000 and 700,000, respectively. The facility is almost 35,000 square feet. Census product line data. Although the estimated number of establishments in Nevertheless, the Barents Group’s Barents Group omitted all costs for each category was then multiplied by apportionment procedure inflates the Eating Places, Drinking Places, and the average cost for each business number of establishments in this Miscellaneous Retail Stores, FDA category using data from the A. T. category from the U.S. Census estimate groups these outlets under Other Kearney site visits. of 71,240 with payroll to 125,222 and Establishments and assumes certain The implications of these 175,311, on the dubious assumption minimal costs, as explained below. This inappropriate establishment number that thousands of small nonpayroll or redistribution of the establishment extrapolations are considerable. For other nonretail establishments are best category groupings reduces the Barents example, A. T. Kearney surveyed a represented by the A. T. Kearney sample Group’s low cost estimate by $65 sample of 10 outlets from its first of mostly large supermarkets/grocery million and its high cost estimate by business category—General stores. $170 million. TABLE 5.ÐESTIMATED NUMBER OF ESTABLISHMENTS REMOVING SELF-SERVICE AND OTHER PROHIBITED RETAIL DISPLAYS

Estimated Number of Number of Retail Estab- Retail Establishments Estimated Total Number Kind of Business lishments with Payroll without Payroll Selling of Establishments Sell- Selling Tobacco Prod- Tobacco Products Over- ing Tobacco Products ucts Over-the-Counter the-Counter Over-the-Counter

A. T. Kearney Categories: General Merchandise 12,117 ± (A) 12,117 Supermarket/Grocery 71,240 ± (B) 71,240 Convenience Stores 29,400 64,345 (C) 93,745 Convenience Stores with Gas 51,913 ± (D) 51,913 Service Stations 37,958 7,581 45,539 Drug Stores 29,046 1,829 30,875 Tobacco Stores 1,477 ± (E) 1,477 Other Establishments ± ± 201,012 (F)

Total 233,151 73,755 507,918 (A) Variety and miscellaneous general merchandise stores are tallied as convenience stores. (B) Food stores are tallied as convenience stores. 44582 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

(C) This category includes food, variety, and miscellaneous general merchandise stores. The 1992 Nonemployer Statistics Series does not provide information about convenience stores without payroll. (D) The 1992 Nonemployer Statistics Series does not provide information about establishments without payroll for this category. (E) The 1992 Nonemployer Statistics Series does not provide information about establishments without payroll for this category. (F) Includes retail establishments excluded from the Kearney field audit and other establishments selling tobacco products over-the-counter.

d. Further modifications. The Barents In February 1996, economic Moreover, if a marketing representative Group faulted FDA for not including consultants to FDA attempted to can throw away free-standing ash trays costs for the removal of banned display replicate the A. T. Kearney field audit filled with sand, as noted by A. T. items or for the replacement of banned in Boston (the Eastern Research Group, Kearney, then a marketing point-of-sale promotional materials. Inc. (ERG),) 316 and in Washington, DC representative can also dismantle and Their estimates assumed that (an independent contractor). While most throw away disposable displays made of manufacturers alone would bear these observations of the number of affected cardboard and plastic. FDA estimates, costs, since the proposed regulation display cases were reasonably therefore, that instead of hiring a required that manufacturers remove all consistent with the A. T. Kearney distribution services company, the prohibited advertising displays. The findings, the observed number of manufacturer’s representative will take final regulation, however, places this exterior and interior promotional no more than 15 minutes to remove responsibility on the owners of the materials deviated significantly from the each disposable unit, install a new displays, which may frequently be the A. T. Kearney audit data. One unattached counter display and restock retail establishments. FDA cannot explanation may be that the seasonal any excess inventory in a nonself- forecast the ultimate distribution of items available at the end of November service area. This assumption decreases display ownership, but in view of had been removed by the following the estimated one-time costs by $7 current business practices, assumes that February. As a result, FDA has not million. the manufacturer representatives will at adjusted its calculations to account for (iii) The A. T. Kearney cost-estimating least participate in the removal process. these discrepancies (except for the cost methodology for the self-service ban Nevertheless, this change in regulatory of basket racks in the Washington, DC implies that store modifications take responsibility is likely to shift a greater stores), but used certain insights from place in a sequential pattern, with no share of the cost burden to retailers. these visits to revise the Barents Group’s allowances for economies of scale. For On the other hand, the Barents Group unit cost assumptions, as follows: example, the outlet cost for hiring a assumed that retailers alone would (i) The agency rejects the Barents distribution services contractor to replace those promotional items having Group’s assumption that retailers rather relocate or replace display cases was a utilitarian function, including display than manufacturers will bear the costs calculated as a fixed multiple of the cases, signs, shopping carts or baskets, of replacing promotional unattached number of cases to be removed, even newspaper racks, ash trays, and clocks. counter displays. Because many of these though many establishments must FDA believes that this assumption is items will be moved to visible locations remove several display cases. This unfounded, because many retailers will behind counters, it is far more likely approach overstates costs by ignoring modify rather than replace these items that manufacturers, not retailers, would the significant scale economies and many manufacturers will share the pay for replacements. For its revised achievable by performing all replacement burden with retailers. For estimate, therefore, FDA assumes that compliance activities at one time. Thus, example, one report describing the manufacturers will pay replacement FDA modified A. T. Kearney’s results of a local self-service ban costs for unattached counter displays. distribution services costs for the indicated that, ‘‘tobacco distributors and Although total costs are unchanged, this removal, relocation and installation of tobacco company sales representatives assumption increases the costs for small attached, retail pack, and carton furnished behind-the-counter shelving manufacturers by $17 million and self-service display cases by assuming and locking cases for tobacco products decreases the costs for retailers by an that the first display unit in an outlet to retailers at no charge in order to assist equal amount. would be removed at a unit charge of retailers comply with self-service/ (ii) A. T. Kearney and the Barents $90, $150, or $185, respectively, but that vendor-assisted regulations.’’ 315 Again, Group contradict themselves on the cost each additional unit would be removed however, the future allocation of these of removing disposable display cases. A. at one-half of these costs. For those costs among manufacturers and retailers T. Kearney describes these units as stores with different sizes of display is unknown. For its initial estimates, temporary displays ‘‘frequently found in cases, the first unit was assumed to be except as explained below, FDA association with promotional offerings, the most expensive to remove (e.g., a maintains the Barents Group’s sales, or seasonal themes,’’ but assumes carton display would be considered the assumptions that removal costs are that retailers will replace them with first item when there is also a retail pack primarily borne by the manufacturer permanent self-standing retail pack display or a small attached display). and replacement costs by the retailer. In cases at $250 each. In contrast, the Adjusting for these scale economies fact, both cost categories will be shared Barents Group calculations imply that a reduces the estimated total costs by $15 and the implications of these distribution services company will million. assumptions are illustrated below remove each display for a fee of $150 (iv) A. T. Kearney assumed that many through sensitivity analysis. and retailers will replace each item for promotional items, such as signs and $50. FDA agrees with the Barents Group clocks, would be removed by a that retailers will not replace temporary 315 Kropp, R., ‘‘A Position Paper on Reducing distribution services company hired by Tobacco Sales to Minors by Prohibiting the Sale of units with permanent retail pack cases. the manufacturer. FDA’s consultants, Tobacco Products by Means of Self-Service however, found that almost all of the Merchandising and Requiring only Vendor-Assisted 316 ‘‘ERG’s Review of Docket Materials Tobacco Sales,’’ North Bay Health Resources Concerning FDA’s Proposed Regulations Covering promotional material observed could be Center, Stop Tobacco Access for Minors Project Tobacco Products: Final Site Visit Report,’’ Eastern easily removed or modified by retail (STAMP), Petaluma, CA, p. 5, November 3, 1994. Research Group, April 22, 1996. personnel or marketing representatives. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44583

For example, rather than needing a retrofitted with locks, the Barents Group Except for those adjustments, FDA contractor to remove the lighted sign in did not include cost estimates for these used the information found in the A. T. one of the sampled outlets, ERG found items. FDA estimates that it would take Kearney field audit to develop its that the front panel was easily 30 minutes of retailer time and cost revised estimate. For comparison, the removable and could be quickly about $10 for materials to add a lock to original Barents Group estimates of the replaced by an acceptable panel. these display cases, increasing the total number of establishments and one-time Although a few signs may require one-time costs by $1.5 million. point-of-sale costs (corrected for substantial time to dismantle, most of (vii) In its analysis of the 1995 miscalculations as described above) are these items will take just a few minutes proposed regulation, FDA shown in Table 6 and FDA estimates of to remove. To account for this range, acknowledged that the required one-time costs in Table 7. Detailed FDA assumes that a manufacturer’s reconfiguration of tobacco displays may summaries of the FDA one-time cost representative will take 15 minutes to also impose added labor costs for some estimates are presented in Table 8 and remove and dispose of the various purchase transactions, especially for Table 9 and indicate that costs related exterior signs, banners, clocks and news those stores that move inventory to to self-service display cases comprise 73 areas located away from employee work stand displays, as well as the interior percent of the total, followed by 18 lighted signs and clocks, lowering total stations. On the assumption that the ban percent for promotional materials and 9 costs by $27 million. on self-service tobacco displays would percent for nonself-service display (v) A. T. Kearney assumed that many require 10 seconds of additional labor cases. As explained above, these display cases located in nonself-service time for 75 percent of all retail areas would be removed and replaced, transactions involving cartons, FDA had estimates assume that manufacturers because of improper advertising. They estimated costs of about $14 million per will bear the cost of removing all assumed that the manufacturer would year. Although a few comments promotional items and retailers will pay for the removal of the old case and indicated that the self-service ban bear the cost of replacing most the installation of the new case, but that would increase labor costs, the Barents functional items. Because the regulation the retailer would purchase the new Group did not include such costs in its places the removal responsibility on display case. Contrary to this finding, assessment. Nevertheless, FDA believes owners of the materials, FDA does not FDA consultants found no sites in the that some establishments, particularly know how these obligations will be Boston or Washington, DC regions those selling a substantial number of divided. However, if retail outlets, where it was necessary to replace cigarette cartons that could not be stored rather than manufacturers, must remove nonself-service displays. Because in within easy reach of a checkout station, these items, the overall cost to each instance, all visible advertising could experience increased annual labor manufacturers falls by about $47 million could be altered or obscured, retailers costs. Thus, FDA recalculated its and the cost to retailers increases by would almost always opt to cover estimate based on the updated retail about $17 million. (Retail compensation impermissible advertising rather than to employee compensation rate of $9.51 rates are about one-third of purchase new display cases costing up suggested by the Barents Group and the manufacturer rates, according to the to $300. Accordingly, FDA estimated new site visit data from the A. T. Barents Group data). The following that it would take 15 minutes and $5 Kearney study, which imply that only discussion describes specific worth of stickers to cover each small about 40 percent of cigarette cartons are compliance costs for each outlet attached display; 25 minutes and $10 purchased at establishments that sell category. worth of stickers to cover each retail cigarette cartons from self-service areas. BILLING CODE 4160±01±F pack display; and 35 minutes and $15 These adjustments project additional worth of stickers to cover each carton annual labor costs of about $10.9 percent of tobacco sales at other outlets. Tobacco 317 display. This modification decreases million per year. sales data from 1992 Census of Retail Trade, pp. 3– total costs by $20 million. 31. Kearney site visits found that 80 percent of (vi) Even though the A. T. Kearney 317 Derived from assumption that 10 percent of general merchandise stores, 33 percent of carton transactions are for multiple (2) cartons, and supermarket/grocery stores, 25 percent of audit identified a number of self-service that cartons constitute 85 percent of tobacco sales convenience stores, 17 percent of service stations, display cases that did not fit in the at supermarket/grocery stores, general merchandise 30 percent of drug stores, 42 percent of tobacco nonself-service area but could be stores, drug stores, and tobacco stores, and 10 stores had self-service carton display cases. 44584 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations ($) 66,907,185 11,937,541 10,688,680 31,803,966 20,315,250 65,731,470 412,984,554 620,368,645 Total Costs Total Costs ($) 3,211,753 3,907,506 5,534,164 4,944,570 34,150,431 11,137,952 57,722,876 11,041,425 131,650,677 5,676,020 4,407,166 35,412,134 13,228,900 32,735,564 13,462,416 Costs ($) 2 158,144,493 263,066,694 1 Manufacturer ($) 6,261,520 6,281,514 6,852,833 Estimated Point-of-Sale Costs (Upper) 18,575,066 34,171,621 30,319,336 254,840,061 357,301,952 Retail Costs 3,384,741 3,263,894 9,644,359 2,974,000 1,966,563 1,046,163 25,067,316 21,879,370 69,226,404 Manufacturer Costs ($) ($) Estimated Point-of-Sale Costs 8,526,863 7,633,511 46,951,050 14,510,955 22,717,576 47,790,978 294,988,630 443,119,563 Total Costs 9,449,404 9,616,053 4,054,323 3,147,456 23,382,610 25,294,382 Costs ($) 112,960,223 187,904,451 Manufacturer Retail Costs ($) 522,765 1,397,066 2,560,164 2,978,007 7,874,058 2,165,591 12,271,061 32,655,560 62,424,273 ($) 4,894,902 4,472,540 4,486,055 Estimated Point-of-Sale Costs (Lower) 24,408,368 13,268,172 21,656,668 182,028,407 255,215,112 Retail Costs ($) 925 217 167 515 19 1,067 2,356 2,940 810 213 122 160 919 364 2,175 ($) per Facility Average Cost Average Cost Per Facility 3,635 93,409 71,478 29,818 72,349 1 127,750 175,311 573,750 Upper 1,477 12,117 71,240 93,745 45,539 30,875 51,913 2,596 Establishments Establishments 507,918 210,012 21,299 51,678 66,721 51,056 91,250 125,222 409,822 Estimated Number of Estimated Number of Lower TABLE 7.ÐFDA ESTIMATE OF ONE-TIME POINT-OF-SALE REGULATORY COSTS TABLE 6.ÐBARENTS GROUP LLC ESTIMATE OF ONE-TIME POINT-OF-SALE REGULATORY COSTS Kind of Business Kind of Business Totals may not add due to rounding. Number of establishments from Table 5. Totals may not add due to rounding. 1 1 2 General Merchandise Supermarket/Grocery Convenience Stores Convenience Stores with Gas Service Stations Drug Stores Tobacco Stores Total General Merchandise Supermarket/Grocery Convenience Stores Convenience Stores with Gas Service Stations Drug Stores Tobacco Stores Other Establishments Total Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44585 44586 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44587 44588 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

BILLING CODE 4160±01±C Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44589

e. General merchandise stores. None service display cases were 28 percent for this sector is about one-half that of of the general merchandise stores in the and 14 percent, respectively. convenience stores without gas. A. T. Kearney sample had exterior The National Association of In comments to the 1995 proposed promotional materials and only a few Convenience Stores (NACS) faulted rule, the Society of Independent had interior promotional materials. FDA on its assumption that the main Gasoline Marketers of America (SIGMA) Eighty percent of the stores had only cost of the self-service ban would be to did not present specific data on the cost self-service displays, with carton relocate tobacco product inventory, to their members, but indicated that displays more numerous than pack contending that their members would many members would be required to displays at these locations. The average incur thousands of dollars in reconfigure their stores. They stated per facility one-time costs estimated by reconfiguration costs. According to that: FDA were $919. Overall, 97 percent of NACS: [m]any SIGMA members keep large the outlet costs related to the [i]t is largely irrelevant that retailers quantities of packs and cartons in self-service replacement of self-service display already keep packs behind the counter. Many displays and would have to reconfigure their NACS members keep large quantities of stores to comply with the ban on self-service cases, although in some general packs and cartons in self-service displays and sales. At a minimum, these members would merchandise stores, tobacco products would have to reconfigure their stores to have to install new cabinets to accommodate were stocked on shelves rather than in comply with the ban on self-service sales. tobacco products behind the counter. Many special display cases, which suggests Based on an estimate from one member members would have to enlarge the counter that the costs for this business category with a high volume of self-service area to make room for the new cabinets. may be overstated. cigarette sales, NACS suggested it could In contrast, the A. T. Kearney field audit found few convenience stores with gas f. Supermarket/grocery. Unlike cost $4,320 and $10,120, respectively, to that have self-service displays, other general merchandise stores, reconfigure a newer and older than unattached promotional counter supermarkets had significant convenience store. displays. Costs to remove or replace promotional materials. While both Based on other evidence, however, promotional counter displays will be packs and cartons were sold at most FDA does not believe that a large borne primarily by manufacturers, not locations, over 75 percent of the stores number of stores will be forced to retailers. In sum, the costs for self- already had nonself-service display undergo extensive modifications and service display cases amount to about areas. FDA estimates per facility costs at finds that most convenience stores can 31 percent of the total, promotional $810. Self-service display case removal adequately adapt space either behind or material 30 percent, and nonself-service and replacement amount to 85 percent above checkout counters. As noted display cases 39 percent. of the total cost, whereas promotional earlier, one regional survey reported i. Service stations. These materials account for 14 percent. that retail outlets readily complied with establishments had both interior and Commenting on the feasibility of the local self-service restrictions without exterior promotional material. Seventy- proposed FDA self-service ban, the Food architectural remodeling or substantial five percent of the locations surveyed Marketing Institute argued that most refitting of checkout counters or store 318 had only nonself-service display cases retail food stores do not have adequate aisles. Space above counters is and one-fourth had carton displays. space at checkout lines for tobacco typically available for display cases FDA estimates the per facility cost at products and rejected the practicability either by suspending a case from the ceiling or by supporting a case on beams $122. of alternative procedures. They j. Drug stores. Drug store outlets had suggested that the only option available from the counter. In its survey, A. T. Kearney found at least some tobacco few exterior and interior promotional to many food retailers would be to materials. As in general merchandise remodel and set-up a controlled area for products sold from nonself-service space in every convenience store. stores, tobacco products were stocked the sale of tobacco products, costing up on shelves in some locations. Ninety to $50,000 per store. The A. T. Kearney Although it is possible that stores might incur added inventory handling costs if percent of the stores surveyed by A. T. audit, however, found that a majority of Kearney already had nonself-service supermarket/grocery stores have already this space were smaller than optimal, FDA concludes that major displays and approximately 70 percent installed nonself-service areas for had carton displays. FDA estimated tobacco products and would not need to reconfiguration would rarely be required and relies on the A. T. Kearney $160 cost per facility for this category of reconfigure their stores. While some business. About 93 percent of the total establishments will incur costs above survey data, as adjusted, to project average costs for this sector. one-time costs are for replacement of the average, the A. T. Kearney site visit self-service display cases. data suggest that most stores could h. Convenience stores with gas. Like convenience stores without gas, these k. Tobacco stores. These stores had comply by either moving inventory to substantial promotional materials and nonself-service areas or by purchasing establishments had numerous interior and exterior promotional materials. multiple display cases. FDA estimates new displays that are compatible with per facility costs of $2,175. About 94 existing store configurations. About 89 percent of the stores surveyed had nonself-service display cases. FDA percent of the costs are for self-service g. Convenience stores. Stores in this estimates per facility costs of $213. display cases, with promotional category exhibited numerous interior Consistent with the findings of the materials and nonself-service display and exterior promotional items. All of Barents Group, the average outlet cost cases dividing the remaining 6 percent. the convenience stores surveyed had While not reflected in the cost totals, nonself-service display cases and 50 318 Kropp, R., ‘‘A Position Paper on Reducing these establishments may choose to percent had carton displays. FDA Tobacco Sales to Minors by Prohibiting the Sale of operate as ‘‘adult only’’ restricted areas estimates per facility costs of $364. Tobacco Products by Means of Self-Service to avoid replacing self-service display Costs for removing and replacing self- Merchandising and Requiring Only Vendor- cases. Assisted Tobacco Sales,’’ North Bay Health service display cases made up 59 Resources Center, Stop Tobacco Access for Minors l. Other establishments. This category percent of the total, while costs for Project (STAMP), Petaluma, CA, p. 5, November 3, includes eating/drinking establishments promotional materials and nonself- 1994. and miscellaneous retail stores, which 44590 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations were excluded from the A. T. Kearney period would be approximately $4 1986 with multiple messages at a cost of audit, plus the estimated 100,000 million. about $17 million a year. 323 FDA is still nonretail establishments that sell The second approach was to use cost evaluating various types of tobacco products OTC, such as hotels, information provided in the regulatory informational programs, with respect to factories and sporting facilities. Due to impact analysis of a roughly comparable both effectiveness and practicality. the low volume of tobacco product sales Canadian regulation. 321 The Canadian Before a final decision is reached, the at these establishments, FDA assumed Government estimated a cost of $30 agency will determine the costs of that only a small quantity of packs and million to change labels for about 300 selected alternatives. no cartons would be sold. Lacking cigarette varieties. Most Canadian 5. Restricted Advertising and detailed data, FDA assigned costs of $19 cigarettes are likewise sold in two sizes, Promotional Activities per outlet, based on the costs of but about 20 percent are also sold in flip removing promotional materials and top packages. 322 Canadian labels, a. Tobacco industry. The relocating and replacing small attached however, are typically printed using a determination of the societal costs display cases, as reported for drug gravure method; which, according to attributable to the restrictions on stores. RTI, is about 3.5 times as expensive as tobacco product advertising and promotion is complex. While there is no 3. Label Changes the lithography process used in the United States. Adjusting the Canadian doubt that individual manufacturers The final regulation requires that the estimate upward, to account for the realize enhanced goodwill asset values tobacco product package contain the larger number of cigarette and from advertising programs, the industry established name of the tobacco product smokeless tobacco varieties in the has long held that advertising prompts in a specified size. FDA estimated the United States; and downward, for the brand-switching, but does not increase compliance costs for printing new labels smaller number of packages per variety aggregate sales. Of course, if this were in its earlier analysis of the proposed and the smaller cost of the lithography true, advertising would be unprofitable regulation and has received no printing process, provides a $17 million from the standpoint of the industry as comments that improve those original estimate for the total cost of these label a whole and reduced levels would estimates. changes. increase rather than decrease aggregate Approximately 933 varieties of industry profits. In addition, if the cigarettes are currently produced in the 4. Educational Program primary motivation for tobacco 319 United States. FDA does not have FDA may issue notification orders advertising is to promote brand- information on the number of smokeless under section 518(a) of the Federal switching, then, as long as all firms are tobacco varieties, but assumes that the Food, Drug, and Cosmetic Act (the act) equally restricted from advertising, the total number of cigarette and smokeless (21 U.S.C.360h(a)) to require above mentioned loss in goodwill value tobacco varieties is roughly 1,000. manufacturers of cigarettes and will be substantially reduced. Because most varieties of cigarettes are smokeless tobacco products to fund In its comments, the tobacco industry packaged in both single packs and consumer educational programs. While claimed that tobacco advertising and cartons, the total number of labels is the precise details of these orders are promotion have virtually no effect on assumed to number about 2,000. still under development, these orders youth consumption. Although FDA does FDA used two approaches to estimate may involve the achievement of specific not accept this claim, the agency does the cost to industry of changing these performance objectives by directing not consider the expected voluntary labels. The first approach relied on manufacturers to initiate informational reduction in the consumption of tobacco information compiled by The Research products to be a societal cost. Although Triangle Institute (RTI) for its report to programs designed to transmit messages that will reach the majority of young industry sales will fall, they will reflect FDA on the cost of changing food new consumer preferences and labels. 320 RTI reported a cost of about people. The 1995 proposed regulation directed manufacturers to spend at least consumer dollars no longer used on $700 for a 1-color change in a tobacco products will be redirected to lithographic printing process. FDA $150 million annually on this program. While industry comments were critical, other more highly valued areas. Thus, multiplied this figure by 4 to account for for the most part, the resulting reduction a 2-color change on the actual warning many other comments suggested that this figure was too low. One comment in industry sales are not net costs and labels and an additional 2 colors for the potential magnitude of this revenue modifications to the existing label to noted that $150 million is equivalent to about one week of pro-tobacco transfer is discussed below under the make room for the warning label. This heading of Distributional Effects. calculation yielded incremental printing expenditures and another that the industry gained $221 million in profits Moreover, as shown in that discussion, costs of about $2,800 per label, or $5.6 any short-term frictional or relocation million for all 2,000 varieties of affected from underage sales. Still another pointed out that the current dollar value impacts will be significantly moderated tobacco products. Adjusting this figure by the gradual phase-in of the economic downward by RTI’s methodology to of the informational advertising that was conducted under the Fairness Doctrine effects. account for the current frequency of b. Advertising industries. In its label redesign predicts that the total would amount to about $300 million per year. One study appears to indicate that original analysis, FDA argued that one-time cost of completing these label advertising and promotional restrictions changes within a 1-year compliance 75 percent of adolescents aged 12 to 17 could have been reached in 1985 to will impose no long term net costs on society. The Barents Group’s study 319 ‘‘Tar, Nicotine, and Carbon Monoxide of the Smoke of 933 Varieties of Domestic Cigarettes,’’ 321 Department of National Health and Welfare, found that the various suppliers of Federal Trade Commission, 1994. ‘‘Tobacco Products Control Regulations, 320 French, M. T., D. M. Neighbors, L. K. Carswell, amendment,’’ Canada Gazette, Part II, vol. 127, No. 323 Bauman, K. E., J. D. Brown, E. S. Bryan, L. A. K. B. Heller, and G. L. McDougal, ‘‘Compliance 16, pp. 3277–3294, August 11, 1993. Fisher, C. A. Padgett, and J. M. Sweeney, ‘‘Three Costs of Food Labeling Regulations,’’ Final Report, 322 Kaiserman, M., Department of National Health Mass Media Campaigns to Prevent Adolescent RTI Project Number 233U–3972–02 DFR, January and Welfare, Canadian Government, personal Cigarette Smoking,’’ Preventive Medicine, vol. 17, 1991. communication, February 1, 1995. pp. 510–530, 1988. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44591 industry advertising will incur will impact the retail sector because One industry comment strongly substantial regulatory costs. It estimated they will lead to a long-term decline in opposed this position, arguing that that illustrative annual costs for this tobacco products sales and a potential advertising is important for product sector could reach $722 million to $2.17 fall in promotional allowances (slotting improvement and that past restrictions billion, or up to one-half of its estimate fees) from manufacturers. Once again, on the advertising of ‘‘low tar’’ products of the total costs of the FDA proposal. these impacts are not net societal costs, retarded product innovation. The crux Upon review, FDA remains firmly since reduced tobacco product sales will of the argument is that color and/or convinced that its original position was be counterbalanced by increased sales imagery are prerequisites for correct. That is, from the standpoint of for other products or services; and disseminating relevant quality assessing societal costs and benefits, smaller promotional allowances, if they information and that, in its absence, reduced revenues from tobacco occur, are gains to tobacco consumers could not be adequately advertising and promotional activities manufacturers that would be used for informed about the merits of new are not net costs and are appropriately other purchases. Consequently, these products. FDA, however, is not considered a distributional impact. impacts also are examined below under persuaded that manufacturers will be Indeed, FDA believes that a strong ‘‘Distributional Effects.’’ unable to convey vital information. The argument can be made that, even d. Consumers. Advertising restrictions agency finds that true product irrespective of health benefits, these may impose costs on society if they improvements in this industry are rare, advertising restrictions will decrease net disrupt the dissemination of relevant but where they exist, manufacturers societal costs by freeing productive information to consumers. Firms engage could rely on traditional ads in adult- resources for alternative uses. This does in advertising to inform potential oriented publications and on ‘‘text not imply that no individual business customers about their product only’’ advertising elsewhere. Moreover, entities will be negatively impacted. (informative advertising) or to persuade FDA and other public health agencies Many of the companies that currently customers that a product is desirable would likely coordinate with companies benefit from tobacco promotions (e.g., (persuasive advertising). According to in disseminating truly important advertising agencies, publishers, the FTC’s Bureau of Economics, the consumer safety information. sporting event promoters) will suffer benefits of advertising derive from: The implications of FTC’s second lost revenues and those firms that ** * its role in increasing the flow and point, which addresses the effect of specialize in those activities may lose a reducing the cost of information to advertising restrictions on market power substantial part of their business. consumers * * * First, advertising provides and prices, are less certain, as various Nevertheless, from a societal information about product characteristics empirical studies have reached perspective, these losses will be that enables consumers to make better conflicting conclusions. One industry counterbalanced by an increase in choices among available goods * ** comment insisted that FDA’s regulation demand for other consumption and Second, theoretical arguments and empirical will deprive consumers of the benefits investment goods, so that nontobacco- studies indicate that advertising increases of competition, stating that, related entities will gain sales. Although new entry and price competition and hence ‘‘[u]ndoubtedly the clearest measure of overlooked in most industry comments, reduces market power and prices in at least consumer benefit is the effect of some industries * * *. Third, advertising advertising on price.’’ To support this this result is acknowledged within the facilitates the development of brand comments submitted for the Tobacco reputations. A reputation, in turn, gives a view, the comment references several Institute by the Barents Group: firm an incentive to provide products that are studies that demonstrate the ability of A key assumption in the simulations is of consistently high quality, that live up to advertising to reduce product prices. that, when tobacco product manufacturers claims that are made for them, and that The comment also contended that the decrease their advertising expenditures, the satisfy consumers. 324 ‘‘[e]limination of advertising will money not spent translates into increased FDA has considered each of these predictably consolidate the market as profits for the industry. The increased profits issues. First, while agreeing that many marginal brands are abandoned and ultimately end up in the hands of the fewer brands are introduced’’ and that, companies’ owners (shareholders) either as forms of advertising offer substantial direct payouts or as investments on their benefits to consumers, the agency ‘‘[o]ver time this can also reduce the behalf in other lines of business. In general, nevertheless believes that consumers number of players, as companies with these profits are ultimately recycled into will lose little utility from these dominant brands drive out others.’’ increased consumption and investment by particular advertising restrictions. The FDA agrees that advertising can often the owners of the companies. regulation does not prohibit factual, lead to decreased product prices, but That report also reveals the underlying written advertising. Thus, the rule will notes that the other industries distributional nature of the impacts by not impede the dissemination of referenced (e.g., eyeglasses and explaining that its modeling important information to most pharmaceuticals) are much more incorporates the assumption that: consumers. In its preliminary analysis, competitive than tobacco products. ** * in the long run economic losses in the agency concluded that, ‘‘[w]hile Moreover, economists have found that one sector of the economy will be imagery and promotional activities may advertising can also serve as a barrier to redistributed to other sectors of the economy, be important determinants of consumer entry in oligopolistic industries. One i.e., winners and losers will generally balance author, for example, determined that out for the economy as a whole. perceptions and sales, they typically provide little meaningful information on ready-to-eat breakfast foods companies Further discussion of the impact of used advertising programs to support these revenue transfers is included essential distinctions among competing tobacco products’’ (60 FR 41314 at brand proliferation strategies in order to below under the section on 325 41368). dominate retail shelf space. These ‘‘Distributional Effects.’’ programs helped to keep new firms out c. Retail sector. In addition to the 324 and prices high without necessarily previously estimated direct costs Recommendations of the Staff of the Federal Trade Commission, ‘‘Omnibus Petition for associated with the removal of Regulation of Unfair and Deceptive Alcoholic 325 Sutton, J., ‘‘Sunk Costs and Market Structure,’’ prohibited point-of-purchase Beverage Advertising and Marketing Practices,’’ The MIT Press, Cambridge, Massachusetts, pp. 229– advertising, promotional restrictions Appendix A, pp. 3–4, March 1985. 247, 1991. 44592 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations embodying improved quality. Thus, in sharply in recent years and currently To refine its analysis, however, FDA certain circumstances, oligopolistic constitute less than 5 percent of the has disaggregated the cost elements. firms can use extensive advertising to industry’s total advertising and Although the Barents Group accepted create barriers for suppressing promotion budget). 328 Conversely, the FDA’s preliminary estimate of 12 innovation and competition. FDA extraordinary growth in industry employees per retail store, FDA now cannot determine whether tobacco advertising and promotion has occurred believes that this figure is accurate only advertising restrictions would in areas that are typically bundled with for retail stores with payroll. Stores ultimately increase or decrease product other products, or placed in prominent without payroll constitute a significant prices. public settings that are difficult to percentage of the stores selling tobacco Finally, FTC’s third point, which ignore. Thus, there is considerable products and, on average, are much emphasizes the positive aspects of question about the contribution of these smaller. As explained above, FDA advertising in supporting brand programs to consumer utility. estimates that about 600,000 reputations, is more relevant for long- establishments will sell over-the- lived items, such as consumer durables, 6. Training counter tobacco products, including the where purchases are infrequent or a. Retailers. The final regulation does 100,000 that replace those vending personal experience is inadequate. not explicitly require retail employees machines that are removed. Table 10 Advertising is less likely to play a key who sell tobacco products to be trained presents the data that underlie FDA’s role in assuring high quality levels for in checking customer I.D.’s. FDA revised estimates of the number of tobacco products, where consumer understands, however, that some employees who will be trained. For search costs are low and a brand’s training is essential to effective existing retail establishments with reputation for quality is tested by performance. In its analysis of the payroll, FDA assumes that training will consumers every day. For these proposed regulation, FDA estimated be needed for all employees in the products, high quality will remain a total annual costs of $10 million for affected outlets, except in General prerequisite of commercial success employee training at retail outlets. This Merchandise and Supermarket/Grocery irrespective of advertising strategies. estimate assumed that an average of 12 stores, where one-third of the employees Other analysts suggest still other employees per store at 467,000 retail will be trained. For establishments potential attributes of product stores (assuming 1/3 of 700,000 stores without payroll, nonretail advertising. For example, according to already conducted training) would establishments, and new establishments F. M. Scherer, author of a widely read receive 15 minutes of training at a replacing vending machines, Census text on industrial organization: compensation rate of $7.41/hour. The data on the number of employees is not Advertising is art, and some of it is good Barents Group commented that FDA’s available, but FDA assumes that an art, with cultural or entertainment value in average of six employees will be trained. its own right. In addition, it can be argued analysis did not account for many individual cost elements, resulting in a As shown in Table 10, these that consumers derive pleasure from the calculations indicate that training will image advertising imparts to products, above significant underestimate of total and beyond the satisfaction flowing in some training costs. It estimated one-time be required for a total of 4.2 million organic sense from the physical attributes of training costs of $184 to $257 million workers. the products. There is no simple case in logic and recurring annual training costs of The Barents Group further faulted for distinguishing between the utility people $48 to $67 million. FDA for underestimating the training obtain from what they think they are getting time that would be required to educate and what they actually receive. As Galbraith Specifically, the Barents Group stated retail sales clerks about recognizing observed, ‘‘The New York housewife who that FDA relied on outdated proper forms of identification and was forced to do without Macy’s advertising compensation data. FDA had obtained handling related customer service would have a sense of loss second only to these data from a 1992 report prepared problems. It assumed that 2 hours of that from doing without Macy’s.’’ 326 by Price Waterhouse for the Tobacco training would be necessary. FDA, Similarly, Becker and Murphy have Institute, but agrees that more recent however, reviewed the time needed to argued that advertisements should be data are available and employs the present the training materials from considered ‘‘goods’’ if people are willing suggested compensation rate of $9.51 for several corporate entities and finds that to pay for them and as ‘‘bads’’ if people its revised estimate. The Barents Group they need not exceed one hour. For 327 must be paid to accept them. They also claimed that FDA failed to consider example, one large convenience store explain that, in general, the more easily recurring training costs due to annual corporation uses a 45 minute training the advertisements can be ignored, the employee turnover and annual videotape that covers the sale of tobacco more likely it is that the ads themselves updating, focusing instead on one-time products, but also covers the sale of provide utility to consumers. training costs only. This criticism is not alcohol and possible inhalants, Newspaper and magazine valid. Table 2 of the original analysis including means for recognizing advertisements, for example, must (60 FR 41314 at 41360) clearly lists inebriated or drugged individuals. provide positive consumer utility or training costs for retail establishments Moreover, many establishments, they would be ignored by readers. This as an annual operating cost and the text especially small stores, will provide no final rule allows such advertisements to (60 FR 41314 at 41367) refers to a ‘‘per formal training, but will provide continue, some in their current form, year’’ cost. Because employees would be instruction during the work day with others in a text-only format. (In fact, trained when first hired, this estimate minimal lost time. Thus, FDA believes industry outlays for newspaper and implied a 100 percent employee that average costs are reasonably based magazine advertisements have dropped turnover rate. on a 1-hour training program.

326 Scherer, F. M., Industrial Market Structure 327 Becker, G. S., and K. M. Murphy, ‘‘A Simple 328 Federal Trade Commission Report to Congress and Economic Performance, 2nd edition, Rand Theory of Advertising as a Good or Bad,’’ Quarterly for 1993: Pursuant to the Federal Cigarette Labeling McNally College Publishing Co., Chicago, IL, p. 380, Journal of Economics, vol. 108, p. 941, November and Advertising Act, issued 1995. 1980. 1993. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44593

TABLE 10.ÐNUMBER OF EMPLOYEES TO BE TRAINED

Payroll Establishments Nonpayroll Establishments Total Kind of Business Establishments No. of Establish- No. of Employees Selling Tobacco Employees Percent Employees ments Sell- Employees Trained Per Store Trained ing Tobacco 1 Products Trained Products Trained

General Merchandise 12,117 60.1 33% 242,593 9,807 58,842 301,435 Supermarket/Grocery 71,240 20.9 33% 497,253 54,538 327,228 824,481 Convenience Store/no gas 29,400 5.6 100% 164,718 ------164,718 Convience Store/gas 51,913 6.8 100% 353,868 ------353,868 Gas Station 37,958 6.0 100% 228,002 7,581 45,486 273,488 Eating Place 11,992 16.5 100% 198,212 3,065 18,390 216,602 Drinking Place 10,745 5.4 100% 58,498 5,336 32,016 90,514 Drug/Proprietary Store 29,046 12.2 100% 354,730 1,829 10,974 365,704 Specialty Tobacco 1,477 3.7 100% 5,530 ------5,530 Miscellaneous 24,995 5.2 100% 130,253 44,879 269,274 399,527

Retail Subtotal 280,883 2,233,656 127,035 762,210 2,995,867 Nonretail2 600,000 Converted Vending Machines2 600,000

Total 4,195,867 1Assumes 6 employees per establishment. 2Assumes 100,000 outlets with 6 employees to be trained. Sources: Table 4 for description of establishment data; 1992 Census of Retail Trade, Subject Series: Establishment and Firm Size (Table 1) for employment data; FDA estimates for percent trained.

Adopting FDA’s original estimate that spend about 1 additional hour per year the monitoring burden for these about one-third of all affected providing this training. This adds $6.0 employees, this training cost should be establishments already provide million to the annual training costs. The correspondingly smaller. Nevertheless, employee training (also assumed by the Barents Group also recommended these manufacturer employees will still Barents Group), implies one-time annual reinforcement training. An need to determine the types of displays employee training costs of $26.6 million annual 10-minute reinforcement that remain permissible. FDA therefore (4.2 million employees x 2/3 x $9.51). training period for employees of those accepts the $1.5 million cost estimate. The Barents Group suggested, however, establishments that do not already have 7. Access Restrictions that even employees who currently a training program will cost about $2.9 receive training would need 5 extra million. In sum, these annual recurring a. Manufacturers. Although voluntary minutes on the new regulations, which training costs total about $20 million. decreases in the sale of consumer adds about $1.0 million to the cost The Barents Group also assumed that products do not impose long-term net estimate. Next, the Barents Group retail managers would need extensive societal costs, mandatory restraints on included costs for time spent by training to understand the new the access of consumers to desired trainers, assuming that the training regulations. FDA estimated in its 1995 products may imply economic costs. would be provided by an outside proposal that manufacturers’ Economists typically measure producer- source. FDA believes that a more typical representatives would need about 8 related inefficiencies attributable to approach would have a store supervisor hours of training on their new product bans by calculating lost provide the training. Using $13.64 as the responsibilities and the Barents Group ‘‘producers’ surplus,’’ which is a compensation rate for a retail manager, assumed that retail managers would technical term for describing the as suggested by the Barents Group, and need a similar duration of training. FDA difference between the amount a adjusting for the assumed one-third rejects this estimate, however, as the producer is paid for each unit of a good current compliance rate in existing final provisions affecting retailers are and the minimum amount the producer establishments, yields a one-time cost straight-forward and will be routinely would accept to supply each unit, or the for trainer time of $6 million. Thus, communicated through traditional area between the price and supply FDA projects total one-time training industry channels. curve. Data derived from Cummings, et costs of about $33.5 million. b. Manufacturers representatives. In al., indicate that youngsters under the In addition, FDA estimates that its preliminary economic analysis, FDA age of 18 consume 316 million packs of employee turnover, using the Barents estimated that 7,300 manufacturer cigarettes per year, leading to industry Group suggested rate of 42 percent, will representatives would be trained for 8 profits of $118 million. 329 On the add annually recurring training costs of hours at a cost of $25.00 per hour. After assumption that the regulation would about $11.2 million. Also, new noting FDA’s ‘‘undocumented’’ cost reduce teenage smoking by one-half, employees will receive I.D. check estimate, the Barents Group proceeded these profits would fall by about $59 training as part of their initial to apply the identical number of orientation activities. Since stores may training hours to their ‘‘documented’’ 329 Cummings, K. M., T. Pechacek, and D. provide this to several new employees cost estimate of $25.70 per hour. They Shopland, ‘‘The Illegal Sale of Cigarettes to U.S. Minors: Estimates by State,’’ American Journal of at once, using either written or video also suggested a 15 percent labor Public Health, vol. 84, No. 2, p. 301, February 1994, training materials, FDA estimates that turnover premium, giving a total cost of (derived by subtracting sales to 18-years-olds from retail managers, on average, would $1.5 million. As the final rule eliminates the reported 516 million packs consumed). 44594 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations million. However, because most of this older consumers would appear to be identification checks have become profit stems from illegal sales to youths, only 30 years old. routine. Nevertheless, FDA adopts the FDA has not counted this figure as a FDA has not accepted this Barents Barents Group’s 100-percent assumption societal cost. Group assumption for several reasons. to assure a full accounting of the b. Consumers. Consumer surplus is a First, the legal age of purchase for relevant costs. concept that represents the amount by alcohol in all 50 States is 21 years, One comment claimed that FDA which the utility or enjoyment whereas the rule for cigarettes and failed to include the cost of hiring associated with a product exceeds the smokeless tobacco sets 18 as the legal additional sales clerks. As noted above, price charged for the product. Because age of purchase. This 3-year difference the FDA calculation does reflect the cost it reflects the difference between the implies that comparable cigarette and of the additional labor time that might price the consumer is willing to pay and smokeless identification checks would be needed. The Barents Group also the actual market price, it is used by be expected only up through age 27. inexplicably asserts that FDA failed to economists to measure consumer Also, the current policy and practice of consider I.D. checking costs as annual welfare losses imposed by product bans. many retail stores is to request costs, instead listing them as a one-time However, FDA’s rule imposes no access identification from tobacco consumers cost. Table 2 of the original analysis (60 restrictions on adults, who will be free only up to age 26. Requiring proof of age FR 41314 at 41360), clearly lists the $28 to consume tobacco products if they so for anyone who appears younger than million identification check cost as an desire. Thus, FDA has not included any 26 years of age was also recommended annual operating cost and the by a working group of 26 State accompanying text (60 FR 41314 at value for lost consumer surplus in its Attorneys General. 332 Finally, the 41367) refers to the figure as a ‘‘per estimate of the societal costs of these Barents Group’s use of age 34 to provide year’’ cost. The Barents Group further access restrictions. a margin of safety for identifying those faulted FDA for not taking into account 8. I.D. Checks under the age of 30 is illogical, since the the cost of checking I.D.’s for those FDA rule requires retail stores to youths under age 18, who will still a. Retailers. For the 1995 proposed identify consumers who are under the attempt to buy cigarettes. While a small regulation, FDA estimated that retail age of 26, not 30. percentage of underage smokers may opt establishments would bear annual The Barents Group accepted the FDA for this course of action, few would compliance costs of $28 million for assumption that an I.D. check would return to complying outlets. Thus, FDA consumer identification checks. This take an average of 10 seconds, but believes that any plausible estimate of figure was derived by multiplying the referenced a study by A. T. Kearney that the associated costs would be less than estimated retail employee compensation found that the actual time needed to $1 million annually. rate by the extra time that might be verify a photo I.D. for a tobacco product FDA originally estimated the number needed to complete purchase sale averaged 8.3 seconds. Because FDA of tobacco product transactions for the transactions. The estimate measured the has no better data, the agency adopts 8.3 18 to 26 year-old age group at 2.2 cost to retailers for either increasing the seconds as the average time needed to billion, but has updated its estimate to number of working hours of existing conduct an I.D. check. The Barents 2.5 billion. 333 Also, the 80-percent staff or for hiring new staff to handle the Group further commented that FDA current noncompliance rate that had added workload. The Barents Group used outdated employee compensation been assumed for the 1995 proposal commented on numerous aspects of this data in its calculations. FDA’s revised may be too high, as the Surgeon General compliance cost estimation, accepting totals use the Barents Group’s employee estimated that minors are unable to several key FDA assumptions, but compensation estimate of $9.51/hour make an OTC purchase of tobacco rejecting others in deriving its estimate (1994 dollars) as the time value for retail products about one-third of the time. 334 of $142 million per year. sales employees. Nevertheless, FDA retains this In its preliminary analysis, FDA FDA originally assumed that only 75 assumption to calculate a cost to estimated the number of tobacco percent of all retail transactions for the product transactions for the 18 to 26 18 to 26 year-old age group would be 333 1994 Population data for 18 to 26 year-olds year-old age group based on data that extended due to I.D. checks. The from 1995 Statistical Abstract, Table 16. Cigarettes: Number of smokers for age group calculated from reflected the tobacco consumption of Barents Group argued that the correct Table 217 (1993 data). Average packs/yr. and total cigarette smokers 5 to 6 years after high percentage should be 100 percent, as the packs/yr. for smokers aged 18 to 26 calculated from school 330 and the annual per capita rule would apply to all sales to the data in Table 20, 1994 SGR, p. 85. (Those smoking consumption of smokeless tobacco. 331 relevant age group. FDA continues to 1 to 5 cigarettes/day assumed to smoke 3, those believe that this assumption leads to an smoking 20+ cigarettes/day assumed to smoke 25). The Barents Group faulted FDA for The resulting number of packs smoked by 18 to 26 limiting these transactions to 18 to 26 over-estimate of the probable costs. yr.-olds totals about 2.5 billion. If even 1 percent year-olds, asserting that the standard First, not every moment of a clerk’s time of these transactions were for cartons, this number practice for alcohol sales is to request is effectively utilized and a few seconds falls to about 2.3 billion. Smokeless: Total units of identification for anyone who appears to more per transaction will not always smokeless products sold calculated from data in result in lost labor productivity. Second, Spit Tobacco and Youth: Additional Analysis, Dept. be 30 years old or younger. The Barents of Health and Human Services, June 1993, Excise Group calculations actually estimated many smokers patronize the same retail Tax calculations, Option 4; Units consumed by compliance costs on the assumption store almost daily and are well-known youths from the Institute of Medicine Report (the that customers up to age 34 would be to clerks. I.D. checks for these customers IOM Report) ‘‘Growing Up Tobacco Free: asked for identification, because some will take little extra time. Finally, many Preventing Nicotine Addiction in Children and Youths’’, p. 8. 1994, Usage data and total units (cans customers will take less time to produce or pouches) consumed for age group for those aged 330 1994 SGR, p. 85. an I.D., once they realize that 18 to 26 from ‘‘Use of Smokeless Tobacco Among 331 U.S. Department of Commerce, Statistical Adults-U.S., 1991’’ in ‘‘MMWR’’, CDC, DHHS, Abstract of the United States 1993, 113th edition, 332 ‘‘No Sale: Youth Tobacco and Responsible volume 42, No. 14, p. 264, 1993. The number of p. 137, 1993; DHHS, Office of Inspector General, Retailing,’’ Findings and Recommendations of containers sold for 18 to 26 yr. old age group totals Spit Tobacco and Youth; Additional Analysis, June Working Group of State Attorneys General, p. 28, about 0.2 billion. 1993. December 1994. 334 IOM Report, p. 202. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44595 retailers for I.D. checks of $43 million price premium for vending machine the Barents Group reports that the per year (2.5 billion transactions x 8.3 packs) to project a net $122 million of estimated average industry profit margin seconds/transaction x $9.51/hour ÷ 3600 regulatory costs to the retail sector. for convenience stores is also 2.9 seconds/hour x 80 percent Although not acknowledged, this percent. If this rate applies to cigarette noncompliance rate). This revised methodology implicitly assumes that a sales at convenience stores and if all lost estimate exceeds FDA’s original $28 redistribution of revenues (from vending vending machine cigarette sales were million figure, but remains far below the machine owners to over-the-counter transferred to convenience stores, the $142 million estimate of the Barents sellers) does not generate added societal net pretax cost to the industry would be Group. costs. Elsewhere, the Barents Group $3.5 million, not $122 million ($403 b. Consumers. The Barents Group also includes distributional impacts in cost million to $281 million) x 2.9 percent). criticized FDA for not quantifying the totals. Nevertheless, even this $122 Moreover, NAMA reports that over 50 costs to consumers for the extra time million estimate is far too high. percent of all vending machines are The fundamental problem is that needed to undergo I.D. verifications. located in bars and taverns and many changes in revenue, as discussed above, They estimated this cost at $282 million others in business establishments a year. FDA agrees that consumers do not measure economic costs. The frequented only by adults. The final rule would incur time costs and, for its relevant economic measure of regulatory permits vending machines in those revised estimates, adopts the analytical costs to an industry is the change in places where the owner can ensure that framework suggested by the Barents producer surplus that a firm makes from Group, which counts only the time lost selling a good or service. Because no young people under age 18 are by young customers. (The Barents producer surplus’ are difficult to present at any time. FDA does not know Group suggests that older consumers measure, accounting profits are how many vending machines will be also would experience delays, but sometimes used as a proxy. By moved to restricted areas in compliance FDA’s estimates already account for the examining only lost revenues, the with this rule, but the number will cost of additional clerk time that would Barents Group ignores the difference in further reduce this annual cost. offset longer checkout lines. Younger the operating costs of the alternative 10. Readership Surveys customers, however, must wait while sales channel, despite its recognition their age is verified, even when that ‘‘[i]n general terms, the extra The Barents Group reported that 101 additional checkout clerks are margin at vending machines reflects the leading national magazines had available.) To estimate the time cost, costs to vending machine owners of advertisements for tobacco products in FDA applies the same methodology that operating these machines, in addition to 1994. In addition, Barents obtained was used to estimate the time cost for a return on their labor effort and capital youth and adult readership data for retail employees. That is, 2.5 billion investments.’’ In other words, the reason 1994 from MediaMark Research, Inc. transactions taking an extra 8.3 seconds that cigarettes purchased from a vending (MediaMark), for 41 of these 101 machine are more expensive is that it each for the 18 to 26 year-old age group, magazines. Applying the regulatory costs more to sell a pack of cigarettes by adjusted for a 20 percent current threshold of 2 million readers or 15 compliance rate. The Barents Group vending machine. Consequently, if percent of total readership below the age used an average hourly private sector cigarette sales shift from more of 18, Barents projected that compensation rate ($15.13/hour) as the expensive-to-operate vending machines basis of its consumer time cost estimate, to OTC, the loss of industry profits is advertisements in 32 of the 41 but FDA finds this average rate too high much smaller than the loss of industry magazines (78 percent) would be for young consumers and estimates a revenues. restricted to ‘‘text only’’ by the proposed range of $9 to $11 per hour. 335 As a An approximate assessment of the net regulation. In comparison, FDA result, FDA’s estimate of the cost to impact on retail profits requires a examined copyrighted youth and adult consumers for lost time cost amounts to comparison of the pretax profit margins readership data from the Simmons between $41 and $50 million per year. for vending machine operations as Marketing Bureau, Inc. (Simmons), compared to OTC sales. The Barents another major marketing research firm, 9. Vending Machines Group cited survey results from the and found that only 13 of the 27 In its comments on the costs of FDA’s National Automatic Merchandising magazines with tobacco ads (48 percent) proposed vending machine ban, the Association (NAMA) showing an had youth readership over the Barents Group reports that automatic average pretax profit margin of 3.8 threshold. A comparison of youth vending machine operators will lose percent in 1993 and 2.0 percent in 1992, readership levels from MediaMark and $403 million in annual revenues. They for an average 2.9 percent for vending Simmons for magazines that had then subtract an estimated $281 million machine operations. Because cigarette tobacco advertisements in 1992 is offset for future over-the-counter sales vending machine sales have decreased shown in Table 11. 336 (calculated by assuming an equal in recent years, current profit margins number of future packs sold and an $.80 might be even smaller. Coincidentally,

335 Data from the 1995 Statistical Abstract of the Conversely, using a benefits/wage ratio of 40 advertising share data from Barents and advertising United States, Table 677 lists weekly earnings for percent for 18 to 26 year-olds will overstate the revenues from Advertising Age. Advertising full time wage and salary workers for the group ‘‘16 costs because lower paid workers (hourly and part- revenue was unavailable for five small publications to 24 year-olds’’ in 1994. Table 682 lists median time workers, college students) are more likely to that accounted for less than one percent of tobacco hourly earnings for workers paid hourly rates for have less generous benefits packages (little or none magazine advertising spending in 1994. To estimate the same group in 1994. Assuming a 40 percent of the following: paid vacation, sick leave, increase for benefits, the compensation rates for employer-paid health insurance). FDA increased tobacco advertising expenditures in these five these two tables for 16 to 24 year-olds are $9.98/ the estimated compensation rates to $9 to $11/hour publications, FDA assumed total advertising hour and $7.87/hour, respectively. to assure it does not underestimate the true revenues for each publication equal to $14,388, Using these figures will result in a low estimate compensation rate. which is the lowest total revenue reported in for the 18 to 26 year-old group because 25 and 26 336 Tobacco industry spending on magazine Advertising Age for 1994. year-olds earn more than 16 and 17 year-olds. advertising was calculated using tobacco 44596 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

TABLE 11.ÐAVAILABLE YOUTH READERSHIP DATA FOR PUBLICATIONS WITH TOBACCO ADVERTISEMENTS IN 1994

Estimated Per- MediaMark Research Inc. (1994 read- Simmons Market Research Bureau, centage of 1994 ership data) Inc. (1994 readership data) Publications with Youth and Adult Read- Tobacco Industry ership Data Spending on Mag- Number of Read- Number of Read- azine Advertise- ers Under 18 Percent of Read- ers Under 18 Percent of Read- ments (000) ers Under 18 (%) (000) ers Under 18 (%)

Sports Illustrated1,2 10.0 5,201 18.0 4,614 17.1 People1,2 9.8 3,020 7.8 2,465 8.0 TV Guide1,2 6.5 6,739 13.2 7,102 15.6 Time 4.1 1,972 7.7 n/a n/a Parade2 3.7 n/a n/a 6,059 6.9 Cosmopolitan1 3.1 2,279 12.8 1,410 11.4 Woman's Day 3.0 1,202 4.8 n/a n/a Entertainment Weekly2 2.9 n/a n/a 674 15.3 Better Homes & Gardens1 2.4 2,042 5.5 785 3.4 Newsweek 2.4 1,911 8.0 n/a n/a Family Circle 2.1 1,210 4.2 646 3.5 Field & Stream 2.1 1,760 11.1 815 7.9 Glamour1,2 2.0 2,216 17.1 1,540 17.4 Rolling Stone1,2 2.0 1,869 18.5 1,506 20.1 Ladies' Home Journal 1.7 838 4.4 n/a n/a McCall's 1.7 1,274 6.7 506 3.7 Redbook 1.7 1,153 7.8 565 5.4 Car & Driver1 1.6 1,465 18.3 n/a n/a Life1 1.6 2,665 12.9 n/a n/a Popular Mechanics 1.5 1,617 14.5 744 10.3 Outdoor Life1 1.3 1,579 18.0 569 8.8 Us 1.2 814 13.8 n/a n/a New Woman 1.1 685 14.0 n/a n/a Road & Track1 1.1 1,234 20.6 n/a n/a Soap Opera Digest 1.1 1,299 14.4 853 12.6 Mademoiselle1,2 1.0 1,369 19.7 959 18.5 Vogue1,2 1.0 2,237 18.0 1,300 17.4 Hot Rod1 0.8 2,295 28.0 n/a n/a Ebony1 0.7 2,111 15.8 1,046 9.4 Gentlemen's Quarterly1 0.7 1,037 15.1 n/a n/a Motor Trend1 0.7 1,393 22.1 n/a n/a Premiere1 0.7 617 25.8 n/a n/a Sport1,2 0.7 2,274 33.8 1,132 24.0 Elle1 0.6 819 17.8 409 14.4 Essence1 0.6 1,251 16.9 537 9.4 Sports Afield 0.6 n/a n/a 0 0.0 True Story 0.5 740 14.8 n/a n/a Jet1 0.4 1,724 16.7 1,169 12.2 Popular Science1,2 0.4 1,906 20.8 874 16.1 Self1 0.4 786 16.2 n/a n/a Harper's Bazaar1 0.3 718 18.2 n/a n/a The Sporting News1,2 0.3 1,394 27.8 666 15.7 Cable Guide1 0.2 3,358 22.6 n/a n/a Ski1,2 0.0 827 26.4 584 24.9 1MediaMark youth readership exceeds regulatory threshold. 2Simmons youth readership exceeds regulatory threshold. Source: Barents Group LLC Tables IV±1 and A±2; Simmons Market Research Bureau, Inc.; R. Craig Endicott, ``The Ad Age 300,'' Advertising Age, June 19, 1995.

The final regulation requires that firms collect data on youth readership Simmons now collects adult specific youth and adult readership data only for those magazines commonly readership data for about 230 magazines be available for any magazine that read by this age group. Thus, although and youth readership for about 65 displays a tobacco advertisement with 78 percent and 48 percent of the magazines. Because tobacco color or imagery. Simmons currently magazines in the two youth readership manufacturers currently advertise in conducts interviews with adults in samples described above exceeded the about 100 magazines, the industry could approximately 20,000 households regulatory readership threshold, these often add magazines that are currently annually and subsequently returns to sample results likely overestimate the part of an ongoing adult readership about 3,000 of these households to percentage of magazines with current survey to a youth survey, saving interview their youth members. In tobacco ads that exceed the threshold. approximately 60 percent of the cost of general, however, marketing research collecting both adult and youth data. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44597

Because FDA does not know how a. Labels and advertising. The rule paperwork requirements on retail tobacco manufacturers will adapt their requires that each manufacturer establishments. marketing strategies to the new annually submit to FDA copies of b. MDR’s. The final rule will require regulatory thresholds, it is difficult to representative samples of labels and MDR’s for serious unexpected incidents. predict the number of new readership advertising. While the agency expects FDA assumes that 31 manufacturing surveys that may be initiated. It seems about 1,000 product labels, FDA has no companies 338 and 1,365 distributors 339 likely, however, that tobacco companies direct evidence on the number of will bear total one-time costs of $21,000 will both increase the frequency of advertisements that will be submitted. and $231,000, respectively, for advertising in ‘‘adult’’ magazines that An approximate estimate, however, can establishing and documenting already carry tobacco advertisements be derived from the number of procedures for MDR reporting. These and find suitable ‘‘adult’’ magazines to advertising samples submitted by the costs include 32 hours of effort per replace many of the other magazines. pharmaceutical industry. First, FDA manufacturing firm and 8 hours per calculated that of the $6.1 billion in distributor. Based on estimates One plausible scenario is that advertising and promotional outlays previously developed for the Medical approximately one-half, or 50, of the reported to the FTC by the tobacco Device User Facility and Manufacturer magazines with current tobacco ads industry, only about $1.2 billion is Reporting Final Rule, these activities would not qualify as ‘‘adult’’ spent on printed advertisements. were distributed over wage rates publications, because they exceed the (Derived by subtracting categories for averaging $21.17. Annual costs for MDR youth readership threshold; and that the ‘‘Coupons/Value Added,’’ ‘‘Promotional reporting requirements are more tobacco industry would choose to Allowances,’’ ‘‘Specialties Items,’’ and difficult to predict, because they depend advertise in 50 other ‘‘adult’’ ‘‘Free Samples’’ from the total $6.1 on the number of adverse event reports publications that do not currently carry billion). that will be submitted. FDA projects, tobacco ads. To identify these 50 The pharmaceutical industry spends however, that followup investigation additional ‘‘adult’’ magazines, the an estimated 22.5 percent of sales on and reporting of a single event takes industry might need to collect new marketing, of which about one-quarter about 8 hours of labor and costs about youth readership data for up to 100 may be allocated to advertising ethical $218. Thus, if 50 adverse event reports magazines. In addition, as noted above, pharmaceuticals. 337 The approximately were filed annually, the annual cost of the original 100 magazines with $50 million in annual sales of would be about $11,000. In addition, if current tobacco advertising, youth pharmaceutical manufacturers, each manufacturing company submits a readership data is now available for at therefore, implies a $2.5 billion annual single baseline report and annual least 40. Thus, the tobacco industry may advertising budget. FDA estimates that updates, these costs would be about initially need to obtain new youth it currently receives about 25,000 pieces $2,100 annually, based on unit costs of readership data for the remaining 60 of pharmaceutical advertising per year. $54 and $14 per report, respectively. magazines. In total, therefore, the As the pharmaceutical budget is roughly Annual certification is necessary, but is tobacco industry might opt to obtain twice the size of the $1.2 billion tobacco typically a formality in terms of data youth readership data for an additional industry figure derived above, the collection and reporting and is 160 publications in the first year that agency might receive half as many estimated to cost about $800 for all the rule becomes effective. In documents. Alternatively, reduced manufacturers and $35,000 for all subsequent years, this number might fall promotional activities may prompt an distributors assuming 1 hour of to about 100 surveys, as the industry increase in the number of printed professional and clerical time at $25.80 would concentrate its survey efforts on advertisements prepared by tobacco per hour. publications very likely to qualify. companies, although the Barents Group c. Registration and listing. If a marketing research firm collects assumed this number would decline. Registration and listing duties are youth readership data, the cost may Therefore, FDA projects that it will estimated to take 41 manufacturing depend on the particular characteristics receive the same number of establishments 2 hours each to prepare of the magazines being surveyed. The advertisements for tobacco products as at a unit cost of $42, totaling about tobacco industry could choose, it currently receives for pharmaceutical $1,700 per year for the industry. however, to hire a survey firm to products, or about 25,000 per year, plus d. CGMP’s. The Tobacco Institute develop and administer a questionnaire about 1,000 labels. asserted that cigarette manufacturers solely to gather readership data for Estimates of the time burden of these would need substantial time to comply magazines with tobacco advertising. paperwork submissions ranged from 20 with CGMP’s as the industry ‘‘would While FDA is uncertain about which minutes (The Barents Group) to 1 hour need to adopt major new systems * ** approach the industry would take, the and estimates of the hourly cost ranged [and] make major changes to their agency estimates that such new surveys from $25.00 (Tobacco Institute) to procedures just to accommodate the might cost approximately $2 million in $45.26 (the Barents Group). Using the recordkeeping required.’’ Conversely, one-time costs and $1 million in annual high end of both ranges provides an the economics study prepared by the costs, based on an average cost of about upper bound cost estimate of $1.2 Barents Group for the Tobacco Institute $650 and $350 per sample household. million. This figure is significantly showed no additional costs for this lower than either the original FDA requirement. FDA agrees that these costs 11. Records and Reports estimate, or the Barents Group estimate 338 1992 U.S. Census of Manufactures, Industry Manufacturers will need to comply of $55 to $57 million, largely because Series, Tobacco Products, Table 1a. A few U.S. with device regulations governing the final rule imposes no specific agents designated to represent foreign submissions of representative labels and manufacturers would also need to file forms, but advertising, medical device reporting 337 U.S. Congress, Office of Technology these costs should be minimal. Assessment, ‘‘Pharmaceutical R&D: Costs, Risks and 339 Special Census Tabulation prepared by U.S. (MDR’s), establishment registration and Rewards,’’ OTA-H-522 Washington, DC: U.S. Bureau of Census for U.S. Small Business product listing, and current good Government Printing Office, pp. 303–304, February Administration, Table 3—United States manufacturing practices (CGMP’s). 1993. (unpublished data). 44598 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations should be minimal for facilities with programs will need between $25 and to one-tenth. The approximate midpoint good quality assurance programs. Its $50 million annually to administer and of that estimate (20 percent) constitutes CGMP’s do not specify a specific format, enforce appropriate State operations. about 40 percent of the regulatory but encompass a wide variety of broad 13. Comparison of Benefits to Costs benefit of reducing underage tobacco requirements for documenting operating use by one-half. If, for illustrative procedures. Contrary to the Tobacco FDA expects the net societal benefits purposes, these results, as well as a Institute’s claim that ‘‘even a well-run of the rule to far exceed the regulatory proportional fraction of the relevant cigarette manufacturing facility would costs. Based on the analysis presented costs, 340 are attributed to SAMHSA, the above, the estimated one-time costs of need to adopt major new systems,’’ incremental net benefits of the FDA rule the combined FDA and SAMHSA rules CGMP’s are, in fact, based on the still range from $16.8 to $25.8 billion at are $174 to $187 million and the activities of well-run operations. a 3 percent discount rate, and from $5.4 estimated annual costs are $149 to $185 Moreover, device CGMP’s are currently to $6.2 billion at a 7 percent discount under revision to bring them even closer million. Taking the midpoint of the rate. to ISO 9001, the generally recognized ranges and annualizing the one-time international standard for quality costs at 3 and 7 percent, respectively, Moreover, FDA assumed that reaching assurance systems. Thus, while FDA has yields total annualized costs of $172 the ‘‘Healthy People 2000’’ goal would little experience with day-to-day million and $180 million. In contrast, deter about one-quarter of the 1 million tobacco manufacturing procedures, the the agency’s best estimate of the youth under age 18 who currently begin agency does not anticipate the need for monetized regulatory benefits that to smoke each year from ever smoking substantial quality system redesign. would follow a 50 percent reduction in as an adult. Thus, this goal implies a 25 Wholesalers and distributors also underage tobacco use ranges from $28.1 percent overall effectiveness rate. If, submitted comments contending that to $43.2 billion at a 3 percent discount however, these rules prevent smoking as the CGMP’s would create added rate and from $9.2 to $10.4 billion at a an adult for even 5 percent of the paperwork burdens, but the agency has 7 percent discount rate. Thus, as shown teenagers who would otherwise become exempted these sectors from the CGMP in Table 12, the net benefits (benefits adult smokers, they would produce requirements. minus costs) of a total effectiveness rate estimated annual net benefits of from of 25 percent range from $27.9 to $43 $5.4 billion to $8.5 billion at a 3 percent 12. Government Enforcement billion at a 3 percent discount rate and discount rate and from $1.7 billion to FDA estimates of internal costs for from $9.0 to $10.2 billion at a 7 percent $1.9 billion at a 7 percent discount rate. administering and enforcing this rate. Table 13 indicates that those regulation are extremely uncertain, as figures imply a cost per life-year saved Even if this latter scenario attributed 40 they will depend on the working of from $800 to $4,700 and a cost per percent of the benefits and relevant relationships to be established with death avoided of from $11,000 to costs to SAMHSA, the annual net State tobacco control programs. As a $52,000. As noted earlier, these benefits benefits of the FDA rule would still best estimate, however, FDA projects are exclusive of the substantial health range from $3.3 billion to $5.1 billion at that between 30 to 50 full-time improvements expected to result from a 3 percent discount rate and from $1.0 employees (FTE’s) will be needed to the reduced consumption of smokeless billion to $1.2 billion at a 7-percent implement the rule. Fully loaded tobacco. discount rate. This last example implies employee costs vary with the type of The substantial differential between a cost per life-year saved of $3,500 to employee (e.g., field inspectors versus these estimated costs and benefits $21,100 and a cost per death avoided of administrative), but an average of withstands rigorous sensitivity analysis $47,000 to $234,246. These figures are $100,000 per FTE places the dollar cost (see Table 12). For example, SAMHSA well within the range of values for at between $3 and $5 million per year. estimated that its rule would reduce health interventions typically SAMHSA has estimated that State underage tobacco use by from one-third considered cost-effective. TABLE 12.ÐNET BENEFITS ($ Billions)

Effectiveness Rates Discount Rate 25% 15% 10% 5% 2.5% Low High Low High Low High Low High Low High

3% 27.9 43.0 16.7 25.7 11.1 17.1 5.4 8.5 2.6 4.1 7% 9.0 10.2 5.3 6.1 3.5 4.0 1.7 1.9 0.74 0.86

Illustrative Incremental Net Benefits1

3% 16.8 25.8 10.0 15.5 6.7 10.3 3.3 5.1 1.6 2.5 7% 5.4 6.2 3.2 3.7 2.1 2.4 1.0 1.2 0.45 0.53

1 Attributes 40% of benefits and associated costs to SAMHSA

340 Costs include 100 percent of SAMHSA’s state costs, vending machine costs, and retail and enforcement costs, plus 40 percent of retail training consumer I.D. check costs. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44599

TABLE 13.ÐCOST EFFECTIVENESS

Effectiveness Rates

Discount 25% 15% 10% 5% 2.5% Rate Cost/Life- Cost/Death Cost/Life- Cost/Death Cost/Life- Cost/Death Cost/Life- Cost/Death Cost/Life- Cost/Death Year Avoided Year Avoided Year Avoided Year Avoided Year Avoided Saved ($) ($) Saved ($) ($) Saved ($) ($) Saved ($) ($) Saved ($) ($)

3% 815 10,862 1,358 18,103 2,038 27,155 4,075 54,310 8,151 108,621 7% 4,722 52,423 7,870 87,372 11,804 131,059 23,609 262,117 47,218 524,235

Illustrative Incremental Cost-effectiveness1

3% 706 9,413 1,177 15,689 1,766 23,533 3,532 47,067 7,064 94,134 7% 4,220 46,849 7,033 78,082 10,549 117,123 21,098 234,246 42,197 468,492 1 Attributes 40% of benefits and associated costs to SAMHSA

E. Distributional Effects totaled 36.3 billion packs, 341 cigarette would result in the displacement of consumption would fall by about 0.4 about 4,000 jobs, or 400 jobs annually These regulations will impose a percent in the first year, 1.8 percent in among manufacturers, warehousers, and variety of sector-specific distributional the fifth year, and 3.5 percent in the wholesalers. Alternatively, a University effects. Those sectors affiliated with tenth year following implementation. of Virginia study concluded that ‘‘the tobacco and tobacco products will lose (In fact, these reductions may take even Price Waterhouse study for the Tobacco sales revenues and these losses will longer, because it may be several years Institute provides estimates of tobacco’s grow over time. Businesses engaged in before the 50-percent effectiveness level impact that are high compared to other the provision of tobacco product is achieved, and because young adults measures.’’ 344 That study referenced a advertising may also face reduced smoke fewer packs than older adults). recent U.S. Department of Agriculture revenues. Simultaneously, nontobacco- Hence, annual tobacco revenues will analysis by Gale that found that related industries will gain sales, decline slowly over time. The U.S. manufacturing and wholesale trade because dollars not spent for tobacco Bureau of the Census estimates 1994 activities employ only 83,000 full-time products will be spent on other revenues for cigarette and smokeless equivalent workers. 345 If true, this commodities. tobacco manufacturers at about $25.9 finding reduces these job loss estimates billion. 342 Assuming comparable to about 3,000 jobs, or 300 annually. 1. Tobacco Manufacturers and reductions in smokeless tobacco, these The smaller job loss estimate is Distributors calculations imply that tobacco generally confirmed by a recent study For its calculation of regulatory manufacturer revenues will fall by $128 by Warner, et al., who applied a benefits, FDA estimates that million in the first year (0.5 percent), computer simulation model to forecast $501 million in the fifth year (1.9 the regional impact of reductions in implementation of the regulations may percent), and $966 million in the tenth tobacco use. 346 The authors used ‘‘a reduce the cigarette consumption of year (3.7 percent). While these state-of-the-art macroeconomic model to underage smokers by one-half within 7 reductions are significant, the gradual simulate what would happen if years. As discussed earlier in this phasing of the impacts will significantly consumers reduced their tobacco section, based on data presented in dissipate any associated economic expenditures, with the same level of Cummings, et al., FDA finds that disruption. spending redistributed to other goods teenage smokers under the age of 18 In a 1992 report prepared for the and services * * *.’’ One scenario consumed about 316 million packs of Tobacco Institute, Price Waterhouse assumed that tobacco control activities cigarettes in 1994. A 50-percent cut in estimated that the tobacco would reduce the expected rate of sales would drop the number of packs manufacturing, warehousing and tobacco purchases by 2.06 percent per sold by 158 million. Moreover, FDA has wholesale trade sectors employed about year, or roughly 5 times the estimated assumed that at least one-half of those 343 107,000 full-time workers. Thus, a effect of the FDA rule. While this 500,000 teenagers who would be constant production-to-employment scenario does not present direct impacts deterred from starting to smoke each ratio projects that a 3.7-percent to the tobacco industry alone, it year would refrain from smoking as reduction in sales over a 10-year period forecasts job losses after 8 years of 6,401 adults, decreasing the number of adult for all U.S. wholesalers and 5,957 for smokers by 250,000 per year. Because 341 ‘‘Tobacco Situation and Outlook Report,’’ Southeast Tobacco Region each adult smoker consumes about 500 U.S.D.A., Economic Research Service, p. 4, April 1995. packs per year, about 124 million fewer 344 342 Knapp, J. L., ‘‘Tobacco in Virginia,’’ Weldon packs would be sold per year. ‘‘1994 Annual Survey of Manufactures: Value of Product Shipments,’’ U.S. Department of Cooper Center for Public Service, University of Thus, achieving the agency’s goal Commerce , Bureau of the Census, Table 1, p. 210. Virginia, p. 5, December 1995. 345 Gale, F., ‘‘What Tobacco Farming Means to would reduce cigarette consumption by ASM does not report data below the 5-digit SIC Code Level. FDA assumed chewing tobacco Local Economies,’’ U.S. Department of Agriculture, 158 million packs in the first year represented the same percentage of SIC Code 2131 Economic Research Service, Agriculture Economic (while only teenagers are affected), 158 (Chewing and Smoking Tobacco) in 1994 as it did Report Number 694, p. 5, September 1994. million plus 124 million packs in the in 1992 when it was classified at a 6-digit SIC code 346 Warner, K. E., G. A. Fulton, P. Nicolas, and D. second year, 158 million plus 2 times in the Census of Manufacturers. R. Grimes, ‘‘Employment Implications of Declining 343 ‘‘The Economic Impact of the Tobacco Tobacco Product Sales for the Regional Economies 124 million packs in the third year, and Industry on the United States in 1990,’’ Price of the United States,’’ JAMA, pp. 1241–1246, April so on. Since 1994 cigarette shipments Waterhouse, p. ES–3, October 1992. 24, 1996. 44600 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations manufacturers. Accounting for the search and retrieve a desired product. In described above, used a ‘‘state-of-the- multiple of 5, comparable job losses the absence of empirical evidence, the art’’ macroeconomic simulation model attributable to the FDA rule would total result is indeterminate; but FDA has to project the employment effects of about 2,600 after 8 years, or about 325 seen no convincing evidence or declining tobacco consumption. 348 annually. arguments to demonstrate that any Assuming domestic tobacco The Barents Group did not address delays caused by the self-service consumption decreases of 2.06 percent the long-term gradual decline in tobacco restriction will significantly curtail per year, Warner, et al. predicted about use projected by FDA. Nevertheless, it adult tobacco use. 7,500 job losses within an 8-year period claimed that the agency underestimated Finally, although FDA calculated for ‘‘Southeast Tobacco Region’’ the economic impact on industry by above that increased delays due to I.D. farmers. As this fall in tobacco use is failing to account for the lost sales to checking could cost young adult roughly five times that projected by adults that would result from the consumers under the age of 26 up to $50 FDA, the analogous job loss estimate proposed ban on vending machines and million per year, even this cost would would be about 1,500 over the 8-year self-service displays and the required not lead to significant consumption period, or about 190 per year. checking of customer I.D.’s. The Barents declines. As described, the increased According to the USDA study by Gale, Group argued that the added consumer checkout waiting time for young ‘‘[f]or most farms, tobacco growing is a inconvenience imposed by these purchasers was estimated to average part-time, seasonal enterprise, and provisions was tantamount to an about 8.3 seconds, which translates to a production per farm is usually small. increase in the effective price of tobacco cost of about 2.3 cents per transaction, About two-thirds of tobacco farmers products, which would rapidly decrease or 1.35 percent of the cost of a pack of work off-farm.’’ 349 Citing 1987 Census the consumption of tobacco by adults. cigarettes. According to the Barents of Agriculture data, Gale notes that only Relying on ‘‘hypothetical scenarios’’ Group, representative estimates of 65 percent of the farms growing tobacco that assume demand declines of 5 and demand elasticities for cigarettes range in the United States reported earning 10 percent, the Barents Group forecast from -0.6 to -1.0. Young adults under more than half of their receipts from that the tobacco manufacturing industry the age of 26, however, purchase only tobacco, and of those farms, would lose from 1,800 to 3,700 jobs due about 10 percent of all tobacco products. approximately 80 percent had total farm to this increased consumer Thus, the fall in total tobacco sales sales under $20,000. He explains that inconvenience. would be, at most, 0.1 percent, not the the availability of alternative land uses FDA believes these Barents 5 to 10 percent assumed by the Barents will dictate the economic results: projections are substantially overstated. Group. Moreover, even the 0.1 percent The key factor in adjustment to a smaller Impacts associated with cigarette figure is an overestimate, because those tobacco industry is the alternative uses available for land, labor, and capital used in consumption declines of 5 to 10 percent consumers irritated by the delay will increase the volume of tobacco products tobacco production * * * For the most part, cannot possibly be attributed to the loss concern is focused on rural areas where of vending machines, because vending purchased per transaction. As a result, tobacco is grown because this stage of machine purchases make up less than 1 the number of cartons sold will rise, but production has the most specialized percent of all cigarette purchases. the decline in tobacco product sales resources with fewer attractive alternative Further, according to NAMA, there are revenues attributable to the uses. In many areas, small farms that are only 141,000 cigarette vending inconvenience effects of I.D. checks will unviable without tobacco profits would cease machines currently in use (and that be negligible. production and their land would be absorbed number is falling rapidly), and the cost into larger neighboring farms or converted to 2. Tobacco Growers other uses * * * In marginal farming areas analysis prepared by the Barents Group As explained above, total cigarette ** * much of the land devoted to tobacco predicted that 100,000 of these would be converted to residential, machines would be replaced by new and chewing tobacco consumption is expected to decrease by 0.5 percent in commercial, industrial, or forestry uses, in OTC establishments. Thus, the Barents which case it would still generate income for Group’s own analysis eliminates any the first year, 1.9 percent by the fifth the local economy * * * This land is already added consumer inconvenience from year, and 3.7 percent by the tenth year, being converted to nonfarm uses in rapidly three-quarters of the existing inventory following compliance with the growing areas like southern Maryland and of machines. Moreover, the near-term regulation. Price Waterhouse estimated Raleigh-Durham, North Carolina. 350 impact on adult tobacco consumption that, on a full-time equivalent basis, FDA notes that the economic will be further moderated both because about 153,000 farmers grew tobacco in consequences of these trends will be the final rule allows vending machines 1990. Based on these figures, constant substantially mitigated by the very in ‘‘adult’’ facilities, and because the production-to-employment ratios imply moderate pace of the projected changes. employment losses among tobacco added inconvenience cost will be 3. Vending Machine Operators partially offset by the lower price of the growers of about 5,700 after 10 years, or The final regulation prohibits all OTC product. These factors together about 570 annually. Alternatively, the vending machine sales of regulated make it extremely unlikely that fewer Gale study for the U.S. Department of 347 tobacco products except for those vending machines will lead to a Agriculture (USDA) estimated the machines located in a facility where substantial near-term fall in tobacco number of full-time equivalent tobacco industry sales revenues. farmers to be only 65,400, which would reduce the job loss estimate to about 348 Warner, K. E., G. A. Fulton, and D. R. Grimes, The likelihood that tobacco sales will ‘‘Employment Implications of Declining Tobacco decline significantly due to 2,500 by the tenth year, or 250 annually. Product Sales for the Regional Economies of the inconvenience imposed on adult This latter figure also closely fits the United States,’’ JAMA, pp. 1241–1246, April 24, customers by the self-service restriction findings of Warner, et al., who, as 1996. 349 is similarly remote. While some Gale, F., ‘‘What Tobacco Farming Means to 347 Gale, F., ‘‘What Tobacco Farming Means to Local Economies,’’ USDA, Economic Research purchasers would need more time to Local Economics,’’ USDA, Economic Research Service, Agriculture Economic Report Number 64, complete a transaction, other purchasers Service, Agriculture Economic Report Number 64, p. 1, September 1994. would save time by no longer having to p. 5, September 1994. 350 Id., p. iii. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44601 persons under the age of 18 are not business increasingly conducted by percent of cigarette vending machines present at any time. In recent years, specialized enterprises.’’ 352 are located in bars and cocktail lounges, cigarette vending sales have dropped Referring to 1992 Census data, NAMA 11 percent in factory/plant locations, precipitously, due to numerous declared that over 3,000 vending and 3 percent in business offices. 353 restrictive State and local ordinances. machine operators supply cigarettes, not Those locations that do not permit the According to the NAMA: including the bars, restaurants, hotels, entry of youngsters under the age of 18 [t]he 1986 cigarette location survey and bowling alleys that own their own will be exempted from the cigarette mirrored an industry with about 700,000 machines. On average, these mostly vending machine restriction. small firms receive 10 percent of their cigarette vending machines on location. In 4. Advertising Sector 1994, the vending industry was estimated to revenues from cigarette sales, although have between 141,000 and 400,000 cigarette some firms are even more dependent. In annual reports to FTC, machines. This represents a decline in the While some vending machines can be manufacturers of cigarettes and number of cigarette vending machines on converted to sell other products, one smokeless tobacco reported 1993 location of between 43 percent and 80 large cigarette machine manufacturer advertising and promotional/marketing percent. maintained that more than 85 percent of expenditures of $6.0 billion and $119 the existing machines can be converted million, respectively (see Table 14). The U.S. Department of Commerce 351 only for new products with packaging About $2.6 billion (43 percent) of these reports that 1992 sales of tobacco similar in dimension and form to outlays went to consumers as financial products by automatic merchandising cigarette packages. incentives to induce further sales (e.g., machine operators were about $452 While vending operators will need to coupons, cents-off, buy-one-get one free, million, or 7.1 percent of that sector’s develop new markets to replace the free samples), and $1.6 billion (26 total sales, but a NAMA fact sheet already dwindling sales revenues from percent) to retailers to enhance the sale shows this rate continuing to fall, cigarette vending machines, the overall of their product. The remaining $1.9 dropping from 8.5 percent in 1990 to 2.7 economic impact will be mitigated billion (31 percent) were related to percent in 1994. One trade magazine somewhat by FDA’s decision to exempt consumer advertising activities that will explains that, ‘‘[c]igarette vending, once ‘‘adult only’’ locations from the ban. be significantly modified by the ‘‘text an industry mainstay, is now a niche According to a 1995 NAMA survey, 58 only’’ restrictions. TABLE 14.ÐTOBACCO ADVERTISING/PROMOTIONAL EXPENDITURES 1993 (Millions of Dollars)1

Promotion Type Cigarettes Smokeless Total

Coupons/Value Added 2,559 32 2,591 Promotional Allowances 1,558 13 1,571 Point of Sale 401 13 414 Specialties Items 756 4 760 Outdoor 231 1 232 Magazines 235 7 242 Public Entertainment 84 23 107 Free Samples 40 16 56 Transit 39 0 39 Newspapers 36 1 37 Direct Mail 31 1 32 Endorsements 0 0 0 All Others 64 7 71

Total 6,035 119 6,154 1 Totals may not add due to rounding. Source: U.S. Federal Trade Commission

FDA cannot project the ultimate require new informational programs that advertising suppliers, however, are not industry response to these advertising would generate a substantial increase in overly specialized with respect to restrictions. On the one hand, the advertising industry revenues. particular consumer products and effectiveness of many advertisements Nevertheless, if tobacco outlays fall, would redirect resources to other will fall. On the other hand, many there will be short-term dislocations as advertising purchasers, albeit at some alternative marketing promotional industry resources are redirected to revenue loss. While FDA is aware that activities will be prohibited or other uses. One firm that depends such demand shifts cause short-term constrained even more stringently, heavily on tobacco advertising warned disruption, the U.S. economy creates raising the relative desirability of the of severe economic burdens, pointing to and discards thousands of products remaining advertising options. income and job losses for many of its each day. For most advertising media, Moreover, as described above, FDA may employees and suppliers. Most the ability to respond rapidly to

351 U.S. Department of Commerce, ‘‘Merchandise 353 National Automatic Merchandising Line Sales,’’ 1992 Census of Retail Trade, RC92–S– Association, Cigarette Vending Machine Location 3RV, pp. 3–27, 3–31. Study, conducted August 31, 1995. 352 Vending Times, Census of the Industry Issue, p. 36–D, 1995. 44602 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations changing markets is a mainstay of in its absence, magazine and newspaper Group found that, in 1993, tobacco economic survival. advertising revenues would fall by 25 to companies routed almost $1 billion a. Print media. The final regulation 75 percent. It also predicted that the through ad agencies (less than 1 percent requires that advertising of cigarettes or reduced revenues would, in turn, force of the reported $131.3 billion spent on smokeless tobacco be restricted to black publication subscription prices to rise. U.S. media advertising in 1992). 356 text on a white background in those FDA agrees that there will be adverse Assuming agency fees of 10 percent publications where youthful readers impacts on certain publications, but (while overlooking the proposed $150 constitute more than 15 percent of total notes that the tobacco industry is million educational campaign), it readership or number more than 2 currently shifting its advertising budget suggested that advertising declines of 25 million. FDA cannot reasonably forecast away from print media and that only 6 to 75 percent would decrease agency the future marketing strategies of of the 32 affected magazines identified annual revenues by $25 million to $77 tobacco manufacturers, but foresees a by the Barents Group received over 10 million. Assuming a 50 percent drop possible fall in the $242 million worth percent of their revenues from tobacco ($140 million) in magazine and of magazine advertising and the $37 products. Moreover, as noted earlier, newspaper advertising, the Barents million worth of newspaper advertising while FDA cannot project the tobacco Group next applied a simulation model that tobacco manufacturers reported to industry’s marketing strategies, the to predict that supplier firms among the FTC in 1993. These advertising agency suggests that restricted advertising agencies, government, revenues comprised about 1.1 percent promotion alternatives could reestablish business and professional services, and and 0.1 percent of the 1992 value of print advertising as a relatively commercial printers businesses would shipments for periodicals and attractive option for conveying product lose revenues of from $12 to $23 newspapers, respectively. 354 The information to adult readers; thereby million. While acknowledging that, Barents Group identified 32 leading slowing or even reversing the recent ‘‘* * * there will be eventual offsetting magazines with tobacco advertising in slide in this type of tobacco advertising. revenue gains in other industries not 1994 that have youth readership levels The Barents Group also asserted that shown * * *,’’ these other sectors were exceeding the regulatory threshold and the commercial printing industry, as not identified and the offsetting found that these publications received, well as other industry sectors, would be revenues not explicitly quantified. The on average, 7.3 percent of their total harmed by restrictions on coupons and Barents Group correctly noted that the advertising revenues from tobacco in ‘‘retail value added’’ promotions. These adjustments will involve short-term 1994. They also predicted, based on the expenditures, which account for $2.6 costs to the affected sectors, but did not sharp downward trend of these billion, or 42 percent of the total tobacco estimate the expected magnitude of advertising outlays, a 21-percent drop in advertising and promotional outlays these adjustment costs. magazine advertising and a 45-percent reported to FTC in 1993, include outlays c. Outdoor advertising industry and drop in newspaper advertising for associated with cents-off coupons and public transit authorities. The final rule tobacco products by 1996, irrespective multiple pack promotions, such as ‘‘buy restricts tobacco billboards and public of the FDA regulation. one, get one free’’ or ‘‘buy two, get one transit advertising to black text on a free;’’ as well as other give-away white background and bans all The impact of these restrictions on the promotions, such as ‘‘buy cigarettes and stationary outdoor tobacco ads within a various advertising media and agencies get a free promotional item.’’ The former 1,000-foot radius of any school or public is difficult to determine. The Barents activity will be permitted but the latter playground. The Barents Group Group contended that FDA had argued prohibited under the final regulation. predicted that almost all urban areas in its original analysis that ‘‘regulations Although a comment submitted by the would be covered by the ban and for print media will have little or no Tobacco Institute noted that, expected almost no new outdoor adverse impact.’’ In fact, FDA made no ‘‘[a]nalytically, such spending is more tobacco advertising ‘‘even in permitted such projection, although the agency akin to a price cut than to areas due to the relative ineffectiveness did present several historical examples advertising,’’ 355 the Barents Group, of black-and-white text as an advertising of advertising bans (e.g., the broadcast nonetheless, concluded that, ‘‘[a] medium.’’ Further, explaining that the ban on tobacco products) where considerable part of this spending $232 million spent on outdoor advertising revenues rebounded in spite would likely be eliminated by the advertising in 1993 accounts for about of new legal restrictions. The Barents proposed regulations.’’ FDA, however, 14 percent of all outdoor advertising in Group also faulted FDA for not does not agree that the printing industry the United States, the Barents Group comparing actual revenues after the will be significantly affected by changes found it unlikely that the industry could broadcast ban to revenues ‘‘that would in ‘‘coupons and value added’’ outlays. find new means of maintaining its have been expected in the absence of Cents-off coupons and multiple pack current revenues. the ban.’’ FDA, however, does not promotions are the principal In fact, the billboard industry and believe that this ‘‘counter factual’’ logic components of these promotions and public transit districts will have to find for estimating costs precludes the will continue to be available under the replacements irrespective of this agency from suggesting that income and final rule. regulation. According to the Barents employment would not necessarily fall b. Advertising agencies and other Group projections, spending on outdoor in the wake of new advertising suppliers. Advertising agency revenues advertising by tobacco companies will restrictions. are directly tied to the level of fall by almost 40 percent between 1988 Several comments declared that advertising expenditures by product and 1996 (Appendix Table). One advertising outlays would fall sharply manufacturers. If tobacco manufacturers billboard trade source notes that, and subscription prices rise. According reduce advertising outlays, these ‘‘almost 60 percent of the industry’s to the Barents Group, imagery is a agencies will lose income. The Barents 1979 revenues were derived from prerequisite for effective promotion and, 355 Beales, J. H., ‘‘Advertising and the 356 Endicott, R. C., ‘‘Top Advertisers Rebound, 354 Statistical Abstract of the United States, p. Determinants of Teenage Smoking Behavior,’’ vol. Spending to $36 Billion,’’ Advertising Age, vol. 64, 750, 1995. 44, p. 13, 1993. No. 41, p. 1, September 29, 1993. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44603 tobacco and alcohol advertisers. Today of these industries. Indeed, the Barents projected a 25 to 75 percent reduction that number is down to 13 percent, Group’s forecasts imply that even if the in sponsorship dollars, calculated to replaced by retail, business and FDA rule were to reduce the 1996 level result in revenue losses of $27 to $80 consumer services, entertainment, and of tobacco industry advertising on million. travel advertisers.’’ 357 Similarly, FDA’s specialty items by 50 percent, these Among the affected U.S. sporting preliminary economic analysis had outlays would still exceed the 1995 events, the auto racing industry receives recognized that Canada’s billboard level. the greatest amount of tobacco industry had rapidly adjusted to a In any case, FDA believes that the recently imposed advertising ban and Barents Group’s forecasted impacts may sponsorship revenues. The Barents ‘‘quickly replaced $20 million in lost be overestimated, as they primarily Group relied on various editions of the cigarette revenues with ads for food, reflect static outcomes, whereas firms IEG Intelligence Reports (IEG) to list soap, toothpaste and beer.’’ 358 supplying such products are constantly these sponsorships. In reviewing the In 1993, tobacco industry spending on adjusting production in response to IEG data and other sources, FDA found public transit ads ($39.1 million) rapidly shifting patterns of demand. that about $29 million worth of 1995 contributed less than 1 percent to total While these regulatory changes will tobacco sponsorship revenues were public transit revenues, having declined impose short-term dislocation costs, designated for the National Association by 35 percent from 1990 to 1993. these costs will be significantly for Stock Car Auto Racing Acknowledging that these expenditures mitigated in view of the extensive lead (NASCAR); 362 which amounted to would continue to fall, irrespective of time provided. Again, the Barents Group about 8.3 percent of estimated NASCAR this rule, the Barents Group argued that noted that FDA had not quantified these sponsorship revenues 363 and about 1.4 since relatively few transit authorities transitory costs, but it also provided no percent of estimated NASCAR total accept tobacco ads, the impact of the estimate. revenues. 364 The IEG data listed Indy regulation would be significant for those e. Sponsorship recipients. According Car tobacco sponsorships totaling only few. to reports submitted to FTC, U.S. about $13 million, although these data d. Specialty item suppliers. The tobacco companies spent $107 million did not cover all events. prohibition of nontobacco specialty on public entertainment, primarily As the majority of the NASCAR items bearing the name or logo of sporting events, in 1993. 360 In tobacco sponsorship revenues were tobacco products will affect a comparison, total spending on corporate directed to the Winston Cup or other substantial number of specialty sponsorships for sports, arts, and other manufacturers. In earlier comments to entertainment by all North American lead series, FDA agrees that a major FTC, 359 the Specialty Advertising companies is estimated to reach $5.4 effect of the ban will be to decrease the Association International noted that it billion in 1996. 361 FDA received price of sponsorships, permitting ‘‘represents 4,400 firms that numerous public comments asserting smaller sponsors to ‘‘trade up’’ to the manufacture or sell utilitarian objects that the loss of sponsorship revenues for more prestigious sponsorships left imprinted with advertising * ** sporting events would increase ticket vacant by tobacco companies. Although predominantly small businesses.’’ It is prices and, in turn, reduce spectator new company sponsors will be attracted likely that some of these firms would, at attendance. In particular, comments by the lower overall sponsorship costs, least initially, lose part of this $760 pointed to the potential loss of jobs, this ‘‘ripple effect’’ will impose million market and would experience employee benefits, and business shortfalls for some smaller or lower short-term costs while exploring other revenues associated with race track profile events. This economic impact business options. events. will be somewhat mitigated, however, The Barents Group projected that The Barents Group contended that a by the rapid growth in nontobacco manufacturer outlays for these substantial part of the payments made sponsorships. According to IEG promotional items, in the absence of the by tobacco manufacturers would be estimates, over the past year, motorsport FDA rule, would triple between 1993 eliminated by a ban on tobacco brand sponsorship spending rose by about 17 sponsorships, because few sponsors and 1996, rising from $760 million to percent 365 and total North American would agree to continue sponsorships $2.2 billion, assumed that the rule corporate sponsorship spending by under corporate names. Acknowledging would cause revenue decreases of 25 to about 15 percent. 366 75 percent, and modeled the impacts the lack of reliable information on economic impacts; it, nonetheless, among other affected industry sectors 362 referenced several studies showing that 1995 IEG Intelligence Report lists $26.7 (e.g., miscellaneous manufacturers million in tobacco sponsorships of NASCAR. Two producing matches and matchbooks, lost sponsorship dollars decrease tobacco-sponsored events did not list the cigarette , pens and pencils, revenues and temporary jobs for local sponsorship fees, which FDA estimates at about $1 million apiece. sporting goods, etc.). The revenue and economies. The Barents Group predicted that, as tobacco companies 363 Koenig, B., ‘‘NASCAR takes Lead in Race for employment losses, therefore, were eliminate payments, other advertisers Sponsors: Stock-car Racing Gains Corporate Funds measured from a baseline that assumed as CART and IRL Lag in Money and Ratings’’, The would replace the major sponsorships, a tripling of future industry revenues. Indianapolis Star, March 8, 1996, Business p. F01.; but leave reduced or no funding for the While these growth projections may be MacCrae, M., ‘‘Ricky Craven Collectibles Boost less popular events. On this basis, it Intensive Fan Interest in Driver’’, Bangor Daily optimistic, they demonstrate the rapid News, May 2, 1996. swings that typify the market for many 364 360 Federal Trade Commission Report to Congress Oliver, S., ‘‘A Fan-Friendly Sport,’’ Forbes, p. for 1993: Pursuant to the Federal Cigarette Labeling 70, July 3, 1995; Horovitz, B., ’’Fine-Tuning an 357 Burns, K., ‘‘Driving Into the Future with New and Advertising Act, p. 18, 1995; Federal Trade Image-New Sponsors Race to NASCAR,’’ USA Technology,’’ Outdoor Advertising Magazine, p. 5, Commission Report to Congress: Pursuant to the Today, Final Edition, p. 1B, April 5, 1996. January/February 1995. Comprehensive Smokeless Tobacco Health 365 MacCrae, M., ‘‘Ricky Craven Collectibles Boost 358 Wolfson, A., ‘‘Canada’s Ad Ban Puts Cigarettes Education Act of 1986, p. 24, 1995. Intensive Fan Interest in Driver,’’ Bangor Daily Out of Sight,’’ The Courier-Journal, pp. A1, A4, 361 EPM Communications, Inc. ‘‘Entertainment News, May 2, 1996. August 1, 1994. Marketing Letter,’’ February 1, 1996. Based on IEG 366 IEG’s Complete Guide to Sponsorship, p. 3, 359 56 FR 11661 (March 20, 1991). Sponsorship Report. 1995. 44604 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

5. Retail Sector significant value on having their more and better shelf space for their In addition to incurring the economic products situated in highly visible brands in order to provide availability to costs described earlier, certain segments locations. Although desirable locations the buyer in the store.’’ Moreover, of the retail industry will experience behind counters or in locked display because FDA has not banned all point- adverse distributional impacts to the cases will be more limited, there is little of-purchase tobacco advertising, ‘‘text extent that they receive smaller reason to believe that manufacturers only’’ advertising at retail stores will be promotional allowances (slotting fees) would stop competing for the best extremely important to tobacco product from manufacturers. In 1993, industry display space available. One comment marketers. promotional allowances totaled $1.6 indicated that following a self-service In addition, alternative opportunities billion dollars. According to FTC: ban in a local area of Northern for point of purchase (POP) advertising Promotional allowances are designed to California, some retailers: have climbed briskly, as POP experts encourage wholesalers and retailers to stock ** * reported losses of tobacco industry- ‘‘cite in-store advertising as the fastest and promote a company’s products, paid slotting fees * * * because of the growing segment of the media including such things as trade allowances removal of self-service promotional tobacco industry.’’ 369 That same Northern and slotting allowances. Trade allowances displays, racks and kiosks; * * * other California study expressly noted the provide deals to cigarette wholesalers, retailers reported they did not loose [sic] ‘‘[r]eplacement of self-service tobacco tobacco industry-paid slotting fees if tobacco dealers and merchants in the form of free displays, racks and kiosks with * ** goods or price reductions in return for the displays, racks or kiosks are relocated behind the counter or if they are replaced by locking non-tobacco products such as candy, purchase of specific quantities of goods. gum and soft drinks for which the Slotting allowances include fees that the cases * * * [There were] no reported losses cigarette manufacturers pay retailers to of other tobacco industry-paid advertising retailer receives slotting fees from the 370 encourage them to carry a new product or to fees, promotional allowances or other manufacturers of these products.’’ allocate premium shelf space to a product. financial incentives paid to retailers for In sum, FDA cannot predict with Trade contests and incentives, training advertising, promoting and marketing certainty the direction of future programs, and trade shows may also be tobacco products in their stores. 367 payments by product manufacturers to counted as promotional allowances. Because of the regional aspects of this retailers. The agency points out, One major convenience store ban, it was a ‘‘worst case’’ situation for however, that this rule would affect association, estimating that its members retail stores. If self-service displays were neither the trade allowances that are currently receive about $5,000 per store, a prerequisite for promotional commonly paid to both wholesalers and remarked that convenience stores would allowances, tobacco manufacturers retailers, nor the slotting allowances ‘‘bear a disproportionate burden should would have quickly transferred them to paid to retailers to encourage them to such allowances be eliminated as a other near-by localities, where self- carry a new product or to assure the result of the ban on self-service service was permitted. The fact that this availability of a particular brand in a displays.’’ Other retailers expressed did not generally occur demonstrates retail outlet. Further, while many similar concerns over the prohibition of that factors other than self-service current promotional activities will be self-service displays and promotional displays can support manufacturer prohibited, a substantial number will advertising, fearing it would lead to the promotional payments to retailers. remain available. As the competitive elimination of these revenues. Another comment noted that, ‘‘[i]n at pressures that drive promotional The Barents Group argued that there least some areas, cigarette companies allowances are unlikely to abate, were strong reasons to believe that have continued payments to retailers for manufacturers will continue to compete promotional allowances would fall favored display space. For instance, vigorously through programs involving sharply as ‘‘tobacco products are Philip Morris has provided clear, plastic both ‘‘text only’’ promotions and select withdrawn to inaccessible areas of the cases for the display of cigarette packs product placements. store, [and] the products taking their and cartons in some stores. These cases place will offer lower allowances.’’ are placed on a checkout counter but 6. Other Private Sectors While acknowledging that, ‘‘[t]he only accessed from the clerk’s side. This FDA is aware of several recent studies possibility of promotional payments arrangement permits prominent display that address the contribution of tobacco continuing may depend on whether the of cigarette packs to customers who are to the U.S. economy; or alternatively, proposed regulations would allow the thereby offered cigarettes at close range the losses to the U.S. economy that tobacco packages and cartons to be while being unable to pick up packs or would follow a decline in tobacco- displayed from behind the check-out cartons themselves.’’ In discussing the related expenditures. The Tobacco counter or from some other secured effects of the Canadian advertising ban, Institute’s Price Waterhouse report 371 location in the stores,’’ they nonetheless a Canadian study 368 suggested that, purports to measure the induced effect presented ‘‘illustrative’’ revenue ‘‘[i]n the absence of advertising and on the national economy of spending by reductions of from 25 to 50 percent and promotion outlets * * * the cigarette the tobacco core and supplier sector projected total revenue losses to the industry may be expected to provide employees and their families. That retail sector of $556 to $1,112 million. greater incentives to retailers to provide Using the higher percentage, their 369 ‘‘P-O-P Scores with Marketers,’’ Advertising analysis implies that pretax profit 367 Kropp, R., ‘‘A Position Paper on Reducing Age, p. 2, September 26, 1994. margins would fall 12.4 percent for the Tobacco Sales to Minors by Prohibiting the Sale of 370 Kropp, R., ‘‘A Position Paper on Reducing Tobacco Products by Means of Self-Service Tobacco Sales to Minors by Prohibiting the Sale of average sized convenience store and Merchandising and Requiring Only Vendor- Tobacco Products by Means of Self-Service even more for smaller stores. Moreover, Assisted Tobacco Sales,’’ North Bay Health Merchandising and Requiring Only Vendor- they predicted that about 2 percent of Resources Center, Stop Tobacco Access for Minors Assisted Tobacco Sales,’’ North Bay Health currently profitable convenience stores Program (STAMP), Petaluma, CA, pp. 2–3, Resources Center, Stop Tobacco Access for Minors would thereafter incur losses. November 3, 1994. Project (STAMP), Petaluma, CA, pp. 2–3, November 368 ‘‘When Packages Can’t Speak: Possible 3, 1994. FDA suspects that many of these impacts of plain and generic packaging of tobacco 371 ‘‘The Economic Impact of the Tobacco concerns are unwarranted as tobacco products,’’ Expert Panel Report, Prepared at the Industry on the United States in 1990,’’ Price manufacturers will continue to place request of Health Canada, p. 140, March 1995. Waterhouse, October 1992. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44605 report concluded that the induced or tobacco advertising may decrease, a workers supported total State multiplier effects support 2.4 jobs for significant portion will be redirected employment of 260,000. FDA is aware every 1 job in the core and supplier towards the remaining permissible that tobacco growing states will sectors combined, and over $3 in promotional activities. experience some adverse economic compensation for every $1 in the other In a second report, the Barents Group effects. Nevertheless, as discussed two sectors. However, a review of that presented the results of using its own above, the agency finds that the income report, by Arthur Andersen Economic cost estimates in a general equilibrium and employment impacts associated Consulting, explained that such model to simulate the impacts of the with reduced tobacco consumption will multipliers lead to ‘‘massive and estimated reductions in advertising and be extremely gradual. Moreover, unrealistic estimates.’’ 372 That review promotional spending on revenue and reduced tobacco consumption will further emphasized that ‘‘money now employment for 56 sectors of the U.S. minimally affect or even boost the being spent on tobacco would not economy. This model predicted 21,000 economies of nontobacco states. For disappear if demand for tobacco were to to 44,000 U.S. job losses, largely among example, a recent economic simulation fall,’’ though the Price Waterhouse wholesale and retail businesses, but also of the regional impacts of spending on report implicitly made that assumption. within advertising, printing, apparel tobacco products by Warner, et al., The Arthur Andersen review concluded and miscellaneous manufacturing found that after 8 years, a 2 percent per that these multipliers ‘‘provide no basis industries. FDA finds, however, that year fall in tobacco consumption (which by themselves for predicting how many this study also is subject to several substantially exceeds the FDA forecast jobs would be lost by a reduction in serious deficiencies. In particular, the for this regulation) would cause the loss tobacco spending.’’ FDA strongly Barents Group relies on its own of 36,600 jobs for the Southeast Tobacco supports this latter view. illustrative cost estimates as model region of the United States (0.2 percent The American Economics Group inputs. As noted above, FDA believes of regional employment); whereas the (AEG), in a new study submitted by the these estimates are far too high. Next, nontobacco regions of the United States Tobacco Institute, employed a national the study focuses solely on those would gain 56,300 jobs. 374 That study input-output model to project broad industry sectors predicted to lose jobs, concluded that ‘‘[t]he primary concern sectoral and regional estimates of ‘‘the while ignoring those sectors expected to about tobacco should be the enormity of induced impact of the FDA proposed gain jobs. In fact, the study explicitly its toll on health and not its impact on regulations nationwide.’’ Applying the acknowledges that the underlying employment.’’ low and high illustrative costs estimated model assumes that: by the Barents Group, AEG predicted the aggregate level of employment is not 7. Excise Tax Revenues job losses of between 32,000 and 92,500. changed in the long run as a result of The rule will decrease State and In addition to the printing and implementing the new regulations. In other Federal tobacco tax revenues as fewer publishing industries, significant words, though particular jobs in particular youths will become addicted to tobacco industries are expected to disappear employment cutbacks were found for permanently, the number of man-hours products. These excise tax losses will food, apparel and textiles, paper, metals, worked per year in the economy as a whole increase as more youths become motor vehicles, and other miscellaneous is assumed not to change in the long run nonsmoking adults. According to the manufacturers. *** Tobacco Institute, State cigarette excise FDA is skeptical of the results of this The Barents Group selectively shows taxes totaled $6.2 billion for the year AEG study. First, the input-output changes in revenue and employment for ending June 30, 1993. 375 As State excise methodology employs an inherently the losers only. taxes on other tobacco products static approach for estimating economic Other analysts concluded that such (including smokeless tobacco) are impacts. Indeed, the Barents Group, in models should not be used to assess reported at $226 million, FDA assumes its second report for the Tobacco longer term national economic impacts, that the value of all State excise taxes Institute, explained that input-output because resources diverted from one use affected by this regulation is about $6.4 models will not capture changing would be reallocated to the production billion annually. Federal excise taxes on economic conditions, because they fail of other goods and services. As one cigarettes totaled $5.5 billion for the to account for changing market prices. economist explained ‘‘[i]f the focus is year ending June 30, 1993. Federal Thus, ‘‘the input-output approach fails longer term, involving a period of, say, excise taxes on smokeless tobacco are to measure the effects of reallocating more than 2 years, then the induced expected to be about $27 million, displaced workers and resources to effect should not be included in the according to the Smokeless Tobacco other parts of the economy.’’ measure because money not spent in Council. As described above, FDA Furthermore, the AEG study suffers one industry would find another outlet estimates that compliance will reduce from the same fundamental problem as with equal (undistinguishable) induced tobacco product sales by a gradually the earlier Price Waterhouse analysis: It effects.’’ 373 increasing rate over time; tobacco sales assumes that all reduced industry Some comments addressed regional will fall by 0.5 percent in the 1st year, revenues are lost to the economy. This issues, pointing to the importance of 1.9 percent in the 5th year, and 3.7 methodology is simply inappropriate. tobacco products to the economies of percent in the 10th year. Thus, the rule Finally, the AEG study is based upon several states. Comments noted, for will decrease State excise taxes on the illustrative cost estimates of the example, that about 177,000 North affected tobacco products by from $30 Barents Group. As described in detail Carolinians were employed by tobacco million in the 1st year to $231 million above, these cost estimates are and that Price Waterhouse estimated in the 10th year and Federal tobacco unreasonably high. Although some that the economic activity of these 374 Warner, K. E., G. A. Fulton, P. Nicolas, and D. 372 ‘‘A Review of the Price Waterhouse Economic 373 Gray, H. P., and I. Walter, ‘‘The Economic R. Grimes, ‘‘Employment Implications of Declining Impact Report and Tobacco Institute Estimates of Contribution of the Tobacco Industry,’’ in Smoking Tobacco Product Sales for the Regional Economies ‘Economic Losses from Increasing the Federal and Society: Toward a More Balanced Assessment, of the United States,’’ JAMA, April 24, 1996. Excise Tax’,’’ Arthur Andersen Economic edited by R. D. Tollison, Lexington Books, p. 248, 375 The Tobacco Institute, ‘‘The Tax Burden on Consulting, p. 93, October 6, 1993. 1986. Tobacco,’’ vol. 28, p. 4, 1993. 44606 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations taxes by from $25 million in the 1st year summary of the assessment of the cigarette manufacturers are large to $196 million in the 10th year. agency of such issues, and a statement businesses, with only 4 employing Since tobacco taxes represented less of any changes made in the proposed fewer than 500 employees. 377 The small than 1 percent of total revenues on both rule as a result of such comments.’’ The business size standard established by the State and Federal level in 1992, 376 analyses presented previously in this the U.S. Small Business Administration even the estimated tenth year impact section addressed the first two of these (SBA) for this industry is 1,000 measures only 0.03 percent of all State elements. employees. 378 The Federal Trade tax revenues and less than 0.02 percent With respect to the changes made in Commission (FTC) provided a list of 52 of all Federal revenues. Nonetheless, if the proposed rule as a result of public cigarette importers and small cigarette necessary, governments could raise comments, the agency has reconsidered manufacturers filing plans with that tobacco product excise rates to offset several of its earlier decisions, at least agency, but could not distinguish these revenue losses. A full evaluation partly due to their projected effect on manufacturers from importers. 379 The of the fiscal consequences, however, small businesses. The preamble above 1993 Census data show that 14 of the 20 would involve a variety of public health describes these changes and presents firms manufacturing chewing and ramifications. For example, State the agency’s rationale for each Medicaid programs will benefit from modification. For example, the smoking tobacco employ fewer than 500 reduced tobacco-related medical care proposed regulation banned all vending employees, the SBA size standard for 380 expenditures, but will need to finance machine sales of tobacco products. In this sector. Also, most of the nation’s additional nursing home expenditures response to public comment, the final 124,000 tobacco farms are small; almost associated with increased life regulation exempts from the ban those 99 percent of the farms growing tobacco expectancy. vending machines in ‘‘adult only’’ in 1992 had total farm sales under the locations. FDA does not know how SBA small business size standard of F. Small Business Impacts many small businesses will be able to $500,000, and almost 91 percent had The Regulatory Flexibility Act take advantage of this exemption, but it total farm sales under $50,000. 381 requires agencies to prepare a final will maintain at least one line of sales Further, 1993 Census data show that regulatory flexibility analysis if a rule for small vending machine operators 1,332 of 1,365 tobacco wholesale trade will have a significant economic impact without jeopardizing the protection of firms (98 percent) employ fewer than on a substantial number of small young people. the 100-employee threshold that entities. Analyses in this section, as well In addition, the proposed regulation constitutes a small business according as in other sections of this preamble, prohibited direct mail-order sales of to the SBA. 382 As noted above, the constitute the agency’s compliance with tobacco products. The public comments, effect of the regulation on tobacco this requirement. According to the however, indicated that many adults, manufacturing, growing, and wholesale Regulatory Flexibility Act, the final especially those who are elderly or who trade operations will be very gradual, regulatory flexibility analysis must have limited mobility, would be taking over 10 years to reach a 4 percent contain ‘‘a succinct statement of the substantially inconvenienced and reduction. need for, and objectives of, the rule.’’ several small businesses would be Section XV.B. of this document explains adversely affected by this ban. Even The regulation will affect numerous that the need for action stems from the more importantly, studies suggest that retail establishments, including food enormous toll on the public health that teenagers purchase cigarettes from stores, small general merchandise is directly attributable to the vending machines or retail merchants stores, small tobacco stores and small consumption of tobacco by children and rather than from nonretail channels. gasoline stations. Table 15 displays the adolescents under the age of 18. As FDA took these considerations into relative share of the tobacco market for described, the primary objective of the account and the final regulation does the major types of tobacco-dispensing regulation is to achieve the ‘‘Healthy not prohibit mail-order sales of outlets with payroll in 1992. As shown, People 2000’’ goal of reducing by one- cigarettes. food stores and service stations received half the number of youngsters who use The final regulatory flexibility about 75 percent of all tobacco sales tobacco. analysis must also include ‘‘a revenue and tobacco products The final regulatory flexibility description of and an estimate of the comprised 5 to 7 percent of the total analysis must also provide ‘‘a summary number of small entities to which the sales of many of these establishments. of the significant issues raised by the rule will apply or an explanation of why Table 16 indicates that the great public comments in response to the no such estimate is available.’’ U.S. majority of all retail outlets in these initial regulatory flexibility analysis, a Census data for 1993 indicate that most sectors are small businesses.

376 U.S. Department of Commerce, Statistical 379 Federal Trade Commission, ‘‘Cigarette 382 Special Census Tabulation prepared by U. S. Abstract of the United States 1994, 114th edition, Importers and Small Manufacturers Plans Filed, Bureau of Census for U.S. Small Business No. 464, p. 298, 1994. May 26, 1993–October 14, 1994.’’ Administration, Table 3—United States. 377 Special Census Tabulation prepared by U.S. 380 Special Census Tabulation prepared by U.S. Bureau of Census for U.S. Small Business Bureau of Census for U.S. Small Business Administration, Table 3—United States p. 68. Administration, Table 3—United States p. 69. 378 U.S. Small Business Administration, ‘‘Table of 381 1992 Census of Agriculture, U.S., vol. 1, Size Standards,’’ March 1, 1996. excerpts from pp. 109–110, 125–126. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44607

TABLE 15.ÐSALES OF TOBACCO PRODUCTS AS A PERCENTAGE OF TOTAL SALESÐ1992 (Establishments with Payroll Only)

Tobacco Sales % of Total Sales Establish- Establishment Type ments All Estab- ($ Mils) (%) Handling lishments Tobacco

All 30,559 100 4.5 2.9 Food Stores 16,132 52 4.5 4.4 Service Stations 7,136 23 7.1 5.3 Drug and Proprietary 2,235 7 3.7 2.9 General Merchandise 3,182 10 2.4 1.3 Liquor Stores 1,045 3 8.0 5.1 Eating and Drinking 219 1 3.0 0.1 Tobacco Stores & Stands 610 2 78.1 78.1 Source: 1992 Census of Retail Trade, Merchandise Line Sales 44608 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations n.a. 3,031 8,811 97,061 14,248 28,010 275,432 124,271 Establishments Without Payroll 2 3 8,176 1,027 25,396 22,859 53,288 473,668 258,381 104,541 1 Small 1,207 62,585 28,606 10,264 26,565 Firms With Payroll 588,505 127,575 331,703 Total TABLE 16.ÐNUMBER OF SMALL RETAIL BUSINESSES Establishment Type Assumes Small Business Administration size standard of $20 million in annual sales for food stores, $6.5 service stations and $5 all others. Due to data limitations, includes firms with annual sales up $25 million. Due to data limitations, includes firms with annual sales up $10 million. 1 2 3 Source: 1992 Census of Retail Trade, Establishment and Firm Size, Summary. All Food Stores Service Stations Drug and Proprietary General Merchandise Liquor Stores Eating and Drinking Tobacco Stores & Stands Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44609

To illustrate the effects of this sell cigarettes, some businesses although FDA does not know how many proposal on a typical small retail store, specializing in cigarette sales would small tracks currently receive significant FDA separately utilized Census data to experience greater revenue declines; revenues from tobacco sponsors. As estimate that the average-sized although this effect will be moderated to discussed previously, some small convenience store sells 177 packages of the extent that cigarette vending operations will likely lose promotional tobacco products daily, of which about machines are placed in areas restricted revenues from tobacco companies, but 25 might be purchased by young adults to adults, which would not be the sport is growing rapidly and other aged 18 to 26. 383 Based on the cost prohibited by the final rule. product manufacturers should make up assumptions described previously, the The rule would also affect the a substantial part of the shortfall. outlet’s first year costs would total about distribution of specialty items showing The final regulatory flexibility $400, with the largest single cost, $199, a tobacco product logo or name. analysis must include ‘‘a description of the labor cost for checking Industry comments do not provide the projected reporting, recordkeeping identification. For those stores that precise data on the size distribution of and other compliance requirements of already verify the age of young these firms, but as noted above, the the rule, including an estimate of the customers of tobacco products, the Specialty Advertising Association classes of small entities which will be additional costs fall to $137. International indicates that 80 percent subject to the requirement and the type This estimate does not account for the of the manufacturers and 95 percent of of professional skills necessary for possible reduction in promotional the distributors in this industry have preparation of the report or record.’’ A allowances, as FDA believes that annual sales below $2 million. While full description of the requirements and competitive pressures will continue to the marketplace in which these firms classes of affected small entities has lead manufacturers to rely on traditionally compete demands a quick been provided earlier in this section and promotional allowances to compete for response to shifting consumer trends, a quantitative review of the paperwork the best shelf space available for their this rule would have at least short-term burdens imposed by the rule is provided products. Because FDA rejected the idea impact on some small firms. in section XVI. of this document. No of prohibiting any visible display of FDA has received no data that would special professional skills will be tobacco products, retailers can retain allow it to estimate the number of small required to prepare the reports or slotting fees by choosing to display firms that are currently involved with records required by the regulation. tobacco products either behind counters some aspect of tobacco advertising or The final regulatory flexibility or in transparent locked display cases. the fraction of these firms that will be analysis must also include ‘‘a Nevertheless, some small affected. In 1992, 861 of 904 year-round description of the steps the agency has establishments might experience outdoor advertising firms (95 percent) taken to minimize the significant reduced promotional payments reported sales revenues of less than the economic impact on small entities following a ban on self-service SBA size standard of $5 million. 386 The consistent with the stated objectives of marketing. impact of this rule, however, is difficult applicable statutes, including a Census data for 1992 indicate that to assess without knowing how the statement of the factual, policy, and almost 4,000 of 4,800 merchandising tobacco industry will alter its legal reasons for selecting the alternative machine operator businesses (83 advertising strategies. Indeed, one of the adopted in the final rule and why each percent) reported annual receipts below largest outdoor advertising firms one of the other significant alternatives 384 the SBA size standard of $5 million. recently decided to reject all tobacco to the rule considered by the agency One trade association noted that almost business, potentially increasing sales to which affect the impact on small 387 three quarters of all vending machine the smaller firms. entities was rejected.’’ operators had annual sales of less than The regulation restricts tobacco The earlier sections of this document 385 $1 million. As explained earlier, advertising to ‘‘text only’’ in magazines provide a full explanation of the prohibiting all cigarette vending with youth readership above the agency’s basis for selecting each machines would initially reduce the regulatory threshold. Of the identified provision of the final rule. In each revenues of vending machine operators 101 magazines with tobacco ads in instance, FDA evaluated the by an average of 2.8 percent. Because 1994, 79 were published by large firms implications of each reasonable only about one-half of the (over 500 employees). Less than 3 regulatory alternative and selected only merchandising machine establishments percent of the total revenue of the those requirements that were absolutely remaining 22 publications (which necessary to satisfy the agency’s 383 Based on data form the 1994 SGR, p. 85, and include, Inc., Rolling Stone and statutory goals. As described, FDA the ‘‘Tobacco Situation and Outlook Report’’ April, Penthouse) was derived from tobacco found that its objectives for reducing the 1995, p. 4, FDA estimates that smokers aged 18 to ads. 388 It is likely, moreover, that many 26 account for about 10 percent of all cigarettes use of tobacco by young people could of these magazines could avoid the ‘‘text smoked. Alternatively, data from the Statistical not be achieved with a partial or one- only’’ restriction for tobacco advertising Abstract, tables 16 and 218, show that smokers aged dimensional approach, but required a 18 to 26 comprise 18 percent of all smokers. FDA by demonstrating a low youth comprehensive set of regulatory used the midpoint of the 10 to 18 percent range to readership. avoid underestimating the cost to small retailers. In restrictions. Thus, the final set of addition, data from the 1996 Census of Retail Trade, The regulation will also affect a substantial number of small race tracks, selected provisions reflect a careful Subject Series-Merchandise Line Sales, pp. 3–9 on examination of the relevant facts the number of convenience stores with payroll and their total tobacco sales, and the average price per 386 1992 Census of Service Industries, pp. 1-145 presented to the rulemaking record, the pack, were used to estimate the average number of and 1-195. agency’s objective of curtailing the use packs sold daily at convenience stores to smokers 387 Collins, G., ‘‘Major Advertising Company to of tobacco by youngsters without aged 18 to 26. Bar Billboard Ads for Tobacco,’’ New York Times, creating unnecessary economic burdens, 384 1992 Census of Retail Trade, ‘‘Establishment A15, May 3, 1996. and a full assessment of the agency’s and Firm Size,’’ Table 4 p. 1–99. 388 1996 Directory of Corporate Affiliations U.S. 385 ‘‘1993: Industry Posts Best Growth in Four Private Companies, New Providence, NJ; Reed legal authorities. Because the rejected Years,’’ Automatic Merchandiser, p. A2, August Elsevier, Inc.; ‘‘Company Profiles’’ database, alternatives would either provide less 1994. Information Access Co., Foster City, CA. protection of public health, or achieve 44610 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations only minimal improvements at would exclude appropriately tailored addition, the agency has considered unwarranted cost, the agency found that restrictions on tobacco advertising. other alternatives as discussed in the approach selected for the final rule One alternative considered by the section XV.G. of this document and best fit its statutory mandate. agency was a far more prescriptive determined that the current rule is the As noted, earlier sections of the monitoring requirement for tobacco least burdensome and the most cost preamble fully describe the agency’s manufacturers. Under this rule, each effective alternative that would meet the rationale for selecting each provision of manufacturer of tobacco products would objectives of this rule. have been required to adopt a system for the final rule and for rejecting each XVI. Paperwork Reduction Act of 1995 alternative approach. Although many monitoring the sales and distributions of alternatives were considered, specific retail establishments. These monitoring The 1995 proposed rule would have exemptions based solely on business systems were to: (1) Include signed collected information from size were not adopted, because FDA written agreements with each retailer, manufacturers, distributors, and believes that children would too (2) contain adequate organizational retailers of cigarettes and smokeless frequently exploit such opportunities. structure and personnel to monitor the tobacco. Proposed § 897.24 would have Unlike certain other regulations where labeling, advertising, and sale of tobacco required such persons to use established restrictions on large firms alone might products at each retail distribution names for cigarettes and smokeless be acceptable, tobacco products are point, and (3) establish, implement, and tobacco. Proposed § 897.29 would have purchased easily from small, as well as maintain procedures for receiving and required manufacturers to establish and large firms. An exemption for small investigating reports regarding any maintain educational programs. retailers, for instance, would shift improper labeling, advertising, or Proposed § 897.32 would have required underage sales to those locations, distribution. The additional costs for manufacturers, distributors, and lessening or eliminating the benefits of this monitoring were estimated at about retailers to observe certain format and the remaining access restrictions. The $85 million per year. FDA rejected this content requirements for labeling and following discussion summarizes the alternative, because it decided that the advertising. Proposed § 897.40 would agency’s consideration of several other industry might employ its resources have required manufacturers to submit regulatory alternatives. more efficiently if permitted to choose labels, labeling, and advertising to FDA. among alternative compliance modes. The preamble to the 1995 proposed G. Other Alternatives Another suggested alternative would rule, in discussing the Paperwork have required package inserts Reduction Act, also invited comments One regulatory alternative would have containing educational information in on four questions: (1) The necessity and banned all tobacco advertising; or cigarette and smokeless tobacco. FDA utility of the proposed information alternatively, all tobacco advertising in had incomplete data to estimate the collection for the proper performance of selected media, such as all written additional cost of this requirement, but the agency’s functions; (2) the accuracy publications, or all outdoor billboards. based on comments submitted by of the estimated burden; (3) ways to FDA rejected this approach in order to industry in response to a Canadian enhance the quality, utility, and clarity focus on those media and aspects of proposal, tentatively projected one-time of the information to be collected; and advertising that children are routinely costs of about $490 million and annual (4) the use of automated collection exposed to and that have the greatest operating costs of about $54 million. techniques or other forms of information effect on youngsters. For example, the This alternative was not selected technology to minimize the information final rule permits black and white ‘‘text because the agency was not certain that collection burden (60 FR 41314 at only’’ tobacco advertising in all written the benefits of this provision would 41356). publications and color and imagery in justify the compliance costs. A. Comments on the Paperwork magazines with fewer than 2 million FDA also considered setting the Reduction Act Statement youthful readers if youth constitute less permissible age for purchase at 19 rather than 15 percent of the publication’s than 18, because many 18-year-old A small number of comments, readership. Billboards are permitted to adolescents are still in high school and primarily from a trade association show black and white ‘‘text only’’ ads if can easily purchase tobacco products for representing cigarette manufacturers located at least 1,000 feet from schools younger classmates. This alternative and from distributors, addressed FDA’s or public playgrounds. Thus, the rule would have added costs of about $34 Paperwork Reduction Act statement. In leaves the informational aspects of million annually, mostly due to lost general, these comments asserted that advertising largely untouched. producer profits. The final regulation FDA’s figures were incorrect or that the Another suggested alternative was to restricts access to regulated tobacco rule would duplicate existing reporting combat underage tobacco use by relying products for persons under the age of requirements. Few comments provided on either voluntary compliance or on 18, because most adult smokers have any figures or evidence to justify using better enforcement of laws prohibiting already become smokers by the age of different estimates. sales to minors. As discussed earlier in 18, and because that age limit is already (1) One comment, submitted by a this document, the tobacco industry’s consistent with most State and local trade association representing major voluntary advertising code has failed to laws. cigarette manufacturers, said FDA’s stop illegal sales to underage buyers. Paperwork Reduction Act statement FDA agrees that these approaches can be H. Unfunded Mandates Reform Act of underestimated the paperwork burden partially effective, but finds that they 1995 due to the exclusion of burden on inadequately counter the appeal of On the basis of the preceding retailers. The comment asserted that tobacco products for young people that discussion, under the Unfunded FDA did not explain how it calculated is created by advertising and Mandates Act, FDA concludes that the the number of respondents and burden promotions. Thus, the agency concludes substantial benefits of this regulation hours for these sections and that the that there is no less burdensome will greatly exceed the compliance costs absence of an explanation made it alternative for achieving its goals that that it imposes on the U.S. economy. In difficult to assess the agency’s estimate. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44611

The comment explained that the Proposed § 897.40(a) would have educational program requirements in agency’s Paperwork Reduction Act required manufacturers to provide proposed § 897.29 alone. The comment estimate said there would be 200,000 copies of labels, labeling, and a estimated that the recordkeeping costs respondents for proposed § 897.40, but representative sampling of advertising for the manufacturers’ educational that the agency’s analysis of impacts to FDA. This, too, would not appear to programs would be $25 per hour, for a estimated that 700,000 retail stores sell be an extremely time-consuming task, total cost between $55 and 57 million tobacco products. The comment also particularly when the rule permits annually. The comment explained that asserted that the average burden per manufacturers to provide a the costs may be even higher because response, under proposed §§ 897.32 and representative sampling of advertising. highly skilled persons would be needed 897.40, should be 1 hour instead of 20 To estimate the time required to to comply with the rule. minutes. Thus, the comment concluded comply with proposed §§ 897.32 and The comment misinterprets the that if all 700,000 outlets spend only 60 897.40, the agency tried to examine agency’s Paperwork Reduction Act minutes annually to comply with all other large-scale labeling and reporting burden estimate. For § 897.29, FDA recordkeeping requirements, at a cost of programs. FDA found that one Federal estimated that 1,000 hours would be $10 per hour, retailers, alone, would department conducts a large-scale needed to comply with the educational spend 700,000 hours and $7 million to labeling program that receives program requirements; this estimate comply with the recordkeeping approximately 200,000 labels annually included all functions related to the requirements in §§ 897.32 and 897.40. and that each label requires a maximum development of an educational program, The agency believes that the comment of 20 minutes to review. Consequently, including recordkeeping. Section misinterprets the figures in the the 1995 proposed rule adopted the 897.40(b), would have required proposed rule’s Paperwork Reduction 200,000 figure as the estimated number manufacturers, distributors, and Act statement. To begin with, the of responses. In the absence of better retailers to make records (including comment mistakenly equates the data, the proposed rule assigned the records on a manufacturer’s educational Paperwork Reduction Act statement’s maximum review time (20 minutes) to program efforts) available to FDA on reference to ‘‘annual number of its estimates for average burden per inspection. Because the estimate for responses’’ with the annual numbers of response. proposed § 897.29 included time spent people or firms that might be affected. FDA, however, has revised the on recordkeeping associated with the The annual number of responses simply 200,000 figure and now estimates that educational program, the agency’s refers to the annual number of things, approximately 25,000 pieces of labeling estimates for proposed § 897.40 properly whether those things are pieces of or advertising will be affected by excluded time spent on maintaining labeling, labels, advertisements, or other § 897.32. (The agency has deleted educational program records. items, that the agency might receive § 897.40 from the rule in favor of other, Otherwise, this time would have been under that particular regulatory preexisting regulations.) As described in counted twice. In any event, the requirement. So, for example, if the greater detail elsewhere in this comment is moot because FDA has agency expected to receive only 500 document, the agency derived these deleted § 897.29 and § 897.40 from the labels, the ‘‘annual number of figures by using advertising final rule. responses’’ would be 500, regardless of expenditures by the cigarette and (3) FDA received several comments whether the number of firms who might smokeless tobacco industries and by the from distributors, claiming that the 1995 be affected by the rule was greater or pharmaceutical industry, applying the proposed rule would result in less than 500. ratio of such expenditures against the substantial paperwork and provide Focusing on §§ 897.32 and 897.40 (the 25,000 pieces of advertising that the duplicative information. The comments provisions cited by the comment), agency receives from the stated that the device listing provisions proposed § 897.32 would have pharmaceutical industry, and projecting of part 807 require each medical device established specific format and content that printed advertisements may wholesaler to prepare and file reports of requirements for labeling and increase due to the rule’s effect on all regulated products. If each brand and advertising. For example, proposed promotional activities. Consequently, package style of cigarettes and § 897.32(a) would have required FDA now estimates that 25,000 pieces of smokeless tobacco are considered a labeling and advertising to use only labeling and advertising will be affected. separate device, this would black text on a white background; the Thus, the agency does not agree that substantially increase paperwork and only exception would be advertising the estimated number of responses duplicative reporting. appearing in ‘‘adult’’ periodicals. should be 700,000 or more because the The comment correctly notes that part Proposed § 897.32(b) would have response rate is not determined by the 807, as currently written, requires required advertising to carry the number of retailers. However, because distributors to register and list devices product’s established name and a the comment estimated that firms would (21 CFR 807.20). However, FDA has statement of intended use, and specified require 1 hour to comply, the agency amended part 807 to exempt those names and the statement of will use the 1 hour figure and has distributors of cigarettes and smokeless intended use. Proposed § 897.32(c) adjusted its paperwork estimates tobacco. Thus, distributors do not have would have required advertising to accordingly. to comply with part 807, nor do they carry a specific brief statement. The (2) The same comment also asserted have to comply with § 897.40 because agency believed that these proposed that FDA’s recordkeeping estimate was FDA has deleted § 897.40 from the final requirements and specific statements incorrect for manufacturers. The rule. were so precise that manufacturers, comment stated that FDA did not (4) Several comments, primarily from distributors, or retailers could determine explain how it calculated the burden small businesses and convenience their regulatory obligations quickly. For hour response for manufacturers under stores, said that the 1995 proposed rule example, it should be quite simple to proposed § 897.40 and asserted that would have no impact and that adding determine whether an advertisement manufacturers would need 40 hours to paperwork would not curb underage uses black text on a white background. document compliance with the smoking. 44612 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

The agency disagrees with the §§ 803.19 and 804.25. For B. Information Collection Provisions in comments. The final rule restricts young manufacturers, these reports are limited the Final Rule people’s access to cigarettes and to adverse events (resulting from This final rule contains information smokeless tobacco and reduces their product contamination, a change in collection provisions that are subject to appeal to young people. FDA believes ingredient or in any manufacturing review by the Office of Management and that the final rule, in conjunction with process, or serious adverse events that Budget (OMB) under the Paperwork State and local government efforts, will are not well-known or well-documented Reduction Act of 1995 (44 U.S.C. 3501– prevent large numbers of young people by the scientific community. For from using or experimenting with these 3520). The title, description, and distributors, these reports are limited to respondent description of the products. Yet, insofar as any adverse events related to contamination. information collection burden is information collection requirements are FDA estimates that it will receive 50 shown below with the estimate of the concerned, FDA points out that the reports and each report will require 8 rule’s paperwork requirements are a annual reporting and recordkeeping hours to prepare. The agency has burden. Included in the estimate is the function of the act and are being amended the information collection imposed to further the purposes of the time for reviewing instructions, burden to reflect these changes to the searching existing data sources, act and of this final rule, not in any rule. attempt to curb underage smoking by gathering and maintaining the data (7) FDA has also revised the simply adding paperwork for needed, and completing and reviewing information collection figures for paperwork’s sake. the collection of information. (5) One comment said that FDA could § 897.24 which requires an established Title: Regulations Restricting the Sale reduce the information collection name on labels. The revision changes and Distribution of Cigarettes and burden in proposed § 897.29 (the the number of respondents from 1,000 Smokeless Tobacco Products to Protect educational program) by requiring to 2,000 to reflect the agency’s position Children and Adolescents. manufacturers to contribute to an that there are 1,000 varieties of Description: The final rule requires educational fund that an independent cigarettes and smokeless tobacco the collection of information regarding agency, such as FDA, CDC, or NIH, products and that each variety has 2 cigarettes and smokeless tobacco. The could use. The comment said that this labels, thus resulting in 2,000 affected final rule requires manufacturers, would create a positive incentive for labels. importers, and distributors to report companies to change their marketing (8) FDA has also revised the certain adverse events to FDA and practices and would reduce the need for information collection figures for requires manufacturers to use extensive recordkeeping and regulatory § 897.32 to account for the survey established names for cigarettes and oversight of manufacturers. evidence that is needed to establish that smokeless tobacco. The final rule also The agency has deleted the a magazine, newspaper, or other requires manufacturers, distributors, educational program provision from the periodical is an ‘‘adult’’ publication that and retailers to observe certain format final rule. Consequently, the is exempt from the requirement of black and content requirements for labeling information collection burden text on a white background. The agency and advertising, and requires associated with proposed § 897.29 no estimates that such surveys will result manufacturers, distributors, and longer exists. in a capital cost of $2 million, with retailers to notify FDA if they intend to (6) In response to comments, FDA has annual costs of $1 million. FDA use an advertising medium that is not amended the final rule to include a estimates that 31 recordkeepers would listed in the regulations. medical device reporting requirement be affected at a total burden hour figure Description of Respondents: for manufacturers and distributors at of 100,000 hours. Businesses. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44613 0 48,900 13,680 35,220 Total Operating & Maintenance Costs 0 0 21,000 231,000 Total Capital Costs 17,000,000 17,250,000 392 Total Hours 80,000 25,000 105,401 8 1 40 Hours per Response 49 2,000 Responses Total Annual 25,000 1 1 1 per Annual Response Frequency Table 17.ÐEstimated Annual Reporting and Disclosure Burden 11 1 1 1 1 8 1 8 1 0 0 49 2,000 25,000 No. of Respondents 21 CFR Section 803.19 804.25 897.24 897.30 897.32 Total Burden 44614 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations Total Operating & Maintenance Costs 1,000,000 1,000,000 Total Capital Costs 2,000,000 2,000,000 URDEN Total Hours B 100,000 100,000 ECORDKEEPING R Hours per 3,226 Recordkeeper NNUAL A 31 STIMATED Records Total Annual 18.ÐE 1 ABLE Annual T keeping Frequency per Record- 31 No. of Recordkeepers 21 CFR Section 897.32 Total Burden Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44615

The 1995 proposed rule provided a and Cosmetic Act (21 U.S.C. 321, 331, 351, PART 807ÐESTABLISHMENT 90-day comment period (extended to 352, 357, 360i, 360j, 371, 374). REGISTRATION AND DEVICE LISTING 144 days in the Federal Register of FOR MANUFACTURERS AND October 16, 1995, 60 FR 53560). As 2. Section 801.126 is added to subpart DISTRIBUTORS OF DEVICES discussed previously, the revised D to read as follows: burden hour estimates in the final rule 7. The authority citation for 21 CFR § 801.126 Exemptions for cigarettes and part 807 continues to read as follows: are based partially on comments smokeless tobacco. received. Authority: Secs. 301, 501, 502, 510, 513, The information collection provisions Cigarettes and smokeless tobacco as 515, 519, 520, 701, 704 of the Federal Food, in the proposed rule were approved defined in part 897 of this chapter are Drug, and Cosmetic Act (21 U.S.C. 331, 351, under OMB no. 0910–0312. Because of exempt from section 502(f)(1) of the 352, 360, 360c, 360e, 360i, 360j, 371, 374). changes made since the proposed rule, Federal Food, Drug, and Cosmetic Act. 8. Section 807.65 is amended by FDA has submitted the information adding a new paragraph (j) to read as collection provisions of the final rule to PART 803ÐMEDICAL DEVICE follows: OMB for review. Prior to the effective REPORTING date of this final rule, FDA will publish § 807.65 Exemptions for device a notice in the Federal Register of 3. The authority citation for 21 CFR establishments. OMB’s decision to approve, modify, or part 803 continues to read as follows: * * * * * disapprove the information collection Authority: Secs. 502, 510, 519, 520, 701, (j) Distributors of cigarettes or provisions in the final rule. 704 of the Federal Food, Drug, and Cosmetic smokeless tobacco as defined in part XVII. Congressional Review Act (21 U.S.C. 352, 360, 360i, 360j, 371, 374). 897 of this chapter.

This final rule has been determined to 4. Section 803.19 is amended by PART 820ÐGOOD MANUFACTURING be a major rule for purposes of 5 U.S.C. adding new paragraphs (f) and (g) to PRACTICE FOR MEDICAL DEVICES: 801 et seq., Subtitle E of the Small read as follows: GENERAL Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121). § 803.19 Exemptions, variances, and 9. The authority citation for 21 CFR FDA is submitting the information and alternative reporting requirements. part 820 continues to read as follows: reports as required by that statute. * * * * * Authority: Secs. 501, 502, 515, 518, 519, List of Subjects 520, 701, 704 of the Federal Food, Drug, and (f) Manufacturers as defined in part Cosmetic Act (21 U.S.C. 351, 352, 360e, 360h, 21 CFR Part 801 897 of this chapter shall submit medical 360i, 360j, 371, 374). device reports concerning cigarettes and Labeling, Medical devices, Reporting 10. Section 820.1 is amended by smokeless tobacco under this part only and recordkeeping requirements. adding and reserving new paragraph (e) for serious adverse events that are not and adding new paragraph (f) to read as 21 CFR Part 803 well-known or well-documented by the follows: Imports, Medical devices, Reporting scientific community, including events and recordkeeping requirements. related to contamination, or a change in § 820.1 Scope. any ingredient or any manufacturing 21 CFR Part 804 process. * * * * * Imports, Medical devices, Reporting (e) [Reserved] (g) User facilities are exempt from and recordkeeping requirements. (f) This part does not apply to submitting medical device reports distributors of cigarettes or smokeless 21 CFR Part 807 concerning cigarettes and smokeless tobacco as defined in part 897 of this Confidential business information, tobacco under this part. chapter. Imports, Medical devices, Reporting and 11. New part 897 is added to read as recordkeeping requirements. PART 804ÐMEDICAL DEVICE follows: DISTRIBUTOR REPORTING 21 CFR Part 820 PART 897ÐCIGARETTES AND Medical devices, Reporting and 5. The authority citation for 21 CFR SMOKELESS TOBACCO recordkeeping requirements. part 804 continues to read as follows: Subpart AÐGeneral Provisions 21 CFR Part 897 Authority: Secs. 502, 510, 519, 520, 701, 704 of the Federal Food, Drug, and Cosmetic Sec. Advertising, Cigarettes, Labeling, Sale Act (21 U.S.C. 352, 360, 360i, 360j, 371, 374). 897.1 Scope. and distribution, Smokeless tobacco. 897.2 Purpose. Therefore, under the Federal Food, 6. Section 804.25 is amended by 897.3 Definitions. Drug, and Cosmetic Act and under adding a new paragraph (c) to read as authority delegated to the Commissioner follows: Subpart BÐProhibition of Sale and of Food and Drugs, 21 CFR parts 801, Distribution to Persons Younger Than 18 Years of Age 803, 804, 807, and 820 are amended and § 804.25 Reports by distributors. a new part 897 is added as follows: 897.10 General responsibilities of * * * * * manufacturers, distributors, and retailers. PART 801ÐLABELING (c) Distributors as defined in part 897 of this chapter shall submit medical 897.12 Additional responsibilities of 1. The authority citation for 21 CFR manufacturers. device reports concerning cigarettes and 897.14 Additional responsibilities of part 801 continues to read as follows: smokeless tobacco under this part only retailers. Authority: Secs. 201, 301, 501, 502, 507, for adverse events related to 897.16 Conditions of manufacture, sale, and 519, 520, 701, 704 of the Federal Food, Drug, contamination. distribution. 44616 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

Subpart CÐLabels requirements pertaining to cigarettes § 897.14 Additional responsibilities of 897.24 Established names for cigarettes and shall also apply to cigarette tobacco. retailers. smokeless tobacco. (c) Distributor means any person who In addition to the other requirements 897.25 Statement of intended use and age furthers the distribution of cigarettes or under this part, each retailer is restriction. smokeless tobacco, whether domestic or responsible for ensuring that all sales of imported, at any point from the original cigarettes or smokeless tobacco to any Subpart DÐLabeling and Advertising place of manufacture to the person who person comply with the following 897.30 Scope of permissible forms of sells or distributes the product to requirements: labeling and advertising. individuals for personal consumption. (a) No retailer may sell cigarettes or 897.32 Format and content requirements for Common carriers are not considered smokeless tobacco to any person labeling and advertising. 897.34 Sale and distribution of nontobacco distributors for the purposes of this part. younger than 18 years of age; items and services, gifts, and (d) Manufacturer means any person, (b)(1) Except as otherwise provided in sponsorship of events. including any repacker and/or relabeler, § 897.16(c)(2)(i) and in paragraph (b)(2) of this section, each retailer shall verify Authority: Secs. 502, 510, 518, 519, 520, who manufactures, fabricates, 701, 704, 903 of the Federal Food, Drug, and assembles, processes, or labels a by means of photographic identification Cosmetic Act (21 U.S.C. 352, 360, 360h, 360i, finished cigarette or smokeless tobacco containing the bearer’s date of birth that 360j, 371, 374, 393). product. no person purchasing the product is (e) Nicotine means the chemical younger than 18 years of age; Subpart AÐGeneral Provisions substance named 3-(1-Methyl-2- (2) No such verification is required for pyrrolidinyl)pyridine or C10H14N2, any person over the age of 26; § 897.1 Scope. including any salt or complex of (c) Except as otherwise provided in (a) This part sets out the restrictions nicotine. § 897.16(c)(2)(ii), a retailer may sell under the Federal Food, Drug, and (f) Package means a pack, box, carton, cigarettes or smokeless tobacco only in Cosmetic Act (the act) on the sale, or container of any kind in which a direct, face-to-face exchange without distribution, and use of cigarettes and cigarettes or smokeless tobacco are the assistance of any electronic or smokeless tobacco that contain nicotine. offered for sale, sold, or otherwise mechanical device (such as a vending (b) The failure to comply with any distributed to consumers. machine); applicable provision in this part in the (g) Point of sale means any location at (d) No retailer may break or otherwise sale, distribution, and use of cigarettes which a consumer can purchase or open any cigarette or smokeless tobacco and smokeless tobacco renders the otherwise obtain cigarettes or smokeless package to sell or distribute individual product misbranded under the act. tobacco for personal consumption. cigarettes or a number of unpackaged (c) References in this part to (h) Retailer means any person who cigarettes that is smaller than the regulatory sections of the Code of sells cigarettes or smokeless tobacco to quantity in the minimum cigarette Federal Regulations are to chapter I of individuals for personal consumption, package size defined in § 897.16(b), or Title 21, unless otherwise noted. or who operates a facility where any quantity of cigarette tobacco or smokeless tobacco that is smaller than § 897.2 Purpose. vending machines or self-service displays are permitted under this part. the smallest package distributed by the The purpose of this part is to establish (i) Smokeless tobacco means any manufacturer for individual consumer restrictions on the sale, distribution, and product that consists of cut, ground, use; and use of cigarettes and smokeless tobacco powdered, or leaf tobacco that contains (e) Each retailer shall ensure that all in order to reduce the number of nicotine and that is intended to be self-service displays, advertising, children and adolescents who use these placed in the oral cavity. labeling, and other items, that are products, and to reduce the life- located in the retailer’s establishment threatening consequences associated Subpart BÐProhibition of Sale and and that do not comply with the with tobacco use. Distribution to Persons Younger Than requirements of this part, are removed or are brought into compliance with the § 897.3 Definitions. 18 Years of Age requirements under this part. (a) Cigarette means any product § 897.10 General responsibilities of which contains nicotine, is intended to manufacturers, distributors, and retailers. § 897.16 Conditions of manufacture, sale, and distribution. be burned under ordinary conditions of Each manufacturer, distributor, and use, and consists of: retailer is responsible for ensuring that (a) Restriction on product names. A (1) Any roll of tobacco wrapped in the cigarettes or smokeless tobacco it manufacturer shall not use a trade or paper or in any substance not manufactures, labels, advertises, brand name of a nontobacco product as containing tobacco; or packages, distributes, sells, or otherwise the trade or brand name for a cigarette (2) Any roll of tobacco wrapped in holds for sale comply with all or smokeless tobacco product, except for any substance containing tobacco applicable requirements under this part. a tobacco product whose trade or brand which, because of its appearance, the name was on both a tobacco product type of tobacco used in the filler, or its § 897.12 Additional responsibilities of and a nontobacco product that were packaging and labeling, is likely to be manufacturers. sold in the United States on January 1, offered to, or purchased by, consumers In addition to the other 1995. as a cigarette described in paragraph responsibilities under this part, each (b) Minimum cigarette package size. (a)(1) of this section. manufacturer shall remove from each Except as otherwise provided under this (b) Cigarette tobacco means any point of sale all self-service displays, section, no manufacturer, distributor, or product that consists of loose tobacco advertising, labeling, and other items retailer may sell or cause to be sold, or that contains or delivers nicotine and is that the manufacturer owns that do not distribute or cause to be distributed, any intended for use by consumers in a comply with the requirements under cigarette package that contains fewer cigarette. Unless otherwise stated, the this part. than 20 cigarettes. Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44617

(c) Vending machines, self-service disseminated advertising or labeling distributor, or retailer demonstrates is displays, mail-order sales, and other which bears a cigarette or smokeless an adult publication. For the purposes ‘‘impersonal’’ modes of sale. (1) Except tobacco brand name (alone or in of this section, an adult publication is as otherwise provided under this conjunction with any other word) or any a newspaper, magazine, periodical, or section, a retailer may sell cigarettes and other indicia of tobacco product other publication: smokeless tobacco only in a direct, face- identification, in newspapers; in (i) Whose readers younger than 18 to-face exchange between the retailer magazines; in periodicals or other years of age constitute 15 percent or less and the consumer. Examples of methods publications (whether periodic or of the total readership as measured by of sale that are not permitted include limited distribution); on billboards, competent and reliable survey evidence; vending machines and self-service posters, and placards; in nonpoint-of- and displays. sale promotional material (including (ii) That is read by fewer than 2 (2) Exceptions. The following direct mail); in point-of-sale million persons younger than 18 years methods of sale are permitted: promotional material; and in audio or of age as measured by competent and (i) Mail-order sales, excluding mail- video formats delivered at a point-of- reliable survey evidence. order redemption of coupons and sale. (b) Labeling and advertising in an distribution of free samples through the (2) A manufacturer, distributor, or audio or video format shall be limited mail; and retailer intending to disseminate, or to as follows: (ii) Vending machines (including cause to be disseminated, advertising or (1) Audio format shall be limited to vending machines that sell packaged, labeling for cigarettes or smokeless words only with no music or sound single cigarettes) and self-service tobacco in a medium that is not listed effects. displays that are located in facilities in paragraph (a)(1) of this section, shall (2) Video formats shall be limited to where the retailer ensures that no notify the agency 30 days prior to the static black text only on a white person younger than 18 years of age is use of such medium. The notice shall background. Any audio with the video present, or permitted to enter, at any describe the medium and discuss the shall be limited to words only with no time. extent to which the advertising or music or sound effects. (d) Free samples. No manufacturer, labeling may be seen by persons (c) Each manufacturer, distributor, distributor, or retailer may distribute or younger than 18 years of age. The and retailer advertising or causing to be cause to be distributed any free samples manufacturer, distributor, or retailer advertised, disseminating or causing to of cigarettes or smokeless tobacco. shall send this notice to the Division of be disseminated, advertising permitted (e) Restrictions on labels, labeling, Drug Marketing, Advertising, and under this subpart D, shall include, as and advertising. No manufacturer, Communications, 5600 Fishers Lane provided in section 502 of the act, the distributor, or retailer may sell or (HFD–40), rm. 17B–20, Rockville, MD product’s established name and a distribute, or cause to be sold or 20857. statement of its intended use as follows: distributed, cigarettes or smokeless (b) No outdoor advertising for ‘‘Cigarettes—A Nicotine-Delivery Device tobacco with labels, labeling, or cigarettes or smokeless tobacco, for Persons 18 or Older’’, ‘‘Cigarette advertising not in compliance with including billboards, posters, or Tobacco—A Nicotine-Delivery Device subparts C and D of this part, and other placards, may be placed within 1,000 for Persons 18 or Older’’, or ‘‘Loose Leaf applicable requirements. feet of the perimeter of any public Chewing Tobacco’’, ‘‘Plug Chewing playground or playground area in a Tobacco’’, ‘‘Twist Chewing Tobacco’’, Subpart CÐLabels public park (e.g., a public park with ‘‘Moist Snuff’’ or ‘‘Dry Snuff’’, equipment such as swings and seesaws, § 897.24 Established names for cigarettes whichever is appropriate for the and smokeless tobacco. baseball diamonds, or basketball courts), product, followed by the words ‘‘A elementary school, or secondary school. Each cigarette or smokeless tobacco Nicotine-Delivery Device for Persons 18 (c) This subpart D does not apply to package shall bear, as provided in or Older’’. cigarette or smokeless tobacco package section 502 of the act, the following labels. § 897.34 Sale and distribution of established name: ‘‘Cigarettes’’, nontobacco items and services, gifts, and ‘‘Cigarette Tobacco’’, ‘‘Loose Leaf § 897.32 Format and content requirements sponsorship of events. Chewing Tobacco’’, ‘‘Plug Chewing for labeling and advertising. (a) No manufacturer and no Tobacco’’, ‘‘Twist Chewing Tobacco’’, (a) Except as provided in paragraph distributor of imported cigarettes or ‘‘Moist Snuff’’, or ‘‘Dry Snuff’’, (b) of this section, each manufacturer, smokeless tobacco may market, license, whichever name is appropriate. distributor, and retailer advertising or distribute, sell, or cause to be marketed, § 897.25 Statement of intended use and causing to be advertised, disseminating licensed, distributed, or sold any item age restriction. or causing to be disseminated, any (other than cigarettes or smokeless labeling or advertising for cigarettes or tobacco) or service, which bears the Each cigarette or smokeless tobacco smokeless tobacco shall use only black brand name (alone or in conjunction package, that is offered for sale, sold, or text on a white background. This section with any other word), logo, symbol, otherwise distributed shall bear the does not apply to advertising: motto, selling message, recognizable following statement: ‘‘Nicotine-Delivery (1) In any facility where vending color or pattern of colors, or any other Device for Persons 18 or Older’’. machines and self- service displays are indicia of product identification Subpart DÐLabeling and Advertising permitted under this part, provided that identical or similar to, or identifiable the advertising is not visible from with, those used for any brand of § 897.30 Scope of permissible forms of outside the facility and that it is affixed cigarettes or smokeless tobacco. labeling and advertising. to a wall or fixture in the facility; or (b) No manufacturer, distributor, or (a)(1) A manufacturer, distributor, or (2) Appearing in any publication retailer may offer or cause to be offered retailer may, in accordance with this (whether periodic or limited any gift or item (other then cigarettes or subpart D, disseminate or cause to be distribution) that the manufacturer, smokeless tobacco) to any person 44618 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations purchasing cigarettes or smokeless brand of cigarettes or smokeless tobacco. or any other indicia of product tobacco in consideration of the purchase Nothing in this paragraph prevents a identification identical or similar to, or thereof, or to any person in manufacturer, distributor, or retailer identifiable with, those used for any consideration of furnishing evidence, from sponsoring or causing to be brand of cigarettes or smokeless tobacco. such as credits, proofs-of-purchase, or sponsored any athletic, musical, artistic, coupons, of such a purchase. or other social or cultural event, or team Dated: August 22, 1996. (c) No manufacturer, distributor, or or entry, in the name of the corporation William B. Schultz, retailer may sponsor or cause to be which manufactures the tobacco Deputy Commissioner for Policy. sponsored any athletic, musical, artistic, product, provided that both the or other social or cultural event, or any corporate name and the corporation David A. Kessler, entry or team in any event, in the brand were registered and in use in the United Commissioner of Food and Drugs. name (alone or in conjunction with any States prior to January 1, 1995, and that Donna E. Shalala, other word), logo, symbol, motto, selling the corporate name does not include message, recognizable color or pattern of any brand name (alone or in Secretary of Health and Human Services. colors, or any other indicia of product conjunction with any other word), logo, NOTE: The following Annex will not identification identical or similar to, or symbol, motto, selling message, appear in the Code of Federal Regulations. identifiable with, those used for any recognizable color or pattern of colors, BILLING CODE 4160±01±F