FOR IMMEDIATE RELEASE:  April 11, 1988

   FTC REVERSES ADMINISTRATIVE LAW JUDGE'S DECISION TO DISMISS
            R. J. REYNOLDS CASE; REMANDS CASE TO ALJ

     The Federal Trade Commission reversed a decision of an
administrative law judge (ALJ) that had dismissed the FTC
complaint against the R. J. Reynolds Tobacco Co., and remanded
the case to the ALJ for further action.  In its decision, the
Commission stated that the judge erred when he granted R.J.
Reynolds' motion to dismiss the complaint on the ground that it
was not subject to the Commission's jurisdiction and when "he
ruled that further opportunity to discover and present facts
relating to jurisdiction was not permitted."  The complaint
alleges deception by Reynolds in the "dissemination of an
advertisement entitled 'Of Cigarettes and Science'," dealing with
the relationship between smoking and health.  The vote to reverse
the ALJ's decision and remand the matter was 4-1, with FTC
Chairman Daniel Oliver dissenting.
     In June 1986 the FTC issued a complaint charging that R. J.
Reynolds' "Of Cigarettes and Science" was an advertisement that
misrepresented the purpose and results of a scientific study.
The study was known as the Multiple Risk Factor Intervention
Trial, or MR FIT.  The complaint charged that "Of Cigarettes and
Science" made claims about the MR FIT study that were false or
misleading, including making false claims that the study provided
credible scientific evidence that smoking is not as hazardous as
the public or the reader has been led to believe.  The complaint
also charged that it was deceptive because it failed to disclose
certain information about the study's findings.
     R. J. Reynolds filed a motion to dismiss the FTC complaint
on the grounds that "Of Cigarettes and Science" was an editorial
fully protected by the First Amendment and therefore could not be
regulated by the FTC.  In August 1986 ALJ Montgomery K. Hyun
dismissed the case, concluding the text of "Of Cigarettes and
Science" was noncommercial speech that was fully protected by the
First Amendment and therefore was beyond the FTC's jurisdiction.
     However, according to the Commission decision, which was
written by Commissioner Andrew J. Strenio, Jr., "viewed in light
of the allegations contained in the complaint, we conclude that
the ALJ erred when he granted respondent's motion to dismiss at
this stage of the proceeding."
     The Commission stated in its decision, "We agree with the
parties and the ALJ that unless the Reynolds advertisement can be
classified as commercial speech, it is not subject to the
Commission's jurisdiction."  According to the Commission,
however, "the ALJ was required to consider the various 'messages,
means, and motives' of the advertisement" in determining whether
it is commercial speech.
     The Commission concluded that, "Accepting the allegations of
the complaint concerning jurisdiction as true for purposes of
this appeal," -- the standard legal approach -- "the content of
the Reynolds advertisement includes words and messages that are
characteristic of commercial speech."  The Commission opinion
discusses

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whether "Of Cigarettes and Science" constitutes commercial speech
in light of the complaint allegations about jurisdiction.  The
following characteristics that the Supreme Court has identified
as relevant to determining whether speech is commercial are
stated in the Commission decision:

     --  The content of "the advertisement refers to a specific
         product, cigarettes."

     --  The content of "the advertisement discusses an important
         product attribute -- the alleged connection between
         smoking and heart disease."  "A message that addresses
         health concerns that may be faced by purchasers or
         potential purchasers of the speaker's product may
         constitute commercial speech."

     --  "The 'means' used to disseminate the Reynolds ad --
         paid-for advertising -- is characteristic of commercial
         speech."

     --  Reynolds is in the business of selling cigarettes.  "It
         is not unreasonable to infer that Reynolds, as a seller
         of cigarettes, had a direct, sales-related motive for
         disseminating the 'Of Cigarettes and Science'
         advertisement."  "[E]conomic motivation also may be
         indicative of commercial speech."

     The decision stated, "It should be clear, however, that the
Commission makes no final determination of jurisdiction."
According to the Commission, a final determination at this stage
of the proceeding would be premature.  Instead, the Commission
remanded the case to the ALJ "for the purpose of determining
whether the facts as applied to appropriate legal standards
support the existence of jurisdiction."
     The Commission stated, "if the ALJ determines that
additional evidence is needed to make a final determination on
jurisdiction, he shall permit further opportunity to develop and
present evidence on the issue," although the Commission did not
conclude that presentation of additional evidence necessarily was
required.  The Commission rejected Reynolds' contention that
consideration of extrinsic evidence, which is evidence other than
the statement itself, was irrelevant to determining jurisdiction
or that consideration of such evidence would violate the First
Amendment.
     In the decision, the Commission reaffirmed that the
protections the First Amendment affords "are of fundamental
importance to a democratic society."  The Commission noted,
however, that the Constitution "accords different degrees of
protection based upon the type of speech at issue."  According to
the decision, regulation of fully protected speech "generally is
limited to reasonable time, place and manner restrictions," but
commercial speech "can be regulated on the basis of its
content."  The Commission stated, "The more limited protection
accorded commercial speech permits the FTC to act when necessary
to challenge false or deceptive advertising."
     In a dissenting statement, Chairman Daniel Oliver stated
that he would have affirmed the ALJ and dismissed the
complaint.  He cited decisions of the Supreme Court that have
concluded that corporations have the full protection of the First
Amendment for their "direct comments on public issues."  In his
view, the statement by R.J. Reynolds was a direct comment in
which the company "questioned the objectivity of the scientists
who examine the issue of smoking and health."  He stated that,
"If the editorial is deceptive, or not believable, or runs
counter to other information on the health question

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that the public is aware of, consumers are free to reject the
message in the editorial.  But it is critical for First Amendment
purposes that the public, and not the government, decide the
answer to this question."
     Chairman Oliver also disagreed with the decision to remand
the case for additional discovery.  He noted that much of the
evidence the majority suggested would be relevant was simply
background information that was not needed.  He disagreed with
the majority's conclusion that evidence of Reynold's motive was
relevant, stating that "the Supreme Court has never looked to the
subjective intent of the speaker" in deciding whether speech was
fully protected or commercial.
     Copies of the Commission decision are available from the
FTC's Public Reference Branch, Room 130, 6th St. and Pennsylvania
Ave. N.W., Washington, D.C. 20580; 202-326-2222; TTY 202-326-
2502.

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MEDIA CONTACT:  Dee Ellison, Office of Public Affairs, 202-326-
     2177

FTC File D.9206

[RJRDec]