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

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 801, 803, 804, 807, 820,

and 897

[Docket No. 95N–0253]

RIN 0910–AA48

Regulations Restricting the Sale and

Distribution of Cigarettes and

Smokeless Tobacco to Protect

Children and Adolescents

AGENCY: Food and Drug Administration,

HHS.

ACTION: Final rule.

SUMMARY: The Food and Drug

Administration (FDA) is issuing

regulations governing access to and

promotion of nicotine-containing

cigarettes and smokeless tobacco to

children and adolescents.

The regulations prohibit the sale of

nicotine-containing cigarettes and

smokeless tobacco to individuals under

the age of 18; require manufacturers,

distributors, and retailers to comply

with certain conditions regarding the

sale and distribution of these products;

require retailers to verify a purchaser’s

age by photographic identification;

prohibit all free samples and prohibit

the sale of these products through

vending machines and self-service

displays except in facilities where

individuals under the age of 18 are not

present or permitted at any time; limit

the advertising and labeling to which

children and adolescents are exposed to

a black-and-white, text-only format;

prohibit the sale or distribution of

brand-identified promotional

nontobacco items such as hats and tee

shirts; prohibit sponsorship of sporting

and other events, teams, and entries in

a brand name of a tobacco product, but

permit such sponsorship in a corporate

name; and require manufacturers to

provide intended use information on all

cigarette and smokeless tobacco product

labels and in cigarette advertising.

These regulations will address the

serious public health problems caused

by cigarettes and smokeless tobacco

products. They will reduce children’s

and adolescents’ easy access to

cigarettes and smokeless tobacco and

will significantly decrease the amount

of positive imagery that makes these

products so appealing to that age group.

The regulations are predicated on the

agency’s assertion of jurisdiction under

the Federal Food, Drug, and Cosmetic

Act over cigarettes and smokeless

tobacco as delivery devices for nicotine,

incorporated as part of the regulations

for purposes of, and to facilitate,

congressional review under the Small

Business Regulatory Enforcement

Fairness Act of 1996.

DATES: Effective date. The regulation is

effective August 28, 1997, except that

§ 897.14(a) and (b) are effective February

28, 1997 and § 897.34(c) is effective

February 28, 1998.

Compliance dates. Manufacturers and

distributors are required to comply with

the requirements of 21 CFR parts 803

and 804 August 28, 1997; manufacturers

are required to comply with the

requirements of 21 CFR parts 807 and

820 February 28, 1998.

ADDRESSES: References listed in the

footnotes of this document have been

placed on public display at the Dockets

Management Branch (HFA–305), Food

and Drug Administration, 12420

Parklawn Dr., rm. 1–23, Rockville, MD

20857, and may be seen by interested

persons between 9 a.m. and 4 p.m.,

Monday through Friday.

FOR FURTHER INFORMATION CONTACT:

Nancy Yeates, Office of Policy (HF–26),

Food and Drug Administration, 5600

Fishers Lane, Rockville, MD 20857,

301–827–0867.

SUPPLEMENTARY INFORMATION:

Preamble Outline

I. Introduction

A. Purpose and Overview of the Rule

B. Background

C. Provisions of the Rule

II. Legal Authority

A. Legal Principles Applicable to

Combination Drug/Device Products

1. The SMDA Recognized Combination

Products for the First Time

2. The SMDA Leaves to FDA’s Discretion

the Determination of Which Regulatory

Authorities to Apply to Particular

Combination Products

3. Interpreting the SMDA to Allow the

Agency to Determine Which Regulatory

Scheme Best Serves the Public Health is

Consistent With 50 Years of Case Law

4. The Implementing Regulations and the

Delegations of Authority Reflect FDA’s

Interpretation That Section 503(g) of the Act

Authorizes the Agency to Determine the

Appropriate Regulatory Authorities

5. The Intercenter Agreements and

Administrative Precedent Recognize That

FDA May Determine Which Regulatory

Authority to Apply to a Particular Product

B. Cigarettes and Smokeless Tobacco Have

Both a Drug and a Device Component and

Are Therefore Combination Products

C. FDA’s Choice of Legal Authorities

1. FDA Will Regulate Cigarettes and

Smokeless Tobacco Under the Act’s Device

Authorities

2. Cigarettes and Smokeless Tobacco

Will be Subject to the Full Range of Device

Authorities

3. The Restricted Device Provision

Authorizes FDA to Establish Access and

Advertising Restrictions

4. Application of Other Device

Authorities

5. FDA Will Classify Cigarettes and

Smokeless Tobacco Under Section 513 of the

Act

D. The Fact That the Act’s Drug Authorities

Authorize the Imposition of Similar

Restrictions Supports the Reasonableness of

the Restrictions That the Agency Has

Imposed

E. Constitutional Issues Regarding

Authority

1. Separation of Powers

2. Nondelegation Doctrine

III. Overview of Comments, Smoking

Prevalence Rates Among Minors, Scope,

Purpose, and Definitions

A. Overview of Comments

B. Smoking Prevalence Rates Among

Minors

C. Scope

D. Purpose (§ 897.2)

E. Definitions (§ 897.3)

IV. Access

A. General Comments

B. General Responsibilities of

Manufacturers, Distributors, and Retailers

(§ 897.10)

C. Additional Responsibilities of

Manufacturers (§ 897.12)

1. Removal of Manufacturer-Supplied or

Manufacturer-Owned Items That Do Not

Comply With the Regulations

2. Visual Inspections by a Manufacturer’s

Representative at Each Point of Sale

D. Additional Responsibilities of Retailers

(§ 897.14)

1. Use of Photographic Identification to

Verify Age

2. Minimum Age

3. Restrictions Against ‘‘Impersonal’’

Modes of Sale

4. Restrictions Against the Sale of

Individual Cigarettes

5. Additional Comments

E. Conditions of Manufacture, Sale, and

Distribution (§ 897.16)

1. Restrictions on Nontobacco Trade

Names on Tobacco Products

2. Minimum Package Size

3. Maximum Package Size

4. Impersonal Modes of Sale

V. Label

A. Established Name (§ 897.24)

B. Package Design

C. Ingredient Labeling

D. Labeling for Intended Use

E. Adequate Directions for Use and

Warnings Against Use (Section 502(f) of the

act)

F. Package Inserts

VI. Advertising

A. Subpart D—Restrictions on Advertising

and Labeling of Tobacco Products

B. The Need for Advertising Restrictions

1. Advertising and Young People

2. Advertising and Adults

C. The Regulations Under the First

Amendment

1. Introduction
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44397

2. The Central Hudson Test

3. Is Cigarette and Smokeless Tobacco

Advertising Misleading, or Does It Relate to

Unlawful Activity?

4. Is the Asserted Government Interest

Substantial?

D. Evidence Supporting FDA’s Advertising

Restrictions

1. Introduction

2. Do the Regulations Directly Advance

the Governmental Interest Asserted?

3. Is There Harm? Does Advertising

Affect the Decision by Young People to Use

Tobacco Products?

4. Why Young People Use Tobacco and

the Role of Advertising in That Process

5. Has The Agency Met Its Burden?

6. The Efficacy of the Restrictions;

Empirical Evidence Concerning Advertising

Restrictions

E. Provisions of the Final Rule

1. Are FDA’s Regulations Narrowly

Drawn?

2. Section 897.30(a)—Permissible Forms

of Labeling and Advertising

3. Section 897.30(b)—Billboards

4. Section 897.32(a)—Text-Only Format

5. Section 897.32(a)—Definition of

‘‘Adult Publication’’

6. Advertising—§ 897.32 Requirements

for Disclosure of Important Information

7. Section 897.34(a) and (b)—

Promotions, Nontobacco Items, and Contests

and Games of Chance

8. Section 897.34(c)—Sponsorship of

Events

9. Proposed § 897.36—False or

Misleading Statements

F. Additional First Amendment Issues

VII. Education Campaign

VIII. Additional Regulatory Requirements

IX. Implementation Dates

X. Relationship Between the Rule and Other

Federal and State Laws

A. The Federal Cigarette Labeling and

Advertising Act

B. The Comprehensive Smokeless Tobacco

Health Education Act

C. Conflict with Congressional Purpose

Behind Current Regulatory Scheme for

Tobacco Products

1. The Cigarette Act and the Smokeless

Act

2. The PHS Act

D. Occupation of the Field

E. Preemption of State and Local

Requirements Under Section 521(a) of the

Act

F. Preemption of State Product Liability

Claims Under Section 521(a) of the Act

XI. Miscellaneous Constitutional Issues

A. Takings Under the Fifth Amendment

1. The Interests at Issue

2. The Takings Analysis

3. The Character of the Governmental

Action

4. The Economic Impact of the

Governmental Action

5. Interference with Reasonable

Investment-backed Expectations

6. Summary

B. Substantive Due Process, Equal

Protection, and Restrictions on Use of Trade

Names

C. Procedural Due Process Under the Fifth

Amendment

XII. Procedural Issues

A. Introduction

B. Adequacy of the Record

1. The Administrative Record

2. The Agency’s Use of Confidential

Documents

3. The Claim that FDA Relied on

‘‘Unknown’’ Undisclosed Data

4. The Claim that FDA Failed to Include

in the Record New Drug Application (NDA)

Data on Which it Relied

5. The Agency’s Reliance in the Final

Rulemaking on New Materials

C. Adequacy of the Notice

1. The Agency Provided Adequate Notice

of the Key Legal and Factual Issues

2. The Agency Provided a ‘‘Reasoned

Explanation’’ for its Current Position

D. Adequacy of the Comment Period

E. Conclusion

XIII. Executive Orders

A. Executive Order 12606: The Family

B. Executive Order 12612: Federalism

C. Executive Order 12630: Governmental

Actions and Interference with

Constitutionally Protected Property Rights

XIV. Environmental Impact

XV. Analysis of Impacts

A. Introduction and Summary

B. Statement of Need for Action

C. Regulatory Benefits

1. Prevalence-Based Studies

2. FDA’s Methodology

3. Reduced Incidence of New Young

Smokers

4. Reduced Number of Adult Smokers

5. Lives Saved

6. Life-Years Saved

7. Monetized Benefits of Reduced

Tobacco Use

8. Reduced Medical Costs

9. Reduced Morbidity Costs

10. Benefits of Reduced Mortality Rates

11. Reduced Fire Costs

12. Smokeless Tobacco

13. Summary of Benefits

D. Regulatory Costs

1. Number of Affected Retail

Establishments

2. Removing Self-Service and Other

Prohibited Retail Displays

3. Label Changes

4. Educational Program

5. Restricted Advertising and

Promotional Activities

6. Training

7. Access Restrictions

8. I.D. Checks

9. Vending Machines

10. Readership Surveys

11. Records and Reports

12. Government Enforcement

13. Comparison of Benefits to Cost

E. Distributional Effects

1. Tobacco Manufacturers and

Distributors

2. Tobacco Growers

3. Vending Machine Operators

4. Advertising Sector

5. Retail Sector

6. Other Private Sectors

7. Excise Tax Revenues

F. Small Business Impacts

G. Other Alternatives

H. Unfunded Mandates Reform Act of 1995

XVI. Paperwork Reduction Act of 1995

A. Comments on the Paperwork Reduction

Act Statement

B. Information Collection Provisions in the

Final Rule

XVII. Congressional Review

Codified Language

I. Introduction

A. Purpose and Overview of the Rule

This rule establishes regulations

restricting the sale and distribution of

cigarettes and smokeless tobacco to

children and adolescents, implementing

FDA’s determination that it has

jurisdiction over these products under

the Federal Food, Drug, and Cosmetic

Act (the act). As described in ‘‘Nicotine

in Cigarettes and Smokeless Tobacco Is

a Drug and These Products Are Nicotine

Delivery Devices Under the Federal

Food, Drug, and Cosmetic Act:

Jurisdictional Determination’’ (the 1996

Jurisdictional Determination), annexed

hereto, FDA has determined that

cigarettes and smokeless tobacco are

intended to affect the structure or

function of the body, within the

meaning of the act’s definitions of

‘‘drug’’ and ‘‘device.’’ The nicotine in

cigarettes and smokeless tobacco is a

‘‘drug,’’ which produces significant

pharmacological effects in consumers,

including satisfaction of addiction,

stimulation, sedation, and weight

control. Cigarettes and smokeless

tobacco are combination products

consisting of the drug nicotine and

device components intended to deliver

nicotine to the body.

FDA has chosen to regulate cigarettes

and smokeless tobacco under the act’s

device authorities. This rule allows the

continued marketing of these products,

while employing measures to prevent

future generations of Americans from

becoming addicted to them. As

discussed in section I.B. of this

document, most people who use

cigarettes and smokeless tobacco begin

their use before the age of 18 and,

therefore, before they fully understand

the addictive nature and serious health

risks of these products. Even though the

sale of tobacco products to minors is

illegal in 50 States, the tobacco industry

has adopted extensive marketing

campaigns which appeal to children

and adolescents. Therefore, the rule

effects measures that would both

complement the existing State

restrictions on access and prevent
44398 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

1 ‘‘National Household Survey on Drug Abuse:

Population Estimate 1993, Department of Health

and Human Services (DHHS), Public Health Service

(PHS), Substance and Mental Health Services

Administration (SAMHSA), Office of Applied

Studies, Rockville, MD, Pub. No. (SMA) 94–3017,

pp. 89 and 95, 1994.

2 ‘‘Cigarette Smoking—Attributable Mortality and

Years of Potential Life Lost—United States, 1990,’’

Mortality and Morbidity Weekly Report, (MMWR)

CDC, DHHS, vol. 42, No. 33, pp. 645–649, 1993;

Lynch, B. S., and R. J. Bonnie, editors, Growing Up

Tobacco Free—Preventing Nicotine Addiction in

Children and Youths, Committee on Preventing

Nicotine Addiction in Children and Youths,

Division of Biobehavioral Sciences and Mental

Disorders, Institute of Medicine, National Academy

Press, Washington, DC, p.3, 1994, (hereinafter cited

as ‘‘IOM Report’’).

3 ‘‘Cigarette Smoking—Attributable Mortality and

Years of Potential Life Lost—United States, 1990,’’

MMWR, CDC, DHHS, vol. 42, No. 33, pp. 645–649,

1993.

4 IOM Report, pp. 3–4.

5See authorities cited at 1996 Jurisdictional

Determination, Section II(B)(2)(a).

6 Id.

7 ‘‘Preventing Tobacco Use Among Young People:

A Report of the Surgeon General,’’ DHHS, PHS,

CDC, National Center for Chronic Disease

Prevention and Health Promotion, the Office on

Smoking and Health (OSH), Atlanta, GA, p. 5, 1994,

(hereinafter cited as ‘‘1994 SGR’’).

8 1994 SGR, p. 65.

9 ‘‘Teen-Age Attitudes and Behavior Concerning

Tobacco,’’ The George H. Gallup International

Institute, p. 54, September 1992.

10 ‘‘Cigarette Smoking Among Adults—United

States, 1991,’’ MMWR, DHHS, CDC, vol. 42, No. 12,

tobacco companies from marketing their

products to children and adolescents.

In determining the best course of

action, the agency considered the highly

addictive nature of cigarettes and

smokeless tobacco and the fact that

these products have previously been

lawfully marketed to millions of adult

Americans. The agency has determined

that the approach outlined in this

document—restrictions to reduce the

use of cigarettes and smokeless tobacco

by individuals under the age of 18 while

leaving these products on the market for

adults—is the available option that is

the most consistent with both the act

and the agency’s mission to protect the

public health.

The agency intends to assist affected

entities, including retailers, distributors,

and manufacturers, in complying with

the rule. The agency also will issue a

small entities guide in easy to

understand language. In addition, the

agency will conduct workshops

throughout the country to assist affected

entities in complying with the rule.

B. Background

Approximately 50 million Americans

currently smoke cigarettes and another

6 million use smokeless tobacco. 1 In the

Federal Register of August 11, 1995 (60

FR 41314), FDA published a proposed

rule entitled ‘‘Regulations Restricting

the Sale and Distribution of Cigarettes

and Smokeless Tobacco Products to

Protect Children and Adolescents’’ (the

1995 proposed rule). As stated in the

preamble to the 1995 proposed rule,

tobacco use is the single leading cause

of preventable death in the United

States. 2 More than 400,000 people die

each year from tobacco-related illnesses,

such as cancer, respiratory illnesses,

and heart disease, often suffering long

and painful deaths. 3 Tobacco alone kills

more people each year in the United

States than acquired immunodeficiency

syndrome (AIDS), car accidents,

alcohol, homicides, illegal drugs,

suicides, and fires, combined. 4

Tobacco products have historically

been legal and widely available in this

country. It was only after millions of

people became addicted to the nicotine

in cigarettes and smokeless tobacco that

health experts became fully aware of the

extraordinary health risks involved in

the consumption of these products.

Consequently, tobacco use has become

one of the most serious public health

problems facing the United States today.

Because of the grave health

consequences of the use of tobacco

products, some have argued that they

should be removed from the market.

However, a ban would have adverse

health consequences and would not be

likely to prevent individuals from

gaining access to these products. Of the

50 million people who use cigarettes, 77

to 92 percent are addicted. 5 Data

suggest that almost as many smokeless

tobacco users may be addicted. 6

Adverse health consequences could

result if these people were suddenly

deprived of the nicotine these products

deliver. As stated in the preamble to the

1995 proposed rule:

Because of the high addiction rates and the

difficulties smokers experience when they

attempt to quit, there may be adverse health

consequences for many individuals if the

products were to be withdrawn suddenly

from the marketplace. Our current health

care system and available pharmaceuticals

may not be able to provide adequate or

sufficiently safe treatment for such a

precipitous withdrawal.

(60 FR 41314 at 41348)

A similar situation would exist for

addicted smokeless tobacco users.

It is probable also that a black market

and smuggling would develop to supply

addicted users with these products. As

stated in the preamble to the 1995

proposed rule, and discussed further in

section II.C.5. of this document, ‘‘[t]he

products that would be available

through a black market could very well

be more dangerous (e.g., cigarettes

containing more tar or nicotine, or more

toxic additives) than products currently

on the market’’ (60 FR 41314 at 41349).

Thus, the agency has concluded that,

while taking cigarettes and smokeless

tobacco off the market could prevent

some people from becoming addicted

and reduce death and disease for others,

the record does not establish that such

a ban is the appropriate public health

response under the act.

To effectively address the death and

disease caused by tobacco products,

addiction to cigarettes and smokeless

tobacco must be eliminated or

substantially reduced. The evidence

demonstrates that this can be achieved

only by preventing children and

adolescents from starting to use tobacco.

Most people who suffer the adverse

health consequences of using cigarettes

and smokeless tobacco begin their use

before they reach the age of 18, an age

when they are not prepared for, or

equipped to, make a decision that, for

many, will have lifelong consequences.

These young people do not fully

understand the serious health risks of

these products or do not believe that

those risks apply to them. They are also

very impressionable and therefore

vulnerable to the sophisticated

marketing techniques employed by the

tobacco industry, techniques that

associate the use of tobacco products

with excitement, glamour, and

independence. When cigarette and

smokeless tobacco use by children and

adolescents results in addiction, as it so

often does, these youths lose their

freedom to choose whether or not to use

the products as adults.

The facts on underage use confirm

this pattern. As stated in the preamble

to the 1995 proposed rule,

approximately 3 million American

adolescents currently smoke and an

additional 1 million adolescent males

use smokeless tobacco. 7 Eighty-two

percent of adults who ever smoked had

their first cigarette before the age of 18,

and more than half of them had already

become regular smokers by that age. 8

Among smokers ages 12 to 17 years, 70

percent already regret their decision to

smoke and 66 percent say that they

want to quit. 9

Moreover, children and adolescents

are beginning to smoke at younger ages

than ever before. Despite a decline in

smoking rates in most segments of the

American adult population, the rates

among children and adolescents have

recently begun to rise. 10 Data reported
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44399

pp. 230–233, 1993; Johnston, L. D., P. M. O’Malley,

and J. G. Bachman, ‘‘National Survey Results on

Drug Use from the Monitoring the Future Study

1975–1993, vol. I: Secondary School Students,’’

Rockville, MD, DHHS, PHS, National Institutes of

Health (NIH), National Institute on Drug Abuse

(NIDA), NIH Pub. No. 94–3809, pp. 9 and 19, 79,

80, and 101, 1994; ‘‘Smoking Rates Climb Among

American Teen-agers, Who Find Smoking

Increasingly Acceptable and Seriously

Underestimate the Risks,’’ The University of

Michigan News and Information Service, Table 1.,

July 17, 1995.

11 ‘‘Results from the 1995 Monitoring the Future

Survey,’’ National Institute on Drug Abuse Briefing

for Donna E. Shalala, Ph.D., Secretary of Health and

Human Services, December 13, 1995.

12 Id.

13 Id.

14 Id.

15McGinnis, J. M., and W. H. Foege, ‘‘Actual

Causes of Death in the United States,’’ Journal of

the American Medical Association (JAMA), vol.

270, No. 18, pp. 2207–2212, 1993; ‘‘Reducing

Health Consequences of Smoking: 25 Years of

Progress, A Report of the Surgeon General,’’ DHHS,

PHS, CDC, National Center for Chronic Disease

Prevention and Health Promotion (NCCDPHP),

OSH, DHHS Pub. No. 89–8411, p. 5, 1989,

(hereinafter cited as ‘‘1989 SGR’’); See generally

‘‘The Health Consequences of Smoking: Chronic

Obstructive Lung Disease: A Report of the Surgeon

General,’’ DHHS, PHS, OSH, 1984, (hereinafter

cited as ‘‘1984 SGR’’); ‘‘The Health Consequences

of Smoking: Cardiovascular Disease—A Report of

the Surgeon General,’’ DHHS, PHS, OSH, 1983

(hereinafter cited as ‘‘1983 SGR’’); ‘‘The Health

Consequences of Smoking: Cancer—A Report of the

Surgeon General,’’ DHHS, PHS, OSH, 1982,

(hereinafter cited as ‘‘1982 SGR’’).

16Taioli, E., and E. L. Wynder, ‘‘Effect of the Age

at Which Smoking Begins on Frequency of Smoking

in Adulthood,’’ The New England Journal of

Medicine, vol. 325, No. 13, pp. 968–969, 1991;

Escobedo, L. G., et al. ‘‘Sports Participation, Age at

Smoking Initiation, and the Risk of Smoking Among

U.S. High School Students,’’ JAMA, vol. 269, No.

11, pp. 1391–1395, 1993; see also 1994 SGR, p. 65.

17Memorandum from Michael P. Eriksen (CDC)

to Catherine Lorraine (FDA) August 7, 1995 and

CDC Fact Sheet (based on J. P. Pierce, M. C. Fiore,

T. E. Novotny, E. J. Hatziandreu, and R. M. Davis,

‘‘Trends in Cigarette Smoking in the United States:

Projections to the Year 2000,’’ JAMA, vol. 261, pp.

61–65, 1989; Unpublished data from the 1986

National Mortality Followback Survey, CDC, OSH;

Peto, R., A. D. Lopez, J. Boreham, M. Thun, and C.

Heath, Jr., ‘‘Mortality from Smoking in Developed

Countries, 1950–2000: Indirect Estimates from

National Vital Statistics,’’ Oxford University Press,

Oxford, 1994).

18 Kann, L., W. Warren, J. L. Collins, J. Ross, B.

Collins, and L. J. Kolbe, ‘‘Results from the National

School-Based 1991 Youth Risk Behavior Survey and

Progress Toward Achieving Related Health

Objectives for the Nation,’’ Public Health Reports,

vol. 108, (Supp. 1), pp. 47–54, 1993.

19 1994 SGR, p. 101.

20 Id., pp. 5, 58, and 65–67.

in December 1995, after publication of

the 1995 proposed rule, showed

increases in 30-day prevalence rates of

cigarette smoking for 4 consecutive

years for 8th- and 10th-graders, and 3

consecutive years for high school

seniors. 11 Daily use of cigarettes by 8th-

, 10th-, and 12th-graders has also

increased in each of the last 3 years. 12

The percentage of 8th- and 10th-graders

who reported smoking in the 30 days

before the survey had risen by one-third

since 1991 to about 19 percent and 28

percent, respectively. 13 Similarly, the

percentage of high school seniors saying

that they had smoked in the 30 days

before the survey had increased by more

than one-fifth since 1991, to about 33.5

percent or one in three. 14

An adolescent whose cigarette use

continues into adulthood increases his

or her risk of dying from cancer,

cardiovascular disease, or lung

disease. 15 Moreover, the earlier a young

person’s smoking habit begins, the more

likely he or she will become a heavy

smoker and therefore suffer a greater

risk of diseases caused by smoking. 16

Approximately one out of every three

young people who become regular

smokers each day will die prematurely

as a result. 17

Similar problems exist with underage

use of smokeless tobacco. As stated in

the 1995 proposed rule, the market for

smokeless tobacco has shifted

dramatically toward young people since

1970 (60 FR 41314 at 41317). Schoolbased surveys in 1991 estimated that

19.2 percent of 9th to 12th-grade boys

use smokeless tobacco. 18 Among high

school seniors who had ever tried

smokeless tobacco, 73 percent did so by

the 9th grade. 19

As long as children and adolescents

become addicted to cigarette and

smokeless tobacco use in these

numbers, there is little chance that

society will be able reduce the toll of

tobacco-related illnesses. If, however,

the number of children and adolescents

who begin tobacco use can be

substantially diminished, tobaccorelated illness can be correspondingly

reduced because data suggest that

anyone who does not begin smoking in

childhood or adolescence is unlikely to

ever begin. 20

On the basis of this evidence, the

agency has determined that establishing

restrictions to substantially reduce the

number of children and adolescents

who become addicted to cigarettes and

smokeless tobacco best serves its public

health obligations. Because such a small

percentage of the U.S. population begins

tobacco use after the age of 18, limiting

the use of these products to the adult

population would substantially reduce

the principal source of new users. Thus,

the appropriate emphasis is on reducing

the use of tobacco products by children

and adolescents.

Evidence in the administrative record

demonstrates that the most effective

way to achieve such a reduction is by

limiting the access to, and attractiveness

of, cigarettes and smokeless tobacco to

young people. FDA concludes that the

act provides sufficient authority to issue

regulations that, while leaving these

products on the market for adult use,

restrict access to and promotion of

cigarettes and smokeless tobacco to

those under 18 years of age.

C. Provisions of the Rule

After considering numerous

comments submitted in response to the

1995 proposed rule, the agency is

adopting the rule in modified form. New

part 897 is being added to Title 21 of the

Code of Federal Regulations and

contains the regulations governing the

labeling, advertising, sale, and

distribution of cigarettes and smokeless

tobacco to children and adolescents.

FDA is regulating nicotine-containing

cigarettes and smokeless tobacco as

restricted devices within the meaning of

the section 520(e) of the act (21 U.S.C.

360j(e)). While leaving these products

on the market for adults, the final rule

prohibits the sale of nicotine-containing

cigarettes and smokeless tobacco to

individuals under the age of 18 and

requires manufacturers, distributors,

and retailers to comply with certain

conditions regarding access to, and

promotion of, these products. Among

other things, the final rule requires

retailers to verify a purchaser’s age by

photographic identification. It also

prohibits all free samples and prohibits

the sale of these products through

vending machines and self-service

displays except in facilities where

individuals under the age of 18 are not

present or permitted at any time. The

rule also limits the advertising and

labeling to which children and

adolescents are exposed. The rule

accomplishes this by generally

restricting advertising to which children

and adolescents are exposed to a blackand-white, text-only format. In addition,

billboards and other outdoor advertising

are prohibited within 1,000 feet of

schools and public playgrounds. The

rule also prohibits the sale or

distribution of brand-identified

promotional, nontobacco items such as

hats and tee shirts. Furthermore, the

rule prohibits sponsorship of sporting

and other events, teams, and entries in

a brand name of a tobacco product, but

permits such sponsorship in a corporate

name. This rule is intended to

complement the regulations issued by

SAMHSA implementing section 1926 of

the Public Health Service Act (42 U.S.C.

300x–26) regarding the sale and
44400 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

21The Secretary of the Department of Health and

Human Services (DHHS) (the Secretary) has the

authority to carry out functions under the act

through the Commissioner of Food and Drugs (the

Commissioner). (See section 903 of the act (21

U.S.C. 393); 21 CFR 5.10 and 5.11.) Throughout this

document, references to FDA include the Secretary

and the Commissioner.

distribution of tobacco products to

individuals under the age of 18 (the

SAMHSA rule).

In this document, FDA: (1) Presents

its analysis of its authority to issue

regulations that impose the enumerated

restrictions on the sale and promotion of

cigarettes and smokeless tobacco to

those under the age of 18, while leaving

cigarettes and smokeless tobacco on the

market for adults; and (2) responds to

comments on the proposed rule.

II. Legal Authority

In the 1996 Jurisdictional

Determination, annexed hereto, the

Food and Drug Administration (FDA) 21

has determined that cigarettes and

smokeless tobacco are combination

products consisting of a drug (nicotine)

and device components intended to

deliver nicotine to the body. The agency

may regulate a drug/device combination

product using the Federal Food, Drug,

and Cosmetic Act’s (the act’s) drug

authorities, device authorities, or both.

The agency exercises its discretion to

determine which authorities to apply in

the regulation of combination products

to provide the most effective protection

to the public health. FDA has

determined that tobacco products are

most appropriately regulated under the

device provisions of the act, including

the restricted device authority in section

520(e) of the act (21 U.S.C. 360j(e)).

A. Legal Principles Applicable to

Combination Drug/Device Products

The agency’s discretion to choose the

appropriate regulatory tools under the

act is based, in part, on the authority

provided under the Safe Medical

Devices Act of 1990 (the SMDA). FDA’s

interpretation, supported by the

language of the statute and its legislative

history, is embodied in the agency’s

implementing regulations codified at

part 3 (21 CFR part 3), the delegations

of premarket approval authority to

FDA’s Center for Drug Evaluation and

Research (CDER), Center for Devices and

Radiological Health (CDRH), and Center

for Biologics Evaluation and Research

(CBER) that enable all three Centers to

administer statutory authority for drugs,

devices, and biologics (56 FR 58758,

November 21, 1991), and the

‘‘intercenter agreements’’ that guide the

agency in allocating Center

responsibility for various categories of

combination products (56 FR 58760,

November 21, 1991). In addition to the

authority provided by the SMDA, the

agency’s discretion is also based on the

principles recognized by the Supreme

Court in cases such as United States v.

An Article of Drug * * * Bacto-Unidisk,

394 U.S. 784 (1969). In Bacto-Unidisk,

for example, the Supreme Court upheld

the agency’s decision to regulate a

diagnostic test kit under its drug

authorities on the grounds that ‘‘[i]t is

enough for us that the expert agency

charged with the enforcement of

remedial legislation has determined that

such regulation is desirable for the

public health * * *.’’ (Bacto-Unidisk

394 U.S. at 791–792.)

The discussion that follows describes

in more detail FDA’s interpretation of

the combination product provisions of

the SMDA, the agency’s understanding

of combination products, and the way in

which the agency has exercised its

discretion in determining the most

appropriate authorities to apply to

regulate combination products.

1. The SMDA Recognized Combination

Products for the First Time

Congress enacted the SMDA’s

combination product provisions to

recognize combination products as

distinct entities subject to regulation

under the act and to alleviate the

difficulty the agency had experienced in

regulating such products, especially

those consisting of components of both

a drug and a device. First, the SMDA

explicitly recognized the existence of

products that ‘‘constitute a combination

of a drug, device, or biological product’’

(section 503(g)(1) of the act (21 U.S.C.

353(g)(1))). Second, the statute provided

a mechanism for determining which

agency component would be assigned

the administrative responsibility of

regulating a particular combination

product (Id.).

In accordance with its recognition of

combination products, the SMDA

changed the statutory definitions of

‘‘drug’’ and ‘‘device’’ at section 201(g)

and (h) of the act (21 U.S.C. 321(g) and

(h)). Before the enactment of the SMDA,

section 201(g) of the act provided that

a drug ‘‘does not include devices or

their components, parts, or accessories.’’

The SMDA removed this language from

the definition of ‘‘drug’’ so that the

terms ‘‘drug’’ and ‘‘device’’ were no

longer mutually exclusive, thereby

making it possible for a combination

product consisting of both a drug and

device to be regarded as an independent

entity subject to regulation. The

legislative history indicates that this

definitional change was made ‘‘to

accommodate the principle of

[combination products in] section 20’’

(S. Rept. 101–513, 101st Cong. 2d sess.,

at 30 (1990)). For the first time it was

possible, as a legal matter, for a single

product to have both drug and device

components.

The SMDA also permitted a wider

range of products to meet the definition

of a device. Prior to its amendment by

the SMDA, section 201(h) of the act

defined a ‘‘device’’ as an instrument or

other item that, among other things,

‘‘does not achieve any of its principal

intended purposes through chemical

action within or on the body of man or

other animals and which is not

dependent upon being metabolized for

the achievement of any of its principal

intended purposes.’’ The SMDA

changed the phrase ‘‘any of its principal

intended purposes’’ in the definition to

read, ‘‘its primary intended purposes.’’

This change broadened the definition of

device and allowed more products to be

categorized as devices.

2. The SMDA Leaves to FDA’s

Discretion the Determination of Which

Regulatory Authorities to Apply to

Particular Combination Products

Having recognized combination

products, the SMDA also provided a

clear mechanism for determining which

agency component a particular

combination product should be directed

to for review. Under the SMDA, the

agency must:

[d]etermine the primary mode of action of

the combination product. If the [agency]

determines that the primary mode of action

is that of—

(A) a drug (other than a biological product),

the persons charged with premarket review

of drugs shall have primary jurisdiction,

(B) a device, the persons charged with

premarket review of devices shall have

primary jurisdiction, or

(C) a biological product, the persons

charged with premarket review of biological

products shall have primary jurisdiction.

(Section 503(g)(1) of the act)

This section of the SMDA ‘‘provide[d]

the [agency] with firm ground rules to

direct products promptly to that part of

FDA responsible for reviewing the

article that provides the primary mode

of action of the combination product’’

(S. Rept. 101–513, 101st Cong., 2d sess.,

30 (1990)).

Although the SMDA provided a

mechanism for determining which

agency component, i.e., a Center, should

review a particular combination

product, the legislation left to FDA the

discretion to decide which statutory

authorities it would use in regulating a

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,

as does the legislative history of the

statute. Indeed, an earlier version of the

bill, S. 3006, would arguably have

removed this discretion by requiring the

agency to regulate a product based only

on its Center assignment. Thus, for

example, if the primary mode of action

were that of a drug, the product would

be subject to regulation by CDER under

the act’s drug authorities. The earlier

version’s language, which Congress

chose to strike from the final enactment,

provided in relevant part:

The [agency] shall require only one market

clearance route for an article that constitutes

a combination of a device, drug, or biological

product. If the [agency] determines that the

primary mode of action of the combination

article is that of—

(A) a drug (other than a biological product),

neither the combination article nor any part

of the article shall be treated as a device or

as a biological product for market clearance

purposes;

(B) a device, neither the combination

article nor any part of the article shall be

treated as a drug or a biological product for

market clearance purposes; or

(C) a biological product, neither the

combination article nor any part of the article

shall be treated as a drug or a device for

market clearance purposes.

(136 Congressional Record, S.12493,

101st Cong., 2d sess., August 4, 1990)

The omission of this language from

the statute indicates that while Congress

considered dictating which regulatory

authority must be applied to particular

combination products, and knew how to

craft language to accomplish such a

result, Congress ultimately chose to rely

on FDA’s expertise in determining the

most appropriate regulatory tools

needed to ensure the safety and

effectiveness of the combination

products that it regulates.

Moreover, Congress enacted language

that recognizes that the agency may

choose the appropriate regulatory

authority for a particular combination

product. Section 503(g)(2) of the act

provides that nothing ‘‘shall prevent the

[Agency] from using any agency

resources of the Food and Drug

Administration necessary to ensure

adequate review of the safety,

effectiveness, or substantial equivalence

of an article.’’ Since the enactment of

the SMDA, the agency has interpreted

the phrase ‘‘any agency resources’’ to

include administrative resources and all

applicable statutory authorities. See

Drug/Device Intercenter Agreement, p.

2, contemporaneous interpretation that:

[u]nder the provisions of the Safe Medical

Devices Act of 1990 and regulations

promulgated to implement the combination

product provisions of the Act, [the Center for

Drug Evaluation and Research] and [the

Center for Devices and Radiological Health]

each may use both the drug and device

provisions of the Federal Food, Drug, and

Cosmetic Act as appropriate to regulate a

combination product.

(See 21 CFR Part 3).

(See also 56 FR 58754 at 58759,

November 21, 1991 (FDA amending its

procedural regulations at part 5 by

adding delegations of authority relating

to the premarket review of combination

products to state that those specified

officials in CBER, CDRH, or CDER ‘‘who

currently hold delegated premarket

approval authority for biologics,

devices, or drugs, respectively, are

hereby delegated all the authorities

necessary for premarket approval of any

product that is a biologic, a device, or

a drug, or any combination of two or

more of these products: * * *’’ (21 CFR

5.33).) Thus, when a combination

product, a single entity, consists of a

component that may be regulated as a

drug, the act’s drug provisions and

device provisions are ‘‘resources’’

available to the agency for regulating the

product.

(1) One comment disputed the

agency’s interpretation of section

503(g)(2) of the act, stating that the

language of section 503(g)(2) can be

construed to mean only ‘‘people,

laboratories, and other agency support.

The term ‘Agency resources’ does not

mean ‘legal authorities’ as FDA would

like to believe.’’

FDA disagrees with this comment.

The agency notes that there is nothing

in the statute itself or the legislative

history that suggests any reason that the

expansive phrase ‘‘any FDA resources’’

should be narrowly interpreted given

the important public health benefit

(‘‘ensuring an adequate premarket

review’’) that is the goal of this section

of the SMDA. The agency’s

interpretation of this language is

supported by the SMDA’s legislative

history, which is discussed more fully

in section II.A.2. of this document. More

importantly, as discussed previously,

the agency has the discretion under the

statute as enacted to choose the

regulatory authorities most appropriate

to the specific product at issue.

3. Interpreting the SMDA to Allow the

Agency to Determine Which Regulatory

Scheme Best Serves the Public Health is

Consistent With 50 Years of Case Law

Construing the act as allowing the

agency discretion to choose the most

appropriate regulatory tools for a

particular combination product is

consistent with over 50 years of judicial

precedent. The importance of

interpreting the act in a manner that is

consistent with the public health

purposes of the act was recognized by

the Supreme Court in United States v.

Dotterweich, 320 U.S. 277 (1943). This

case, decided shortly after substantial

changes were made to expand the

agency’s authority by the 1938 act,

addressed the breadth of the term

‘‘person’’ in determining who was

subject to prosecution for violations of

the act. The Court described the spirit

in which the statute should be

interpreted:

By the Act of 1938, Congress extended the

range of its control over illicit and noxious

articles and stiffened the penalties for

disobedience. The purposes of this

legislation thus touch phases of the lives and

health of people which, in the circumstances

of modern industrialism, are largely beyond

self-protection. Regard for these purposes

should infuse construction of the legislation

if it is to be treated as a working instrument

of government and not merely as a collection

of English words.

(Id. at 280)

The approach in Dotterweich was

followed by a number of cases in which

FDA’s interpretation of the statute,

especially in the area of selecting how

to regulate a product to achieve a public

health purpose, has been granted

deference and has been upheld. In

United States v. An Article of Drug

* * * Bacto-Unidisk, 394 U.S. 784

(1969), FDA’s interpretation of the

definition of the term ‘‘drug’’ and the

applicability of the premarket review

requirements were at issue. The Court

upheld the agency’s expansive

interpretation of the definition of

‘‘drug’’ to include a laboratory screening

product, in large part because this

interpretation resulted in greater

protection of the public health by virtue

of the premarket review that the product

would be subject to as a drug. As the

Court reasoned:

It is enough for us that the expert agency

charged with the enforcement of remedial

legislation has determined that such

regulation is desirable for the public health,

for we are hardly qualified to second-guess

the Secretary’s medical judgment.

(Bacto-Unidisk, 394 U.S. at 791–792)

The Court further stated:

The historical expansion of the definition

of drug, and the creation of a parallel concept

of devices, clearly show, we think, that

Congress fully intended that the Act’s

coverage be as broad as its literal language

indicates—and equally clearly, broader than

any strict medical definition might otherwise

allow * * *. But we are all the more

convinced that we must give effect to

congressional intent in view of the wellaccepted principle that remedial legislation

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

with the Act’s overriding purpose to protect

the public health, and specifically, § 507’s

purpose to ensure that antibiotic products

marketed serve the public with ‘efficacy’ and

‘safety.’

(Id. at 798); (See also U.S. v. 25 Cases,

More or Less, of An Article of a Device,

* * * Sensor Pads, 942 F.2d 1179 (7th

Cir. 1991) (upholding FDA’s

determination that a latex bag filled

with a layer of silicone lubricant that

was intended to aid women in selfexaminations for early detection of

breast cancer was a device, because,

among other reasons, the court deferred

to the agency’s discretion to interpret its

own statute based on the legislative

history of the act and on the principles

announced in Chevron U.S.A., Inc. v.

Natural Resources Defense Council,

Inc., 467 U.S. 837 (1984)); AMP, Inc. v.

Gardner, 389 F.2d 825, 830 (2d Cir.),

cert. denied, sub nom. AMP, Inc. v.

Cohen, 393 U.S. 825 (1968) (upholding

FDA’s classification of appellant’s

product for tying off severed blood

vessels as a drug because, in part, the

court was reluctant to give a narrow

construction to the act, ‘‘touching the

public health as it does’’).)

These cases stand for two principles:

(1) FDA’s interpretations of its own

statute should be given deference, and

(2) the act should be interpreted

expansively to achieve its primary

purpose, protecting the public health.

These principles support the agency’s

determinations, carefully made after

applying its considerable scientific

expertise to the evaluation of the

evidence before it, that cigarettes and

smokeless tobacco are drug delivery

devices and that these combination

products are most appropriately

regulated using the device authorities of

the act. The agency’s decision regarding

tobacco products is consistent with

other determinations that the agency has

made, which have been upheld and

endorsed by the courts, to regulate

products in the most reasonable manner

that will result in the best protection of

the public health.

4. The Implementing Regulations and

the Delegations of Authority Reflect

FDA’s Interpretation That Section 503(g)

of the Act Authorizes the Agency to

Determine the Appropriate Regulatory

Authorities

FDA’s implementing regulations and

delegations of authority, adopted shortly

after passage of the SMDA, reflect the

agency’s contemporaneous

interpretation of section 503(g) of the act

as authorizing the agency to apply the

most appropriate regulatory authorities

to any given combination product. In

§ 3.2(e)(1), FDA defined a combination

product to include, in relevant part:

A product comprised of two or more

regulated components, i.e., drug/device,

biologic/device, drug/biologic, or drug/

device/biologic, that are physically,

chemically, or otherwise combined or mixed

and produced as a single entity[.]

In a final rule that published in the

Federal Register of November 21, 1991

(56 FR 58754), the agency explained

that ‘‘the term combination product

means a product comprised of two or

more different regulated entities, e.g.,

drug, device, or biologic * * *’’ or that

are produced together as a single entity,

packaged together, or used together to

achieve the intended effect. Thus, the

fact that a single product contains

elements of two or more regulated

entities does not change the regulatory

status of the individual elements. Each

‘‘different regulated entit[y]’’ of the

combination continues to satisfy the

criteria of its relevant statutory

definition; that is, a drug component

must satisfy the definition in section

201(g) of the act, and a device

component must comply with the

definition in section 201(h) of the act.

Because the elements of a combination

product meet more than one

jurisdictional definition, the agency may

apply one or more sets of regulatory

provisions to the product.

In the same issue of the Federal

Register in which the agency published

the final regulations governing

combination products, the agency

published delegations of authority that

allow the officials in CDER, CDRH, and

CBER to utilize the premarket approval

authorities for any product that is a

drug, device, biologic, or any

combination of two or more of these (56

FR 58758, November 21, 1991 (21 CFR

5.32)). These delegations allow the

officials of one Center to conduct a

premarket review of a product under

another Center’s regulatory authority,

thereby making it possible, for example,

for CDER to review a drug/device

combination product under the device

authorities. While the combination

product regulations created the

procedure for making the proper Center

assignment, the delegations were

necessary in order for FDA to exercise

its discretion to determine which

regulatory authority is most appropriate

and to make it possible to apply that

authority to review a particular product.

If the primary mode of action of a

combination product having drug and

device components resulted in the

assignment of the product to CDER, for

example, but the agency determined

that the device component of the

product presented the most important

regulatory and scientific questions, the

delegations make it possible for CDER

officials to conduct the premarket

review of the product under the device

provisions of the act.

The regulations and the delegations of

authority constitute the agency’s

contemporaneous interpretation of

section 503(g) of the act as granting the

agency discretion to choose the

premarket approval authority that

provides the best public health

protection. Such contemporaneous

interpretations by an agency are entitled

to considerable deference by the courts.

(See Young v. Community Nutrition

Institute, 476 U.S. 974 (1986).)

5. The Intercenter Agreements and

Administrative Precedent Recognize

That FDA May Determine Which

Regulatory Authority to Apply to a

Particular Product

In addition to the regulations and

delegations of authority implementing

section 503(g) of the act, FDA has also

adopted and made public three

guidance documents, entitled

‘‘Intercenter Agreements,’’ that describe

the agreements reached among the

Centers about regulatory pathways for

specified products or classes of products

as of October 31, 1991. (See Intercenter

Agreement Between the Center for

Biologics Evaluation and Research and

the Center for Devices and Radiological

Health; Intercenter Agreement Between

the Center for Drug Evaluation and

Research and the Center for Devices and

Radiological Health (the Drug/Device

Agreement); and Intercenter Agreement

Between the Center for Drug Evaluation

and Research and the Center for

Biologics Evaluation and Research.)

These documents detail which Center

generally will have the lead

responsibility for regulating particular

types of products. The Intercenter

Agreements also state which regulatory

authority usually will be applied to

specific products. For example, the

Drug/Device Agreement provides that a

device with the primary purpose of

delivering or aiding in the delivery of a

drug and distributed containing a drug

(i.e., ‘‘prefilled delivery system’’) will be

regulated by ‘‘CDER using drug

authorities and device authorities, as

necessary’’ (Drug/Device Agreement, p.

6). Examples given of such combination

products include a nebulizer, prefilled

syringe, and transdermal patch (Drug/

Device Agreement, p. 6). The Drug/

Device Agreement specifically provides

that such combination products may be

regulated under either the drug or
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44403

22A later section of the Drug/Device Agreement

states that a ‘‘device containing a drug substance as

a component with the primary purpose of the

combination product being to fulfill a drug purpose

is a combination product and will be regulated as

a drug by CDER.’’ While this is the approach that

FDA will usually take with such products, the

earlier language of the Drug/Device Agreement

expressly recognizes that FDA may use its device

authorities where appropriate, and as discussed in

the text, there are several examples of this type of

prefilled delivery system being regulated using the

device authorities.

device authorities, whichever is more

appropriate for a particular product. 22

FDA’s implementation of the

Intercenter Agreement reflects these

understandings. For example, one drug

delivery product that has been regulated

under the device authorities under the

Drug/Device Agreement is the prefilled,

intravenous infusion pump,

manufactured by two companies. These

are pumps designed to be sold prefilled

with a diluent, either a sodium chloride

solution or a dextrose solution. FDA

regulates the diluents in the pumps as

drugs under section 201(g)(1)(B) of the

act because they are intended for use in

the treatment of disease. The pumps are

combination products consisting of a

device component, the pump, and a

drug component, the diluent; and the

product’s purpose is to deliver the

diluent to be mixed by the doctor or

other health care provider attending the

patient with another drug substance for

infusion into the patient. These pumps

prefilled with diluents are clearly ‘‘a

device containing a drug substance as a

component with the primary purpose of

the combination product being to fulfill

a drug purpose’’ that would be regulated

as a drug according to the general

principle stated in the Drug/Device

Agreement (Drug/Device Agreement, p.

14). However, the agency exercised its

discretion and determined that these

drug delivery products should be

regulated under the device authorities.

The agency based its determination

on the fact that the drugs that were

delivered by the products, saline and

dextrose, are two ingredients very

commonly used in intravenous

infusions about which the agency had a

wealth of scientific information and

thorough regulatory experience. The

pumps, the device component of this

combination, however, operated on

novel design principles. Because the

device components of these

combination products were new and

raised significant regulatory questions,

the agency determined that the products

would receive the most appropriate

premarket review if the device

authorities were applied.

Another example of the agency’s use

of its discretion and its ability under the

guidance in the Intercenter Agreements

to make a sensible decision about

product assignment is its decision

regarding regulation of a catheter flush

solution containing a blood-thinning

drug and an antibiotic. The solution is

intended as a flush solution to prevent

the catheter (or tube) inserted into a

patient’s body from becoming clogged

with blood and to prevent dangerous

bacteria from growing in the catheter.

Under the Drug/Device Agreement, this

product would appear to fit into the

category of a ‘‘liquid * * * or other

similar formulation intended only to

serve as a component * * * to a device

with a primary mode of action that is

physical in nature [and] will be

regulated as a device by CDRH’’ (see

Drug/Device Agreement, p. 13). The

agency did determine that the product’s

premarket review would be conducted

under the device authorities, but it

assigned the review responsibility to

CDER. The decision to follow an

approach different from the one

generally suggested in the Drug/Device

Agreement was based on the fact that

the inclusion of the blood-thinning and

anti-infective drugs in the flush solution

represented an innovation in such

solutions and raised important scientific

and regulatory questions that were most

properly reviewed by the scientists in

CDER. Because CDER was assigned the

lead, the sponsor of this product was

informed that the clinical investigations

of this product should proceed under

the investigational drug provisions of

the act (section 505(i) of the act (21

U.S.C. 355(i)). This determination

tailored the act’s premarket review

provisions, incorporating the most

appropriate sections of both the drug

and device authorities without being

redundant, to the special features of this

original product.

The agency has thus in the past made

its jurisdiction decisions by determining

the most reasonable course of action to

protect public health given the scientific

questions presented by each product.

FDA considers essential its ability to

continue to assess the individual

circumstances of particular products.

This will allow the agency to respond to

technological developments, expanded

scientific understanding, or additional

factual information concerning a

specific product or class of products.

B. Cigarettes and Smokeless Tobacco

Have Both a Drug and a Device

Component and Are Therefore

Combination Products

As discussed in detail in the 1996

Jurisdictional Determination, the agency

has concluded that the nicotine in

cigarettes and smokeless tobacco is a

drug within the meaning of section

201(g)(1)(C) of the act. The agency has

also concluded that cigarettes and

smokeless tobacco contain, in addition

to the drug nicotine, delivery device

components that deliver a controlled

amount of nicotine to the body. Thus,

cigarettes and smokeless tobacco are

combination products that contain both

a ‘‘drug’’ and a ‘‘device.’’

The agency further concluded that

processed loose cigarette tobacco, which

is used by smokers who roll their own

cigarettes, is a combination product.

C. FDA’s Choice of Legal Authorities

1. FDA Will Regulate Cigarettes and

Smokeless Tobacco Under the Act’s

Device Authorities

Having established that cigarettes and

smokeless tobacco are combination

products consisting of both a drug

component and device components, the

agency has the discretion to choose

whether it will regulate these products

under the act’s drug authorities, device

authorities, or both if appropriate.

Making this determination requires FDA

to consider how the public health goals

of the act can be best accomplished.

The act’s drug and device provisions

have a common objective: To ensure the

safety and effectiveness of regulated

products. They also provide the agency

with similar authorities to regulate

drugs and devices. In certain ways,

however, the device provisions offer

FDA more flexibility. The Medical

Device Amendments of 1976 (the

Medical Device Amendments) were

enacted nearly 40 years after the act

itself. During that period of time,

Congress observed FDA’s efforts to

regulate devices under the authority of

the act, noting that the agency’s

authority over devices became

increasingly inadequate as the nature of

the devices on the market changed (H.

Rept. 94–853, 94th Cong., 2d sess., 6–10

(1976)).

In 1938 most of the devices in use

were ‘‘relatively simple items which

applied basic scientific concepts * * *’’

(H. Rept. 94–853, 6). However, by the

time the Medical Device Amendments

were enacted, the universe of device

products had evolved from primarily

simple products, such as tongue

depressors and bandages, to include a
44404 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

variety of scientifically and

technologically sophisticated products,

such as cardiac pacemakers, lasers, and

magnetic resonance imaging equipment.

This wide range of technology posed

many more varied regulatory concerns

than those posed by drugs, which as a

group of products are less diverse in

nature.

Congress recognized the need for

specific authority for devices that would

take into account ‘‘the great diversity

among the various medical devices and

their varying potentials for harm as well

as their potential benefit to improved

health’’ (S. Rept. 94–33, 94th Cong., 1st

sess., 10 (1975)). Thus, with the Medical

Device Amendments, Congress

enhanced FDA’s authority to tailor

regulatory controls, from an array of

statutory tools, to fit the particular

safety and effectiveness issues presented

by individual devices.

Because of this additional flexibility,

the agency has determined that the

device authorities provide the most

appropriate basis for regulating

cigarettes and smokeless tobacco.

Because millions of Americans are

addicted to cigarettes and smokeless

tobacco, regulation of these products

presents unique safety problems that

require careful, tailored solutions. The

Medical Device Amendments provide

the agency with regulatory options that

are well suited to the unique problems

presented by cigarettes and smokeless

tobacco.

Although the agency has determined

that the device authorities are the most

appropriate authorities for regulating

cigarettes and smokeless tobacco, the

agency disagrees with the comments

that suggest that the agency could not

regulate cigarettes and smokeless

tobacco as drugs. To the contrary, as

discussed in section II.D. of this

document, the agency could have used

its drug authorities to implement similar

types of controls on cigarettes and

smokeless tobacco as it is imposing

under the somewhat more flexible

device authorities.

2. Cigarettes and Smokeless Tobacco

Will be Subject to the Full Range of

Device Authorities

In regulating cigarettes and smokeless

tobacco, FDA will follow the regulatory

scheme created by Congress for devices.

Because the universe of devices is

extremely diverse, presenting a broad

spectrum of safety and effectiveness

issues, the Medical Device Amendments

include a wide range of regulatory

controls. Some of these controls, such as

the adulteration and misbranding

requirements, are applicable to all

devices, while others, such as premarket

approval and restrictions on sale,

distribution, and use, are to be applied

only where FDA concludes that they are

necessary to provide reasonable

assurance of safety and effectiveness for

particular devices. The Medical Device

Amendments are thus designed to allow

the agency to regulate individual

devices with controls that are tailored to

address the safety and effectiveness

problems raised by those devices.

As devices, cigarettes and smokeless

tobacco will be subject to all mandatory

provisions of the act, except where

exemption is permitted by statute and is

appropriate for these products. In

addition, cigarettes and smokeless

tobacco will be subject to other

discretionary provisions of the act that

the agency has concluded are necessary

to address the special safety issues

posed by these products.

The basic requirements of the act

applicable to all devices include:

Adulteration and misbranding

provisions (sections 501 and 502 of the

act (21 U.S.C. 351 and 352)), labeling

requirements (section 502),

establishment registration, device

listing, and premarket notification

(section 510 (21 U.S.C. 360)),

recordkeeping and reporting

requirements (section 519 (21 U.S.C.

360i)), and good manufacturing practice

(GMP) requirements (section 520(f)). As

described in more detail in section

II.C.4. of this document, FDA intends to

apply these requirements, where

appropriate, to cigarettes and smokeless

tobacco at a future time. In addition, the

act requires the agency to classify

devices into one of three classes.

Depending on the class into which a

product is classified, additional

regulatory requirements may apply:

Class I (general controls), class II

(special controls), and class III

(premarket approval). As described in

more detail in section II.C.5. of this

document, as the act contemplates, FDA

intends to classify cigarettes and

smokeless tobacco at a future time, and

will impose any additional

requirements that apply as a result of

their classification.

The agency has determined that the

safety of cigarettes and smokeless

tobacco cannot be assured without

restrictions on the sale, distribution, and

use of these products to children and

adolescents. Accordingly, FDA is

imposing restrictions under the

authority granted in section 520(e) of

the act.

(2) Several comments argued that the

regulatory requirements proposed by

FDA for cigarettes and smokeless

tobacco distort the regulatory scheme

for devices established by Congress.

These comments contended that FDA

has: (1) Selectively applied the

provisions of the Medical Device

Amendments; (2) inappropriately relied

on section 520(e) of the act (restrictions

on sale, distribution, or use) while

ignoring other mandatory provisions of

the act, such as classification; and (3)

determined that cigarettes and

smokeless tobacco are unsafe and yet

failed to invoke provisions of the act

that, according to the comments, require

the agency to remove them from the

market.

FDA disagrees with these comments.

As already described, FDA intends to

apply to cigarettes and smokeless

tobacco all of the mandatory provisions

of the Medical Device Amendments.

Thus, FDA is neither selectively

applying the provisions of the act nor

ignoring mandatory provisions.

Although FDA intends to impose on

cigarettes and smokeless tobacco all

requirements applicable to devices, the

act does not provide that these

requirements should all be imposed

immediately. Classification serves the

purpose of identifying which devices

need to be subject to special controls

(class II) or premarket approval (class

III) in addition to the general controls

applicable to all devices. Classification

requires FDA to institute a separate

rulemaking proceeding. The act does

not require the agency to classify a

device before general controls become

applicable to it. Rather, the general

controls provisions of the act apply to

all devices both before and after

classification and irrespective of the

class into which a device is ultimately

classified. Because the classification

process involves many steps and can

take years to complete, FDA does not

ordinarily complete the classification

process before regulating the device

under its general controls.

Moreover, the statute contains no

requirement that the agency complete a

classification rulemaking before

invoking the general controls that apply

to all devices. For example, each of the

literally thousands of medical devices

that have been classified by rulemaking

under section 513 of the act (21 U.S.C.

360c) were subject to the general

controls of the statute—such as the

provisions on adulteration,

misbranding, registration,

investigational device controls, and

GMP—in advance of the completion of

the classification rulemaking

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,

603 (D.C. Cir. 1985), cert. denied 474

U.S. 1062 (1986).) Indeed, in some

cases, the general controls provisions

were applicable to marketed devices for

many years before completion of

classification.

Consistent with the agency’s practice,

FDA has made a decision to apply the

general controls provisions of the act to

cigarettes and smokeless tobacco,

including restrictions on their

distribution, sale, and use under section

520(e) of the act, before classifying

cigarettes and smokeless tobacco. As

described in section II.C.5. of this

document, FDA will, in a future

rulemaking, classify cigarettes and

smokeless tobacco in accordance with

the procedures in section 513 of the act.

In the meantime, the general controls

will apply.

FDA also disagrees that the act

requires the agency to remove cigarettes

and smokeless tobacco from the market.

As described in the preamble to the

1995 proposed rule (60 FR 41314),

although cigarettes and smokeless

tobacco pose very grave risks, the

agency cannot conclude that removing

them from the market would most

effectively meet the statutory goal of

providing reasonable assurance of safety

and effectiveness. Because millions of

Americans are addicted to cigarettes and

smokeless tobacco, the consequences of

their removal from the market, as

discussed in greater detail in section

II.C.5. of this document, would include

adverse health effects from sudden

withdrawal, the likely development of a

black market, and the possibility that

the products that would be available

through a black market would pose

greater risks than those currently on the

market. None of the statutory sections

cited by the comments require the

agency to remove products from the

market where the agency concludes that

such action would be contrary to the

public health. Here, FDA has

determined that the unique safety issues

presented by highly addictive and longmarketed products like cigarettes and

smokeless tobacco can most effectively

be addressed by actions to prevent new

users from becoming addicted to these

devices.

In section II.C.3. of this document,

FDA discusses its authority to impose

restrictions on sale, distribution, and

use to prevent children and adolescents

from becoming addicted to cigarettes

and smokeless tobacco. In section II.C.4

of this document, FDA discusses

imposition of other general controls,

and, in section II.C.5 of this document,

FDA discusses classification of

cigarettes and smokeless tobacco.

3. The Restricted Device Provision

Authorizes FDA to Establish Access and

Advertising Restrictions

Congress provided FDA with

authority to prevent the use of a device

by those not competent to use it safely

in the restricted device provision

(section 520(e) of the act). Specifically,

section 520(e) of the act states in part:

(1) The [agency] may by regulation require

that a device be restricted to sale,

distribution, or use—

(A) only upon the written or oral

authorization of a practitioner licensed by

law to administer or use such device, or

(B) upon such other conditions as the

[agency] may prescribe in such regulation, if,

because of its potentiality for harmful effect

or the collateral measures necessary to its

use, the [agency] determines that there

cannot otherwise be reasonable assurance of

its safety and effectiveness.

Section 520(e) is one of the act’s

‘‘general controls’’ (see section

513(a)(1)(A) of the act). As a general

control, section 520(e) of the act can be

used by FDA to regulate any class of

device (section 513(a) of the act).

Because its applicability does not

depend upon the outcome of the

classification process, 520(e) of the act—

like the other general controls—can be

used by FDA to regulate a device prior

to the classification of the device.

In applying section 520(e) of the act

to restrict the sale, distribution, or use

of a device, FDA must find that without

the restriction ‘‘there cannot otherwise

be reasonable assurance of its safety and

effectiveness.’’ This provision requires

FDA to find that the restrictions in

section 520(e) of the act are necessary to

assure the safety and effectiveness of the

device, but FDA does not have to find

that the restrictions are sufficient to

assure safety and effectiveness. During

the classification process, FDA

determines whether additional controls

beyond section 520(e) of the act and the

other general controls applicable to all

devices are needed to assure the safety

and effectiveness of the device.

The restricted device provision in

section 520(e) of the act authorizes FDA

to adopt regulations that ensure that

children and adolescents, who by State

law are not competent to use cigarettes

and smokeless tobacco, will not be able

to obtain them. In particular, FDA has

determined that section 520(e) of the act

authorizes the access and advertising

restrictions in the final rule because

without these restrictions ‘‘there cannot

otherwise be reasonable assurance of

* * * safety * * *.’’

As described more fully later in this

section of this document, the agency’s

use of section 520(e) of the act in this

rule is consistent with the plain

language of section 520(e), the

legislative history, and the agency’s

prior use of section 520(e) in, for

example, restricting the sale,

distribution, and use of hearing aids (42

FR 9285, February 15, 1977, as amended

at 47 FR 9397 through 9398, March 5,

1982).

As discussed in section II.C.5. of this

document, the agency intends to classify

cigarettes and smokeless tobacco under

the procedures contained in section 513

of the act. The classification process is

the time at which the agency determines

what degree of regulation is necessary to

provide a ‘‘reasonable assurance of

safety and effectiveness’’ for a particular

product, such as tobacco products.

However, the act does not specify the

timing of the application of device

authorities, and the agency is therefore

able to issue restrictions under section

520(e) of the act prior to initiating the

classification process. The agency also

did so in its regulation of hearing aids.

In 1977, FDA adopted regulations under

section 520(e) of the act containing

restrictions on the sale, distribution, and

use of hearing aids (42 FR 9285,

February 15, 1977, as amended at 47 FR

9397 and 9398, March 5, 1982), but did

not classify these products until 1986

(51 FR 40378 at 40389, November 6,

1986).

FDA is following a similar course

here. The agency has determined that

unless measures are taken now to

prohibit the sale and promotion of these

products to young people under the age

of 18, there cannot otherwise be

reasonable assurance of safety.

Therefore, FDA is acting under section

520(e) of the act to restrict the sale,

distribution, and use of cigarettes and

smokeless tobacco.

a. The restricted device provision

authorizes FDA to prevent access to

persons who cannot use a device safely

or effectively. Section 520(e) of the act

is in part the device counterpart to

section 503(b), the act’s prescription

drug provision. Section 503(b)(1) of the

act, for instance, authorizes FDA to

restrict access to potentially dangerous

drugs by requiring that they be

dispensed ‘‘only upon a * * *

prescription of a practitioner licensed

by law to administer such a drug

* * *.’’ Similarly, section 520(e)(1)(A)

of the act authorizes FDA to restrict

access to potentially dangerous medical

devices ‘‘only upon the * * *

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

* * *.’’

The restricted device provision,

however, is significantly broader than

the prescription drug provision. Not

only may FDA restrict sale, distribution

and use by prescription, but it may do

so upon ‘‘such other conditions as [it]

may prescribe in such regulation’’

(section 520(e)(1)(B) of the act

(emphasis added)). There is no

counterpart to this ‘‘other conditions’’

authority in the prescription drug

provisions.

Section 520(e) of the act was designed

to deal with the risks that are created by

improper use of a device. The legislative

history of the Medical Device

Amendments specifically states that

section 520(e) of the act was intended to

‘‘supersede[ ]’’ and ‘‘add[ ]’’ to the

prescription authority derived from

section 503(b) of the act (H. Rept. 94–

853, 94th Cong. 2d sess., 24–25 (1976)).

This confirms that Congress intended to

give FDA broad authority to restrict

access to potentially dangerous devices.

(See also ‘‘Medical Device Regulation:

The FDA’s Neglected Child,’’ Report of

the Subcommittee on Oversight and

Investigations, House Committee on

Energy and Commerce, 98th Cong., 1st

sess., 31 (1985).)

Congress’ use of the phrase ‘‘could

include’’ indicates that this discussion

was intended to be illustrative rather

than exhaustive. The examples of

possible restrictions described in the

legislative history demonstrate that

Congress intended to give the agency

authority to restrict access to devices in

a variety of ways, depending upon the

type of risk posed by the device and the

measures needed to ensure that the

device is not used inappropriately. In

short, the legislative history supports

the statutory language and establishes

that Congress intended FDA’s authority

to restrict the sale, distribution, and use

of devices ‘‘upon such other conditions

as the [agency] may prescribe’’ to be a

flexible authority that allows FDA to

tailor restrictions on sale, distribution,

and use according to the circumstances

posed by the device being regulated.

b. The restricted device provision also

authorizes FDA to restrict promotional

activities that encourage uses that are

inconsistent with the regulatory scheme.

Section 520(e) of the act is a broad grant

of authority. The Secretary, and by

delegation FDA, is authorized to restrict

the sale, distribution, or use of a device

‘‘upon such other conditions as the

[agency] may prescribe in such

regulation.’’ This broad grant of

authority covers all aspects of the sale

of a device, including the offer of sale.

How a device is sold involves many

elements. It involves not only the

circumstances surrounding the

exchange of money for the device, but

also whether the device must be sold

only on the authorization of a

practitioner, whether age limits on users

are appropriately established, and how

the device is represented to potential

users. It is in the latter regard that

advertising plays a role and may be

restricted under section 520(e) of the

act.

The Supreme Court cases on

commercial speech recognize that a

State’s interest in regulating sales

extends to advertising promoting the

sale. In Edenfield v. Fane, 507 U.S. 761,

767 (1993), the Supreme Court said that

commercial transactions are ‘‘linked

inextricably’’ with the commercial

speech that proposes the transaction,

and that the State’s interest in regulating

the underlying transaction may give it a

concomitant interest in the expression

itself. Likewise, under section 520(e) of

the act, the sale of a device is ‘‘linked

inextricably’’ to the advertising that

promotes the sale, giving FDA

concomitant authority to impose

necessary restrictions on the

advertising.

FDA’s regulation of hearing aids

exemplifies this aspect of section 520(e)

of the act. One of the most important

purposes of the restrictions on sale,

distribution, and use imposed on

hearing aids was to respond to

widespread inappropriate promotion of

hearing aids to consumers for whom the

devices are not effective (see 41 FR

16756 at 16757 (April 21, 1976)). In that

regulation, in addition to restricting

sales to persons who had been

medically evaluated for hearing aids,

FDA relied upon section 520(e) of the

act to require that an instructional

brochure be distributed to each

prospective hearing aid user. These

brochures described the adverse

reactions and side effects associated

with hearing aids and encouraged

prospective users to seek medical

evaluations. The distribution of the

brochure was required as a means of

ensuring that advertising for hearing

aids did not inappropriately induce

persons who had not been medically

evaluated to purchase the hearing aids.

The agency’s authority to use section

520(e) of the act to restrict advertising

is especially strong when limits on

advertising are necessary to ensure that

advertising does not undermine the

conditions on sale, distribution, or use

that the agency adopts under section

520(e). The agency should not be—and

under section 520(e) of the act is not—

powerless to prevent advertising that

encourages sales that the agency has

barred under section 520(e). Rather, the

agency may use its authority to impose

‘‘such other conditions as the [agency]

may prescribe’’ to restrict advertising

that directly undercuts the agency’s

restrictions on sale, distribution, and

use.

c. The restricted device provision

authorizes FDA’s restrictions on youth

access and on advertising designed to

make cigarettes and smokeless tobacco

appealing to youth. The restricted

device provision authorizes the

restrictions on youth access and on

advertising in this final rule. Section

520(e) of the act contemplates these

types of restrictions on sale and

distribution. Moreover, they are

necessary if FDA ever were to be able

to find that there is a reasonable

assurance of the safety of cigarettes and

smokeless tobacco under the act. As

section 520(e) of the act provides,

without these restrictions ‘‘there cannot

otherwise be reasonable assurance of

safety and effectiveness.’’

The provisions in the final rule that

restrict the access of minors to cigarettes

and smokeless tobacco are clearly

restrictions on ‘‘sale, distribution, or

use’’ of a device within the meaning of

section 520(e) of the act. FDA’s access

restrictions are designed to ensure that

children and adolescents are unable to

have access to cigarettes and smokeless

tobacco. These restrictions directly limit

the sale of cigarettes and smokeless

tobacco by, for instance, banning the

sale of these products to persons under

18. They also directly limit the

distribution of cigarettes and smokeless

tobacco by, for instance, banning the

distribution of free samples. Hence,

these access restrictions are within the

plain language of section 520(e) of the

act.

The advertising restrictions in the

final rule are also among the types of

restriction that section 520(e) of the act

authorizes. As in the case of the

restrictions imposed on hearing aids,

the advertising restrictions are designed

to address inappropriate promotion of

cigarettes and smokeless tobacco to

individuals for whom the potentiality

for harm is particularly great. The

advertising restrictions are necessary to

prevent advertising by the

manufacturers of cigarettes and

smokeless tobacco from undercutting

the access restrictions. The effectiveness

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

manufacturers were free to entice

children and adolescents to circumvent

the access restrictions. In this

circumstance, restrictions on advertising

are properly treated as restrictions on

‘‘sale, distribution, or use’’ within the

meaning of section 520(e) of the act.

The final requirement of section

520(e) of the act is that the agency

establish that without the restrictions on

the device ‘‘there cannot otherwise be

reasonable assurance of its safety and

effectiveness.’’ This requirement is

plainly met in the case of the access and

advertising restrictions for cigarettes

and smokeless tobacco. Without

effective restrictions on sale and

distribution of cigarettes and smokeless

tobacco to children and adolescents

under 18, young people will continue to

become addicted to these products and,

once addicted, will as adults continue to

use them in spite of their potential for

harmful effects. As stated in section I.B.

of this document, the earlier tobacco use

begins, the greater the risk of disease

caused by, or associated with, the use of

these products. Thus, there can be no

doubt that without the access and

advertising restrictions imposed in this

final rule, no finding that there is a

reasonable assurance of safety for

cigarettes and smokeless tobacco would

be possible.

Although FDA finds that the

restrictions under section 520(e) of the

act are necessary for providing a

reasonable assurance of safety, FDA is

not required under section 520(e) of the

act to show that the restrictions are

sufficient by themselves to provide a

reasonable assurance of safety or

effectiveness. Under section 520(e) of

the act, all that FDA must establish is

that without the section 520(e)

restrictions, the device could not be

found to be safe.

It is in the classification process—not

in the application of section 520(e) of

the act—that FDA must determine what

controls are necessary if the agency is to

find that there is a reasonable assurance

that a device is safe and effective for its

intended use. As discussed in section

II.C.5. of this document, FDA intends to

classify cigarettes and smokeless

tobacco in a future rulemaking.

d. Response to other comments. FDA

received several comments on whether

section 520(e) of the act authorizes

restrictions on youth access and

advertising. Most of the comments were

from tobacco trade associations, tobacco

companies, and advertisers, arguing that

section 520(e) of the act does not

provide authority for either the access or

advertising restrictions. A comment

from a public interest group, however,

fully supported FDA’s reliance on

section 520(e). FDA also received a large

number of comments from a broad

cross-section of the public that

expressed support for, or opposition to,

the proposed restrictions without

delving into the legal issues analyzed in

the 1995 proposed rule.

(3) One comment said that FDA uses

the term ‘‘conditions’’ in section

520(e)(1)(B) of the act to mean any

regulatory imposition that the agency

believes would bring about an

improvement in safety in some way

related to the device in question. The

comment argued that FDA has used this

term in such an overinclusive way that

it would authorize FDA to impose many

of the requirements that Congress

imposed in other provisions of the act.

For example, the comment argued that

under FDA’s interpretation it could

require premarket approval of a device

with a potentiality for harmful effect as

a ‘‘condition’’ on the ‘‘sale, distribution,

or use’’ of the device, on the theory that

without premarket approval it would be

impossible for there to be ‘‘reasonable

assurance of its safety.’’

FDA disagrees with this comment.

FDA’s interpretation of section 520(e) of

the act does not create any redundancy

with the other provisions of the Medical

Device Amendments. Most of the

general controls authorized under the

act, and the major thrust of the

provisions on performance standards

and premarket approval, are geared

toward ensuring that finished devices,

when ready for use, will be free from

defects and will provide a reasonable

assurance of safety and effectiveness for

their labeled use. Restrictions under

section 520(e) of the act, on the other

hand, are imposed because the device’s

‘‘potentiality for harmful effect or the

collateral measures necessary to its

use,’’ and the determination that,

without such restrictions, there cannot

otherwise be a reasonable assurance of

safety and effectiveness. The restrictions

under section 520(e) of the act on

cigarettes and smokeless tobacco focus

on those who may not purchase and use

these products rather than on those who

will be using the products. Without

successful restrictions on sale,

distribution, and use of cigarettes and

smokeless tobacco to children and

adolescents under 18, there will never

be reasonable assurance of the safety of

these products because they would

continue to be available to these young

people, who, by State law, are not

competent to use them.

(4) With regard to access, industry

comments contended that FDA’s

authority under the provisions of the act

relating to restricted devices was

intended to be no broader than its

prescription drug authority and,

accordingly, could not extend to

restrictions such as those in the 1995

proposed rule.

FDA disagrees with this view and

believes that it is unsupported by the

clear language of the act and the

legislative history (see H. Rept. 94–853,

94th Cong., 2d. sess., 24–25 (1976)). Had

Congress meant for the authority

granted FDA under section 520(e) of the

act to be no broader than the authority

granted in section 503(b)(1) of the act to

limit drugs to prescription use, it could

simply have amended section 503(b)(1)

of the act to add ‘‘or device’’ after

‘‘drug’’ each time the term is used.

Indeed, as discussed in Becton,

Dickinson and Company v. Food and

Drug Administration, 589 F.2d 1175 (2d

Cir. 1978) that approach was the one

used in early versions of the legislation

that became the 1976 amendments but

was abandoned in favor of the broader

‘‘restricted device’’ approach that has

been a part of the law for 20 years. The

plain language of the enacted provision

contains no limitation on the types of

restrictions that can be imposed and

certainly is not limited by its terms to

restriction to prescription use.

Moreover, as previously discussed, the

legislative history specifically states that

the agency’s authority under section

520(e) of the act is broader than its

authority under the prescription drug

provisions (H. Rept. 94–853, 94th Cong.,

2d sess., 24–25, 1976).

(5) An industry comment contended

that ‘‘FDA uses what is merely the

medical device version of prescription

drug status as the sole legal justification

for an elaborate system of controls far

broader and more intrusive than is

authorized even for true medical

devices.’’

As discussed in section II.C.3. of this

document, FDA’s restricted device

authority is significantly broader than

suggested by this comment. Given the

potentiality for harm from cigarettes and

smokeless tobacco, FDA has ample

authority to impose the conditions on

their sale, distribution, and use that it is

adopting.

As is the case with other medical

devices, cigarettes and smokeless

tobacco are subject to those regulatory

controls that are appropriate for medical

devices generally (e.g., registration,

labeling, and inspection), along with

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

restrictions and advertising controls).

Thus, FDA is treating cigarettes and

smokeless tobacco in a manner that is

consistent with how it treats other

medical devices.

(6) Turning to the advertising

restrictions, several comments argued

that section 520(e) of the act authorizes

only restrictions on ‘‘sale, distribution,

or use,’’ and that it does not include the

words ‘‘offer for sale.’’ These comments

pointed out that Congress used the

words ‘‘offer for sale’’ elsewhere in the

act (sections 301(m) and (o) (21 U.S.C.

331(m) and (o)) and 503(c)), and they

therefore drew the inference that if

Congress had intended section 520(e) of

the act to authorize restrictions on how

medical devices are offered for sale, it

would have made this fact explicit.

FDA is not persuaded by this

argument. In each of the instances cited

in the comments where Congress has

included the phrase ‘‘offer for sale’’ in

the act, it was defining a prohibited act,

that is, an act whose commission would

violate the statute, in which the

prohibition focused, at least in part, on

the sale of a food, drug, or device. By

including the phrase ‘‘offered for sale’’

in these provisions, Congress sought to

ensure that the statutory objective of

preventing the actual sale of products

where advertising or labeling does not

meet the statutory requirement would

be met by including products merely

‘‘offered for sale’’ within the statute’s

coverage. The agency notes that,

similarly, the words ‘‘offered for sale’’

appear in section 502(q) of the act, the

provision that the agency would use to

enforce section 520(e) of the act. Thus,

Congress did in fact include ‘‘offer for

sale’’ in the scope of conduct regulated

under section 520(e) of the act and its

enforcement clause, section 502(q). The

comment’s argument, however, misses

the significance of section 520(e) of the

act.

As discussed in section II.C.3. of this

document, the authority to restrict the

‘‘sale, distribution, or use’’ of a device

includes the authority to restrict the

circumstances surrounding the sale and

distribution of the device, including the

device’s advertising. The use of section

520(e) of the act to restrict advertising

is particularly appropriate when the

advertising restrictions are necessary to

ensure that access restrictions issued

under section 520(e) of the act are not

undermined by a manufacturer’s

advertising. Here, FDA is restricting the

sale of cigarettes and smokeless tobacco

because of their potential harmful

effects on individuals who start using

them before the age of 18 and who lack

the competency to decide to do so. FDA

has determined, as explained in sections

VI.B. and D. of this document, that how

cigarettes and smokeless tobacco are

advertised plays a material role in the

decision of children and adolescents

under 18 to purchase and use these

products. Thus, if the restrictions on

how cigarettes are sold, distributed, and

used that FDA is adopting under section

520(e) of the act are to be effective, they

must include restrictions on how

cigarettes and smokeless tobacco are

advertised.

(7) The comments also argued that

section 520(e) of the act on its face says

nothing about advertising. Thus,

according to these comments, FDA’s

authority to regulate the advertising of

restricted devices is limited by section

502(q)(1) of the act, which prohibits

false or misleading advertising, and

section 502(r) of the act, which

prescribes certain statements in the

advertising for these devices. One

comment implied that FDA’s

interpretation of section 520(e)(1) of the

act had rendered section 502(q)(1) and

(r) of the act superfluous.

FDA is not persuaded by these

comments. The interpretation of section

520(e) of the act that FDA has adopted

in this proceeding would not render

either section 502(q)(1) or (r) of the act

inoperative or superfluous. These

sections impose requirements on

advertising of the permissible sale,

distribution, and use of restricted

devices. They set out conditions on

advertising to which manufacturers

must adhere in offering these devices for

sale. Section 520(e) of the act, on the

other hand, is the means by which FDA

demarcates permissible and

nonpermissible conditions of sale,

distribution, and use of these devices. In

so doing, as has been explained in

response to the previous comments,

FDA may by regulation impose limits on

advertising that it finds are necessary to

ensure that advertising is not used to

undermine the conditions on sale,

distribution, or use that the agency

adopts. This is what §§ 897.30,

897.32(a), and 897.34, the regulations

that set out the restrictions on

advertising, are designed to accomplish.

In fact, section 502(q)(1) of the act

reinforces this authority because any

advertisement that promotes the sale of

a device for a use that is inconsistent

with a restriction established by FDA

would be false and misleading because

it would represent that the device is

appropriate for that use, which would

not be the case.

Thus, Congress clearly intended

section 502(q)(1) and (r) of the act and

any restrictions that FDA adopts under

section 520(e) of the act to be

complementary. This intent is further

evidenced by the fact that section

502(q)(2) of the act provides that a

restricted device is misbranded if it is

sold, distributed, or used in violation of

regulations prescribed under section

520(e) of the act. Section 502(q)(2) of the

act thus complements sections 502(q)(1)

and (r) of the act, which, as previously

explained, address different aspects of

the regulation of restricted devices than

does section 520(e) of the act.

FDA’s interpretation of section 520(e)

of the act accordingly does not render

either section 502(q)(1) or (r) of the act

superfluous. Rather, the three

provisions support and reinforce each

other.

(8) An additional argument advanced

by two tobacco trade associations was

that the interpretation of section

520(e)(1)(B) of the act, which authorizes

FDA to restrict the sale of a device upon

such ‘‘other conditions’’ as it deems

necessary, is governed and limited by

the rule of ejusdem generis. This rule of

statutory construction provides that,

where general words follow an

enumeration of persons or things of a

particular and specific meaning, such

general words are not to be construed in

their widest extent but are to be held as

applying to only persons or things of the

same general kind or class as those

specifically mentioned. Thus, the

comment argued that here, ejusdem

generis limits the scope of ‘‘other

conditions’’ in section 520(e)(1)(B) of

the act to restrictions similar in nature

to the restriction to prescription use in

section 520(e)(1)(A) of the act. The

comment argued that it would be totally

inconsistent with the rule of ejusdem

generis to expand the scope of ‘‘other

conditions’’ to include a provision as

dissimilar to a prescription requirement

as a restriction on advertising. FDA does

not agree that ejusdem generis is

controlling, or that it has any

application here. In Norfolk & Western

v. American Train Dispatchers Ass’n,

the Supreme Court held that this canon

does not control ‘‘when the whole

context dictates a different conclusion’’

(499 U.S. 117, 129 (1991)). The context

involving section 520(e) of the act does

not support the application of ejusdem

generis to it. There is no indication that

Congress thought that it was providing

a list of similar measures in section

520(e)(1)(A) and (e)(1)(B) of the act. In

fact, the face of the act is to the contrary.

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

device, Congress granted the Secretary

broad authority to impose ‘‘such other

conditions as [she] may prescribe in

such regulation.’’ Congress, rather than

limiting the Secretary’s options, left it to

the Secretary to decide what conditions

are necessary for a particular device.

Nor does the legislative history support

the comments. As stated in section

II.C.3.a. of this document, Congress

intended section 520(e) of the act to add

to the agency’s authority beyond

providing for use by prescription only

(H. Rept. 94–853, 94th Cong., 2d sess.,

24–25 (1976)).

Moreover, the ‘‘or’’ connecting section

520(e)(1)(A) of the act with section

520(e)(1)(B) is properly read here as

disjunctive rather than conjunctive. (See

Garcia v. United States, 469 U.S. 70, 73

(1984).) Section 520(e) of the act is

intended to authorize such conditions

on the sale, distribution, or use of a

device as are necessary to ensure that

the device is not improperly used and

without which a reasonable assurance of

its safety and effectiveness cannot be

provided. There is no basis on the face

of the act or in the legislative history to

conclude that Congress was trying to

limit the conditions that FDA could

impose to achieve that end (other than

the admonition not to base a physician

restriction on board certification).

(9) One comment argued that the

interpretation of section 520(e) of the act

that FDA is advancing in this

proceeding is contrary to the

interpretation that the agency offered in

imposing restrictions on hearing aids in

1977. The comment pointed out that

FDA stated at that time: ‘‘The

Commissioner notes, however, that the

[Act] regulates the safety * * * of the

[device] itself’’ (42 FR 9286 at 9287,

February 15, 1977). The comment

asserted that, for this reason, FDA

concluded that it could not prescribe

competency standards for hearing

health professionals, fix the price of

hearing aids, or control the promotional

practices of hearing aid dispensers, all

matters that were being handled by the

Federal Trade Commission (FTC) (42 FR

9286 at 9287). The comment argued

that, for the same reasons, FDA may not,

under section 520(e) of the act, regulate

attire, contests, or athletic or cultural

events.

FDA does not agree that the hearing

aid proceeding provides any support for

the view that the agency has been

inconsistent in its interpretation of

section 520(e) of the act. In that

proceeding, FDA was aware that FTC

had developed a proposed trade

regulation rule that included a

prohibition of certain selling techniques

(42 FR 9286 at 9287). FDA said that it

was avoiding any duplication of effort

with FTC. Thus, it was not necessary for

FDA to consider the extent of its

authority to specifically regulate selling

techniques of hearing aid dispensers.

Contrary to the comment’s assertion,

this proceeding is consistent with the

hearing aid proceeding. Although FDA

did not duplicate FTC’s effort and

directly regulate selling techniques,

FDA imposed various restrictions that

were tailored to restrict inappropriate

promotion of hearing aids including

requiring a medical evaluation before

purchase and distribution of a user

instructional brochure. In the case of

cigarettes and smokeless tobacco, FDA

is imposing restrictions that are tailored

to promotion of tobacco products to

ensure that advertising does not induce

the use of cigarettes and smokeless

tobacco by children and adolescents

under 18.

(10) Finally, several comments argued

that FDA lacks statutory authority for

the advertising restrictions that it is

imposing. Some of these comments

sought to analogize this rulemaking to

American Pharmaceutical Ass’n v.

Weinberger, 377 F. Supp. 824, 831

(D.D.C. 1974), aff’d sub nom. American

Pharmaceutical Ass’n v. Mathews, 530

F.2d 1054 (D.C. Cir. 1976) (per curiam).

That case involved an attempt by FDA

to limit the distribution of methadone to

certain designated facilities under the

drug authorities of the act. The court

held that the statutory drug authority

did not authorize the agency to impose

these limitations on the distribution of

methadone, even though methadone

posed unique problems of medical

judgement, law enforcement, and public

policy.

FDA regards the American

Pharmaceutical Ass’n case as a

questionable precedent. The case

predates both the Supreme Court’s

decision in Chevron U.S.A., Inc. v.

Natural Resources Defense Council, 467

U.S. 837 (1984), and the Medical Device

Amendments. In Chevron, the Court

stated that ‘‘considerable weight should

be accorded to an executive

department’s construction of a statutory

scheme it is entrusted to administer

* * *’’ (467 U.S. at 844). Moreover,

when Congress enacted section 520(e) of

the act, one of its objectives was to

provide FDA with precisely the kind of

authority over medical devices that the

court found that the agency did not have

over drugs in American Pharmaceutical

Ass’n. Thus, FDA now has explicit

authority under section 520(e) of the act

to impose conditions on the sale,

distribution, and use of a medical

device to prevent its misuse, including

the access and advertising restrictions in

the final rule. FDA is imposing controls

on the sale of cigarettes and smokeless

tobacco to ensure that individuals under

18 will not be able to purchase them.

Further, to ensure that these controls on

sale, distribution, and use are not

undermined, FDA has found that they

must include restrictions on how these

products are advertised, so that

individuals under 18 are not encouraged

to purchase or use them. These actions

are consistent with the language and

purpose of section 520(e) of the act.

4. Application of Other Device

Authorities

As described in section II.C.2. of this

document, FDA intends to follow its

normal course and apply the ‘‘general

controls’’ provisions of the Medical

Device Amendments to cigarettes and

smokeless tobacco pending

classification of these products. The

general controls authorized by the

Medical Device Amendments include

adulteration and misbranding (sections

501 and 502 of the act), establishment

registration, device listing, and

premarket notification (section 510),

labeling requirements (section 502),

recordkeeping and reporting

requirements (section 519), and GMP

(sections 501 and 520(f)).

(11) Tobacco industry comments

claimed that FDA had ignored a number

of mandatory provisions of the act

applicable to devices, ‘‘presumably

because they again recognize that those

provisions would mean the prohibition

of tobacco sales.’’ The comments also

asserted that FDA had picked and

chosen among statutory provisions and

had misinterpreted Heckler v. Chaney,

470 U.S. 821 (1985), as authorizing this

selective regulatory approach. These

comments also argued that FDA had

ignored section 520(a) of the act, which

provides that the adulteration,

misbranding, and records and reports

requirements are applicable to devices

until the applicability of these

requirements is changed by an action

under the classification, premarket

approval, standard-setting, or

investigational device provisions of the

act.

The agency disagrees with these

comments. FDA is applying to cigarettes

and smokeless tobacco the general

controls applicable to all devices.

In the following discussion, the

agency elaborates on the applicability of

the general controls provisions to
44410 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

cigarettes and smokeless tobacco, and

on matters the agency has reconsidered

in response to comments (the

applicability of labeling requirements to

cigarettes and smokeless tobacco is

discussed in sections V. and VI. of this

document). Overall, FDA believes that it

has developed a regulatory system for

cigarettes and smokeless tobacco that is

consistent with the statutory scheme

and the record of this rulemaking.

a. Adulteration and misbranding.

Cigarettes and smokeless tobacco will be

subject to the adulteration and

misbranding provisions in sections 501

and 502 of the act, and the

implementing regulations, with one

exception that is permitted by statute.

Section 502(f) of the act authorizes the

agency to grant exemptions from section

502(f)(1) of the act under certain

circumstances. As described in section

V.E. of this document, FDA has

determined that an exemption from

section 502(f)(1) of the act is appropriate

for cigarettes and smokeless tobacco. In

addition, section VI.E.6. of this

document also contains a more detailed

description of the applicability of

specific labeling requirements to

cigarettes and smokeless tobacco.

The adulteration and misbranding

provisions are largely self-executing and

do not require the agency to impose

requirements by regulation.

b. Device registration and listing.

Section 510 of the act and part 807 (21

CFR part 807) of the regulations require

that device manufacturers and importers

register their establishments with the

agency. Every year an annual

registration form is sent to all registered

establishments to be completed and

returned to the agency (§ 807.22(a)). Any

significant changes of information to the

original must be reported to FDA within

30 days of the change (§ 807.26).

Manufacturers are also required to list

their devices that are in commercial

distribution in the United States (part

807). Foreign manufacturers may, but

are not required to, register (§ 807.40).

However, they are required to list their

devices (§ 807.40(b)). Manufacturers are

required to update their listing if there

are significant changes to listing

information.

Manufacturers of cigarettes and

smokeless tobacco will be subject to the

establishment registration and device

listing requirements in section 510 of

the act and part 807 of FDA’s

regulations. The application of these

provisions to cigarettes and smokeless

tobacco derives from their status under

the device provisions of the act and

does not require rulemaking by the

agency.

Section 510(k) of the act requires

submission of a premarket notification

to the agency whenever a manufacturer

markets a device for the first time,

whenever there is a major change in the

intended use of an already marketed

device, or whenever an already

marketed device is to be modified in a

way that could significantly alter its

safety or effectiveness (§ 807.81). The

device may not be commercially

distributed unless the agency issues an

order finding the device substantially

equivalent to one or more predicate

devices already legally marketed in the

United States for which premarket

approval is not required (section 513(i)

of the act (§ 807.100), or unless the

agency approves a premarket approval

application for a device subject to an

approval requirement under section 515

of the act (21 U.S.C. 360(e)). Substantial

equivalence means that a device has the

same intended use and the same

technological characteristics as the

predicate device; or has the same

technological characteristics, but it can

be demonstrated that the device is as

safe and effective as the predicate

device and does not raise different

questions regarding safety and

effectiveness (section 513(i) of the act).

The premarket notification submission

must include either a summary of the

safety and effectiveness information

upon which a substantial equivalence

determination may be based, or state

that safety and effectiveness data will be

made available to anyone upon request

(section 513(i)(3)(A) of the act (21 U.S.C.

360c(i)(3)(A)), and §§ 807.87(h) and

807.92).

c. Records and reports. Section 519 of

the act contains several requirements

relating to the keeping of records and

making of reports on devices. In

addition to implementing the specific

requirements of the act, the agency has

used its authority under section 519 of

the act to issue several regulations. As

nicotine delivery devices, which are

drug-device combination products that

FDA is regulating under its device

authorities, cigarettes and smokeless

tobacco are subject to the requirements

of section 519 of the act and the

implementing regulations unless

otherwise exempted.

Section 519(a) of the act requires

manufacturers, importers, and

distributors of devices to establish and

maintain records, and make reports and

other information available to the

agency, to ensure that a device is not

adulterated or misbranded and to

otherwise ensure its safety and

effectiveness. Similarly, section 519(b)

of the act requires medical device user

facilities to make reports to device

manufacturers and the agency when

they become aware of information

suggesting that a device has caused or

contributed to a death, serious injury, or

serious illness. Under this authority, the

agency has issued part 803 (21 CFR part

803), on medical device reporting, and

part 804 (21 CFR part 804), on medical

device distributor reporting (the MDR

requirements). These regulations were

recently amended by a final rule

published in the Federal Register of

December 11, 1995 (60 FR 63578) (the

1995 reporting requirements final rule),

reflecting changes in the reporting

requirements of section 519 of the act

that were mandated by the SMDA and

the Medical Device Amendments of

1992.

The 1995 proposed rule would have

amended parts 803 and 804 to exempt

cigarettes and smokeless tobacco from

the MDR requirements. These proposed

exemptions were based on the fact that

‘‘the adverse health effects attributable

to cigarettes and smokeless tobacco

products are extensive and welldocumented’’ (60 FR 41314 at 41342).

The agency stated that it did not

anticipate any real benefit in requiring

manufacturers and distributors of these

products to report such information

(Id.).

(12) The agency received several

comments criticizing this proposed

exemption. One comment from a trade

association stated that, although it

disagreed with the agency’s

classification of cigarettes as medical

devices, the agency had no authority to

exempt manufacturers from this

reporting requirement. This trade

association also stated that, because the

agency has concluded that cigarettes are

not safe for individual users, this

exemption cannot be reconciled with

the standard under section 519(c) of the

act for exempting this product. (Section

519(c)(3) of the act provides for

exemptions upon a finding that

compliance with recordkeeping and

reporting is not necessary to ensure that

a device is not adulterated or

misbranded or to otherwise ensure its

safety and effectiveness.) Another trade

association claimed that the agency did

not follow the proper exemption

procedures under the act. A trade

association also noted that the agency

did not propose to require such user

facility reports for cigarettes and also

noted that such reports are not

‘‘suitable’’ for cigarettes.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44411

In view of these comments, the

agency has reconsidered its tentative

position regarding the application of the

MDR requirements in parts 803 and 804.

The adverse health effects attributable to

these products are extensive and welldocumented. As a result, the cost of

processing the enormously high volume

of MDR reports related to the use of

cigarettes and smokeless tobacco would

likely be prohibitive in light of the small

benefit to be gained from reports

documenting adverse health effects

already known to the agency.

Nevertheless, there would be a benefit

to receiving information regarding

adverse events that are not welldocumented and thus, not well-known

or anticipated. Therefore, the agency has

determined that it will require MDR

reporting in certain limited

circumstances, and is amending

§§ 803.19 and 804.25 of its regulations

to make this clear.

In the preamble to the 1995 reporting

requirements final rule, the agency

clarified that it may grant a written

exemption, variance, or alternative to

some or all of the MDR requirements

‘‘when it determines compliance with

all MDR requirements is not necessary

to protect the public health’’ (60 FR

63578 at 63592). The agency cited, as an

example for an appropriate exemption,

devices for which ‘‘adverse events that

are known and well documented, are

occurring at a normal rate, and do not

justify the initiation of remedial action

* * *’’ (Id.).

To limit the volume of reports that

could otherwise be required, the agency

is modifying the MDR requirements for

adverse events relating to tobacco. The

agency has added § 803.19(f) to the

regulation’s ‘‘Exemption, variances, and

alternative reporting requirements’’

section in order to limit the medical

device reports concerning cigarettes and

smokeless tobacco; specifically, new

paragraph (f) requires reports from

manufacturers only for those adverse

events related to contamination, a

change in any ingredient or any

manufacturing process, or any serious

adverse event that is not well-known or

well-documented by the scientific

community.

The agency notes that user facilities

are not likely to have direct knowledge

of even these limited adverse events

required to be reported by

manufacturers. Therefore, the agency is

adding § 897.19(g) to exempt user

facilities from the MDR requirements

relating to cigarettes and smokeless

tobacco.

For similar reasons, FDA is also

modifying the MDR requirements for

distributors of cigarettes and smokeless

tobacco. Because distributors handle

these products, break open cartons, and

even affix the tax stamp, the agency

believes that distributors could be

responsible for, or aware of,

contamination of these products. The

agency does not believe, however, that

distributors are likely to have direct

knowledge of any change in ingredient

or manufacturing process or any serious

adverse event that is not well-known or

well-documented by the scientific

community. Therefore, the agency is

limiting the MDR requirements for

distributors to require reports

concerning cigarettes and smokeless

tobacco only for adverse events relating

to contamination.

The agency notes that it has granted

similar variances in the past for

circumstances that justify modifications

to the MDR requirements and has issued

guidance that establishes criteria for

modified reporting. Examples where

reporting has been modified include

events involving health care

professionals being stuck by needles

and certain events involving

defibrillators. These modifications were

made in order to clarify which events

would provide valuable information to

the agency given the inherently risky

circumstances surrounding the use of

these devices. A variance from the MDR

requirements has also been granted to

the manufacturers of breast implants in

order to limit the frequency of reports

for events already known to the agency.

(13) Industry comments also

questioned why FDA had not proposed

to apply device tracking and premarket

surveillance provisions to cigarettes and

smokeless tobacco. Section 519(e) of the

act, governing device tracking, applies

only to products that are permanently

implantable, life-sustaining or lifesupporting, or have been designated by

the agency to be tracked. Cigarettes and

smokeless tobacco do not fall within the

first two categories, and the agency has

not designated them for tracking.

For the reasons cited in the previous

discussion of 519(e) of the act,

postmarket surveillance will not be

required unless, at a future date, the

agency specifically designates these

products under section 522 of the act

(21 U.S.C. 360l).

Section 519(f) of the act, which

requires FDA to issue regulations to

require reports on device removals and

corrections, will apply to

manufacturers, importers, and

distributors of cigarettes and smokeless

tobacco. To implement section 519(f) of

the act, FDA issued a proposed rule in

the Federal Register of March 23, 1994

(59 FR 13828), that would require

manufacturers, importers, and

distributors of devices to report

promptly to FDA any corrections or

removals of a device undertaken to

reduce a risk to health posed by the

device or to remedy a violation of the

act caused by the device which may

present a risk to health. The agency

expects that the final rule will publish

in 1996. This rule will apply to

removals and corrections of medical

devices including cigarettes and

smokeless tobacco.

d. GMP. In the preamble to the 1995

proposed rule, FDA specifically

recognized that the GMP regulations

may be appropriate for tobacco products

(60 FR 41314 at 41352). In this final

rule, FDA is requiring that the

manufacturers of cigarettes and

smokeless tobacco comply with GMP

regulations in part 820 (21 CFR part

820), which the agency is currently

revising. (See 58 FR 61952, November

11, 1993.) Application of GMP’s to

cigarettes and smokeless tobacco will

assist the tobacco industry in avoiding

such situations as the recall of

Marlboros in 1995 because of a

contamination mishap in processing

and, in such cases, may advance public

health by reducing to some degree the

overall risk associated with these

products.

(14) A comment from a tobacco trade

association urged that FDA provide

ample time for compliance with GMP

and requested a 2-year period for

compliance.

FDA recognizes that manufacturers

will need an adequate amount of time

to comply with GMP requirements and

is accepting the suggestion in the

comment by adopting a 2-year period

for compliance. The tobacco industry

already has a sophisticated approach to

quality control with the production of

their products. Thus, much of what is

required to meet the requirements of

part 820 appears to be in place already,

and therefore, 2 years should be a

sufficient time for compliance.

(15) In response to comments from

tobacco distributors expressing concern

about present or future applicability of

the GMP regulations, FDA advises that

it is exempting distributors from part

820. The agency has decided to amend

part 820 by adding a new § 820.1(f) to

exempt distributors from the

requirement of complying with GMP

regulations because it has concluded

that compliance with GMP requirements
44412 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

23 ‘‘Cigarette Smoking-Attributable Mortality and

Years of Potential Life Lost—United States, 1990,’’

MMWR, CDC, vol. 42, No. 33, pp. 645–649, 1993.

by distributors is not necessary to assure

that these devices will be safe and

effective or otherwise in compliance

with the act.

5. FDA Will Classify Cigarettes and

Smokeless Tobacco Under Section 513

of the Act

In addition to applying the general

device authorities previously described

to cigarettes and smokeless tobacco, the

agency will classify cigarettes and

smokeless tobacco under section 513 of

the act. The agency relies on

classification to determine what level of

control of the device is required to

provide a reasonable assurance of safety

and effectiveness. For devices classified

into class I, general controls (sections

501, 502, 510, 516, 518, 519, and 520 of

the act (21 U.S.C. 351, 352, 360, 360f,

360h, 360i, and 360j, respectively)) are

sufficient to provide a reasonable

assurance of safety and effectiveness.

For devices classified into class II,

special controls (such as performance

standards under section 514 of the act

(21 U.S.C. 360d)) are needed in addition

to the general controls to provide a

reasonable assurance of safety and

effectiveness. For devices classified into

class III (premarket approval), neither

general nor special controls are

sufficient to provide a reasonable

assurance of safety and effectiveness,

without the added safeguard of

premarket approval. Therefore, these

devices are subject to ‘‘premarket

approval’’ under section 515 of the act.

The process of classification is an

important component of device

regulation, but it includes numerous

procedural steps and thus cannot be

part of this final rule. Under section 513

of the act, FDA is required to convene

or use a classification panel, which

should consist of experts who ‘‘possess

skill in the use of, or experience in the

development, manufacture, or

utilization of,’’ the device and who

provide ‘‘adequately diversified

expertise in such fields as clinical and

administrative medicine, engineering,

biological and physical sciences, and

other related professions’’ (section

513(b)(2) of the act). The classification

panel is required to ‘‘provide an

opportunity for interested persons to

submit data and views on the

classification’’ and, after consideration

of these data and views, to submit to

FDA its ‘‘recommendation for the

classification of the device’’ (section

513(c)(1) and (c)(2) of the act). Upon

receipt of the panel recommendation,

FDA must publish in the Federal

Register ‘‘the panel’s recommendation

and a proposed regulation classifying

such device’’ and provide interested

persons ‘‘an opportunity to submit

comments on such recommendation and

the proposed regulation’’ (section 513(d)

of the act). After reviewing the

comments, FDA must classify the device

‘‘by regulation’’ (Id.).

As required by section 513 of the act,

FDA will, in a future rulemaking,

classify cigarettes and smokeless

tobacco in accordance with the

procedures in section 513 of the act.

Without prejudging that proceeding, the

agency recognizes that it will involve

consideration of both the known risks of

tobacco products and the public health

concerns that could be raised by

withdrawal from the market of cigarettes

and smokeless tobacco to which many

adults are addicted. Moreover, the

agency’s restrictions on access and

advertising in this final rule, which are

carefully designed to help prevent

young people from becoming addicted,

will need to be factored in as well.

Consistent with the statute and the

agency’s normal practice, however, FDA

is not postponing regulation of

cigarettes and smokeless tobacco under

its general authorities pending

classification. Such a postponement

would serve no useful purpose, because

the general authorities will be

applicable to cigarettes and smokeless

tobacco regardless of the outcome of the

classification proceeding. To the

contrary, postponing application of

FDA’s general authorities would have

adverse consequences for public health

because, during the several years that it

may require to complete classification,

the applicability of the controls put in

place by this final rule, as well as the

registration, GMP, and other general

controls discussed in this document,

would be delayed with respect to

cigarettes and smokeless tobacco.

During this period, millions of children

and adolescents would be likely to use

cigarettes and smokeless tobacco for the

first time and, in the absence of FDA

regulation under its general authorities,

become addicted to these dangerous

products.

The tobacco industry argues that FDA

cannot classify cigarettes and smokeless

tobacco because, given ‘‘FDA’s view of

the health effects’’ of cigarettes and

smokeless tobacco, classification would

inevitably lead to a ban of the products.

According to the industry, FDA cannot

classify cigarettes under class I or class

II because neither the general nor the

special controls will provide what FDA

will regard as a reasonable assurance of

safety, leaving FDA with only one

option: To classify cigarettes and

smokeless tobacco under class III.

According to the industry, classifying

cigarettes and smokeless tobacco under

class III would lead to a ban of cigarettes

and smokeless tobacco because FDA

cannot grant premarket approval of a

class III device until it is satisfied that

there is reasonable assurance that the

device is safe. The tobacco industry

argues that the inability of FDA to

classify cigarettes and smokeless

tobacco without triggering a ban of the

products demonstrates that the act was

never intended to apply to cigarettes

and smokeless tobacco.

It would not be appropriate for FDA

to make a final determination at this

time as to whether the application of all

appropriate regulatory controls

identified in a classification proceeding

would result in a reasonable assurance

of safety and effectiveness for cigarettes

and smokeless tobacco for any users.

This determination must await

completion of the classification process

and of any regulatory steps identified in

the classification process (section 513 of

the act). Nonetheless, it seems clear that

the best public health result is one that

prevents access to tobacco products by

children and adolescents while allowing

their continued availability for adults.

Moreover, the agency disagrees with

industry comments that argue that it

does not have the authority to permit

the sale of tobacco products to adults

because the agency has found that

tobacco products are unsafe.

In considering this issue, the agency

reiterates that tobacco products are

dangerous. As discussed more fully in

section I. of this document and in the

preamble to the 1995 proposed rule,

cigarettes and smokeless tobacco cause

great pain and suffering from illness,

such as cancer, respiratory illnesses,

and heart disease. More than 400,000

people die each year as a result of

tobacco use. 23

If the act required that the agency

limit its consideration to the risks of

tobacco products, then it could not find

that there is a reasonable assurance of

safety. To the contrary, tobacco products

are unsafe, as that term is

conventionally understood. However, as

reflected in the act and in judicial

decisions, the determination as to

whether there is a ‘‘reasonable

assurance of safety’’ involves

consideration of not only the risks

presented by a product but also any of

the countervailing effects of use of that

product, including the consequences of
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44413

24 ‘‘National Household Survey on Drug Abuse:

Population Estimate 1993,’’ DHHS, PHS, SAMHSA,

Office of Applied Studies, Rockville, MD, Pub. No.

(SMA) 94–3017, pp. 89 and 95, 1994.

25 1996 Jurisdictional Determination, section

II(B)(2)(a).

26 Id.

27That a black market and smuggling will occur

can be predicted by examining the current situation

with illegal drugs in the United States and past

experience with prohibition of respect to alcoholic

beverages. In both situations, individuals continued

using the products. Moreover, in the case of

cigarettes, even increased cost due to tax disparities

can lead to smuggling and black markets. S. Rept.

95–962, 95th Cong., 2d Sess., (June 28, 1978);

Joossens, L., and M. Raw, ‘‘Smuggling and Cross

Border Shopping of Tobacco in Europe,’’ British

Medical Journal, vol. 310, May 27, 1995.

28Such has been the case with illegally produced

alcohol. See ‘‘Elevated Blood Lead Levels

Associated with Illicitly Distilled Alcohol—

Alabama, 1990–1991,’’ MMWR, CDC, DHHS, vol.

41, No. 17, pp. 294–295, 1992; Pegues, D. A., B. J.

Hughes, C. H., Woernle, ‘‘Elevated Blood Lead

Levels Associated with Illegally Distilled Alcohol,’’

Archives of Internal Medicine, vol. 153, pp. 1501–

1504, 1993. 29 1994 SGR, pp. 5, 58, and 65–67.

not permitting the product to be

marketed. Thus, section 513(a)(2)(C) of

the act declares that, with respect to

safety and effectiveness, the agency

must ‘‘weigh[] any probable benefit to

health from the use of the device against

any probable risk of injury or illness

from such use (see also 21 CFR

860.7(d)(1)). According to the legislative

history of the Medical Device

Amendments, ‘‘[the reasonable

assurance of safety standard] is

predicated upon the recognition that no

regulatory mechanism can guarantee

that a product will never cause injury’’

because ‘‘[r]egulation cannot eliminate

all risks but rather must eliminate those

risks which are unreasonable in relation

to the benefits derived’’ (H. Rept. 94–

853, 94th Cong., 2d sess., 16, 17 (1976);

see also United States v. Rutherford, 442

U.S. 544, 555 (1979)).

An example of the balancing of risks

of using a product against the risks of

not using a product can be found in the

agency’s approval of a number of drugs

used in the treatment of various cancers.

These drugs are highly toxic to patients

who receive them, and in approving

these drugs for chemotherapy, FDA

balances the seriousness of the diseases

these drugs were intended to treat

against the drugs’ toxicity. In cases

where the risks of not treating the

cancer outweighed the risks of the

drugs, FDA has approved these

products.

Similarly, in the case of tobacco

products, the agency must weigh the

risks of leaving cigarettes and smokeless

tobacco on the market against the risks

of removing these products from the

market. For children and adolescents,

the serious health consequences of

using tobacco products support an

approach designed to reduce their use,

as all 50 States and many of the tobacco

companies themselves recognize. It is

also relevant that many children who

use tobacco products are in the period

of initiation and are not addicted, and

thus a prohibition of the sale and

promotion to this segment of the

population will effectively reduce their

use of tobacco products. Although some

children and adolescents are addicted to

tobacco products, the agency has

concluded that the approach that most

effectively takes into account the health

of young people is one that prohibits the

sale and promotion of tobacco products

to children and adolescents under 18

years of age.

The issue is more difficult with

respect to adults, particularly adults

who are addicted to cigarettes and other

tobacco products. There are

approximately 50 million Americans

who currently smoke and another 6

million who use smokeless tobacco. 24 It

is particularly relevant that 77 to 92

percent of all smokers are addicted 25

and that a substantial number of all

users of smokeless tobacco are

addicted. 26

The agency believes that these factors

must be considered when developing a

regulatory scheme that achieves the best

public health result for these products.

The sudden withdrawal from the market

of products to which so many millions

of people are addicted would be

dangerous. First, there could be

significant health risks to many of these

individuals. Second, it is possible that

our health care system would be

overwhelmed by the treatment demands

that these people would create, and it is

unlikely that the pharmaceuticals

available could successfully treat the

withdrawal symptoms of many tobacco

users. Third, the agency also believes

that, given the strength of the addiction

and the resulting difficulty of quitting

tobacco use, a black market and

smuggling would develop to supply

smokers with these products. 27 It also

seems likely that any black market

products would be even more dangerous

than those currently marketed, in that

they could contain even higher levels of

tar, nicotine, and toxic additives. 28

Whether individuals who use these

products have an opportunity to make

an informed choice is also relevant.

Most individuals who use these

products begin as children and

adolescents, at an age when they are not

prepared for or equipped to make a

decision that for many will have lifelong

consequences.

In contrast, adults generally have the

capacity to make informed decisions. In

the case of cigarette and smokeless

tobacco, very few adults who have not

used tobacco as children and

adolescents choose to use these

products as adults. 29 Unfortunately, for

the many individuals who have become

addicted, their capacity to choose

whether to use cigarettes or smokeless

tobacco in large measure no longer

exists. Thus, the agency must take their

addiction into consideration when

developing its regulatory scheme.

Serious health consequences follow

both from the option of leaving tobacco

products on the market and from the

option of banning tobacco products.

However, on balance, an approach that

prohibits the sale and promotion of

cigarettes and smokeless tobacco to

children and adolescents, while

permitting the sale to adults seems most

appropriate. It is consistent with the

statutory standard of reasonable

assurance of safety and is more effective

in achieving public health goals than a

ban on all tobacco products. Therefore,

FDA is adopting this approach in this

final rule.

There is also a basis for finding that

these products are ‘‘effective’’ for adults

who are addicted to tobacco products

because such products sustain with

great efficacy the individual’s continued

need for the active ingredient nicotine.

Tobacco products are effective for

preventing withdrawal symptoms in

individuals addicted to nicotine in

much the same way that methadone is

effective in preventing withdrawal.

Section 516 of the act supports this

analysis. Section 516 of the act is the

provision that gives the agency the

authority to ban medical devices. Under

that provision, the agency ‘‘may’’ ban a

device if it finds that the device presents

‘‘an unreasonable and substantial risk of

illness or injury.’’ There are two

elements of discretion which plainly

allow the agency to leave these products

on the market—the word ‘‘may’’ which

applies to the entire banned device

authority; and the standard of

‘‘unreasonable * * * risk of illness or

injury,’’ which gives the agency ample

discretion to balance the unique

circumstances surrounding this product.
44414 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

D. The Fact That the Act’s Drug

Authorities Authorize the Imposition of

Similar Restrictions Supports the

Reasonableness of the Restrictions That

the Agency Has Imposed

(16) At least one tobacco industry

comment argued that the agency’s

proposed access and advertising

restrictions were an affront to ‘‘common

sense’’—i.e., that the types of

restrictions the agency had proposed,

under the device provisions of the act,

went well beyond what the plain

language of the act could be read to

support. The agency, however, could

have chosen to impose similar

restrictions using the act’s drug

authorities. As this section

demonstrates, the agency has restricted

the marketing of a number of drug

products, using the adulteration,

misbranding, and marketing provisions

governing drug products. That similar

restrictions can be invoked under either

the act’s device authorities or under the

act’s drug authorities supports the

reasonableness of restrictions adopted

in the final rule.

As discussed in the 1995 proposed

rule and in sections II.A. and B. of this

document, cigarettes and smokeless

tobacco are drug delivery systems—i.e.,

they combine a drug component and a

device component in a single

combination product (60 FR 41314 at

41347 through 41349). As such,

cigarettes and smokeless tobacco are

subject to regulation under the device

provisions of the act, the drug

provisions of the act, or a combination

of the two. The agency has determined

that it should use the act’s device

authority to regulate these products

because the device provisions of the act

offer the agency greater regulatory

flexibility than do the drug provisions of

the act (see section II.B. of this

document and the 1995 proposed rule at

60 FR 41314 at 41347 through 41349).

However, if there were no device

component to cigarettes and smokeless

tobacco, or if the agency had chosen to

regulate these combination products

under the act’s drug authorities, the

agency nevertheless could have limited

the access to and advertising of these

products in order to protect children

and adolescents.

Although the agency’s authority to

impose access restrictions on a drug

product is not as explicit as it is under

the device provisions of the act (see

section 520(e) of the act authorizing

controls over the ‘‘sale, distribution, or

use’’ of a device to protect against a

potentially harmful or unsafe use), the

agency has in fact drawn from several

statutory sources to achieve some of the

same regulatory results for a drug. The

agency routinely imposes restrictions to

protect against unsafe uses of drug

products—even where those uses are

otherwise unlawful, wholly irrational,

or in contravention of express warnings.

From the time of the product’s

development and manufacture through

its retail sale, the agency is authorized

to ensure that drug products are neither

unsafe, misbranded, nor adulterated.

(See sections 201(n), 301, 501, 502, 503

and 505 of the act; United States v.

Sullivan, 332 U.S. 689, 696 (1948)

(Congress intended ‘‘to safeguard the

consumer by applying the Act to articles

from the moment of their introduction

into interstate commerce all the way to

the moment of their delivery to the

ultimate consumer’’).)

Consistent with this broad grant of

authority, Congress also authorized the

agency to issue regulations for the

‘‘efficient enforcement’’ of the act, such

as regulations that set forth the

conditions under which a drug must be

marketed to ensure that it will not be

deemed violative of the act (see section

701(a) of the act (21 U.S.C. 371); United

States v. Nova Scotia Food Products

Corp., 568 F.2d 240, 246 (2d Cir. 1977);

and Pharmaceutical Manufacturers

Association v. FDA, 484 F. Supp. 1179,

1183 (D. Del. 1980) (FDA has broad

authority to issue drug regulations

reasonably related to the public health

purposes of the act, so long as the

regulations further congressional

objectives evidenced elsewhere in the

act)).

With this authority, the agency has

imposed restrictions on the advertising,

labeling, and packaging of drug

products, as well as restrictions on

access to drug products, without which

the products could not be lawfully

marketed. For example, the agency has

used its authority to ensure that drug

products are not adulterated to require

special packaging requirements for overthe-counter (OTC) drugs, to protect

against product tampering (see 47 FR

50442 at 50447, November 5, 1982);

§ 211.132 (21 CFR 211.132)). Thus, the

agency has imposed industry-wide

packaging requirements to protect

against product contamination as well

as unintended, unsafe uses of drug

products. (Compare § 897.14(d)

(prohibiting retailers from breaking

open cigarette and smokeless tobacco

packages to sell loose cigarettes or

smokeless tobacco).)

Similarly, the agency has authority to

control carefully the package size of

drug products to protect persons who

fail to follow the directions from taking

a lethal dose of the product (see 60 FR

52474 at 52491, 52502, and 52503,

October 6, 1995, and § 355.20 (21 CFR

355.20) (final monograph setting

package size limitations on OTC

anticaries drugs to prevent individuals

from ingesting an acutely toxic dose)).

(Compare § 897.16(b) (setting minimum

package size for cigarettes).)

Along the same lines, the agency has

used its authority to ensure that drugs

are not misbranded to restrict the

marketing of certain drug products

where consumers simply were unable or

unwilling to heed the warnings on these

products. In some instances, the agency

has banned altogether the marketing of

persistently misused drug products.

(See, e.g., 47 FR 41716 at 41719,

September 21, 1982 (camphorated oil

products deemed misbranded because,

despite label warnings, consumers

continued to misuse the product); 47 FR

34636, August 10, 1982 (proposing

withdrawal of all drugs containing

phenacetin because of persistent abuse,

and associated health risks, despite

label warnings contained on those

products).) In other instances, the

agency has restricted the product to

prescription use. (See, e.g., § 250.12 (21

CFR 250.12) (requiring prescription

dispensing of OTC stramonium

preparations because, despite package

warnings, young people continued to

abuse and misuse them); § 250.100 (21

CFR 250.100) (switching amyl nitrite

inhalant from OTC to prescription

dispensing because of persistent offlabel use and abuse); see also 60 FR

38643, July 27, 1995 (proposing to

restrict ephedrine drug products to

prescription marketing because of the

illicit use of OTC ephedrine in the

manufacture of certain controlled

substances).)

Finally, the agency has approved drug

products with strict limits on

distribution, to ensure that the drug will

be safe for use under the conditions,

prescribed, recommended, or suggested

in the product’s labeling. For example,

the drug Clozaril (clozapine), used in

the treatment of schizophrenia, can

cause the onset of a potentially fatal

blood condition, agranulocytosis.

However, early detection of

agranulocytosis through routine blood

testing can substantially reduce the risk

of death. FDA, therefore, approved the

drug with labeling that provides that the

drug is available ‘‘only through a

distribution system that ensures weekly

[white blood cell] testing prior to

delivery of the next week’s supply of
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44415

30Clozaril (clozapine tablets) product labeling,

Sandoz Pharmaceuticals, March 1994, in

Physician’s Desk Reference, 50th edition, p. 2252,

1996.

31 ‘‘The Federal Food, Drug, and Cosmetic Act

provides authority for FDA to restrict the conditions

for use, including the channels of distribution and

use, of any drug, or withdraw approval of an NDA,

if a drug cannot otherwise safely be used’’ (H. Rept.

No. 93–884, 93d Cong., 2d Sess., p.4, 1974,

reprinted in U.S. Cong. & Admin. News, pp. 3029–

3032). But see American Pharmaceutical Ass’n v.

Weinberger, 377 F.Supp. 824, 829 (D.D.C. 1974)

(striking down an FDA regulation restricting the

distribution of methadone), aff’d per curiam sub

nom. American Pharmaceutical Ass’n v. Mathews,

530 F.2d 1054 (D.C. Cir. 1976). The American

Pharmaceutical Ass’n case, however, was decided

before the emergence of cases such as Chevron

U.S.A., Inc. v. Natural Resources Defense Council,

467 U.S. 837 (1984), in which the Court signaled

the importance of deferring to an agency’s

interpretation of its own statute, provided the

interpretation is sufficiently rational. The case also

involved some unique circumstances: the agency

had withdrawn approval of the NDA for the drug

(methadone), but nevertheless permitted the drug to

be marketed under a regulation to certain treatment

programs and pharmacies. Also, because

methadone is a controlled substance within the

provisions of the Controlled Substances Act, the

district court concluded that issues regarding

restrictions on the distribution of the drug were

more properly within the jurisdiction of the

Department of Justice than FDA. In most other

instances, however, where a drug is not subject to

the Controlled Substances Act, and where certain

marketing restrictions are necessary to ensure that

the drug will be used safely and effectively, under

the conditions contemplated in a new drug

application, the American Pharmaceutical Ass’n

case is distinguishable.

medication.’’ 30 This labeling was

intended to ensure that Clozaril would

not continue to be administered to those

for whom it presents an unreasonable

risk of harm. The marketing of Clozaril

in contravention of the labeling would

result in the product being deemed

misbranded and subject to regulatory

action. More recently, the agency issued

regulations authorizing generally

restrictions on the distribution of drug

products in instances where ‘‘a drug

product shown to be effective can be

safely used only if distribution or use is

restricted * * *’’ (see § 314.520 (21 CFR

314.520)). (Compare § 897.16 (setting

conditions on the manufacture, sale,

and distribution of cigarettes and

smokeless tobacco); § 897.14(b)(1)

(requiring retailers to verify the

consumer’s age to ensure that the

product will not be used by minors)

§ 897.16(c)(1) (prohibiting use of selfservice displays at retail

establishments).) 31

These examples illustrate how the

agency has interpreted sections 501,

502, 503, and 505 of the act (in

conjunction with sections 201(n), 301,

and 701(a) of the act) as authorizing an

array of controls to prevent unsafe uses

of drug products. The minimum age

requirement for cigarettes and

smokeless tobacco (see § 897.14(a)), and

the controls on packaging (see

§§ 897.14(d) and 897.16(b) and (d)),

vending machine sales (see §§ 897.14(b)

and 897.16(c)), and self-service displays

(see §§ 897.14(c) and 897.16(c)), follow

this same path. Without these

restrictions, cigarettes and smokeless

tobacco as drug products could be

deemed misbranded or adulterated drug

products and could present too great a

safety risk to be marketed at all.

The final rule also regulates the

advertising used to promote cigarettes

and smokeless tobacco (see §§ 897.30,

897.32, and 897.34). While the act’s

device provisions provide the most

direct and extensive basis for regulating

the advertising of these products (see

section VI. of this document), the drug

provisions of the act also would have

allowed the agency to regulate the

advertising of these products.

Whether a drug is marketed on a

prescription basis or OTC, the agency

has authority to prohibit advertising that

promotes the product for a use for

which it would be unapproved or

misbranded (see sections 201(n), 301,

502, and 505 of the act; see also

§ 201.128 (21 CFR 201.128) (advertising

of a drug product may be used to

establish that the product is being

marketed for a use for which it is

neither labeled nor approved)). Though

the agency generally will defer to FTC

with respect to the advertising of OTC

drugs (see Food and Drug

Administration and Federal Trade

Commission Memorandum of

Understanding (36 FR 18539, September

16, 1971)), the agency retains authority

to take action against an OTC drug that

is promoted for an unapproved use. (See

§ 330.1(d) (21 CFR 330.1(d)) (for an OTC

drug to be generally recognized as safe

and effective, and not misbranded, the

advertising for the drug must not

prescribe, recommend, or suggest its use

under conditions not stated in the

labeling); see, e.g., § 310.519 (21CFR

310.519) (prohibiting the marketing of

any OTC drug that is ‘‘labeled,

represented, or promoted as an OTC

daytime sedative (or any similar or

related indication)’’.)

The agency also has authority to

require that a drug product not be

advertised in a manner that would

undercut or counteract the product’s

labeling, including label-based

warnings. (See McNeilab, Inc. v.

Heckler, Food Drug Cosm. L. Rep. (CCH

1985) (Transfer Binder) ¶38,317, p. 39,

787 (D.D.C. 1985) (while FDA ‘‘cannot

rely on advertising to make safe [an

OTC] drug which is deemed too

dangerous to be sold with label

warnings alone,’’ it would be ‘‘proper

for the agency * * * to ensure that ads

do not undercut otherwise sufficient

labeling’’); see also 57 FR 13234 at

13237, April 15, 1992 (preamble to

Accelerated Approval Regulations

discussing requirement of submission of

promotional materials to ensure that the

drugs approved under this section will

not be put to inappropriate or unsafe

uses).) And, irrespective of whether a

drug is marketed OTC or by

prescription, the agency has authority to

prohibit the distribution of ‘‘false or

misleading’’ product ‘‘labeling’’ (see

section 502(a) of the act).

Last, had the agency chosen to use the

act’s drug authorities to regulate these

products, one possible means of limiting

their access would have been to require

some form of prescription dispensing. In

that case, the agency’s authority to

regulate the advertising of cigarettes and

smokeless tobacco would be extensive

(see section 502(n) of the act; § 202.1 (21

CFR 202.1); § 314.81(b)(3)(i) (21 CFR

314.81(b)(3)(i))). The agency, for

example, has discretion under the act to

regulate both the presentation and

format of prescription drug advertising.

According to the House Conference

Report on section 502(n) of the act,

Congress contemplated that:

[I]n administering the requirement

contained in the conference substitute that

advertisements contain brief summaries of

side effects, etc., the Secretary under the

conference substitute has sufficient

discretion to exercise due regard to the size

of the advertisement, the need for protecting

the public health, and the conditions for

which the drug is offered in the

advertisement.

(Report of the Committee of Conference,

H. Conf. Rept. 2526, 87th Cong. 2d sess.,

(Oct. 3, 1962) reprinted in 1962 U.S.

Code Cong. and Admin. News 2927,

2934 (emphasis added).)

Further, the agency may take action

against a prescription drug

advertisement to the extent it lacks ‘‘fair

balance’’ or is otherwise ‘‘false or

misleading’’ (see sections 201(n), 502(a),

and (n) of the act; § 202.1 (21 CFR

202.1)). Thus, had the agency chosen to

regulate these products as prescription

drugs, the agency’s existing prescription

drug advertising regulations themselves

would require significant changes to the

content and format of the tobacco

industry’s advertising campaigns.

The final concern—had the agency

regulated these products as drugs—is

whether cigarettes and smokeless

tobacco could continue to be marketed

to adults. As discussed in greater detail
44416 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

32See Cutler v. Hayes, 818 F.2d 879, 893 (D.C.

Cir. 1987) (‘‘The FDC act imposes no clear duty

upon FDA to bring enforcement proceedings to

effectuate either the safety or the efficacy

requirements of the Act’’); Schering Corp. v.

Heckler, 779 F.2d 683, 686 (D.C. Cir. 1985) (FDA’s

agreement not to take enforcement action against an

unapproved product for a period of 18 months was

unreviewable); see also Cutler v. Kennedy, 475

F.Supp. 838, 856 (D.D.C. 1979) (while FDA may not

formally authorize the sale of drugs that it has

found do not comply with the safety and

effectiveness provisions of the act, the agency may

use its enforcement discretion not to move against

these unapproved drug products).

33 In a number of other contexts, the agency has

declined to take enforcement action against

particular uses of unapproved drug products.

Indeed, the agency has on occasion set forth

detailed guidelines outlining the conditions under

which it will, as a general matter, refrain from

taking regulatory action. (See, e.g., FDA Compliance

Policy Guide, (CPG) 7132b.15 (stating that pending

completion of the OTC Drug Review, FDA generally

will not take regulatory action against unapproved

or misbranded OTC drugs prior to completion of a

final monograph); CPG 7125.06 (setting conditions

exempting extra-label use of new animal drugs from

regulatory action); Regulatory Procedures Manual

9–71 (setting conditions under which FDA

generally will permit the import of small quantities

of unapproved drugs for personal use which are not

available domestically).)

in section II.C.5. of this document, there

are compelling public health reasons for

permitting the continued marketing of

these products to adults. The same

rationale would apply had these

products been regulated as drugs. As is

the case with respect to devices, there

is a basis for concluding that an

approach that prohibits the sale and

promotion of cigarettes and smokeless

tobacco to children and adolescents, yet

allows these products to continue to be

marketed to adults who are addicted to

these products, could be found to be

consistent with the statutory standard of

‘‘safe’’ and ‘‘effective’’ under section 505

of the act for these products.

It is, of course, essential to this

analysis that the agency’s youth access

restrictions in new part 897 be

implemented. These restrictions are

necessary to help ensure that the most

alarming safety issue associated with

these products will have been

contained. Absent these restrictions, the

risks associated with the continued

marketing of these products, even to

adults, may be overwhelming. The close

issue of whether the public health is

better served by allowing adults to

continue to use these products, such

that the agency could find that cigarettes

and smokeless tobacco are ‘‘safe’’ and

‘‘effective,’’ depends heavily on the

agency’s ability to prevent the most

alarming use of these products, namely,

use by substantial numbers of children.

Moreover, the approach of allowing

the continued marketing of these

products to adults, so long as youth

access is carefully controlled, would be

consistent with the agency’s inherent

discretion to take enforcement action

against some uses of a drug product, but

not others. Such an exercise of

discretion would be unreviewable

(Heckler v. Chaney, 470 U.S. 821

(1985)). 32

In resolving that there is a

presumption against judicial review of

agency determinations not to take

enforcement action, the Chaney Court

reasoned that an agency’s

nonenforcement policy generally

involves a complex weighing of factors

‘‘peculiarly’’ within the agency’s

expertise. (Id. at 831). These factors

include, ‘‘whether agency resources are

best spent on this violation or another,’’

‘‘whether the agency has enough

resources to undertake the action at all,’’

and ‘‘whether the particular

enforcement action requested best fits

the agency’s overall policies.’’ (Id. at

831–832).

A decision by the agency to focus its

resources on youth access to cigarettes

and smokeless tobacco involves the

same ‘‘ordering of priorities’’—i.e., the

same balancing of agency-specific

factors—on which the rule crafted in

Chaney rests. Thus, were the agency to

enforce the act only with respect to the

promotion and sale of these products to

children and adolescents, such a

decision would enjoy the full force of

the Chaney Court’s presumption of

nonreviewability. 33

Thus, while the agency finds that

cigarettes and smokeless tobacco are

more appropriately regulated as

restricted devices, as the discussion in

section II.C. of this document

demonstrates, the agency could have

crafted a serviceable regulatory scheme

for these products under the drug

provisions of the act. Contrary to the

comments that have argued that the act

is inherently unfit for regulation of these

products, or that the agency’s proposed

restrictions exceeded the common sense

boundaries of the act, both the device

provisions and the drug provisions of

the act provide sound authority for

controlling the access to and promotion

of these drug delivery devices.

E. Constitutional Issues Regarding

Authority

1. Separation of Powers

The doctrine of Separation of Powers

refers to the distribution under the

Constitution of the Federal

Government’s powers among the

legislative, executive, and judicial

branches. In particular, under this

scheme only Congress has the

constitutional authority to make law.

(17) Numerous comments by industry,

media, and retailer trade associations

and by State legislators and individuals

argued that FDA’s assertion of

jurisdiction over tobacco products

supersedes Congress’ legislative

judgment, and, some argued, therefore

violates the doctrine of Separation of

Powers. The comments contended that

Congress has provided statutory

authority over tobacco products to the

Executive Branch only under the

statutes that it has enacted that

expressly apply to tobacco products,

such as the Comprehensive Smokeless

Tobacco Health and Education Act (the

Smokeless Act) (15 U.S.C. 4401 et seq.)

and the Federal Cigarette Labeling and

Advertising Act (the Cigarette Act) (15

U.S.C. 1331 et seq.) and not at all under

the act. The comments cited the history

of proposals in Congress further to

regulate tobacco products, none of

which came to fruition, as evidence that

Congress has exercised its legislative

will not to act further on tobacco

regulation.

The agency does not agree that the

rule violates the Separation of Powers

Doctrine. The relevant legal standards

are set out in Youngstown Sheet and

Tube Co. v. Sawyer, 343 U.S. 579 (1952),

and Chrysler Corp. v. Brown, 441 U.S.

281 (1979), which are cited in the

comments. Justice Black’s opinion for

the Court in Youngstown stands for the

proposition that the Executive Branch

may not act unless authorized by the

Constitution or by statute to do so. In

particular, lacking Constitutional

authority, the Executive Branch may act

only under the aegis of a statute passed

by Congress under its ‘‘law making

power’’ (see Youngstown, 343 U.S. at

585–586, 589).

Executive Branch agencies frequently

act by rulemaking. In Chrysler, the

Supreme Court considered the

prerequisite for an agency’s ‘‘legislative’’

or ‘‘substantive’’ rules to have the ‘‘force

and effect of law’’ (see Chrysler, 441

U.S. at 301–302). ‘‘The legislative power

of the United States is vested in the

Congress, and the exercise of quasilegislative authority by governmental

departments and agencies must be

rooted in a grant of such power by the

Congress and subject to limitations

which that body imposes’’ (Id. at 302).

Therefore, for legislative rules to have

the ‘‘force and effect of law,’’ they must

be ‘‘reasonably within the

contemplation of [the statutory] grant of

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

relied upon may not be ‘‘so strained that

it would do violence to established

principles of separation of powers to

denominate the[] particular regulations

‘legislative’ and credit them with the

‘binding effect of law’’’ (Id. at 307–308).

This is not to say that any grant of

legislative authority to a Federal agency by

Congress must be specific before regulations

promulgated pursuant to it can be binding on

courts in a manner akin to statutes. What is

important is that the reviewing court

reasonably be able to conclude that the grant

of authority contemplates the regulations

issued.

(Id. at 308.)

Youngstown therefore requires that FDA

act under a statutory grant by Congress,

while Chrysler demands a ‘‘nexus

between [FDA’s] regulations and some

delegation of the requisite legislative

authority by Congress’’ (see Chrysler,

441 U.S. at 304).

As discussed elsewhere in this

document, Congress exercised its

lawmaking power to provide FDA with

the authority to regulate any product

that is a drug or device as defined in

section 201 of the act. The evidence

cited in both the 1995 Jurisdictional

Analysis and the 1996 Jurisdictional

Determination annexed hereto

demonstrates that cigarettes and

smokeless tobacco meet the statutory

definitions of drug and device. FDA

may therefore act to regulate tobacco

products, and in doing so, it is acting

‘‘pursuant to an express or implied

authorization of Congress,’’ and the

executive branch’s ‘‘authority is at its

maximum * * *’’ (see Youngstown, 343

U.S. at 635 (Jackson, J., concurring)).

Moreover, Chrysler does not require that

the act specifically refer to tobacco

products, as the comments suggested

(see Chrysler, 441 U.S. at 308). In fact,

most products regulated by FDA are not

specifically referred to in the act. In

addition, as discussed in sections X.A.

and X.B. of this document, neither the

Smokeless Act nor the Cigarette Act

precludes regulation under the act of

cigarettes and smokeless tobacco as drug

delivery devices. FDA’s assertion of

jurisdiction over cigarettes and

smokeless tobacco is therefore

reasonably contemplated by the laws as

enacted by Congress. Consequently, in

regulating tobacco products under the

act, FDA is not asserting the lawmaking

power reserved by the Constitution to

Congress.

2. Nondelegation Doctrine

The Nondelegation Doctrine, broadly

speaking, imposes constraints on

Congress’ authority to delegate to others

the legislative power vested in it by the

Constitution.

(18) While maintaining that Congress

has not granted FDA the authority to

regulate tobacco products, an industry

comment argued that FDA seeks to

assume authority that, under the

Nondelegation Doctrine, Congress could

not have delegated to the Executive

Branch. In particular, the comment

argued that the act requires FDA to

approve a new drug as safe and

effective, or to ban it, and to classify a

device into one of three categories in

which it will be required to meet

conditions that ensure that it is safe and

effective. Because FDA proposed to do

neither with respect to nicotine and

cigarettes and smokeless tobacco, the

comment contended, the agency is free

to choose any course it wishes; and had

Congress delegated to FDA such

unlimited authority, it would have

violated the Nondelegation Doctrine.

The comment can also be read to

suggest that, if FDA has the flexibility to

regulate medical devices, and in

particular tobacco products, as it

proposed, then Congress provided the

agency without a standard, that is, with

too much discretion.

The agency disagrees with this

comment. The act, while vesting FDA

with broad discretion to regulate foods,

drugs, and devices, does so by precisely

defining the agency’s jurisdictional

ambit in section 201 of the act and by

establishing a range of requirements and

enforcement provisions—for example,

in sections 301, 302, 303, 304, 501, 502,

505, 510, 513, 514, 515, 516, 517, 518,

519, 520, and 701 of the act (21 U.S.C.

331, 332, 333, 334, 351, 352, 355, 360,

360c, 360d, 360e, 360f, 360g, 360h, 360i,

360j, and 371 respectively)—for it to

pursue when, in its discretion, Heckler

v. Chaney, 470 U.S. 821 (1985), it has

found the operative facts established by

Congress. The act therefore involves no

delegation of Congress’ legislative

power that violates the Nondelegation

Doctrine, as the courts have repeatedly

held. (See, e.g., United States v.

Shreveport Grain and Elevator Co., 287

U.S. 77, 85 (1932); United States v.

Garfinkel, 29 F.3d 451, 457–59 (8th Cir.

1994); White v. United States, 395 F.2d

5, 9–10 (1st Cir.), cert. denied, 393 U.S.

928 (1968)); United States v. 62

Packages, More or Less, of Marmola

Prescription Tablets, 48 F. Supp. 878,

884 (W.D. Wis. 1943), aff’d, 142 F.2d

107 (7th Cir.), cert. denied, 323 U.S. 731

(1944).)

The Supreme Court has only

infrequently invalidated a congressional

delegation to the Executive Branch.

(See, e.g., Panama Refining Co. v. Ryan,

293 U.S. 388, 418 (1935) (holding

statute authorizing the President to

prohibit interstate shipment of ‘‘hot oil’’

determined by State law or regulation to

be ‘‘excess’’ to be unconstitutional

delegation because ‘‘Congress left the

matter to the President without standard

or rule, to be dealt with as he pleased’’);

Schechter Poultry Corp. v. United

States, 295 U.S. 495, 541–542 (1935)

(reversing convictions for violations of

code of conduct for poultry suppliers

because ‘‘the discretion of the President

in approving or prescribing [such]

codes, and thus enacting laws for the

government of trade and industry

throughout the country, is virtually

unfettered’’).)

More recently, the courts have

applied the Nondelegation Doctrine to

reach, or require from an agency, a

narrow interpretation of a statutory

provision that would otherwise be too

broad a delegation. (See, e.g., Industrial

Union Dep’t., AFL-CIO v. American

Petroleum Inst., 448 U.S. 607, 646

(1980); International Union, UAW v.

OSHA, 37 F.3d 665, 668–69 (D.C. Cir.

1994); International Union, UAW v.

OSHA, 938 F.2d 1310, 1316–17 (D.C.

Cir. 1991).)

Unlike the statutes under review in

Panama Refining and Schechter, the act

sets standards for FDA to follow. The

agency need not narrowly interpret the

act to avoid an otherwise over-broad

delegation, and courts have repeatedly

directed that the act be construed

liberally in light of its public health

purpose (see sections I.B. and II.A. of

this document). The agency’s

rulemaking with respect to tobacco

products is a legitimate application of

those standards to the facts before the

agency. The agency therefore concludes

that neither the act nor this rulemaking

violates the Nondelegation Doctrine.

III. Overview of Comments, Smoking

Prevalence Rates Among Minors,

Scope, Purpose, and Definitions

A. Overview of Comments

From the time the 1995 proposed rule

was published on August 11, 1995 (60

FR 41314), until January 2, 1996, the

Food and Drug Administration (FDA)

accepted public comments. This

comment period was the opportunity for

the public to speak to FDA about the

matter of regulating nicotine-containing

tobacco products. On March 18, 1996,

the agency reopened the comment

period for 30 days to make additional

information relevant to this rulemaking

available for public comment.
44418 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

34Opponents and proponents of the rule

organized letter-writing campaigns. One, a massive

tobacco company-orchestrated campaign, generated

some 300,000 pieces of mail—nearly half of all of

the mail received by the agency on this topic.

The 1995 proposed rule generated

more responses than the agency had

received at any other time in its history

on any other subject. Altogether, the

agency received more than 700,000

pieces of mail, representing the views of

nearly 1 million individuals. Most of the

submissions were form letters or post

cards. The agency identified more than

500 different types of form letters. 34

Others were petitions with sometimes

hundreds of signatures. More than

95,000 submissions expressed

individual comments on the 1995

proposed rule, including more than

35,000 from children who were

overwhelmingly supportive. The

individual comments included one from

an industry trade association which

delivered a single submission of some

45,000 pages on the last day of the

announced comment period.

As may be expected, comments

differed sharply on the overarching

issues of whether FDA should regulate

cigarettes and smokeless tobacco, and

whether the 1995 proposed rule would

have the desired effect of reducing the

availability and attractiveness of these

products to children and adolescents.

Several Government officials

commented, including U.S. Senators

and Congressmen, other Federal

agencies, State governors and

legislators, and law enforcement

officials. Comments came from every

corner of the country. FDA heard from

smokers who could not understand why

the Government was meddling in their

lives, and from smokers who

desperately wanted to quit, but could

not. It heard from employers and

employees in the affected industries,

including tobacco farmers, wholesalers,

cigarette manufacturers, and even

laborers with the lowest paying jobs

who feared that they might lose the only

jobs they know. The agency even heard

from school children who wanted to be

protected from tobacco. ‘‘It is not fair,’’

wrote one 13-year-old, ‘‘that the tobacco

companies try to get kids to use

tobacco.’’

Although many of the comments were

addressed to specific portions of the

tobacco regulation proposal, tens of

thousands of letters commented in

general. Thousands of general

comments supported the rule. Some,

like this one, came from surprising

sources: ‘‘I support regulations

restricting the sale, advertising,

promotion and distribution of cigarettes

and chewing tobacco. I grow tobacco,

but I know it is wrong to sell death. I

really feel sorry for people who are

’hooked’ on nicotine.’’ Other supporting

comments came from more traditional

sources, especially the medical and

public health communities. One letter

from a coalition of medical associations

that was addressed to President Clinton

said: ‘‘We, the undersigned 125

organizations, representing more than

18 million members and volunteers,

urge your strong support for Food and

Drug Administration actions to protect

children and teenagers from tobacco.’’

Many expressed strong overall

opposition to the rule. One comment

said: ‘‘I am taking the time to write this

letter to express my overwhelming

dissatisfaction with the action of the

FDA in trying to rewrite the

Constitution and take control of the

Tobacco Industry.’’

Although many comments opposed

FDA’s regulation of tobacco products,

there was nearly unanimous

agreement—even from the tobacco

companies and smokers—that children

under the age of 18 should not be using

nicotine-containing products, either

cigarettes or smokeless tobacco. A few

children, however, did write that, even

if tobacco use is unhealthy, it should

still be their choice, even if they are

younger than 18. The agency received

thousands of general comments about

the addictive and harmful consequences

of tobacco use, and they called on the

agency to act.

A summary of the general issues

reflected in the thousands of comments,

and the agency’s responses, follows:

(1) The agency received several

thousand comments stating that FDA

should focus on the products it already

regulates. In addition, many comments

said that FDA should not expand its

responsibilities because the agency’s

resources already are inadequate. Others

stated that the regulation of tobacco is

a responsibility that Congress has

reserved for itself.

In contrast, many supporters of the

1995 proposed rule argued that it was

appropriate for FDA to take action on

this issue. One woman wrote: ‘‘As the

Federal agency designed to protect

consumers from harmful consumer

products, FDA clearly has both the right

and the responsibility to take these

actions against the most serious health

threat to our young people.’’

The regulation of drugs and medical

devices sold through interstate

commerce is central to FDA’s

established role. Based on recently

available information, as stated in

section II. and in the 1996 Jurisdictional

Determination annexed hereto, FDA has

determined that nicotine is an addictive

drug, and that cigarettes and smokeless

tobacco are drug delivery devices,

which are combination products under

section 503(g) of the Federal Food, Drug,

and Cosmetic Act (the act) (21 U.S.C.

353(g)). As such, these products fall

within the traditional scope of FDA’s

jurisdiction. Therefore, by regulating

these products, FDA is carrying out its

traditional role.

(2) FDA received thousands of

comments about how smoking was an

issue of free choice for adults. Most of

the comments focused either on the

ideological issue of freedom to choose

anything, even something dangerous, or

on related economic issues, such as the

freedom to receive discount or specialty

tobacco products by mail. Many

comments said the Government must

not attempt to regulate human behavior,

especially for adults, even when there

are health consequences. Letters like

this were typical: ‘‘As individuals we

too have been promised the freedom of

choice and this should continue to be.

I don’t want the government regulating

my personal freedoms.’’

Supporters of the rule countered that

because nicotine addiction is a pediatric

disease, the choice to start smoking is

not being made by adults, but by

adolescents who constitute a most

vulnerable population. Because they are

not yet mature individuals, they are not

really expressing a free choice, the

comments said. In addition, supporters

of the rule stated that adolescents, who

are so impressionable, are being

manipulated by the tobacco companies,

especially through advertising, and

therefore, are actually being denied a

free choice. Instead, the comments

urged that adolescents not be allowed to

choose something addictive that may

damage their health or shorten their

lives.

FDA believes that adults should

continue to have the freedom to choose

whether or not they will use tobacco

products. However, because nicotine is

addictive, the choice of continuing to

smoke, or use smokeless tobacco, may

not be truly voluntary. Because

abundant evidence shows that nicotine

is addictive and that children are not

equipped to make a mature choice about

using tobacco products, the agency

believes children under age 18 must be

protected from this addictive substance.

(3) Numerous comments, many from

adult smokers, expressed the fear that

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

the 1995 proposed rule is a prelude to

prohibition. One woman wrote: ‘‘The

most insidious insight into this

proposed regulatory act is the Federal

Government’s thinly veiled motive of

the eventual prohibition of tobacco sales

in the United States to appease a small

minority of fanatical anti-smoking

zealots.’’

FDA strongly disagrees with these

comments and reiterates that it has no

intention of banning cigarettes and

smokeless tobacco. FDA is aware that at

least one tobacco manufacturer, in

letters sent to its customers encouraging

them to submit comments opposing the

rule, claimed that the ‘‘real agenda is

Backdoor Prohibition of all tobacco

products.’’ These allegations are

baseless and ignore statements made by

the President and FDA to the contrary.

For example, when the President

announced the proposed FDA

regulations on August 10, 1995, one

reporter asked whether an outright ban

would be more logical than a

‘‘regulatory partial step.’’ The President

replied:

I think it would be wrong to ban cigarettes

outright because, number one, it’s not illegal

for adults to use them * * * tens of millions

of adults do use them. And I think it would

be as ineffective as prohibition was. But I do

think to focus on our children is the right

thing to do.

(Transcript, ‘‘Press Conference by the

President,’’ dated August 10, 1995)

The preamble to the 1995 proposed rule

expressed a similar view that removing

cigarettes and smokeless tobacco from

the market would not be in the best

interest of public health (60 FR 41314 at

41348 and 41349).

Rather than instituting prohibition,

the agency’s rule will inhibit the spread

of smoking behavior from one

generation to the next. As a result, fewer

and fewer adolescents will become

addicted to nicotine-containing

products. As current smokers either quit

or die, the total number of smokers will

gradually decline as they are replaced

by fewer and fewer new smokers. The

agency wants to reassure those who fear

that FDA is taking the first steps that

would lead inexorably to a ban on the

sale of these products to those 18 and

over that FDA will not ban these

products for adults. Thus, any claim

that the rule is a prelude to or would

lead to prohibition is totally without

merit.

(4) FDA received many comments

from politicians, industry

representatives, and private citizens

who argued that the agency does not

need to regulate tobacco because the

product is already highly regulated.

Many comments observed that all 50

States have passed their own laws

prohibiting the sale of tobacco products

to minors younger than 18. Comments

on existing State enforcement programs

primarily came from those opposed to

FDA’s proposed regulation, including

legislators from more than a dozen

States. These comments claimed that

this should remain a State matter, that

State laws are either sufficient or

superior to the 1995 proposed rule, that

State officials, unlike FDA, are

responsive to the concerns of State

citizens, and that States and private

groups are more responsible and

effective than a Federal agency.

Comments like this were common:

‘‘Many states have strict restrictions on

tobacco sales to minors already and in

my State (Maryland) these regulations

are being enforced with great success.’’

Many supporters of the 1995

proposed rule, however, pointed out

that State rules generally have failed to

stop minors from purchasing tobacco

products. One individual wrote: ‘‘I

currently live in a State where there is

absolutely no enforcement of the laws

banning sales of tobacco to minors,’’ and

numerous other comments referred to

specific instances in which they said

State laws were not observed. A joint

letter sent by attorney generals from 25

States, as well as Guam and Puerto Rico,

welcomed the 1995 proposed rule,

saying:

Although every State bans the sale of

tobacco to minors, studies show that children

have easy access to tobacco. * * * We

believe the proposed rule, which emphasizes

reducing access and limiting the appeal of

tobacco products to children, should be a

crucial component of a national effort by

Federal, State and local officials to help our

youngest generation of Americans avoid

suffering preventable disease and premature

death from the use of tobacco products.

Many comments stated that the

tobacco industry has in place guidelines

to prevent the sale of tobacco products

to minors. Said one comment: ‘‘I fail to

see why the government is so quick to

dismiss voluntary action on the part of

the industry.’’ Other comments

recommended that voluntary education

programs aimed at retailers, or, more

specifically, at retail sales clerks, would

be sufficient. These educational

programs would either be based on

voluntary efforts by the affected

industries or in-house, employee

training programs.

Supporters of the rule, however,

expressed widespread distrust of the

industry and of its promise to use

voluntary programs to prevent minors

from smoking. One woman wrote:

‘‘Thirty years of experience in

compromising with the tobacco industry

has proven that the industry can not be

trusted. After the release of the Surgeon

General’s report in 1964, the tobacco

industry promised to abide by a

voluntary advertising code, but the code

was quickly ignored after the threat of

government regulation had passed.’’

Another comment said: ‘‘When tobacco

companies fear government regulation,

they often adopt voluntarily the

restrictions the government is

considering. However, there is no

penalty for violating a voluntary

guideline. The tobacco industry has a

track record that speaks for itself. Please

don’t play the tobacco industry’s game!’’

The agency believes that the

comments opposing the rule on the

basis that the States already have

restrictions have misinterpreted its

scope and application. FDA, under the

act, regulates human and animal drug

products, certain foods, and devices that

are, or have been in interstate

commerce. The fact that these products

move across State lines makes their

regulation a Federal matter.

Other statutes and regulations provide

further evidence that tobacco regulation

is not reserved to States. The Federal

Cigarette Labeling and Advertising Act

(15 U.S.C. 1331 et seq.) (Cigarette Act)

and the Comprehensive Smokeless

Tobacco Health Education Act (15

U.S.C. 4401 et seq.) (Smokeless Act),

among other things, place federallyrequired statements and warnings on

cigarettes and smokeless tobacco and

require manufacturers to submit reports

to the Federal Government. These

products are also subject to Federal

taxes (see, e.g., 26 U.S.C. 5701) and

Federal, rather than State, laws and

regulations intended to guard against

contraband cigarettes (see 18 U.S.C.

2341 et seq.; 27 CFR part 296, subpart

F). Thus, tobacco regulation is clearly

both a Federal and State matter.

FDA also disagrees with those

comments suggesting that States and

private groups may be more responsible

or efficient than FDA or that FDA may

not be as responsive to citizens’

concerns. Federal regulation of these

products has several significant

advantages over State or private group

oversight alone; for example, the rule

establishes minimum, national

standards for the sale and distribution of

these products whereas State or private

group efforts may be limited to a

specific locality or to group members.

FDA’s regulations also create

enforceable obligations whereas private
44420 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

group efforts, voluntary codes, and

industry policies do not.

FDA notes that this regulation does

not necessarily preclude States from

enforcing their own laws. In fact, under

section 1926 of the Public Health

Service Act (the PHS Act) (42 U.S.C.

300x-26), States are expected to enact

and to enforce laws to prohibit any

manufacturer, retailer, or distributor of

tobacco products from selling or

distributing such products to any

individual under age 18.

Moreover, States may choose to

regulate areas that are not addressed in

this rule and not authorized by the act,

such as requiring licenses for retailers.

FDA agrees with the comments from

State attorneys general that effective

regulation of cigarettes and smokeless

tobacco, in order to protect children and

adolescents, will involve cooperation

and joint efforts by Federal and State

officials and FDA’s rule will enhance,

rather than hinder, State tobacco control

efforts.

Moreover, States are not precluded

from taking action in areas that are

addressed in this rule. Although some of

these requirements may be preempted,

the State may petition the agency for an

exemption from the act’s preemptive

effect under section 521(b) of the act (21

U.S.C. 360k(b)). A more detailed

discussion of preemption can be found

in section X. of this document.

Finally, regarding the comments

questioning FDA’s response to State or

citizen concerns, mechanisms do exist

for States and individual citizens to seek

regulatory action or changes by FDA.

FDA regulations permit any person to

petition the agency to request an action

(such as issuance, amendment, or

revocation of a rule), to reconsider an

action, or to stay an administrative

action (see §§ 10.30, 10.33, and 10.35

(21 CFR 10.30, 10.33, and 10.35)). Less

formal mechanisms for communicating

with FDA, such as letters or meetings,

exist as well.

(5) Many comments opposing this

rule argued that the tobacco industry

already is intensely regulated, and that

more regulation is unneeded and

unjustified. One person wrote: ‘‘As you

know the tobacco industry is already

one of the most heavily regulated

industries in the United States. Current

laws would accomplish the stated

objective of the proposed FDA

regulations.’’ Others disagreed: ‘‘I

believe that the tobacco industry has a

long, sorry, and cynical record * * *. It

is an industry that greatly deserves to be

regulated further.’’

While it is true that production of

tobacco products is regulated, and the

industry is heavily taxed, virtually none

of these measures is aimed at the

product’s impact on the health of the

individuals using them or on public

health. FDA regulation of tobacco

products is intended to have a

completely different effect than any of

the rules that currently applies to the

tobacco industry. The agency’s

regulatory effort will attempt to reduce

the number of young people who smoke

or use tobacco products, consistent with

FDA’s mission to protect public health

by existing laws.

(6) Many comments objected to the

1995 proposed rule, stating that

cigarettes and smokeless tobacco are

legal products and should be treated

like any other legal consumer product.

FDA believes that the comments

misunderstand the regulatory basis for

the rulemaking. FDA has determined

that these products contain both a drug

and device component as defined in

section 201(g) and (h) of the act (21

U.S.C. 321(g) and (h)), respectively,

because the products, and the nicotine

in the products, are intended to affect

the structure and function of the body.

The agency has further determined that

these products should be regulated as

devices. Thus, the issue is not merely

whether the products themselves have

been legally marketed, but how they

may be most appropriately regulated to

protect the public health, given their

status under the act and potential to do

harm.

(7) Some comments suggested that if

the Government begins regulating

tobacco, it will soon regulate many

other consumer products that are now

legal, but judged to be harmful to health,

including alcohol and caffeine. They

expressed fear that, once FDA begins to

regulate one consumer product, it will

be obligated to regulate others. Said one

man: ‘‘The FDA thinks it is being sly by

defining cigarettes as ‘nicotine delivery

devices.’ A shot glass must then be

described as a device for alcohol

consumption. A coffee mug must be a

device for caffeine consumption. Will

the FDA be regulating my morning

coffee by restricting the size of my

cup?’’ Some supporters of the proposed

rule said that FDA should regulate some

of the other consumer products

associated with medical disorders.

Wrote one: ‘‘Bud frogs are no different

than Joe Camel.’’

FDA strongly disagrees with these

comments and believes that the

concerns they express are misplaced. In

no way does the agency’s regulation of

cigarettes and smokeless tobacco as

nicotine delivery devices justify or

require the regulation of coffee cups and

shot glasses.

First, the agency notes that currently

it regulates both caffeine and alcohol

under the authority of the act. Caffeine

naturally occurs in coffee, tea, and other

foods. It is also used as an ingredient in

soft drinks. The act defines ‘‘food’’ as

‘‘articles used for food or drink for man

or other animals’’ (section 201(f)(1) of

the act (21 U.S.C. 321(f)(1))). When

caffeine naturally occurs in products

that are foods, such as coffee, or when

caffeine is used in soft drink products

in accordance with section 402 of the

act (21 U.S.C. 342), the product is a

‘‘food’’ under section 201(f)(1) of the act

and thus explicitly excepted from the

definition of ‘‘drug’’ in section

201(g)(1)(C) (21 U.S.C. 321(g)(1)(C)).

Caffeine used in soft drinks in

accordance with section 402 of the act

is appropriately regulated as a food

under 201(f)(1) of the act. Caffeine is

also used as an active ingredient in

several products regulated as drugs by

the agency, including over-the-counter

stimulants, internal analgesics and

menstrual discomfort relief products.

Likewise, alcohol is used as an

ingredient in products regulated as

drugs under the act, including over-thecounter cough and cold preparations.

There is no evidence to suggest that the

agency’s current regulation of these

substances is inappropriate or

inadequate to protect the public health.

Therefore, there is no factual or

scientific basis for the agency to change

the manner in which these substances

are now being regulated.

FDA’s attention was drawn to tobacco

rather than caffeine and alcohol because

of certain fundamental differences

among the substances. Nicotine is a

highly addictive drug. As discussed in

section I.B. of this document, studies

estimate that as many as 92 percent of

all smokers are addicted to the nicotine

in cigarettes. There is no evidence that

either caffeine or alcohol pose this kind

of health problem. Moreover, cigarettes

and smokeless tobacco are dangerous

products that are associated with lung

cancer, heart disease, and many other

serious illnesses and conditions.

Yet these factors only served to draw

FDA’s attention to the tobacco problem.

What ultimately separates caffeine and

alcohol from nicotine and tobacco

products is that caffeine and alcohol are

currently being appropriately regulated

as foods or drugs based on their

intended use. Nicotine and tobacco

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,

in large measure, are not being

appropriately regulated. FDA is moving

to correct this situation, and the public

health will undoubtedly benefit as a

result.

(8) Several comments argued that it is

the responsibility of parents and

teachers, not the Federal government, to

educate young people about cigarette

and smokeless tobacco use. Some

comments feared that FDA’s effort to

reduce the use of nicotine-containing

cigarettes and smokeless tobacco by

youth might interfere with the

relationship between parents and their

children. Many comments voiced the

argument that this rule is a sign of big

Government getting in the way of

parents educating their children. One

comment stated, ‘‘This is obviously a

case of misplaced priorities * * *. The

battle will really be won on the home

front. Parental guidance will go a long

way in curbing underage smoking.’’

Other parents, however, were grateful

for any assistance they could get to help

protect their children from nicotine

addiction. One person said: ‘‘The

parents cannot do it all alone.’’

Furthermore, most parents who

submitted comments stated that a strong

national approach to reducing these

products’ accessibility and appeal

would reinforce messages that their

children get at home. One comment

stated, ‘‘While I am in no way an

advocate of government in my life, this

to me is a totally different circumstance

* * * children should not be expected

to make these choices.’’ One comment

from a middle school student said,

‘‘Giving school age children the

opportunity to purchase things that will

endanger them is inexcusable.’’

The agency recognizes the unique role

that parents and teachers have in

educating young people and has no

intention of intervening in that

relationship. Rather, FDA expects the

rule to complement parental and

educational efforts by reducing the

availability and appeal of tobacco

products. The preamble to the 1995

proposed rule contained ample

evidence as to how these products are

easily accessible to and appeal to young

people and how a comprehensive

approach, aimed at reducing both access

and appeal, will be more effective than

an educational approach alone.

Educating young people about health

risks may deter some young people from

trying cigarettes and smokeless tobacco,

but educating them and simultaneously

reducing their ability to acquire the

products, as well as reducing the appeal

of the products themselves, will prevent

more young people from using the

products.

FDA also emphasizes that cigarettes

and smokeless tobacco are combination

drug-device products that are subject to

regulation under the act. Consequently,

the rule properly addresses issues

relating to the sale, distribution, and use

of these products by children and

adolescents. The rule does not adversely

affect a parent’s or teacher’s ability to

discuss cigarette and smokeless tobacco

use with young people.

(9) Comments suggested that, for

some, illegal drugs and crime evoke

stronger emotions than tobacco use.

Many comments stated that the

Government, although not FDA

specifically, should spend more of its

resources on fighting crime instead of

trying to regulate a legal product such

as tobacco. One of the form letters stated

it this way: ‘‘Federal dollars would be

much better spent addressing inner-city

violence, illegal drug sales, and this

country’s deteriorating education

system.’’

FDA’s authority is defined by the act.

FDA lacks the authority to help with

other social ills such as crime and illicit

drug sales.

(10) One comment urged FDA to

institute policies that would facilitate

‘‘whistleblowing.’’ The comment said

that FDA should encourage tobacco

company employees to disclose

allegedly illegal or dishonest practices.

Any person, regardless of the industry

that employs that person, can provide

records and information to FDA for law

enforcement purposes with the

assurance that his or her identity, and

the information and records that he or

she provides, will not be publicly

disclosed. Current Federal statutes and

FDA regulations already protect records

or information compiled for law

enforcement purposes from public

disclosure. For example, the Freedom of

Information Act exempts law

enforcement records and information

from public disclosure. FDA’s

regulations governing public disclosure

elaborate on this exemption, stating,

among other things, that the agency may

withhold from public disclosure records

or information compiled for law

enforcement purposes to the extent that

disclosure of such records or

information could reasonably be

expected to disclose the identity of a

confidential source and information

furnished by a confidential source in the

case of a record compiled by FDA or any

other criminal law enforcement

authority in the course of a criminal

investigation (§ 20.64 (21 CFR 20.64(a))).

B. Smoking Prevalence Rates Among

Minors

The agency received some comments

stressing the importance of accurately

measuring youth consumption of

tobacco products, reiterating the

problem of growing use among young

people, and stressing the need to curb

such growth to improve health and to

reduce the tremendous health care costs

attributable to tobacco-related illnesses.

However, several disputed the statistics

FDA cited on the number of youth

smokers and challenged the data

sources used. These comments are

discussed below.

(11) One comment objected to FDA’s

description of smoking as a ‘‘pediatric

problem,’’ arguing that ‘‘TAPS II

[Teenage Attitude and Practice Survey

II] demonstrates that smoking in any

meaningful sense is a phenomenon that

occurs in the later teenage years, not in

the pre-teen or early teen years.’’ It

further charged that the agency’s use of

the term ‘‘pediatric’’ is intended to serve

‘‘emotive and/or political purposes, not

to describe the problem of underage

smoking in scientific or medical terms.’’

A comment from a public health

association, however, cited the TAPS II

survey as showing that ‘‘the average

teen smoker initiates smoking at age 13,

and becomes a regular smoker by age

14.5.’’ It also referred to the Center for

Disease Control and Prevention (CDC’s)

1992 Youth Risk Behavior Survey,

which showed ‘‘similar patterns of early

initiation rates, with smoking initiation

rates rising rapidly between 10 and 14

years of age.’’

The agency maintains its position that

smoking is a pediatric disease. It agrees

with the comment citing TAPS II and

Youth Risk Behavior Survey data

showing that the average teen smoker

begins smoking in the early teens or

even preteens, rather than later years.

Furthermore, the American Academy

of Pediatrics’ Council on Child and

Adolescent Health states that the

purview of pediatrics includes the

physical and psychosocial growth,

development, and health of the

individual beginning before birth

through early adulthood, and that ‘‘[t]he

responsibility of pediatrics may

therefore begin with the fetus and

continue through 21 years of age.’’ This

definition of pediatrics obviously

includes the age group FDA has targeted

to reduce smoking.

(12) One comment from the tobacco

industry charged that FDA’s assertion
44422 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

35 ‘‘1993 Teenage Attitudes and Practices Survey,

Public Use DataTape,’’ CDC, OSH, p. 3, 1993

(unpublished data).

36Pierce, J. P., M. C. Fiore, T. E. Novotny, E. J.

Hatziandreu, and R. M. Davis, ‘‘Trends in Cigarette

Smoking in United States: Projections to the Year

2000,’’ JAMA, vol. 261, pp. 61–65, January 6, 1989.

that smoking has increased among 8thand 10th-grade students ignored CDC’s

TAPS II data showing that the incidence

of underage smoking declined between

1989 and 1993. TAPS II, the comment

maintained, showed that ‘‘[a]lthough

total smoking in the interview sample

[1993] has increased as minors have

aged since 1989, comparing the results

for minors of a given age indicates that

the incidence of underage smoking

declined between the two surveys’’ and

that ‘‘between the two surveys both

daily smoking and any smoking in the

past 30 days declined among minors.’’

The introduction to TAPS II stated

that its prevalence findings were

comparable to or lower than those of

other national surveys. It explained that

the survey method used in TAPS II,

computer-assisted telephone interviews,

had several limitations that may have

led to the lower estimates. For example,

young people may be fearful of

disclosing smoking behavior if a parent

is present in the room during the

telephone interview. Further, telephone

interviews do not afford the same

opportunity for building a rapport

between the interviewer and the

respondent as do in-person interviews.

As a result, young people being

interviewed in this manner may be less

likely to disclose their real smoking

behavior. For these reasons, the

introduction stated, ‘‘prevalence

estimates from TAPS II may be lower

than they would have been had the

entire TAPS I cohort been successfully

reinterviewed and therefore, should be

interpreted with caution.’’ 35

(13) One comment challenged FDA’s

claim that 3,000 young people become

new smokers every day. The comment

maintained that ‘‘the study from which

the ‘3,000 per day’ number was derived

did not refer to children at all,’’ but to

smokers ‘‘aged 20 years old’’ (Pierce et

al., 1989) (emphasis from original). 36

The agency agrees that the study

surveyed individuals who were 20-

years-old, although the agency referred

to these individuals in essentially the

same terms used by the authors of the

study—‘‘young persons.’’

Any potential confusion is mitigated

by the fact that subsequent surveys

indicate that the vast majority of 20-

year-olds begin smoking at a younger

age. For example, according to the

Combined National Health Interview

Surveys for 1987 to 1988, 92 percent of

20-year-old smokers started smoking by

age 18. Taking into account the

comment and these data, the agency

believes that it is accurate to state that

approximately 3,000 young people

begin to smoke each day, regardless of

whether young people is defined as

under 18, or 20 years and under,

although the agency would note that of

the 3,000 young people who begin

smoking each day, 2,722 are under age

18.

C. Scope

Proposed § 897.1(a) would have stated

that ‘‘[t]his part is intended to establish

the conditions under which cigarettes

and smokeless tobacco products that

contain or deliver nicotine, because of

their potential for harmful effect, shall

be sold, distributed, or used under the

restricted devices provisions of the

Federal Food, Drug, and Cosmetic Act.’’

Proposed § 897.1(b) would have stated

that ‘‘[r]eferences in this part to

regulatory sections to the Code of

Federal Regulations are to chapter I of

Title 21, unless otherwise noted.’’ The

final rule is being amended to explicitly

state that failure to comply with any

applicable provision would render the

product misbranded.

The preamble to the 1995 proposed

rule stated that ‘‘[t]he proposed rule

would not apply to pipe tobacco or to

cigars because the agency does not

currently have sufficient evidence that

these products are drug delivery devices

under the act’’ (60 FR 41314 at 41322).

The preamble stated that ‘‘FDA has

focused its investigation of its authority

over tobacco products on cigarettes and

smokeless tobacco products, and not on

pipe tobacco or cigars, because young

people predominantly use cigarettes and

smokeless tobacco products’’ (Id.).

(14) A comment opposing this

provision stated that FDA does not have

authority to regulate cigarettes under the

restricted device (or any other)

provision of the act.

The agency disagrees. A full

discussion of the agency’s authority can

be found in section II. of this document.

(15) Several comments supported the

provision. Some comments

recommended that the scope of the rule

should also apply to adult smokers. One

comment stated that:

[I]t is evident from the FDCA [the Federal

Food, Drug, and Cosmetic Act] that the FDA

has clear and unambiguous authority to

regulate and restrict the sale of the subject

products not only to minors but also to

adults, who suffer equally from the mortality

and morbidity effects of the toxic

components of cigarette smoke and tobacco.

As discussed in section I.B. of this

document, the agency believes that, on

balance, it is better for cigarettes and

smokeless tobacco to remain available

for use by adults.

(16) Several comments urged that the

scope should be expanded to include all

nicotine containing products, including

cigars and pipes. Another comment

expressed concern that the sale and use

of big cigars and pipe tobacco by youth

may be increasing, and therefore

recommended that FDA expand the

scope ‘‘to include all presently marketed

nicotine delivery devices,’’ or to

‘‘include regular monitoring of youth’s

use of these products, and should that

use increase, provide a means to extend

the FDA’s rulings to include those

products.’’

Another comment stated that since

‘‘federal regulations often take seven to

ten years to enact and enforce, it is

essential that the regulation be written

pro-actively to adequately address the

problem at the outset.’’ The comment

stated that ‘‘[i]t is therefore, important to

write regulations to protect the public

from all ‘nicotine delivery devices’ that

in the future, might be placed in

something other than tobacco’’ because

‘‘[a]ny product containing the addictive

substance of nicotine has a future

market because of its addictive nature.’’

Finally, this comment asserted that

FDA should broaden the scope of the

rule to include all products that deliver

nicotine, because the comment stated

that smoking mothers are at greatest risk

for reproductive hazards, such as low

birth weight babies. The comment stated

that ‘‘[c]onsidering that over 50% of

births are unplanned, and that people

believe they can always quit smoking, it

is too late to avoid damage by smoking

mothers by the time they realize they

are pregnant.’’

The preamble to the 1995 proposed

rule stated that ‘‘[t]he proposed rule

would not apply to pipe tobacco or to

cigars because the agency does not

currently have sufficient evidence that

these products are drug delivery devices

under the act’’ (60 FR 41314 at 41322).

The preamble stated that ‘‘FDA has

focused its investigation of its authority

over tobacco products on cigarettes and

smokeless tobacco, and not on pipe

tobacco or cigars, because young people

predominantly use cigarettes and

smokeless tobacco products’’ (60 FR

41314 at 41322).

The agency advises that, at this time,

there is insufficient evidence of cigar or

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

cigar, pipe tobacco, or ‘‘all presently

marketed nicotine delivery devices’’

within the scope of the final rule

(section III.E. of this document).

In response to the comment stating

that the agency should monitor youths’

use of products such as cigars or pipe

tobacco, and that the agency should

provide a means to ‘‘extend FDA’s

rulings to include these products,’’ the

agency advises that, as stated in the

1995 proposed rule, the objective of the

final rule is to meet the goal of the

report ‘‘Healthy People 2000,’’ by

reducing roughly by half children’s and

adolescents’ use of tobacco products.

The agency is not asserting jurisdiction

over pipes and cigars at this time

because it does not have sufficient

evidence that these products satisfy the

definitions of drug and device in the act.

However, the agency will consider any

additional evidence that becomes

available, including any new evidence

that these products meet the statutory

definitions as well as evidence that

indicates that cigars and pipe tobacco

are used significantly by young people.

FDA also disagrees with the comment

claiming that Federal regulations take 7

to 10 years to enact and enforce. While

it may be true that rulemaking, in

general, can be a time-consuming task,

the agency can and has taken prompt

action to issue rules with significant

public health implications. For

example, the proposed rule for this final

rule appeared in the Federal Register of

August 11, 1995 (60 FR 41314). (See

also 56 FR 60366 et al., November 27,

1991, and 58 FR 2066 et al., January 6,

1993 (15 months to issue Nutrition

Labeling and Education Act

regulations); 60 FR 5530, January 27,

1995, and 60 FR 63372, December 8,

1995 (11 months to issue regulations to

facilitate communications between FDA

and State and foreign governments in

order to enhance regulatory

cooperation).) If it is necessary to amend

this regulation, the agency will also be

able to do so expeditiously.

The agency agrees with the comment

stating that smoking mothers are at risk

for certain reproductive hazards. FDA

has chosen to tailor its regulation to

address only children and adolescents.

However, other agencies within the

Department of Health and Human

Services (DHHS) have programs that

currently address tobacco use by

persons of all ages.

FDA, on its own initiative, has revised

§ 897.1 to simplify and to clarify the

scope of the rule. As revised, § 897.1(a)

states that part 897 ‘‘sets out the

restrictions under the Federal Food,

Drug, and Cosmetic Act (the act) on the

sale, distribution, and use of cigarettes

and smokeless tobacco that contain

nicotine.’’ This sentence is comparable

to proposed § 897.1(a), but more

accurate because the 1995 proposed rule

only referred to FDA’s restricted device

authority. FDA has also added a new

§ 891.1(b) stating that ‘‘[t]he failure to

comply with any applicable provision

in this part in the sale, distribution, and

use of cigarettes and smokeless tobacco

renders the product misbranded under

the act.’’ This sentence is intended to

remind parties that violations of a

regulation for a restricted device and

other actions relating to the sale of a

device may cause a device to be

‘‘misbranded’’ under the act. Proposed

§ 897.1(b), which would have stated that

regulatory references are to title 21 of

the Code of Federal Regulations, has

been renumbered as § 891.1(c) in the

final rule and has not been changed.

D. Purpose (§ 897.2)

Proposed § 897.2(a) would have stated

that:

[t]he purpose of this part is to establish

conditions for the sale, distribution, and use

of cigarettes and smokeless tobacco products

in order to: * * * [r]educe the number of

people under 18 years of age who become

addicted to nicotine, thus avoiding the lifethreatening consequences associated with

tobacco use and to provide important

information regarding the use of these

products to users * * *.

The agency has modified the final rule

to provide information regarding the use

of these products only to users; it has

deleted potential users because the final

rule no longer includes an education

program for young people. Proposed

§ 897.2(b) stated that this part of the

provision is intended to ‘‘[p]rovide

important information regarding the use

of these products to users and potential

users.’’ The agency’s response to more

specific comments follows.

The preamble to the 1995 proposed

rule stated that the proposed rule would

reduce ‘‘the appeal of and access to

cigarettes and smokeless tobacco

products by persons under 18 years of

age,’’ but ‘‘would preserve access to

cigarettes and smokeless tobacco

products by persons 18 years of age and

older’’ (60 FR 41314 at 41322).

This rule is designed to complement

the regulations (sometimes referred to as

‘‘the Synar regulations’’) issued by the

Substance Abuse and Mental Health

Services Administration (SAMHSA) (the

SAMHSA rule) implementing section

1926 of the PHS Act regarding the sale

and distribution of tobacco products to

individuals under the age of 18. The

SAMHSA rule contains standards for

determining State compliance with

section 1926 relating to the enactment

and enforcement of State laws

prohibiting the sale and distribution of

tobacco products to individuals under

the age of 18. Both sets of regulations

are designed to help address the serious

public health problem caused by young

people’s use of nicotine-containing

tobacco products. By approaching this

pediatric disease from different

perspectives, these regulations together

will help achieve the Administration’s

goal of reducing the number of young

people who use tobacco products by 50

percent.

(17) One comment opposing this

provision stated that ‘‘it will have little

effect on tobacco use by young people,

is beyond FDA’S statutory authority, is

unjustified as a matter of policy, and

would violate the Constitution.’’

The agency believes that the comment

opposing this provision misinterprets

§ 897.2. This particular provision

merely states the purpose of the entire

rule and is not intended, in and of itself,

to impose any new restrictions. The

agency disagrees that the entire rule will

have little effect on tobacco use by

young people; that it is beyond the

agency’s statutory authority; that it is

unjustified as a matter of policy; and

that it violates the Constitution. All of

these issues are discussed in detail

elsewhere in this document.

(18) Several comments supported the

provision, stating that a national policy

is essential because State laws are

ineffective and inconsistent.

The agency agrees with these

comments and advises that the final rule

complements the existing efforts by

States to enforce restrictions on young

people’s access to cigarettes and

smokeless tobacco. As stated in the

comments, all States currently have

laws prohibiting the sale of tobacco

products to minors. Section 1926 of the

PHS Act creates an incentive for the

States to reduce the unlawful sales of

tobacco products to young people by

‘‘requiring States to have in effect laws

which prohibit the sale of tobacco

products to minors as a condition of

receipt of substance abuse grants.’’ This

rule would only preempt individual

State requirements that are different

from or in addition to these regulations

(see section 521(a) of the act (21 U.S.C.

360k(a))). Thus, a State restriction on

the sale of cigarettes and smokeless

tobacco to individuals under the age of

18 will continue to be enforced by the

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

agency expects the State laws to reduce

smoking among young people, those

laws unlike FDA’s rule, only reduce

access and not the appeal of smoking to

young people. Thus, the agency believes

that the rule will help States achieve

their goals under the substance abuse

programs.

(19) One comment supporting the

provision stated that although the focus

of the rule should be on children, ‘‘the

needs of adult smokers should not be

abandoned.’’ Another comment stated

that:

Cigarettes and smokeless tobacco products

are nicotine delivery devices and they

regularly cause addiction in their users.

Because addiction often leads to serious

illness and death, it is important to reduce

the number of people under 18 years of age

who become addicted to nicotine. Similarly,

it is important to provide accurate

information about the use of these products

to users and to potential users.

The agency appreciates the

comment’s suggestion, but advises that,

for reasons explained in section I.B. of

this document, the final rule focuses

principally on children and adolescents.

FDA, on its own initiative, has revised

§ 897.2 to state that the purpose of part

897 is ‘‘to establish restrictions on the

sale, distribution, and use of cigarettes

and smokeless tobacco in order to

reduce the number of children and

adolescents who use these products,

and to reduce the life-threatening

consequences associated with tobacco

use.’’ FDA believes this revision is a

simpler and more accurate statement of

the rule’s purpose.

E. Definitions (§ 897.3)

Proposed § 897.3 would have

contained definitions for the terms

‘‘cigarette,’’ ‘‘cigarette tobacco,’’

‘‘distributor,’’ ‘‘manufacturer,’’

‘‘nicotine,’’ ‘‘package,’’ ‘‘point of sale,’’

‘‘retailer,’’ and ‘‘smokeless tobacco.’’

The agency received several comments

on the definition section of the

proposal, regarding either the specific

definitions provided or requesting

definitions for additional terms. In

response to the comments, the agency

has clarified several terms, including

‘‘distributor’’ and ‘‘retailer,’’ and has

modified the term ‘‘cigarette’’ to exclude

little cigars.

Proposed § 897.3(a)(3) would have

provided a definition of ‘‘cigarette’’

which included the following language,

modeled after the definition of ‘‘little

cigar’’ contained in the Cigarette act:

(a) Cigarette means * * *

(3) [a]ny roll of tobacco wrapped in leaf

tobacco or any substance containing tobacco

* * * and as to which 1,000 units weigh not

more that 3 pounds.

(20) Several comments supported the

inclusion of ‘‘little cigars’’ in the

definition of ‘‘cigarette’’ and suggested

that the definition be broadened to

include other tobacco products as well.

These comments argued that all tobacco,

including ‘‘snuff,’’ chewing tobacco,

cigars, and pipes, should be regulated in

the same manner as cigarettes, as these

products are also nicotine delivery

systems. These comments further stated

that there is evidence to show that cigar

smoking is becoming increasingly

popular among young adults and

adolescents.

In contrast, several comments from

industry indicated that little cigars are

unique products which should not be

regulated as cigarettes. One comment

stated that the agency has no studies to

support the inclusion of little cigars in

the rule. Moreover, the U.S. Treasury

Department’s Bureau of Alcohol,

Tobacco and Firearms (BATF)

submitted a comment opposing the

inclusion of little cigars in the

‘‘cigarette’’ definition, as this would

require little cigars to be labeled and

advertised as a cigarette under the FDA

regulations, but taxed and labeled as a

‘‘cigar,’’ under the Internal Revenue

regulations enforced by BATF.

The agency has decided, based upon

the comments and the record of this

proceeding, not to include little cigars

in the definition of ‘‘cigarettes’’ for the

purposes of the regulation. The

differences between little cigars and

cigarettes are significant—the products

are easily distinguishable, taxed at

different levels, and marketed to

different consumers. Moreover, little

cigars are neither advertised extensively

nor sold in vending machines. Most

importantly, the agency is not currently

aware of sufficient evidence of use of

little cigars by children or adolescents to

support inclusion of such products in

the rule. Therefore, FDA has deleted

little cigars from the definition of

‘‘cigarette’’ in § 897.3(a). Moreover, FDA

will continue to coordinate definitions

with BATF as appropriate.

Additionally, FDA has deleted

‘‘components, accessories, or parts’’

from § 897.3(a). The reference to

‘‘components, accessories, or parts’’ was

unnecessary because the statutory

definition of ‘‘device’’ includes ‘‘any

component, part, or accessory.’’

Proposed § 897.3(b) would have

defined ‘‘cigarette tobacco’’ as ‘‘any

loose tobacco that contains or delivers

nicotine and is intended for use by

consumers in a cigarette.’’ The proposed

definition also would have stated that

‘‘[u]nless otherwise stated, the

requirements pertaining to cigarettes

shall also apply to cigarette tobacco.’’

(21) One comment by manufacturers

of ‘‘roll-your-own’’ (RYO) cigarette

tobacco argued that the inclusion of

RYO cigarette tobacco under the 1995

proposed rule was arbitrary and

capricious, as the agency had no factual

information about RYO’s composition,

marketing, and usage. This comment

also asserted that there is no evidence

of RYO tobacco usage by minors.

The agency disagrees that the

inclusion of cigarette tobacco in the rule

is arbitrary and capricious. RYO tobacco

is nothing less than cigarettes that have

not yet been assembled.

Unquestionably, RYO cigarettes contain

tobacco and are smoked. The comment

did not challenge the agency’s proposed

finding that the smoke from RYO

cigarettes is inhaled, that the RYO

tobacco is processed, and that RYO

cigarettes deliver nicotine. Unlike ‘‘little

cigars,’’ discussed in paragraph 1 of this

section of the document, the agency

believes that there is no significant

difference in the composition of RYO

tobacco or in the reason consumers use

it (to deliver nicotine) from cigarettes.

The agency believes that, because a RYO

cigarette is fundamentally the same

product as a commercially

manufactured cigarette posing the same

risks, it should be subject to the

restrictions in this rule in order to

protect the public health.

Furthermore, it is important to

include RYO tobacco because to exclude

it would provide a simple and obvious

way to avoid the restrictions in this

regulation. If such an exception existed,

cigarettes could be packaged and sold in

such a way as to be considered RYO

products. Tobacco companies would

then be free to sell these products using

all the marketing and promotion

techniques currently used for cigarettes,

techniques that are particularly

successful with young people. An

exception so broad would quickly

undermine the entire purpose of the

rule. Additionally, FDA has made a

minor change to § 897.3(b) to have

‘‘cigarette tobacco’’ mean ‘‘any product

that consists of loose tobacco * * *.’’

The addition of the words ‘‘any

product’’ is intended to make § 897.3(b)

conform with the format used for other

definitions.

(22) In proposed § 897.3(c),

‘‘distributor’’ would have been defined

as ‘‘any person who furthers the

marketing of cigarettes or smokeless

tobacco products * * * from the
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44425

37Webster’s New World Dictionary, edited by V.

Neufeldt, Third College Edition, Prentice Hall, New

York, p. 299, 1991.

original place of manufacture to the

person who makes final delivery or sale

to the ultimate user, but who does not

repackage or otherwise change the

container, wrapper, or labeling of the

* * * products.’’

Several comments stated that the

definition of ‘‘distributor’’ is vague and

over broad, because:

[P]ersons ‘who further the marketing of

cigarettes or smokeless tobacco’ [may

include] literally everyone involved in the

production, shipping, advertising, or

promotion of cigarettes. Such ‘distributors’

could thus include, for example, cigarette

manufacturers and their employees; truckers

and shipping clerks involved in the physical

movement of the product; advertising

agencies; people involved in promotional

activities and the manufacture of

promotional materials; retailers and their

employees; and conceivably even individuals

who ‘deliver’ cigarettes to social

acquaintances or family members as ‘ultimate

users.’ Including such persons and entities

within the definition of ‘distributor’ would,

in turn, render them ‘responsible,’ * * * for

ensuring that the cigarettes the ‘marketing’ of

which they ‘further’ comply with ‘all

applicable requirements’ of part 897.

(23) One comment suggested that an

individual advocating a particular brand

of cigarette would fall within the

definition of ‘‘distributor.’’

The agency recognizes the concerns

expressed about the proposed definition

of ‘‘distributor.’’ Therefore, based upon

the comments received, the agency has

determined that the definition should be

modified to clarify the term. The

definition of ‘‘distributor’’ has been

modified to mean ‘‘any person who

furthers the distribution of cigarettes or

smokeless tobacco, whether domestic or

imported, at any point from the original

place of manufacture to the person who

sells or distributes the product to

individuals for personal consumption.’’

The term does not include persons who

do not manufacture, fabricate, assemble,

process, or label a finished cigarette or

smokeless tobacco product, and does

not repackage or otherwise change the

container, wrapper, or labeling of the

cigarette or smokeless tobacco product,

because such persons would be

‘‘manufacturers’’ under § 897.3(d).

Under this modified definition, one

who manufactures cigarettes or

smokeless tobacco is not considered a

distributor, but is subject to the

requirements applicable to

manufacturers (see § 897.3(d), definition

of ‘‘manufacturer’’). Similarly, one who

‘‘sells or distributes the product to

individuals for personal consumption’’

is not a distributor, but is subject to the

requirements applicable to retailers (see

§ 897.3(h), definition of ‘‘retailer’’).

Furthermore, the modified definition

clearly does not apply to advertising

agencies. Although advertising agencies

may be said to further the ‘‘marketing’’

of a product they advertise, they do not

further the ‘‘distribution’’ of that

product. As for truckers and other

carriers, section 703 of the act only

requires ‘‘carriers engaged in interstate

commerce’’ and persons receiving or

holding devices in interstate commerce

to provide access to records showing the

devices’ movement or holding in

interstate commerce. Thus, such carriers

would not be subject to the

requirements applicable to distributors

under this part.

(24) Proposed § 897.3(d) would have

defined ‘‘manufacturer,’’ in part, ‘‘as any

person, including any repacker and/or

relabeler, who manufactures, fabricates,

assembles, processes, or labels a

finished cigarette or smokeless tobacco

product.’’ One comment suggested that

this definition be modified to exclude

foreign manufacturers and

manufacturers of products that make up

less than 1 percent of the total U.S.

cigarette market.

The agency disagrees that foreign

manufacturers and ‘‘small’’

manufacturers should be excluded from

the definition. A company that

manufactures a small amount of a

product is, nevertheless, a

manufacturer. Thus, small

manufacturers and foreign

manufacturers of products marketed in

the United States are included in the

definition of ‘‘manufacturer’’ and are

subject to the provisions of this rule.

Furthermore, as discussed in more

detail later, FDA regulates devices as a

class without making exceptions for

small market share.

Additionally, FDA, on its own

initiative, has deleted the part of the

definition which would have stated that

a ‘‘manufacturer’’ ‘‘does not include any

person who only distributes finished

cigarettes or smokeless tobacco

products.’’ FDA believes this text was

unnecessary given the definition of

‘‘distributor’’ in § 897.3(c).

Proposed § 897.3(e) would have

defined ‘‘nicotine’’ by its chemical

formula, 3-(1-Methyl-2-pyrolidinyl)

pyridine, and would have included any

salt or complex of nicotine. FDA did not

receive any comments that would

warrant a change to § 897.3(e), and has

finalized this definition without change.

Proposed § 897.3(f) would have

defined ‘‘package’’ as a pack, box,

carton, or container of any kind in

which cigarettes or smokeless tobacco

are offered for sale, sold, or otherwise

distributed to consumers.

FDA did not receive any comments

that would warrant a change to

§ 897.3(f) but has, on its own initiative,

deleted the word ‘‘products’’ from

‘‘smokeless tobacco products’’ to

correspond to similar changes

throughout the rule.

(25) Proposed § 897.3(g) would have

defined ‘‘point of sale’’ to mean ‘‘any

location at which a consumer can

purchase or otherwise obtain cigarettes

or smokeless tobacco products for

personal consumption.’’ One comment

stated that this definition is

unconstitutionally vague and over

broad, because ‘‘a person can ‘obtain’

cigarettes from a social acquaintance or

family member * * * in any number of

* * * settings.’’ The comment

suggested that ‘‘point of sale’’ be limited

to ‘‘commercial establishments where

tobacco products are sold in arm’slength commercial transactions.’’

The agency agrees that obtaining a

cigarette from a social acquaintance or

family member should not render the

venue of this ‘‘transaction’’ a ‘‘point of

sale.’’ However, the agency does not

believe that the definition of ‘‘point of

sale’’ is vague or overly broad, or that

it needs to be modified. The definition,

as proposed, makes it clear that ‘‘point

of sale’’ does not contemplate venues

where cigarettes are lent or offered to

social acquaintances or family members.

The definition in § 897.3(d) refers to the

‘‘location at which a consumer can

purchase or otherwise obtain’’ the

product (emphasis added). The term

‘‘consumer,’’ means ‘‘a person who buys

goods or services for personal needs and

not for resale or to use in the production

of other goods for resale.’’ 37 Thus, in its

normal use, the term ‘‘consumer’’

implies a commercial relationship and

precludes the possibility that, for

example, the act of providing a cigarette

to a travel partner would render the

vehicle in which both are traveling the

‘‘point of sale’’ for that product.

(26) Proposed § 897.3(h) would have

defined ‘‘retailer’’ to mean ‘‘any person

who sells or distributes cigarettes or

smokeless tobacco products to

individuals for personal consumption.’’

One comment stated that this definition

is unconstitutionally vague and over

broad, because a ‘‘manufacturer or

wholesaler that ‘distributes’

complimentary cigarettes to its

employees, or to guests at a private

function, would be a ‘retailer,’ as would
44426 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

38 1994 SGR, p. 249.

be any individual who gives any other

individual a cigarette.’’

The agency agrees that, although the

intended meaning of the term is clear,

a ‘‘person who * * * distributes * * *

[a product] to individuals for personal

consumption’’ may include transactions

that the agency does not intend to

regulate (i.e., noncommercial

transactions). Therefore, the definition

is modified to mean ‘‘any person who

sells cigarettes or smokeless tobacco to

individuals for personal consumption.’’

Additionally, under § 897.3(h) as

revised, a retailer can be any person

‘‘who operates a facility where vending

machines and self-service displays are

permitted under this part.’’ This change

complements a change to § 897.16(c)

which permits vending machines and

self-service displays in facilities where

no person under age 18 is present, or

permitted to enter, at any time. The

agency addresses § 897.16(c) in greater

detail below.

Proposed § 897.3(i) would have

defined smokeless tobacco as ‘‘any cut,

ground, powdered, or leaf tobacco that

contains or delivers nicotine and that is

intended to be placed in the oral

cavity.’’

FDA did not receive any comments

that would warrant a change to

§ 897.3(i). However, FDA has revised

the definition to refer to ‘‘any product

that consists of cut, ground, powdered,

or leaf tobacco * * *.’’ The agency

made this change because the words

‘‘smokeless tobacco’’ are often

understood as meaning a ‘‘smokeless

tobacco product’’ or products.

Additionally, elsewhere in this rule,

FDA has replaced ‘‘smokeless tobacco

product’’ with ‘‘smokeless tobacco.’’

(27) Several comments requested

definitions for additional terms.

Specifically, one comment requested

that ‘‘advertising’’ be defined to

distinguish between trade and consumer

advertising; several comments requested

that ‘‘vending machine’’ be defined to

exempt machines which dispense

cigarettes to cashiers, machines that

dispense individual cigarettes, or

machines that scan a driver’s license or

age of majority card before dispensing

cigarettes; and several comments

requested that ‘‘playground’’ be defined

for clarity.

The agency disagrees that additional

definitions are necessary for the terms

‘‘advertising’’ and ‘‘vending machine.’’

However, the agency has clarified the

use of those terms in the relevant

sections of the preamble. The agency

has determined that a definition for the

term ‘‘playground’’ is necessary, and has

added some examples to § 897.30. A

discussion of the comments regarding

the definition of ‘‘playground’’ can be

found in section VI. of this document.

IV. Access

Subpart B of part 897 (now retitled as

‘‘Prohibition of Sale and Distribution to

Persons Younger than 18 Years of Age’’)

contains the restrictions on access to

cigarettes and smokeless tobacco by

individuals under the age of 18. This

subpart, by imposing restrictions on

manufacturers, distributors, and

retailers, is intended to ensure that

children and adolescents cannot

purchase these products.

In support of proposed subpart B, the

preamble to the 1995 proposed rule

cited studies showing that the majority

of junior high and high school

students—from 67 percent of 9th grade

students in a 1990 survey to 94 percent

of junior high and high school students

in a 1986 survey—believed that

purchasing cigarettes and smokeless

tobacco was easy (60 FR 41314 at 41322,

August 11, 1995). Other studies

supported that belief. As noted in the

preamble to the 1995 proposed rule, the

1994 Surgeon General’s Report entitled

‘‘Preventing Use Among Young People:

A Report of the Surgeon General’’ (the

1994 SGR) examined 13 studies of overthe-counter (OTC) sales and determined

that approximately 67 percent of minors

are able to purchase cigarettes illegally.

The 1994 SGR examined nine studies

and found that the weighted average

rate of illegal sales to children and

adolescents from vending machines was

88 percent. 38

Significant numbers of children and

adolescents successfully purchased

smokeless tobacco as well, with the

success rate ranging from 30 percent for

junior high school students to 62

percent for senior high school students

(60 FR 41314 at 41322). Ninety percent

of smokeless tobacco users in junior

high and high school in a 1986 survey

said they bought their own smokeless

tobacco (60 FR 41314 at 41322).

Studies indicate that a comprehensive

approach to reducing young people’s

access to cigarettes and smokeless

tobacco would be more effective than

relying primarily on retailer education

programs about the need to prevent

sales to underage persons. For example,

the preamble to the 1995 proposed rule

cited a comprehensive community

intervention in Woodridge, IL, involving

retailer licensing, regular compliance

checks, and penalties for merchant

violations. The Woodridge program

reduced illegal sales from 70 percent to

less than 5 percent almost 2 years later

(60 FR 41314 at 41322). Rates of both

experimentation and regular smoking

decreased more than 50 percent among

seventh and eighth grade students (60

FR 41314 at 41322).

In contrast, another study cited in the

1995 proposed rule indicated that

retailer education programs, alone, may

have limited utility. In the study,

retailers received informational

packages on preventing illegal sales to

young people, yet despite these

informational packages, young people

were able to buy cigarettes in 73 percent

of the stores that received these

informational packages, and, after a

comprehensive retailer educational

program was conducted, illegal sales

were still found to occur in 68 percent

of the stores (60 FR 41314 at 41322).

When the program began issuing

citations to violative establishments, the

illegal sales rate dropped to 31 percent

(Id.). This study, as well as other studies

reviewed by the agency in the 1995

proposed rule and made available for

public comment and review, led the

Food and Drug Administration (FDA) to

draft a comprehensive proposal to

reduce young people’s access to

cigarettes and smokeless tobacco and to

make explicit the responsibility of

manufacturers, distributors, and

retailers to prevent cigarette and

smokeless tobacco product sales to

persons under 18 years of age.

Subpart B to part 897 consists of four

provisions. Section 897.10 establishes

the general responsibilities of

manufacturers, distributors, and

retailers to ensure that the cigarettes and

smokeless tobacco that they

manufacture, label, advertise, package,

distribute, sell, or otherwise hold for

sale comply with the requirements in

this subpart. The agency made one

minor change to this provision, to

change ‘‘smokeless tobacco products’’ to

‘‘smokeless tobacco.’’

Section 897.12 sets forth additional

responsibilities of manufacturers.

Proposed § 897.12(a) would have

required manufacturers to remove from

point of sale all violative self-service

displays, advertising, labeling, and other

manufacturer-supplied or manufacturerowned items. In response to comments

from manufacturers and sales

representatives objecting to their

responsibility for items not owned by

them, the agency has amended this

provision to require manufacturers only

to remove from point of sale all violative

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

manufacturer.

Proposed § 897.12(b) would have

required manufacturers’ representatives

who visit a point of sale in the normal

course of business to visually inspect

and ensure that products are labeled,

advertised, and distributed in

accordance with this subpart. In

response to comments questioning the

need for and operation of this

requirement, FDA has deleted this

provision.

Section 897.14 sets forth additional

responsibilities of retailers. Many of the

comments supported the requirements

to verify age and to ban the sale of single

cigarettes. Comments were divided on

the requirement for a direct transaction.

The comments opposing the 1995

proposed rule were taken into account

in the modifications to the final rule.

The final rule contains a new

§ 897.14(a), which states that no retailer

may sell cigarettes or smokeless tobacco

to any person younger than 18 years of

age. This new paragraph codifies a

concept that was implicit in the 1995

proposed rule.

Proposed § 897.14(a) (now

renumbered as § 897.14(b)) would have

required that the retailer or an employee

of the retailer verify by means of

photographic identification showing the

bearer’s date of birth that no purchaser

is younger than 18 years of age. In

response to changes made to § 897.16

regarding mail-order and vending

machine sales and self-service displays

in facilities inaccessible to children and

adolescents, the final rule excepts the

requirements for proof of age under

these limited circumstances. New

§ 897.14(b)(2) eliminates the verification

requirement for consumers 26 years of

age or older.

Proposed § 897.14(b) (now numbered

as § 897.14(c)) would have required that

cigarettes or smokeless tobacco be

provided to the purchaser by the retailer

or an employee of the retailer, without

the assistance of an electronic or

mechanical device, such as a vending

machine. The final provision has been

modified to reflect changes made to

§ 897.16 permitting vending machines

and self-service displays in certain

limited circumstances and to

correspond more closely to the

requirements in § 897.16(c)(1).

Proposed § 897.14(c) (now

renumbered as § 897.14(d)) would have

prohibited the retailer or an employee

from opening any cigarette or smokeless

tobacco package to sell or distribute

individual cigarettes or any quantity of

the product that is smaller than the

quantity in the unopened products. In

order to clarify the intent of this

provision, the final rule prohibits

retailers from breaking or otherwise

opening ‘‘any cigarette or smokeless

tobacco product package to sell or

distribute individual cigarettes or a

number of unpackaged cigarettes that is

smaller than the quantity in the

minimum cigarette package size defined

in § 897.16(b), or any quantity of

cigarette tobacco or smokeless tobacco

that is smaller than the smallest package

distributed by the manufacturer for

individual consumer use.’’

The final rule also adds § 897.14(e) to

clarify that each retailer is responsible

for removing all violative self-service

displays, advertising, labeling, and other

items located in the retailer’s

establishment or for bringing those

items into compliance with the

requirements in this rule. This provision

complements § 897.12 which requires

manufacturers to remove manufacturerowned, violative items from retail

establishments.

Section 897.16 establishes the

conditions of manufacture, sale, and

distribution. Proposed § 897.16(a)

would have prohibited the use of a trade

or brand name for a nontobacco product

as the trade or brand name for a tobacco

product ‘‘except for tobacco products on

which a trade or brand name of

nontobacco product was in use on

January 1, 1995.’’ The only change to

§ 897.16(a) has been to clarify the

agency’s intent by amending the

language to restrict manufacturers to

those product names ‘‘whose trade or

brand name was on both a tobacco

product and a nontobacco product that

were sold in the United States on

January 1, 1995.’’

Section 897.16(b) would have

established a minimum package size of

20 for cigarettes. The final rule was

amended only to provide a very limited

exception consistent with the changes

made to § 897.16(c)(2)(ii), discussed

below.

Proposed § 897.16(c) would have

prohibited vending machines, selfservice displays, mail-order sales, and

other ‘‘impersonal’’ modes of sale and

required direct, face-to-face exchanges

between retailers and consumers. In

response to comments criticizing the

restrictions as inconveniencing adults,

the agency has amended this section.

The final rule allows mail-order sales

(except for mail-order redemption of

coupons and the distribution of free

samples through the mail). The final

rule also allows vending machines (even

those selling packaged, single

cigarettes), and self-service displays

(merchandisers) in facilities that are

inaccessible to persons under the age of

18.

Proposed § 897.16(d) would have

prohibited manufacturers, distributors,

and retailers from distributing any free

samples of cigarettes or smokeless

tobacco. FDA made one minor change to

this provision, changing the words

‘‘manufacturers, distributors, and

retailers may not distribute’’ to ‘‘no

manufacturer, distributor, or retailer

may distribute’’ free samples.

The final rule adds a new § 897.16(e)

to prohibit manufacturers, distributors,

and retailers from selling, distributing,

or causing to be sold or distributed

cigarettes or smokeless tobacco with

advertising or labeling that does not

comply with the rule’s advertising and

labeling requirements. This provision is

intended to clarify that the rule’s

advertising and labeling requirements

are conditions on the sale, distribution,

and use of these products.

A. General Comments

The agency received many general

comments both in support of and in

opposition to proposed subpart B of part

897. Comments supporting the 1995

proposed rule often stated that the rule,

if finalized, would help prevent young

people from obtaining or using

cigarettes and smokeless tobacco and

would eventually lead to a healthier

population and lower health care costs.

The agency also received comments

from attorneys general of more than 25

States concluding that, overall, the 1995

proposed rule ‘‘should be a crucial

component of a national effort by

Federal, State, and local officials to help

our youngest generation of Americans

avoid suffering preventable disease and

premature death from the use of tobacco

products.’’

Comments opposing the 1995

proposed rule, in general, asserted that

FDA regulation was unnecessary or

unauthorized or that the proposed

requirements would be ineffective. The

following is an analysis of and response

to these general comments.

(1) Several comments stated that the

1995 proposed rule violates the

Commerce Clause of the Constitution.

The comments argued that there is no

equivalent to a congressional finding

that the regulated activity at issue—the

sale of tobacco products to children and

adolescents—affects interstate

commerce, nor is the regulation

reasonably adapted to an end permitted

by the Constitution. They argued that

the regulation of tobacco products by
44428 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

39 DiFranza, J. R., and J. B. Tye, ‘‘Who Profits from

Tobacco Sales to Children?’’ JAMA, vol. 263, No.

20, pp. 2784–2787, 1990.

the Federal Government is

impermissible based on United States v.

Lopez, 115 S.Ct. 1624 (1995) (Congress

lacked power under Commerce Clause

to criminalize possession of a gun

within 1,000 feet of a school).

The agency disagrees with these

comments. The Constitution gives

Congress the power ‘‘[t]o regulate

Commerce with foreign Nations, and

among the several States, and with the

Indian Tribes.’’ Under the Commerce

Clause, Congress may ‘‘regulate those

activities having a substantial

relationship to interstate commerce, i.e.,

those activities that substantially affect

interstate commerce’’ (Lopez, 115 S.Ct.

at 1629–30 (citation omitted)). The

Supreme Court has consistently held

that Congress acted within its powers

under the Commerce Clause when it

enacted and subsequently amended the

Federal Food, Drug, and Cosmetic Act

(the act). (See United States v. Sullivan,

332 U.S. 689, 697–98 (1948); United

States v. Walsh, 331 U.S. 432, 437–38

(1947); Weeks v. United States, 245 U.S.

618, 622 (1918); Seven Cases of

Eckman’s Alternative v. United States,

239 U.S. 510, 514–15 (1916); McDermott

v. Wisconsin, 228 U.S. 115, 128 (1913);

Hipolite Egg Co. v. United States, 220

U.S. 45, 58 (1911).) Regulation of

tobacco products is a legitimate exercise

of FDA’s authority under the act to

regulate drugs and devices and is

therefore within the scope of Congress’

power under the Commerce Clause.

The Supreme Court’s recent opinion

in Lopez does not affect this analysis. As

the Court noted, ‘‘[t]he possession of a

gun in a local school zone is in no sense

an economic activity that might,

through repetition elsewhere,

substantially affect any sort of interstate

commerce.’’ (See Lopez, 115 S.Ct. at

1634; see also Id. at 1640 (Kennedy, J.,

concurring) (‘‘[H]ere neither the actors

nor their conduct have a commercial

character, and neither the purposes nor

the design of the statute have an evident

commercial nexus.’’).)

By contrast, this tobacco regulation

affects conduct that is distinctly

commercial in character. In particular,

the access restrictions—the national

minimum age for purchase of tobacco

products and the restrictions on handto-hand sales, sales from opened

packages, package size, vending

machine sales, and self-service

displays—all involve actors

(manufacturers, vendors, and

consumers) and conduct (the marketing,

sale, and purchase of products that are

themselves in interstate commerce) that

are quintessentially commercial (see,

e.g., Katzenbach v. McClung, 379 U.S.

294, 298–304 (1964) (under the

Commerce Clause, Congress may

regulate activities of restaurants that

serve food, a substantial portion of

which has moved in interstate

commerce)). In addition, the purpose

and design of the regulation—to deter

this commercial activity directed at

persons under the age of 18 in order to

reduce addiction to the nicotine in these

products—has the requisite commercial

nexus. (See, e.g., Heart of Atlanta Hotel,

Inc. v. United States, 379 U.S. 241

(1964); Perez v. United States, 402 U.S.

146 (1971).) Moreover, because youths

alone purchase an estimated $1.26

billion of tobacco products annually, the

regulated activity—sales of tobacco

products—substantially affects

interstate commerce. 39

As noted, tobacco products are in

interstate commerce as defined in

section 201(b) of the act (21 U.S.C.

321(b)). Cigarettes manufactured in the

United States include myriad

components that are in interstate

commerce. For example, American-type

blended cigarettes contain oriental

tobacco imported from Greece, Turkey,

Russia, Yugoslavia, or Bulgaria, and

they may also contain imported fluecured tobacco from, for example,

Zimbabwe or Brazil. In addition, they

contain other tobacco and tobacco

products, filters, paper, ammonia,

sugars, humectant, licorice, and cocoa,

among nearly 600 other possible

ingredients. (See generally Brown, C. L.,

The Design of Cigarettes, Hoechst

Celanese Corp., Charlotte, NC (3d ed.

1990); ‘‘Ingredients Added to Tobacco

in the Manufacture of Cigarettes by the

Six Major American Cigarette

Companies,’’ (April 12, 1994)).

Similarly, smokeless tobacco is made

from tobacco grown in Pennsylvania

and Wisconsin or in Kentucky and

Tennessee and contains other

ingredients from a list of over 560, such

as sugar, molasses, and licorice, which

are in interstate commerce. (See The

Health Consequences of Using

Smokeless Tobacco: A Report of the

Advisory Committee to the Surgeon

General, DHHS, PHS, p. 5, 1986;

‘‘Smokeless Tobacco Ingredient List as

of April 4, 1994, attached to letter of

May 3, 1994, from Stuart M. Pape to the

Hon. Henry A. Waxman and the Hon.

Thomas J. Bliley, Jr.)

(2) The comments also suggested that

Congress’ Commerce Clause powers do

not allow imposition of a national

minimum age for the purchase of

tobacco products.

The agency disagrees. The cases cited

in these comments, South Dakota v.

Dole, 483 U.S. 203 (1987) and Oregon v.

Mitchell, 400 U.S. 112 (1970), do not

address the Commerce Clause, and there

is no case law suggesting that an agency

may not impose regulations on

commerce based on the age of people

involved, under a statute passed

pursuant to Congress’ Commerce Clause

power, and in particular that an agency

may not set a national minimum age for

sales of cigarettes and smokeless

tobacco in order to reduce the risks of

addiction and to health associated with

their use by individuals under age 18.

In fact, under its authority to regulate

commerce, Congress may exclude from

interstate commerce goods produced by

children workers, United States v.

Darby, 312 U.S. 100, 115–17 (1941)

(overruling Hammer v. Dagenhart, 247

U.S. 251 (1918), which held that

Congress lacked power to exclude

products of child labor from interstate

commerce), and criminalize, for

example, the transportation in interstate

commerce of pornography involving

children (18 U.S.C. 2251 through 2259),

or the sale of firearms and ammunition

to individuals under the age of 18 (18

U.S.C. 922(b)(l)).

Moreover, ‘‘‘[t]he authority of the

Federal government over interstate

commerce does not differ’ * * * ‘in

extent or character from that retained by

the states over intrastate commerce.’’’

(See Heart of Atlanta Hotel, 379 U.S. at

260 (quoting United States v. Rock

Royal Co-op., Inc., 307 U.S. 533, 569–70

(1939)).) States may set a minimum age

for sales of cigarettes and smokeless

tobacco, and these products are in

interstate commerce (and as devices, are

presumed under section 709 of the act

to be in interstate commerce for the

purpose of jurisdiction under the act).

Thus, it follows that the Federal

Government may establish a national

minimum age for sales of tobacco

products.

In summary, the imposition of a

national minimum age for purchase of

tobacco products and restrictions on

hand-to-hand sales, sales from opened

packages, package size, vending

machine sales, and self-service displays

is within Congress’ authority under the

Commerce Clause.

(3) Several comments argued that the

regulation’s imposition of a national

minimum age for purchase of tobacco

products and its restrictions on

impersonal sales, sales from opened

packages, package size, vending
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44429

machine sales, and self-service displays

violate the Tenth Amendment to the

Constitution. In particular, the

comments argued that the regulation of

tobacco products and decisions about

eligibility and maturity are traditionally

State functions, and that this fact

required Congress to have made it

unmistakably clear by statute that it

intended FDA to regulate tobacco

products.

The agency believes that this

regulation does not violate the Tenth

Amendment. The Tenth Amendment

provides that ‘‘[t]he powers not

delegated to the United States by the

Constitution, nor prohibited by it to the

States, are reserved to the States

respectively, or to the people.’’ It

follows that, ‘‘[i]f a power is delegated

to Congress in the Constitution, the

Tenth Amendment expressly disclaims

any reservation of that power to the

States.’’ (See New York v. United States,

505 U.S. 144, 156.) Because FDA is

acting under the act, which Congress

enacted under its Commerce Clause

authority, there is no Tenth Amendment

violation.

FDA disagrees that regulation of

tobacco sales or decisions about

eligibility and maturity are traditional

State functions. Even if they were,

however, that fact would not implicate

the Tenth Amendment. ‘‘As long as it is

acting within the powers granted it

under the Constitution, * * * Congress

may legislate in areas traditionally

regulated by the States’’ (Gregory v.

Ashcroft, 501 U.S. 452, 460 (1991)).

Because the agency is acting to regulate

cigarette and smokeless tobacco sales in

order to eliminate the health risks of

those products, and is doing so under a

statute passed under Congress’

Commerce Clause power, these

provisions do not violate the Tenth

Amendment.

Further, Congress need not make its

intention to regulate in such areas

‘‘unmistakably clear in the language of

[a] statute,’’ Will v. Michigan Dept. of

State Police, 491 U.S. 58, 65 (1989)

(quotations omitted), as suggested in the

comments. This requirement only

applies to Federal statutes that ‘‘go[]

beyond an area traditionally regulated

by the States’’ to affect ‘‘decision[s] of

the most fundamental sort for a

sovereign entity,’’ Gregory, 501 U.S. 460,

because such statutes ‘‘alter the usual

constitutional balance between the

States and the Federal Government,’’

Will, 491 U.S. 65 (quotations omitted);

see also Seminole Tribe of Florida v.

Florida, 116 S.Ct. 1114, 1123–1132

(1996) (holding that, even if Congress,

acting under the Commerce Clause,

makes its intention to subject

unconsenting States to Federal suits by

private parties absolutely clear, the

Eleventh Amendment bars such suits).

Regulation of the sale of cigarettes and

smokeless tobacco does not

fundamentally affect the States’

prerogatives under the Constitution

(such as abrogating the States’ sovereign

immunity), and so Congress need not

have made it unmistakably clear by

statute that it intended FDA to regulate

their sale.

In summary, the agency is imposing a

national minimum age for purchase of

tobacco products and restrictions on

impersonal sales, sales from opened

packages, package size, vending

machine sales, and self-service displays

in order to eliminate the health risks to

young people associated with products

in interstate commerce. These

provisions therefore do not violate the

Tenth Amendment.

(4) A comment from an industry trade

association stated that the Ninth

Amendment to the Constitution is a

‘‘barrier to federal laws that would

restrict freedom of adults as well as

others to use tobacco products.’’ Several

comments from adults expressed similar

arguments regarding an adult’s

‘‘freedom’’ to purchase or use tobacco

products.

The agency disagrees that its

imposition of a national minimum age

for purchase of tobacco products and its

restrictions on hand-to-hand sales, sales

from opened packages, package size,

vending machine sales, and self-service

displays impinge on unenumerated

rights protected by the Ninth

Amendment.

The Ninth Amendment provides that

‘‘[t]he enumeration in the Constitution,

of certain rights, shall not be construed

to deny or disparage others retained by

the people.’’ Although not a source of

rights itself, the Ninth Amendment

nevertheless ‘‘show[s] the existence of

other fundamental personal rights’’ and

that ‘liberty’ protected by the Fifth

* * * Amendment[] from infringement

by the Federal Government * * * is not

restricted to rights specifically

mentioned in the first eight

amendments.’’ Griswold v. Connecticut,

381 U.S. 479, 493 (1965) (Goldberg, J.

concurring).

The final rule regulates commercial

transactions involving tobacco products

to limit young people’s access to them.

Young people do not have an

unenumerated, fundamental right

protected by the Constitution to have

commercial access to tobacco products.

(See Bowers v. Hardwick, 478 U.S. 186,

190 (1986).) Nor does the agency believe

that it is merely a specific manifestation

of a broader right, Id. at 199 (Blackmun,

J., dissenting), whether styled as the

right to privacy, Griswold, 381 U.S. at

484–485, or to be let alone, Olmstead v.

United States, 277 U.S. 438, 478 (1928)

(Brandeis, J., dissenting), or to

individual autonomy, Carey v.

Population Services Int’l, 431 U.S. 678,

687 (1977).

In particular, the right to privacy does

not protect commercial access to

tobacco products for young people,

because restricting sales of addicting

tobacco products to young people ‘‘is

within the area of governmental interest

in protecting public health.’’ (See

Rutherford v. United States, 616 F.2d

455, 457 (10th Cir.), (right to privacy

does not include access to laetrile) cert.

denied, 449 U.S. 937 (1980); see also

Carnohan v. United States, 616 F.2d

1120, 1122 (9th Cir. 1980)

(‘‘Constitutional rights of privacy and

personal liberty do not give individuals

the right to obtain laetrile free of the

lawful exercise of government police

power’’); United States v. Horsley, 519

F.2d 1264, 1265 (5th Cir. 1975), (holding

that right of privacy does not protect

possession of marijuana with intent to

distribute) cert. denied, 424 U.S. 944

(1976); United States v. Kiffer, 477 F.2d

349, 352 (2d Cir.) (same), cert. denied,

414 U.S. 831 (1973).) The agency

therefore concludes that this rule does

not abridge an unenumerated,

fundamental right reserved to the

people by the Ninth Amendment to the

Constitution.

(5) Several comments suggested that

comprehensive regulations were

unnecessary. Instead, these comments

advocated training programs for retailers

and, more specifically, for retail sales

clerks. These training programs would

be based either on voluntary efforts by

the affected industries or on in-house,

employee training programs. A few

comments argued that any regulations to

restrict access to cigarettes and

smokeless tobacco would be futile

because young people ‘‘would get the

products anyway.’’

The agency disagrees with these

comments. The preamble to the 1995

proposed rule indicated that

informational or training programs,

alone or without any enforcement

mechanisms, have limited success (60

FR 41314 at 41322). Given the health

risks caused by or associated with these

products and the evidence that current,

voluntary restrictions on youth access

are ineffective, FDA believes that it
44430 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

40FDA Regulatory Procedures Manual, DHHS,

PHS, Office of Regulatory Affairs, Office of

Enforcement, Division of Compliance Policy,

Chapter 3, p. 45, August 1995.

needs to develop an effective,

mandatory program under the act to

restrict young people’s access to

cigarettes and smokeless tobacco. The

agency cannot and should not abdicate

its public health responsibilities in

deference to voluntary efforts to inform

employees or other parties on the sale

and distribution of these products, given

the evidence cited in the preamble to

the 1995 proposed rule that such

programs must be bolstered by

government sanctions and measures like

those in subpart B of part 897 in order

to be effective.

(6) Other comments, particularly

those submitted by a few State

legislators, claimed that States should

be free to allocate their resources as they

wished so that, if a State decided not to

address a particular issue, such as

access to tobacco products, that decision

would be within the State’s purview.

In contrast, comments submitted by

State and local public health officials

were unanimous in recommending

strong Federal leadership in reducing

young people’s access to cigarettes and

smokeless tobacco.

The agency believes that the

comments opposing the rule

misinterpret the rule’s scope and

application. The rule does not require

States to enforce any provision, nor does

it require States to allocate resources in

any manner. FDA will enforce the rule

as it does any other rule, by using FDA’s

own resources or, where appropriate

and with cooperation from State

officials, by ‘‘commissioning’’ State

officials to perform specific functions on

the agency’s behalf. FDA is authorized,

under section 702(a) of the act (21

U.S.C. 372), to conduct examinations

and investigations through any health,

food, or drug officer or employee of any

State, territory, or political subdivision

commissioned as an officer of DHHS. In

most cases, a commissioned State or

local government official is authorized

to perform one or more of the following

functions: (1) Conduct examinations,

inspections, and investigations under

the act; (2) collect and obtain samples;

(3) copy and verify records; and (4)

receive and review official FDA

documents. 40 The scope of the official’s

authority depends on his or her

qualifications, and the commissioning

process involves active and voluntary

participation by States in identifying

suitable candidates for commissioning

and establishing the scope of the

commissioned official’s duties.

(7) A few comments claimed that the

rule would create friction between

States and the Federal Government

because, according to these comments,

FDA would be interfering in State

affairs. Some comments also claimed

that the rule would make State efforts

less effective because State regulatory or

police agencies would defer to FDA.

In contrast, as noted above, several

State attorneys general expressed a

different view, stating that the rule

would strengthen State efforts to reduce

cigarette and smokeless tobacco use

among young people.

The agency respectfully disagrees

with those comments that claim FDA

will be interfering in State affairs or that

the rule will create friction or

undermine the effectiveness of State

officials. The agency has a history of

cooperative relations with State

regulatory officials. For example, as

mentioned earlier, section 702(a) of the

act authorizes FDA to commission State

officials to perform specific functions on

FDA’s behalf. FDA also works with

State officials in implementing statutes

such as the Prescription Drug Marketing

Act of 1987, the Nutrition Labeling and

Education Act of 1990, and the

Mammography Quality Standards Act of

1992. Given this history of cooperation

between FDA and State regulatory

agencies, FDA does not agree that the

rule will create friction between FDA

and State authorities or undermine the

effectiveness of State officials.

(8) Many comments argued that the

1995 proposed rule would restrict an

adult’s ability to purchase or select

cigarettes and smokeless tobacco.

Several asserted that regulations would

be ineffective because young people

would obtain cigarettes and smokeless

tobacco anyway. Hence, these

comments would eliminate all

provisions intended to reduce a young

person’s access to these products.

In contrast, many comments

supported the rule, stating that it would

reduce a young person’s easy access to

and opportunity for early

experimentation with cigarettes and

smokeless tobacco, help reduce the use

of those products by young people, and

prevent young people from suffering

adverse health effects associated with

using these products.

The agency agrees that the rule may

have an incidental effect on an adult’s

ability to purchase cigarettes or

smokeless tobacco, but FDA emphasizes

that the rule’s benefits far outweigh any

inconvenience to adults. FDA has

narrowly focused the rule to address

those activities and practices that are

especially appealing to, or used by,

young people and to preserve, to the

fullest extent practicable, an adult’s

ability to purchase these products. Any

inconvenience to adults should be

slight. For example, although the final

rule eliminates self-service displays for

cigarette packages in facilities that are

accessible to young people, the limited

amount of time spent in requesting and

receiving a cigarette pack from a retail

clerk should not result in hardship on

adults. The agency has also amended

the rule, as discussed in section IV.E. of

this document to retain specific modes

of sale that are restricted to—or used

almost exclusively by—adults. These

amendments respond to comments from

adult consumers and retailers that

young people cannot or do not use

certain modes of sale and so those

modes of sale should remain available

to adults.

(9) Several comments argued that the

1995 proposed rule ‘‘intruded’’ on

private life or ‘‘discriminated’’ against

adult cigarette and smokeless tobacco

users.

In contrast, other comments agreed

that FDA has jurisdiction over cigarettes

and smokeless tobacco and that the rule

was an appropriate exercise of FDA’s

authority and properly focused on

curtailing access by young people.

Several comments suggested amending

the rule to add restrictions for adults, to

ban smoking, or to provide information

to help all smokers to stop smoking.

As stated earlier, the agency has

drafted the rule as narrowly as possible

to restrict the sale and distribution of

these products to children and

adolescents, while preserving adults’

ability to purchase the products.

As for extending the rule to include

adults or to ban smoking, FDA declines

to adopt the comments’ suggestion. As

discussed in section III.A. of this

document, the President, and the agency

in its preamble to the 1995 proposed

rule, have stated that removing

cigarettes and smokeless tobacco from

the market would not be in the best

interests of the public health. The

agency adheres to this position.

(10) Many comments urged FDA to

refrain from rulemaking and instead rely

on voluntary, manufacturer-developed

or retailer-developed programs, such as

‘‘Action Against Access,’’ ‘‘It’s the

Law,’’ and ‘‘We Card,’’ to prevent sales

to young people. Some would require

retailers and their employees to be

trained to comply with existing State

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

already have in place.

Other comments expressed skepticism

about such programs and, therefore,

strongly supported FDA’s rulemaking

activities.

The agency declines to rely solely on

voluntary, manufacturer- or retailerdeveloped programs to prevent sales to

young people. The agency is regulating

cigarettes and smokeless tobacco as

devices under the act. Voluntary

programs cannot serve as a substitute for

such regulation and do not provide

many of the safeguards that the act

provides.

As for retailer programs to train

employees not to sell cigarette and

smokeless tobacco to young people,

FDA believes that such training efforts

will help retailers comply with their

obligations under § 897.14. However,

retailer training programs, alone, will

not be as effective as the rule’s

comprehensive approach because such

training would not affect certain

activities (such as free samples and

advertising) that are used by or appeal

to young people.

Similarly, voluntary, manufacturerdeveloped programs are not sufficient to

prevent sales to young people. Such

programs purport to deter young people

from using cigarettes or smokeless

tobacco until they reach legal age, but

often omit retail activities or impose no

sanctions if a voluntary code or

provision is violated. For example, one

comment supported the rule, in part,

because a retailer gave the author, when

he was 15 years old, and other children

free cigarettes. A manufacturerdeveloped program might not be

effective at curtailing such practices by

retailers, whereas the rule bars

distribution of free samples by

manufacturers, distributors, and

retailers.

(11) One comment suggested

amending the rule to include

advertisers.

FDA declines to amend the rule as

suggested by the comment. The agency’s

authority attaches to the product and

those responsible for its manufacture,

distribution, or sale in interstate

commerce. Advertisers do not have

control over the products and

presumably act at the direction of

manufacturers, distributors, and

retailers. If an advertisement violated

the requirements of this part, the agency

would hold the appropriate

manufacturer, distributor, or retailer

responsible for the violative

advertisement.

(12) One comment argued that

cigarettes should be sold by prescription

only. Other comments opposing the rule

predicted that the agency would require

prescriptions.

The agency declines to amend the

rule to require prescriptions. Such a

requirement would unduly affect adults

and retailers and, FDA expects that the

more narrowly tailored provisions in

subpart B of part 897 will adequately

restrict young people’s access to these

products.

(13) One comment criticized the 1995

proposed rule for not restricting where

cigarettes and smokeless tobacco may be

sold. The comment said that pharmacies

and health care facilities often sell these

products and that such sales undermine

the credibility of health warnings

related to these products. The comment

suggested that FDA prohibit

‘‘inappropriate places’’ from selling

these products.

FDA declines to amend the rule as

suggested by the comment. The agency

has no information or criteria that

would permit it to determine whether

certain places or types of establishments

are not ‘‘appropriate’’ for selling

cigarettes and smokeless tobacco.

B. General Responsibilities of

Manufacturers, Distributors, and

Retailers (§ 897.10)

Proposed § 897.10 would have

required each manufacturer, distributor,

and retailer to be responsible for

ensuring that the cigarettes or smokeless

tobacco that it ‘‘manufactures, labels,

advertises, packages, distributes, sells,

or otherwise holds for sale’’ comply

with the requirements in part 897. FDA

proposed this provision setting forth

these general responsibilities as part of

the agency’s comprehensive program to

reduce young people’s access to

cigarettes and smokeless tobacco.

Through this provision FDA intended to

ensure that these products, from the

time of their manufacture to the time of

their purchase, comply with part 897

and that manufacturers, distributors,

and retailers appreciate their roles, and

carry out their legal responsibilities to

reduce the accessibility and appeal of

these products to young people. The

final rule retains § 897.10 without any

significant changes.

(14) Many comments interpreted

proposed § 897.10 as imposing strict

liability on manufacturers, distributors,

and retailers. Generally, these comments

interpreted the 1995 proposed rule as

making a party responsible for

violations committed by another party,

even if the former was unaware that the

violation had been committed by the

latter. Some comments asserted that the

agency cannot impose such vicarious

liability, under these comments’

interpretation of United States v.

Dotterweich, 320 U.S. 277 (1943), and

United States v. Park, 421 U.S. 658

(1975). One comment acknowledged

that proposed § 897.10, when read

literally, would not hold parties

responsible for acts committed by other

parties, but nevertheless claimed that,

despite such language, FDA would hold

manufacturers, distributors, and

retailers liable for any action committed

by any party.

The agency believes that the

comments have misinterpreted § 897.10.

Section 897.10 holds manufacturers,

distributors, and retailers responsible

for their own actions; it does not require

any party to ensure that another party

complied with the regulations, nor does

it hold a party responsible criminally or

civilly for actions that it did not commit

or about which it had no responsibility

under the act and no knowledge. This

is the most logical and straightforward

interpretation of § 897.10, and, as stated

earlier, the provision states that ‘‘each

manufacturer, distributor, and retailer is

responsible for ensuring that the

cigarettes and smokeless tobacco it

manufactures, labels, advertises,

packages * * * comply with all

applicable requirements under this

part’’ (emphasis added). The word ‘‘it’’

refers to the individual manufacturer,

distributor, or retailer, while the word

‘‘applicable’’ signifies that a party,

depending on the circumstances, is

subject only to those requirements for

which that party is responsible. This

issue is discussed in greater detail later

in this section of the document.

In determining which party may be

responsible for a regulatory violation,

FDA will examine where and when the

violation occurred. For example,

§ 897.14(d), among other things,

prohibits retailers from opening any

cigarette package and selling individual

cigarettes. If a retailer, on its own

initiative, opened a package and sold

single cigarettes, without the knowledge

of a manufacturer or distributor, only

the retailer would be responsible

because only the retailer engaged in

actions that violated the requirements in

this part. However, if the manufacturer

or distributor supplied single cigarettes

to the retailer—contrary to § 897.16(b)

which establishes a minimum package

size for cigarettes—and the retailer sold

the single cigarettes, or if the

manufacturer or distributor knew or had

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

provide cigarettes to the retailer, the

manufacturer or distributor, as well as

the retailer, would be subject to

regulatory action. The manufacturer or

distributor would have violated

§ 897.16(b) and assisted in violating

§ 897.14(d), while the retailer would be

in violation of § 897.14(d). In sum, each

manufacturer, distributor, and retailer is

responsible for ensuring that its

products (whether it manufactures,

labels, advertises, packages, distributes,

sells, or otherwise holds them for sale)

comply with all requirements

applicable to it and its products. As

such, § 897.10 does not create the

problems that the comments suggested

it does.

(15) Several comments objected to

proposed § 897.10 because it would

have each manufacturer, distributor,

and retailer responsible for ensuring

compliance with the regulatory

requirements in part 897. These

comments interpreted the provision as

having the affected industries, rather

than Federal or State Governments,

determine compliance. One comment

also asserted that the imposition of such

responsibility on private persons is a

violation of the Due Process Clause of

the Fifth Amendment, which prevents

unreasonable delegations of

governmental authority. Several

comments added that manufacturers,

distributors, and retailers should not

‘‘spy’’ on each other to ensure

compliance. One comment said that the

rule would create a ‘‘hidden

enforcement tax.’’

FDA believes that the comments

objecting to § 897.10 have

misinterpreted its application. Section

897.10 does not make manufacturers,

distributors, or retailers solely

responsible for ensuring compliance

with the regulations nor does it alter or

affect any Federal or State enforcement

mechanism. Section 897.10 is intended

to remind manufacturers, distributors,

and retailers that they are responsible

for complying with the regulations that

are applicable to them. FDA remains

primarily responsible, as it does for

most FDA regulations, for determining

whether parties comply with the

regulations. States, of course, remain

free to enforce applicable State laws

relating to these products.

(16) One comment asserted that

proposed § 897.10 would impose

vicarious liability in violation of the

Eighth Amendment’s Excessive Fines

Clause.

As previously discussed, § 897.10

does not impose the sort of vicarious

liability on manufacturers or

distributors that the comments

suggested it does. The Excessive Fines

Clause of the Eighth Amendment states

that ‘‘excessive fines [shall not be]

imposed.’’ Here, neither § 897.10 nor

any other provision of the final rule

imposes an excessive fine or any fine at

all. Moreover, whether a fine is

excessive in a particular case requires a

close analysis of the facts of that case.

(See, e.g., United States v. One Parcel

Property Located at 427 and 429 Hall

Street, Montgomery, Montgomery

County, Alabama, 74 F.3d 1165, 1170–

73 (11th Cir. 1996) (adopting and

applying proportionality test to in rem

civil forfeiture); United States v.

Chandler, 36 F.3d 358, 365–66 (4th Cir.

1994) (adopting and applying three-part

instrumentality test to in rem civil

forfeiture) cert. denied, 115 S.Ct. 1792

(1995).)

(17) A few comments implied that

manufacturers should be excluded from

§ 897.10, stating that retailers, rather

than manufacturers, should be

responsible for preventing sales to

young people.

The agency declines to amend the

rule to exclude manufacturers. The

preamble to the 1995 proposed rule

demonstrated how certain practices by

manufacturers, such as the distribution

of free samples, offer young people easy

and inexpensive access to cigarettes and

smokeless tobacco. (See 60 FR 41314 at

41326 (free samples).) FDA received

several comments that reinforced these

views, such as comments from a 12-year

old recounting how his classmate

acquired free cigarettes from a

manufacturer, and a mother whose 14-

year old daughter and friends attributed

their cigarette use to free samples

obtained from manufacturers. Thus,

manufacturers play a critical role in

making cigarettes and smokeless

tobacco accessible and appealing to

young people.

In addition, because cigarettes and

smokeless tobacco are products subject

to the act, regulation of these products

properly follows them from the time of

their manufacture to their sale to the

consumer. Focusing solely on the sale of

these products to consumers would

deprive the agency of any ability to

address problems that may exist at the

manufacturer or distributor level. For

example, if products were incorrectly

packaged or labeled, a rule that

concentrated solely on retail sales might

permit FDA to restrict sales of those

products, but might not permit FDA to

require the manufacturer to package or

label those products correctly.

(18) Two comments would amend the

rule to exempt manufacturers that had

1 or 2 percent of the cigarette or

smokeless tobacco product market. One

comment came from an association of

specialty tobacco companies that either

manufacture or import specialty

cigarettes and other tobacco products.

The comment claimed that specialty

cigarettes account for a very small

fraction (approximately 400 million

cigarettes) of the total cigarettes market,

are sold at higher retail prices compared

to domestic cigarettes (from $1.75 for 10

Indonesian cigarettes to $4.00 for 20

German cigarettes), and are sold in

shops that young people normally do

not frequent. The comment also stated

that the rule would have an adverse

effect on foreign products (particularly

products in packages containing less

than 20 cigarettes), that the companies

had little control over foreign

manufacturers, and that companies

would go out of business or be adversely

affected by the rule. The comment

sought an exemption either for firms or

brands that have 1 percent or less of the

total cigarette market in the United

States. The comment explained that an

exemption would be equitable because,

the comment asserted, there is no

evidence that speciality cigarettes

contribute to underage smoking, and

would also be consistent with an

exemption granted by the Federal Trade

Commission (FTC) for rotating cigarette

label warnings and regulations by the

U.S. Department of Agriculture (USDA)

defining a ‘‘domestic manufacturer of

cigarettes’’ for assessing payments under

the Agricultural Adjustment Act of

1938.

The other comment came from a firm

whose sales focused primarily on

smokeless tobacco, with the remainder

devoted to cigars and ‘‘smoking

tobaccos.’’ The company said that it had

approximately 1 percent of the

smokeless tobacco market and is the

sixth largest smokeless tobacco product

manufacturer. The comment sought an

exemption for companies with market

shares under 2 percent because it

claimed the rule would ‘‘sound the

death knell’’ for small, family-owned

businesses.

Both comments indicated that 80 to

90 percent of their sales occurred

through the mail.

The agency declines to accept the

comments’ suggestions to create an

exemption based solely on market share.

The agency believes that subjecting

similar or identical products to the same

statutory and regulatory standards is

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

able to expect that similar or identical

products made by different

manufacturers will be regulated in the

same fashion. Similarly, manufacturers

will not be unfairly advantaged or

disadvantaged if they are all subject to

the same statutory and regulatory

requirements. For example, the final

rule prohibits the distribution of free

samples. This restriction applies

regardless of a manufacturer’s market

share and, aside from eliminating a free

source of cigarettes and smokeless

tobacco that people use, also treats

manufacturers equally.

FDA is not persuaded by one

comment’s suggestion that an

exemption would be consistent with

actions taken by other agencies. FTC’s

exemption is based on statutory

language at 15 U.S.C. 1333(c)(2)(A)(i)

and is limited to changes in the label

rotation sequence; in other words, the

exemption does not relieve the

manufacturer from placing warning

statements on its packages. USDA’s

regulation pertaining to ‘‘domestic’’

manufacturers is based on statutory

language at 7 U.S.C. 1301(b)(17) as part

of the Agricultural Adjustment Act of

1938 that was designed, among other

things, to create an incentive for

domestic manufacturers to use domestic

tobacco leaf. Thus, neither the FTC nor

USDA statutes or regulations were

intended to relieve foreign products

from substantive requirements or to

regulate foreign manufacturers.

As for the comments’ assertions that

their products are either not used by or

accessible to young people, the agency

has amended the rule to permit specific

modes of sale, including mail order

sales, that young people cannot or do

not use. The agency did not amend the

rule, however, to exclude cigarettes and

smokeless tobacco or brands that young

people do not appear to use or purchase.

It would be inappropriate to exempt a

particular brand or specialty product

simply because a manufacturer claims

young people do not purchase that

product. (The agency also notes that the

$1.75 price charged for 10 Indonesian

cigarettes is lower than the price

charged for some domestic brands and

creating an exemption for a low cost

cigarette product in a ‘‘kiddie pack’’ size

would be contrary to the rule’s

purpose.)

Additionally, FDA traditionally

classifies, as a group, device products

that are sufficiently similar so that they

can be considered the same type of

device for purposes of applying the

regulatory controls in the act (see

§ 860.3(i) (21 CFR 860.3(i)) (definition of

‘‘generic type of device’’), using the

cumulative evidence from several

manufacturers. Reclassification of one

product of a particular type results in

the reclassification of the entire group.

(See 42 FR 46028, September 13, 1977;

and 43 FR 32988 July 28, 1978.) The

alternative would require FDA to

classify individually each

manufacturer’s device, and to undertake

the classification process whenever a

new manufacturer marketed a product

within an already identified device

type. Thus, FDA applies the same

regulatory requirements to all devices

within an identified device type that are

substantially equivalent to one another.

This approach is necessary to provide

similar regulatory treatment for

essentially identical products of

different manufacturers and distributors

(42 FR 46028 at 46031; and 43 FR 32988

at 32989).

Additionally, assuming that the rule

effectively restricts a young person’s

access to cigarettes and smokeless

tobacco, it is reasonable to assume that

a young person would turn to

alternative products, such as foreign

cigarettes that the comment would

exempt. Consequently, the agency

declines to exempt products with small

market shares from the rule.

(19) FDA received several comments

from wholesalers or distributors arguing

that they should be exempt from the

1995 proposed rule, particularly

proposed § 897.10, because they are

unable to affect the actions of

manufacturers and retailers. Several

comments asserted that wholesalers and

distributors are ‘‘merely a conduit’’ for

transferring products from

manufacturers to retailers and have

small staffs that would be unable to

comply with all requirements in part

897. According to these comments, a

wholesaler or distributor would either

have to hire additional staff to ensure

that products complied with all

applicable requirements or be without

sufficient staff to ensure that all

products supplied to all retailers

complied with the regulations. Several

comments added that requiring

wholesalers and distributors to maintain

records, submit reports to FDA, and be

subject to inspection by FDA would

waste the wholesaler’s or distributor’s

resources and provide FDA with little or

no useful information. A minority

expressed confusion as to their

obligations if they relabel cigarettes or

smokeless tobacco.

The agency believes that the

comments misinterpret § 897.10. The

provision states that a distributor would

be responsible for ensuring that the

cigarettes or smokeless tobacco that it

manufactures, labels, advertises,

packages, distributes, sells, or otherwise

holds for sale complies with all

applicable requirements. For example,

the reporting requirement in proposed

§ 897.40 was directed at manufacturers.

Consequently, distributors would not

have been required to submit reports to

FDA under § 897.40. (Moreover, as

discussed in section VIII. of this

document, FDA has deleted § 897.40

and exempted distributors from the

registration and listing requirements in

part 807. Distributors are, however,

subject to other reporting requirements,

such as medical device distributor

reports under part 804.) However, if a

distributor acts in a manner that is

outside the definition of distributor in

§ 897.3, it may alter its regulatory status

and become subject to other provisions

in this part. For example, a distributor

who relabels cigarettes would, for those

relabeled products, become a

‘‘manufacturer’’ under this rule and be

subject to those provisions pertaining to

manufacturers. Section 897.3 defines a

manufacturer, in part, as any person,

including any repacker and/or relabeler,

who manufactures, fabricates,

assembles, processes, or labels finished

cigarettes or smokeless tobacco.

(20) Several comments would exempt

distributors from the rule because, the

comments claimed, the 1995 proposed

rule set forth little or no evidence to

justify regulating distributors.

FDA declines to exempt distributors

from the rule. The agency reiterates that

it is regulating cigarettes and smokeless

tobacco under its drug and device

authority, and that, as it does for other

FDA regulated products, FDA’s rule

follows the products from the time of

their manufacture to the time of their

sale. Wholesale or distribution

operations must be included in any

effective regulatory system because

products can be contaminated, diverted

into illegal channels, or otherwise

adulterated or misbranded at the

wholesale or distribution level just as

they can at the manufacturing and retail

levels.

(21) Many comments asserted that,

rather than impose responsibilities on

manufacturers and distributors, FDA

should limit the rule to requiring that

retailers verify the age of persons

purchasing cigarettes and smokeless

tobacco. These comments claimed that

no other regulatory provisions would be

necessary if retailers, or their sales

clerks, verified the purchaser’s age.
44434 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

FDA declines to exclude

manufacturers and distributors from the

rule. As stated earlier in section IV.B. of

this document, cigarettes and smokeless

tobacco are products subject to

regulation under the act, and, as a

result, the rule follows the products

from the time of their manufacture,

through storage and distribution, to

product sale at the consumer level.

Excluding manufacturers and

distributors would compromise FDA’s

ability to ensure that these products are

not accessible or appealing to young

people. Manufacturers engage in

activities, such as advertising, labeling,

and distributing samples, that make

cigarettes and smokeless tobacco

accessible and/or appealing to young

people. Distributors channel products

from manufacturers to retailers, and so

the rule includes distributors to ensure,

among other things, that the products do

not become adulterated or misbranded

while held by distributors.

(22) FDA received many comments

from retailers stating that FDA

regulation was unnecessary because

retailers train their staffs to request

proof of age or have taken other steps to

prevent sales to young people.

The preamble to the 1995 proposed

rule provided reasons for not relying on

retailer training programs alone. The

preamble to the 1995 proposed rule

cited a report by 26 State attorneys

general stating that industry training

films and retailers’ programs have not,

on their own, prevented illegal sales to

young people and that, in some retail

sectors, high employee turnover rates

complicated training efforts (60 FR

41314 at 41323). The preamble to the

1995 proposed rule also cited studies

showing that significant numbers of

young people are not asked to verify

their age when purchasing cigarettes or

smokeless tobacco and that, in some

cases, retail clerks even encouraged the

young person’s purchase by suggesting

cheaper brands or offering to make up

the difference in the purchase price if

the young person lacked sufficient

funds (60 FR 41314 at 41323). FDA

received some comments that further

illustrated the ease with which young

people can purchase these products; for

example, one comment reflected on the

author’s own practice, at age 11, of

purchasing cigarettes by saying ‘‘They

are for my Mom.’’ Thus, while training

retail clerks to request proof of age

should help curtail a young person’s

access to cigarettes and smokeless

tobacco, the reports and studies cited in

the 1995 proposed rule, as well as the

personal experiences reflected in some

comments, suggest that additional

measures are necessary to reduce a

young person’s access to these products.

(23) Several comments from retailers

claimed that the 1995 proposed rule

violated their ‘‘right’’ to sell products or

arrange their stores in any manner they

wished. Many comments added that, if

retailers are subject to the rule, many

retailers will lose sales and fees

associated with cigarettes and smokeless

tobacco and could be forced to fire staff.

One comment further stated that this

would actually harm young people

because the retailer would fire its

newest staff, and such staff employees

are usually young people. Conversely,

some comments claimed that, in order

to comply with the rule, retailers would

be obliged to hire additional staff.

In contrast, FDA received two

comments denying that retailers would

lose slotting or promotional fees. (Some

manufacturers pay retailers to display

their products (often referred to as

‘‘slotting fees’’) in a specific fashion or

to display signs or other materials

provided by the manufacturer.) One

comment, based on experience in an

area in northern California where selfservice displays were prohibited, stated

that retailers did not suffer significant

economic losses after the displays were

banned. Another comment opined that

manufacturers would still have an

incentive to offer slotting fees or

allowances to retailers to ensure

advantageous placement of their

products behind the counter.

FDA disagrees with the comments

asserting an unrestricted ‘‘right’’ to sell

products. Section 520(e) of the act (21

U.S.C. 360j(e)) states, in part, that the

agency may require that a device be

restricted to sale, distribution, or use

upon such conditions as the agency may

prescribe by regulation. Because FDA

has determined that these products

should be regulated as restricted

devices, the act authorizes FDA to

impose controls on their sale and

distribution. The agency further notes

that, in addition to restrictions

authorized under the act, other

consumer products are sold subject to

various restrictions. For example, under

23 U.S.C. 158(a)(1), the ‘‘national

minimum drinking age’’ is 21 years, and

the Secretary of Transportation is

authorized to withhold certain highway

funds from States that have a lower

minimum age. Federal law expressly

prevents licensed importers,

manufacturers, dealers, and collectors

from selling firearms and ammunition to

any individual that the licensee knows

or has reasonable cause to believe to be

under 18 years old (except in specific,

limited cases), or, if the firearm is not

a shotgun or rifle, prohibits sales to

individuals under 21 years of age (18

U.S.C. 922(b)).

Thus, there is no unfettered or

unrestricted ‘‘right’’ to sell consumer

products. Instead, products are often

sold subject to conditions or

restrictions, including those based on

age, that are designed to protect the

integrity of the product, to protect users

or other members of the public, or to

prevent the product from reaching

certain groups of people.

FDA also disagrees with those

comments predicting that the rule will

result in lower sales and fees and

compel retailers to lay off staff. Insofar

as retailers are concerned, the rule does

not affect sales to adults. It is intended

to eliminate illegal sales to young

people. Thus, for a retailer to assert that

the rule will reduce its sales revenue so

much as to require staff reductions,

illegal sales would necessarily have to

play a significant role in funding staff

positions.

With respect to fees, the agency

cannot determine whether

manufacturers will discontinue paying

slotting fees or other allowances to

retailers as a result of the rule. The

preamble to the 1995 proposed rule did

estimate that industry promotional

allowances totaled approximately $1.6

billion in 1993, or $2,600 per retailer if

the sum is evenly distributed among the

estimated 600,000 retail outlets (60 FR

41314 at 41369). FDA does note,

however, that some comments

supported the agency’s position that

retailers will not suffer significant

economic losses. One study cited in the

preamble to the 1995 proposed rule

stated that, ‘‘in the absence of

advertising and promotion outlets * * *

the cigarette industry may be expected

to provide greater incentives to retailers

to provide more and better shelf space

for their brands in order to provide

availability to the buyer in the store’’ (60

FR 41314 at 41369). Thus, while some

manufacturers might stop paying

slotting fees, others might continue

paying those fees or even increase the

fees to obtain favorable placement of

their products behind the counter.

Furthermore, as described in greater

detail in section IV.E.4.b. of this

document, FDA has amended the rule to

permit self-service displays (or, more

specifically, merchandisers) in facilities

that are inaccessible to young people.

As for those comments stating that

retailers would have to hire additional

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

the rule will now prohibit or restrict

may need to hire additional staff. For

example, if a retailer derived a

substantial portion of its revenue from

vending machines and those machines

would not be available under the rule,

the retailer might decide to hire staff in

order to continue selling cigarettes or

smokeless tobacco. However, the

comments did not provide sufficient

information to enable FDA to determine

the number of retailers who might be

affected or the extent to which they

might be affected.

(24) A few comments challenged the

validity of the 1995 proposed rule

because it did not impose

responsibilities on young people who

purchase cigarettes and smokeless

tobacco. These comments claimed that

omitting young people from the rule,

while requiring retailers to comply, was

unfair, arbitrary, and capricious. One

comment stated, ‘‘any effective public

policy to restrict sales of tobacco

products to minors must go beyond the

discouragement of promotion,

advertising and merchandising to

minors. It must be accompanied by

realistic penalties for minors who

purchase and possess cigarettes and for

adults who purchase for them.’’

It would be inappropriate for FDA to

amend the rule to impose penalties or

sanctions on young people who

purchase or possess cigarettes or

smokeless tobacco or adults who

purchase such products for young

people. The main focus of the act is on

the introduction, shipment, holding,

and sale of goods in interstate

commerce. Thus, the actions of minors

who purchase cigarettes and smokeless

tobacco are appropriately a matter for

State or local law.

(25) One comment stated that FDA

should prohibit young people under 18

years of age from selling tobacco

products.

The agency declines to amend the

rule to place age restrictions on those

who sell these products. FDA has little

evidence to suggest that manufacturers’,

distributors’, or retailers’ young

employees play a significant role in

making cigarettes and smokeless

tobacco accessible or appealing to young

people. Although some evidence

indicates that, in certain settings, a

young employee might be less likely to

check age or to challenge his or her

peers (as in situations where the young

employee distributed free samples (60

FR 41314 at 41326)), other provisions in

this subpart, such as the elimination of

free samples, should reduce the need to

place age restrictions on employees.

The agency does note, however, that

in response to comments requesting that

vending machines and self-service

displays be permitted in ‘‘adult-only’’

facilities, FDA has amended the final

rule to allow vending machines and

self-service displays in facilities that are

totally inaccessible to people under 18

and employ no persons below age 18.

This is to ensure that an ‘‘adults-only’’

facility is truly restricted to adults rather

than to create an age restriction on

sellers. These changes to the rule are

described in greater detail elsewhere in

this document.

The agency is aware that several local

governments have statutes or

regulations that establish minimum age

requirements for persons who sell

tobacco products. Because this rule does

not contain a minimum age requirement

for persons who sell these products,

those statutes or regulations are not

preempted. The rule’s preemptive effect

on other State or local statutes or

regulations and federalism issues are

discussed elsewhere in this document.

(26) Several comments suggested that,

instead of issuing regulations, the

Federal Government should transfer

funds to States for use in preventing

cigarette and smokeless tobacco sales to

young people.

FDA must decline to accept the

comments’ suggestion. Federal funding

of State prevention efforts is beyond the

scope of the rule. The agency does

intend to work with State officials and

cooperate in enforcement activities

where appropriate and to the extent that

its resources permit.

(27) Several comments suggested that

FDA amend the rule so that the

restrictions on the sale and distribution

of cigarettes and smokeless tobacco do

not apply to locations where young

people do not enter or where entry is

restricted, such as bars, liquor stores,

factories, and prisons.

After consideration of these

comments, the agency has amended the

rule to allow certain retail practices to

continue because those practices are not

used by young people or are

inaccessible to them. For example, the

final rule permits mail-order sales to

occur because the evidence does not

establish that young people use mailorder sales to acquire these products.

The final rule also permits vending

machines and self-service displays

(merchandisers only) to be used in

locations where young people cannot

enter, such as locations where proof of

age is required in order to enter the

premises or facilities that employ only

adults. These changes are described in

detail in the discussion of § 897.16 and

elsewhere in this document.

C. Additional Responsibilities of

Manufacturers (§ 897.12)

1. Removal of Manufacturer-Supplied or

Manufacturer-Owned Items That Do Not

Comply With the Regulations

Proposed § 897.12(a) would have

required manufacturers, in addition to

their other obligations under part 897, to

remove, from each point of sale, ‘‘all

self-service displays, advertising,

labeling, and other manufacturersupplied or manufacturer-owned items’’

that do not comply with the

requirements in part 897. In response to

comments, the agency has amended the

final rule to require the manufacturer to

remove only those violative items that

the manufacturer owns.

(28) Many comments, including

comments from manufacturers’ sales

representatives and retailers, strongly

objected to this provision, particularly

as it would apply to self-service

displays. In general, the comments

claimed that retailers, rather than

manufacturers, own the self-service

displays. The comments also expressed

concern that manufacturers’

representatives or retailers’ employees

might be physically harmed if a

manufacturer’s representative attempted

to remove a self-service display from a

retailer. Several comments also

interpreted proposed § 897.12(a) as

requiring a manufacturer’s sales

representative to remove self-service

displays supplied by another

manufacturer; these comments said

removing a competitor’s self-service

display would be unethical and could

result in the sales representative being

barred from reentering the retail

establishment in the future.

In contrast, a few comments

supported proposed § 897.12(a) because

manufacturers provide the displays to

retailers and visit retailers often. One

comment added that the burden of

removing displays should not rest on

retailers alone, but added that retailers

should remain ultimately responsible

for displays they use or have on site.

This comment suggested that retailers

be responsible for removing displays if

the manufacturer fails to do so.

The agency agrees, in part, with the

comments critical of the proposed

provision and has amended § 897.12 to

clarify that a manufacturer is

responsible for removing all self-service

displays (which the final rule also

clarifies as referring to merchandisers),
44436 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

advertising, labeling, and other items

that it owns that do not comply with the

requirements in part 897. FDA has also

amended § 897.14 to clarify the

obligation of retailers with respect to all

other violative items in the retailer’s

establishment. These changes should

eliminate potential conflicts between

manufacturers’ sales representatives and

retailers.

Additionally, § 897.12 requires a

manufacturer to be responsible only for

the removal of the items it owns. The

agency does not expect manufacturers to

remove items owned by another

manufacturer, but encourages

manufacturers to inform another

manufacturer and FDA if another

manufacturer’s items violate the

requirements in part 897. However, the

agency advises manufacturers who

know or have reason to know that a

distributor or retailer is misbranding

that manufacturer’s products, or causing

its products to violate these regulations

or the act, to take action, such as

discontinuing sales, incentives, and

supplies, to halt the violation.

Manufacturers might be held liable for

subsequent violations by the distributor

or retailer, if the manufacturer knew or

should have known about the violation

and continued to supply its product to

such parties.

Liability, both criminal and civil,

under the act is very broad. Section 301

of the act (21 U.S.C. 331) prohibits

certain acts ‘‘and the causing thereof.’’

United States v. Dotterweich, 320 U.S.

277 (1943), and United States v. Park,

421 U.S. 658 (1975) elaborate on the

meaning of ‘‘causing’’ in section 301 of

the act (see Park, 421 U.S. at 673). These

cases stand for the proposition that a

corporate official can be held criminally

liable as having caused the corporation’s

violations of the act of which he had no

knowledge, so long as he stood in a

‘‘responsible relationship’’ to the

violations (Id. at 672).

Under the act, ‘‘all who * * * have

* * * a responsible share in the

furtherance of the transaction which the

statute outlaws’’ have caused the

violation and are subject to civil and

criminal liability (Dotterweich, 320 U.S.

at 284). Indeed, a corporate employee

and the corporation itself can have a

responsible share in the furtherance of

a violation of the act committed by

another corporation or a person who is

not an employee of the corporation.

(See, e.g., United States v. Parfait

Powder Puff Co., 163 F.2d 1008, 1009–

10 (7th Cir. 1947) (holding defendant

corporation criminally liable for

violations committed without its

knowledge by second corporation that

defendant had contracted with to

manufacture, package, and distribute its

cosmetic product), cert. denied, 332

U.S. 851 (1948); United States v.

Articles of Drug, 601 F. Supp. 392 (D.

Neb. 1984) (enjoining drug distributor

that induced its customers to pass off its

drugs as controlled substances), aff’d in

part, rev’d in part on other grounds, 825

F.2d 1238 (8th Cir. 1987); cf. Inwood

Lab., Inc. v. Ives Lab., Inc., 456 U.S. 844,

853–54 (1982) (manufacturer or

distributor who ‘‘intentionally induces

another’’ to violate trademark law or

who ‘‘continues to supply its product to

one whom it knows or has reason to

know’’ will violate trademark law is

itself responsible for violation).) And it

is a ‘‘settled doctrine[] of criminal law’’

(Park, 421 U.S. at 669) that a person

who knows or has reason to know that

goods that he sells will be used

unlawfully may be criminally liable as

aider and abettor under 18 U.S.C. 2;

Bacon v. United States, 127 F.2d 985,

987 (10th Cir. 1942) (discussing former

18 U.S.C. 550, precursor to 18 U.S.C.

2(a))).

For example, a manufacturer or

distributor that continues to supply its

product to a retailer whom it knows or

has reason to know sells cigarettes or

smokeless tobacco to young people (or

who breaks open packages and sells

single cigarettes) might be liable for

subsequent violations by that retailer.

Likewise, a manufacturer who paid a

retailer a fee for the retailer to use an

illegal self-service display in a store

might be liable for the retailer’s

violation.

These examples are, however, only by

way of illustration because, as the

Supreme Court stated in Dotterweich,

‘‘[t]o attempt a formula embracing the

variety of conduct whereby persons may

responsibly contribute in furthering a

transaction forbidden by an Act of

Congress * * * would be mischievous

futility’’ (320 U.S. at 285). It added that,

‘‘[i]n such matters the good sense of

prosecutors, the wise guidance of trial

judges, and the ultimate judgment of

juries must be trusted’’ (Id.).

(29) One comment challenged FDA’s

authority to require manufacturers to

remove items that fail to comply with

the regulations. The comment explained

that FDA, rather than manufacturers, is

responsible for compliance activities

and a manufacturer’s representative is

not deputized or authorized to act on

the agency’s behalf. The comment

added that sales representatives are not

trained to perform investigative or law

enforcement functions and, unlike

Government employees, would not

enjoy the same legal protections

accorded to the agency’s inspectors. The

comment also argued that FDA lacks

authority to require manufacturers, or

any other party, to remove any materials

that would violate the regulations. The

comment asserted that the agency has

no general recall authority and that the

recall authority in the act for devices

requires the agency to find that a

reasonable probability of serious

adverse health consequences or death

exists and, when exercising that recall

authority, to provide an opportunity for

a hearing. Thus, according to the

comment, the 1995 proposed rule is

deficient because it makes no findings

and fails to provide for a hearing.

The agency believes that the comment

misinterprets the provision. Section

897.12 would not ‘‘deputize’’

manufacturers’ representatives nor

confer any official responsibility on

them. FDA intends to enforce the act

and regulations itself and, where

appropriate, will consider

commissioning State officials, under its

authority in section 702(a) of the act, to

perform specific functions on FDA’s

behalf. Section 702(a) of the act does not

extend to commissioning private

parties, and the agency has no intention

of commissioning manufacturers’

representatives.

FDA also disagrees with the

comment’s claim that FDA has no

authority to require manufacturers to

remove materials that violate FDA

regulations. FDA is issuing this

provision, as well as part 897 generally,

under its authority under section 520(e)

of the act, which expressly declares, in

part, that the agency may, by regulation,

require that a device be restricted to

sale, distribution, or use ‘‘upon such

other conditions as the Secretary may

prescribe in such regulation.’’ Section

897.12, as amended, is a logical and

necessary complement to the

restrictions on the devices’ sale,

distribution, and use because it requires

the manufacturer to assume

responsibility for removing items that it

owns that do not comply with the

restrictions. Furthermore, as the

Supreme Court stated in United States

v. Park, 421 U.S. 658, 672 (1975), ‘‘the

act imposes not only a positive duty to

seek out and remedy violations when

they occur but also, and primarily, a

duty to implement measures that will

insure that violations will not occur.’’

The comment’s argument with respect

to the agency’s recall authority is also

misplaced. Section 897.12 applies in

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

of information supplied to it, that one of

its items does not comply with the

regulations. Knowing that the item does

not comply with the requirements in

part 897, the manufacturer is then

obligated to remove the violative item.

Notice of an opportunity for a hearing

or other due process considerations

associated with recalls under section

518 of the act (21 U.S.C. 360h) are

inapplicable because the manufacturer,

rather than the government, would be

the principal party during this process,

using information it has to act on its

own items. In any case, section 518 of

the act applies to the recall of a device,

not its advertising.

FDA fully expects manufacturers to

comply with § 897.12. For example, if

the manufacturer provided advertising

that used colors and photographs,

contrary to § 897.32, which requires

black and white text only, the

manufacturer is deemed to know that

the advertising does not comply with

§ 897.32 and should remove that

advertising. In this situation, where the

manufacturer’s advertising clearly does

not comply with the regulations,

requiring FDA to provide notice and an

opportunity for a hearing (as the

comment would apparently require)

would simply waste FDA’s and the

manufacturer’s resources.

FDA will take regulatory action

against manufacturers who fail to

comply with this provision or any other

applicable provision. The nature of the

regulatory action will depend, in large

part, on the violation, but could range

from issuance of a warning letter, to an

injunction under section 302 of the act

(21 U.S.C. 332), the imposition of civil

penalties, criminal fines, and/or

imprisonment under section 303 of the

act (21 U.S.C. 333), and seizures under

section 304 of the act (21 U.S.C. 334).

2. Visual Inspections by a

Manufacturer’s Representative at Each

Point of Sale

Proposed § 897.12(b) would have

required a manufacturer’s

representatives to visually inspect each

point of sale that they visit during the

normal course of business to ensure that

cigarettes and smokeless tobacco are

‘‘labeled, advertised, and distributed in

accordance with this part.’’ The

preamble to the 1995 proposed rule

indicated that manufacturers keep

extremely detailed records about each

retailer and that some records noted

whether the retailer should be visited

weekly, biweekly, etc. and noted the

types of displays in the retailer’s

establishment (60 FR 41314 at 41323).

The preamble to the 1995 proposed rule

also stated that this provision would not

impose a new responsibility or burden

on companies that did not visit retailers

as part of their ordinary business

practice and, for those manufacturers

that would be expected to comply,

estimated that these visual inspections

would take no more than 2 to 3 minutes

per visit (60 FR 41314 at 41323 and

41365). Based on the comments

received in response to this proposal,

the agency has deleted § 897.12(b) from

the final rule.

(30) Several comments opposed

proposed § 897.12(b). One comment

argued that proposed § 897.12(b) is

unconstitutional because it would hold

manufacturers vicariously liable for the

acts of others in violation of the Due

Process Clause, and would violate

Article I, Section 8 of the Constitution,

which implicitly reserves to States the

authority to raise militias. One comment

asserted that the number of

manufacturers’ representatives varies

among manufacturers and that there are

too many retail establishments for those

representatives to inspect. The comment

added that any inspection would

require more than 3 minutes to be

effective, so that conducting inspections

at each retailer would be labor intensive

and costly. Another comment,

notwithstanding the statement in the

preamble to the 1995 proposed rule that

the provision applied only to those

firms that visit retailers in the ordinary

course of business, asserted that its

entire staff would be too small to visit

all the retailers that it services. A small

number of comments added that such

responsibilities would, in effect,

constitute a hidden ‘‘tax’’ on

manufacturers.

Other comments, many submitted by

sales representatives, objected to

proposed § 897.12(b), stating that the

representatives have no power over a

retailer’s actions and cannot take any

adverse action, such as discontinuing

supplies, to retailers who sell cigarettes

and smokeless tobacco to young people.

Some comments explained that, even if

a sales representative could ask a

distributor to stop supplying certain

retailers, the retailer could simply

switch distributors and continue to

obtain products. Other comments

argued that the responsibility to prevent

sales to young people rests solely with

the retailer.

In contrast, several comments

supported proposed § 897.12(b) because

sales representatives frequently visit

retailers or because manufacturers

deliver materials, such as self-service

displays and promotional materials, to

retailers. One comment even suggested

amending the rule to require

manufacturers to enter into contracts

with retailers and distributors to comply

with FDA regulations and to state that

failure to comply would result in

termination of the retailer’s or

distributor’s ability to obtain the

manufacturer’s cigarettes or smokeless

tobacco.

After consideration of the comments,

the agency has removed § 897.12(b).

FDA intends to examine this matter

further and to develop a guidance

describing how manufacturers may be

able to assist retailers to comply with

this subpart. Possible options might

include methods suggested by the

comments, such as contractual

agreements between retailers and

manufacturers including provisions on

compliance and the consequences of

noncompliance.

D. Additional Responsibilities of

Retailers (§ 897.14)

Proposed § 897.14 would have

established additional responsibilities

for retailers, stating that ‘‘[i]n addition

to the other requirements under this

part, each retailer is responsible for

ensuring that all sales of cigarettes and

smokeless tobacco to any person (other

than a distributor or retailer)’’ comply

with specific, listed requirements.

FDA, on its own initiative, has

amended § 897.14 to delete the

parenthetical text referring to a

distributor or retailer because the

evidence does not establish that retailers

sell these products to such parties, and

if a retailer did sell these products to a

distributor or retailer, the retailer would

be acting as a ‘‘distributor’’ as defined

in § 897.3(c).

FDA, also on its own initiative, has

amended § 897.14 to add a new

paragraph (a) stating that, as one of the

listed requirements, ‘‘[n]o retailer may

sell cigarettes or smokeless tobacco to

any person younger than 18 years of

age’’ and has renumbered proposed

§ 897.14(a) through (c) accordingly. The

new paragraph codifies a concept that

was present throughout the 1995

proposed rule, namely that retailers are

not to sell cigarettes or smokeless

tobacco to young people under 18 years

of age.

1. Use of Photographic Identification to

Verify Age

Under proposed § 897.14(a) (now

renumbered as § 897.14(b)), each

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

means of photographic identification

containing the bearer’s date of birth, that

no person purchasing or intending to

purchase cigarettes or smokeless

tobacco is younger than 18 years of age.

The preamble to the 1995 proposed

rule explained that studies indicate that

young people who purchase cigarettes

and smokeless tobacco from stores are

often not asked to verify their age. For

example, one study found that 67

percent of young people, whose mean

age was 15 years, were asked no

questions when they attempted to

purchase cigarettes. In some cases, retail

clerks even encouraged purchases by

young people, suggesting less expensive

brands or offering to make up the

difference if he or she lacked sufficient

funds (60 FR 41314 at 41323). The

preamble to the 1995 proposed rule also

noted that requiring proof of age to

purchase cigarettes and smokeless

tobacco could reduce cigarette and

smokeless tobacco use among young

people (60 FR 41314 at 41323).

Consequently, the 1995 proposed rule

would have required retailers to verify

that persons who intend to purchase

cigarettes or smokeless tobacco are

legally entitled to do so.

The preamble to the 1995 proposed

rule also indicated that a driver’s license

or college identification card would be

acceptable forms of photographic

identification, but the agency invited

comment on whether the final rule

should contain more specific

requirements on the types of

identification (60 FR 41314 at 41323).

FDA received many comments

supporting a proof of age requirement.

These comments came from law

enforcement entities, drug abuse

prevention groups, health care

professionals, medical societies, public

health organizations, and even some

adult smokers who agreed that a proof

of age requirement will reduce young

people’s access to cigarettes and

smokeless tobacco. One comment from

a coalition of State attorneys general

said there ‘‘are many teenagers who look

much older than they are, who can

obtain tobacco products quite easily.

When they are required to show age

verification, they will not be mistaken

for an older age. Therefore, they will not

be permitted to acquire tobacco

products.’’ Another comment from a

State public health department reported

that, based on data analyzed from the

State’s own experience, illegal tobacco

purchases occur less than 5 percent of

the time when the retailer checks a

photographic identification card to

verify age, as opposed to a 95 percent

illegal sales rate when no photographic

identification card is checked.

In response to comments and changes

to § 897.16 regarding mail order and

vending machine sales and self-service

displays in facilities that are

inaccessible to children and

adolescents, the final rule excepts the

proof of age requirement under these

limited circumstances.

(31) Several comments objected to

making retailers responsible for their

employees’ actions. These comments

asserted that an employee’s failure to

verify a potential purchaser’s age or an

employee’s error should not subject the

retailer to any regulatory action. A few

comments faulted the 1995 proposed

rule for not holding sales clerks

responsible or argued that the rule

would be ineffective because it would

not alter a sales clerk’s behavior.

In contrast, many comments

supported the requirements that hold

retailers responsible for preventing

illegal sales. Indeed, one comment

suggested that there should be

‘‘significant penalt[ies] for sales to

persons under 18, including the loss of

the opportunity to sell tobacco * * *.’’

Another comment stated that the rule

should contain penalties for illegal

tobacco sales.

The agency declines to amend the

rule to relieve retailers from

responsibility. Retailers, in general, are

responsible for the acts of their

employees. (See United States v. Park,

421 U.S. 658, 672 (1975).) Relieving

retailers from responsibility for their

employees’ actions would only invite

abuse because retailers could continue

to sell products to young people and, if

caught making such sales, could blame

their employees without suffering any

adverse consequences themselves. To

reflect its position that retailers are

generally responsible for their

employees’ actions, FDA has amended

§ 897.14 to remove all references to ‘‘an

employee of the retailer.’’ Thus, § 897.14

now refers to a ‘‘retailer’’ and makes no

distinction for the retailer’s employees.

As for the comment claiming the rule

contains no penalties for illegal tobacco

sales, the agency believes that the

comment misunderstands how the rule

will operate. In general, FDA regulations

implement and interpret the agency’s

statutory obligations under the act,

including various criminal and civil

penalties. Thus, a regulation need not

specify what penalties are attached to a

violation because the act provides this

information.

FDA has, however, amended

proposed § 897.14(a) (now renumbered

as § 897.14(b)) to state that, ‘‘[e]xcept as

otherwise provided in § 897.16(c)(2)(i)

and in paragraph (a)(2) of this section,’’

a retailer shall ensure compliance with

the prohibition against sales to persons

under 18 by verifying the purchaser’s

age. FDA made this amendment to

correspond with the prohibition, in

§ 897.14(a), against sales to persons

under 18 and because, as discussed in

greater detail below, the final rule

permits sales from vending machines

and self-service merchandisers that are

inaccessible to young people and

permits mail-order sales. These modes

of sale are either secure from access by

young people (by requiring age

verification upon entrance to the

facility) or not used by them. The

exception for paragraph (a)(2)

complements another change to § 897.14

(discussed in greater detail below) to not

require proof of age from persons over

the age of 26.

FDA has also amended § 897.14(b) to

delete the words ‘‘intending to

purchase.’’ The requirement that

retailers verify the age of persons

‘‘purchasing the product’’ sufficiently

accomplishes the provision’s goal of

reducing illegal sales.

(32) Several comments supported the

use of identification cards to verify the

purchaser’s age. Some comments,

responding to a question in the

preamble to the 1995 proposed rule

asking whether the rule should specify

the types of identification that would

comply with a proof-of-age requirement,

advocated using identification cards,

passports, or other official documents

establishing the bearer’s age issued by

States, the Federal Government, or

foreign governments. One comment

recommended that States develop a

uniform coding system for identification

cards to permit retailers to read or to

scan identification cards quickly to

verify a purchaser’s age. Other

comments advised against the use of

college or school identification cards;

the comments noted that colleges and

schools have little incentive to design

their identification cards to be

sufficiently tamper-proof.

In contrast, one comment stated that

the agency should not ask for comment

on the type of identification card to

require, arguing that the ‘‘degree of

micromanagement implied by the

Agency’s invitation for such comment

underscores the inappropriateness of

federal action in this area.’’

FDA recognizes the comments’

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

a Federal, State, or local government

identification card.

(33) FDA received several comments

that addressed when a retailer should

inspect a purchaser’s photographic

identification card. One comment

interpreted the provision as requiring

retailers to inspect visually the

photographic identification card of

every purchaser, and said that this

would be unreasonable. The same

comment contended that retailers and

their employees should be required to

demand proof of age only from

prospective purchasers who do not

appear to be over 18; this was the

standard employed in Everett, WA,

which was cited in the preamble to the

1995 proposed rule.

In contrast, other comments

supported age verification for all

tobacco sales. Some comments from

retailers indicated that some retailers

check identification cards for all tobacco

sales, while many comments submitted

by retailers stated that they check

identification cards to verify the age of

purchasers who appear to be

‘‘underage.’’ Other comments suggested

that the regulation require visual

inspection of photographic

identification cards for purchasers who

appear to be younger than 21, 25, 26, or

30 years of age. Such a requirement

appeared to be independently selected

to ensure that the purchaser met the age

requirement in the particular

jurisdiction.

Contrary to the comment that

interpreted the rule as requiring proof of

age in all transactions, the 1995

proposed rule would have given

retailers some flexibility in deciding

when to demand proof of age. The

preamble to the 1995 proposed rule

cited studies and reports demonstrating

that few retailers request proof of age

from young people attempting to

purchase cigarettes or smokeless

tobacco (60 FR 41314 at 41323).

Consequently, proposed § 897.14(a)

(now renumbered as § 897.14(b)) would

have required retailers to verify that

prospective purchasers are of legal age,

and the preamble to the 1995 proposed

rule suggested that retailers request

proof of age from anyone who does not

appear to be at least 26 years old (60 FR

41314 at 41323). This suggestion was

similar to a recommendation made in a

report by 26 State attorneys general. The

agency anticipated, for example, that

requiring proof of age from a senior

citizen would be unnecessary, but

strongly recommended requiring proof

of age from an individual who appears

youthful.

However, due to concerns that,

despite the language in the preamble to

the 1995 proposed rule, the rule would

require age verification in all cases, the

agency has amended the rule to except

from the age verification requirement

individuals who are over 26 years old.

The agency declines to amend the rule

to require age verification if the

purchaser appears to be 21, 25, 26, or 30

years old. Determining a person’s age by

his or her physical appearance alone is

a subjective determination, and so

requiring age verification if a person

‘‘looked’’ like he or she was a particular

age would be difficult to administer and

to enforce. By requiring age verification

if a purchaser is 26 years old or younger,

regardless of his or her appearance, the

retailer foregoes age verification at its

own risk.

The agency notes that using the

higher age of 26 as the threshold for

requiring proof of age should increase

the likelihood that illegal sales to young

people will not occur. Using a lower

age, such as 18 (which is used in some

States) or 21, as the threshold for

requiring proof of age may enable some

young people to purchase cigarettes and

smokeless tobacco, and, as a result,

cause a retailer to be in violation of this

subpart.

(34) Many comments, particularly

comments from retailers, supported the

requirement for age verification but

added that the requirement should be

voluntary. Others said that State law or

regulations requiring age verification are

adequate, and that, as a result, FDA

regulation is unnecessary. Other

comments claimed FDA regulation

would add ‘‘red tape and paperwork’’

that would not reduce young people’s

access to cigarettes and smokeless

tobacco and would instead ‘‘come at

great cost to taxpayers.’’

On the other hand, State attorneys

general and other State and local

enforcement authorities commented that

the Federal regulations requiring age

verification by inspection of

photographic identification card will

complement and enhance their

enforcement abilities.

FDA declines to delete an age

verification requirement from the rule.

The preamble to the 1995 proposed rule

cited studies and reports to show that

young people are often able to purchase

cigarettes and smokeless tobacco

without showing proof of age (60 FR

41314 at 41323). In one case, the young

people were able to purchase cigarettes

even when they admitted that they were

under the legal age (60 FR 41314 at

41323). These studies and reports

suggest that the final rule must require

retailers to demand proof of age because

voluntary efforts are ineffective.

As for deferring to State laws and

regulations, FDA believes that State

efforts to require proof of age, and

retailer compliance with such efforts,

should increase and become more

effective due to section 1926 of the PHS

Act. This provision requires States to

enact and to enforce laws prohibiting

manufacturers, retailers, or distributors

of tobacco products from selling or

distributing such products to persons

under age 18 in order to receive

substance abuse prevention and

treatment block grants. However, State

laws may differ, and so the final rule

requires retailers to verify the age of

purchasers. This will establish a

uniform, national requirement regarding

proof of age and is consistent with the

assertion of Federal authority over these

products under the act.

(35) Many comments pointed out that

there is no penalty for parents who

allow underage children to smoke.

FDA believes that the vast majority of

adults and parents do not purchase

tobacco products for young people.

Parental actions are also beyond the

scope of FDA’s authority. However, it

should be noted that parental consent to

a young person’s purchase of cigarettes

and smokeless tobacco cannot override

the requirements in § 897.14(a)

prohibiting sales to anyone under 18

and in § 897.14(b) that each purchase is

subject to age verification. Thus, under

this rule, a retailer must refuse to sell

cigarettes or smokeless tobacco to any

young person who claims that he or she

has ‘‘permission’’ to purchase such

products for himself or herself or for an

adult.

(36) One comment contended that the

photographic identification card

requirement is invalid because it

exceeds FDA’s authority under section

520(e) of the act because it does not

purport to provide reasonable assurance

of the safety and effectiveness of

cigarettes.

FDA disagrees with the comment.

Section 520(e) of the act authorizes the

agency to establish, by regulation,

conditions restricting the sale,

distribution, or use of a device if,

because of the device’s potentiality for

harmful effect or the collateral measures

necessary to its use, the agency

determines that there cannot be a

reasonable assurance of the device’s

safety or effectiveness. A photographic

identification card requirement is a
44440 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

41 1994 SGR, p. 67.

42 Id., p. 65.

43 Id.

44Black’s Law Dictionary, edited by M. A. Black,

West Publishing Co., St. Paul, MN, p. 955, 1990.

condition of sale for these products and

a collateral measure that is necessary to

the requirement that the products are

not sold to anyone under the age of 18.

(37) One comment contended that

proposed § 897.14(a) (now renumbered

as § 897.14(b)) is precluded by section

1926 of the PHS Act. The comment

stated that this law established

Congress’ intent to allow States to enact

necessary programs to keep tobacco

products out of the hands of young

people as a condition for receiving block

grant funding. According to the

comment, there is no single best

approach, and the FDA proposal

prevents States from emulating the

successful approach used in Woodridge,

IL. The comment stated that FDA may

not preempt State laws without making

a showing of clear and manifest

congressional intent to authorize its

preemption of those State laws.

The agency disagrees with the

comment. The preemption issues

related to this rule (as well as the rule’s

relationship to the regulations issued by

the Substance Abuse and Mental Health

Services Administration (SAMHSA)

implementing section 1926 of the PHS

Act regarding the sale and distribution

of tobacco products to individuals

under the age of 18 (the SAMHSA rule)

are discussed in great detail in section

X. of this document.

2. Minimum Age

Proposed § 897.14(a)(now renumbered

as § 897.14(b)), would have required

retailers to verify that persons buying

cigarettes or smokeless tobacco were not

younger than 18 years of age. FDA

received many comments supporting a

Federal minimum age to purchase

cigarettes and smokeless tobacco. Some

comments suggested that enforcement of

this provision would be as effective as

advertising limitations in controlling

underage smoking. In supporting the

proposal, comments noted that while

most teenage smokers do not plan to be

smokers 5 years after they begin

smoking, less than 10 percent of

teenagers are able to quit within 5 years

of starting. Moreover, like their adult

counterparts, 70 percent of high school

seniors who smoke would like to stop

smoking completely. Some comments

noted that the average age at which

teenage smokers first tried their first

cigarette is 13 or 14 years, and by age

18, many teens are smoking daily and

smoking at a rate very near the adult

rate. Health-care professionals (nurses,

physicians, dentists, public health

officials, etc.) as a group were very

supportive of a Federal minimum age

limit of at least 18.

(38) A major American medical

association suggested amending

§ 897.14(a) (now renumbered as

§ 897.14(b)) to raise the minimum age of

sale to 21. It noted that one State,

Pennsylvania, has set 21 as the

minimum age for the purchase of

cigarettes, and argued that prior to

enactment of the national standard of

age 21 for alcohol purchase, many States

had laws that allowed purchase at age

18, but subsequently changed to 21

without hardship.

Other comments advocated raising the

minimum age to 19 years. Several

comments explained that many high

school students are 18 years old; thus,

if FDA increased the minimum age to 19

years, it would be less likely that an

underage high school student would be

able to purchase or obtain cigarettes or

smokeless tobacco, because raising the

age to 19 would eliminate from the high

school environment peers who are

legally able to obtain nicotinecontaining tobacco products. In

addition, the agency received a

considerable number of comments from

students, teachers, and even adult

smokers, urging the agency to raise the

legal age to purchase cigarettes to 21, to

be consistent with the legal age to

purchase alcohol. Indeed, many

comments assumed that the legal age

was already 21 and urged the agency to

retain this age limit.

In contrast, other comments

supporting 18 as the minimum age for

purchasing cigarettes and smokeless

tobacco argued that, because most States

already established 18 as the minimum

age, FDA regulations did not need to

establish a minimum age. A few

comments, mostly from young people,

asked FDA to lower the legal age for

purchasing cigarettes to below 18 years

of age.

In order to make its decision on the

appropriate minimum age, the agency

weighed a variety of factors including

evidence on the onset of nicotine

addiction and the history underlying the

age of majority. FDA’s goal is to prevent

underage use of tobacco in order to

preclude as many new cases of nicotine

addiction as possible. The agency

considered minimum ages from 18 to

21, because individuals are generally

viewed as reaching adulthood in this

age range. The agency faced the

question: At which age in this range are

most individuals able to make an

informed decision to begin using a

product that the overwhelming majority

of individuals will not be able to stop

using, even though using the product is

likely to lead to severe disability and

premature death?

The agency began by reviewing key

data sources on the onset and course of

nicotine addiction. The National

Household Surveys on Drug Abuse

sought to determine the age when

individuals first tried a cigarette and the

age when individuals first started

smoking daily—an important measure

of the progression toward addiction.

The survey asked questions of 30 to 39

year olds who had ever smoked daily.

The average age of first trying a cigarette

was 14.5 years. 41 Eighty-two percent

had tried a cigarette before 18, 89

percent before 19, 91 percent before 20,

and 98 percent before 25. 42 Daily

smoking began slightly later. Fifty-three

percent began smoking daily before 18,

71 percent before 19, 77 percent before

20, and 95 percent before 25. 43

The agency reviewed the history

underlying the theory of majority and

the concept of adults making informed

choices. Majority is defined in Black’s

Law Dictionary as ‘‘the age at which, by

law, a person is capable of being legally

responsible for all his or her acts * * *,

and is entitled to the management of his

or her own affairs and to the enjoyment

of civic rights. * * *’’ 44 The 26th

Amendment to the United States

Constitution provides those 18 years

and above with the right to vote. Prior

to the adoption of the 26th Amendment

in 1971, the age of majority in almost

every State was 21. Each State has the

power to set its own age of majority and

since enactment of the 26th Amendment

most States have lowered the age of

majority from 21 to 18.

The agency reviewed the reasons why

Congress chose 18 as the appropriate

age to vote. According to a Senate report

on lowering the voter age, the 21 year

age was believed to be derived by

historical accident. Eighteen-year olds

bore many adult citizens’

responsibilities such as the ability to

marry and raise a family, and serve in

the military. A lower voting age was

seen as benefiting society by bringing

into the American political system the

idealism, concern, and energy of young

people. (See ‘‘Lowering the Voting Age

to 18,’’ S. Rept. 92–96, 92d Cong., 1st

sess., p. 5, March 8, 1971.)

While the justifications do not

necessarily support establishing a

minimum age of 18 for tobacco
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44441

products, the agency declines to raise

the minimum age for several reasons.

First, as stated in the preamble to the

1995 proposed rule, all States prohibit

the sale of tobacco products to persons

under the age of 18; currently only four

States prohibit cigarette sales to persons

over 18 (60 FR 41314 at 41315).

Consequently, setting a national

minimum age of 18 is consistent with

most States. Second, selecting 18 as the

minimum age is consistent with the age

Congress established under section 1926

of the PHS Act, which conditions a

State’s receipt of substance abuse grants

on State laws to prohibit any

manufacturer, retailer, or distributor of

tobacco products from selling or

distributing such products to any

individual under the age of 18.

FDA also declines to amend the rule

to eliminate a Federal minimum age and

instead rely on existing State laws.

Establishing 18 as the national

minimum age will strengthen State and

local enforcement, as discussed earlier.

FDA also declines to amend the rule

to reduce the minimum age. Reducing

the minimum age would undermine

existing State laws and the rule’s

effectiveness because it would, in

essence, circumvent statutory and

regulatory protections by letting more

young people purchase these products.

Reducing the minimum age would also

be contrary to the evidence cited in the

preamble to the 1995 proposed rule,

which shows that half of adults start

smoking daily before age 18.

FDA does plan to monitor closely the

incidence of new cases of nicotine

addiction. If the evidence indicates that

the number of new cases of nicotine

addiction does not significantly decline,

consistent with the agency’s stated goal

of a 50 percent reduction, but rather are

merely delayed a year or two, FDA will

consider whether increasing the

minimum age for purchase of nicotinecontaining tobacco products would

further the goal of the rule.

3. Restrictions Against ‘‘Impersonal’’

Modes of Sale

Proposed § 897.14(b) (now

renumbered as § 897.14(c)) would have

required the retailer or an employee of

the retailer to provide cigarettes or

smokeless tobacco to a purchaser

‘‘without the assistance of any

electronic or mechanical device (such as

a vending machine or remote-operated

machine).’’ The preamble to the 1995

proposed rule stated that this provision

would have the practical effect of

making access to cigarettes and

smokeless tobacco more difficult for

young people (60 FR 41314 at 41324). In

response to comments, the agency has

amended § 897.14(c) to allow for the use

of certain impersonal modes of sale,

such as vending machines and self

service displays (merchandisers only),

in facilities which are inaccessible to

individuals under the age of 18 at any

time. Additionally, as stated in section

IV.D.1. of this document, FDA has

deleted the reference to ‘‘an employee of

the retailer’’ because retailers are

generally responsible for their

employees’ actions and has revised the

text to correspond more closely with

§ 897.16(c).

(39) Several comments objected to

proposed § 897.14(b). One comment

asserted that proposed § 897.14(b) (now

renumbered as § 897.14(c)) was

unjustified, and arbitrary and capricious

because it would apply to locations

where young people are not permitted

to enter and, in places where they can

enter, would be unnecessary if retailers

required proof of age from prospective

cigarette and smokeless tobacco

purchasers. The comment stated that

less restrictive alternatives, such as

increased supervision over self-service

displays, exist. The comment further

argued that FDA lacked support for this

provision, stating that, regardless of how

tobacco products are sold over-thecounter, the key party in the transaction

is the cashier. According to the

comment, requiring retail clerks to

comply with applicable minimum age

laws should be sufficient to prevent

illegal sales to young people, thereby

making the proposed provision

unnecessary. The comment, therefore,

stated that the evidence did not support

a rule that would preclude State and

local governments from relying on ‘‘less

drastic controls.’’

In contrast, many comments agreed

that this provision would reduce a

young person’s access to cigarettes and

smokeless tobacco because it would

require potential purchasers to interact

with retailers or would discourage

young people from purchasing these

products because they would have to

interact with a retailer and provide

proof of age. One comment stated that

the regulations establish a code of

conduct for merchants, ensuring that

they take practical steps to prevent

illegal sales of tobacco products to

young people. One comment stated that

face-to-face transactions are the only

way to assure that identification of

under-age customers is checked.

FDA disagrees, in part, with the

comments that oppose this provision.

FDA declines to amend the rule to rely

on alternative measures such as

increased supervision of displays or

proof of age alone. The preamble to the

1995 proposed rule cited reports and

studies showing that young people can

easily use impersonal modes of sale

despite restrictions on their placement

or the installation of devices to prevent

illegal sales. For example, for selfservice displays, the Institute of

Medicine (IOM) Report Growing Up

Tobacco Free, Preventing Nicotine

Addiction in Children and Youths

(1994) referred to surveys in two

communities that found over 40 percent

of daily smokers in grade school

shoplifted cigarettes (60 FR 41314 at

41325). For vending machines, the

preamble to the 1995 proposed rule

cited several studies and reports

showing that young people were able to

purchase cigarettes—despite laws

restricting the placement of those

machines, or requiring the machines to

have a locking device to prevent sales to

young people (60 FR 41314 at 41324

through 41325).

FDA also found that relying solely on

retailers to verify the purchaser’s age

had limited effect on reducing young

people’s access to cigarettes and

smokeless tobacco; retail clerks rarely

asked young people to verify their age

or even assisted in completing a

purchase. Some retail sectors also

suffered from high employee turnover

rates that undermined the effectiveness

of retailer programs to prevent illegal

sales (60 FR 41314 at 41323).

Consequently, the agency believes that

the most effective approach towards

reducing young people’s access to

cigarettes and smokeless tobacco is a

sufficiently comprehensive set of access

restrictions to prohibit most impersonal

modes of sale, require retailers to verify

the consumer’s age, and make young

people’s access to these products more

difficult.

The agency also reminds parties that

these products are restricted devices

because of their potentiality for harmful

effect. The final rule contains

restrictions that the agency believes are

necessary in order to reduce the number

of children and adolescents who use

and become addicted to these products.

Relying solely on retail clerks to verify

age, increasing supervision over

displays, or deferring to other less

restrictive alternatives would not, in

comparison to the rule’s comprehensive

approach, be sufficient to achieve that

goal.

With respect to locations that are

entirely inaccessible to young people,

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,

such as vending machines and selfservice displays (merchandisers only),

in facilities where young people are not

present, or permitted to enter, at any

time. These modes of sale do not

involve hand-to-hand transactions

between the retailer and the purchaser.

Consequently, FDA has made a

corresponding amendment to

§ 897.14(c) to require retailers to

personally provide cigarettes or

smokeless tobacco to purchasers

‘‘[e]xcept as otherwise provided in

§ 897.16(c)(2)(ii) and revised the text to

correspond more closely with the

language in § 897.16(c)(1).’’ The

amendments to § 897.16 are discussed

in greater detail below.

(40) A few comments questioned the

need for proposed § 897.14(b) (now

renumbered as § 897.14(c)). These

comments said that the rule would not

prompt retailers to verify a prospective

purchaser’s age because retailers who

sell cigarettes and smokeless tobacco to

minors are already in violation of State

laws.

FDA disagrees with the comments’

assertion. FDA’s enforcement authority

and the range of sanctions under the act

should give retailers additional

incentives to verify proof of age. Hence,

FDA believes that the weight of Federal

law and these regulations will prompt

retailers to pay more attention to the

consumer’s age. By way of analogy, the

United States enjoys a very high rate of

compliance with prescription drug

restrictions in part because a violation

of the prescription requirement is

actionable under Federal law. Similarly,

section 1926 of the PHS Act gives

States, as a condition for receiving a

block grant for the prevention and

treatment of substance abuse, further

incentive to ensure that illegal tobacco

sales to young people do not occur and

that the illegal sales rate steadily

decreases from 50 percent in fiscal year

1994 (or fiscal year 1995 for some

States) to 20 percent 4 years later. States

must also conduct annually a reasonable

number of random, unannounced

inspections to ensure compliance with

State law (see 61 FR 1492 at 1508,

January 19, 1996). Section 1926 of the

PHS Act and its implementing

regulations should also prompt States to

devote more attention to compliance

efforts to prevent illegal sales to young

people and, through the requirement for

random, unannounced inspections,

make retailers more aware of the need

to verify the consumer’s age.

4. Restrictions Against the Sale of

Individual Cigarettes

Proposed § 897.14(c) (now

renumbered as § 897.14(d)) would have

prohibited the retailer or an employee of

the retailer from breaking or otherwise

opening any cigarette package or

smokeless tobacco product to sell or

distribute individual cigarettes or any

quantity of cigarette tobacco or of a

smokeless tobacco that is smaller than

the quantity in the unopened product.

In response to comments and for other

reasons discussed below, the agency has

amended § 897.14(d) to prohibit

retailers from breaking or otherwise

opening ‘‘any cigarette or smokeless

tobacco package to sell or distribute

individual cigarettes or a number of

unpackaged cigarettes that is smaller

than the quantity in the minimum

cigarette package size defined in

§ 897.16(b), or any quantity of cigarette

tobacco or smokeless tobacco that is

smaller than the smallest package

distributed by the manufacturer for

individual consumer use.’’

Additionally, as stated in section IV.D.1.

of this document, FDA has deleted the

reference to ‘‘an employee of the

retailer’’ because the retailer is generally

responsible for its employee’s actions.

(41) Several comments opposed

proposed § 897.14(c) (now renumbered

as § 897.14(d)) in conjunction with

proposed § 897.10 (which would

establish general responsibilities for

manufacturers, distributors, and

retailers). The comments said it would

be unreasonable to expect retailers to

inspect all packages to assure

compliance with minimum package

requirement, as well as other

requirements, and yet retailers would

face significant penalties if they failed to

comply. Other comments asked whether

retailers would be held liable for

opening shipping packages consisting of

individual cigarette packages or cartons

and selling the individual packages or

cartons.

The comments misinterpreted the

proposed provision. Section 897.14(d)

does not require retailers to police

minimum package requirements, but

rather expressly states that the retailer

shall not break or otherwise open any

cigarette or smokeless tobacco package

to sell or distribute individual cigarettes

or number of cigarettes or any quantity

of cigarettes or smokeless tobacco that is

smaller than the quantity in the

unopened package. The confusion may

have stemmed from the definition of

‘‘package.’’ Section 897.3(f) defines

‘‘package’’ as a ‘‘pack, box, carton, or

other container * * * in which

cigarettes or smokeless tobacco are

offered for sale, sold, or otherwise

distributed to consumers.’’ The

provision, therefore, focuses on two

distinct actions: (1) The retailer breaks

or opens a cigarette package or

smokeless tobacco product; and (2) the

retailer sells or distributes a portion of

the cigarette package or smokeless

tobacco product to a consumer.

A literal reading of proposed

§§ 897.3(f) and 897.14(d) together would

prohibit a retailer from opening a carton

of cigarettes to sell a single package of

20 cigarettes. The agency did not intend

to prohibit retailers from opening

shipped quantities or bundles of

cigarette packages or cartons or

smokeless tobacco in order to break that

shipment down into ordinary packages,

cartons, or other standard product units.

The agency has amended § 897.14(d), to

eliminate this unintended effect. The

new language clarifies that retailers may

open shipping boxes or cigarette cartons

to sell a pack of cigarettes or a

smokeless tobacco package.

Additionally, FDA has modified the

introduction to § 897.14(d), changing

‘‘the retailer shall not’’ break or open

any cigarette or smokeless tobacco

package to ‘‘no retailer may’’ break or

open any package. This change is

intended to simplify the text and does

not alter a retailer’s obligations under

§ 897.14(d).

(42) One comment from a company

opposed a restriction on the sale of

single cigarettes because it had made a

substantial investment developing a

vending machine that would sell single

cigarettes that complied with applicable

labeling and tax laws. The comment

added that its machines are located in

areas that are frequented by or limited

to adults and that there is a market for

adults who wish to smoke only

occasionally.

The restriction against the sale of

single cigarettes pertained to single

cigarettes that are removed from

cigarette packages or cartons and sold

on an individual basis. Thus, the

product described by the comment, a

prepackaged single cigarette that

complies with all applicable labeling

and tax laws, does not appear to

correspond to what is commonly known

as a ‘‘loosie.’’ As for selling a packaged

single cigarette in a vending machine,

the final rule permits vending machines

to be used in certain locations that are

entirely inaccessible to young people.

This comment, and corresponding

amendments to the rule, are discussed

in greater detail in section IV.E.4.a. of

this document.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44443

(43) A small number of comments

opposed any restriction on the sale of

single cigarettes, stating that such a

restriction would make purchases by

adults more difficult or could actually

work to the detriment of adults who are

trying to reduce their cigarette

consumption by purchasing single

cigarettes.

Most comments, however, supported

a prohibition against the sale of single

cigarettes. In general, they agreed that

eliminating single cigarettes would

make cigarette purchases more

expensive for young people and, as a

result, less likely. A number of State

attorneys general stated that this

provision, in conjunction with others,

would assist States in enforcing

compliance with State laws. A few

comments noted reports of single

cigarette sales occurring within their

State or jurisdiction; one stated that ‘‘the

problem of loosies is a very old story

within the inner city,’’ while another

even claimed seeing young people wait

in line for free samples of single

cigarettes.

The agency declines to amend the

rule to exclude single cigarettes. The

preamble to the 1995 proposed rule

cited evidence that a significant number

of retailers are willing to sell single

cigarettes to young people and are

sometimes more inclined to sell single

cigarettes to young people than to adults

(60 FR 41314 at 41324). The comments

supporting the rule reinforce the notion

that single cigarettes appeal to young

people.

While FDA is sensitive to the fact that

adults who wish to quit smoking may

wish to purchase single cigarettes to

reduce smoking, on balance, the agency

believes that the benefits of eliminating

single cigarette sales to young people

outweighs any possible detriment to

adults.

5. Additional Comments

(44) Several comments suggested that

FDA license retailers and impose fines

or other sanctions on retailers who sell

cigarettes and smokeless tobacco to

young people.

The agency declines to amend the

rule to create a licensing system. FDA

notes that SAMHSA confronted similar

comments when it proposed rules to

implement section 1926 of the PHS Act

and elected not to require a licensing

system (61 FR 1492 at 1495). The

preamble to the SAMHSA rule indicated

that States could use a licensing system

to identify retail outlets and enforce

State laws, with licensure fees and civil

penalties funding the States’ random,

unannounced inspections and covering

administrative and enforcement costs

(61 FR 1492 at 1495). FDA concurs with

the SAMHSA analysis and, because

licensure would be a State matter, will

refrain from establishing a licensing

system for retailers.

As for fines and other sanctions, no

amendment to the rule is necessary. The

act already establishes fines and other

sanctions for parties who violate the act.

For example, any restricted device that

is sold, distributed, or used in violation

of regulations for that restricted device

is misbranded under section 502(q) of

the act (21 U.S.C. 352(q)), and section

301(a) of the act prohibits the

introduction or delivery for introduction

into interstate commerce of a

misbranded device. (Section 709 of the

act creates a presumption that all

devices are in interstate commerce and

section 304 allows seizure of

adulterated or misbranded devices even

in the absence of interstate commerce.)

Among other things, section 301(b) of

the act prohibits the misbranding of a

device in interstate commerce, while

section 301(c) of the act prohibits the

receipt in interstate commerce of any

misbranded device. Additionally, any

person who violates section 301 of the

act is subject to injunctions under

section 302 of the act and civil

penalties, fines and imprisonment

under section 303 of the act, while

section 304 of the act authorizes seizure

actions against misbranded devices

themselves without any need for proof

of interstate commerce.

(45) One comment argued that

retailers should be required to keep

cigarette products from public view.

FDA declines to amend the rule as

suggested by the comment. The agency

believes that concealing these products

from view would not significantly

enhance the restrictions against access

by young people and would instead

unduly impair an adult’s ability to

determine what products and brands a

retailer is selling as well as the retailer’s

ability to sell those products.

(46) One comment stated that § 897.14

can only be enforced by routine

compliance checks using underage

agents. The comment suggested that

FDA negotiate with States to receive

information on violations of State laws

and to use that information against

retailers who fail to comply with

§ 897.14.

FDA intends to cooperate with State

governments to curtail illegal sales of

cigarettes and smokeless tobacco to

young people. Additionally, as stated

earlier in this document, FDA is

authorized to commission State officials

to perform certain functions on behalf of

the agency. FDA may consider

commissioning State officials, where

appropriate, if commissioned State

officials would help ensure compliance

with these regulations.

(47) One comment would amend

§ 897.14 to refer to ‘‘purchasing’’ and

‘‘obtaining’’ cigarettes or smokeless

tobacco. The comment said this would

prevent young people from attempting

to obtain cigarettes or smokeless tobacco

from retailers by claiming to act with a

parent’s permission or on behalf of a

parent or adult.

The agency declines to amend the

rule as suggested by the comment. As

written, § 897.14 prohibits retailers from

selling cigarettes or smokeless tobacco

to anyone under 18 and also requires

retailers to verify the purchaser’s age.

These provisions do not make any

distinction or exception as to whether

the person purchasing the products

claims to be purchasing the products for

an adult. In other words, even if a young

person claimed to have a parent’s

permission or to be purchasing these

products for an adult, § 897.14(a) still

prohibits retailers from selling cigarettes

or smokeless tobacco to that young

person, and § 897.14(b) requires the

retailer to verify the purchaser’s age.

(48) As mentioned earlier in the

discussion for § 897.10, FDA has

amended the final rule to create a new

§ 897.14(e) to require each retailer to

remove or bring into compliance all selfservice displays, advertising, labeling,

and other items at the retailer’s

establishment if those items do not

comply with the requirements under

this part. This amendment became

necessary because comments from

manufacturers and retailers claimed that

retailers owned the self-service displays

or that, once the manufacturer’s

representative gives an item to a retailer,

the item becomes the retailer’s property.

Consequently, § 897.14(e) requires

retailers to remove or otherwise bring

into compliance items at the retailer’s

establishment if those items do not

comply with this subpart. This

provision essentially gives retailers

three options with respect to an item

that violates the requirements in this

rule: (1) If the item belongs to a

manufacturer, the retailer could ask the

manufacturer to remove the item,

consistent with the manufacturer’s

obligations under § 897.12; (2) the

retailer could convert the item to

another use or alter the item to make it

comply with the regulations; or (3) the

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

Distribution (§ 897.16)

1. Restrictions on Nontobacco Trade

Names on Tobacco Products

Proposed § 897.16 would have

established several important

restrictions or conditions on the sale of

cigarettes and smokeless tobacco.

Proposed § 897.16(a) would have

prohibited the use of a trade or brand

name for a nontobacco product as the

trade or brand name for a tobacco

product ‘‘except for tobacco products on

which a trade or brand name of

nontobacco product was in use on

January 1, 1995.’’ For example, Harley

Davidson cigarettes would be

‘‘grandfathered’’ under this provision.

The preamble to the 1995 proposed rule

stated that the provision would be

necessary to prevent the industry from

circumventing the purpose behind the

rule (60 FR 41314 at 41324) by

benefitting from the promotion of the

nontobacco items in ways that appeal to

young people. FDA noted, however, that

several cigarette brands already used

trade names that are normally

associated with nontobacco products

and would exempt those brands from

§ 897.16. The final regulation remains

essentially the same, but clarifies the

agency’s intent by amending the

language to limit the exception to those

product names ‘‘whose trade or brand

name was on both a tobacco product

and a nontobacco product that were

sold in the United States on January 1,

1995.’’

(49) FDA received few comments on

this provision. The comments asserted

that the 1995 proposed rule would effect

takings compensable under the Fifth

Amendment.

The agency disagrees with these

comments. The final rule does not

violate the Fifth Amendment. This issue

is discussed in greater detail in section

XI. of this document.

(50) Several comments on the use of

nontobacco trade names on tobacco

products would delete proposed

§ 897.16(a), arguing that the provision

will have no effect on cigarette or

smokeless tobacco use by young people,

and that businesses should be free to

decide how to advertise or sell their

products. One comment challenged the

agency’s authority to regulate

nontobacco trade names, stating that the

act only permits the agency to take

action against names that are false and

misleading. According to this comment,

a nontobacco trade name that appeals to

young people does not become subject

to the act. The comment further charged

that FDA has no evidence to support a

conclusion that a tobacco product

bearing a nontobacco trade name would

be especially appealing to young people;

the comment explained that the brands

mentioned by FDA in the preamble to

the 1995 proposed rule—HarleyDavidson, Cartier, and Yves St.

Laurent’s Ritz cigarettes—either have

very small market shares or are not sold

in the United States.

In contrast, one comment said

§ 897.16(a) is ‘‘essential to avoid the

same problems that occur with ‘image’

advertising.’’ The comment explained

that tobacco manufacturers have used

nontobacco trade names on tobacco

products to give the tobacco products an

‘‘instant image.’’

The point of this provision, like the

restrictions on advertising, is to ensure

that the restrictions on sale and

distribution to children and adolescents

are not undermined by how the product

is presented to the public. As detailed

in subpart D of part 897, FDA is

restricting the way cigarette and

smokeless tobacco are advertised in

order to eliminate those elements that

resonate most strongly with the needs of

those under 18 to establish an

appropriate image and to create a sense

of acceptance and belonging. The use of

nontobacco trade names has particular

appeal in the former regard. If a firm

could use a popular nontobacco product

trade name and put it on a tobacco

product, the firm could attempt to

exploit the imagery or consumer

identification attached to the

nontobacco product to make the tobacco

appeal to young people.

For example, young people might

purchase a particular nontobacco

product that they perceive as

symbolizing the adult sophistication or

sex appeal of its users; they might also

be inclined to purchase cigarettes

bearing the same trade name if they

perceive that the cigarettes will enhance

their lifestyles in the same manner.

Section 897.16(a), therefore, eliminates

a potential loophole in the advertising

and labeling provisions.

FDA also disagrees with the comment

challenging FDA’s authority. Section

897.16(a) is authorized under section

520(e) of the act which permits FDA to

restrict, by regulation, the sale,

distribution, or use of certain devices.

Prohibiting firms from adopting

nontobacco product names that appeal

to young people is a restriction on the

product’s ‘‘sale.’’ The comment’s

suggestion that FDA cannot rely on

section 502(a) of the act reveals a

misunderstanding of FDA’s position.

FDA predicated its action on section

520(e) of the act and therefore it is not

necessary to address the relevance of

section 502(a).

FDA is not persuaded that small

market shares for cigarette products

bearing nontobacco trade names

undermines the need for § 897.16(a).

The preamble to the 1995 proposed rule

demonstrated that young people use the

most heavily advertised brands and that

they can purchase cigarettes and

smokeless tobacco easily (60 FR 41314

at 41323 through 41326, and 41332).

The brands cited in the preamble,

Harley-Davidson, Cartier, and Yves St.

Laurent’s Ritz, are not among the most

heavily advertised brands, and,

according to the comment, two (Cartier

and Ritz) are not sold in the United

States. Thus, there is no reason to

expect these brands to be especially

appealing to or purchased by young

people in the United States today.

However, if the other provisions in this

rule are effective, some manufacturers

might try altering their advertising or

marketing strategy in order to generate

product appeal; § 897.16(a) thus

eliminates this potentially significant

avenue for making a product appeal to

young people.

(51) A few comments noted that the

provision did not elaborate on what

constitutes a ‘‘trade or brand name for

a nontobacco product.’’ One comment

interpreted the terms as including any

nontobacco product trade name used

anywhere in the world and, as a result,

argued that the provision would impose

an impossible burden on manufacturers

to conduct trademark searches. The

comment added that manufacturers

would not be able to conduct trade or

brand names searches with certainty

(because the 1995 proposed rule did not

confine itself to registered trademarks)

and manufacturers would be subject to

regulatory action even if they

unknowingly used a trade or brand

name for a nontobacco product.

In contrast, another comment noted

that a brand name directory published

by the Tobacco Merchants Association

of the United States lists numerous

brand names for both nontobacco and

tobacco products. The comment

suggested that there are a greater

number of cigarette products whose

brand names were the same as brand

names for nontobacco products than the

three brands that FDA identified in the

preamble to the 1995 proposed rule. The

comment suggested that FDA amend the

rule to limit eligible brand name ‘‘tieins’’ to those relating to both tobacco

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

1, 1995.

FDA agrees, in part, with the

comments. It would be unreasonable for

the regulation to encompass all possible

nontobacco product trade names,

regardless of their nationality or

whether the trade name was a registered

trademark. Neither FDA nor

manufacturers would be able to ensure

that a name was not used elsewhere.

FDA intended that proposed § 897.16(a)

would apply to trade names in use in

the United States, and that the

exception for nontobacco product trade

names would apply only to product

trade names that were in use on both

tobacco and nontobacco products as of

January 1, 1995. Consequently, to clarify

the rule, FDA has amended § 897.16(a)

to restrict manufacturers to use of those

product names that were used on both

nontobacco and tobacco products in the

United States as of January 1, 1995.

(52) One comment would amend

§ 897.16(a) to state that, in addition to

being on the market as of January 1,

1995, the cigarette brand had to have

generated sales of at least 500 million

cigarettes or 500 million grams of

cigarette or smokeless tobacco in 1994.

The comment explained that this

amendment would eliminate a

‘‘loophole’’ because a product with

‘‘nominal sales volume could open up

large marketing holes for all sorts of

product names.’’

FDA declines to amend the provision

as suggested by the comment. The final

rule, as amended, prohibits

manufacturers from using a nontobacco

product trade or brand name as the

trade or brand name for a cigarette or

smokeless tobacco product. The sole

exception is for tobacco products whose

trade or brand name was on both

nontobacco and tobacco products sold

in the United States as of January 1,

1995. FDA will construe this exception

narrowly such that the trade or brand

name on the nontobacco product must

be the same. For example, if the trade

name for a nontobacco product was

‘‘Old Time Country Store,’’ a cigarette

product called ‘‘Old Time’’ would not

qualify for the exception because the

name is not identical to that for the

nontobacco product.

(53) FDA, on its own initiative, has

amended § 897.16(a) to replace the word

‘‘may’’ with ‘‘shall.’’ This amendment is

intended to reinforce the notion that,

except as otherwise provided in

§ 897.16(a), manufacturers are

prohibited from using a trade or brand

name of a nontobacco product as the

trade or brand name for a cigarette or

smokeless tobacco product.

2. Minimum Package Size

Proposed § 897.16(b) would have

made 20 cigarettes the minimum

package size for cigarettes. The

preamble to the 1995 proposed rule

explained that FDA selected 20 as the

minimum number of cigarettes because

most cigarette packs in the United States

contain 20 cigarettes and that

establishing a minimum package size

would preclude firms from

manufacturing so-called ‘‘kiddie packs.’’

The preamble to the 1995 proposed rule

explained that ‘‘kiddie packs’’ usually

contain a small number of cigarettes, are

easier to conceal, and are less expensive

than full-sized packs. The preamble to

the 1995 proposed rule also noted that,

based on studies or reports in other

countries, significant numbers of

children purchase ‘‘kiddie packs’’ (60

FR 41314 at 41324). Thus, by

establishing a minimum package size,

the 1995 proposed rule would have

essentially eliminated the manufacture,

distribution, and sale of ‘‘kiddie packs.’’

The final rule provides a narrow

exception to the minimum package size

in response to a comment on vending

machines that sell certain packaged,

single cigarettes.

(54) Several comments opposed

creating any minimum package size. A

minority disputed that the rule would

be effective, stating that young people

will get cigarettes anyway or will simply

begin purchasing full-sized packs. One

comment, submitted on behalf of

specialty tobacco companies, suggested

exempting specialty tobacco products

from the rule. The comment explained

that many specialty tobacco products

are produced in package sizes smaller

than 20 cigarettes, ranging from 8 to 18

cigarettes, but that young people do not

purchase specialty tobacco products.

Consequently, the comment sought an

exemption for specialty tobacco

products or for products with a very

small market share. One comment

asserted that small package sizes reduce

smoking by adults while another

comment would amend the rule to

lower the minimum size to 10 cigarettes;

neither comment offered any evidence

to support their assertions.

In contrast, many comments

supported proposed § 897.16(b). The

comments indicated that eliminating

‘‘kiddie packs’’ is ‘‘essential to protect

youth’’ and described ‘‘kiddie packs’’ as

an ‘‘obvious come-on that would appeal

to kids.’’ Other comments said the

provision would reduce underage

purchases because children would not

be able to afford full-sized packs as

easily or as quickly as they might afford

‘‘kiddie packs.’’

The final rule retains 20 cigarettes as

the minimum package size. The agency

disagrees that this provision will be

ineffective. The provisions in this

subpart are designed to: (1) Make young

people’s access to cigarettes and

smokeless tobacco more difficult by

restricting specific modes of access to

these products that young people use,

and (2) make purchases by young

people more difficult (by requiring proof

of age, and other methods) and more

expensive (by eliminating free samples

and ‘‘kiddie packs’’).

Additionally, while some tobacco

products, specifically the specialty

tobacco products, may have been sold in

smaller sizes, the benefits of eliminating

‘‘kiddie packs,’’ namely eliminating a

product size that is relatively

inexpensive and appealing to young

people, outweigh any inconvenience to

adults.

FDA also declines to create an

exemption based on market share or

claims that young people do not use a

particular type of cigarette; such

exemptions would not treat

manufacturers equally, would depart

from FDA’s traditional approach of

regulating devices as a class (see section

IV.B. of this document), and would be

impractical because a firm’s compliance

with the rule could vary depending on

fluctuations in market share and use by

young people. Moreover, even a small

percentage of a market, such as 1 or 2

percent, could translate into a large

number of Americans; for example, 2

percent of the approximately 50 million

Americans who smoke would represent

1 million people. Two percent of the

approximately 3 million children under

age 18 who are regular smokers would

represent 60,000 young people.

Furthermore, FDA declines to make

10 cigarettes the minimum package size.

The comment did not offer any

justification for the lower figure, and the

agency believes that a smaller package

size would be counterproductive

because a 10-cigarette minimum size

would be tantamount to making a

‘‘kiddie pack’’ the minimum package

size for cigarettes.

(55) One comment supported the

provision, but suggested that FDA

amend the rule to prevent the

development of ‘‘mini’’ cigarettes or

‘‘short smokes.’’ The comment said such

products contain less tobacco so that

they can be sold at a lower price.
44446 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

45Wilson, D. H., et al., ‘‘15’s: They Fit in

Everywhere—Especially the School Bag: A Survey

of Purchases of Packets of 15 Cigarettes by 14 and

15 Year Olds in South Australia,’’ Supplement to

Community Health Studies XI (1), pp. 16s–20s,

1987.

The agency declines to amend the

rule as suggested by the comment.

Section 897.3(a) define a cigarette, in

part, as any product that consists of any

roll of tobacco; it does not establish a

minimum quantity of tobacco. Thus,

while manufacturers can develop such a

product, it would still be a cigarette

under this rule and subject to all

restrictions for cigarettes.

(56) Two comments would amend the

minimum package size by increasing it

to 200 cigarettes or a carton of cigarettes.

The comments explained that making

cartons the minimum package size

would further reduce access to

cigarettes by young people because

cartons would be more expensive than

single packs and would be harder to

shoplift. The comment said that adults

would not be adversely affected by such

a change because adults generally buy

cartons.

The agency declines to make 200

cigarettes or one carton the minimum

‘‘package’’ size. Eliminating cigarette

packages would unduly affect those

adults who prefer to purchase cigarette

packs rather than cartons due to limited

funds or other reasons, and would

unduly affect manufacturers,

distributors, and retailers because, at the

very least, they would need to revise

manufacturing practices or machines

and/or revise or reconfigure product

storage practices and units to

accommodate only cartons. It is even

possible that some adults might

consume more cigarettes if the

minimum package size were increased

to 200 cigarettes.

(57) One comment challenged the

agency’s authority for proposed

§ 897.16(b). The comment argued that

requiring a minimum package size

exceeds FDA’s authority under the act

because it does not purport to provide

reasonable assurance of the product’s

safety and effectiveness to potential

users.

FDA disagrees with the comment.

Section 520(e) of the act authorizes the

agency to impose restrictions on the

sale, distribution, and use of a device.

Establishing a minimum package size is

a restriction on the sale and distribution

of these devices and is reasonably

related to assuring the product’s safety

for those persons, namely young people,

whom this rule protects. Cigarettes and

smokeless tobacco either cause or are

associated with serious adverse health

effects, and the evidence suggests that

‘‘kiddie packs’’ appeal to young people.

Hence, establishing a minimum package

size that is larger than a ‘‘kiddie pack’’

should help reduce young people’s

access to these products and, as a result,

protect them from those potential

adverse health effects.

(58) One comment stated that the

agency lacks factual support for a

minimum package size, claiming that

there is no evidence that young people

buy such products or that ‘‘kiddie

packs’’ are especially popular with

young people. The comment claimed

that the studies cited by FDA in the

preamble to the 1995 proposed rule are

flawed due to small sample size. The

comment disputed the results of those

studies, arguing that the studies did not

show whether young people favored

small package sizes because they are

easily concealed—a reason identified by

FDA in the preamble to the 1995

proposed rule—or because they are less

expensive. The comment added that

FDA’s rationale is further undermined

by the fact that FDA has claimed both

that young people are price sensitive

and that they do not purchase

inexpensive brands. According to the

comment, it is not possible to have it

both ways.

Specifically, the comment questioned

the validity of the 1987 Australian study

by Wilson. 45 The comment argued that

the authors could not assure that the

subject population of 14- and 15-year

olds was representative and, because

selection criteria for the adult subjects

differed, the results from the adult

population could not be compared to

the results from the 14- to 15-year old

subjects. The comment disputed the

study’s finding that young Australians

favored smaller cigarette packages

because the small packs were more

‘‘concealable,’’ stating that the study did

not explain whether a pack containing

15 cigarettes was significantly smaller

than a pack containing 20 cigarettes.

The comment also criticized the study

for being unclear as to whether the

researchers surveyed youth smokers

alone or young smokers and other

youths to determine why young people

purchased the 15-cigarette package, and

it criticized FDA for not mentioning that

the third most popular reason for

purchasing 15-cigarette packs was

‘‘reducing smoking.’’

FDA is not persuaded that the studies

are unreliable. The comment’s

criticisms of the Wilson study do not

acknowledge that the study’s authors

compensated for the lack of a

population-based probability sample by

using a sample size that exceeded the

required size for a simple random

sample. The authors used a crosssectional sample of 649 young people

between the ages of 14 and 15. This

number exceeded the 363 persons

required for a simple random sample,

based on an estimate that 40 percent of

the 25,000 South Australian children

aged 14 to 15 years old would be

smokers and using 95 percent

confidence intervals of 35 to 45 percent,

and exceeded the 567 person sample

size that would be obtained when the

random sample size is multiplied by a

factor of 1.3 to allow for a clustered

design and increased 20 percent to

allow for persons dropping out of the

survey.

Additionally, while the study did say

that the sample of 14- and 15-year old

children was a ‘‘sample of

convenience,’’ that, alone, does not

make the study unreliable. Many studies

use a sample of convenience rather than

a representative sample, and the

application of a study’s results or

findings to a broader population

depends on the study’s methodology.

The comment’s criticism of the

different selection methods lacks merit

because it neglects to consider the

context for the selection method. The

authors selected schools in order to

obtain underage subjects; this selection

method precluded getting a

representative sample of adults (because

they would not be in schools). For the

adult subjects, selection was based on a

probability-based method of selection

instead of school affiliation. Both

selection methods were scientifically

valid.

Moreover, two well-conducted studies

provide a reasonable basis for

comparison, even between different

populations. This is especially true for

the Wilson study because both the

adolescent and adult studies were

performed under the auspices of the

South Australian Health Commission

and were drawn from the same

geographical area within 2 weeks of

each other. Thus, one can reasonably

assume that the studies were well

conducted and that comparisons

between the adolescent and adult

groups were appropriate.

Finally, the comment’s criticism of

Wilson’s findings is also misplaced.

Contrary to the comment’s assertion, the

issue is not whether 15-cigarette packs

are smaller or more easily concealed

than full-sized packs. Nor is the issue

whether underage smokers, as opposed

to underage smokers and other young
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44447

46 Id., p. 19s.

47Hill, D. J., et al., ‘‘Tobacco and Alcohol Use

Among Australian Secondary Schoolchildren in

1987,’’ Medical Journal of Australia, vol. 152, pp.

124–130, 1990.

48 Id., p. 128.

49 Id., p. 126.

50 ‘‘Students and Tobacco,’’ The Nova Scotia

Council on Smoking and Health Survey, Final

Report, March 1991.

people, prefer 15-cigarette packs.

Instead, the issue is whether young

people, for whatever reason, favor and

purchase smaller packs. The study

indicated that over 90 percent of the

young people surveyed preferred 15-

cigarette packs because they considered

them to be less expensive, easier to

conceal, or helpful to reduce smoking.

This led the authors to state that, ‘‘if

adolescents did not have available to

them these cheaper brands, or the price

was raised considerably, or packaging in

a way that is more appealing to

adolescent budgets was prohibited then

the current popularity of 15’s would be

reduced considerably.’’ 46

(59) The same comment challenged a

study by Hill. 47 The preamble to the

1995 proposed rule cited this study to

show that younger children (12-year

olds in the study) preferred 15-cigarette

packages more than older children (17-

year olds) and that older children

preferred packages containing 25

cigarettes. However, the comment

interpreted the Hill study in a much

different manner, noting that, according

to the study, the youngest age group

experienced the greatest decline in

smoking prevalence in the period

following the introduction of the 15-

cigarette package. Thus, the comment

asserted that, ‘‘[t]his fact suggests that

smaller packages are associated with

less youth smoking, rather than more.’’

The comment further stated that the

researchers’ opinion that price and

‘‘concealability’’ make smaller packages

appealing to young people is

contradicted by the findings that

children in all age groups preferred 25-

and 30-cigarette packages.

FDA believes that the comment

misinterprets the study. While the study

did indicate that the proportion of

Australian students, aged 12 to 17 years,

who smoked weekly declined from 1984

to 1987 (with the greatest declines in the

youngest age groups), the study did not

attribute the decline to the introduction

of a smaller cigarette package. Instead,

the study attributed the decline to ‘‘the

health education and promotional

campaigns that were established in

Australia during the period between the

surveys.’’ 48

Similarly, a closer examination of the

study does not support the comment’s

assertion that the popularity of larger

cigarette packages among Australian

schoolchildren refutes FDA’s statement

that the price and ‘‘concealability’’ of

smaller packages appeal to young

people. The study found that 42 percent

of the children surveyed smoked

cigarettes from 25-cigarette packages,

with the next most popular size being

30-cigarette packages. Nearly 20 percent

smoked cigarettes from 15-cigarette

packages, and ‘‘preference for packets of

this size showed a marked inverse

relationship with age, decreasing from

30% of 12-year-old school children to

11% of 17-year-old school children.’’ 49

The study did not attribute the

popularity of the smaller package size to

lower price or concealability but merely

cited the Wilson study to say that young

people ‘‘presumably’’ prefer the smaller

packages for those reasons. Yet,

regardless of the reason, the Hill study

illustrates that a significant percentage

of young people prefer smaller package

sizes and that the percentage increases

in the younger age groups.

(60) The same comment also

criticized the Nova Scotia study. 50 FDA

cited this study to show that 49 percent

of tobacco users in the sixth grade

purchased 15-cigarette packages. The

comment criticized the Nova Scotia

study for the ‘‘absurdly small size of this

population sample (37 students).’’ The

comment also criticized the Nova Scotia

study’s assertion that price and

concealability motivate young people to

purchase small cigarette packages. The

Nova Scotia study indicated that only 3

percent of the sixth grade students

surveyed (or one out of the 37 students)

purchased single cigarettes compared to

11 percent of the twelfth grade students

(or 12 students out of the 123 surveyed).

The comment argued that the Nova

Scotia study showed that twelfth grade

students ‘‘were four times as likely as

the sixth-graders to purchase single

cigarettes’’ and that, ‘‘[i]f price and

‘concealability’ were the key factors for

young people, those in the youngest age

group would surely be purchasing

single cigarettes, not 15’s’’.

The comment misconstrues the

importance of the study. FDA cited this

study to show that 49 percent of tobacco

users in the sixth grade purchased 15-

cigarette packages, but the agency did

not rely solely on the Nova Scotia study

as evidence that young people prefer

small cigarette packages. Instead, the

agency cited the Nova Scotia study and

the Hill study that surveyed 19,166

Australian schoolchildren to show that

the youngest children prefer smaller

cigarette packages. So, even if the Nova

Scotia study used a small sample size,

the study’s findings are consistent with

the Australian study that surveyed

19,166 children.

The agency also disagrees with the

comment’s claim that the Nova Scotia

study contradicts FDA’s view that

young people purchase ‘‘kiddie packs’’

due to their low price and small size.

The study did not examine specific

reasons for purchasing single cigarettes

as opposed to

15-, 20-, or 25-cigarette packages, and so

it would be inappropriate to draw any

conclusions based on different purchase

rates alone. In other words, the

percentage of students who purchase a

particular package size may offer little

or no insight as to the reasons why a

student selected a particular package

size.

Other factors might also explain the

low rate of single cigarette sales relative

to cigarette packages. Low price and

concealability might be important

factors in purchasing behavior, but they

may not be the controlling or sole

factors behind a purchase. For example,

the preamble to the 1995 proposed rule

stated, among other things, that single

cigarettes make children more willing to

experiment with tobacco products (60

FR 41314 at 41324), and stated that

young people see or use tobacco

products as a badge or method of

conveying or creating a certain image for

themselves (60 FR 41314 at 41329). A

single cigarette, sold without a package,

is an ineffective ‘‘badge’’ compared to

the more conspicuous cigarette pack.

Additionally, very young children may

not opt for single cigarettes because

such products are typically purchased

from retailers that may question the

children’s age. (See 60 FR 41314 at

41325 (very young children rely on

vending machines more often than older

children).) The Nova Scotia study,

however, did not examine reasons for

purchasing single cigarettes as opposed

to purchasing 15-cigarette packages, and

so the agency declines to draw any

conclusions solely from different sales

rates for single cigarettes compared to

those for cigarette packages.

(61) One comment suggested

amending § 897.16(b) to prohibit

manufacturers, distributors, and

retailers from selling or causing to be

sold, distributing or causing to be

distributed, ‘‘cigarettes unless contained

in packages of at least 20 cigarettes.’’

The comment said that the rule did not

prevent anyone other than retailers from

selling individual cigarettes.
44448 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

FDA believes the comment

misinterpreted the rule. Section 897.3

defines a ‘‘retailer’’ as any person who

sells cigarettes or smokeless tobacco to

individuals for personal consumption.

Thus, a manufacturer or distributor who

attempted to sell single cigarettes to a

consumer would, under the final rule,

be considered a ‘‘retailer’’ for purposes

of that transaction and would be in

violation of the individual cigarette

restriction in § 897.14.

(62) One comment suggested

amending the rule to create a minimum

package size for smokeless tobacco. The

comment would make the minimum

package size for smokeless tobacco

equivalent to 20 doses of nicotine, but

it did not state what a dose would be.

The agency agrees that a minimum

package size for smokeless tobacco may

be helpful, but lacks sufficient

information to determine what that size

should be for the various forms of

smokeless tobacco on the market.

Unlike cigarettes, which are generally

sold in packages of 20, smokeless

tobacco comes in various forms and

sizes, and, with the possible exception

of prepackaged forms, can be used in

quantities determined by the user. One

individual, for example, might place

more chewing tobacco in his or her

mouth than another individual.

Consequently, absent more information,

the agency is unable to establish a

minimum package size for smokeless

tobacco.

(63) The agency, on its own initiative,

has amended § 897.16(b) (minimum

cigarette package size) to add the

introductory phrase, ‘‘Except as

otherwise provided under this section.’’

This amendment became necessary

because, as discussed in greater detail in

section IV.E.4.a. of this document, the

agency has concluded that vending

machine sales should be permitted in

facilities that are inaccessible to young

people, and FDA is aware of at least one

type of vending machine that sells

packaged, single cigarettes. The agency

is aware of vending machines that

dispense cartons, packages, and now

packaged, single cigarettes and has

made an exception for packaged, single

cigarettes due to their unique nature

(relatively high price compared to

‘‘loosies,’’ packaging in compliance with

labeling and tax requirements, and sale

only in adult locations). Additionally,

FDA, on its own initiative, has revised

the rule to state that no manufacturer,

distributor, or retailer ‘‘may’’ sell (rather

than ‘‘shall’’ sell) cigarette packages

containing less than 20 cigarettes.

3. Maximum Package Size

The preamble to the 1995 proposed

rule also invited comment as to whether

a maximum package size should be

established. The preamble to the 1995

proposed rule cited one study that

found that older Australian children

favored cigarette packs containing 25

cigarettes (60 FR 41314 at 41324).

(64) Several comments offered

suggestions regarding a maximum

package size. One comment noted that

packages containing 10 and 25 cigarettes

have been sold in the United States and

suggested that, when considering a

maximum package size, FDA should

consider the attractiveness of the pack

and whether a larger pack would

encourage increased consumption. The

comment added that one option would

be to limit sales to 200 units (or one

carton). Another comment would make

20 cigarettes the maximum package size,

but conceded that there is insufficient

evidence to make a strong

recommendation.

In contrast, one comment stated that

the agency has no authority or evidence

to justify creating a minimum package

size and so it lacks authority and

evidence to create a maximum package

size.

Based on the comments, there is

insufficient evidence to establish a

maximum package size for cigarettes.

There is little experience in the United

States with package sizes greater than 20

cigarettes. As a result, the final rule does

not establish a maximum package size

for cigarettes.

4. Impersonal Modes of Sale

Proposed § 897.16(c) would have

permitted cigarettes and smokeless

tobacco to be sold only in a direct, faceto-face exchange between the retailer, or

the retailer’s employees, and the

consumer. Thus, the proposal would

have prohibited the use of vending

machines, self-service displays, mailorder sales, and mail-order redemption

of coupons. Implicit in this provision,

and in subpart B of part 897, is the

notion that transactions involving

restricted devices should involve a

sense of ‘‘formality’’ or gravity that

conveys to both the seller and the buyer

the seriousness of the transaction and of

the products themselves. FDA has

amended this provision in response to

comments. As discussed in section

IV.E.4.c. of this document, certain mailorder sales are now exempted from this

requirement, as are vending machines

and self-service merchandisers in

facilities not admitting individuals

under the age of 18.

a. Vending machines. The preamble to

the 1995 proposed rule cited numerous

studies and surveys showing that

significant percentages of young people

are able to purchase cigarettes from

vending machines, even in jurisdictions

that have laws restricting the placement

of those machines or requiring the use

of locking devices. In some cases, young

people successfully bought cigarettes

from vending machines 100 percent of

the time (60 FR 41314 at 41324 through

41325). Consequently, the agency

elected to prohibit the use of vending

machines rather than restrict their

placement or require locking devices.

FDA’s proposal to eliminate the use of

vending machines (§ 897.16(c))

generated more comments than any

other provision aimed at reducing

children’s and adolescents’ access to

tobacco products; the agency received

thousands of comments on this

provision. While agreeing that children

and adolescents should not use tobacco

products, comments submitted by adult

smokers, the tobacco industry, and

vending machine owners and operators,

strenuously objected to the provision.

Nearly all of the comments in

opposition stated that the provision

would be unnecessary if State and local

jurisdictions enforced existing laws

prohibiting the sale of tobacco products

to children and adolescents under the

age of 18.

By contrast, concerned adults,

parents, educators, State and local

public health agencies, and medical

professionals overwhelmingly

supported the provision. In addition,

tens of thousands of school children

wrote letters asking that vending

machines be eliminated. Nearly all

comments in favor of the provision

pointed to the serious health risks that

a lifetime of nicotine addiction poses to

children and adolescents who begin to

smoke, arguing that vending machines

offer children and adolescents who

choose to begin to smoke easy access to

cigarettes.

(65) Several comments asserted that

the proposed restriction pertaining to

vending machines would effect takings

compensable under the Fifth

Amendment.

The agency disagrees with the

comments. As discussed in greater

detail in the paragraph below, FDA has

amended the final rule to permit

vending machines in facilities that are

inaccessible to young people at all

times. Additionally, given the character

of this regulation and the lack of

reasonable investment-backed

expectations in personal property, its
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44449

economic impact, while potentially

significant for some persons, is not such

as to effect a taking. The agency

addresses Fifth Amendment issues in

greater detail in section XI. of this

document.

(66) Most comments submitted by

adult smokers and nearly all of the

comments submitted by the cigarette

and vending machine industries stated

that the provision would not effectively

reduce children’s and adolescents’

access to cigarettes. The comments

argued that the proposed elimination of

vending machines is not supported by

the evidence in the record, either

because the studies cited by FDA do not

measure children’s and adolescents’

actual purchasing habits, or because the

percentage of children and adolescents

who reportedly buy cigarettes from

vending machines is not significant.

Finally, many adult smokers and some

parents argued that determined

teenagers will find a way to obtain

cigarettes whether or not vending

machines are eliminated.

On the other hand, almost all of the

children, parents, adults who do not

smoke, medical professionals, and

public interest groups commented that

the provision would effectively reduce

children’s access to cigarettes. These

comments generally cited personal

experience in concluding that vending

machines provide an easy source of

cigarettes for many children who smoke.

For example, the executive director of a

public health education program wrote:

‘‘It is outrageous that we allow tobacco,

a most addictive drug, to be sold

through vending machines where

anyone can purchase it!’’ Comments

overwhelmingly concluded that the

elimination of vending machines,

coupled with the other proposed access

and advertising restrictions and the

proposed education campaign, would

effectively reduce the availability of

cigarettes to children.

Several comments analyzed currently

available studies and concluded that

‘‘easy access to vending machines * * *

enable[s] young people to obtain

cigarettes, and that high proportions of

vending machine users are people under

18.’’ Moreover, several comments in

support of the provision cited their own

studies indicating the ease with which

children and adolescents obtain

cigarettes from vending machines. For

example, a coalition dedicated to

preventing and reducing tobacco use

submitted its 1994 annual report, which

included an article describing an

undercover buying survey, the largest of

its kind, conducted in Spring, 1994. One

hundred and seven teenagers

participated in the 12-county survey by

entering stores under the supervision of

an adult and attempting to purchase

cigarettes, and:

[k]ids were more successful attempting to

buy cigarettes through vending machines

[than through retail outlets], without any

adults trying to stop them. Teens made 21 of

24 successful attempts to purchase cigarettes

through vending machines, an 88 percent

success rate.

Similarly, the manager of a youth

tobacco prevention program in

Washington State’s Department of

Health commented that ‘‘[a] recent

survey in one Washington county found

that youth can still purchase tobacco

from vending machines at a 75 percent

success rate.’’ The comment

recommended that all tobacco vending

machines be eliminated.

Finally, comments submitted by

children, parents, and nonsmoking

adults indicate that these groups believe

tobacco vending machines are easily

accessible to children and adolescents.

One comment, typical of those

submitted by children, stated: ‘‘I

especially agree with getting rid of

vending machines. That, I think, is

probably the most common way that

children get their cigarettes.’’ The

director of a public health center in

California submitted the results of a poll

indicating that 75 percent of

Californians support banning cigarette

vending machines.

Vending machines certainly represent

one of the major ways that children

currently obtain cigarettes. In addition

to studies depicting how easily children

and adolescents could purchase

cigarettes from vending machines, the

1995 proposed rule cited surveys of

children’s actual purchasing behavior

(60 FR 41314 at 41324 through 41325).

Relying on both types of evidence, the

agency concluded that the provision

would eliminate one of the primary

sources of cigarettes for at least 2

percent of 17-year-old smokers and 22

percent of 13- to 17-year-old smokers.

Moreover, the agency finds that the

number of children and adolescents in

these two groups is substantial.

While the agency agrees that some

children and adolescents who are

determined to smoke may find or create

new ways of obtaining cigarettes, the

removal of vending machines from sites

accessible to young people will

eliminate what is currently a popular

and easy means of access to tobacco,

especially for younger children. In

addition, if other access restrictions are

imposed, such as requiring customers to

provide proof of age, without also

eliminating vending machines, use of

vending machines among children

between the ages of 13 and 17 years

would likely increase (60 FR 41314 at

41325). Therefore, the agency has

concluded that the provision is an

important part of the overall scheme to

reduce children’s and adolescents’

access to cigarettes.

(67) The agency received many

comments regarding the location of

vending machines. A trade association

representing the cigarette industry

stated that most vending machines are

currently inaccessible to children and

adolescents because they are located

either in areas that are off-limits to

young people, such as nightclubs or

casinos, or in areas that young people

rarely frequent, such as industrial plants

and private offices. Thus, the comment

concluded, eliminating vending

machines will not discourage youth

smoking.

The vending machine industry and

establishments that currently have

vending machines unanimously

opposed the provision. Some comments

suggested that the agency specifically

allow vending machines in locations

where young people are not present.

One vending machine operator

commented, ‘‘[m]any cigarette machine

vendors are small businessmen like

myself; 95 percent of our locations are

in taverns and lounges, where no one

under 21 years old is allowed in.’’ Other

comments argued that, even if retail

purchases become increasingly difficult,

vending machines in establishments

that are not open to the public should

not be eliminated because children and

adolescents cannot enter these places.

Both the cigarette and vending

machine industries argued that FDA’s

conclusion, that children and

adolescents can easily purchase

cigarettes from vending machines even

in ‘‘adult’’ locations, was based on

flawed studies. Comments argued that

the sting operations, on which these

studies were based, do not demonstrate

where teenagers actually or usually go.

One comment, submitted by an

association representing 1,700 vending

machine companies, argued that: ‘‘it is

highly questionable if minors might

have alone and without encouragement

entered taverns or bars in restaurants

just to purchase cigarettes without

exemption from the district attorney’s

office.’’ Moreover, these comments

argued, local sting operations do not

establish the national cigarette

purchasing habits of children and

adolescents.
44450 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

51 IOM Report, p. 214.

52 ‘‘Design of Inspection Surveys for Vendor

Compliance with Restrictions on Tobacco Sales to

Minors,’’ Battelle, prepared for the CDC, OSH, p. 17,

April 1994.

In contrast, a national public health

organization concluded that available

studies indicate that restricting the

location of vending machines is an

ineffective method of controlling sales

of tobacco to young people. Another

comment opposed to weakening the

provision characterized as unreliable

the number of machines currently in

‘‘adult’’ locations. The comment

attacked as statistically unsound a

vending machine industry survey that

concluded that 77 percent of all vending

machines are in ‘‘adult locations.’’

FDA has determined that cigarettes

should not be dispensed to consumers

from vending machines that are

accessible to children and adolescents.

While young people’s actual current

purchasing habits provide irrefutable

evidence of accessibility, available

evidence demonstrates that cigarette

vending machines also are accessible to

children and adolescents even in

locations that are not often or currently

frequented by young people. FDA has

determined that cigarette vending

machines should be eliminated from

locations that are accessible to children

and adolescents, whether or not

children and adolescents currently use

them.

While the IOM recommended that

vending machines be eliminated

altogether, it cautioned that, if partial

bans were to be enacted, the definition

of ‘‘adult’’ location must be narrowly

drawn.

Youths do not now report ‘‘adult’’

locations as major sources of tobacco, but

there is evidence that minors can often easily

enter ‘‘adult’’ locations, and once inside, can

easily buy tobacco products * * *. If partial

vending machine bans are to be effective, the

statutes must define ‘‘adult’’ locations

carefully and narrowly. For example, the bar

area of a restaurant is not sufficiently

inaccessible to minors to deter their

purchases. * * * Many bars only restrict

access to alcohol; they do not restrict

entrance by age. Accordingly, if vending

machine are permitted at all, they should be

permitted only in locations to which minors

may not be admitted. 51

Based on comments, FDA has

determined that some ‘‘adult’’ locations

can be made sufficiently secure to

prevent young people’s access and that

vending machines should remain

available to adults in these locations.

For example, some establishments, such

as nightclubs or casinos, require that

patrons present proof of age before they

are permitted to enter or post a guard at

the door to prohibit underage access. In

1994, CDC analyzed 15 recent studies of

children’s access to tobacco and noted

that ‘‘[s]ome inspections of private clubs

and bars were not carried out because

access to the outlet was blocked by a

doorman or security guard.’’ 52 FDA

finds that those establishments where

people under the age of 18 are legally

prohibited from entering and where a

system exists to ensure that children are

prevented from entering, can, in fact, be

sufficiently inaccessible to children that

the goals of the rule would not be

significantly advanced by prohibiting

vending machines in those limited

locations.

Other ‘‘adult’’ establishments prohibit

children and adolescents from entering,

as a matter of establishment policy. For

example, some private clubs do not

grant membership to persons under the

age of 18 and require that members

provide proof of membership before

entering the club. Similarly, for

example, some industrial or

manufacturing facilities not open to the

public may, for safety reasons, prohibit

the hiring of persons under the age of

18, and require that employees present

proof of employment upon entering the

facility. FDA finds that these

establishments, like some nightclubs or

casinos, can be similarly inaccessible to

children and, if so, should be permitted

to make cigarette vending machines

available to their adult members or

employees.

Futhermore, an exemption for

vending machines located in areas

where no person under 18 is present or

permitted to enter is consistent with the

‘‘Prohibition of Cigarette Sales to Minors

in Federal Buildings and Lands Act’’

(Pub. L. 104–52, sec. 636). This

particular statute, which became law on

November 19, 1995, prohibits the sale of

tobacco products in vending machines

located ‘‘in or around any Federal

building,’’ but the statute authorizes the

Administrator of the General Services

Administration (GSA) or the head of an

agency to exempt areas that prohibit the

‘‘presence of minors’’ (whom the statute

defines as individuals under age 18).

See also 41 CFR 101–20.109(d)

(Administrator of the GSA or agency

head may designate areas where

vending machine sales of tobacco

products may occur ‘‘if the area

prohibits minors’’); 61 FR 2121, January

25, 1996.

Consequently, § 897.16(c) exempts

vending machines located in

establishments that are totally

inaccessible to persons under 18. The

owner of the facility must ensure, by

means of photographic identification or

some other means, that no one under 18

enters the facility. Thus, the rule would

permit a vending machine in an

establishment only where persons under

18 are not present, or permitted to enter,

at any time. FDA emphasizes that this

narrowly drawn exemption

accommodates adults only in locations

where young people, in fact, have no

access at any time. For example, a

vending machine might be permitted in

a facility that employs only adults and

where guards prevent any person under

18 from entering. A vending machine

would not be permitted in a facility that

employs only adults but also permits

employees to bring children to work.

The agency further emphasizes that it is

the exempt establishment’s

responsibility to ensure that no one

under 18 is present, or permitted to

enter the premises, at any time.

In addition, under § 897.16(c), a

vending machine in an exempt

establishment must be entirely

inaccessible to children. Thus, an

establishment must place the machine

entirely inside the premises, beyond the

point where persons are required to

present proof of age, membership, or

employment. Vending machines are

prohibited from any public area in or

around the establishment, including, for

example, lobbies, parking lots, and

entrances.

FDA emphasizes that the final rule

exempts only establishments that are, in

fact, inaccessible to young people at all

times. FDA will monitor young people’s

access to cigarettes from vending

machines in exempt establishments,

and, after 2 years, will assess whether

the vending machine exemption has

been effective. At that time, the agency

finds that vending machines continue to

be accessible to young people, FDA will

propose further restrictions.

(68) Several comments suggested that,

rather than eliminate vending machines

or restrict their location, FDA require

that they be supervised. These

comments would allow vending

machines to be placed anywhere, even

in locations frequented by children and

adolescents, as long as the machines

were supervised.

FDA disagrees that supervising

vending machines would prevent illegal

sales to children and adolescents.

Comments opposed to the provision

offered no evidence that supervision of

vending machines would sufficiently

impede a young person’s access to

cigarettes. In fact, studies indicate that

young people are able to purchase
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44451

53Cismoski, J., and M. Sheridan, ‘‘Availability of

Cigarettes to Under-age Youth in Fond du Lac,

Wisconsin,’’ Wisconsin Medical Journal, vol. 92,

No. 11, pp. 626–630, 1993.

54 ‘‘Cigarette Vending Machines Sell Cigarettes to

Children, 11–15 Years Old, 100% of the Time,’’

Smokefree Educational Services, Inc., October 1990.

‘‘Critics Target Vending Machines,’’ The Christian

Science Monitor, p. 6, April 1990.

55Mead, R., ‘‘Teen Access to Cigarettes in Green

Bay, Wisconsin,’’ Wisconsin Medical Journal, pp.

23–24, January, 1993.

56 ‘‘Springfield Teen Tobacco Purchase Survey,’’

Stop Teenage Addiction to Tobacco (STAT), 1993.

57 Jason, L. A., P. Y. Ji, M. D. Aneo, and S. H.

Birkhead, ‘‘Active Enforcement of Cigarette Control

Laws in the Prevention of Cigarette Sales to

Minors,’’ JAMA, vol. 266, No. 22, pp. 3159–3161,

December 11, 1991.

58 Kotz, K., ‘‘An Evaluation of the Minnesota Law

to Restrict Youth Access to Tobacco,’’ presented to

the American Public Health Association (APHA)

121st Annual Meeting, San Francisco, CA, October

24–28, 1993.

59 IOM Report, p. 213.

60 ‘‘Youth Access to Cigarettes,’’ Department of

Health and Human Services (DHHS), Office of the

Inspector General, Pub. No. OEI–02–90–02310, p. 9,

May 1990.

cigarettes even from vending machines

under the immediate vicinity and

control of employees.

One study conducted in a State

requiring that vending machines be

supervised demonstrated that youths

were able to purchase from 72 percent

of vending machines, in bars and

taverns, within clear view of an

employee. 53 Another report examining

vending machine sales in New York

City demonstrated that 11- and 12-yearolds successfully purchased cigarettes

from supposedly supervised vending

machines in bars and taverns 100

percent of the time. The study found

that children and adolescents ‘‘had no

more difficulty buying cigarettes from

vending machines in bars than they had

buying cigarettes from restaurants, pizza

parlors, or video arcades. In all

instances, the barman and/or patrons

watched but did not intervene.’’ 54

In other studies, employees helped

children and adolescents to illegally

purchase cigarettes by providing change

for the cigarette vending machine 55 or

suggesting that the children and

adolescents go next door where

cigarettes were cheaper. 56

Additionally, each provision in

subpart B of part 897 is intended to

eliminate a popular source of cigarettes

and smokeless tobacco for children. The

vending machine restriction is intended

to complement, and be reinforced by,

the other restrictions.

The preamble to the 1995 proposed

rule cited studies indicating that the use

of vending machines by adolescents is

greater in jurisdictions that have

stronger access restrictions (60 FR 41314

at 41325). Based on those studies and

comments that it received, FDA

concludes that decreasing the supply of

tobacco products to children and

adolescents by one means of access,

such as restricting self-service displays,

would cause an increased demand by

another means of access, such as

cigarette vending machines. FDA

remains persuaded that, without

eliminating cigarette vending machines

accessible to children and adolescents,

other access restrictions would cause an

increase in illegal vending machine

sales.

(69) Most comments submitted by the

tobacco and vending machine industries

recommended that, rather than

eliminate vending machines, FDA

should require that they be equipped

with electronic locking devices (devices

that render the machine inoperable until

activated by an employee) or token

mechanisms (which require consumers

to purchase tokens from an employee in

order to use a vending machine). Either

method would require a face-to-face

transaction between the purchaser and

the retailer.

The cigarette and vending machine

industries commented that studies do

not support FDA’s conclusion that

locking devices are ineffective.

Comments asserted that the studies

failed to include vending machines

fitted with locking devices in

traditionally adult locations or to

account for the lack of enforcement in

the jurisdiction in which the study was

conducted. In addition, several

comments pointed out that the tobacco

sales ordinance in Woodridge, IL, where

illegal tobacco sales were reduced from

70 percent to less than 5 percent 2 years

later, included a locking device

requirement rather than a ban on

cigarette vending machines.

On the other hand, one comment from

a public interest group strongly

supported FDA’s proposal to eliminate

vending machines altogether and urged

that FDA not permit the use of locking

devices. The comment cited a survey,

conducted by an association of public

health officials in New Jersey, in which

young people successfully purchased

cigarettes from supposedly locked

vending machines in 11 of 15 attempts.

The comment noted that ‘‘[i]n some

instances, the remote control device to

operate the machine was sitting on top

of the machine to save store personnel

the bother of having to press the

switch.’’

FDA acknowledges that properly

installed locking devices require that

vending machine purchasers engage in

a face-to-face transaction, increasing the

likelihood that children would be

prevented from purchasing cigarettes.

However, as explained in the preamble

to the 1995 proposed rule, available

evidence indicates that the industry is

slow to install the locking devices, and

that, after a short period, the locking

devices are often disabled (60 FR 41314

at 41324 through 41325).

FDA agrees that the Woodridge, IL,

community was able to dramatically

reduce illegal tobacco sales while

permitting the use of locking devices on

cigarette vending machines. However,

FDA notes that when the community

implemented its tobacco ordinance in

May, 1989, the community had only six

vending machines, and when the study

was completed December, 1990, the

number of vending machines had

dropped to two. Moreover, despite the

requirement of locking devices and

persistent compliance checks by law

enforcement, a child was able to

purchase cigarettes from one of the two

remaining vending machines in

December, 1990. 57

Similarly, in 1990, Minnesota enacted

a law eliminating vending machines in

public areas unless the machines were

only operable by activation of an

electronic switch or token and were

under the direct supervision of a

responsible employee. One year after

the law was passed, a study conducted

in four cities found many machines had

not been fitted with the required devices

and, of those fitted with the devices,

there was no significant reduction in

purchase success. 58

IOM reviewed the available evidence

and determined that locking devices do

not effectively prevent youth access to

cigarette vending machines. IOM noted

that ‘‘although fewer cigarettes are sold

to youths than where vending machines

are completely unrestricted, businesses

that installed locking devices on

vending machines were still more likely

to sell cigarettes to young people than

businesses that used over-the-counter

sales.’’ 59

Finally, the Inspector General

reported that Utah experienced limited

success with locking devices:

Reportedly, clerks would simply activate

the machine without checking the age of the

purchaser. Since the locking devices require

employee participation, they are often not as

effective in busy places, such as bars or

restaurants, where employees are more likely

to simply activate the machine. 60

FDA has not been persuaded that

vending machines equipped with

locking devices sufficiently guard
44452 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

61Forster, J. L., M. Hourigan, and P. McGovern,

‘‘Availability of Cigarettes to Underage Youth in

Three Communities,’’ Preventive Medicine, vol. 21,

No. 3, pp. 320–328, May 1992.

62 ‘‘Design of Inspections Surveys for Vendor

Compliance with Restrictions on Tobacco Sales to

Minors,’’ Battelle, prepared for CDC, OSH, p. 14,

April 1994.

against children’s access to tobacco

products. Comments provided no

evidence, and FDA is not aware of any

studies, on whether law enforcement

efforts affect children’s ability to access

tobacco products through locked

vending machines. However, one study

examined the effect of law enforcement

efforts on illegal vending machine sales

in three comparable communities that

did not require locking devices. Despite

the fact that merchants in one of the

three communities received a letter

describing the State law and warning

them of the city’s intention to enforce

the law, there was no significant

difference in the rate of illegal vending

machine sales among the

communities. 61

Comments also provided no evidence

that restricting the location of cigarette

vending machines equipped with a

locking device renders the machines

less accessible to children and

adolescents. FDA notes that, if locking

devices were effective, the location of

the machine would be of no

consequence. Yet, as discussed in the

preceding paragraphs, FDA is persuaded

that some establishments are entirely

inaccessible to young people.

Accordingly, the final rule allows the

use of vending machines in those

establishments without requiring that

the machines be equipped with a

locking device.

FDA declines to grant an exception

for tokens in the absence of evidence

that machines operated only by tokens

prevent children from obtaining

cigarettes. Several comments suggested,

rather than eliminate vending machines,

that FDA require either locking devices

or tokens. These comments focused on

locking devices, without offering any

evidence of the number of vending

machines currently operating with

tokens, the extent to which tokens have

been tested in the marketplace, or

whether the technology prevents

children and adolescents from obtaining

cigarettes from vending machines. FDA

is aware that three States whose laws

restrict the use of vending machines

permit the use of locking devices or

tokens. However, FDA is not aware of

any evidence indicating that the use of

tokens prevents young people’s access

to cigarettes from vending machines that

are otherwise accessible to children.

(70) The most common concern raised

by adult smokers was that the

elimination of vending machines would

inconvenience them. Most adult

smokers stated that vending machines

are closer than retail outlets to their

homes or places of work. Some adult

smokers stated that they would be

unable to purchase cigarettes late at

night if vending machines were

eliminated. Others indicated that

vending machines provide the only

means of obtaining their brand, or of

obtaining cigarettes altogether.

In contrast, while acknowledging that

adult smokers would be somewhat

inconvenienced, comments in support

of eliminating vending machines

pointed out that adult smokers would

still be able to purchase their products

in retail transactions. Nearly all

comments in support of the provision,

including comments from grade school

students, parents, and health

professionals, said that the significant

reduction in children’s access to

cigarettes would outweigh any

inconvenience experienced by adult

smokers.

The agency is persuaded that the

provision would not unduly burden

adult smokers, who could continue to

purchase cigarettes in retail

transactions, and that the inconvenience

some smokers would experience is a

small burden when compared to the

significant public health benefit of

reducing children’s and adolescents’

access to tobacco.

(71) A few comments questioned the

propriety of using young people in

‘‘sting’’ operations to determine the

level of compliance with existing laws

restricting the sale of tobacco products

to children. One comment suggested

that these operations taught children

how and where to purchase cigarettes,

concluding that the operations ‘‘have

done more to increase smoking in our

youth than any tobacco company or

advertisement could have.’’

FDA relied on several types of

evidence in proposing these regulations,

including teen surveys and peerreviewed studies. Compliance testing

involves sending underage children and

adolescents into tobacco outlets to

attempt to purchase cigarettes or

smokeless tobacco. This type of study

provides reliable evidence of children’s

ability to illegally obtain tobacco

products.

A 1994 review 62 of the design of

recent studies indicates children who

participated in these studies received

specific instructions about the method

and purpose of the study and were

escorted by at least one adult. Some

adults waited outside the outlet for the

young person while others went inside

to observe the child attempt the

purchase. In response to comments on

the final rule on substance abuse

prevention and treatment block grants

(suggesting that participating in sting

operations could be detrimental to

children and adolescents), DHHS

explained that ‘‘proper training and

adult supervision can reduce any

potential risk of negative consequences

toward youth’’ (61 FR 1492 at 1494,

January 19, 1996). In addition, DHHS

offered States assistance in developing

compliance testing procedures.

FDA is not persuaded that

participating in compliance testing

entices children to smoke. The agency

believes that, with proper training and

adult supervision, children and

adolescents who participate in

compliance testing will understand that

their role in this testing is to help

reduce teenage smoking by identifying

places that illegally sell tobacco

products to children, and that, after

identification and publicity or

enforcement action, these places will

stop illegal sales.

(72) Several adult smokers

commented that the provision, either

alone or in conjunction with other

provisions, would cause a decrease in

tobacco consumption. To compensate

for this loss, they argue, tobacco

companies will raise their prices and

governments will increase taxes.

Overwhelmingly, adult smokers

commented that the price of a package

of cigarettes is already unfairly high.

The agency has narrowly tailored the

final regulations to prevent only young

people’s use of cigarettes and smokeless

tobacco. Because sales to children

account for a small percentage of total

tobacco sales, industry revenues will be

significantly diminished only after

many years have passed. Moreover, the

long-term effect on product prices is

difficult to forecast because reduced

product demand could easily result in

price decreases.

(73) In contrast, one comment cited a

1995 survey in which three-quarters or

more of those Californians polled

supported increasing the tobacco tax by

25 cents. Another comment suggested

that an additional portion of excise

taxes be allocated to smoking cessation

programs and to prenatal care,

especially antismoking messages

targeted to pregnant women. Other

comments noted that increased prices
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44453

63 IOM Report, p. 214.

64 ‘‘Model Sale to Tobacco Products to Minors

Control Act, A Model Law Recommended for

Adoption by States of Localities to Prevent the Sale

of Tobacco Products to Minors,’’ DHHS, p. 2, May

24, 1990.

65 Id., p. 5.

66 ‘‘No Sale: Youth Tobacco and Responsible

Retailing Developing Responsible Retail Sales

Practices and Legislation to Reduce Illegal Tobacco

Sales to Minors, Findings and Recommendations of

a Working Group of State Attorneys General,’’ pp.

31–32, December 1994.

67 Id., p. 32.

68 ‘‘Youth Access to Cigarettes,’’ DHHS, Office of

the Inspector General, Pub. No. OEI–02–90–02310,

pp. 8–9, May 1990. 69 IOM Report, p. 215.

could serve to deter some children and

adolescents from purchasing cigarettes.

The agency cannot act on these

comments as it lacks the authority to

levy taxes or mandate prices.

(74) One comment submitted by

cigarette manufacturers characterized as

misleading FDA’s claim that its

proposal to eliminate vending machines

is consistent with recommendations

from IOM, PHS, a working group of

State attorneys general, and the

Inspector General of DHHS (60 FR

41314 at 41325). FDA disagrees. IOM

and PHS specifically recommended that

vending machines be eliminated. IOM

advocated that less restrictive measures

be adopted only if shown to be

effective, 63 while PHS cautioned that

alternatives be examined carefully. 64

Moreover, PHS specifically noted that

Utah found disabling devices to be

‘‘ineffectual in practice.’’ 65

The State attorneys general

determined that ‘‘very young children

rely heavily on vending machines as a

major source of tobacco products,’’ and

that ‘‘their use of these machines is

difficult to police.’’ 66 Consequently, the

group recommended that retail stores

‘‘remove cigarette vending machines

from their premises and sell tobacco

products only from the controlled

settings recommended above.’’ 67 The

referenced controlled settings included

the use of electronic price scanners to

prompt retail clerks to check a

customer’s identification and to display

the last acceptable date of birth, using

price scanner systems with tobacco

‘‘locks,’’ and requiring tobacco products

to be kept behind sales counters. The

State attorneys general did acknowledge

that, ‘‘at a minimum,’’ vending

machines should be modified to require

tokens that could be purchased only

from a store manager or be programmed

to operate only if a cashier activates a

remote switch, but their principal

recommendation was the removal of

vending machines.

While the Inspector General made no

recommendation, his report noted that

42 percent of State health department

officials believe that total bans are the

only way to prevent teens from using

cigarettes. 68

FDA believes the provision on

vending machines is consistent with the

positions taken by the IOM, PHS, State

attorneys general, and the Inspector

General of DHHS.

(75) One comment suggested that the

rule define ‘‘vending machine’’ to avoid

regulating machines that dispense

cigarettes to salespersons rather than

customers. The comment described a

machine designed to limit theft and to

control the inventory of cigarettes and

other similarly packaged items in retail

stores, principally supermarkets. The

machine requires that a computer

command be entered before it dispenses

a package of cigarettes. The comment

asserted that among the machine’s

benefits is its ability to exclude

customer access to cigarettes.

FDA did not contemplate the type of

inventory machine described by the

comment, and the provision, as drafted,

would not include this type of machine.

Section 897.16(c) is intended, in part, to

eliminate mechanical devices that

dispense cigarettes or smokeless tobacco

to purchasers in locations that are

accessible to children. FDA declines at

this time to define ‘‘vending machine’’

so as to exclude from the rule

mechanical devices developed in the

future, including those intended to aid

in preventing theft.

(76) One comment opposed to the

provision interpreted it as prohibiting a

vending machine that dispenses single

cigarettes, packaged separately in tubes,

each bearing the Surgeon General’s

warning and in compliance with tax

laws. The comment explained that in

some adult locations, such as cocktail

lounges and casinos, many adults would

like to purchase a single cigarette, and

that the person submitting the comment

developed the machine to fill this

perceived gap in the marketplace.

The proposal did not contemplate the

type of machine described by the

comment. Accordingly, § 897.16(c) has

been amended to permit the sale of a

packaged, single cigarette in locations

inaccessible to persons under the age of

18. This exception is restricted to

packaged, single cigarettes that comply

with other applicable laws and

regulations.

b. Self-service displays. Proposed

§ 897.16(c) also would have prohibited

the use of self-service displays. The

preamble to the 1995 proposed rule

explained that self-service displays

enable young people to quickly, easily,

and independently obtain cigarettes and

smokeless tobacco. FDA cited one report

that reviewed surveys of grade school

students; the report found that over 40

percent of the students who smoked

daily shoplifted cigarettes from selfservice displays (60 FR 41314 at 41325).

The agency also cited one study

showing that tobacco sales to young

people dropped 40 to 80 percent after

enactment of ordinances prohibiting

self-service displays and requiring

vendor-assisted sales (60 FR 41314 at

41325). The proposed provision,

therefore, was intended to prevent

young people from helping themselves

to these products and to increase the

amount of interaction between the sales

clerk and the underage customer.

The preamble to the 1995 proposed

rule also referred to the IOM Report

which stated that placing products out

of reach ‘‘reinforces the message that

tobacco products are not in the same

class as candy or potato chips.’’ 69

In response to the comments, the

agency has amended this section to

except certain self-service displays

(merchandisers) in facilities inaccessible

to persons under the age of 18.

(77) Several comments asserted that

the proposed restriction pertaining to

self-service displays would effect

takings compensable under the Fifth

Amendment.

The agency disagrees with the

comments. Given the character of the

section, as modified in this final rule,

and the lack of reasonable investmentbacked expectations in personal

property, its economic impact, while

potentially significant for some parties,

is not such as to effect a taking. The

agency addresses Fifth Amendment

issues in greater detail in section XI.A.

of this document.

(78) Several comments challenged

FDA’s basis and authority for

prohibiting self-service displays. The

comments focused, in part, on the

studies and reports cited by the agency.

They argued that active enforcement of

laws, rather than elimination of selfservice displays, led to decreases in

young people’s access to cigarettes and

smokeless tobacco. Other comments

disputed whether significant shoplifting

occurs from self-service displays.

According to these comments, FDA did

not provide any evidence to suggest that

eliminating self-service displays is

necessary to prevent shoplifting.
44454 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

70 Kropp, R., ‘‘A Position Paper on Reducing

Tobacco Sales to Minors by Prohibiting the Sale of

Tobacco Products by Means of Self-Service

Merchandising and Requiring Only VendorAssisted Tobacco Sales,’’ Stop Tobacco Access for

Minors Project (STAMP), North Bay Health

Resources Center, November 3, 1994.

One comment examined studies that

FDA did not cite in the 1995 proposed

rule and found one study estimating

that less than 5 percent of the

adolescents surveyed had shoplifted

cigarettes. Also, a number of comments

stated that, if shoplifting were truly a

significant problem, retailers would

have a financial interest in reducing

their losses and would remove selfservice displays themselves. The

comments implied that shoplifting is

not a significant problem, and several

claimed FDA’s rationale was

inconsistent because, if young people

could purchase cigarettes and smokeless

tobacco easily from retailers, they would

not have to steal them from self-service

displays.

In contrast, several comments

supported the prohibition on selfservice displays, reiterating FDA’s

position that displays encourage

shoplifting, and their absence increases

the likelihood of age verification. For

example, a drug addiction counselor

commented that teens do not want to go

to the counter and ask for cigarettes

since there is a greater likelihood that

they will be asked to show their

identification and they might be

embarrassed. One comment also

asserted that retailers get products for

displays at a discount, and such

discounts are, in effect, a subsidy for

shoplifting. Another comment alleged

that, in one area of the country, lowpriced brands are put in displays and

that retailers are compensated for any

shoplifting losses.

Comments from other areas of the

country agreed that shoplifting occurs,

sometimes at significant rates. One

comment stated that a 1993 survey of

9th-grade students in one county

revealed that 51 percent had shoplifted

cigarettes. Another comment, reflecting

on experiences conducting retailer

compliance checks in three small towns,

stated that its teenage volunteers

‘‘commented on the ease with which

they could have lifted cigarettes from

free-standing displays.’’ A comment

describing practices in a rural part of the

country stated that theft was one

method of acquiring smokeless tobacco,

and that young people often began using

such products at the age of 10, 11, or 12.

Other comments suggested an

additional reason for eliminating selfservice displays. These comments

indicated that young people can easily

pick up products from displays, leave

their money at the cashier’s desk, and

leave the premises without being

challenged by a retailer or before the

retailer can request proof of age.

FDA believes there is ample evidence

to support a restriction on self-service

displays. The preamble to the 1995

proposed rule cited surveys suggesting

that a significant percentage of children

and adolescents (40 percent in the two

areas surveyed) shoplift cigarettes (60

FR 41314 at 41325), and at least one

comment reported an even higher

percentage (50 percent). Although one

comment from cigarette manufacturers

suggested the shoplifting rate to be only

5 percent, FDA emphasizes that, even if

one accepts the 5 percent figure, the

numbers of young people engaging in

shoplifting can be very large. For

example, 5 percent of the estimated 3

million young people who smoke

cigarettes daily equals 150,000 children

and adolescents. Five percent of the

estimated 3 million smokeless tobacco

product users under the age of 21 also

equals 150,000 people.

These numbers may even be

artificially low because they exclude the

number of young people who do not

smoke or use smokeless tobacco daily,

and these numbers may be extremely

low if the 40 or 50 percent shoplifting

rates identified by the agency or by

other comments prove to be more

accurate than the 5 percent rate cited by

the cigarette manufacturers.

FDA also disagrees with those

comments claiming that shoplifting is

not a significant problem. Generally,

such comments asserted that the

problem is not significant because, if it

were, retailers would move self-service

displays, and most have not done so.

Such comments, however, misconstrue

the significance of the problem. The

agency did not, and does not, claim that

individual retailers are suffering

significant shoplifting losses (although

FDA did receive one comment

containing information showing that

shoplifting losses at two stores

amounted to several thousands of

dollars worth of cigarettes annually).

Instead, FDA is stating that significant

numbers of young people shoplift these

products. The distinction is critical. To

illustrate, if 1,000 retailers each lose 1

cigarette package to shoplifting, each

retailer might feel that the shoplifting

rate, from its perspective, is

insignificant. However, if 1,000 young

people acquire cigarettes by shoplifting,

the shoplifting problem, from a public

health perspective, then becomes much

more significant.

(79) Several comments argued that the

studies cited by the agency, having been

conducted at only two locations in the

United States (Erie County, NY, and

Fond du Lac, WI), cannot be used to

justify a nationwide prohibition against

self-service displays.

The agency disagrees with these

comments. The comments offered no

evidence to show that these

communities are so distinct or unique

from the remainder of the United States

to require FDA to discount or to ignore

their findings. To the contrary, FDA

received other comments from various

parts of the nation supporting the rule,

and these comments often agreed that

young people shoplift these products

from displays.

FDA also notes that it does not require

clinical investigations for product

approvals to be conducted on a national

scale. One important aspect of any

study, whether it is submitted as part of

an investigational product exemption,

marketing application, or rulemaking, is

whether the study is conducted and

analyzed in a scientifically valid way

that permits the results to be

extrapolated to a broader population. In

other words, the methodology and

analysis are more important than where

the study was conducted. If the agency

could only act after nationwide studies

had been conducted, it would be unable

to act or to respond promptly, even in

response to significant public health

problems or emergencies.

(80) Several comments questioned the

evidence supporting the proposed

restriction on self-service displays. The

comments stated that FDA had no

evidence to support the assertion that

removing self-service displays will

increase the likelihood of retail clerks

requesting proof of age. One comment

stated that the one document cited by

FDA (which compared smoking

practices in five California counties

before and after the institution of

ordinances prohibiting self-service

merchandising) 70 cannot be used to

justify a rule with nationwide

application because the document,

which the comment correctly identified

as a ‘‘position paper’’ rather than a

study, did not: (a) Indicate whether the

ordinances contained other provisions

that would have led to enhanced

compliance with minimum age laws;

and (b) disclose whether retailers were

told of the compliance testing operation

before or after the fact, such that, had

the retailers known, they would have

been more vigilant in ensuring
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44455

71 Id., p. 3.

compliance regardless of how their

products were displayed. This comment

further asserted that the act of adopting

the ordinances, and the penalties they

contained, may have made retailers

more vigilant in ensuring compliance

with minimum age laws than the

restrictions in the ordinances

themselves. Finally, the comment stated

that the document was not a controlled

study and that there was no indication

that it was not biased, was subjected to

peer review, or was even published in

a scientific journal. The comment stated

that the document would not be

acceptable to FDA if it had been

submitted as proof of a product’s

effectiveness.

Another comment echoed criticism of

the document, stating that factors

besides the restriction on self-service

displays could have reduced tobacco

use by young people and so the

document does not support a

prohibition against self-service displays.

FDA acknowledges that the document

omitted details regarding the author’s

methodology and the ordinances in the

5 California counties and the 24 cities

covered in the document. The agency

disagrees, however, with the comments’

assertion that factors other than the

restriction on self-service displays or

other features of the ordinances may

have been principally responsible for

decreasing tobacco use among young

people. Such comments overlook the

document’s statement that the

ordinances were to ‘‘prohibit selfservice merchandising (display and

sale) of tobacco products and point-ofsale tobacco promotional products and

require only vendor-assisted sales of

tobacco products and point-of-sale

tobacco promotional products in retail

stores.’’ 71 This statement suggests that

the ordinances focused on restricting

self-service displays (or merchandisers)

and point-of-sale promotional products

rather than other activities.

Other criticisms of the document are

inappropriate as well. For example, the

comment claimed that other provisions

in the ordinances or other factors may

have contributed to the decline in

tobacco use in young people so that a

restriction on self-service displays,

alone, may not have been a significant

factor in reducing tobacco use among

young people. This criticism, however,

overlooks the fact that the rule’s

restriction on self-service displays is

also complemented by other provisions

(such as requiring retailers to verify age

and prohibiting distribution of free

samples) that will, both individually

and collectively, reduce young people’s

access to cigarettes and smokeless

tobacco.

Similarly, FDA does not agree that the

document is flawed because retailers

were not informed of the compliance

testing operation before it was

conducted. Alerting a retailer to an

upcoming compliance test would bias

any results because the retailer would

alter its behavior in order to ‘‘pass’’ the

test.

Additionally, in drafting the 1995

proposed rule, FDA used the best

evidence available to it. The comments

did not provide any studies to

contradict the cited document, and

while some criticisms of the document

may be valid, such criticisms do not

require the agency to revoke the

provision entirely. The document was

not FDA’s sole basis for proposing to

restrict self-service displays. The

preamble to the 1995 proposed rule

indicated that such a restriction would

also reduce shoplifting, eliminate the

‘‘message’’ that displays send to young

people, and increase interaction

between retailers and their customers.

These other justifications, and the

comments pertaining to them, are

discussed in greater detail in this

document.

(81) Other comments objected to a

prohibition on self-service displays

because, according to these comments,

the rule did not impose any sanctions

on young people or contain any

provisions that would modify a young

person’s behavior so that he or she

would not shoplift. Some comments

suggested that, instead of restricting the

use of self-service displays, shoplifters

should be prosecuted, but these same

comments also declared that State or

local government authorities usually

decline to prosecute young shoplifters.

As stated earlier, it would be

inappropriate for FDA to amend the rule

to impose penalties on young people

who purchase or possess cigarettes or

smokeless tobacco. The main focus of

the act is on the introduction, shipment,

holding and sale of goods in interstate

commerce. Thus, whether young people

should be prosecuted for shoplifting,

and the penalty for shoplifting are

appropriately matters for State or local

law.

(82) Several comments challenged the

statement in the preamble to the 1995

proposed rule that removing self-service

displays would reinforce the message to

children that tobacco products are not

as acceptable as candy or potato chips.

The comments said that young people

know that tobacco products are not like

candy or potato chips and that there is

no evidence to show that the statement

is true. A small number of comments

added that FDA’s rationale would force

retailers to remove other ‘‘unhealthy’’

products (such as products containing

fat or cholesterol) from displays.

In contrast, a few comments agreed

that self-service displays for cigarettes

and smokeless tobacco convey an

implied message that these products are

acceptable. One comment from a local

government reported that young people

often see tobacco products as being

socially acceptable (or less harmful to

health) because they are openly

displayed. The comment noted that the

local jurisdiction had restricted displays

to being within 20 feet of the checkout

counter and in a direct line of sight, but

expressed regret that it had not

eliminated displays altogether. Other

comments noted that many retailers

display cigarettes next to candy,

baseball cards, and other items that

appeal to children and adolescents.

These comments concluded that it is

necessary to eliminate self-service

displays so that young children do not

associate cigarettes with other products

that they find amusing or that adults

give to children and adolescents as

treats.

The IOM Report advanced the theory

that young people see self-service

displays as an implied message

regarding the acceptability or safety of

cigarettes and smokeless tobacco. The

IOM report represents the informed

decisions, opinions, and

recommendations of a body of experts,

and so, with respect to this issue, the

agency disagrees with those comments

that would have FDA dismiss the IOM’s

opinion.

FDA also disagrees with those

comments arguing that the agency

would have to eliminate self-service

displays for potato chips, candy, and

other supposedly ‘‘unhealthy’’ products.

These food products do not present the

same range or magnitude of adverse

health effects or effects on the body to

warrant tighter restrictions on their sale,

distribution, or use.

(83) Several comments challenged

FDA’s claim that removing self-service

displays would increase direct

interaction between sales clerks and

underage consumers. The comments

asserted that removing self-service

displays will not prompt sales clerks to

check for proof of age and that FDA had

no evidence to support this proposition.

Other comments opposed any

restriction on self-service displays
44456 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

because, they claimed, retail clerks,

rather than self-service displays, are

responsible for sales to young people. If

retail clerks consistently demanded

proof of age, these comments would

permit self-service displays to be used.

Other comments asserted that FDA

has no reasonable basis to assume that

clerks will check for proof of age when

clerks already ignore State laws.

In contrast, a few comments agreed

that eliminating self-service displays

would increase interaction between

clerks and underage consumers or deter

young people from attempting to

purchase cigarettes or smokeless

tobacco. One comment from a local

board of health stated that it eliminated

self-service displays because its

evidence indicated that young people in

the locality are less likely to purchase

cigarettes if they have to request them

from retail clerks. Another comment

reflected on the author’s own

experience as a child when she would

purchase cigarettes and said it is easy to

grab a cigarette package, leave money on

the counter, and simply leave a store

before the sales clerk can react.

Section 897.14(b)(1) requires retailers

to verify that persons purchasing

cigarettes or smokeless tobacco are not

under the age of 18. This provision, in

conjunction with the prohibition against

sales to anyone under 18 in § 897.14(a),

the restriction on self-service displays in

§ 897.16(c), the sanctions that are

available under the act, and the

likelihood that State agencies will

devote more attention to illegal sales to

young people as a result of section 1926

of the PHS Act should increase the

probability that retailers will verify the

age of prospective purchasers.

Yet logically, removing self-service

displays should increase interaction

between retailers and potential

consumers because the retailer, under

this rule, must physically hand the

product to the consumer. While this

action probably will take little time (the

preamble to the 1995 proposed rule and

to this final rule estimate that the

elimination of self-service displays

would require 10 seconds of additional

labor time for many retail transactions),

nevertheless it increases the interaction

between the retailer and potential

customers. Furthermore, by restricting

self-service displays, the rule eliminates

a young person’s ability to take a

package of cigarettes or smokeless

tobacco, leave money on the counter,

and leave the retailer’s premises without

having to provide proof of age.

(84) Many comments opposed any

restriction on self-service displays

because they said eliminating selfservice displays would adversely affect

adult consumers or would be

‘‘inconvenient’’ because adults would

not be able to purchase products

quickly; see, handle, or choose

products; or obtain information about a

product or a special promotion. A few

comments asserted, without any

supporting evidence, that self-service

displays are not or cannot be used by

young people, and, therefore, should not

be regulated.

Conversely, one comment supporting

the provision recommended that FDA

clarify or modify the term ‘‘self-service

displays’’ to distinguish self-service

sales or merchandisers from advertising

displays.

The comments opposing the rule

misinterpreted how it would apply. The

final rule prohibits self-service displays

from being in facilities that are

accessible to young people. Eliminating

self-service displays from such facilities

simply means that a consumer will not

be able to take physical possession of a

product without the retailer’s assistance.

Any inconvenience to an adult should

be slight. For example, it is extremely

unlikely that adults will suffer undue

hardship or wait an unreasonable

amount of time if they must ask a retail

clerk to hand a product to them.

Moreover, the provision does not

prevent adults from seeing or choosing

a product or from seeing or receiving

information about a product; products

would remain visible, but they would be

behind a counter or in an area accessible

only to the retailer.

Deleting self-service displays from the

rule because adults wish to avoid

contact with clerks would be

inappropriate as well. As a practical

matter, adults who use self-service

displays would not be able to avoid all

contact with a retailer because they

presumably still interact with the

retailer when they pay for the product.

An important component of these

regulations is to eliminate those modes

of sale used by young people that do not

require them to show proof of age or

otherwise do not challenge a young

person to show that he or she is legally

entitled to purchase the product.

FDA does agree, however, that the

rule should be clarified so that the

reference to displays in § 897.16(c) is

understood to cover self-service sales or

merchandisers rather than advertising

displays that contain no products and

has amended the rule accordingly.

However, advertising displays are

restricted under the advertising

provisions in this rule.

(85) The preamble to the 1995

proposed rule expressed a belief that

retailers, in order to comply with a

prohibition on self-service displays,

could move displays behind a retail

counter or create an area that would be

accessed only by the retailer’s

employees.

Many comments rejected this notion,

claiming that, due to space constraints,

many retailers would be unable to move

displays behind a counter and would be

obliged to build areas where access

would be controlled. The comments

said such construction and remodeling

could be expensive and could force

some retailers to scale back their

tobacco sales or abandon them

completely; such actions would lead to

decreased sales by the retailer and

trigger reductions in staff and in State or

local Government tax revenues.

One comment estimated that, for

convenience stores, the average

remodeling cost would be as high as

$7,000 per store and noted that tobacco

purchases account for 28 percent of

convenience store sales. So, instead of

eliminating self-service displays, some

comments advocated alternative

approaches. The alternatives included

attaching electronic article surveillance

tags to products (although the comment

suggesting this alternative conceded that

new technology or assistance at the

manufacturer’s level would be needed);

‘‘source tagging,’’ where random

packages contain an electronic tag so

that would-be shoplifters would not

know which packages were tagged and,

as a result, would be less inclined to

shoplift products; and requiring

displays to be within a certain distance

of a cash register or the cashier’s line of

sight, supplemented by posting signs

against underage sales and by training

sales clerks. ‘‘Source tagging’’ would

require manufacturers, rather than

retailers, to insert tags into packages.

The alternatives identified by the

comments appear to be less effective or

less practical than removing self-service

displays from places that are accessible

to young people. For example,

surveillance tags and, to a lesser extent,

‘‘source tagging’’ might deter

shoplifting, but this would require all

manufacturers to agree to place such

tags in their products and would require

retailers to install machines or gates to

detect those tags. More importantly,

comments from manufacturers did not

address the creation or use of such tags.

A ‘‘line-of-sight’’ or restricted-placement

alternative (requiring a display to be

within a certain distance of a retail

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

retailers, yet the preamble to the 1995

proposed rule cited studies where

similar requirements for vending

machines failed to prevent illegal sales

to young people (60 FR 41314 at 41325).

Employees might also be distracted or

blocked from seeing the displays,

thereby reducing the effectiveness of

any ‘‘line-of-sight’’ or restricted

placement alternative. Furthermore, the

alternatives would fail to eliminate the

implied message that self-service

displays send regarding the

acceptability or safety of these products.

Because FDA is unaware of any effective

alternative, the agency declines to

amend the rule as suggested by the

comments.

FDA has, however, amended the rule

to permit self-service displays

(merchandisers only) in facilities that

are inaccessible to people under 18 at

all times. The agency made this change

in response to comments stating that

some facilities are inaccessible to young

people and so certain requirements,

such as restrictions against vending

machines and self-service displays,

should not apply. This exception is

subject to the same restrictions as the

exception on vending machine sales.

(86) Many comments, particularly

from retailers, opposed eliminating selfservice displays, stating that they derive

a significant portion of their revenue

from displays and slotting fees provided

by manufacturers. Several cited figures

that were in the hundreds of thousands

of dollars. The comments generally

stated that eliminating self-service

displays would decrease or eliminate a

significant portion of their revenue and,

according to some, lead to layoffs or

prevent them from hiring young people.

Similarly, FDA received a few

comments from firms that manufacture

or sell displays. These comments stated

that the firms would lose significant

amounts of revenue or would be forced

out of business if self-service displays

were eliminated.

A few comments, however, disputed

whether retailers would lose slotting

fees. One comment explained that

manufacturers would continue to pay

fees to ensure that their products would

be placed in strategic locations behind

the counter, while another comment

noted that many retailers in a northern

California region where self-service

displays were eliminated did not lose

slotting fees.

The agency declines to amend the

rule because of the possible loss of

slotting fees or other revenue from

manufacturers. The theoretical loss of

fees that are, at best, tangential to the

sale of these products is an

inappropriate basis for determining

whether this provision denies young

people’s access to these products

effectively. Furthermore, FDA

appreciates that such fees may be

important to certain retailers, but, as

stated earlier, the agency has no reason

to conclude that all manufacturers will

discontinue those fees because of this

rule. The preamble to the 1995 proposed

rule (see 60 FR 41314 at 41369) and one

comment cited experience in California

to show that retailers might not suffer

significant economic losses if selfservice displays are removed.

FDA reiterates that removing selfservice displays from places that are

accessible to young people does not

mean that cigarettes and smokeless

tobacco must be hidden from public

view. It simply means that retailers will

be required to hand these products to

consumers. Presumably, if the products

are moved behind the counter,

manufacturers still have an incentive to

ensure that their products are

strategically placed in order to attract

adult consumers.

(87) Several comments objected to a

restriction on self-service displays,

claiming that retailers have a ‘‘right’’ to

advertise and sell products in their own

establishments in any manner they

select.

As mentioned in section IV.B. of this

document earlier, section 520(e) of the

act states, in part, that the agency may

issue regulations to establish conditions

on the sale, distribution, or use of a

restricted device. Restrictions on

cigarette and smokeless tobacco sales

are appropriate given the potential

adverse health effects caused by or

associated with the use of these

products and their accessibility and

appeal to young people.

(88) A few comments said that

eliminating self-service displays will

make it difficult or impossible for

marginal brands of cigarettes or

smokeless tobacco to compete against

established brands.

FDA reiterates that eliminating selfservice displays from places that are

accessible to young people does not

mean that the products must be hidden

from view; it simply means that

consumers will not be able to take

physical possession of the product

without the retailer’s assistance.

Consequently, all products will face the

same constraints, insofar as retailer

space is concerned.

(89) Many comments would delete a

prohibition against self service displays

because, according to these comments,

the prohibition would be ineffective.

These comments stated that self-service

displays do not entice young people to

smoke, do not increase consumption of

tobacco products, or are only used

where retailers check the consumer’s

age. Others stated that young people

would get the products anyway, so there

was no need to prohibit the use of selfservice displays.

The preamble to the 1995 proposed

rule stated, among other things, that

young people shoplift products from

displays (60 FR 41314 at 41325).

Additionally, the preamble to the 1995

proposed rule indicated that young

people will adjust or shift their

purchasing behavior as certain avenues

of obtaining these products are

eliminated. (See 60 FR 41314 at 41325

(citing different vending machine use

rates depending on the access

restrictions used in the jurisdiction).)

Given this evidence, it is reasonable to

assume that, as young people are

precluded from purchasing these

products, they may be inclined to

acquire them by theft and other means.

Thus, when properly framed, the issue

is not whether displays entice young

people to smoke or to use smokeless

tobacco (which FDA did not advance as

the principal justification for the rule),

but whether the agency should

eliminate self-service displays as an

avenue that young people use to obtain

these products. The agency concludes

that self service displays must be

eliminated from places that are

accessible to young people as part of the

general restriction against impersonal

modes of sale.

(90) Several comments opposed

elimination of self-service displays

because they claimed that retailers

would be forced to hire additional staff.

These comments contrasted sharply

with the majority of comments from

retailers who predicted that the loss of

self-service displays would compel

them to lay off staff. One comment

explained that a self-service display

frees the retailer’s staff to perform other

tasks. The other asserted that the rule

would compel retailers to hire

additional staff in order to sell these

products and that this would result in

an ‘‘unfunded mandate’’ in violation of

the Unfunded Mandates Reform Act.

The preambles to the 1995 proposed

rule and to this final rule estimate that

eliminating self-service displays would

require 10 seconds of additional labor

time for many retail transactions

involving cigarette cartons (60 FR 41314

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

document places the labor cost for this

time at approximately 2.6 cents per

carton. Thus, for a retailer to be

compelled to hire additional staff to

compensate for the loss of self-service

displays, cigarette and smokeless

tobacco product purchases would have

to account for a substantial number of

transactions. Some retailers may indeed

feel that they need to hire additional

staff, but the agency believes that the

rule’s benefits—reducing young

people’s access to cigarettes and

smokeless tobacco nationwide—

outweigh the hiring and accompanying

economic burdens that might be

imposed on some retailers. Moreover,

because the final rule permits selfservice displays (merchandisers only) in

facilities that are inaccessible to under

18 people at all times, the final rule’s

impact on some retailers may be

reduced.

FDA also disagrees with the comment

claiming that the agency violated the

Unfunded Mandates Reform Act. The

preamble to the 1995 proposed rule

contained a discussion of the Unfunded

Mandates Reform Act as well as the

estimated added labor costs in the

‘‘Analysis of Impacts’’ (60 FR 41314 at

41367 and 41359 through 41372).

(91) One comment disputed FDA’s

estimate that eliminating self-service

would result in 10 seconds of additional

labor time for most retail transactions.

The comment, however, did not provide

any estimate of the time that would be

required.

The agency did not receive any data

to suggest that the additional labor time

would be greater or less than 10

seconds. While some transactions may

take more than 10 seconds, the agency

believes that the additional labor time

will be so negligible that it will not be

a significant burden on the retailer.

c. Mail-order sales and mail-order

redemption of coupons.—i. Mail-order

sales. Proposed § 897.16(c) would also

have prohibited the use of mail-order

sales and mail-order redemption of

coupons. The preamble to the 1995

proposed rule stated that mail-order

sales and mail-order redemption of

coupons do not involve a face-to-face

transaction that would enable

verification of the consumer’s age.

The agency received thousands of

comments on the proposed restriction

against the mail-order sale of cigarettes

and smokeless tobacco. Comments

supporting the proposed restriction

noted that it would make cigarettes and

smokeless tobacco more difficult for

young people to obtain. Specifically,

comments stated that ‘‘mail-order sales

should be prohibited since the seller has

obvious difficulties verifying the age of

the purchaser in selling where there is

no face-to-face encounter.’’ A comment

from 26 State attorneys general stated

that ‘‘ending distribution of tobacco by

mail-order * * * will greatly assist our

efforts to enforce compliance with our

state laws.’’ As a result of some

comments discussed in detail below,

however, the final rule permits mailorder sales, except for redemption of

coupons and free samples.

(92) The agency received hundreds of

comments opposing the proposed

restriction against mail-order sales.

Many comments were submitted by

older smokers (senior citizens, retirees

on fixed incomes, etc.) who identified

themselves as pipe tobacco smokers

who purchased tobacco products

through the mail; most individuals

appeared to be clients from one tobacco

product supply house in Tennessee.

These comments stated that young

people do not smoke pipe tobacco and

added that they would like to continue

to purchase their pipe tobacco through

the mail.

The agency believes that the

comments misinterpreted the 1995

proposed rule. The preamble to the 1995

proposed rule stated that the rule did

not apply to pipe tobacco or to cigars

because FDA has no evidence

demonstrating that pipe tobacco and

cigars are drug delivery devices under

the act or that young people use such

products to any significant degree (60

FR 41314 at 41322).

(93) One comment asserted that the

proposed mail-order provision is

unauthorized and contrary to law.

According to the comment, neither

section 520 of the act nor any other

provision of the act gives FDA the

authority to declare matter unmailable.

The comment explained that, under the

Prescription Drug Marketing Act

(PDMA), prescription drug samples may

be sent through the mail to those

authorized by law to obtain them.

Furthermore, the comment argued,

Congress has specifically determined

and legislated what products should not

be sent through the mail (39 U.S.C.

3001(f) and (g) (Federal statute on

‘‘nonmailable matter’’)).

The agency disagrees with the

comment. Section 520(e) of the act

expressly authorizes the agency to issue

regulations pertaining to the sale,

distribution, or use of a restricted

device. Restrictions on the sale or

distribution of such a device through

the mail are clearly within the scope of

FDA’s authority under that section.

Additionally, FDA does not agree that

the PDMA or 39 U.S.C. 3001 prevents

the agency from acting on mail-orders.

The PDMA’s mail-order restrictions

represented a congressional response to

a specific problem, namely the

diversion of adulterated prescription

drug products (including drug samples)

into illegal markets. Here, the products

in question are devices rather than

prescription drugs, and the rule does

not purport to address the diversion of

adulterated cigarettes or smokeless

tobacco or samples of those products.

Similarly, the Postal Service provision

(39 U.S.C. 3001) on ‘‘nonmailable

matter’’ does not preclude FDA from

issuing regulations pertaining to the

distribution of a regulated device. The

provision simply states that certain

items or types of items are nonmailable

and directs the United States Postal

Service (USPS), in certain situations, to

issue regulations (such as regulations

pertaining to fragrance advertising

samples). FDA interprets 39 U.S.C.

3001, therefore, as establishing certain

‘‘nonmailable’’ items for USPS purposes

rather than precluding FDA from

regulating the sale and distribution of a

device pursuant to its device authority.

Nevertheless, as discussed in comment

94 below, FDA has amended the rule to

permit mail order sales, so the issue of

the USPS restrictions on nonmailable

matter is moot.

(94) The agency received many

comments from individuals who

contended that the proposed mail-order

restriction is unwarranted because the

agency cited no studies to demonstrate

that young people actually use the mail

to obtain cigarettes. One comment noted

that IOM acknowledges that ‘‘the extent

of mail-order purchase of tobacco

products by minors is not known.’’

According to the comment, the mailorder restriction must be based on

actual evidence that a substantial

number of young people use the mail to

purchase cigarettes and not based on

‘‘theoretical purchasability.’’

Other comments stated that young

people do not obtain cigarettes through

the mail because they do not possess

checks or credit cards to effectuate mailorder purchases. In addition, the

comments questioned whether young

people are patient enough to wait

several weeks to obtain tobacco

products. A few comments, including a

comment from a mail-order firm,

contended that mail-order purchases

would be too expensive for young

people, either because of the cost or the
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44459

72 IOM Report, pp. 108, 225–226.

minimum order sizes (which, according

to one comment, usually consists of

several pounds of tobacco). These

comments opposed the proposed mailorder restriction on the basis that it

would not effectively reduce young

people’s access to tobacco products and

would instead eliminate an adult’s

access to entirely legal tobacco

products.

Other comments from firms with a

significant mail-order business stated

that the elimination of mail-order sales

would force the firms to terminate staff

or go out of business.

The agency also received many

comments from adults opposing the

proposed mail-order restriction. These

comments stated that because mailorder sales are highly preferable to

purchases in retail stores the products

sold through the mail are unavailable in

stores or are less expensive than those

sold in stores. Other comments

(including one from a prison inmate)

said that because mail-order sales serve

those in rural or isolated areas,

eliminating mail-order sales would

eliminate the principal or sole source of

tobacco for those adults.

After carefully reviewing the

comments, the agency has decided to

delete mail-order sales from § 897.16.

The restriction was intended to

preclude young people from having easy

access to cigarettes and smokeless

tobacco. However, there is inadequate

evidence demonstrating that young

people use mail-order sales to any

significant degree. This lack of evidence

may indicate that it is not relatively easy

for young people to purchase cigarettes

and smokeless tobacco through the mail.

FDA also considered the impact of the

proposed mail-order restriction on

adults. The agency does not intend to

unreasonably interfere with an adult’s

ability to obtain legally his or her

preferred tobacco products.

Consequently, FDA has amended

§ 897.16(c) to allow mail-order sales of

cigarettes and smokeless tobacco. The

agency emphasizes, however, that the

final rule retains the restrictions against

the redemption of coupons and

distribution of free samples through the

mail. This amendment is consistent

with the IOM Report which

recommended a suitably limited Federal

ban on the distribution of tobacco

products through the mail as part of a

long-term access strategy and, at a

minimum, restrictions against the mailorder redemption of coupons and the

distribution of free samples through the

mail. 72

FDA remains concerned, however,

that young people may turn to mailorder sales as the rule’s restrictions

against other forms of access (such as

vending machines and retail stores)

become effective. Accordingly, FDA

strongly advises mail-order firms to take

appropriate steps to prevent sales to

young people and reminds mail-order

firms that § 897.14(a) prohibits the sale

of cigarettes and smokeless tobacco to

anyone under age 18. The agency will

monitor the sales of mail-order tobacco

products, and if FDA determines that

young people are obtaining cigarettes or

smokeless tobacco through the mail, the

agency will take appropriate action to

address the situation.

(95) Several comments criticized the

agency for failing to consider less

restrictive alternatives. The comments

noted that tobacco mail-order houses

require payment by check or credit card.

Other comments would amend the rule

to require firms to maintain records

evidencing compliance with proof of

age requirements. Another comment

suggested a requirement for photocopies

of photographic identification cards,

such as an identification with a drivers

license number, for mail-order

transactions.

As stated previously, FDA has

amended the final rule to permit mailorder sales, but will monitor such sales

to ensure that young people do not

obtain cigarettes or smokeless tobacco

through the mail. The agency, therefore,

strongly advises firms to take

appropriate measures to prevent sales to

young people.

(96) Several comments expressed

concern about the financial well being

of the USPS. These comments predicted

that the USPS would lose income if

tobacco products could no longer be

sent by mail. The comments predicted

that the USPS would be forced to raise

postal rates to compensate, thus

affecting product users and nonusers

alike.

As stated previously, the agency has

amended the rule to permit mail-order

sales to continue. However, FDA notes

that speculative or theoretical impacts

on the USPS are not an appropriate

basis for determining how or whether to

regulate a restricted device under the

act.

(97) One comment representing the

concerns of specialty tobacco products

noted that 90 percent of its

manufacturer-distributor-retailer

distribution system uses the mail or

other commercial carriers. This

comment requested that FDA clarify

that the proposed restriction on mailorder sales pertained to mail-order sales

to the ultimate user rather than to intercompany transfers.

Proposed § 897.16(c) was intended to

address sales and distributions to

consumers. Transactions and shipments

between manufacturers, distributors,

and retailers, therefore, are not subject

to the restrictions on mail-order sales of

cigarettes and smokeless tobacco.

However, because the final rule permits

mail-order sales, there is no need to

amend the rule to clarify this point.

(98) One comment supported the

restriction against mail-order sales in

part because, the comment claimed,

such sales permit the purchaser to avoid

taxes on these products (by purchasing

the products from firms in States with

lower taxes). The comment also stated

that eliminating these sales would help

Canadians because American mail-order

firms are not subject to high Canadian

taxes and can sell comparatively lowercost cigarettes in Canada. The comment

said this practice increases cigarette

consumption in Canada and

undermines the health benefits resulting

from high Canadian taxes.

The issues raised by the comments are

beyond the scope of this rule and FDA’s

authority.

ii. Mail-order redemption of coupons.

Proposed § 897.16(c) would have

prohibited mail-order redemption of

coupons. The preamble to the 1995

proposed rule addressed mail-order

redemption of coupons in conjunction

with mail-order sales, and the

restriction against mail-order

redemption of coupons was meant to

apply only to coupons that a

prospective purchaser would send

through the mail (regardless of whether

the prospective purchaser used the

USPS or a private carrier) to a firm to

obtain cigarettes or smokeless tobacco.

(99) Most comments on this issue

mistakenly assumed that FDA was

proposing to ban all direct mail

coupons. These comments contended

that direct mail coupons are redeemed

during face-to-face transactions at larger

retail establishments such as grocery

stores. For the most part, these

comments suggested that young people

do not routinely use coupons to

purchase tobacco products, noting that

the smaller, convenience stores where

young people frequently obtain

cigarettes and smokeless tobacco often

do not accept coupons.
44460 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

73 Id.

In contrast, FDA also received several

comments supporting the proposal to

eliminate mail-order redemption of

cigarette and smokeless tobacco

coupons. For example, the attorney

general for a populous northeastern

State commented that ‘‘[i]n another

operation conducted by my office earlier

this year, 30 minors mailed in coupons

to obtain free samples of smokeless

tobacco products from United States

Tobacco Company. Virtually all of the

minors were provided with such free

samples.’’

Proposed § 897.16(c)’s reference to

mail-order redemption of coupons was

directed at the redemption of coupons

through the mail. The provision was not

intended to prevent adults from

redeeming coupons at a point of sale or

from receiving coupons through the

mail. FDA based this provision on the

IOM Report which, among other things,

noted that value added promotions,

including coupons, constituted the

largest market expenditure by the

tobacco industry in 1991, that coupons

are accessible to young people through

direct mail campaigns, and that pricesensitive young people are attracted to

such schemes or may be increasingly

attracted to such schemes as their other

sources of tobacco products are

restricted. 73

Comments supporting this provision

confirmed the need for prohibiting mailorder redemption of coupons. These

comments reported incidents where one

or more young people obtained several

packages of cigarettes or smokeless

tobacco by sending in coupons (usually

for free samples). Consequently, the

final rule retains the restriction against

mail-order redemption of coupons. FDA

adds that, for purposes of this subpart,

‘‘mail’’ is not confined to USPS delivery

but includes items shipped through

private carriers.

d. Free samples. Proposed § 897.16(d)

would have prohibited manufacturers,

distributors, and retailers from

distributing or causing to be distributed

any free samples of cigarettes or

smokeless tobacco. The agency

proposed this restriction because free

samples are often distributed at ‘‘mass

intercept locations,’’ such as street

corners and shopping malls, and at

events such as festivals, concerts, and

games. The preamble to the 1995

proposed rule stated that free samples

represent a ‘‘risk-free and cost-free’’ way

for young people to obtain and possibly

use cigarettes or smokeless tobacco and

that, when free samples are distributed

at cultural or social events, peer

pressure may lead some young people to

accept and to use the free samples (60

FR 41314 at 41326).

The preamble to the 1995 proposed

rule also cited surveys and reports

demonstrating that young people,

including elementary school children,

can obtain free samples easily. Young

people were able to obtain free samples

despite industry-developed, voluntary

codes that supposedly restrict

distribution of free samples to underage

persons. The agency cited the IOM

Report which suggested that

distribution of free samples to young

people occurs because the samplers are

often placed in crowded places and

operating under time constraints that

may limit their ability to request proof

of age. The IOM Report added that the

samplers are usually young themselves

and, as a result, ‘‘may lack the

psychological wherewithal to request

proof of age and refuse solicitations

from those in their own peer group’’ (60

FR 41314 at 41326).

(100) FDA received a few comments

that opposed any restrictions on free

samples, claiming that eliminating free

samples would violate the ‘‘rights’’ of

adult consumers, reduce choices for

adults, or deprive adults of the

opportunity to save money.

In contrast, many comments

supported proposed § 897.16(d),

including several that opposed the

remainder of the rule but expressly

supported a prohibition on the

distribution of free samples. Several

comments stated that young people can

easily obtain free samples; a few

comments, including two from 12-year

old students, mentioned that their

classmates were able to receive free

samples or reported that young people

were able to receive free samples

without being asked to show proof of

age. One comment even reported that a

young person was able to receive 4

cigarette packages through the mail as

free samples, while another claimed to

have seen 12 cans of smokeless tobacco

being given to teenagers.

Another comment supported the

provision, based on the author’s own

experience when he was 15 years old;

a neighborhood grocer gave him and his

friends free cigarettes ‘‘until we were

hooked’’ and then the grocer ‘‘had

steady paying customers.’’ Other

comments supported this provision for

the same reason that they supported

eliminating single-cigarette sales and

establishing a minimum package size:

Such items encourage young people to

experiment with cigarettes or they

represent, as a consortium of State

attorneys general said, ‘‘sales and

marketing practices that provide young

people with the easiest access to

tobacco.’’

The agency agrees that § 897.16(d)

will affect adults by effectively requiring

them to purchase cigarettes and

smokeless tobacco rather than receive

them free of charge. However, the

comments opposing the elimination of

free samples did not offer any

suggestions as to how to prevent free

samples from reaching young people. In

view of the evidence showing that

young people obtain free samples

despite any industry-imposed

restrictions or (in the case of at least one

comment) that they obtain free

cigarettes from a retailer, the agency

concludes that the benefits of

eliminating free samples as a source for

young people outweigh the

inconvenience to adults.

FDA also disagrees with the

comments asserting that eliminating free

samples adversely affects an adult’s

ability to choose products or otherwise

violates adult ‘‘rights.’’ The final rule

does not alter an adult’s ability to select

or purchase cigarettes and smokeless

tobacco.

(101) Several comments submitted by

manufacturers or their representatives

opposed the prohibition against the

distribution of free samples, stating that

manufacturers use free samples to

introduce new products, to encourage

adult consumers to switch brands, or to

thank their adult consumers for their

patronage. Others comments added that

free samples do not encourage young

people to smoke or to use smokeless

tobacco or that eliminating free samples

would not reduce cigarette or smokeless

tobacco use by young people.

The agency is eliminating free

samples because they are an

inexpensive and easily accessible source

of these products to young people and,

when distributed at cultural or social

events, may increase social pressure on

young people to accept and use free

samples (60 FR 41314 at 41326). The

preamble to the 1995 proposed rule

cited studies and reports to support the

agency’s views; those documents

contradict the comments’ claim that free

samples do not encourage young people

to use these products or affect use by

young people.

As for the rule’s impact on

manufacturers’ practices, the public

health benefits from eliminating free

samples as an avenue that young people

use to obtain cigarettes and smokeless

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

devise new ways to introduce new

products, to get adults to switch brands,

or to thank adult consumers. FDA

believes that manufacturers will be able

to devise new approaches to promote

new brands or to attract new adult

customers that comply with these

regulations.

(102) One comment expressed strong

opposition to proposed § 897.16(d). The

comment argued that FDA lacked

authority to ban free samples, especially

when the agency would permit sales to

adults, and that the agency had no

evidence to support a ban on free

samples. The comment added that the

act did not extend to device samples

and argued that Congress knows how to

give FDA authority over samples, as

evidenced by sampling provisions in the

PDMA. The comment further stated that

the term ‘‘sample’’ was over-broad

because it was not limited to products

distributed in public settings for

promotional purposes; thus, the

comment continued, any

complimentary gift could be a ‘‘sample’’

under proposed § 897.16(d).

FDA disagrees with the comment.

Section 520(e) of the act states that the

agency may ‘‘require that a device be

restricted to sale, distribution, or use

* * * upon such other conditions as the

Secretary may prescribe by * * *

regulation.’’ Restricting free samples is

clearly a restriction on the product’s

distribution.

As for the PDMA, the comment’s

claim that the PDMA’s sampling

restrictions shows that Congress has not

authorized FDA to regulate device

samples (due to the absence of express

language on device samples) fails to take

into account the fact that FDA’s

restricted device authority is broader

than its prescription drug authority.

Also, the comment fails to take into

account the reasons behind enactment

of PDMA. PDMA was enacted not to

give FDA new authority over

prescription drug samples, but to curtail

the illegal diversion of drugs, including

samples, into the market. (See S. Rept.

100–303, 100th Cong., 2d sess. 2–3

(1988).) Before PDMA was enacted, FDA

regulated prescription drug samples in

the same manner as prescription drug

products. Thus, PDMA is not intended

to give FDA new authority over

samples; instead, it reflects a

congressional decision to give FDA a

comprehensive and explicit set of new

authority to prevent illegal diversions of

prescription drug products, including

the diversion of prescription drug

samples to illegal markets.

FDA also declines to amend the rule

to allow ‘‘gifts.’’ Allowing ‘‘gifts’’ would

enable parties to declare that their free

samples were now ‘‘gifts’’ and therefore

outside the rule and could lead to

disputes as to whether an item was a

prohibited ‘‘sample’’ or an allowable

‘‘gift.’’ However, the agency will

exercise discretion in interpreting and

enforcing this rule. For example, a

manufacturer’s employee who sends

cigarettes or smokeless tobacco to an

adult relative to celebrate a birthday

would not be subject to regulatory

action under the free sample restriction

in § 897.16(c).

(103) One comment stated that,

notwithstanding the preamble to the

1995 proposed rule, FDA has no

evidence to support a restriction on the

distribution of free samples. The

comment stated that the rule

overestimated the prevalence of sample

activities and that cigarette sampling

accounted for only 0.7 percent of the

total spent on cigarette advertising and

promotion in 1993. The comment also

said that FDA relied on an outdated

version of the cigarette manufacturers’

voluntary code. According to the

comment, the outdated code prohibited

distribution of cigarette samples within

two blocks of any ‘‘center of youth

activities’’ and ‘‘required samplers to

demand proof of age in doubtful cases.’’

The revised code adds that ‘‘[s]ampling

shall not be conducted in or on public

streets, sidewalks or parks, except in

places that are open only to persons to

whom cigarettes lawfully may be sold.’’

In contrast, two comments cautioned

FDA against deferring to a voluntary

code or relying on the industry. One

comment stated that, in Maine, the

industry agreed to submit reports on

sampling activities to the State in place

of legislation that would have curtailed

sampling activities, but the industry

discontinued these reports as soon as

State authorities stopped sending

reminders that the reports were due.

Another comment stated that, in

Massachusetts, a lawsuit over sampling

practices by a smokeless tobacco firm

ended in a settlement whereby the firm

would require photocopies of

identification cards for all mail-in

requests for samples. The comment said

that the settlement represented an

improvement over requiring no proof of

age at all, but noted that the firm refused

to apply this practice outside the State

and that the restriction did not apply to

other smokeless tobacco firms. The

comment also claimed that firms often

agree to restrict sampling activities only

after adverse publicity or agree to

restrict sampling activities without

setting any measurable performance

goals.

FDA disagrees with the comment

asserting that the agency has no

evidence to support a restriction on free

samples. The preamble to the 1995

proposed rule cited several reports and

surveys showing that young people,

including elementary school children,

obtain free samples easily (60 FR 41314

at 41326). The agency also has no

assurance that the revised cigarette

industry code will be any more effective

than earlier versions. Moreover, as

mentioned earlier in this document,

FDA received comments stating that

young people continue to receive free

samples of cigarettes and smokeless

tobacco. The comments refute the claim

that voluntary industry restrictions on

sampling preclude the need for FDA

regulation of free samples.

Additionally, the rule offers several

important advantages over voluntary

codes. The rule creates enforceable

obligations which, if violated, may

subject the manufacturer, distributor, or

retailer to sanctions under the act. These

sanctions, in turn, create an incentive

for regulated parties to adhere to the act

and its implementing regulations. A

voluntary code also applies only to the

parties that accept the code or fall

within the same industry; for example,

a voluntary manufacturers’ code might

not extend to distributors or to retailers,

or, as the comment recognized, a

voluntary cigarette manufacturers’ code

might differ from a voluntary smokeless

tobacco manufacturers’ code.

Furthermore, a regulation creates

uniform standards and policies for the

same product. Those standards apply

regardless of whether a firm is a member

of a voluntary organization.

Finally, the agency notes that, while

the comment said that ‘‘only 0.7 percent

of the total spent on cigarette

advertising and promotion’’ in 1993

went to cigarette sampling activities,

this percentage still translates into a

large sum. Cigarette advertising and

promotion expenditures, according to

the same FTC report cited by the

comment, were approximately $6

billion in 1993. Thus, the seemingly

small percentage devoted to cigarette

sampling activities, when translated

into dollars, represents $42 million.

(104) Several comments supported the

prohibition against the distribution of

free samples, but suggested that FDA

amend the rule to prevent distribution

of cigarettes and smokeless tobacco at

prices below their fair market value.

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

price in the region. Another comment

would amend § 897.16(d) to prohibit

sales or distribution of cigarettes and

smokeless tobacco ‘‘in return for

nominal consideration.’’

The agency declines to amend the

rule as suggested by comments. While

the comments have merit, FDA usually

has no role in the prices charged for an

FDA-regulated product. Additionally, it

would be difficult for FDA to monitor

fair market values for various products,

and disputes would inevitably arise as

to whether the ‘‘market’’ should cover a

broader or narrower geographic area, the

data used to determine the fair market

value, and how compliance actions

would be affected by fluctuations in the

fair market value. Similar disputes

would arise regarding ‘‘nominal

consideration.’’ Furthermore, regardless

of the price at which the product is sold,

other provisions in this subpart should

deter or reduce access by young people.

e. Restrictions on labeling and

advertising. The agency on its own

initiative has added § 897.16(e) as a

point of clarification to the final rule.

This provision states that ‘‘no

manufacturer, distributor, or retailer

may sell or distribute, or cause to be

sold or distributed, cigarettes or

smokeless tobacco with labels, labeling,

or advertising not in compliance with

the restrictions in Subparts C and D

* * *.’’ The restrictions on labels,

advertising, and labeling in subparts C

and D of part 897 are authorized, in

part, under section 520(e) of the act and

are considered conditions of sale,

distribution, and use. Therefore,

§ 897.16(e) clarifies the statutory

obligations of manufacturers,

distributors, or retailers under this rule.

V. Label

In the 1995 proposed rule (60 FR

41314, August 11, 1995), subpart C of

part 897 was entitled ‘‘Labels and

Educational Programs,’’ and contained

two provisions. Proposed § 897.24,

would have required cigarette or

smokeless tobacco packages to contain

the appropriate ‘‘established name’’ of

the product; the final rule retains that

provision and does not make any

substantive changes to it. Proposed

§ 897.29 would have required

manufacturers to establish and maintain

a national educational program to

discourage children from using

cigarettes and smokeless tobacco. Based

on issues raised by comments, proposed

§ 897.29 has been deleted from the final

rule, and instead, the Food and Drug

Administration (FDA) has determined

that issuing notification orders under

section 518 of the Federal Food, Drug,

and Cosmetic Act (the act) (21 U.S.C.

360h) would be the most practicable

and appropriate means of requiring

tobacco manufacturers to inform young

people of the unreasonable health risks.

Discussion of the comments received

regarding this education provision is

included in section VII. of this

document.

A. Established Name (§ 897.24)

Proposed § 897.24 would have

required that each cigarette or smokeless

tobacco product package, carton, box, or

container of any kind that is offered for

sale, sold, or otherwise distributed bear

whichever of the following established

names is appropriate: ‘‘Cigarettes,’’

‘‘Cigarette Tobacco,’’ ‘‘Loose Leaf

Chewing Tobacco,’’ ‘‘Plug Chewing

Tobacco,’’ ‘‘Twist Chewing Tobacco,’’

‘‘Moist Snuff,’’ or ‘‘Dry Snuff.’’

The preamble to the 1995 proposed

rule explained that this provision was

intended to implement section 502(e)(2)

of the act (21 U.S.C. 352(e)(2)), which

states that a device shall be deemed

misbranded if its label fails to display

the established name for the device.

Section 502(e)(4) of the act, in turn,

explains that the ‘‘established name’’ for

a device is the applicable official name

of the device designated under section

508 of the act (21 U.S.C. 358), the

official title in a compendium if the

device is recognized in an official

compendium but has no official name,

or ‘‘any common or usual name of such

device.’’ In this case, no official names

have been designated under section 508

of the act, and no compendium provides

an established name for these products.

Consequently, § 897.24 proposed

designating ‘‘cigarettes,’’ ‘‘cigarette

tobacco,’’ and the common or usual

names for smokeless tobacco (such as

‘‘moist snuff’’ or ‘‘loose leaf chewing

tobacco’’) as established names for these

products.

(1) The agency received few

comments on proposed § 897.24. One

comment that opposed the provision

stated that it was unnecessary and

would produce anomalous results. The

comment stated that, because cigarettes

are already required to be labeled

‘‘cigarettes’’ under regulations adopted

by the Bureau of Alcohol, Tobacco and

Firearms (BATF) under the Internal

Revenue Code (27 CFR 270.215 (1995)),

‘‘Cigarettes’’ is already the common and

usual name and, therefore, there is no

need to designate an ‘‘established

name.’’

The agency has concluded that the

BATF requirement does not conflict

with the act’s requirement that the label

bear the established name of these

products. The agency recognizes that

BATF regulations currently require

cigarette packages to include the word

‘‘cigarettes’’ on the package or on a label

securely affixed to the package (27 CFR

270.215). For smokeless tobacco and

chewing tobacco, BATF regulations

require the packages to include the

words ‘‘snuff’’ or ‘‘chewing tobacco,’’ or

alternatively, ‘‘Tax Class M’’ or ‘‘Tax

Class C,’’ respectively (27 CFR 270.216).

These terms also describe the

established name, as required in section

502(e) of the act.

Many of the labeling provisions of the

act, including section 502(e)(2), are

intended to provide important basic

information to consumers and others

coming in contact with a regulated

product. In this case, the act requires

that the established or common name be

placed on the product’s label in a clear

way so that it is easily seen and

consumers can readily identify the

product. Congress provided an

exception only for cases where

compliance with this provision is

‘‘impracticable.’’ If a manufacturer

believes that it cannot comply with this

provision of the rule, the manufacturer

should consult with the agency to

determine if it qualifies for an

impracticability exception under section

502(e)(2) of the act.

(2) One comment that supported the

provision on established name

recommended that, in addition to the

established names set forth in the 1995

proposed rule, little cigars and tobacco

sticks should also be listed as separate

products with their own specific

established names, ‘‘little cigars’’ and

‘‘tobacco sticks’’ ‘‘in keeping with the

manner and style of the established

names to be used for smokeless tobacco

products.’’

One comment that opposed the

provision stated that since proposed

§ 897.3(a) would define ‘‘cigarettes’’ to

include little cigars, the same package of

little cigars that must be labeled ‘‘small

cigars’’ or ‘‘little cigars’’ (under current

BATF regulations, 27 CFR 270.214(c)

(1995)), would also have to carry the

established name of ‘‘cigarettes’’ under

the proposed FDA regulation. The

comment argued that such a conflicting

labeling requirement is absurd, and

would create confusion where none

now exists.

The agency has modified the

definition of ‘‘cigarette’’ found in

proposed § 897.3(a) to exclude little
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44463

74 ‘‘When Packages Can Speak: Possible Impacts

of Plain and Generic Packaging of Tobacco

Products,’’ Health Minister of Canada, March 1995.

75Rootman, I., B. R. Flay, and D. Flay, ‘‘A Study

on Youth Smoking, Plain Packaging Health

Warnings, Event Marketing and Price Reductions,

Key Findings,’’ A Joint Research Project by

University of Toronto, University of Illinois, York

University, Ontario Tobacco Research Unit,

Addiction Research Foundation, p. 7, 1995.

cigars from the final rule. The agency

also advises that, to the best of its

knowledge, tobacco sticks currently are

not sold in the United States. If tobacco

sticks were to be marketed in this

country, the agency advises that such

products would be subject to premarket

notification under section 510(k) of the

act (21 U.S.C. 360(k)) and 21 CFR part

807, and could be included under the

established name of ‘‘cigarette tobacco,’’

and therefore do not need to be listed

as separate products at this time.

B. Package Design

(3) Several comments noted that the

1995 proposed rule did not include any

action to eliminate the use of the

tobacco product package itself to

influence children. A few comments

cited a March 1995 Canadian study,

which found that package designs affect

the ability of teens to associate lifestyle

and personality imagery to specific

brands and detract from the health

message. 74 Another study found that

the ‘‘badge’’ value of cigarette packages

for youths was decreased when the

packages were stripped of their unique

characteristics. 75 The comment

suggested that the provisions of

proposed § 897.30, requiring text only

with black text on a white background,

should be extended to cigarette

packages. One comment pointed out

that FDA has the authority to require

plain packaging without violating the

Federal Cigarette Labeling and

Advertising Act (the Cigarette Act), 15

U.S.C. 1334(a), which prohibits

additional statements related to smoking

and health on cigarette packages.

The agency agrees with the comments

that cigarette package design and

imagery are powerful tools that increase

the appeal of the product, especially to

young people. In the preamble to the

1995 proposed rule the agency cited

several studies demonstrating that

‘‘[i]magery ties the products to a

positive visual image’’ (60 FR 41314 at

41335). Another study showed that

‘‘children and adolescents react more

positively to advertising with pictures

and other depictions than to advertising

(or packaging) that contains only print

or text’’ (60 FR 41314 at 41335).

The agency has considered extending

the requirements of § 897.30 (text only,

black on white background) to the

package itself, but believes at this time

these measures are not necessary

considering the comprehensive nature

of the regulatory scheme contained in

this rule. Therefore, the agency is not

extending the requirements applicable

to advertising and labeling to the

package itself.

C. Ingredient Labeling

The agency specifically requested

comments on whether it should

implement recommendations from the

Ad Hoc Committee of the President’s

Cancer Panel, which recommended,

among other things, that the range of tar,

nicotine, and carbon monoxide

delivered by each product be

communicated to consumers. In

addition, the Ad Hoc Committee

recommended that smokers be informed

of ‘‘other hazardous smoke

constituents.’’

(4) The agency received several

comments suggesting that tar and

nicotine delivery or yield information

should be disclosed on product

packages in order to assist consumers in

making more informed decisions about

the use of cigarettes. Some of these

comments also suggested that labels list

the toxins present in, or delivered from,

cigarettes and state their effect, e.g.,

‘‘known carcinogen.’’

One comment stated that it cannot be

claimed that the ingredients are trade

secret information and, therefore,

cannot be disclosed, because the

tobacco companies voluntarily released

a list of ingredients to the public in

1995. The comment noted that, under

current case law, only items kept

confidential qualify as trade secrets.

(See Kewanee Oil v. Bicron Corp., 416

U.S. 470 (1974); Avtect Systems v.

Peiffer, 21 F.3d 568 (4th. Cir. 1994).)

The comment noted further that because

companies can and do perform reverse

engineering on another company’s

products, the ingredients are not trade

secret. The comment proposed that, at a

minimum, FDA should designate a

partial list of previously disclosed

ingredients and require that the list be

included on package labels. Another

comment stated that only a reasonable

number of ingredients should be listed

on the label or in a package insert.

One comment stated that ingredient

listing is not barred by the Cigarette Act

or by the Comprehensive Smokeless

Tobacco Health Education Act of 1986

(Smokeless Act). (See 15 U.S.C. 1331 et

seq. and 15 U.S.C. 4401 et seq.) These

statutes require the current Surgeon

General’s warnings on tobacco products

and preempt any additional statements

relating to smoking or health from being

required on cigarette or smokeless

tobacco packages. The comment

asserted that a list of ingredients is not

a statement, and cannot be reasonably

construed as a statement relating to

smoking and health, because a

statement expresses a point of view,

whereas an ingredient list does not.

One comment noted that the Cigarette

and Smokeless Acts require

manufacturers to submit annually to the

Department of Health and Human

Services (DHHS) a list of ingredients

added to tobacco products, and the

statutes further require that the lists be

treated as confidential commercial or

trade secret information. (See 15 U.S.C.

1335(a) and 15 U.S.C. 4403.) The

comment stated that the confidentiality

provisions in both statutes bind the

Secretary of DHHS with respect to trade

secrets, but do not restrict FDA’s

authority to require ingredient listing.

FDA agrees that accurate information

about the tar, nicotine, and carbon

monoxide delivery from a cigarette to

the user would be useful information.

FDA is aware of the Federal Trade

Commission’s (FTC’s) recent efforts to

develop a system to measure, more

accurately than the current test, the tar,

nicotine, and carbon monoxide

delivered by cigarettes. FTC has

announced that it will issue a report of

its findings regarding a new test method

in the near future. FDA believes that it

would be premature to require

manufacturers to put any of this

information on tobacco product labels

before FTC has issued its report and

made recommendations on accurately

measuring the delivery of tar, nicotine,

and carbon monoxide to product users.

With regard to ingredients other than

tar, nicotine, and carbon monoxide, the

agency agrees that it has authority under

the act to require labeling or listing of

other substances present or delivered by

cigarettes. (See section 502(r) of the act.)

The agency notes that there are

hundreds of ingredients added to or

delivered by cigarettes and smokeless

tobacco. Even if the agency were to

require listing of only a ‘‘reasonable

number,’’ current methodologies are not

adequate to accurately identify and

quantify the added ingredients or the

constituents delivered by these

products. Moreover, at this time there is

not enough data to enable the agency to

determine what a ‘‘reasonable’’ number

of ingredients would be or to determine

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

is not requiring the listing of ingredients

in the rule.

As discussed in the preamble to the

1995 proposed rule, cigarettes and

smokeless tobacco are subject to various

pre-existing requirements in the statute

and the regulations. The preamble

stated that such ‘‘regulations include the

general labeling requirements for

devices at part 801 (21 CFR part 801)

(excluding § 801.62)’’ (60 FR 41314 at

41352). The parenthetical reference was

a typographical error because the 1995

proposed rule would have exempted

such products from § 801.61, not

§ 801.62 (60 FR 41314 at 41342). Section

801.62 states the requirements for

‘‘Declaration of net quantity of

contents.’’ This provision requires that

the label of an over-the-counter device

bear a declaration of the net quantity

and weight of the contents, e.g., ‘‘20

cigarettes.’’ The agency fully expects

manufacturers to comply with this

provision and, as discussed below, also

expects manufacturers to comply with

§ 801.61.

D. Labeling for Intended Use

(5) The agency received comments

suggesting that FDA require intended

use information on the package label of

cigarettes and smokeless tobacco.

Proposed § 801.61(d) would have

exempted cigarettes and smokeless

tobacco from the statement of identity

and labeling for intended use

requirements of § 801.61. The comments

stated that such information informs the

public about the product’s intended use.

One comment supported proposed

§ 801.61(d).

Based on the comments received, the

agency has reconsidered the matter and

concluded that it is appropriate to

require that this information appear on

the label. Consequently, the agency has

deleted § 801.61(d) from the final rule.

All over-the-counter devices are

required to comply with § 801.61 and

bear the ‘‘common name of the device

followed by an accurate statement of the

principal intended action(s) of the

device’’ on the principal display panel

of the package. (See § 801.61.) As overthe-counter devices, cigarettes and

smokeless tobacco are legally required

to comply with this provision.

In the 1995 proposed rule, the agency

proposed to exempt these products

because ‘‘section 801.61 stems, in part,

from the Fair Packaging and Labeling

Act (FPLA), and [t]obacco products are

exempt from the statute’s requirements’’

(60 FR 41314 at 41342). Further

evaluation revealed that the

requirements in § 801.61 are also based

on FDA labeling authorities including,

but not limited to, section 502(a), (c),

(e), (f), and (q) of the act, and not the

FPLA.

Furthermore, section 1460 of the

FPLA contains ‘‘Savings provisions’’ (15

U.S.C. 1460). The provisions state that

‘‘Nothing contained in this Act [15

U.S.C. 1451 et. seq.] shall be construed

to repeal, invalidate, or supersede

* * *(b) the Federal Food, Drug, and

Cosmetic Act [21 U.S.C. 301 et. seq.]

* * *.’’ Thus, because FDA’s assertion

of jurisdiction over these products is

under its statutory authority under the

act, any conflict between the two

statutes shall be resolved in favor of the

act. (See Jones v. Rath Packing, 430 U.S.

519 (1977).) Consequently, section 1459

of the FPLA, which removes tobacco

from the definition of ‘‘consumer

commodity,’’ and thus, removes it from

jurisdiction under the FPLA, is

superseded by FDA’s coverage of these

products under the act.

As stated in the preamble to the 1995

proposed rule, manufacturers of

cigarette and smokeless tobacco are

expected to comply with the general

labeling requirements in part 801 (60 FR

41314 at 41352). For purposes of

§ 801.61, the ‘‘common name of the

device’’ is the established name as set

forth in § 897.24.

To more accurately reflect the

permitted intended use of these

products, the agency has modified the

statement of intended use set forth in

the proposal. The agency proposed that

the intended use of these products be

described as a ‘‘nicotine delivery

device.’’ Under this rule, these products

may be intended for use only by persons

18 years of age and older. Thus, a more

accurate statement of the permitted

intended use of these products is

‘‘Nicotine Delivery Device For Persons

18 or Older.’’

Further authority for this requirement

stems from section 520(e)(2) of the act

(21 U.S.C. 360j(e)(2). This provision

states that: ‘‘The label of a restricted

device shall bear such appropriate

statements of the restrictions required

by a regulation under paragraph (1) as

the Secretary may in such regulation

prescribe.’’ The statement of intended

use, in essence, incorporates the

statement of one of the principal

restrictions FDA is imposing on these

products.

Accordingly, a provision has been

added to § 897.25 that codifies this

intended use statement and statement of

restrictions for purposes of § 801.61.

E. Adequate Directions for Use and

Warnings Against Use (Section 502(f) of

the act)

(6) A few comments stated that FDA

failed to discuss or provide for adequate

directions for use, as required in section

502(f) of the act. The comments stated

that FDA’s silence on this issue is a tacit

acknowledgment that the agency cannot

have jurisdiction over these products

because adequate directions for use

cannot be prepared for them.

The agency disagrees with these

comments. It does not logically follow

that because the agency was silent on

this issue, it does not have jurisdiction

over tobacco products. In fact, in the

preamble to the 1995 proposed rule, the

agency cited one of the authorities for

the labeling requirements for these

products as section 502 of the act.

According to section 502(f) of the act,

a device shall be deemed misbranded:

Unless its labeling bears (1) adequate

directions for use; and (2) such adequate

warnings against use in those pathological

conditions or by children where its use may

be dangerous to health, or against unsafe

dosage or methods or duration of

administration or application, in such

manner and form, as are necessary for the

protection of users, except that where any

requirement of clause (1) of this paragraph,

as applied to any drug or device, is not

necessary for the protection of the public

health, the Secretary shall promulgate

regulations exempting such drug or device

from such requirement.

For devices, ‘‘adequate directions for

use’’ means ‘‘directions under which the

layman can use a device safely and for

the purposes for which it is intended’’

(§ 801.5). These regulations outline the

type of information which, if missing,

may lead to a product being deemed to

be misbranded. Such information

includes conditions, purposes, and uses

for which the device is intended;

quantity of dose; frequency, duration,

time, route or method of administration;

or preparation for use (§ 801.5).

The agency acknowledges that it is

very difficult to establish adequate

directions for use for cigarettes and

smokeless tobacco, primarily because of

the inherent nature of the products,

their addictiveness, the numerous

hazards associated with their use, and

because the behavior of each user (e.g.,

the depth of inhalation, the duration of

puff, whether the filter holes are

covered, and length of time in mouth)

determines the amount of tar and

nicotine delivered to the user from the

device.

Section 502(f) of the act provides for

an exemption for adequate directions for

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

example, the agency has established

exemptions from adequate directions for

use where adequate directions for

common uses of certain devices are

known to the ordinary individual. (See

§ 801.116.) Tobacco products have a

very long history of use in this country,

and they are one of the most readily

available consumer products on the

market today. Consequently, the way in

which these products are used is

common knowledge. FDA believes that

the public health would not be

advanced by requiring adequate

directions for use. Accordingly, the

agency has added a provision to the

final rule exempting cigarette and

smokeless tobacco from the requirement

of having adequate directions for use.

Section 801.126, states, ‘‘Cigarette and

smokeless tobacco as defined in part

897 of this chapter are exempt from

section 502(f)(1) of the Federal, Food,

Drug, and Cosmetic Act.’’

The agency has considered the

requirement in section 502(f)(2) of the

act that the labeling of a medical device

must provide ‘‘adequate warnings

against use * * * by children where its

use may be dangerous to health.’’ In the

agency’s view, the warnings mandated

by the Cigarette Act (15 U.S.C. 1333)

and the Smokeless Act (15 U.S.C. 4402)

satisfy this requirement. Additionally,

the Surgeon General’s warnings provide

information warning against use in

persons with certain conditions, i.e.,

pregnant women. Consequently,

cigarettes and smokeless tobacco are not

exempt from the statutory requirements

under section 502(f)(2) of the act.

F. Package Inserts

(7) Several comments stated that FDA

should require cigarette and smokeless

tobacco packages to contain package

inserts that contain health information

and information about the chemicals

added to cigarettes and smokeless

tobacco. One comment stated that FDA

has statutory authority to require

package inserts under sections 502(a)

and (q) and 520(e) of the act. Another

comment stated that the agency is not

preempted from requiring package

inserts because sections 1334(a) and

4406 of the Cigarette Act and the

Smokeless Act, respectively, preempt

statements related to health ‘‘on any

package,’’ not in any package.

FDA agrees with the comments that it

has statutory authority under the act to

require package inserts for these

products. Under section 502(a) of the

act, a device is misbranded if its

labeling is false or misleading in any

particular. Section 201 of the act (21

U.S.C. 321), the ‘‘Definitions’’ section of

the act, describes the concept of

‘‘misleading’’ in the context of labeling

and advertising. Section 201(n) of the

act explicitly provides that, in

determining whether the labeling of a

device is misleading, there shall be

taken into account not only

representations or suggestions made in

the labeling, but also the extent to

which the labeling fails to reveal facts

that are material in light of such

representations or material with respect

to the consequences that may result

from use of the device under the

conditions for use stated in the labeling

or under customary or usual conditions

of use.

These statutory provisions, combined

with section 701(a) of the act (21 U.S.C.

371(a)), authorize FDA to issue a

regulation designed to ensure that

persons using a medical device will

receive information that is material with

respect to the consequences that may

result from use of the device under its

labeled conditions. In the prescription

drug context, this interpretation of the

act and the agency’s authority to require

patient labeling for prescription drug

products have been upheld. (See

Pharmaceutical Manufacturers Assn. v.

FDA, 484 F.Supp. 1179 (D. Del. 1980)

aff’d per curiam, 634 F.2d 106 (3rd Cir.

1980).)

Additionally, on several occasions,

the agency has required patient package

inserts for devices, and has specified

either the express language for the

patient package insert or the type of

information to be included in the

patient package insert. These devices

include hearing aids (§ 801.420),

intrauterine devices (§ 801.427), and

menstrual tampons (§ 801.430).

The agency also agrees with the

comment that it is not prohibited from

requiring patient package inserts due to

the preemption clauses in the Cigarette

Act and the Smokeless Act. Each of the

clauses in these statutes specifically

prohibits requirements that statements

relating to smoking and health be placed

on the package. Package inserts, by

nature, are typically found in the

package.

Although the agency believes that

package inserts for these products are

authorized under the act and would

provide useful information to users,

further evaluation would be needed to

determine what specific information a

package insert would contain.

Therefore, the agency is not requiring

them as part of this rule.

VI. Advertising

A. Subpart D—Restrictions on

Advertising and Labeling of Tobacco

Products

Subpart D in part 897 contains the

restrictions for advertising and labeling

of cigarettes and smokeless tobacco.

Subpart D of part 897 in the Food and

Drug Administration’s (FDA’s) August

11, 1995, proposed rule (60 FR 41314)

(the 1995 proposed rule) provoked some

of the strongest and most passionate

comments from both supporters and

opponents of the proposed restrictions.

Many comments from the tobacco

industry, the advertising industry,

public interest groups, and individuals

expressed major concerns about the

legality, constitutionality, and wisdom

of the advertising restrictions in general

and about the underlying support for

individual sections of the 1995

proposed rule. Comments from the

largest organization of psychologists in

the world, public interest and health

groups, individual advertisers, and

individuals expressed strong support for

the legality and constitutionality of the

proposal, provided information

supporting various provisions of the

proposal, and emphasized the necessity

for comprehensive advertising

regulations.

The purpose of the advertising

regulations is to decrease young

people’s use of tobacco products by

ensuring that the restrictions on access

are not undermined by the product

appeal that advertising for these

products creates for young people. (See

Central Hudson Gas and Electric Corp.

v. Public Serv. Comm’n of N.Y., 447

U.S. 557, 569 (1980).) Proposed subpart

D of part 897 included a range of

restrictions that attempted to preserve

the informational components of

advertising and labeling which can

provide useful product information for

adult smokers, while eliminating the

imagery and color that make advertising

appealing and compelling to children

and adolescents under 18 years of age.

Briefly, the 1995 proposed rule

included four provisions. Section

897.30 would have defined those media

in which labeling and advertising for

cigarettes or smokeless tobacco may

appear. In addition, it would prohibit

outdoor advertising within 1,000 feet of

elementary and secondary schools and

playgrounds. Proposed § 897.32 would

limit all advertising to black text on a

white background. Advertising in any

publication that is read primarily by

adults would be permitted to continue

to use imagery and color. Further, all
44466 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

76For the purposes of section VI. of this

document, the agency will refer to advertising and

labeling merely as ‘‘advertising.’’ As the agency

pointed out in the preamble to the 1995 proposed

rule, advertising and labeling often perform the

same function: to convey information about the

product; to promote consumer awareness, interest,

and desire; to change or shape consumer attitudes

and images about the product; and/or to promote

good will for the product (60 FR 41314 at 41328).

Moreover, most court cases involving advertising do

not distinguish between the forms of advertising

that FDA calls labeling and those referred to as

advertising. When there is a need to distinguish

between the two forms of promotion, for example,

when labeling and advertising are subject to

different statutory requirements, this document will

make clear what is being discussed.

cigarette and smokeless tobacco product

advertisements would be required to

include the product’s established name

and intended use, e.g., ‘‘Cigarettes—A

Nicotine Delivery Device,’’ and cigarette

advertisements would be required to

include a brief statement, such as

‘‘About one out of three kids who

become smokers will die from their

smoking.’’ Proposed § 897.34 would

prohibit the sale and distribution of

nontobacco items, contests and games of

chance, and sponsored events using any

indicia of product identification (e.g.,

brand name, logo, recognizable pattern

of color). Finally, proposed § 897.36

outlined those conditions under which

the agency would find the advertising or

labeling of any cigarette or smokeless

tobacco product to be false or

misleading.

In response to comments filed, FDA

has modified the proposed regulations.

Briefly, some of the more substantive

changes include: The definition of

adult-oriented publications remains

unchanged, but the preamble makes

clear that the responsibility will be

assigned specifically to the

manufacturer, distributor, or retailer of

tobacco products that wishes to place

advertisements to gather and retain

competent and reliable evidence that

the readership of the publication meets

the criteria for an adult-oriented

publication. Moreover, unrestricted

advertising, i.e., with color and imagery,

may be displayed at facilities described

in § 897.16(c)(2)(ii) that may sell tobacco

from vending machines and self-service

provided that the advertising, e.g.,

posters and signs, must be displayed so

that they are not visible from outside the

facility and are affixed to a wall or

fixture in the facility.

The revised intended use statement is

‘‘Nicotine Delivery Device for Persons

18 or Older,’’ and the agency will not

require a brief statement other than the

Surgeon General’s warnings.

As provided in the 1995 proposed

rule, the final rule states that any event

sponsored by a manufacturer,

distributor, or retailer of tobacco

products is to be sponsored only in the

corporate name. Teams and entries also

may be sponsored but only in the

corporate name. The regulation includes

a ban on all brand-identified nontobacco

items, including those transactions

based upon proofs-of-purchase.

However, the proposed ban on contests

and games has been deleted. Finally, the

agency has decided to delete the

definition of false or misleading

advertising and labeling from this final

rule because it is duplicative and

unnecessary in light of the underlying

requirements in sections 201(n), 502(a),

and 502(q) (21 U.S.C. 321(n), 352(a), and

352(q)) of the Federal Food, Drug, and

Cosmetic Act (the act).

Section VI.B. of this document

provides a general discussion of the

rationale for including significant

advertising restrictions in the final

regulation, including a discussion in

response to comments concerning the

theory of advertising and the

importance of color and imagery to

advertising’s appeal, especially for

young people. This section also

provides a discussion of the effects of

advertising on young people, including

expert opinion and research evidence

provided by the American Psychological

Association.

Section VI.C. of this document

provides responses to questions raised

about the constitutionality of the

regulations. Section VI.D. of this

document includes a discussion of the

evidence that cigarettes and smokeless

tobacco advertising plays a direct and

material role in young people’s

decisions to purchase and use these

products. This part also explains why

restricting tobacco advertising will

advance the Federal Government’s

interest in preventing the use of tobacco

products by young people, and provides

responses to comments about the

evidence. Finally, section VI.E. of this

document responds to comments

concerning the factual evidence

provided by FDA in support of its

proposed regulation in a section-bysection format, as well as to comments

claiming that each of these sections was

not narrowly tailored to minimize the

burden on commercial speech. 76

B. The Need for Advertising Restrictions

In the preamble to the proposed 1995

rule, FDA tentatively asserted that a

preponderance of the quantitative and

qualitative studies of cigarette

advertising suggested: (1) A causal

relationship between tobacco

advertising and tobacco use by young

people, and (2) a positive effect of

stringent advertising measures on

smoking rates and on youth tobacco use.

In arriving at this tentative finding, FDA

relied heavily on the National Academy

of Sciences Institute of Medicine’s

(IOM’s) Report entitled Growing Up

Tobacco Free, Preventing Nicotine

Addiction in Children and Youths,

Washington, DC 1994 (the IOM Report)

and the Department of Health and

Human Services’ (DHHS’) Center for

Disease Control and Prevention’s

(CDC’s) Report entitled Preventing

Tobacco Use Among Young People, A

Report of the Surgeon General (1994)

(1994 SGR). Both indicated that

advertising was an important factor in

young people’s tobacco use, and that

restrictions on advertising must be part

of any meaningful approach to reducing

smoking and smokeless tobacco use

among young people. In addition, FDA

was careful to note that industry

statements and actions and examples of

youth oriented advertising and

marketing campaigns lent support to the

agency’s findings.

FDA’s review and consideration of the

comments received has led the agency

to conclude that advertising plays a

material role in the decision by those

under 18 to use tobacco products.

1. Advertising and Young People

(1) Comments from the tobacco

industry argued that FDA had simply

assumed that young people found

cigarette and smokeless tobacco

advertising to be appealing, and that

there was no empirical evidence of how

young people actually perceived the

imagery displayed in cigarette and

smokeless tobacco advertisements. The

comments argued that the research cited

by the agency relates primarily to the

role of imagery in brand choice

decisions. In addition, several

comments disputed FDA’s evidence that

young people are particularly

vulnerable to image-oriented

advertisements. To respond to these

comments, it is necessary to describe

the function of advertising and how it

affects young people.

a. Function of advertising. Advertisers

use a mix of advertising and

promotional vehicles to call attention to

the product they are selling—to describe

its properties, to convey its superiority

over other products, and in some cases

to give it an allure above and beyond the

qualities of the product itself. (A red

convertible can be a mode of

transportation; it can also tell people a
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44467

77 Gunther, A. C., and E. Thorson, ‘‘Perceived

Persuasive Effects of Product Commercials and

Public Service Announcements: Third Person

Effects in New Domains,’’ Communication

Research, vol. 19, pp. 574–575, 1992.

78Flynn, B. S., J. K. Worden, R. H. Secker-Walker,

G. J. Badger, B. M. Geller, and M. C. Costanza,

‘‘Prevention of Cigarette Smoking Through Mass

Media Intervention and School Programs,’’

American Journal of Public Health, vol. 82, pp.

827–834, 1992.

79 ‘‘Philip Morris Keeps Smoking—Campbell Sees

Growth for Tobacco Unit in Declining Industry,’’

Advertising Age, p. 20, Nov. 19, 1990.

80Flynn, B. S., J. K. Worden, R. H. Secker-Walker,

G. J. Badger, B. M. Geller, and M. C. Costanza,

‘‘Prevention of Cigarette Smoking Through Mass

Media Intervention and School Programs,’’

American Journal of Public Health, vol. 82, pp.

827–834, 1992.

81Flynn, B. S., J. K. Worden, R. H. Secker-Walker,

P. L. Pirie, G. J. Badger, and B. M. Geller, ‘‘Mass

Media Interventions for and School Interventions

for Cigarette Smoking Prevention: Effects Two Years

After Completion,’’ American Journal of Public

Health, vol. 84, pp. 1148–1150, 1994.

82Hanssens, D., and B. Weitz, ‘‘The Effectiveness

of Industrial Print Advertisements Across Product

Categories,’’ Journal of Marketing Research, vol. 17,

pp. 294–306, 1980.

83MacInnis, D. J., and L. L. Price, ‘‘The Role of

Imagery in Information Processing: Review and

Extensions,’’ Journal of Consumer Research, vol. 13,

pp. 473–491, 1987.

84Short, D., ‘‘The Colour of Money,’’ The

European, p. 21, April 10, 1996.

85 Id. Brant was commenting on Pepsi’s decision

to change its brand color to blue.

86Lutz, K. A., and R. J. Lutz, ‘‘Effects of

Interactive Imagery on Learning: Applications to

Advertising,’’ Journal of Applied Psychology, vol.

62, pp. 493–498, 1977; Hendon, D. W., ‘‘How

Mechanical Factors Affect Ad Perception,’’ Journal

of Advertising Research, vol. 13, pp. 39–45, 1973;

See also Holbrook, M. B., and D. R. Lehmann,

‘‘Form Versus Content in Predicting Starch Scores,’’

Journal of Advertising Research, vol. 20, pp. 53–62,

1980; Twedt, D. W., ‘‘A Multiple Factor Analysis of

Continued

lot about who you are, or who you think

you are or want to be.)

Advertising creates a matrix of

attributes for a product or product

category and beliefs about the product

and its possessor. It can serve to convey

images that are recalled later when an

event prompts the consumer to think

about a purchase. Consumers, as a

general rule, overestimate the effect that

advertising has on the market in general,

but they routinely underestimate its

effect upon them and their own

purchasing choices. 77

As discussed in sections VI.B.1.b. and

VI.B.1.c. of this document, advertising

that is diverse, image-laden, and

colorful can be particularly effective in

attracting attention in a cluttered

advertising environment. Further,

advertising that is repeated frequently

and in as many different media as

possible is most likely to ensure that its

message is received by the maximum

number of consumers. This trend

toward the use of many media in a

coordinated effort to communicate an

advertising message supports the need

for a comprehensive approach to

mitigating the effects of tobacco

advertising. 78

Every presentation can add to and

build upon the imagery and appeal

created for a product category or a

particular brand. Print advertising,

direct mail, and outdoor advertising

help to create an image of the brand

(and sometimes an image of the brand’s

user) and provide information about

price, taste, relative safety, and product

developments for current or prospective

users. William Campbell, Chief

Executive Officer of Philip Morris,

explained the importance of linking the

brand imagery in various media in

relationship to the success in marketing

its Marlboro product:

[W]e’ve managed to take what was

originally tunnel vision advertising and

positioning * * * into every kind of avenue

* * *. For example, our auto racing activities

are just another way to express the Marlboro

positioning. Some would say the Marlboro

Cup is different from Marlboro Country, but

it is absolutely consistent. 79

The use of many different media is

also important in advertising directed to

children. An example of a successful

multimedia approach directed to

children is the cigarette smoking

prevention program conducted by Flynn

et al., in Vermont, New York, and

Montana, and cited in the preamble to

the 1995 proposed rule. 80 This effort

combined school cigarette smoking

prevention programs with a mass media

intervention featuring more than 50

different television and radio spots over

a 4-year period. Some communities

received the school cigarette smoking

prevention programs alone, and others

received the school program in

combination with the mass media

intervention. By the final year of the

program, students exposed to both

school and mass media interventions

were 35 percent less likely to have

smoked during the past week than

students exposed only to the school

program. Further, this preventive effect

persisted for at least 2 years following

the completion of the program. 81 The

researchers attributed the effectiveness

of their program in part to the fact that

their intervention used a wide variety of

messages and message styles over a

significant period of time.

Thus, all media collectively along

with the amount of exposure time to

young people, can increase the

effectiveness of the advertiser’s message.

For example, billboards near schools or

playgrounds expose children to

unavoidable advertising messages for a

more prolonged period of time than

billboards they pass on the highway.

Further, sponsored events that typically

last for 2 to 3 hours ensure that those

attending the event or viewing it at

home on television are exposed for a

sustained period of time.

b. Color contributes. Color is an

important component of advertising. It

can be used to promote a ‘‘feeling’’ and

a message—blue is cool, red is hot,

green is menthol. Studies have shown

that four-color advertisements

significantly increase attention and

recall relative to two color or black- and

white- advertisements. 82 Moreover, the

importance of color in advertising

becomes more salient when it is

considered that most consumer behavior

occurs in conditions of ‘‘low

involvement.’’ 83 Low involvement

conditions are those that occur when a

reader skims a magazine advertisement

rather than carefully searching for an

advertisement for information about

price, taste, relative ‘‘safety’’ of the

product, or product improvement.

A recent article in The European 84

described the importance of color:

[S]ecuring a brand colour is more

important than ever, particularly for

companies chasing a youth market. The main

reason is the increasing use of fast and

furious graphics in advertising and marketing

communications generally. ‘‘This makes

owning a colour more and more important.

You can keep changing the graphics, but the

colour remains constant in the consumer’s

mind.’’ Owning a colour also helps when

sponsoring a sports event, for instance, ‘‘All

Pepsi now has to do is put up lots of blue,’’

said Brant. 85

c. The importance of imagery.

Imagery also enhances the ability of

advertising to communicate more

quickly in low involvement situations

and in quick exposure contexts.

Pictorial information is remembered

much better than verbal information, as

pictures perform a function of

‘‘organizing’’ the qualities of the product

as depicted with an image. Generally, as

the pictures or images in an

advertisement increase (both in number

and the proportion of the advertisement

occupied by the image), the

advertisement is more likely to be

recognized, and the brand name more

likely to be remembered. In most cases,

pictorial or image advertising is a more

robust and flexible communications

medium and can be used to

communicate with the functionally

illiterate or the young person in a

hurry. 86
44468 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

Advertising Readership,’’ Journal of Applied

Psychology, vol. 36, pp. 207–215, 1952.

87 Kurnit, P., ‘‘10 Tips From the Top Agency-Exec

Explains How Griffin Bacal Scores with Kids,’’

Advertising Age Supplement, pp. 19–20, February

10, 1992.

88Petty, R. E., and J. T. Cacioppo, Communication

and Persuasion: Central and Peripheral Routes to

Attitude Change, Springer-Verlag, New York, p. 3,

1986.

89See also, Huang, D. P., D. Burton, H. L’Howe,

and D. M. Sosin, ‘‘Black-White Differences in

Appeal of Cigarette Advertisements Among

Adolescents,’’ Tobacco Control, vol. 1, pp. 249–255,

1992.

An executive from Griffin Bacal, one

of the largest advertising agencies in

New York, explained how visual

imagery scored with young people:

Pictures sell. Visuals count * * * even

those visuals that seemingly have nothing to

do with the product sale. * * * [including

locations, sets, props, wardrobe, colors,

numbers, sexes and ages of people in the ads]

* * * Kids want to be like each other. Group

acceptance, and living the life of the gang, is

critical. * * * Similarly, kids define

themselves by the product choices they make

and share. Be sure your advertising makes

the ‘‘world’’ accessible and ‘‘invites’’ the

viewer to join. 87

Evidence from social psychology and

marketing research shows image-based

advertising, such as that employed by

the cigarette and smokeless tobacco

industry, is particularly effective with

young people, and that the information

conveyed by imagery is likely to be

more significant to young people than

information conveyed by other means in

the advertisement.

According to the ‘‘elaborationlikelihood model of persuasion,’’

persuasive communications, such as

advertisements, can persuade people

either: (1) By the ‘‘central route,’’ or (2)

by the ‘‘peripheral route.’’ 88 The central

route refers to the process by which a

person reads the messages or

information contained in the

advertisement and thinks carefully

about it and is influenced by the

strength of its arguments. The

peripheral route is a process in which

individuals, particularly young people,

are more likely to pay attention and be

persuaded by peripheral cues such as

attractive models, color and scenery,

which are unrelated to the primary parts

of the message. Therefore, a young

person, or anyone who is unmotivated

or unable to carefully consider the

arguments in a message, is likely to be

persuaded via the peripheral route.

In markets where most brands in a

product category are similar (as is the

case with cigarettes and smokeless

tobacco products), most advertising

provides little, if any, new information.

Thus, peripheral cues (such as color and

imagery) take on added significance.

Moreover, according to the model, for

children, the motivation and ability to

‘‘elaborate’’ upon the arguments (pay

attention to and think about the factual

information) contained in cigarette and

smokeless tobacco advertising are

relatively low, making young people

more susceptible to influence from

peripheral cues such as color and

imagery.

Finally, according to the comment

from the nation’s largest psychological

association, children generally have less

information-processing ability than

adults, and they are less able or less

willing to pay attention to the factual

information in the advertisements. This

comment stated that because any

possible negative health consequences

associated with using tobacco products

are relatively far in the future for them,

children are less motivated than adults

to carefully consider information such

as tar and nicotine content or the

Surgeon General’s warnings, which are

contained in cigarette and smokeless

tobacco advertising. Thus, the comment

concludes, color and imagery in

advertisements are important

components for young people. 89

A communications researcher who

provided comments on FDA’s 1995

proposed rule for the consolidated

comment of the cigarette industry

asserted that the elaboration likelihood

model was relevant to the way children

respond to tobacco advertising, but took

a somewhat different view than that

expressed above. Specifically, the

comment stated that children are most

likely to use the central route when they

are ego-involved in the subject of

persuasion, and that ‘‘ego-involvement

generally comes from those subjects

which are salient to the groups with

which one is aligned - e.g. peers.’’

However, the comment also stated that

because children would have no real

experiences surrounding the initiation

of cigarette smoking, they would be

likely to engage in peripheral

processing, and would rely on credible

sources, such as peers. The comment

contended,

The reason the elaboration likelihood

model is relevant here is that the decision to

begin smoking cigarettes does not come out

of a set of fixed or habituated experiences

personal to the decision maker. For that

reason this decision is likely to be one on

which a person is particularly susceptible to

the influence of others, and therefore source

credibility becomes key. [Emphasis added].

The agency is not convinced by the

comment. This explanation does not

address children’s responses to tobacco

advertisements—it essentially assumes

that children are influenced by

advertising only insofar as it is filtered

through the experience of their peers.

This reasoning is both circular and

illogical. However, the agency does

concur with the comment’s view that

children typically process tobacco

advertising via the peripheral route, that

children are particularly susceptible to

the influence of others regarding the

decision to start smoking or to use

smokeless tobacco, and that perceived

source credibility plays an important

role. FDA maintains that the ‘‘source’’ of

the persuasive message in tobacco

advertising is frequently conveyed by

the imagery presented in the

advertisement. The same comment

expressed this sentiment, stating

‘‘[s]ince the media consumer often does

not know the writer or broadcaster

personally, the consumer or receiver

may attribute source credibility to the

media themselves.’’ To the extent that

characters featured in tobacco

advertising, such as Joe Camel, the

Marlboro Man or the attractive models

or race car heroes typically portrayed in

such advertising appear credible and

appealing, they are perceived as

credible sources, and could influence

children regarding the decision to

smoke or to use smokeless tobacco

products.

2. Advertising and Adults

(2) Several comments from the

tobacco industry and the advertising

industry stated that cigarette and

smokeless tobacco advertising plays an

important economic role in tobacco

marketing. A comment from the tobacco

industry stated that FDA proposed

restrictions would: (1) Substantially

impair advertising of tobacco to adults;

(2) deprive adults of useful information

about products and services such as

availability, price, and quality; (3)

reduce the incentive and ability to

market improved products; and (4)

deprive adult smokers of the benefits of

competition to provide a broad range of

choices and to assure that tobacco

products are provided at the lowest

possible cost. Consequently, the

comment said that the 1995 proposed

rule would have a far greater adverse

impact on advertising to adults than on

advertising seen by young people.

One comment from an advertising

agency argued that restrictions on the

advertising of tobacco products would

‘‘significantly erode the progress made

over the past 15 years in increasing the

quantity and variety of information

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

benefited and continues to benefit the

public.

Further, several comments argued that

unfettered advertising is consistent with

our Nation’s belief in providing the

broadest possible range of information

to individuals, so that they can exercise

informed judgment in their daily lives.

For these reasons, the comment stated,

further restrictions on the advertising of

legal products would not be in the

public interest and should be opposed.

FDA recognizes, as these comments

maintained, that imagery and color

make advertising appealing to adults, as

well as to children, and that advertisers

consistently use these elements to make

advertisements compelling and

attention getting. Moreover, removal of

color and imagery will make

advertising’s role in presenting

information to adults more difficult.

However, as stated more fully in the

preamble to the 1995 proposed rule,

FDA has attempted to tailor its

advertising restrictions as narrowly as

possible consistent with its purpose of

reducing young people’s attraction to

and use of tobacco. Thus, rather than

banning all advertising, the proposed

regulations retain the informational

function of advertising by permitting

text-only advertising while removing

color and imagery from those

advertisements to which young people

are unavoidably exposed.

FDA does not believe that these

restrictions should dramatically

increase search costs for adult smokers

and smokeless tobacco users who are

actively looking for information on price

and new product innovations. Text-only

advertising requires a high involvement

on the part of the consumer but can

realistically be expected to provide

sufficient information to carry the

message and also provide sufficient

appeal to attract current smokers and

smokeless tobacco users. Some

advertising for low-tar products relies

on text-only or text with few pictures.

If the information about product type

is important and desired by adult

tobacco users, it can and will be

provided by text-only advertisements if

the industry desires to make the

information available. As noted above,

advertising for low-tar cigarettes is

generally high-involvement advertising

at the present and therefore can be

expected to survive in a text-only

environment. Nonetheless, the agency

recognizes that it may be more difficult

for advertising, without imagery and

color, to attract the attention of current

tobacco users. However, the agency has

decided that the public health benefits

of reducing advertising’s ability to

create appeal for young people greatly

outweighs the tobacco companies’

interest in unrestricted advertising to

adults.

The position argued by these

comments is essentially that industry

has the right to communicate freely with

its intended audience regardless of the

impact its advertising has on the illegal

and vulnerable audience of children and

adolescents. Other comments counter

this comment asserting that it is the

Government’s obligation to protect

children because of their special

vulnerabilities, their lack of experience

and knowledge, and their limited ability

to make appropriate decisions regarding

behavior that will have lifelong health

consequences. FDA believes its

obligation with respect to tobacco

products is to safeguard the health and

safety of young people to ensure that

they do not begin a potentially lifelong

addiction to products that cause so

much disease and premature death.

C. The Regulations Under the First

Amendment

1. Introduction

Under section 520(e) of the act (21

U.S.C. 360j(e)), FDA included a number

of proposed conditions in the 1995

proposed rule on how cigarettes and

smokeless tobacco could be advertised

as part of its proposed restrictions on

the sale of these products. The agency

tentatively found that these conditions

are necessary to reduce the advertising’s

ability to create demand for these

products—that is, the desire to purchase

them—among children and adolescents

under 18, for whom these products are

not safe (60 FR 41314 at 41350). In

addition, FDA tentatively found that it

was necessary to include an industryfinanced education program among

these conditions.

In proposing these measures, FDA

recognized that they would have to pass

muster under the protections of

communication extended by the First

Amendment to the United States

Constitution, in particular, under the

protections extended to commercial

speech (60 FR 41314 at 41353). Before

addressing the commercial speech

analysis, however, this section responds

to several comments which registered

more fundamental complaints under the

First Amendment about FDA’s proposed

approach.

(3) Several comments, which were

from the tobacco and advertising

industries, found in statements made by

FDA evidence of an intent not merely to

protect the health of young persons but

to ‘‘delegitimize’’ lawful adult conduct,

to engage in ‘‘viewpoint

discrimination,’’ and to run

‘‘roughshod’’ over the rights of cigarette

and smokeless tobacco companies. One

comment said that it is outside the

realm of permissible exercise of

governmental power to suppress speech

for the purpose of instilling values that

the Federal Government believes are

appropriate. This comment also said

that the purpose of FDA’s rulemaking is

to eliminate speech that conflicts with

Government messages on smoking and

health. The comment noted that FDA’s

goal is to bring about the demise of

smoking as a social custom. However, a

comment from a consumer group

disagreed, saying instead that FDA’s

1995 proposed rule was limited to

covering only those activities designed

to promote the sale of the product to

young people and thus covered only

commercial speech.

FDA has carefully considered these

comments and has taken the concerns

that they expressed into account as it

developed this final rule. The agency

recognizes that its authority is limited

by the act and the Constitution. Thus, it

has scrutinized each of the conditions

on advertising that it proposed in light

of whether the condition advances the

purposes of section 520(e) of the act or

some other section of the act, and

whether the condition is consistent with

the First Amendment.

FDA’s primary concern is the public

health. Because of the potentiality for

harmful effects on individuals under 18

from use of cigarettes and smokeless

tobacco, FDA is adopting restrictions on

advertising among other restrictions on

the sale, distribution, and use of these

products. These restrictions will mean

that it should be more difficult to sell

these products to people under age 18,

who currently purchase these products

in significant numbers.

The agency acknowledges that insofar

as these restrictions help reduce the sale

of tobacco products to young people, the

restrictions will have an adverse effect

on the cigarette and smokeless tobacco

companies. However, this fact does not

mean that FDA is trying to bring about

the demise of the tobacco industry. The

restrictions that FDA is adopting have

been tailored to help reduce tobacco

advertising’s ability to create an

underage market for these products,

while leaving open ample avenues for

cigarette and smokeless tobacco

companies to communicate to current

users 18 years of age or older about their

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

that the First Amendment requires.

(4) Several comments argued that, in

the 1995 proposed rule, FDA had

understated the protection that

commercial speech is afforded under

the First Amendment. These comments

pointed out that advertisers and

consumers have powerful First

Amendment rights to send and receive

commercial messages. To support this

point, one comment pointed out that the

Supreme Court has recognized that the

free flow of commercial information is

‘‘indispensable to proper allocation of

resources in a free enterprise system.’’

(See Virginia State Bd. of Pharmacy v.

Virginia Citizen’s Consumer Council,

Inc., 425 U.S. 748, 765 (1976).) The

comment also pointed out that the Court

went on to say that a ‘‘particular

consumer’s interest in the free flow of

commercial information * * * may be as

keen, if not keener by far, than his

interest in the day’s most urgent

political debate’’ (Id. at 763).

Another comment, however, citing

Ohralik v. Ohio State Bar Ass’n., 436

U.S. 447 (1978), stated that there are

dangers inherent in a free-for-all

marketplace, and that, at times, vigilant

Government action is needed to protect

the public from false, deceptive, or

overbearing sales campaigns.

In addition to the comments, the

agency has considered the Supreme

Court’s recent decision in 44

Liquormart, Inc. v. Rhode Island, 116

S.Ct. 1495 (1996), which was handed

down after the rulemaking record was

closed. The Court ruled unanimously

that Rhode Island’s ban on all

dissemination of price advertising for

alcoholic beverages was violative of the

First Amendment. No rationale for this

judgment commanded a majority of the

Court, however. Nonetheless, FDA

considered each part of the principal

opinion, as well as the concurring

opinions, in arriving at the decisions

that are set forth in this final rule.

FDA in no way underestimates the

protection extended to commercial

speech by the First Amendment. FDA

recognizes the important societal

interests served by this type of speech

and has given full consideration to those

interests in developing this final rule.

Nonetheless, it is also true, as the

agency stated in the 1995 proposed rule

(60 FR 41314 at 41353 to 41354), that

the measure of protection that

commercial speech receives is

commensurate with its subordinate

position in the scale of First

Amendment values, and it is subject to

modes of regulation that might be

impermissible in the realm of

noncommercial expression. (See Florida

Bar v. Went For It, Inc., 115 S.Ct. 2371,

2375 (1995).)

However, in 44 Liquormart, Inc., three

Justices stated:

[w]hen a State entirely prohibits the

dissemination of truthful, nonmisleading

commercial messages for reasons unrelated to

the preservation of a fair bargaining process,

there is far less reason to depart from the

rigorous review that the First Amendment

generally demands.

(116 S.Ct. at 1507)

This statement has no application to

the restrictions that FDA is imposing for

two reasons. First, FDA is not entirely

prohibiting the dissemination of

commercial messages about cigarettes

and smokeless tobacco. As explained in

section VI.E. of this document, it is

adopting carefully tailored restrictions

on the time, place, and manner in which

such messages may be conveyed so that

they are not used to undermine the

restrictions on access by minors.

Second, the restrictions are related to

the bargaining process. As explained in

section II.C.3. of this document in the

discussion of section 520(e) of the act,

the access restrictions, and the

concomitant restrictions on promotion

of these products, derive from the fact

that, at least as a matter of law, minors

are not competent to use these products.

‘‘The protection available for

particular commercial expression turns

on the nature both of the expression and

of the governmental interests served by

its regulation.’’ (See Central Hudson,

447 U.S. at 563.) FDA has weighed these

factors in deciding what restrictions on

cigarette and smokeless tobacco

advertising can appropriately be

included in this final rule.

2. The Central Hudson Test

The comments were unanimous in

agreeing that any restrictions the agency

adopts on commercial speech will be

assessed under the test first articulated

by the Supreme Court in Central

Hudson, 447 U.S. at 563–64. This test

was originally set out as a four-step

analysis in Central Hudson; however, in

one recent case, Florida Bar v. Went For

It, Inc., the Supreme Court described the

test as having three prongs after a

preliminary determination is made,

although the matters to be considered

remain unchanged:

Under Central Hudson, the government

may freely regulate commercial speech that

concerns unlawful activity or is misleading*

* *. Commercial speech that falls into neither

of these categories, * * * may be regulated

if the government satisfies a test consisting of

three related prongs: first, the government

must assert a substantial interest in support

of its regulation; second, the government

must demonstrate that the restriction on

commercial speech directly and materially

advances that interest; and third, the

regulation must be ‘‘narrowly drawn’’ * * *.

(115 S.Ct. at 2376 (citations omitted))

FDA explained in the preamble to the

1995 proposed rule why the restrictions

on advertising that it was proposing met

each requirement of the Central Hudson

test (60 FR 41314 at 41354 and 41356).

The agency received a number of

comments on its analysis—mostly from

the tobacco industry, newspaper or

magazine associations, and advertisers.

These comments argued that FDA’s

proposed restrictions failed under one

or more elements of the Central Hudson

test. The agency also received comments

from a public interest group, which has

the protection of commercial speech as

one of its interests, and from a coalition

of major national health organizations.

Both of these comments argued that, in

virtually all respects, FDA’s proposed

restrictions satisfy the Central Hudson

test.

In the sections that follow, for each of

the restrictions on advertising that the

agency proposed, FDA will analyze the

case law that elucidates the applicable

standard, the information presented in

comments, and all other available

evidence and decide whether that

standard is met. However, before the

agency does so, it must first consider the

preliminary inquiry under Went For It

and decide whether the First

Amendment provides any protection to

the advertising that is restricted by this

final rule.

3. Is Cigarette and Smokeless Tobacco

Advertising Misleading, or Does It

Relate to Unlawful Activity?

As stated earlier, the preliminary

inquiry under the Went for It case is

whether the commercial speech is

misleading or relates to unlawful

activity. FDA did not specifically

address this aspect of the Central

Hudson analysis in its proposal (60 FR

41314 at 41354). Nonetheless, several

comments did.

Many of the comments asserted that

the targeted speech concerns lawful

conduct, and that, therefore, this aspect

of the Central Hudson analysis is

satisfied. One comment noted FDA’s

silence on this matter and said that

there is thus no suggestion that cigarette

advertisements propose an illegal

transaction or urge youths to begin

smoking before it is lawful for them to

do so.

Some comments argued, however,

that cigarette and smokeless tobacco
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44471

90As explained more fully below, FDA finds

unpersuasive the quote from McDonald because it

does not address the means by which cigarette and

smokeless tobacco product advertising influences

minors’ decisions on whether to purchase and use

these products. Therefore, the agency turns to the

legal issue raised by the comments.

91 ‘‘State Laws on Tobacco Control—United

States, 1995,’’ Morbidity and Mortality Weekly

Report (MMWR), CDC, DHHS, vol. 44, No. ss–6, pp.

16–17, November 3, 1995. 92 Id.

advertising is not entitled to First

Amendment protection because it is

misleading, and it concerns unlawful

activity. These comments pointed out

that it is unlawful in all 50 States to sell

tobacco products to children under the

age of 18. The comments said the

evidence that FDA assembled in its

1995 proposal suggested that

manufacturers of tobacco products are

aware that their advertising campaigns

induce minors to experiment with

tobacco products (citing 60 FR 41314 at

41330–41331), and that much of the

promotional efforts of the tobacco

industry are geared toward an illegal

end—inducing minors to try to break

the law by obtaining cigarettes and

smokeless tobacco that may not legally

be sold or otherwise provided to them.

The comments also argued that

governmental entities are entitled to

broad discretion when regulating the

promotion of legal products or activities

that pose dangers to society (citing, e.g.,

United States v. Edge Broadcasting Co.,

509 U.S. 418 (1993)). The comments

argued that cigarette advertising is

designed to persuade minors that any

concerns about health hazards are

misplaced or overstated, and that their

peers are having fun because they

smoke.

Contrary positions were taken by

several comments. One argued that the

fact that the sale of tobacco to minors is

illegal under State law does not remove

the constitutional protection for

advertising to adults an otherwise

lawful product (citing Dunagin v. City of

Oxford, 718 F.2d 738, 743 (5th Cir.

1983) (en banc), cert. denied, 467 U.S.

1259 (1984).) A second comment cited

the conclusion of a respected researcher

that: ‘‘the suggestion that advertising

messages are somehow working

subliminally to twist children’s minds

before they are old enough to know

better is a complete invention, for which

there is no evidence whatever’’ (citing

McDonald, C., ‘‘Children, Smoking and

Advertising: What Does the Research

Really Tell Us?,’’ 12 International

Journal Of Advertising 286 (1993)).

These comments also argued that given

the warnings that must appear in all

tobacco advertising, it could not be

maintained that tobacco advertising is

misleading.

FDA has carefully considered these

comments. They raise the fundamental

question of whether tobacco advertising

is protected by the First Amendment.

This question cannot be disposed of

based simply on the question of whether

such advertising explicitly urges young

people to begin purchasing or using

tobacco products before it is lawful for

them to do so. 90

The Supreme Court has repeatedly

said that commercial speech ‘‘related

to’’ unlawful activity is not entitled to

First Amendment protection. (See 44

Liquormart, Inc., 116 S.Ct. at 1505 n.7

(‘‘ By contrast, the First Amendment

does not protect commercial speech

about unlawful activities.’’); Florida Bar

v. Went For It, 115 S.Ct. 2376 (‘‘Under

Central Hudson, the government may

freely regulate commercial speech that

concerns unlawful activity or is

misleading’’); Bolger v. Youngs Drug

Products Corp., 463 U.S. 60, 69 (1983)

(‘‘The State may also prohibit

commercial speech related to illegal

behavior.’’); Central Hudson, 447 U.S. at

563–564 (‘‘The government may ban * *

* commercial speech related to illegal

activity.’’ (citations omitted)).) Tobacco

advertising is ‘‘related to illegal

activity’’ in two significant respects and

thus, in fact, might not be protected

speech.

First, tobacco ads, at least as a legal

matter, propose a commercial

transaction (see Virginia State Bd. of

Pharmacy v. Virginia Citizens Consumer

Council, Inc., 425 U.S. 748, 762 (1976);

Pittsburgh Press Co. v. Human Relations

Com’n, 413 U.S. 376, 389 (1973)), that

is, to sell cigarettes and smokeless

tobacco. In proposing these transactions,

the advertisers do not differentiate

between adult and minor purchasers.

Because sales to minors are unlawful in

every State, 91 the undifferentiated offer

to sell constitutes, at least in part, an

unlawful offer to sell. At the very least,

these advertisements are clearly

perceived by minors as offers or

inducements to buy and use these

products. Millions of American children

and adolescents act on these perceived

offers. It is estimated that each year

children and adolescents consume

between 516 million and 947 million

cigarette packages and 26 million

containers of smokeless tobacco (60 FR

41314 at 41315). Thus, in a practical

sense, cigarette and smokeless tobacco

advertising is proposing transactions

that are illegal (see Virginia State Board

of Pharmacy v. Virginia Citizens

Council, Inc., 425 U.S. at 772), whether

or not that is the advertiser’s intent. As

such, the protections of the First

Amendment might not attach to such

advertising because it proposes an

illegal transaction. (See Pittsburgh Press

Co., 413 U.S. at 389; Zauderer v. Office

of Disciplinary Counsel, 471 U.S. 626

638 (1985) (‘‘The States and the Federal

Government are free to prevent the

dissemination of commercial speech

that is false, deceptive, or misleading, *

* *, or that proposes an illegal

transaction * * *’’ (citations omitted)).)

Second, even if it is assumed,

arguendo, that cigarette and smokeless

tobacco ads are not, for constitutional

purposes, literal offers to sell to minors,

they nonetheless are ‘‘related to’’ an

unlawful activity. Whether it is the

advertiser’s intent or not, as explained

in sections VI.D.3. through VI.D.6. of

this preamble, cigarette and smokeless

tobacco advertising has a powerful

appeal to children and adolescents

under the age of 18 and through this

appeal, by means of the image that it

projects, it has an effect on a young

person’s decision to use, and thus to

attempt to purchase, tobacco products.

Yet, as stated above, sale of tobacco

products to minors is unlawful in all 50

States, and the purchase, possession, or

use of tobacco products by minors is

unlawful in a majority of States.92 Thus,

the appeal of tobacco advertising to

minors is such that this type of

advertising can appropriately be viewed

as encouraging, and thus being ‘‘related

to’’, illegal activity. As a result, it is

arguable that, without more, FDA would

be able to freely restrict such

advertising.

Nevertheless, the advertising also

relates to lawful activity—the sale of

tobacco products to adults.

Consequently, FDA may not have

unlimited discretion to regulate tobacco

advertising. (See Dunagin v. City of

Oxford, 718 F.2d at 743.) At the very

least, however, FDA should be afforded

discretion to do what it has tried to do

in these regulations; that is, to

distinguish advertising that ‘‘relates to’’

commercial activity that, in substantial

respects, is unlawful, the sale of tobacco

products to children, from advertising

that does not.

Significantly, the Supreme Court was

confronted with a situation similar to

this in United States v. Edge

Broadcasting. In Edge, the Supreme

Court upheld a Federal statute that

prohibited advertising that ‘‘related to’’

unlawful activity (broadcast of lottery

advertising by a broadcaster licensed to
44472 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

a State that does not allow lotteries), but

not advertising that did not relate to

unlawful activity (broadcasting of

lottery advertising by a broadcaster

licensed to a State that allowed a

lottery.)

Edge was recently cited with approval

by the plurality opinion in 44

Liquormart Inc., 116 S.Ct. at 1511.

Justice Stevens (joined by Justices

Thomas, Kennedy, and Ginsburg)

reasoned that the statute in Edge ‘‘was

designed to regulate advertising about

an activity that had been deemed illegal

in the jurisdiction in which the

broadcaster was located.’’ He contrasted

the statute in Edge to the statute in 44

Liquormart which ‘‘targets information

about entirely lawful behavior’’ (Id.).

Thus, the Supreme Court has

countenanced distinctions in how

speech is regulated that are based on

whether the underlying conduct to

which the speech relates is entirely

lawful or not. That is exactly the type

of distinction that FDA is drawing here.

Thus, a credible argument can be

made that advertising of cigarettes and

smokeless tobacco, at least to the extent

that it is related to sale of these products

to children under 18, is not speech

protected by the First Amendment, and

thus that the regulations that FDA is

adopting restricting such advertising are

subject only to review under an

arbitrary or capricious standard. (See

Florida Bar v. Went For it, Inc., 115 S.Ct.

at 2376.) However, FDA is not relying

solely on this analysis. Alternatively,

FDA has assumed that a Central Hudson

test, such as that applied in Edge—for

products that relate to both lawful and

unlawful transactions—would be

appropriate here. Therefore, a full

analysis of these restrictions under

Central Hudson follows.

Before proceeding to the Central

Hudson analysis and considering the

comments that bear on it, FDA wants to

emphasize that, even if the First

Amendment applies to tobacco

advertising, the restrictions that the

agency is adopting have very limited

impact on those attributes of

commercial speech that are protected by

the First Amendment. In 44 Liquormart,

Inc., a plurality of the Supreme Court

reemphasized that commercial speech is

protected solely because of the

informational value:

Advertising, however tasteless and

excessive it sometimes may seem, is

nonetheless dissemination of information as

to who is producing and selling what

product, for what reason, and at what price.

So long as we preserve a predominantly free

enterprise economy, the allocation of our

resources in large measure will be made

through numerous private economic

decisions. It is a matter of public interest that

those decisions, in the aggregate, be

intelligent and well informed. To this end,

the free flow of commercial information is

indispensable.

116 S.Ct. at 1505 (emphasis added),

quoting Virginia Board of Pharmacy v.

Virginia Citizens Consumer Council.

The restrictions that FDA is adopting

have virtually no effect on the core

informational function of commercial

speech as described in 44 Liquormart,

Inc. and Virginia Board of Pharmacy.

Except for billboards within 1,000 feet

of schools and playgrounds, which, as

explained below, present special

circumstances, FDA is not restricting

the ability of a manufacturer,

distributor, or retailer to inform the

public about what they are selling, why

they are selling it, or the price of their

products or, for that matter, about the

characteristics of their products or about

any other aspect of what they sell.

FDA’s concerns are about the ability of

manufacturers to use images, color, and

peripheral presentations (such as

sponsorship) in their advertising and

promotion of their products to create

particular appeal for children and

adolescents under 18. Thus, FDA has

designed the restrictions that it is

adopting to ensure that adults can

continue to be informed by the

information in tobacco advertising

while restricting the noninformative

aspects of advertising that appeal to

children and adolescents under the age

of 18. The agency will explain how it

has achieved this end in the discussion

that follows.

4. Is the Asserted Government Interest

Substantial?

Assuming that the Central Hudson

test applies, ‘‘[t]he State must assert a

substantial interest to be achieved by

restrictions on commercial speech.’’

(See Central Hudson, 447 U.S. at 564.)

In the 1995 proposed rule, FDA stated

that this prong of the Central Hudson

test was satisfied because the proposed

regulations serve the substantial

Government interest of protecting the

public health. FDA stated that the

advertising restrictions will help to

reduce the use of cigarettes and

smokeless tobacco by those who are

‘‘the most vulnerable to addiction and,

perhaps, the least capable of deciding

whether to use the products. Decreased

use of these products will reduce the

risk of tobacco-related illnesses and

deaths’’ (60 FR 41314 at 41354).

Most of the comments that FDA

received on this issue, even some from

those who otherwise opposed the

agency’s proposed restrictions, agreed

with the agency that it has a substantial

interest in protecting the health of

individuals under 18 years of age.

(5) Two comments, however, said that

the interest asserted by FDA is

insufficient to justify the proposed

restrictions on speech. One of those

comments said that smoking is a legal

and widespread activity, and that there

is no congressional policy against

smoking. One comment said that while

the Government has a substantial

interest in ensuring that tobacco

products are used by adults only, FDA

is not empowered to protect that

interest.

FDA strongly disagrees with the latter

comments. The Government’s interest in

the public health, and particularly in

the well-being of minors, is wellestablished. (See Action for Children’s

Television v. FCC, 58 F.3d 654, 661

(D.C. Cir. 1995) and 60 FR 41314 at

41354.) In fact, the Supreme Court has

found that there is a compelling, not

merely a substantial, interest in

protecting the physical and

psychological well-being of children,

New York v. Ferber, 458 U.S. 747, 756–

57 (1982), and that the Government’s

interest in the well-being of youth and

in parents’ claim to authority in their

own household can justify the

regulation of otherwise protected

expression, FCC v. Pacifica Foundation,

438 U.S. 726, 749 (1978). (See also

Denver Area Educational

Telecommunications Consortium v.

FCC, 64 U.S.L.W. 4706 (in press) (June

28, 1996).)

As the agency has explained in

section II.B. and in the 1996

Jurisdictional Determination annexed

hereto, cigarettes and smokeless tobacco

are drug delivery devices that are

subject to regulation as devices under

the act. Their use by children and

adolescents under 18 presents serious

risk to the health of this segment of the

population. For example, studies show

that the age one begins smoking

influences the amount of smoking one

will engage in as an adult and will

ultimately influence the smoker’s risk of

tobacco related morbidity and mortality

(60 FR 41314 at 41317). In addition, the

risk of oral cancer increases with

increased exposure to smokeless

tobacco products (60 FR 41314 at

41319). Thus, the health of children and

adolescents is related to their use of

cigarettes and smokeless tobacco.

FDA’s compelling interest in the

health and well-being of minors

supports restrictions on cigarette and

smokeless tobacco advertising to ensure
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44473

93 Id.

that advertising does not undermine

FDA’s restrictions on the sale of these

products.

One comment said that while FDA’s

articulated interest in protecting minors

from harm clearly is substantial, this

interest is not served by FDA’s

regulations. According to the comment,

the only goal served directly by the

proposed regulations is that of

delegitimatizing smoking. Two

comments said that under the guise of

protecting adolescents and children,

FDA is trying to ‘‘‘save’ all Americans

from the ‘evils’ of smoking.’’ Two

comments said that the agency is trying

to prevent cigarette advertising from

presenting smoking in a positive light.

One comment, citing Carey v.

Population Services International, 431

U.S. 678 (1977), said that the

Government cannot restrict cigarette

advertising because it legitimizes or

favorably influences a young person’s

views toward tobacco products.

FDA finds no merit in these

comments. Advertisements for cigarette

and smokeless tobacco are not banned

by the restrictions that FDA is adopting.

For example, the companies are free to

use advertising in almost all media that

communicates to adults about the price,

taste, or joys of using their product, as

long as they do so using black-andwhite, text-only advertisements, or

using imagery and color in publications

read primarily by adults. Thus, it is

simply not true that manufacturers will

be prevented from presenting tobacco

use in a positive light or that they will

be prevented from conveying truthful,

nonmisleading information in almost all

media.

These regulations are intended,

however, as explained in section VI.E.

of this document, to prevent

manufacturers from advertising their

tobacco products in a way that

encourages underage individuals to

purchase these products. They are

authorized by sections 520(e) and 502(q)

of the act and are in no way inconsistent

with Carey v. Population Services

International.

Carey involved a challenge to a law

that banned all advertisement of

contraceptives. The Government argued

that advertising contraceptives would

legitimize sexual activity of young

children. The Supreme Court said that

this basis was not a justification for

validating suppression of expression

protected by the First Amendment (431

U.S. at 701).

Carey is distinguishable from the

present situation in several ways. The

advertisements in that case stated the

availability of products and services that

were not only entirely legal but were

constitutionally protected because they

involved the exercise of a fundamental

right (Id.). (The Court also struck down

other provisions of the law that

prohibited distribution of contraceptives

to anyone under the age of 16 and by

anyone other than a licensed

pharmacist.) Cigarettes and smokeless

tobacco are neither lawful for all people

nor constitutionally protected. The sale

of these products to individuals under

18 is unlawful in every State (see also,

42 U.S.C. 300x–26), and possession,

purchase, or use of at least some tobacco

products by this segment of the

population is unlawful in a majority of

States. 93 Moreover, there was no

credible suggestion in any of these

comments that the restrictions on the

sale of these products infringe on the

exercise of a fundamental right.

The Supreme Court in Carey made

clear the limited coverage of its holding.

(See 431 U.S. at 702, n. 29 (‘‘We do not

have before us, and therefore express no

views on, state regulation of the time,

place, or manner of such commercial

advertising based on these or other state

interests.’’).) Thus, given the significant

differences in the two situations, Carey

does not limit FDA’s ability to adopt

conditions on advertising that are

designed to ensure that restrictions on

sale to minors are not undermined.

(6) Finally, a group of comments on

this first prong of the Central Hudson

test attacked FDA for being

paternalistic. These comments said that

a principal theme of commercial speech

doctrine is a societal intolerance for

Government-enforced ignorance

designed to ‘‘help’’ consumers who are

not trusted by bureaucrats to evaluate

advertising for themselves. One

comment said that how to balance shortterm gratification against long-term risk

is a uniquely personal analysis that is

best left to individual autonomy rather

than Government censorship. The

comment said that people must be

trusted to perceive their own best

interests without Government

intervention in the information flow.

These comments take on a particular

significance in light of the plurality’s

statement in 44 Liquormart, Inc. v.

Rhode Island, 116 S.Ct. at 1508, that

‘‘[t]he First Amendment directs us to be

especially skeptical of regulations that

seek to keep people in the dark for what

the government perceives to be their

own good.’’

FDA has no disagreement with these

comments with respect to individuals

and, in fact, finds these regulations

cannot fairly be characterized as

paternalistic with respect to that

population group. These regulations do

not prohibit the inclusion of any

information in advertising. They also do

not impose the type of ban on accurate

commercial information that has

characterized the limitations on

commercial speech that the Supreme

Court has branded as paternalistic. (See,

e.g., 44 Liquormart, Inc., 116 S.Ct. at

1510; Virginia Bd of Pharmacy, 425 U.S.

at 769–770.)

The agency acknowledges, however,

that in another respect, these regulations

are paternalistic. These regulations are

specifically aimed at protecting children

and adolescents under the age of 18

from the appeal of tobacco advertising.

The agency finds however, that for it to

be paternalistic with respect to children

and adolescents in no way offends the

First Amendment or Supreme Court

precedent. (See Denver Area

Communications Consortium, Inc. v.

FCC, No. 95–124 (U.S. June 28, 1996)

slip op. at 25.) Nothing in 44

Liquormart, Inc., for example, suggests

in any way that government may not be

paternalistic with respect to children

and adolescents under the age of 18.

In fact, the Supreme Court has stated:

‘‘* * * [T]he law has generally regarded

minors as having a lesser capability for

making important decisions.’’ (See

Carey v. Population Services

International, 431 U.S. at 693, n. 15.)

Given these facts—that most cigarette

smokers smoke their first cigarette

before 18, that children and adolescents

who use tobacco products quickly

become addicted to them before they

reach the age of 18, that among smokers

aged 12 to 17 years, 70 percent regret

their decision to smoke, and 66 percent

state that they want to quit (60 FR

41314)—the decision to smoke is among

the most important that an individual

will make. Significantly, all 50 States

have prohibited sales of cigarettes to

people under 18 years of age. These

regulations have been tailored to help

ensure that individuals do not make a

decision on whether to smoke before

they are 18 and have a greater capacity

to understand the consequences of their

actions, and that they are not influenced

to make this decision before that time by

advertising. At the same time, FDA has

sought to ensure that the restrictions do

not burden any more speech than is

necessary to accomplish this goal. Thus,

FDA’s purpose is not inconsistent with

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

autonomy.

D. Evidence Supporting FDA’s

Advertising Restrictions

1. Introduction

Having considered the preliminary

inquiry and the first prong of the Central

Hudson analysis, the agency turns to the

heart of this analysis, whether the

restrictions on cigarette and smokeless

tobacco advertising that FDA is

imposing are in proportion to the

interest that it is seeking to advance. To

meet its burden on this issue, FDA first

must show that tobacco advertising

plays a concrete role in the decision of

minors to smoke, and that each specific

restriction on this advertising that it is

adopting will contribute to limiting its

effects and thus to protecting the health

of children and adolescents under the

age of 18. The extensive evidence in this

proceeding fully supports these

judgments.

2. Do the Regulations Directly Advance

the Governmental Interest Asserted?

In Central Hudson, the Supreme

Court said that any limitation on

commercial speech that the State

imposes ‘‘must be designed carefully to

achieve the State’s goal’’ (447 U.S. at

564). ‘‘* * * [T]he restriction must

directly advance the State interest

involved; the regulation may not be

sustained if it provides only ineffective

or remote support for the government’s

purpose’’ (Id.).

The Supreme Court elaborated on

what this aspect of the Central Hudson

test requires in Edenfield v. Fane, 507

U.S. 761, 770–771 (1993);

It is well-established that ‘‘[t]he party

seeking to uphold a restriction on

commercial speech carries the burden of

justifying it.’’ * * * This burden is not

satisfied by mere speculation or conjecture;

rather, a governmental body seeking to

sustain a restriction on commercial speech

must demonstrate that the harms it recites are

real and that its restriction will in fact

alleviate them to a material degree * * *.

Without this requirement, a state could with

ease restrict commercial speech in the service

of other objectives that could not themselves

justify a burden on commercial expression.

In Edenfield, the Court struck down a

Florida ban on in-person solicitation by

Certified Public Accountants (CPA’s)

because the State board failed to

demonstrate that the harm it recited was

real.

It presents no studies that suggest personal

solicitation of prospective business clients by

CPAs creates the dangers of fraud,

overreaching, or compromised independence

that the Board claims to fear. The record does

not disclose any anecdotal evidence, either

from Florida or another State, that validates

the Board’s suppositions.

(Id.)

In Rubin v. Coors, the Court struck

down a section of the Federal Alcohol

Administration Act (27 U.S.C. 201 et

seq.) that prohibited beer labels from

displaying alcohol content because the

Government failed to demonstrate that

this restriction would alleviate the

recited harm to a material degree. (See

115 S.Ct. at 1592.) The Court

characterized the Government’s

regulatory scheme as ‘‘irrational’’ (Id.).

See also, Justice Stevens’ opinion in 44

Liquormart, 116 S.Ct. at 1509, 1510. (In

striking down Rhode Island’s ban on

price advertising for failure to

demonstrate that the restrictions would

advance the State’s interest, Stevens,

joined by Justices Kennedy, Ginsburg,

and Souter, found that while the record

‘‘suggests that the price advertising ban

may have some impact on the

purchasing patterns of temperate

drinkers of modest means * * * no

evidence [has been presented] to suggest

that its speech prohibition will

significantly reduce market-wide

consumption.’’ Therefore, Stevens

stated that ‘‘[s]uch speculation certainly

does not suffice when the State takes

aim at accurate commercial information

for paternalistic ends.’’)

Thus, under the applicable case law,

to adopt the proposed restrictions on

cigarette and smokeless tobacco

advertising, FDA must find that it can

conclude from the available evidence

that: (1) Advertising plays a material

role in the process by which children

and adolescents decide to begin or to

continue to use these products; and (2)

Limitations on advertising will

contribute in a direct and material way

to FDA’s efforts to ensure that the

restrictions it is adopting on the sale

and use of tobacco products to minors

are not undermined.

Contrary to what some comments

asserted, it is not necessary for FDA to

establish by empirical evidence that

advertising actually causes underage

individuals to smoke, or that the

restrictions on advertising will directly

result in individuals that are under 18

ceasing to use cigarettes or smokeless

tobacco. It is not necessary in satisfying

this prong of Central Hudson for the

agency to prove conclusively that the

correlation in fact (empirically) exists,

or that the steps undertaken will

completely solve the problem. (See

United States v. Edge Broadcasting Co.,

509 U.S. 418, 434–35.) Rather, the

agency must show that the available

evidence, expert opinion, surveys and

studies provide sufficient support for

the inference that advertising does play

a material role in children’s tobacco use.

In the 1995 proposed rule, FDA

suggested that its judgment as to

whether the governmental interest

involved was directly advanced by its

actions was entitled to some deference.

‘‘The Supreme Court has stated that,

when determining whether an action

advances the governmental interest, it is

willing to defer to the ‘common sense

judgments’ of the regulatory agency as

long as they are not unreasonable’’

(citing, Metromedia Inc. v. City of San

Diego, 453 U.S. 490, 509 (1981) (60 FR

41314 at 41354)).

Several comments took issue with this

suggestion. One comment said that FDA

had mischaracterized Supreme Court

jurisprudence, and two comments said

that courts will defer only to common

sense judgments of legislatures.

FDA disagrees with those comments.

In Florida Bar v. Went For It, Inc., the

Supreme Court said that it had

permitted ‘‘litigants,’’ which it did not

limit to State legislatures, to justify

speech restrictions by ‘‘studies and

anecdotes pertaining to different locales

altogether, * * * or even, in a case

applying strict scrutiny, to justify

restrictions based solely on history,

consensus, and ‘‘simple common sense

* * *’’ (115 S.Ct. at 2378). Thus, FDA’s

reliance on common sense (which, as

made clear in section VI.D.3. through

VI.D.6. of this document, provides only

part of the basis for FDA’s findings) is

justified.

(7) One comment said that, rather

than giving FDA deference, courts

review with special care any regulations

that suppress commercial speech to

pursue a nonspeech-related policy.

FDA disagrees with this comment for

two reasons. First, these regulations do

not suppress commercial speech. While

they limit such speech, they leave open

significant means of communication

about these products. Second, this

comment derives specifically from

footnote 9 of Central Hudson, 447 U.S.

at 566 (‘‘We review with special care

regulations that entirely suppress

commercial speech in order to pursue a

nonspeech-related policy.’’). In that

case, the Supreme Court found that

control of demand for electricity was a

speech-related policy (see 447 U.S. at

569). Similarly, the policy that FDA

seeks to advance here, control of

demand for cigarettes and smokeless

tobacco by minors, is a speech-related

policy.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44475

94Fischer, P. M., M. P. Schwartz, J. W. Richards,

A. O. Goldstein, and T. H. Rojas, ‘‘Brand Logo

Recognition by Children Aged 3 to 6 years: Mickey

Mouse and Old Joe Camel,’’ Journal of the

American Medical Association (JAMA), vol. 266,

pp. 3145–3148, 1991; Mizerski, R., K. Straughn, and

J. Feldman, ‘‘The Relationship Between Cartoon

Trade Character Recognition and Product Category

Attitude in Young Children,’’ presented at

Marketing and Public Policy Conference, 1994.

95For example, Lavidge, R. J., and G. A. Steiner,

‘‘A Model for Predictive Measurements of

Advertising Effectiveness,’’ Journal of Marketing,

vol. 25, pp. 59–62, 1961; McGuire, W. J.,

‘‘Persistence of the Resistance to Persuasion

Induced by Various Types of Prior Belief Defenses,’’

Journal of Abnormal and Social Psychology, vol. 64,

pp. 241–248, 1962.

96Pechmann, C., and S. Ratneshwar, ‘‘The Effects

of Antismoking and Cigarette Advertising on Young

Adolescents’ Perceptions of Peers who Smoke,’’

Journal of Consumer Research, vol. 21, pp. 236–

251, 1994.

97See also, Hock, J., P. Gendall, and M. Stockdale,

‘‘Some Effects of Tobacco Sponsorship

Advertisements on Young Males,’’ International

Journal of Advertising, vol. 12, pp. 25–35, 1993.

98Bonnie, R. J., and B. S. Lynch, ‘‘Time to Up the

Ante in the War on Smoking,’’ Issues in Science

and Technology, vol. 11, pp. 33–37, 1994.

99Chapman, S., and B. Fitzgerald, ‘‘Brand

Preference and Advertising Recall in Adolescent

Smokers: Some Implications for Health Promotion,’’

American Journal of Public Health, vol. 72, pp.

491–494, 1982; Aitken, P. P., and D. R. Eadie,

‘‘Reinforcing Effects of Cigarette Advertising on

Under-Age Smoking,’’ British Journal of Addiction,

vol. 85, pp. 399–412, 1990; Goldstein, A. O., P. M.

Fischer, J. W. Richards, and D. Creten,

‘‘Relationship Between High School Student

Smoking and Recognition of Cigarette

Advertisements,’’ Journal of Pediatrics, vol. 110, pp.

488–491, 1987; Botvin, G. L., C. J. Goldberg, E. M.

Botvin, and L. Dusenbury, ‘‘Smoking Behavior of

Adolescents Exposed to Cigarette Advertising,’’

Public Health Reports, vol. 108, pp. 217–224, 1993;

Klitzner, M., P. J. Gruenewald, and E. Bamberger,

‘‘Cigarette Advertising and Adolescent

Experimentation With Smoking,’’ British Journal of

Addiction, vol. 86, pp. 287–298, 1991; Aitken, P. P.,

D. R. Eadie, G. B. Hastings, and A. J. Haywood,

‘‘Predisposing Effects of Cigarette Advertising on

Children’s Intentions to Smoke When Older,’’

British Journal of Addiction, vol. 86, pp. 383–390,

1991; O’Connell, D. L., H. M. Alexander, A. J.

Dobson, D. M. Lloyd, G. R. Hardes, H. J.

Springthorpe, and S. R. Leeder, ‘‘Cigarette Smoking

and Drug Use in Schoolchildren: II. Factors

Associated With Smoking,’’ International Journal of

Epidemiology, vol. 10, pp. 223–231, 1981;

Alexander, H. M., R. Calcott, A. J. Dobson, G. R.

Hardes, D. M. Lloyd, D. L. O’Connell, et al.,

‘‘Cigarette Smoking and Drug Use in

Schoolchildren: IV. Factors Associated With

Changes in Smoking Behaviour,’’ International

Journal of Epidemiology, vol. 12, pp. 59–66, 1983.

(8) Finally, one comment said that

FDA claimed deference for its common

sense judgments to deflect attention

from the lack of a factual basis for the

1995 proposed rule. Two comments,

however, stated that FDA has compiled

a record on the problem that is more

extensive than any that existed in any

of the cases in which the Supreme Court

upheld restrictions on commercial

speech.

In the discussion that follows, FDA

reviews the evidence on whether

cigarette and smokeless tobacco

advertising affects the decision by

minors to use these products, and

whether the restrictions on advertising

that it is imposing will limit the effect

to a material degree. This review

demonstrates that FDA’s judgment on

these issues is supported not only by

common sense but by studies,

anecdotes, history, expert consensus

documents, and empirical data. All of

this evidence provides support that

restrictions on the advertising of these

products will directly advance the

Government’s interest in protecting the

health of children and adolescents

under 18 years of age.

3. Is There Harm? Does Advertising

Affect the Decision by Young People to

Use Tobacco Products?

a. In general. In the preamble to the

1995 proposed rule, FDA stated that

perhaps the most compelling piece of

evidence supporting restrictions was

that these products were among the

most heavily advertised and widely

promoted products in America. The

agency cited the most recent Federal

Trade Commission (FTC) figures of

overall expenditures for 1993, that

indicated that over $6.1 billion had been

spent by the cigarette and smokeless

tobacco industries to promote their

products in diverse media. These

include magazines, newspapers,

outdoor advertising, point of purchase,

direct mail, in-store, dissemination of

nontobacco items with brand

identification, and sponsorship of

cultural and sporting events.

(9) Several comments from the

tobacco industry and the advertising

industry criticized FDA’s reliance on

the immensity of advertising

expenditures that show that tobacco

products are heavily advertised. The

comments claimed that the size of the

industry advertising budget is not

evidence that it is effective in causing

young people to smoke.Conversely, one

comment concluded that:

[h]ighly repetitious ad exposure likely

leads to judgment biases in both risk and

social perceptions, such as assessments of

smoking prevalence and the social

acceptance experienced by smokers.

The largest psychological association,

in its comments, agreed and stated that

research indicates that young people are

indeed exposed to substantial and

unavoidable advertising and

promotion, 94 even though they have

been banned from radio and television.

Referencing numerous studies, this

comment stated further that:

there is considerable evidence that young

people are exposed to tobacco ads, that those

who smoke are especially likely to be aware

of cigarette advertising, and that liking of

cigarette advertising among young people is

predictive of smoking behavior * * *.

The comment continued that

increasing one’s exposure to advertising

and promotions creates persuasion, and

that reducing that exposure will impede

that process. 95 One study 96 found that

even brief exposure to tobacco

advertising can cause some young

people to have more favorable beliefs

about smokers. 97

FDA did not cite the industry’s

expenditures to indicate that the size of

the industry’s advertising budget was, in

and of itself, a problem, but rather to

show that the very size of the campaign,

and the resultant ubiquity and

unavoidability of the advertising in all

media, created a climate that influences

young people’s decisions about tobacco

use. The ubiquity creates what FDA

referred to in the preamble to the

proposed rule (60 FR 41314 at 41343),

as ‘‘friendly familiarity’’ that makes

smoking and smokeless tobacco use

seem respectable to young people. In its

comments, the advertising agency that

coined this phrase in the 1960’s has

protested that FDA used the phrase

improperly. However, regardless of the

firm’s protest, the agency finds that this

phrase ‘‘friendly familiarity’’ accurately

describes the effect of massive

marketing that uses a variety of media

and saturates potential consumers with

information and imagery. Researchers

have found that ‘‘the ubiquitous display

of messages promoting tobacco use

clearly fosters an environment in which

experimentation by youth is expected, if

not implicitly encouraged.’’ 98

b. Evidence regarding young people’s

exposure to, recall of, approval of, and

response to advertising. Many studies

have demonstrated that young people

are aware of, respond favorably to, and

are influenced by cigarette advertising.

In the preamble to the 1995 proposed

rule, FDA presented a number of studies

examining young people’s exposure to,

recall of, approval of, and response to

cigarette advertising. 99 Collectively,

these studies showed that children who

smoke are more likely to correctly

identify cigarette advertisements and

slogans in which the product names or

parts of the slogans have been removed

than are children who do not smoke,

and that exposure to and approval of

cigarette advertising were positively
44476 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

100Aitken, P. P., D. R. Eadie, G. B. Hastings, and

A. J. Haywood, ‘‘Predisposing Effects of Cigarette

Advertising on Children’s Intentions to Smoke

When Older,’’ British Journal of Addiction, vol. 86,

pp. 383–390, 1991.

101Chapman, S., and B. Fitzgerald, ‘‘Brand

Preference and Advertising Recall in Adolescent

Smokers: Some Implications for Health Promotion,’’

American Journal of Public Health, vol. 72, pp.

491–494, 1982.

102Chassin, L., C. C. Presson, S. J. Sherman, E.

Corty, and R. W. Olshavsky, ‘‘Predicting the Onset

of Cigarette Smoking in Adolescents: A

Longitudinal Study,’’ Journal of Applied Social

Psychology, vol. 14, pp. 224–243, 1984; Collins, L.

M., S. Sussman, J. Mestel Rauch, C. W. Dent, C. A.

Johnson, W. B. Hansen, and B. R. Flay,

‘‘Psychosocial Predictors of Young Adolescent

Cigarette Smoking: A Sixteen-Month, Three-Wave

Longitudinal Study,’’ Journal of Applied Social

Psychology, vol. 17, pp. 554–573, 1987; Sussman,

S., C. W. Dent, J. Mestel-Rauch, C. A. Johnson, W.

B. Hansen, and B. R. Flay, ‘‘Adolescent

Nonsmokers, Triers, and Regular Smokers’

Estimates of Cigarette Smoking Prevalence: When

do Overestimations Occur and by Whom?,’’ Journal

of Applied Social Psychology, vol. 18, pp. 537–551,

1988; 1994 SGR, p. 192–195, citing Burton, et al.,

The L.A./Finland Study; Sherman, S. J., C. C.

Presson, L. Chassin, E. Corty, and R. Olshavsky,

‘‘The False Consensus Effect in Estimates of

Smoking Prevalence: Underlying Mechanisms,’’

Personality and Social Psychology Bulletin, vol. 9,

pp. 197–207, 1983; Botvin, G. J., C. J. Goldberg, E.

M. Botvin, and L. Dusenbury, ‘‘Smoking Behavior

of Adolescents Exposed to Cigarette Advertising,’’

Public Health Reports, vol. 108, pp. 217–224, 1993.

103Pierce, J. P., E. Gilpin, D. M. Burns, E. Whalen,

B. Rosbrook, D. Shopland, and M. Johnson, ‘‘Does

Tobacco Advertising Target Young People to Start

Smoking?’’ JAMA, vol. 266, pp. 3154–3158, 1991;

Fischer, P. M., M. P. Schwartz, J. W. Richards, A.

O. Goldstein, and T. H. Rojas, ‘‘Brand Logo

Recognition by Children Aged 3 to 6 Years: Mickey

Mouse and Old Joe Camel,’’ JAMA, vol. 266, pp.

3145–3148, 1991; Hastings, G. B., H. Ryan, P. Teer,

and A. M. MacKintosh, ‘‘Cigarette Advertising and

Children’s Smoking: Why Reg was Withdrawn,’’

British Medical Journal, vol. 309, pp. 933–937,

1994; Pierce, J. P., L. Lee, and E. A. Gilpin,

‘‘Smoking Initiation by Adolescent Girls, 1944

through 1988: An Association with Targeted

Advertising,’’ JAMA, vol. 271, pp. 608–611, 1991.

104Fischer, P. M., M. P. Schwartz, J. W. Richards,

A. O. Goldstein, and T. H. Rojas, ‘‘Brand Logo

Recognition by Children Aged 3 to 6 Years: Mickey

Mouse and Old Joe the Camel,’’ JAMA, vol. 266, pp.

3145–3148, 1991; Pierce, J. P., E. Gilpin, D. M.

Burns, E. Whalen, E. Rosbrook, D. R. Shopland, and

M. Johnson, ‘‘Does Tobacco Advertising Target

Young People to Start Smoking?’’, JAMA, vol. 266,

pp. 3154–3158, 1991.

105Hastings, G. B., H. Ryan, P. Teer, and A. M.

MacKintosh, ‘‘Cigarette Advertising and Children’s

Smoking: Why Reg was Withdrawn,’’ British

Medical Journal, vol. 309, pp. 933–937, 1994.

106Pierce, J. P., L. Lee, and E. A. Gilpin,

‘‘Smoking Initiation by Adolescent Girls, 1944

through 1988: An Association with Targeted

Advertising,’’ JAMA, vol. 271, pp. 608–611, 1994.

107 Id.; See also Pierce, J. P., and E. A. Gilpin, ‘‘A

Historical Analysis of Tobacco Marketing and

Uptake of Smoking by Youth in the United States:

1890–1977,’’ Health Psychology, vol. 14, pp. 500–

508, 1995. Burns, D. M., L. Lee, J. W. Vaughn, Y.

K. Chiu, and D. R. Shopland, ‘‘Rates of Smoking

Initiation Among Adolescents and Young Adults,

1907–1981,’’ Tobacco Control, vol. 4, supp. 1, pp.

52–58, 1995.

related to smoking behavior and

intentions to smoke.

(10) Several comments from the

tobacco industry and advertising groups

were critical of these studies. The

comments argued that none of the

studies demonstrated that recognition

of, exposure to, or approval of, cigarette

advertising caused the initiation of

cigarette smoking; that smoking in fact

engendered increased exposure to,

approval of and recognition of cigarette

advertising; and that the samples were

inappropriate and not generalizable.

One comment took issue with the way

in which smoking transition was

defined in the Aitken study cited by the

agency. 100 In addition, the same

comment questioned the use of selfreported measures of cigarette

advertising exposure in several of the

studies.

FDA agrees that none of these studies

individually is sufficient to: (1)

Establish that advertising has an effect

of directly causing minors to use

tobacco products; (2) determine

directionality—that is, did advertising

cause the observed effect, or are smokers

more observant of advertising (the

Klitzner, Aitken, et al., and Alexander

studies attempted to control for this

effect); or (3) define terms or disprove

the influence of peer pressure in

smoking behavior.

However, none of these defects is

sufficient to render it inappropriate for

FDA to use the studies as evidence. The

studies, in fact, present useful insight

into how advertising affects smoking

behavior and when considered with

other studies provide sufficient support

for the agency’s conclusions. For

example, one study 101 stated that the

results show that part of the process of

becoming a smoker is to adopt a

preferred brand, which the advertising

and tobacco industries concede is

affected by advertising. Moreover, these

studies clearly indicate that, at a

minimum, advertising plays an

important role in developing an

appealing and memorable image for

brands. Finally, FDA recognizes that

advertising may not be the most

important factor in a child’s decision to

smoke; however, the studies cited by the

agency establish that it is a substantial,

contributing, and therefore material,

factor.

c. Evidence concerning

overestimation of smoking prevalence.

In the preamble to the 1995 proposed

rule, FDA cited numerous studies

finding that children’s misperceptions

about the prevalence of smoking are

related to smoking initiation and the

progression to regular smoking. 102

Further, the evidence indicated that

cigarette advertising plays a role in

leading young people to overestimate

the prevalence of smoking.

(11) Several comments criticized the

overestimation of smoking prevalence

studies presented by FDA in its 1995

proposed rule. The most common

criticism was that the cited studies did

not demonstrate a causal relationship

between either exposure to advertising

or overestimation of smoking prevalence

and intentions to smoke. One comment

noted that some of the cited studies did

not necessarily measure

‘‘overestimation,’’ but instead simply

measured respondents’ perceptions of

smoking levels among their peers and

adults. Another comment argued that

FDA ignored other variables (such as

whether or not one’s friends smoked)

that were predictive of smoking status

or intentions to smoke.

It is true that some of the cited studies

did not measure ‘‘overestimation’’ in the

most literal sense but instead measured

respondents’ perceptions of smoking

levels among peers and adults.

However, the perceived levels were still

uniformly higher among those who

smoked than among those who did not.

The importance of these studies is the

fact that they established differences in

perception between smoking and

nonsmoking young people about the

prevalence, and therefore the

acceptability, of smoking.

d. The effects of selected advertising

campaigns that were effective with

children. In the preamble to the 1995

proposed rule, FDA presented evidence

about two campaigns that appear to

have been particularly effective with

children, and a historical analysis of

trends in U.S. smoking initiation among

10- to 20-year-olds from 1944 to

1980. 103

FDA presented several studies finding

that the ‘‘Joe Camel’’ campaign had a

significant impact on underage smoking

in the United States, 104 and that a

humorous character for Embassy Regal

cigarettes named ‘‘Reg’’ was appealing

to children in the United Kingdom. 105

FDA also cited a recent study that

used data from the National Health

Interview Survey to study trends in

smoking initiation among 10 to 20 year

olds from 1944 through 1980. 106 The

study concluded that tobacco marketing

campaigns that targeted women resulted

in increased smoking uptake in young

women and girls, but not in adults

generally. 107

The Joe Camel Campaign—In the

preamble to the 1995 proposed rule,
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44477

108Pierce, J., et al., ‘‘Does Tobacco Advertising

Target Young People to Start Smoking? Evidence

from California,’’ JAMA, vol. 266, No. 22, p. 3154–

3158, 1991.

109Fischer, P. M., et al., ‘‘Brand Logo Recognition

by Children Aged 3 to 6 Years: Mickey Mouse and

Old Joe the Camel,’’ vol. 266, pp. 3145–3148, 1991;

Mizerski, R., ‘‘The Relationship Between Cartoon

Trade Character Recognition and Product Category

Attitude in Young Children,’’ presented at

‘‘Marketing and Public Policy Conference,’’ May

13–14, 1994.

110 Independent research by Fischer found that 91

percent of 6 year-olds and 30 percent of 3 year-olds

recognized Joe Camel. Fischer, P. M., J. W.

Schwartz, A. O. Goldstein, and T. H. Rojas, ‘‘Brand

Logo Recognition by Children Aged 3 to 6 Years:

Mickey Mouse and Old Joe the Camel,’’ JAMA, vol.

266, pp. 3145–3148, 1991.

111Henke, L., ‘‘Young Children’s Perceptions of

Cigarette Brand Advertising Symbols: Awareness,

Affect and Target Market Identification,’’ Journal of

Advertising, in press.

112Roper Starch, ‘‘Advertising Character and

Slogan Survey,’’ pp. 16–17, November 1993

(conducted for R. J. Reynolds Tobacco Co.).

113 ‘‘1993 Teenage Attitudes and Practices Survey,

Public Use Data Tape,’’ CDC, OSH, p. 3, 1993

(unpublished data).

114 Johnston, L. D., P. M. O’Malley, and J. G.

Bachman, National Survey Results on Drug Use

from the Monitoring the Future Survey, 1975–1993:

vol. I: Secondary School Students, Rockville, MD,

DHHS, Public Health Service (PHS), National

Institutes of Health (NIH), National Institute on

Drug Abuse (NIDA), NIH Pub. No. 94–3809, 1994.

115Henke, L., ‘‘Young Children’s Perceptions of

Cigarette Brand Advertising Symbols: Awareness,

Affect and Target Market Identification,’’ Journal of

Advertising, in press.

FDA described R. J. Reynolds’ (RJR) use

of the cartoon Joe Camel as the

centerpiece of a very successful

campaign that sought to revitalize

Camel cigarettes. The preamble to the

1995 proposed rule described two sets

of studies. One set indicatedthat the

campaign was so pervasive and juvenile

that children as young as 3 to 6 years

old, recognized the Joe Camel character

and knew that he sold cigarettes. The

other set of studies provided evidence

that the campaign had resulted in

Camel’s share of the adolescent youth

market rising from below 4 percent of

underage smokers to between 13 and 16

percent in a short period of time (60 FR

41314 at 41333).

This description of the Camel

campaign produced over 200 comments

from the advertising, tobacco, legal and

publications industries, members of

legislative bodies, State and local

government officials and agencies,

health providers and organizations,

academics, and the general public. The

latter included many anecdotal

references to children’s positive

reactions to the campaign, including

comments from parents, teachers, and

children themselves. One comment,

from a State attorney general, stated that

‘‘in 1993, after reviewing research

documenting the extremely powerful

effect R. J. Reynolds’ ‘Cool Joe Camel’

ads have on children, I joined with 26

other State Attorneys General in

calling’’ for a ban on that campaign.

(12) The comments differed radically

in assessing the accuracy of FDA’s use

of Joe Camel as evidence of the effect of

a youth-oriented campaign. A number of

comments stated that the Joe Camel

campaign was neither directed toward

children nor effective at reaching them,

and that FDA’s evidence did not

support the agency’s position. The

comments criticized the studies cited by

FDA and referred to other studies that

they believed supported their

contention that the Joe Camel campaign

was not directed toward children. For

example, one comment argued there

was no evidence to suggest that brand

recognition had any influence on

smoking initiation. This same comment

also complained that the studies relied

on by FDA were ungeneralizable and

were from medical journals, not

marketing journals. Another comment

argued that the Pierce study cited by the

agency had demonstrated only that

Camel and Marlboro were thought to be

the most advertised brands across all

respondent age groups. 108

Several comments argued that the

finding in the Fischer and Mizerski

studies that children recognize Joe

Camel did not necessarily indicate that

they liked Joe Camel, let alone that they

would be more likely to take up

cigarette smoking. 109 For example,

some comments from the tobacco

industry discussed the Mizerski study

funded by RJR and criticized FDA’s use

of it. FDA, as noted above, had cited this

study in the 1995 proposed rule to show

that 72 percent of 6 year olds and 52

percent of children between the ages of

3 and 6 could identify Joe Camel. 110

This exceeded the recognition rates for

Ronald McDonald, a character

frequently advertised on television. The

comments, however, stated that the

results of the study indicated that while

recognition of the cartoon trade

characters and liking of the associated

product each tended to increase with

age, for Joe Camel, at every age, children

who recognized Joe Camel were more

likely to report disliking cigarettes than

did children who did not recognize Joe

Camel.

Several comments also cited another

study by Henke (the Henke Study), 111

which found results suggesting that

even though recognition of brand

advertising symbols increases with age,

recognition does not necessarily

indicate favorable attitudes about a

product. Although the children in the

study were generally able to recognize

Joe Camel, 97 percent of the

respondents reported that cigarettes

were ‘‘bad for you,’’ and all but one of

the minors stated that cigarettes were for

adults. Several comments also

mentioned a November 1993 Roper

survey of over 1,000 young people

between ages 10 and 17. 112 This survey

found that 97 percent of those youths

who recognized ‘‘Joe Camel’’ had

negative opinions about smoking.

Finally, these comments also stated

that the Joe Camel campaign did not

increase the smoking rates of minors.

The comments cited to data from CDC’s

Office of Smoking and Health’s (OSH’s)

study ‘‘1993 Teenage Attitudes and

Practices Survey, Public Use Data Tape’’

(TAPS II) 113 that show that, contrary to

FDA’s assertion and citation to data

from Monitoring the Future, 114 there

has not been an increase in youth

smoking rates as a result of the Joe

Camel campaign.

Conversely, several comments from

professional associations and many

from private citizens supported FDA’s

tentative conclusion that some tobacco

advertising campaigns—particularly Joe

Camel—are very effective with children.

Some comments referred to the same

research evidence cited by FDA in the

1995 proposed rule.

It is not the agency’s position that the

recognition studies provide evidence of

the effect of this campaign upon the

smoking habits of children. The Henke

study found that children age 6 and

younger do not smoke and uniformly

report that they dislike smoking. 115

However, although young children

usually dislike smoking, many of them

later do smoke. FDA’s point in using the

recognition studies was that advertising

for Camel cigarettes was so pervasive

and appealing to young people that

children saw the advertisements and

assimilated them even though they were

too young to even think about smoking.

These studies provide important

evidence of the pervasiveness of tobacco

advertising.

The Henke study (cited by comments

opposed to the 1995 proposed rule),

which reported that although

recognition of brand advertising

symbols increases with age, recognition

does not necessarily indicate favorable

attitudes toward a product—is subject to
44478 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

116 Dubow, J. S., ‘‘Advertising Recognition and

Recall by Age-Including Teens,’’ Journal of

Advertising Research, pp. 55–60, Sept/Oct 1995.

117 ‘‘Advertising Character and Slogan Survey,’’

pp. 10, 12, 22–23.

118 ‘‘Current Trends: Changes in the Cigarette

Brand Preferences of Adolescent Smokers—United

States, 1989–1993,’’ MMWR, CDC, vol. 43, pp. 577–

581, Aug 19, 1994.

119 Johnston, L. D., P. M. O’Malley, and J. G.

Bachman, National Survey Results on Drug Use

from the Monitoring the Future Study, 1975–1993:

Vol. I; Secondary School Students, DHHS, PHS,

NIH, NIDA, NIH Pub. No. 94–3809, 1994.

many of the same criticisms as those

leveled by the tobacco industry at

studies cited by FDA, and in fact

contains more serious flaws that suggest

that its results should be interpreted

with a great deal of caution.

First, the sample employed in this

study was both inadequate to test the

author’s hypotheses, and is

nongeneralizable to other populations.

There were only 83 participants in the

study; this sample is too small to allow

for adequate power to test the author’s

fine-grained hypotheses concerning age.

In fact, the inadequate sample size led

the author to collapse the participants

into three age groups for many analyses,

which meant that 3-year olds were

placed into the same group as children

who were 5-and-a-half years old. In

addition, participants all were recruited

from middle class neighborhoods in the

same ‘‘small coastal town’’ in Maine.

Racial breakdowns were not presented,

but it is likely, given the demographics

of upstate Maine, that whites were

overrepresented and African-Americans

underrepresented. In addition, males

were overrepresented. At best, the

sample represents the population of 3-

to 8-year-old children in that small town

in Maine, but it is not even clear that

this is the case.

Second, the interview process used to

collect data in the study, and even the

nature of the interviewers themselves,

greatly limit the conclusions that may

be drawn from the study. The study

used six different interviewers, five of

whom were college undergraduates, and

one of whom was a child care

professional. Each interviewer

participated in but a single training

session before collecting data. Further,

not all of the interviewers were blind to

the hypotheses of the study. This is a

great concern, considering the very

subjective nature of the interview. It was

not reported whether who the

interviewer was had significant effects

on the results of the study (and indeed

the sample size is probably too small to

permit such an analysis), but it is

unlikely that all six interviewers

conducted the interviews in precisely

the same way or elicited the same types

of responses from the participants.

The interview process itself appeared

to be highly biased and subjective in

nature. It is not surprising that the

children overwhelmingly reported that

cigarettes were ‘‘bad for you’’ and were

meant for adults, given that they were

being interviewed face-to-face by adult

strangers. Any potential differences

attributable to recognition of cigarette

advertising were probably masked by

the intimidating presence of the

interviewer. Further, the answers to

questions such as ‘‘Do you like this

product or not like this product?,’’ and

‘‘Is this product good for you or bad for

you?’’ can depend to a great extent on

the manner in which they are asked.

Overall, the small, nonrepresentative

sample, the excessive number of

questionable interviewers, and the

interview process itself all cast serious

doubt on the value of this study.

Finally, as noted in the previous

paragraph, children almost uniformly

report that smoking is bad, but many of

them will smoke in the future in part

due to the appeal created for the

product by advertising.

Additional studies—Two additional

studies on this issue of recognition were

submitted to the docket. The first, an

article by Joel S. Dubow, 116 merely

commented on several general studies

on recall of advertising. The result was

that children and especially adolescents

remember more about advertising than

adults. (FDA agrees with the point that

advertising is more memorable to

children.) Further, all the

advertisements tested, and those that

children and adolescents remembered

so well, were either on television or

presented in a movie theater setting.

Children and adolescents are more

visually oriented than adults; they

remember what they see on television.

However, as noted, commercials for

cigarettes are not on television and so

the high recognition rates of Joe Camel

cannot be accounted for on that basis.

Thus, the study begs the same question

that is raised by the Mizerski study:

Where did those 3 to 6 year olds see the

cigarette advertisements they found so

memorable?

The answer may be provided by the

second recognition study submitted by

RJR. One study was conducted by Roper

Starch in November 1993 for RJR and

tested young people’s recognition of

advertising characters. The results of

that study show that Joe Camel was

recognized by 86 percent of all 10 to 17

year olds, in both aided and unaided

recall. The characters with greater

recognition were all televised

characters: the Energizer Bunny, Ronald

McDonald, the Keebler Elves, etc.

Recognition scores for those characters

were in the 97 percent to 100 percent

range. Of more interest, 95 percent of

those who recognized Joe Camel knew

that he sold cigarettes, similar to the

product familiarity rates for the other

characters. 117

But perhaps the most interesting

answers were those provided by the

children who responded that they knew

that Joe Camel sold cigarettes. In

response to the question, ‘‘[p]lease tell

me the ways that you might have seen

or heard about this character,’’ 51

percent said the information came from

a billboard advertisement, 45 percent

said from an advertisement in a

magazine, 32 percent said from an

advertisement in the store, and 22

percent said on a tee shirt. A sizable

group said they had seen him on

television (42 percent). On the other

hand, all the other characters were

identified as having been on television

(88 percent to 100 percent). Recognition

based upon billboard exposure for these

other characters was between 6 percent

and 13 percent. Most were not

recognized as having been on tee shirts.

Clearly, cigarettes are marketed

differently than most consumer

products; nonetheless, whatever the

marketing mix used by the tobacco

industry, cigarette advertisements are

clearly being seen and assimilated by

those too young to be interested in or to

have started smoking.

A second type of study, provided

evidence of the effect of this campaign

on adolescent smoking rates. As noted,

one comment disputed that there was a

rise in young people’s smoking rates

that corresponded to the introduction of

the Joe Camel campaign. The

significance of this argument is that if

smoking rates after the introduction of

the Joe Camel advertising campaign did

not rise, there is little reason to believe

that the campaign caused young people

to take up smoking. This comment

referred to its own analysis of smoking

trends, which it stated were derived

from TAPS II 118 data and not from the

data in Monitoring the Future used by

FDA. 119

FDA has provided a more detailed

answer to this comment above. As

explained there, the agency finds this

comment to be without merit. The

Monitoring the Future study is the most

consistent source of data available on

youth smoking rates. RJR’s expert, Dr. J.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44479

120Beales, J. H., ‘‘Teenage Smoking: Fact and

Fiction,’’ The American Enterprise, vol. 21, March/

April 1994.

121 Johnston, L. D., P. M. O’Malley, and J. G.

Bachman, National Survey Results on Drug Use

from the Monitoring the Future Study, 1975–1994,

Vol. I: Secondary School Students, DHHS, PHS,

NIH, NIDA, NIH Pub. No. 94–3809, 1995.

122FTC analyzed the complaint recommendation

before it under its unfairness jurisdiction. An action

is unfair if it causes substantial consumer injury,

without offsetting benefits to consumers or

competition, which consumers cannot reasonably

avoid. (International Harvester, 194 FTC 949, 1070,

1984.)

Howard Beales, III, has referred to it as

‘‘[t]he most consistent data available’’ to

track the incidence of teen smoking over

time. 120 Moreover, Dr. Beales noted that

other Government studies are

‘‘sporadic’’ and, by implication, cannot

be relied upon to give an accurate

picture of overall smoking trends.

The Monitoring the Future Study

indicates that from 1987 to 1993, the 30-

day smoking rates and daily smoking

rates for male high school seniors

increased steadily, although with

variations in some years. 121 During that

same period, Camel’s share of the youth

market rose from below 4 percent to

around 13 percent (60 FR 41314 at

41330).

These data do not absolutely prove

that Camel advertising ‘‘caused’’ a rise

in youth smoking. However, they do

provide further evidence that the Joe

Camel campaign had an effect on youth

smoking rates.

(13) Comments from the tobacco

industry maintained that FTC’s

investigation, which failed to produce

‘‘evidence to support’’ FTC action

against RJR for the Joe Camel campaign,

should have been dispositive of the

issue. Therefore, the comments argued,

it is inappropriate for FDA to use the

campaign as evidence that advertising

causes children to start to smoke. The

comments maintained that the FTC

review included the same studies relied

upon by FDA to condemn the Joe Camel

campaign.

Comments stated further that

Congress has vested jurisdiction in FTC

to prosecute unfair and deceptive

advertising of tobacco products, and

that it has sole jurisdiction in this area.

(See Federal Trade Commission Act (the

FTC Act) (15 U.S.C. 41).) These

comments noted further that FTC has

shown its ability to fulfill its

responsibilities in this area, citing two

recent consent agreements secured by

FTC. One was against RJR for

advertising that disputed some of the

health risks of smoking. (See In the

matter of R. J. Reynolds Tobacco

Company, 113 FTC 344 (1990).) The

other was against American Tobacco

Company for allegedly misleading

statements about tar and nicotine

ratings. (See In the matter of The

American Tobacco Company, Dkt. No.

C–3547 (Consent Order, January 31,

1995).)

On the other hand, comments from

two national health organizations

alleged that the fact FTC concluded it

was unable to take action against Joe

Camel demonstrates that the FTC Act, as

it is currently being interpreted by the

Commission, is not sufficient to protect

American youth from inappropriate

tobacco advertising and that FDA,

therefore, needs to take action under its

authority.

The industry comments

misapprehend FDA’s citation to the Joe

Camel campaign. As noted above, FDA

cited to numerous studies that had been

performed by independent researchers

on children’s recognition of the main

character of a youth oriented advertising

campaign (60 FR 41314 at 41333). The

agency also cited to several documents

that it had obtained that indicated that

RJR may have intended for its Joe Camel

campaign to appeal to and attract young

people (60 FR 41314 at 41330). FDA’s

discussion of the marketing success of

the Joe Camel campaign is not intended

to suggest that FDA had found or

concluded that the Joe Camel campaign

violated any law, but that FDA had

found in that success—tripling Camel’s

share of the youth market—support for

restricting such activities in the future

through rulemaking.

Moreover, FTC did not disagree with

FDA’s use of the campaign. In its

comment to FDA on the 1995 proposed

rule, FTC stated, ‘‘This decision [by FTC

to close the RJR investigation without

issuing a complaint] does not contradict

FDA’s conclusion.’’ FTC continued that

its failure to initiate legal action did not

‘‘mean that cigarette and smokeless

tobacco advertising, in the aggregate, is

not one of a number of factors that

‘play[s] an important role in a youth’s

decision to use tobacco.’’’ 122

(14) The other citation to the Joe

Camel campaign (60 FR 41314 at 41330)

utilized RJR’s documents to illustrate

the youth focus of one advertising

campaign through use of the company’s

own documents. Some comments

received from the tobacco industry

(including one from RJR), trade

associations, and some individuals

disagreed with this use and stated that

the Camel campaign was designed to,

and did in fact, attract the attention of

young adult smokers, aged 18 to 24.

These comments stated that the Joe

Camel campaign was directed to adult

smokers, specifically existing male

Marlboro smokers aged 18 to 24. The

comments stated that the illustrated

character Joe Camel was developed to

reposition the brand by stressing images

and characteristics, such as the ‘‘Smooth

Moves’’ image, which appeal to the

young adult, particularly male,

Marlboro smoker.

Industry comments further stated that

the company conducted no market

research on nonsmokers, and that the

campaign reached adult smokers aged

18 to 24 years. One comment postulated

that it is merely the cartoon form of Joe

Camel that causes people to mistakenly

believe that Joe Camel is child-oriented.

It stated further that many adult

products are advertised using illustrated

characters, such as the Pink Panther for

fiberglass insulation, Garfield the Cat for

a hotel chain, Mr. Clean for household

products, and the Peanuts characters for

life insurance. Moreover, RJR stated that

it made efforts to ensure that the ad

copy and promotional activity for Joe

Camel would not appeal to minors. It

said that a skateboard promotion

proposed by an advertising agency was

rejected by the company because it was

assumed that skateboarding is

disproportionately engaged in by

children and adolescents. Similarly,

marketing research included 25 to 34

year olds ‘‘to serve as a safety check to

make sure that the concept appeal did

not skew too young.’’

These comments further stated that

Joe Camel advertisements were directed

to, and reached, the intended market.

Examples of publications in which the

Joe Camel advertisements were placed

are Cycle World, Penthouse,

Gentleman’s Quarterly, and Road and

Track. Joe Camel’s share of 18 to 24 year

olds increased by 6.9 percentage points,

from 3.2 in 1986, the year before Joe

Camel’s inception, to 10.1 by the end of

1994. The comment stated that Camel’s

and Marlboro’s growth came at the

expense of other brands. These

comments are consistent with the

industry’s assertion that this is the

whole point of cigarette advertising: to

encourage current smokers to buy the

advertised brand either by switching

brands or remaining loyal to their

existing brands. (This comment states

that because there is no evidence that

smoking rates have risen among

adolescents, there cannot be a reason to

believe that Camel’s success among

adolescents came from new, as opposed

to existing, smokers. See section III.B. of
44480 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

123Teague, C., Research Planning Memorandum

on the Nature of the Tobacco Business and the

Crucial Role of Nicotine Therein, pp. 4–5, 1972.

124Teague, C., Research Planning Memorandum

on Some Thought About New Brands for Cigarettes

for the Youth Market, p. 1, 1973.

125 Id., pp. 1–2. 126 Id., pp. 6–7.

this document for a refutation of the

industry assertion that smoking rates

among adolescents are static.)

In contrast, comments from health

organizations and concerned citizens

stated that Joe Camel has been

successful in attracting underage

smokers. These comments further stated

the belief that the campaign was

intended to attract children, citing the

methods of advertising and promotion

employed as evidence of its intention to

appeal to children. For example, one

comment stated: ‘‘* * * T-shirts and

caps, like those marketed with ‘Joe

Camel’ are found in disproportionate

numbers of children.’’

FDA continues to believe that RJR

documents do illustrate the creation of

and execution of a decidedly youthoriented campaign.

FDA finds that previously

confidential RJR documents provide

convincing evidence of the company’s

intention to attract young smokers and

so-called presmokers to its Camel brand.

These documents, identified as RJR

marketing documents and submitted

during the comment period, reflect a

company policy that in order to grow

and ensure a profitable future, the

company must develop new brands that

would appeal to and capture a share of

the youth market. These young people

were described as ‘‘presmokers’’ and

‘‘learners’’ in RJR marketing language

and were identified as being 14 to 18

year olds.

While the documents concerning the

Camel campaign (focus group reports,

etc.) submitted by RJR to the rulemaking

docket do not identify the under-18

group as the company’s target, the

implication arises from the companysubmitted documents that the Camel

campaign was the logical outgrowth of

the planning and forecasting contained

in the heretofore confidential marketing

documents.

In a 1972 memo entitled ‘‘Research

Planning Memorandum on the Nature of

the Tobacco Business and the Crucial

Role of Nicotine Therein,’’ the author,

Claude Teague Jr., Assistant Director of

Research and Development, wrote:

[I]t may be well to consider another aspect

of our business; that * * * the factors which

induce a presmoker or nonsmoker to become

a habituated smoker. * * * He does not start

smoking to obtain undefined physiological

gratifications or reliefs, and certainly he does

not start to smoke to satisfy a nonexistent

craving for nicotine. Rather, he appears to

start to smoke for purely psychological

reasons—to emulate a valued image, to

conform, to experiment, to defy, to be daring,

to have something to do with his hands, and

the like. Only after experiencing smoking for

some period of time do the physiological

‘‘satisfactions’’ and habituation become

apparent and needed. Indeed, the first

smoking experiences are often unpleasant

until a tolerance for nicotine has been

developed. * * * [I]f we are to attract the

nonsmoker or presmoker, there is nothing in

this type of product that he would currently

understand or desire. We have deliberately

played down the role of nicotine, hence the

nonsmoker has little or no knowledge of

what satisfactions it may offer him and no

desire to try it. Instead, we somehow must

convince him with wholly irrational reasons

that he should try smoking, in the hope that

he will for himself then discover the real

‘‘satisfactions’’ obtainable. 123

In 1973, the same author reported in

another memo, ‘‘Research Planning

Memorandum on Some Thought about

New Brands of Cigarettes for the Youth

Market,’’ his thoughts on how to acquire

a portion of the important youth market:

[W]e should simply recognize that many or

most of the ‘‘21 and under’’ group will

inevitably become smokers, and offer them

an opportunity to use our

brands.Realistically, if our Company is to

survive and prosper, over the long-term we

must get our share of the youth market. In my

opinion this will require new brands tailored

to the youth market; I believe it unrealistic

to expect that existing brands identified with

an over-thirty ’establishment’ market can

ever become the ’in’ products with the youth

group. Thus we need new brands designed to

be particularly attractive to the young

smoker, while ideally at the same time being

appealing to all smokers. 124

Mr. Teague then described the factors

he thought must be taken into account

in designing a brand that would attract

young people:

Several things will go to make up any such

new ‘‘youth’’ brands, the most important of

which may be the image and quality-which

are, of course, interrelated. The questions

then are: What image? and What quality?

Perhaps these questions may best be

approached by consideration of factors

influencing pre-smokers to try smoking, learn

to smoke and become confirmed smokers. *

* * For the pre-smoker and ‘‘learner’’ the

physical effects of smoking are largely

unknown, unneeded, or actually quite

unpleasant or awkward. The expected or

derived psychological effects are largely

responsible for influencing the pre-smoker to

try smoking, and provide sufficient

motivation during the ‘‘learning’’ period to

keep the ‘‘learner’’ period going, despite the

physical unpleasantness and awkwardness of

the period. * * * 125

Mr. Teague continues with some

reasons why young people smoke and

then gives advice on the type of

advertising campaign that would appeal

to the presmoker group based on these

reasons:

A. Group Identification—Pre-smokers learn

to smoke to identify with and participate in

shared experiences of a group of associates.

If the majority of one’s closest associates

smoke cigarettes, then there is strong

psychological pressure, particularly on the

young person, to identify with the group,

follow the crowd, and avoid being out of

phase with the group’s value system even

though, paradoxically the group value system

may esteem individuality. This provides a

large incentive to begin smoking.

* * * * *

[The brand’s] promotion should emphasize

togetherness, belonging and group

acceptance, while at the same time

emphasizing individuality and ‘‘doing ones

own thing.’’

B. Stress and Boredom Relief—The teens

and early twenties are periods of intense

psychological stress, restlessness and

boredom. Many socially awkward situations

are encountered. [the documents mentions

smoking gives you something to do with your

hands—find an ashtray etc.]

C. Self-Image Enhancement—The fragile,

developing self-image of the young person

needs all of the support and enhancement it

can get. Smoking may appear to enhance that

self-image in a variety of ways. [Values

mentioned in the document include

adventurousness, adult image.] If one values

certain characteristics in specific individuals

or types and those persons or types smoke,

then if one also smokes he is psychologically

a little more like the valued image. This selfimage enhancement effect has traditionally

been a strong promotional theme for cigarette

brands and should continue to be

emphasized.

D. Experimentation—There is a strong

drive in most people, particularly the young,

to try new things and experiences. This drive

no doubt leads many presmokers to

experiment with smoking, simply because it

is there and they want to know more about

it. A new brand offering something novel and

different is likely to attract experimenters,

young and old, and if it offers an advantage

it is likely to retain those users. 126

In March 1976 R. J. Reynolds’ Research

Department created a memo entitled,

‘‘Planning Assumptions and Forecast for

the Period 19**–1986 for R. J. Reynolds

Tobacco Company.’’ Under a heading,

The Tobacco Industry and R. J.

Reynolds Tobacco Company—

subheading E. Products—the memo

states:

The present large number of people in the

18–35 year old age group represents the

greatest opportunity for long-term cigarette

sales growth. Young people will continue to

become smokers at or above the present rates

during the projection period. The brands

which these beginning smokers accept and
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44481

127An RJR spokesperson referred to these

documents and did not dispute their validity. (See

Levy, D., ‘‘RJR Memo Targeted Teen Market,’’ USA

Today, p. 1D, October 6, 1995; ‘‘Report: Teen

Cigarettes Eyed,’’ AP Online, October 4, 1995.);

Planning Assumptions and Forecast for the Period

197*–1986 for R.J. Reynolds Tobacco Company,

Research Department, 1976.

128Freedman, A. M., and S. L. Huang, ‘‘Reynolds

Marketing Strategy Sought to Get Young Adults to

Smoke Camels,’’ Wall Street Journal, p. B10, col. 3,

November 2, 1995.

129A 1984 strategic research document, authored

by Diane Burrows of R. J. Reynolds and entitled

‘‘Younger Adult Smokers: Strategies and

Opportunities,’’ came to FDA’s attention as a result

of its inclusion as an exhibit attached to a brief filed

by the State of Minnesota and Blue Cross in Ramsey

County District Court in litigation involving the

seven tobacco companies. The document was also

described in numerous press accounts of the event

(e.g., Phelps, D., and J. Hodges, ‘‘Suit: Kids were

focus of Reynolds strategy. Documents filed in

state’s lawsuit against the tobacco industry show

how R. J. Reynolds targeted young smokers as

critical to the industry’s future,’’ Star Tribune, 1A,

July 11, 1996; Worklan, P., ‘‘R. J. Reynolds Secret

Report Targets Young Adult Market,’’ Chicago

Tribune, N19, July 11, 1996.) Although the agency

has not relied on this memo as part of the

justification for this rule, FDA is citing to it here

because it is relevant to the issues discussed.

The memo indicates that by 1984, R. J.

Reynolds was beginning to conduct research on the

concepts detailed above that were developed during

the 1970’s. The memo describes the problem facing

Reynolds at that time of declining market share and

then proposed a solution: ‘‘RJR’s consistent policy

is that smoking is a matter of free, informed, adult

choice which the Company does not seek to

influence. However, in order to plan our business,

we must consider the effects those choices may

have on the future of the Industry. Furthermore, if

we are to compete effectively, we must recognize

the imperative to know and meet the wants of those

who are 18 and have already elected to smoke, as

well as those of older smokers (emphasis added).’’

The memo recognizes several important facts:

‘‘The renewal of the market stems almost entirely

from 18-year-old smokers. No more than 5% of

smokers start after age 24.’’Moreover, the memo also

recognizes that: ‘‘[t]he brand loyalty of 18-year-old

smokers far outweighs any tendency to switch with

age. Thus, the annual influx of 18-year-old smokers

provides an effortless, momentum to successful

‘first brands’.’’

These ‘‘first brands’’ were identified as those

which appeal to the 18-year-old smoker rather than

switchers ages 19–24.

The memo identifies additional factors that had

to be considered in this calculus: (1) Although 18-

to 24-year-olds account for a very small part of

market share, this age group represents the future

of a brand. Those young, brand loyal smokers who

now consume very few cigarettes, will consume

more cigarettes with age and generally remain loyal

to this first brand, its brand family or to the

company; (2) Although young smokers are easier to

switch than older smokers, a brand can not rely

exclusively on switching younger smokers to

produce a lasting brand equity—the major and most

important share advantage available to a company

is to have a cigarette brand relevant to young people

and accepted by them as their ‘‘first brand.’’

The reports’s recommendation was to research

and capitalize on the factors and strategies which

have been successful with youth brands of the past.

This would require devoting substantial resources

to identifying and tracking values, wants, and

media effectiveness relevant to younger people.

Because of the sensitivity of this young market, the

memo continued: ‘‘brand development/

management should encompass all aspects of the

marketing mix and maintain a long term, singleminded focus to all elements-product, advertising,

name, packaging, media, promotion and

distribution. (Emphasis omitted)’’

This must include, the memo stated, a careful

emphasis on the ‘‘imagery and product positives’’

relevant to ‘‘younger adults.’’

130 ‘‘White Paper,’’ Camel Advertising

Development, p. 1, undated.

131Bolger, M. R., ‘‘Camel ‘Big Idea’ Focus

Groups—Round II,’’ Marketing Research Report,

September 21, 1988.

use will become the dominant brands in

future years. Evidence now available * * *

indicate[s] that the 14 to 18 year old group

is an increasing segment of the smoking

population. RJR must soon establish a

successful new brand in this market if our

position in the industry is to be maintained

over the long term.

(Emphasis omitted.) 127

By the mid to late 1980’s, RJR was

marketing its newly revitalized Camel

brand to ‘‘young adults’’ 18 to 20 years

old. According to an internal memo

cited in the Wall Street Journal, 128 the

business plan for 1990 had a singleminded focus on getting young adults,

especially the 18 to 20 year olds, to

smoke Camels. The brand was to be

refocused on young adult smokers, aged

18 to 24 with a strong emphasis on

males 18 to 20. 129

Documents submitted by RJR in its

comment detail its plans for developing

and promoting Joe Camel as the

spokescharacter for the brand. In

language reminiscent of the 1973

Teague memo, RJR reemphasized the

importance of the young adult smokers

(which RJR nicknamed the ‘‘YAS’’)—

noting that only 5 percent of smokers

start after age 24. 130 The paper noted

that 40 percent of the ‘‘virile’’ segment

have made a brand choice at age 18—

a brand to which they will be loyal for

years or throughout their smoking

career. Thus, although this document

describes the YAS as 18 to 24 year olds,

the company’s interest appears to have

been with those younger than 18 who

are in the process of selecting their first

brand, the 14 to 18 year olds described

by Teague.

In addition, the problem, the White

Paper emphasized, was that Camel

needed a facelift to make it relevant to

this YAS group. Research, they noted,

indicates that YAS see advertising as

‘‘younger adult oriented’’ when it is

speaking directly to them. Therefore,

advertising needed to be developed to

speak to the target audience, to appeal

to the ‘‘hot buttons’’ of young people

such as to ‘‘escape into imagination.’’

‘‘Fantasy to these smokers can mean

imagining a place to escape to or an

image of yourself that is better than

reality.’’

The YAS group also relates to

excitement and fun, noted the White

Paper: ‘‘Younger adults center their

lives on having fun in every way

possible and at every time possible.

Their definition of success is ‘enjoying

today’ which differentiates them from

older smokers. Advertising which

incorporates an ‘exciting’, ‘fun’,

‘humorous’ theme provides a way for

these smokers to ‘feel good’ about the

message.’’

By 1988 RJR was testing its new ideas

about Camel. It described the results in

a Marketing Research Report, entitled

Camel ‘‘Big Idea’’ Focus Groups—

Round II dated September 21, 1988, and

written by M. R. Bolger. The group was

composed of male Marlboro smokers

ages 18 to 34. Two groups were men 18

to 20, two groups were 21 to 24, and one

group was age 25 to 34 to serve as a

‘‘safety check’’ to make sure the concept

did not skew too young. Various themes

were tested and one, ‘‘Smooth Moves,’’

was received best by the younger

portion of the target—those that had

fewer responsibilities, are single, and go

to parties. The focus groups also showed

that premiums (nontobacco items)

performed best among the younger

portion of the group. Older smokers

were more discerning and saw the items

as being of little value to them. 131

What resulted from this research was

the Joe Camel campaign, an unusually

successful effort, particularly with the

group that RJR research documents

discussed—the 14 to 18 year olds. Thus,

RJR appears to have used its research on

18 to 20 year olds to its advantage with

the 14 to 18 year old group—a group

who shares many of the same interests

and ‘‘hot’’ buttons of the older group.

These internal documents complement

those cited in the preamble to the 1995

proposed rule. In the preamble to the

1995 proposed rule, FDA described two

letters from RJR sales managers about

the placement of YAS [Camel]

merchandise. Both letters stated that

high school neighborhoods were a likely

location for YAS. RJR, in its comments

to the proposed rule, stated that those

two letters were mistakes. However,

these latest documents rebut RJR’s

comment. The mistake made by the two

sales representatives was in speaking

too clearly of the company’s intention.

‘‘Reg’’—The second campaign

reviewed by FDA was the ‘‘Reg’’

campaign used in the United Kingdom.

One comment took issue with FDA’s

claim that the ‘‘Reg’’ campaign was
44482 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

132Pierce, J. P., L. Lee, and E. A. Gilpin,

‘‘Smoking Initiation by Adolescent Girls, 1944

through 1988, An Association with Targeted

Advertising,’’ JAMA, vol. 271, pp. 608–611, 1994.

133A more sophisticated example of this type of

time series analysis was published by the FTC to

show that health claims in food advertising could

have a beneficial effect upon people’s consumption

of high fiber breakfast cereals. (Ippolito, P., and A.

Mathios, Health Claims in Advertising and

Labeling, A Study of the Cereal Market, Bureau of

Economics Staff Report, FTC, August 1989.)

134 ‘‘Current Trends: Changes in the Cigarette

Brand Preferences of Adolescent Smokers—United

States, 1989–1993,’’ MMWR, CDC, vol. 43, pp. 577–

581, August 19, 1994; Goldstein, A. O., P. M.

Fischer, J. W. Richards, and D. Creten,

‘‘Relationship Between High School Student

Smoking and Recognition of Cigarette

Advertisements,’’ Journal of Pediatrics, vol. 110, pp.

488–491, 1987.

135 ‘‘Current Trends: Changes in the Cigarette

Brand Preferences of Adolescent Smokers—United

States, 1989–1993,’’ MMWR, CDC, vol. 43, pp. 577–

581, August 19, 1994.

136Teinowitz, I., ‘‘Add RJR to List of Cig Price

Cuts,’’ Advertising Age, pp. 3 and 46, April 26,

1993.

137 Goldstein, A. O., P. M. Fischer, J. W. Richards,

and D. Creten, ‘‘Relationship Between High School

Student Smoking and Recognition of Cigarette

Advertisements,’’ Journal of Pediatrics, vol. 110, pp.

488–491, 1987.

138 ‘‘Current Trends: Changes in the Cigarette

Brand Preferences of Adolescent Smokers—United

States, 1989–1993,’’ MMWR, CDC, vol. 43, pp. 577–

581, August 19, 1994.

particularly effective with British

adolescents and argued that the study

that FDA relied on was based on

unreliable evidence and is not

applicable to American adolescents. The

comment contended that there was no

evidence to show that liking the ‘‘Reg’’

character caused children to smoke and

argued instead that children who

smoked came to like ‘‘Reg.’’ The

comment also argued that the

recognition task, described in the study,

was too suggestive and biased, and

suggested that the young people were

primed and pressured to say they had

seen the advertisements during ‘‘games’’

that they say took place before the

recognition task.

First, this comment is wrong. Games

were played during another portion of

the study, not the one referenced. The

comment confused the quantitative

survey with the qualitative. Second,

evidence from England about youth

smoking habits is no less probative than

evidence from the United States, as it

provides insights into children’s

smoking behavior.

Smoking Trends—A few comments

were critical of the study of trends in

the smoking initiation study, which

found a temporal relationship between

advertising targeted at women and

rising initiation rates among girls and

young women. 132 The principal

criticisms were that the authors failed to

examine the actual advertising

campaigns in question, that FDA failed

to consider alternative explanations for

the study’s findings, and that the study’s

measures were subjective and

unreliable.

In response, the agency reiterates that

it did not cite to this study, or any one

study, as ‘‘proof’’ that advertising during

this period ‘‘caused’’ a rise in smoking

initiation. The study was provided as

one example of targeted marketing being

‘‘associated’’ with increases in cigarette

consumption among young people. 133 A

logical inference to be drawn from the

cumulative effect of such studies is that

advertising does play a role in young

people’s smoking behavior.

e. Evidence that youth brand choices

are related to advertising. Virtually all

of the comments from the tobacco

industry claimed that cigarette and

smokeless tobacco manufacturers

market their products solely to adults.

They disputed the findings of studies,

cited by FDA in the preamble to the

1995 proposed rule, examining

advertising campaigns that had been

particularly effective with children. In

addition, while the comments

acknowledged that younger smokers are

the intended targets for some cigarette

advertising, they argued that only

younger smokers of legal age were

targeted.

In the preamble to the 1995 proposed

rule, FDA presented a number of studies

showing that youth cigarette brand

choices are related to advertising. 134

These studies showed that young people

smoke many fewer brands than adults,

and that their choices are directly

related to the amount and kind of

advertising. While 86 percent of youths

who smoke choose the three most

advertised brands, 135 the most

commonly smoked cigarettes (39

percent) among adult smokers are

brandless (i.e., private label, generics, or

plain packaged products). 136 Another

study found that children who smoke as

few as one cigarette per week can

identify a preferred brand. 137

One comment argued that the CDC

study that found that most children

smoke the three most advertised brands

showed only a correlation between

advertising expenditures and brand

preferences, and that the data did not

even support this correlation

consistently. The comment noted that

the data on which these findings were

based included 18 year olds, who are of

legal age to smoke. The comment also

contended that the data did not allow a

determination of what came first:

Changes in advertising expenditures or

changes in brand preference

(directionality).

The same comment also criticized the

study indicating that children who

smoke as few as one cigarette per week

can identify a preferred brand. In

addition to pointing out that the study

did not demonstrate a causal

relationship and that the sample was

not generalizable, the comment argued

that:

* * * other research has found that

adolescents smoke a smaller number of

different brands than do adults, [the

researchers] tested only the correlation

between adolescent smoking and advertising

recognition. [The researcher] did not know

which brands the adolescents in this study

smoked. [emphasis in original]

Contrary to the comment, these

studies are evidence that, when

considered together, form a coherent

pattern that establishes the role that

advertising plays in young people’s

smoking behavior.

The CDC study 138 provides evidence

of young people’s smoking choices.

Neither the fact that the data included

18-year-olds nor the question of

directionality is sufficient to invalidate

the study’s utility. While the data

available for the study contained 18-

year-old use, there is little difference

between 17- and 18-year-old cigarette

use; certainly not enough to invalidate

the general finding that underage and

18-year-old smokers choose the three

most heavily advertised brands. The

issue of directionality of the results is

no more important. The results showed

that young people chose cigarettes that

are heavily advertised, not ones that are

cheap or low tar, etc. The CDC study, as

noted, did not prove causality—it was

not intended to and it did not.

The comment’s criticism of the study,

which involved children who smoke as

few as one cigarette a week, is not

correct. The researchers did know the

brands that the adolescents in the study

smoked. ‘‘Fifty-two percent of all

students who had used cigarettes

identified a single preferred brand * *

*. One brand of cigarettes (Marlboro)

accounted for 76% of all preferred

brands.’’ The study’s finding is

consistent with every other study of

adolescent brand preference: Marlboro

is the number one brand choice.

The effect of advertising on brand

choice by young people is important. It

shows that young people choose the

imagery of the two or three most highly

advertised brands to smoke, brands that

provide specific definitions of a user.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44483

139RJR-MacDonald, Inc. v. Canada (Attorney

General), S.Ct. of Canada, 100 C.C.C. 3d 449, Sept.

21, 1995.

140Roberts, M. J., and L. Samuelson, ‘‘An

Empirical Analysis of Dynamic, Nonprice

Competition in an Oligopolistic Industry,’’ Rand

Journal of Economics, vol. 19, pp. 200–220, 1988.

The choice permits the user to adopt the

image created by the brand.

f. The Canada advertising case. A

series of comments raises new issues

not considered in the preamble to the

1995 proposed rule.

The September 1995 decision of the

Supreme Court of Canada on the

Canadian Tobacco Products Control Act

(TPCA), 139 enacted to regulate tobacco

advertising and promotion in Canada,

prompted several comments, primarily

from the tobacco industry. The TPCA

banned all tobacco advertising,

restricted the promotion of tobacco

products and required packaging to

display prominent unattributed health

messages and toxic constituent

information. As soon as the TPCA was

enacted in 1988, the tobacco companies

challenged the act as unconstitutional.

On September 21, 1995, the Supreme

Court of Canada found that Parliament

had the criminal law power to legislate

regarding the advertising and promotion

of tobacco products, but that, based on

the record developed in the court below,

the restrictions on advertising and

promotion violated the tobacco

companies’ freedom of expression

guaranteed to all Canadians. Several of

the key sections of the TPCA were

struck down by the Canadian Supreme

Court. The Canadian court ruled that the

government had failed to demonstrate

that the restraints regarding advertising,

promotion, and labeling were

reasonable and justified restrictions on

freedom of expression.

The Canadian court also found that

the government had failed to

demonstrate that less intrusive

measures, falling short of a complete

restriction on advertising and

promotion, would be less effective in

protecting young people from

inducements to use tobacco products.

Further, the Canadian court found that

the government had failed to show that

unattributed health messages were

required to achieve its objective of

reducing tobacco consumption. Finally,

the Canadian court decided that there

was no rational connection between

prohibiting a tobacco product trademark

on a nontobacco product and the

objective of the TPCA. The decision left

the advertising and promotion of

tobacco products substantially

unregulated in Canada.

Because of some similarities between

the Canadian federal tobacco control

strategy and FDA’s proposed regulation,

some comments suggested that the

opinions of the Canadian court are a

basis for rejecting actions and laws

targeting lawful tobacco advertising,

particularly FDA proposed regulations.

Moreover, the comments said that the

Canadian court concluded that the

proposed prohibition on tobacco

advertising could not be sustained

because it ‘‘failed the rational

connection test’’ in that there was no

causal connection ‘‘whether based on

direct evidence or logic and reason’’

justifying the law (100 C.C.C. 3d. 449,

Charter of Rights).

In contrast, one comment suggested

that the ruling on this case is consistent

with FDA’s emphasis on reducing image

advertising directed towards young

people. The comment stated that FDA’s

focus fits the Canadian court’s decision

and had the Canadian government

restricted image advertising rather than

banning all advertising, it would have

upheld the regulation.

FDA does not find the decision of the

Canadian court to be contrary to its

findings. The Canadian court did

recognize that image or lifestyle

advertising can affect overall

consumption. Moreover, contrary to the

comment’s suggestion, the court

specifically recognized that: ‘‘measures

* * * to prohibit advertising aimed at

children and adolescents * * * would be

a reasonable impairment of the right to

free expression, given the important

objective and the legislative context’’

(100 C.C.C. 3d. 449).

Finally, FDA has considered a much

larger quantity of evidence than that

which was before the Canadian court,

including the evidence concerning

nontobacco item ownership by young

people and the materials received

during the comment period. The latter

included the heretofore confidential or

secret documents from RJR’s marketing

department and also those concerning

the results of RJR’s focus groups, which

showed that interest in nontobacco

items was highest among the young.

Thus, FDA considered a much fuller

record than that before the Canadian

court. Moreover, the comment period

provided the agency with additional

evidence concerning various proposed

provisions. FDA’s final rule is thus

based on a very complete and full

record and its decisions are well

justified.

g. Roberts and Samuelson.

Concerning the effect of advertising on

consumption patterns, one study not

considered by the court in Canada, but

cited by FDA in the preamble to the

1995 proposed rule, was an econometric

analysis employed by Roberts and

Samuelson 140 to show that advertising

can increase the market demand for

tobacco products. The study measured

the effect on brand share and market

size of advertising for low and high-tar

cigarettes. The results indicated that

advertising for low tar cigarettes did

increase overall market size.

The study looked at the question of

the effect of advertising not from the

viewpoint of the consumer, but from the

producer’s perspective—how much

should a firm invest in advertising in

order to maximize its profits. A

predicate assumption is that a

manufacturer would not invest in

advertising if the cost did not produce

a return. This study also was conducted

by independent economists and

appeared in a peer reviewed journal.

Several comments criticized the study

as an ‘‘ambitious failure.’’ The industry

comments criticized the study on the

following grounds: The study

inappropriately measures the level of

advertising in messages and not in

expenditures, and the study had

inadequacies in some assumptions and

in the data and these flaws thus call into

question the study’s results. Moreover,

the comments alleged that misallocation

of advertising expenditures may have

biased the results. The results of the

study show that advertising for low tar

cigarettes had a beneficial effect on the

overall level of consumption, but that

the same effect did not occur for high tar

cigarette advertising. The comments

noted that young people do not

consume low tar cigarettes, and

therefore the results are irrelevant to a

discussion of youth smoking. Moreover,

the comments said that the results are

not generalizable to all cigarette

advertising. Finally, the comments said

that population growth may have

accounted for the finding of a

relationship between advertising and

consumption.

The agency disagrees with the

criticisms of this study and finds

instead that it is persuasive evidence of

the effects of tobacco advertising for

low-tar cigarettes on the overall market.

In answer to the first criticism, the study

used messages instead of expenditures

as a measure of advertising in order to

increase the accuracy of the analysis. It

is the messages actually seen by a

consumer, and not the amount spent by

the company on advertising, that is

more relevant in assessing the effect of

advertising. If the cost of advertising
44484 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

141 ‘‘Cigarette Smoking Among Adults—United

States-, 1993,’’ MMWR, CDC, vol. 43, pp. 925–930,

1994.

were to go up, and thus firms would

have to pay more for fewer messages, we

would not expect to find a greater effect

on consumers, which was the effect

shown by the study.

The second issue, that there were

flaws in the study, is similarly not fatal.

As noted in section VI.D.4.d. of this

document, each study utilizes the best

data and methods available at the time.

This may not be the perfect study, but

its flaws are minor and do not affect its

usefulness. Moreover, one major

criticism was with the advertising

variable and as noted more fully in

section VI.D.6.a. of this document data

on advertising expenditures are

generally considered trade secrets by the

companies. Thus, independent

researchers have to use whatever data

are available, even if they are not

perfect. If the industry wanted to ensure

more complete studies, it could release

old data relevant to advertising

expenditures.

Third, the comments complain that

the focus of the study, low-tar

advertising, limits the applicability of

the results. However, the fact that this

study found that advertising for low-tar

cigarettes increased the market is not a

limitation that restricts the results to

that one example. The importance of the

results is that the study shows that

advertising in this oligopolistic industry

can affect the market size. The purpose

of dividing the market into high- and

low-tar advertising was an attempt to

isolate the effect of advertising for each

of the product classes.

Fourth, the comments expressed

concern about the possibility of

population growth as an intervening

factor. Population growth should not

have affected the results as growth

would have affected the high-tar market

as well as the low-tar market, a

consequence that did not occur.

FDA concludes that this study

presents excellent evidence of the effect

of advertising on consumption patterns

and, that it would have provided quite

supportive evidence before the Canada

court for advertising restrictions.

h. The African-American youth

market. Referring to the declining

African American youth tobacco market,

several comments argued that FDA’s

tentative finding in the preamble to the

1995 proposed rule on the relationship

between outdoor cigarette advertising

and tobacco consumption by young

people is incorrect. Comments said that

if cigarette advertising increases the

prevalence of smoking among young

people, the percentage of AfricanAmerican young people who smoke

should be equivalent to that of whites,

because African-American young people

see as much or more cigarette

advertising than do whites. However,

smoking rates for young AfricanAmericans are much lower than for

white young people. One comment

further indicated that African-American

young people’s decision to smoke may

be more responsive to peer influence

and parental and community advice

than cigarette advertising.

It is unclear why African-American

young people do not use tobacco at the

same rate as white young people. It is

surely not that their parents smoke less;

the smoking rate among AfricanAmerican adults is 26 percent, almost

the same rate as for white adults. 141

Whatever may be the reason (and it is

unknown) for the lower smoking rates

among youth among that segment of the

population, it does not provide

sufficient evidence against advertising

restrictions when other evidence shows

that advertising does affect children’s

decisions to use tobacco products.

i. The evidence relating to smokeless

tobacco. A couple of comments argued

that FDA had presented insufficient

evidence regarding the effect of

advertising on the decision to use

smokeless tobacco. One joint comment

from the smokeless tobacco

manufacturers stated:

The studies cited by the agency regarding

cigarette advertisements and smoking are all

either highly flawed, biased, or simply do not

support the agency’s hypothesis. * * * Even

more troubling—and from the standpoint of

sustaining its legal obligation, a fatal flaw—

is the agency’s audacity to propose a virtual

ban on advertising for smokeless tobacco

products without even deigning to build a

case.

The comment is correct that there is

less evidence available regarding

smokeless tobacco advertising practices

and smokeless tobacco use.

Nevertheless, the record contains

sufficient evidence to provide a basis for

applying the advertising restrictions in

the 1995 proposed rule to smokeless

products. In the preamble to the 1995

proposed rule (60 FR 41314 at 41331),

reference was made to the remarkably

successful regeneration of the smokeless

tobacco market by U.S. Tobacco (UST),

the leading smokeless tobacco company,

in the 1980’s. In the 1970’s, the segment

of the population with the highest use

of these products was over age 50, and

young men were among the lowest.

Fifteen years later, there had been a

tenfold increase in the use of smokeless

tobacco by young men, whose use

became double that of men over 50. The

preamble to the 1995 proposed rule

attributed that increase to the concerted

advertising and marketing efforts of

UST.

As detailed more fully in the

preamble to the 1995 proposed rule (60

FR 41313 at 41331), officials at UST

held a marketing meeting in 1968

where, according to the Wall Street

Journal, the vice-president for marketing

said, ‘‘We must sell the use of tobacco

in the mouth and appeal to young

people *** we hope to start a fad.’’

Another official attending the same

meeting was quoted as saying, ‘‘We

were looking for new users-younger

people who, by reputation, wouldn’t try

the old products.’’

Later, Louis Bantle, the chairman of

the board of UST, described the reason

that so many young males use

smokeless tobacco, ‘‘I think there are a

lot of reasons, with one of them being

that it is very ‘macho;.’’ UST’s

advertising utilized the themes that play

well with ‘macho’ boys—rugged

masculine images—and utilized heros to

this group—professional athletes. Bantle

described the success of this program

thus: ‘‘In Texas today, a kid wouldn’t

dare to go to school, even if he doesn’t

use the product, without a can in his

Levis.’’

The UST program also utilized a

promotional program that it called

‘‘graduation strategy’’:

UST distributes free samples of low

nicotine-delivery brands of moist snuff and

instructs its representatives not to distribute

free samples of higher nicotine-delivery

brands. The low nicotine-delivery brands

also have a disproportionate share of

advertising relative to their market share. For

example, in 1983, Skoal Bandits, a starter

brand, accounted for 47 percent of UST’s

advertising dollars, but accounted for only 2

percent of the market share by weight. In

contrast, Copenhagen, the highest nicotinedelivery brand, had only 1 percent of the

advertising expenditures, but 50 percent of

the market share. This advertising focus is

indicative of UST’s ‘‘graduation process’’ of

starting new smokeless tobacco product users

on low nicotine-delivery brands and having

them graduate to higher nicotine-delivery

brands as a method of recruiting new,

younger users.

(60 FR 41314 at 41331)

Therefore, the agency disagrees with

the assertion that it has presented no

evidence to support restricting

smokeless tobacco advertising. In fact, it

finds the graduation strategy to be

strong evidence of the effectiveness of

advertising in targeting young people to

become new users and consistent with

and supported by the general
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44485

142Chassin, L., C. C. Presson, S. J. Sherman, E.

Corty, and R. W. Olshavsky, ‘‘Predicting the Onset

of Cigarette Smoking in Adolescents: A

Longitudinal Study,’’ Journal of Applied Social

Psychology, vol. 14, pp. 224–243, 1984; Collins, L.

M., S. Sussman, J. Mestel Rauch, C. W. Dent, C. J.

Johnson, W. B. Hansen, and B. R. Flay,

‘‘Psychosocial Predictors of Young Adolescent

Cigarette Smoking: A Sixteen-Month, Three-Wave

Longitudinal Study,’’ Journal of Applied Social

Psychology, vol. 17, pp. 554–573, 1987.

143Pechmann, C., and S. J. Knight, ‘‘Cigarette

Ads, Antismoking Ads and Peers: Why do Underage

Youth Smoke Cigarettes?’’ Advances in Consumer

Research, Association for Consumer Research,

edited by Corfman, K. P., and J. G. Lynch, eds.,

Provo, UT, vol. 23, pp. 267–268, 1996.

144Chassin, L., C. Presson, S. J. Sherman, E.

Corty, and R. W. Olshavsky, ‘‘Self-Images and

Cigarette Smoking in Adolescence,’’ Personality

and Social Psychology Bulletin, vol. 7, pp. 670–676,

1981; Barton, J., L. Chassin, C. Presson, and S. J.

Sherman, ‘‘Social Image Factors as Motivators of

Smoking Initiation in Early and Middle

Adolescence,’’ Child Development, pp. 1499–1511,

1982.

145 Id.

146Chassin, L., C. Presson, S. J. Sherman, E.

Corty, and R. W. Olshavsky, ‘‘Self-Images and

Cigarette Smoking in Adolescence,’’ Personality

and Social Psychology Bulletin, vol. 7, pp. 670–676,

1981; Barton, J., L. Chassin, C. C. Presson, and S.

J. Sherman, ‘‘Social Image Factors as Motivators of

Smoking Initiation in Early and Middle

Adolescence,’’ Child Development, pp. 1499–1511,

1982; Belk, R. W., ‘‘Possessions and the Extended

Self,’’ Journal of Consumer Research, vol. 15, pp.

139–168, 1988; Belk, R. W., R. Mayer, and A.

Driscoll, ‘‘Children’s Recognition of Consumption

Symbolism in Children’s Products,’’ Journal of

Consumer Research, vol. 10, pp. 386–397, 1984;

Brown, B. B., M. J. Lohr, and E. L. McClenahan,

‘‘Early Adolescents’ Perceptions of Peer Pressure,’’

vol. 6, pp. 139–154, 1986; Messick, P. M., and C.

C. McClelland, ‘‘Social Traps and Temporal Traps,’’

Personality and Social Psychology Bulletin, vol. 9,

pp. 105–110, 1983; Levy, S. J., ‘‘Meanings in

Advertising Stimuli,’’ Advertising and Consumer

Psychology, Praeger, New York, pp. 214–226, 1986;

Solomon, M. R., ‘‘The Role of Products as Social

Stimuli: A Symbolic Interactionism Perspective,’’

Journal of Consumer Research, vol. 10, pp. 319–

329, 1983.

147Brown, B. B., M. J. Lohr, and E. L.

McClenhanan, ‘‘Early Adolescents’ Perceptions of

Peer Pressure,’’ Journal of Early Adolescence, vol.

6, pp. 139–154, 1986; Messick, P. M., and C. C.

McClelland, ‘‘Social Traps and Temporal Traps,’’

Personality and Social Psychology Bulletin, vol. 9,

pp. 105–110, 1983.

148Nichter, M., and E. Cartwright, ‘‘Saving the

Children for the Tobacco Industry,’’ Medical

Anthropology Quarterly, vol. 5, pp. 236–256, 1991.

149Stacey, B. G., ‘‘Economic Socialization in the

Pre-Adult Years,’’ British Journal of Social

Psychology, vol. 21, pp. 159–173, 1982.

150A July 3, 1974 memo, authored by D. W.

Tredennick, of R. J. Reynolds’ Marketing Research

Department was submitted to the rulemaking

docket by the Attorney General of Mississippi in

response to the reopening of the rulemaking record

(61 FR 11349, March 20, 1996). Although the

agency has not relied on the memo as part of the

justification for this rule, FDA is citing to it here

because it is relevant to the issues discussed. The

memo was also reported in the press, see Schwartz,

J., ‘‘R. J. Reynolds Marketing Memo Discusses

Young Smokers’ Brand Image,’’ Washington Post,

A03, April 23, 1996. The memo asked and

answered the question: ‘‘What causes smokers to

select their first brand of cigarettes?’’ The answers

developed by Mr. Tredennick echos the concepts

discussed above. The memo hypothesized that:

‘‘[t]he causes of initial brand selection relate

directly to the reasons a young person smokes. The

more closely a brand meets the psychological

’support’ needs (advertising or otherwise

communicated brand or physiological needs

(product characteristics), the more likely it is that

a given brand will be selected. (Emphasis added)’’

One important characteristic was associated with

the user ‘‘image’’ associated with a brand. ‘‘To some

extent young smokers ’wear’ their cigarette and it

becomes an important part of the ’I’ they wish to

be, along with their clothing and the way they style

their hair.’’ The memo also recognized the

importance of peer influence on a young person’s

decisions about smoking and noted that: ‘‘It must

also be true that influential young smokers (perhaps

relatively few) have made brand selections based on

product characteristics or advertising and

promotion communication. The fact that two

brands, Marlboro and Kool, have such dominant

shares among youths suggests the above hypothesis

* * *.’’ Tredennick noted further that both Marlboro

and Kool project imagery that is psychologically

important to adolescents—the need for support and

strength.

discussion, see sections VI.B. and VI.D.

of this document.

4. Why Young People Use Tobacco and

the Role of Advertising in That Process

(15) Regardless of the evidence cited

in section VI.D.3. of this document,

many comments argued that children

start to smoke and use smokeless

tobacco because of influences on them

other than advertising, primarily the

influence of their friends and peers.

a. Why young people use tobacco. One

comment cited studies showing that

young people who were most likely to

be smokers were those who were

particularly rebellious or prone to

deviant behavior, 142 and said that it was

counterintuitive that young people

fitting these profiles would want to

conform to what advertising portrayed

as desirable.

Conversely, many comments said that

cigarette advertising, like all advertising

portrays highly attractive images. One

comment stated that when young

people’s peers are also smoking, this can

serve to personalize the images and

make them relevant for their own lives,

and cause them to have favorable

impressions about their friends who

smoke. 143

One comment argued further that

children smoke because they hope to

convey a positive self-image. 144 Hence,

young people may be particularly

vulnerable to being influenced by the

attractive images presented in cigarette

and smokeless tobacco advertising. 145

Specifically, the same comment cited

numerous studies that indicate that

many young people smoke because they

hope to convey a positive image. 146

Based on these studies, the comment

stated: ‘‘Image or impression

management (Schlenker, 1980) has great

utility for young people as they struggle

for social acceptance and autonomy

(citations omitted).’’

Finally, the comment described the

developmental aspects of adolescents

that are relevant to this issue:

With respect to developmental aspects of

adolescence, there are two related factors that

make adolescents especially vulnerable to

being influenced by tobacco advertising.

First, adolescents are typically beginning to

focus on peer group interactions more than

on family interactions (e.g., Brown et al.,

1986), which they may likewise value to a far

greater extent. Second, tobacco use

constitutes a ‘‘temporal trap’’ (Messick and

McClelland, 1983) in the sense that the peer

group benefits of tobacco use are immediate,

while the negative consequences in terms of

health outcomes are so far into the future that

many adolescents, who often see themselves

as invulnerable even in the present, would

consider them to be irrelevant. Furthermore,

the negative social consequences of tobacco

use in adulthood (i.e., social stigmatization *

* *) are also unimportant to adolescents at

the time they are making the decision to use

tobacco products. 147

Stated differently, adolescence is a

time of ‘‘identity formation.’’ Young

people use the attractive imagery of

advertising as a ‘‘window into the adult

world.’’ They are ‘‘susceptible to the

images of romance, success,

sophistication, popularity, and

adventure * * *.’’ 148 By adolescence,

clothes, possessions, and ‘‘badge

products’’ such as cigarettes are used to

define oneself and to control relations

with others. 149

Support for this view of the role of

tobacco advertising also comes from the

tobacco industry:

FDA turns a blind eye to the fact that the

personal display of products with

commercial logo—through dress and other

forms of expression—is a form of

participation in American popular culture. It

is a way to register a group identity to signal

one’s place in the social fabric.

In addition to these comments, FDA has

the words of RJR’s research department

in a 1973 memo, detailed in section

VI.D.3.d. of this document, that chart a

course for attracting the young

smoker. 150

On the basis of the evidence cited and

reviewed in section VI.D.3. of this

document, the agency finds that the

suggestion that it is impossible to

advertise in a way that would appeal to

rebellious nonconformist teenagers is
44486 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

151 Dr. Beales used children’s designation of a

‘‘most advertised brand’’ as a surrogate for the effect

of advertising.

152Beales, J. H., ‘‘Advertising and the

Determinants of Teenage Smoking Behavior,’’ p. 44,

1993.

without merit. Tobacco advertising

plays directly to the factors that are

central to adolescents as they decide

whether to use tobacco products. Thus,

the available evidence clearly supports

a finding that advertising plays an

important role in young people’s

tobacco use.

b. Determinants of smoking. Several

comments from the advertising and

tobacco industries claimed that the

econometric studies performed for them

by experts found that peers, parents,

and siblings have the greatest influence

on young peoples’ decision to start

smoking.

Citing an econometric analysis

performed for RJR by Dr. J. H. Beales, on

data concerning its Joe Camel

advertising campaign, one comment

argued that ‘‘minors balance the risks

and rewards of smoking to decide

whether or not to smoke, just as they

would any other consumption decision.

The greater an individual minor

perceives the net rewards of smoking,

the more likely he or she will try

smoking. Minors who perceive greater

net rewards of smoking are also likely

to smoke more intensively.’’

The comment further argued that an

analysis based upon this theoretical

model by Dr. Beales found that neither

advertising nor advertising expenditures

has an appreciable effect on young

people’s perceptions of the benefits of

smoking and thus would have no

indirect effect on teenage smoking

decisions. 151 More specifically, the

comments stated that the Beales’ studies

show that advertising expenditures for

the particular brands that most

teenagers smoke, Marlboro and Camel,

do not influence and are not associated

with smoking decisions. Moreover, Dr.

Beales reported that the results of his

studies indicate further that advertising

did not have an indirect effect on

smoking behavior. Beales concluded

that minors who had been exposed to

more advertising did not identify the

perceived rewards of smoking—

‘‘smoking helps when bored,’’ ‘‘smoking

helps relax,’’ ‘‘smoking helps with

stress,’’ and ‘‘smoking helps in social

situations,’’ in a greater number than

did those minors who reported less

exposure. The comment concluded that

the failure of the 1993 Beales study to

find either direct or indirect effects from

advertising on smoking behavior should

be conclusive.

FDA does not agree. The 1993 Beales

study presents only one analysis of

youthful smoking and that analysis is

flawed. 152 Dr. Beales appears to have

performed tests using an ordered

logistic regression model to test for: (1)

The effect of advertising on smoking

behavior, using advertising

expenditures and young people’s view

of ‘‘most advertised brand’’ as measures;

and (2) smoking behavior as a function

of a number of psychosocial variables

and determinants.

First, a logistic model is only as good

as the variables used. Thus, if a variable

is mispecified or imprecise, the model’s

predictive capacity will be severely

compromised. The variable ‘‘most

advertised brand’’ appears to be quite

imprecise as a measure to capture the

effect of advertising. The most that this

variable would capture would be the

ability of the campaign to be seen and

remembered. It would not capture the

appeal of the campaign, or the effect of

the campaign on consumers, nor could

it measure the ability of an advertising

campaign to change or create consumer

action. In addition, it would not be

surprising to find that almost as many

nonsmoking young people as young

smokers found Camel (or Marlboro) to

be the most advertised brands, since

those advertising campaigns were quite

ubiquitous at the time the data for this

study were collected and were, in fact,

the most advertised brands. A variable

that cannot discriminate between users

and nonusers, because all had seen and

remembered the advertising, cannot be

expected to produce useful predictive

results in a regression analysis of why

people, particularly young people,

smoke.

Second, Dr. Beales attempted to

determine whether differences in

advertising expenditures would predict

smoking behavior. It appears, however,

that Dr. Beales did not look at this

question longitudinally—that is, he did

not look at whether smoking rates

varied as a function of advertising

expenditures for Camel cigarettes before

the Joe Camel campaign and after the

campaign started. Instead, he appears to

have measured smoking rates as a

function of the differences in regional

advertising expenditures in California

during one time period. It should not be

surprising therefore that little if any

effect on smoking rates was found: (1)

There is no reason to expect to find

significant changes in smoking behavior

based on small regional variations

within one State in advertising

expenditures, and (2) optimum

expenditures for advertising outlays in

any given region would have been

determined in advance by an

advertising agency and therefore would

more likely reflect smoking patterns

already in existence. Had he wanted to

measure smoking behavior as a function

of Camel’s advertising, he should have

modeled it longitudinally over time.

Since the regional advertising

expenditures must have been obtained

from a RJR data base, Beales clearly had

access to other sources of data within

the company. He therefore should have

been able to acquire advertising

expenditures for the Camel brand before

the introduction of Joe Camel and

advertising expenditures for the period

after Joe Camel’s appearance. This

would have been a better test.

Finally, Dr. Beales performed an

analysis to determine the ‘‘true’’

determinants of smoking. Dr. Beales’

regression analysis utilized a series of

psychosocial characteristics and beliefs

about smoking. He found that the only

factor that failed to produce an

association was advertising. First, as

noted, there is no reason to believe that

‘‘most advertised brand’’ would perform

as a useful surrogate for the effects of

advertising. Therefore, regardless of the

value of the study, it is not good

evidence concerning the role of

advertising in young people’s smoking

decision. Second, the analysis indicates

what is already known: certain beliefs

and life patterns can help predict who

may become a smoker. However, it does

not measure what effect advertising can

have on a young person’s perception or

beliefs.

Additional concerns about the study

are similar to those that the tobacco

industry comments raised about studies

cited by FDA. The first concern is that

several variables used in the model

measure the same impact. This

redundancy could create a

multicollinearity problem (i.e., two or

more variables vary together but it is

very difficult to determine which

variable influences the other). Moreover,

the redundancy may have caused

irrelevant variables to be included in the

regression equation. Both

multicollinearity and the inclusion of

irrelevant variables can affect the

efficiency of the model’s estimates. The

second concern is that the model used

in the study is questionable. The correct

model could well have been a double

hurdle model, i.e., modeling the

decision to smoke first and then

modeling the choice of what brand to

smoke, second.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44487

153Laugesen, M., and C. Meads, ‘‘Advertising,

Price, Income, and Publicity Effects on Weekly

Cigarette Sales in New Zealand Supermarkets,’’

British Journal of Addiction, vol. 86, pp. 83–89,

1991.

154The authors cited this study as an example of

one having access to full industry data. Leeflang, P.

S. H., and Reuiyl, ‘‘Advertising and Industry Sales:

An Empirical Study of the West German Cigarette

Market,’’ Journal of Marketing, vol. 49, p. 97, 1985;

Laugesen, M., and C. Meads, ‘‘Advertising, Price,

Income, and Publicity Effects on Weekly Cigarette

Sales in New Zealand Supermarkets,’’ British

Journal of Addiction, vol. 86, pp. 83–89, 1991.

155The American Psychological Association

represents 132,000 members and affiliates and is

the largest organization of psychologists in the

world. Its comment represents the organization’s

‘‘research-based recommendations’’ and reflects

significant input from several relevant divisions

including the Division of Personality and Social

Psychology, the Division of Society for the

Psychological Study of Social Issues, and the

Division of Consumer Psychology.

Finally, there is concern that the data

for the impact of advertising

expenditures and smoking behavior

were incompatible and, thus, may have

failed to find a relationship that did in

fact exist. The teen smoking prevalence

data were from a behavioral study, and

the measurement of advertising

expenditures was from regional

advertising expenditures, undoubtedly

maintained by the company. The

smoking decision for a teenager may

very well not have been influenced by

the amount of money spent but by the

number of messages he/she receives.

The aggregate expenditures for

advertising cannot measure the number

of messages actually received by an

individual teen.

Given the multitude of problems with

the design of the study and the choice

of variables, the study has limited

capability for producing results that can

adequately describe advertising effects

on smoking behavior. Moreover, this

study is but one of many and, whatever

its value, it does not overwhelm the

evidence that FDA has relied on.

c. Laugesen and Meads. In contrast to

the Beales’ study, FDA had cited a study

by Laugesen and Meads, entitled

‘‘Advertising, Price, Income and

Publicity Effects on Weekly Cigarette

Sales in New Zealand

Supermarkets,’’ 153 which provided

evidence that increases in advertising

expenditures had an effect on youth

smoking behavior including recruiting

new smokers and increasing the market

base.

One comment stated that data from

supermarkets were unrepresentative,

both because of the percentage of sales

from supermarkets in New Zealand

(presumably not large), and because it is

not known what percentage of sales to

young people are made at supermarkets.

Moreover, many conditions were not

accounted for, including possible

different pricing structures between

retail outlets.

The comments also criticized several

major assumptions they claim were

made in the study, for example, that

young people purchase the less

expensive, down market brand. Finally,

the comment criticizes the failure to

control for other variables (such as

rotating health warnings and new

advertising restrictions).

The authors themselves responded to

some of the concerns expressed. For

example, they explained that they

specifically chose to collect data from

supermarkets because other ‘‘authors

with access to full industry data 154 have

recommended that the data interval [for

supermarket sales] should reflect the

inter-purchase time for cigarettes,’’

which in New Zealand is a week or less.

Moreover, the authors found that

supermarket cigarette sales are more

consistent than other points of sales.

Hence there were fewer fluctuations in

the demand data for cigarettes.

Moreover, in response to the second

comment, the authors did not assume

that young people purchase

downmarket cigarettes at a higher rate

than the general population, but that

people with lower income, which

includes young people, purchase these

brands more often. But more

importantly, the study found that it

takes only 2 years of advertising of this

downmarket brand to expand the teen

market by 4 percent, and this fact was

not disputed.

d. Other comments. Finally, several

comments criticized the quality of the

evidence cited by FDA in its preamble

to the 1995 proposed rule. One

comment stated that FDA has relied too

heavily on studies conducted by

physicians or others not familiar with

the art and science of persuasion.

Further, it asserted that most of the

evidence cited in support of the

regulations had been published in

medical journals and not in peer

reviewed marketing journals.

However, a review of the evidence

presented belies that concern. First,

FDA relied on the research and expert

opinion of consumer psychologists,

business and marketing experts,

economists and social science

researchers as well as medical experts.

Moreover, FDA has relied on two

outstanding reports issued in the past

few years that specifically addressed the

issue of young people’s use of tobacco—

the 1994 SGR and the IOM Report. Both

commented extensively on the role that

advertising plays in young people’s

smoking behavior and use of smokeless

tobacco and both recommended strongly

that a comprehensive plan to attack the

problem of youth tobacco use include

stringent advertising restrictions.

Moreover, of the 15 members of the

IOM committee, 7 were expert in the

fields of behavioral sciences, including

psychology, psychiatry and public

policy, anthropology, and economics.

Similarly, the contributing authors to

the 1994 SGR included experts in

economics, social research, marketing,

and business administration. Finally,

the comments submitted include

additional empirical evidence, the

expert opinion of the American

Psychological Association, 155 and the

words of the tobacco industry itself, all

of which are referred to in this

document.

One comment criticized FDA’s

reliance on the IOM Report and the

1994 SGR as simply presenting

‘‘selective reviews’’ of much of the same

‘‘dubious literature’’ reviewed by FDA.

Another comment stated that FDA had

indiscriminately relied on studies cited

in the 1994 SGR, none of which, the

comment claimed, was capable of

determining whether advertising

influences children to initiate smoking.

Several comments appeared to place

great importance on the fact that both

reports acknowledge that the

psychosocial and econometric research

that they present do not prove that

cigarette advertising causes young

people to begin smoking or to use

smokeless tobacco. The IOM Report

stated that, because of the nature of the

research, it is not known for certain

whether youths already interested in

smoking or smokeless tobacco become

more attentive to advertisements for

these products or whether these

advertisements lead youths to become

more interested in these products. One

comment argued that the ‘‘IOM’s

recognition of this weakness fatally

undermines its own and FDA’s

arguments on the impact of advertising

on smoking behavior.’’ Another

comment claimed that the IOM Report

acknowledges the lack of a causal

relationship between advertising and

smoking and acknowledges that the very

econometric studies it cites are

unreliable to determine whether

advertising contributes to youth

smoking behavior. The comment also

stated that FDA misstates IOM’s

conclusion regarding evidence of a
44488 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

156 1994 SGR, p. 188.

157 1989 SGR, p. 517.

158 1994 SGR, p. 195. 159 Id., p. 188.

causal relationship between advertising

and smoking initiation. Further, several

comments cited to a statement in the

1994 SGR that ‘‘no longitudinal study of

the direct relationship of cigarette

advertising to smoking initiation has

been reported in the literature.’’ 156

However, these comments failed to

include the sentence immediately

preceding this quote: ‘‘Considered

together, these studies offer a

compelling argument for the mediated

relationship of cigarette advertising and

adolescent smoking.’’

Another comment in support of

advertising restrictions on tobacco

products argued that the

multidisciplinary studies cited in the

1994 SGR supported the conclusion that

marketing and advertising tobacco

products do play a role in tobacco use

among young people. The comment

suggested that this conclusion is

consistent with the 1989 Surgeon

General’s conclusion that ‘‘the collective

empirical, experiential, and logical

evidence makes it more likely than not

that advertising and promotional

activities do stimulate cigarette

consumption.’’ 157 Additionally, the

comment supported the findings of the

1994 SGR that ‘‘cigarette advertising

appears to increase young people’s risk

of smoking’’ by conveying the

impression that smoking has social

benefits and is far more common than

it really is. 158 Moreover, this comment

contended that the IOM’s conclusions

supported FDA’s tentative view that

image advertising of tobacco products is

tremendously appealing to young

people.

As noted more fully in section VI.B.

of this document, FDA did rely heavily

on the two reports, and continues to

find the reports persuasive evidence.

They represent mainstream scientific

consensus and are appropriately

entitled to a great deal of deference. The

agency notes that, in a different but not

entirely unrelated context, that of health

claims for food, Congress has said that

FDA would have to specifically justify

any decision rejecting the conclusions

of a report from an authoritative

scientific body of the United States. (See

section 403(r)(4)(C) of the act (21 U.S.C.

343(r)(4)(C)).) No justification for

rejecting the IOM’s conclusions exists

here.

Finally, the agency, like the 1994 SGR

and IOM Report, finds that an adequate

basis does exist to conclude that

advertising plays a ‘‘mediated

relationship’’ to adolescent tobacco

use. 159 The proper question is not, ‘‘Is

advertising the most important cause of

youth initiation?’’ but rather, ‘‘does FDA

have a solid body of evidence

establishing that advertising encourages

young people’s tobacco use such that

FDA could rationally restrict that

advertising?’’ The answer to this

question is ‘‘yes.’’

5. Has the Agency Met Its Burden?

(16) Several comments from the

tobacco and advertising industries

criticized the agency for failing to

present evidence that conclusively

establishes a causal link between

advertising and young people’s

decisions to begin using cigarettes and

smokeless tobacco.

FDA disagrees that its burden is to

conclusively prove by rigorous

empirical studies that advertising causes

initial consumption of cigarettes and

smokeless tobacco. No single study is

capable of doing so. As one comment

stated, it would in fact be practically

and ethically impossible to conduct

such a study. Certainly no study

presented by industry or any other party

demonstrated that advertising does not

cause the initial consumption of

cigarettes and smokeless tobacco.

Indeed, it should be noted that not one

study cited by FDA or submitted by

industry could conclusively

demonstrate that any factor actually

caused children to begin smoking or to

use smokeless tobacco. This includes

family and peer influences, which the

tobacco industry repeatedly cite as the

major determinants of youth smoking

and smokeless tobacco use. As was

suggested by a comment, however, even

when a young person’s decision to

smoke is strongly influenced by a friend

or parent, advertising reinforces the

decision and makes the young person

feel good about the decision and the

‘‘identity’’ thereby acquired.

It should also be noted that the

apparent focus on the possible causal

role of cigarette and smokeless tobacco

advertising in young people’s initial

decision to smoke or to use smokeless

tobacco is overly narrow. Human

behavior cannot be modeled so

simplistically. In point of fact, tobacco

advertising has an effect on young

people’s tobacco use behavior if it

affects initiation, maintenance, or

attempts at quitting.

The evidence that FDA has gathered

in this proceeding establishes that

cigarette and smokeless tobacco

advertising does have such an effect.

While not all the evidence in the record

supports this conclusion, there is more

than adequate evidence, that when

considered together, supports a

conclusion that advertising, with the

knowledge of the industry, does affect

the smoking behavior and tobacco use of

people under the age of 18. This

behavior includes the decision whether

to start using cigarettes or smokeless

tobacco, whether to continue using or to

increase ones consumption, when and

where it is proper to use tobacco, and

whether to quit. This evidence includes:

Expert opinion—The American

Psychological Association provided

expert opinion, with specific citation to

numerous studies, to show that tobacco

advertising plays directly to the factors

that are central to children and

adolescents and thus plays an important

role in their decision to use tobacco.

(See section VI.D.4.a. of this document;

and 60 FR 41314 at 41329.)

Advertising Theory—Basic advertising

and consumer psychology theory,

statements from advertising experts, and

general consumer testing show that

advertising that is multi-media, that

uses color, and that employs more

pictures, characters, or cartoons as

opposed to text is more robust and can

be better processed, understood and

remembered by children and

adolescents, who have less information

processing ability than adults. (See

section VI.B.1. and VI.B2. of this

document.)

Studies and Surveys—Studies show

that children are exposed to substantial

and unavoidable advertising, that

exposure to tobacco advertising leads to

favorable beliefs about tobacco use, that

advertising plays a role in leading young

people to overestimate the prevalence of

tobacco use, and that these factors are

related to young people’s tobacco

initiation and use. (See sections

VI.D.3.a., VI.D.3.b., and VI.D.3.c. of this

document.)

Empirical Studies—Studies

conducted on sales data have shown

that advertising did increase one

segment of the tobacco market (low tar

cigarettes), that advertising in New

Zealand had the effect of increasing

tobacco sales to young people, and that

a large multi-country survey showed

that advertising tends to increase

consumption of tobacco products. (See

60 FR 41314 at 41333 through 41334;

sections VI.D.3.g., VI.D.4.c., and

VI.D.6.a. of this document)

Anecdotal Evidence, and Various

Advertising Campaigns Successful with
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44489

160Beales, J. H., ‘‘Advertising and the

Determinants of Teenage Smoking Behavior,’’ vol.

44, 1993.

161McDonald, C., ‘‘Children, Smoking and

Advertising: What Does the Research Really Tell

Us?’’, International Journal of Advertising, vol. 12,

pp. 279–287, 1993; Goddard, E., ‘‘Why Children

Start Smoking,’’ British Journal of Addiction, vol.

87, No. 1, pp. 17–25, 1992.

162 Daniels, D., Giants, Pygmies and Other

Advertising People, Crain, Chicago, p. 245, 1974.

163Cohen, J. B., ‘‘Reconceptualizing Alcohol

Advertising Effects: A Consumer Psychology

Perspective,’’ The Effects of the Mass Media on the

Use and Abuse of Alcohol, Research Monograph,

No. 28, Bethesda, MD, NIH, 1995; Goldberg, M. W.,

J. Madill-Marshall, G. J. Gorn, J. Liefeld, and H.

Vredenburg, ‘‘Two Experiments Assessing the

Visual and Semantic Images Associated with

Current and Plain (Generic) Cigarette Packaging,’’

Advances in Consumer Research, edited by

Corfman, K. P., and J. G. Lynch, Association for

Consumer Research, Provo, UT, vol. 23, 1996;

Pollay, R. W., and A. M. Lavack, ‘‘The Targeting of

Youths by Cigarette Marketers: Archival Evidence

on Trial,’’ Advances in Consumer Research,

Association for Consumer Research, Provo, UT, vol.

20, pp. 266–271, 1993; Richins, M. L., ‘‘Social

Comparison and the Idealized Images of

Advertising,’’ Journal of Consumer Research, vol.

18, pp. 71–83, 1991.

Young People—Studies show that the

buying behavior of young people is

influenced by advertising, that they

smoke the most advertised brands, that

children ages 3 to 6 can recognize a

cartoon character associated with

smoking at the same rate as they

recognize Ronald McDonald, that

various ad campaigns (Camel cigarettes,

Reg cigarettes, products designed for

women, and smokeless tobacco

advertising aimed at new users) that

appeared to be targeted to young people

did have an effect upon young people’s

purchases and use of tobacco, and that

young people report that they got their

information about a tobacco brand from

billboards, magazines, in store

advertising and on teeshirts (60 FR

41314 at 41329 through 41334; and see

sections VI.D.3.d., VI.D.3.e., and

VI.D.3.i. of this document).

Industry Statements—Statements in

documents created by R. J. Reynolds’

researchers, by Philip Morris advertising

people, by executives of US Tobacco

and by people in and doing work for

various Canadian tobacco companies

indicate that young people are an

important and often crucial segment of

the tobacco market.

Consensus Reports—The IOM and

1994 SGR concluded on the basis of an

exhaustive review of the evidence that

advertising affects young people’s

perceptions of the pervasiveness, image,

and function of smoking, that

misperceptions in these areas constitute

psychosocial risk factors for the

initiation of tobacco use, and thus

advertising appears to increase young

people’s risk of tobacco use.

Consequently, tobacco advertising

works in a way that is roughly

analogous to the way the Supreme Court

described how deceptive advertising

works (FTC v. Colgate - Palmolive Co.,

380 U.S. 374 (1965)). The Supreme

Court described how sellers use

deceptive practices to break down the

resistance of the buying public (Id. at

389–90). Here, as the 1994 SGR, the

IOM report, and the comment of the

American Psychological Association

demonstrate, cigarette and smokeless

tobacco companies use image and other

advertising techniques to appeal to

adolescents’ need to belong and to

appear to be adult, and thereby to break

down their resistance to tobacco use.

The advertising helps the companies to

overcome the fact, as documents for R.

J. Reynolds show, that there is no

natural craving for nicotine. While the

advertising techniques used by the

tobacco industry are quite different than

those used by the company in the

referenced Supreme Court case, they

ultimately have the same goal—to

induce people, in this case young

people, to purchase and use these

products.

Thus, the evidence in this proceeding

demonstrates that cigarette and

smokeless tobacco advertising plays a

material role in the decision of children

and adolescents under the age of 18 to

engage in tobacco use behavior. It

therefore establishes that the harm from

this advertising is real.

6. The Efficacy of the Restrictions;

Empirical Evidence Concerning

Advertising Restrictions

The final aspect of the analysis under

the second prong of the Central Hudson

test requires a showing by the agency

that the restrictions that it seeks to

impose will alleviate the harm to a

material degree. FDA finds, based upon

a review of all of the evidence and the

comments received, that the restrictions

will, in fact, meet this test.

(17) Nearly all comments in

opposition to advertising restrictions

argued that the preponderance of the

empirical evidence supported a finding

of no effect from advertising on young

people. Some comments stated that,

consequently, the advertising

restrictions are ‘‘unwarranted,

unjustified, unnecessary, [and] will not

be effective in reducing underage

smoking.’’ Several comments,

representing a variety of interest groups,

claimed that the ‘‘best available

evidence’’ found that ‘‘peer pressure,’’

‘‘peer and family smoking behaviors’’

and ‘‘young people’s perceptions of the

costs and benefits of smoking’’ are more

important than advertising and

promotion in encouraging young people

to experiment with cigarettes and

smokeless tobacco. 160 Still others

claimed that ‘‘being a girl,’’ ‘‘living with

a single parent,’’ ‘‘having relatively less

negative views about smoking,’’ ‘‘having

no intention to stay in full-time

education after age 16,’’ and ‘‘thinking

they might be a smoker in the future,’’

are key influencing factors for a young

person to start smoking. 161

The tobacco industry and the

advertising industry stated that their

advertising is not directed at children

and adolescents but to adults who

already use tobacco, and thus it is not

a proper subject for government

regulation. The advertising agency for

the largest cigarette brand stated,

‘‘[T]obacco advertising has as its

intended audience existing smokers * *

* it is not the company’s desire that

children start to smoke.’’

However, one comment questioned

this and asked how cigarette advertising

that has an impact upon adults can be

assumed to leave unaffected a young

viewer, smoker or otherwise. The same

comment also cited the words of one

retired Marlboro ad man: ‘‘I don’t know

any way of doing this (advertising

cigarettes) that doesn’t tempt young

people to smoke.’’ 162

Many comments from consumer

groups, public health organizations and

numerous private individuals were

supportive of the agency’s position that

the 1995 proposed rule will reduce

underage smoking and use of smokeless

tobacco. The comments cited evidence

from numerous sources such as

government officials, university

researchers, and antismoking advocates

to demonstrate that restrictions on

advertising would be effective.

For example, a comment from a

leading psychological association stated

that research, common sense, and its

expert opinion support that, if imageoriented advertising and promotion are

replaced with text-only advertising, it

would reduce the advertiser’s ability to

suggest that tobacco users project a

desirable image, e.g., glamour, sexiness

or maturity. 163

FDA has concluded that restrictions

on advertising and promotion are

necessary to reduce the appeal of

tobacco products to young people. Such

restrictions will protect the access

restrictions that the agency is adopting

from being undermined and thereby the

health of young people. To be effective,
44490 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

164Smee, C., ‘‘Effect of Tobacco Advertising on

Tobacco Consumption—A Discussion Document

Reviewing the Evidence,’’ Department of Health,

Economics, and Operational Research Division,

London, 1992; ‘‘Health or Tobacco—An End to

Tobacco Advertising and Promotion,’’ Toxic

Substances Board (TSB), Wellington, New Zealand,

May 1989; Laugesen, M., and C. Meads, ‘‘Tobacco

Advertising Restriction Price, Income and Tobacco

Consumption in OECD Countries, 1960–1986,’’

British Journal of Addiction, vol. 86, pp. 1343–

1354, 1991.

165Aaro, L. E., B. Wold, L. Kannas, and M.

Rimpela, ‘‘Health Behavior in Schoolchildren: A

WHO Cross-National Survey,’’ Health Promotion,

vol. 1, pp. 17–33, May 1986.

166 Van Reek, J., H. Adriaanse, and L. Aaro,

‘‘Smoking by Schoolchildren in Eleven European

Countries,’’ Proceedings of the 7th World

Conference on Tobacco and Health, Duroton, B.,

and K. Jamrozik, vol. 301, pp. 301–302, 1991.

167Bjartveit, K., ‘‘The Effect of an Advertising

Ban—Who has the Burden of Proof,’’ National

Health Screening Service, Norway, 1994; Rimpela,

M., L. E. Aaro, and A. H. Rimpela, ‘‘The Effects of

Tobacco Sales Promotion on Initiation of Smoking,’’

Scandinavian Journal of Social Medicine, 1994.

these restrictions must be

comprehensive, that is, they must apply

to the many types of media currently

used in a coordinated way to advertise

cigarettes and smokeless tobacco.

FDA finds support for the need for

comprehensive regulation in the

experiences of other countries which

have enacted and put into place some

form of restrictions on the advertising of

tobacco. Some comments discussed the

experience in other countries in which

tobacco advertising has been banned.

These comments indicated that in

countries that have enacted restrictions

on advertising that were not

comprehensive, the industry was able to

continue advertising and portraying

attractive imagery in media left

uncovered by regulations. For example,

Canada, Finland, Great Britain, and

Australia enacted regulations of tobacco

advertising that did not completely ban

or restrict all forms of advertising and

promotion. In each of those instances,

according to the comments, the tobacco

industry was able to take advantage of

loopholes in the system to continue to

advertise to reach their target audience.

Thus, in Canada the advertising ban,

which did not ban nontobacco items,

was accompanied by the increased use

of nontobacco items that carried the

tobacco brand name as a mechanism for

continuing to advertise the tobacco

brand and its prior image. In Great

Britain, sophisticated colorful

advertisements appeared when the use

of human figures in tobacco advertising

was banned; in Australia, loopholes in

sports sponsorship provisions enabled

the industry to continue sports

advertising.

Another comment detailed numerous

other examples of tobacco companies

continuing to advertise effectively in

spite of a ban or restrictions on

advertising. For example, this comment

noted that after France banned all

cigarette advertising in magazines,

Philip Morris set up a travel agency and

advertised ‘‘Marlboro Country Travel’’

in French magazines (Thus, although

there was no longer any ‘‘cigarette

advertising,’’ Philip Morris was able to

continue using its western, cowboy

theme in advertisements for a travel

agency). The comment noted further

that in Europe, advertising for cigarettes

was replaced by advertisements, using

the same imagery, for Camel and

Marlboro sports watches and Camel

boots. In Malaysia, cigarette companies

set up travel agencies called Marlboro,

Kent, and Peter Stuyvesant, clothing

stores named Camel, jewelry stores

named for Benson and Hedges, luxury

car dealerships named More, Salem

record stores and Salem and More

concert and movie promotions to

advertise cigarettes in a country that has

banned cigarette advertising. FDA finds

that these comments provide strong

support for the need for the advertising

restrictions to be comprehensive and

apply to all advertising media to be

effective.

Two aspects of the evidence in this

proceeding are particularly persuasive

in evidencing that restrictions on

advertising will directly advance the

agency’s goal of protecting the health of

children and adolescents under 18. The

experience of other countries that have

adopted advertising restrictions shows

that when those restrictions are

enforced, they have resulted in

reductions in the level of tobacco use.

In addition, the courts themselves have

generally found that, as a matter of

common sense, reductions in

advertising have produced a reduction

in demand. While some comments tried

to distinguish these cases, FDA finds

that they are relevant.

A discussion of each of these aspects

of the evidence follows:

a. International and cross country

studies. FDA did not receive consistent

comment on the international studies 164

that it cited in the preamble to the 1995

proposed rule on the relationship

between advertising restrictions and

consumption.

(18) Several comments stated that

advertising restrictions have not affected

tobacco product consumption, and

further stated that, in fact, tobacco

product consumption has increased in

most countries with advertising and

promotional restrictions.

In contrast, other comments

supported the findings of the same

studies and stated that the studies

support the conclusion that advertising

and promotional restrictions can be

effective in curbing smoking initiation

among young people.

Several comments opposing the 1995

proposed rule maintained that better

surveys of the results of advertising

restrictions abroad were done in

conjunction with the World Health

Organization (WHO). The two WHO

surveys on the health behavior of

schoolchildren in four countries found

that smoking among schoolchildren is

related to peer smoking behaviors and to

the number of smokers in the family. 165

More importantly, the comments said

that the survey found ‘‘no systematic

differences’’ between the smoking

behavior of young people in countries

where tobacco advertising is completely

restricted and in countries where it is

not. They asserted that the findings of

the WHO survey completely repudiate

FDA’s assertion that advertising

restrictions reduce tobacco consumption

among young people. The comments

further argued that a followup survey

found that the prevalence of smoking

among schoolchildren in countries with

total tobacco advertising restrictions

was actually higher than countries with

fewer restrictions. 166

However, the two surveys cited by

these comments did not compare the

percentage of young people who

smoked before and after the

implementation of tobacco advertising

restrictions within countries. In order to

realistically measure the effect of

advertising restrictions, each country

must be looked at individually. For

example, country A, with a high rate of

smoking, cuts its smoking rate in half.

This would be considered a major

success for country A, but country A

still may have a higher smoking rate

than country B. Country B may not have

instituted any advertising restrictions

because its smoking rate has always

been low. Thus, comparing the rates of

countries A and B would be like

comparing apples and oranges.

Studies that have looked at before and

after data from individual countries

have reported downward trends in

smoking rates among young people

following advertising restrictions. 167

For example, in Norway the percentage

of 15-year old boys and the percentage

of 15-year old girls who were daily

smokers in 1975, before a restriction on

all forms of tobacco advertising and

promotion was put in place, was
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44491

168Rimpela, M., L. E. Aaro, and A. H. Rimpela,

‘‘The Effects of Tobacco Sales Promotion on

Initiation of Smoking,’’ Scandinavian Journal of

Social Medicine, vol. 49, pp. 1–23, 1994.

169 Van Reek, J., H. Adriaanse, and L. Aaro,

‘‘Smoking by Schoolchildren in Eleven European

Countries,’’ Proceedings of the 7th World

Conference on Tobacco and Health, Duroton, B.,

and K. Jamrozik, vol. 301, pp. 301–302, 1991.

170Boddewyn, J. J., ‘‘Tobacco Advertising Bans

and Consumption in 16 Countries,’’ International

Advertising Association, 1986; Boddewyn, J. J.,

‘‘Why do Juveniles Start Smoking?’’ Children’s

Research Unit of London (CRU) Study, 1986;

Boddewyn, J. J., ‘‘Cigarette Advertising Bans and

Smoking: The Flawed Policy Connection,’’

International Journal of Advertising, vol. 13, No. 4:

pp. 311–332, 1994.

171Bjartveit, K., ‘‘The Effect of an Advertising

Ban—Who Has the Burden of Proof,’’ National

Health Screening Service, Oslo, Norway, October

1994; Lund, K., ‘‘Tobacco Advertising and How to

Measure Its Effect on Smoking Behavior,’’ Tobacco

and Health, Slama, K., ed., Plenum Press, New

York, pp. 199–204, 1995; Rimpela, M., L. E. Aaro,

and A. H. Rimpela, ‘‘The Effects of Tobacco Sales

Promotion on Initiation of Smoking,’’ Scandinavian

Journal of Social Medicine, vol. 49, pp. 1–23, 1994.

172Rimpela, M., L. E. Aaro, and A. H. Rimpela,

‘‘The Effects of Tobacco Sales Promotion on

Initiation of Smoking,’’ Scandinavian Journal of

Social Medicine, vol. 49, pp. 1–23, 1994.

approximately 23 percent and 28

percent, respectively. 168 According to

the WHO followup survey, the

percentage of 15- to 16-year old boys

and the percentage of 15- to 16-year old

girls who were daily smokers in 1986–

1987 was 16 percent and 17 percent,

respectively. 169 This represents success

not only with the group that was

prohibited from purchasing cigarettes,

those younger than 16, but also with a

group that could legally purchase

cigarettes. These results also appear to

indicate that the restrictions did not

simply move the onset of smoking to the

first legal year of purchase.

Comments from the tobacco industry

also relied upon research conducted by

J. J. Boddewyn, which has found results

contrary to those presented by FDA, to

argue that tobacco advertising bans have

not been a successful part of tobacco

control policy. 170 Boddewyn’s research

is directly contrary to many of the

studies cited by FDA in support of its

1995 proposed rule and is also

inconsistent with the best available data

on smoking rates from the countries

studied.

Boddewyn has used selective data on

the total number of cigarettes sold in a

particular country as the basis for his

analysis and has used it to justify a

finding that, in those countries where

advertising bans have been introduced,

decreases in the total number of

cigarettes sold have not followed.

Relying solely on the number of

cigarettes sold in a country to measure

the effects of government restrictions

fails to take into account the myriad of

influences that can affect cigarette

consumption and, thus, will not yield

accurate results.

First, the overall number of cigarettes

sold in a country may be influenced by

factors other than the percentage of the

population that smokes. For example, if

the population of a country has risen, or

if those who remained smokers were the

heaviest smokers, the number of

cigarettes smoked may not fall even

though the percentage of the population

that smokes has decreased. Moreover,

an analysis based on the number of

cigarettes sold would not account for

the success advertising restrictions

might have had with those not yet

addicted to tobacco. The preaddicted

group, mostly composed of children,

does not smoke as many cigarettes as do

older addicted smokers. Therefore, any

success in stemming initiation rates

would not show up for many years if

measured as fewer cigarettes consumed.

Finally, Boddewyn and others have

claimed that the experience in Norway,

Finland, and Sweden supports the view

that advertising restrictions have been

ineffective in reducing smoking rates.

However, three reports 171 presented at

the World Conference of Tobacco and

Health in Paris, France in October 1994

support the conclusion that advertising

restrictions, if comprehensive and

enforced, are effective in helping to

reduce the percentage of people who

smoke, particularly young people not

yet addicted to tobacco.

Bjartveit’s report presented the results

of the Norwegian experience after the

implementation of the 1975 Norway

advertising ban. In 1975, Norway

banned all advertising of tobacco

products and prohibited the sale of

tobacco to anyone under the age of 16.

Norway also required warnings on

packages, an educational program, and,

in 1980, a larger excise tax. The results

of Norway’s actions belie Boddewyn’s

claims. First, the prevalence of smoking

for boys and girls declined between

1975 and 1990. The percentage of daily

smokers aged 13 to 15 declined from 15

percent to 9 percent for boys and from

17 percent to less than 10 percent for

girls. Per-capita consumption for boys

and girls also declined. Between 1975

and 1994, the overall sales of cigarettes

and smoking tobacco per person among

15 year olds has declined from over

2,000 grams of tobacco to less than

1,800 grams.

In 1976, Finland banned some forms

of tobacco advertising and promotion

and increased expenditures for health

education. While relatively little data

are available on the smoking trends in

Finland, one comment reported data

that showed the government’s actions

did have an impact, although the extent

has been more uneven than in Norway.

Before the advertising restrictions,

cigarette consumption was increasing at

the rate of 2.2 percent per year. In the

decade since the 1975 Finland

advertising ban, the rate of increase has

been cut in half to a little over 1 percent

per year—a meaningful change but not

a decline. However, the greatest benefits

have been for teenagers. In 1973, 26

percent of 16 to 18 year olds in

secondary school smoked. By 1979, 2

years after restrictions went into place,

this rate dropped to 14 percent. Since

that time, the decrease has continued

but has leveled off. In 1973, 19 percent

of 14-year old children in Finland

smoked. By 1979, 2 years after the ban,

only 8 percent of 14-year old children

in Finland smoked, a decrease of over

50 percent.

Moreover, a report by Rimpela 172

provided a more complete explanation

of the experience that Finland has had

with its advertising restrictions.

Although the 1978 Finnish Tobacco Act

banned cigarette advertisements in

youth magazines, it did not eliminate

the advertising of product-families or

the sponsorship of events.

Consequently, the tobacco companies

found new means of sales promotion

through image advertising in these two

venues. The author concluded that a

promotional onslaught in these two

forums undercut the so-called

advertising ban, and the weak

implementation of the legislation by

health authorities caused the advertising

restrictions to be less effective than they

might have been with a total ban. The

author contrasted these uneven results

with the success of Norway’s total ban.

The study presents strong evidence

for the need for comprehensive

advertising restrictions covering all

forms of advertising and promotion in

order to achieve the best results in

reducing youth tobacco use. Finally, the

restrictions imposed in Sweden have

not been in effect long enough to

measure accurately.

i. The British Health Department

Report. Several comments from the

tobacco industry criticized the findings

of the British Health Department Report

(Smee Report) that advertising increases

consumption of tobacco products, and

that restrictions on advertising decrease

tobacco use beyond what would have

occurred in the absence of
44492 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

173Smee, C., ‘‘Effect of Tobacco Advertising on

Tobacco Consumption—A Discussion Document

Reviewing Evidence,’’ Department of Health,

Economics, and Operational Research Division,

London, p. 18, 1992.

174 ‘‘Health or Tobacco—An End to Tobacco

Advertising and Promotion,’’ TSB, Wellington, New

Zealand, May 1989.

175Laugesen, M., and C. Meads, ‘‘Tobacco

Advertising Restrictions, Price, Income, and

Tobacco Consumption in OECD Countries, 1960–

1986,’’ British Journal of Addiction, vol. 86, pp.

1343–1354, 1991.

176Chetwynd, J., P. Coope, R. J. Brodie, and E.

Wells, ‘‘Impact of Cigarette Advertising on

Aggregate Demand for Cigarettes in New Zealand,’’

British Journal of Addiction, vol. 83, p. 409–414,

1988; Harrison, R., J. Chetwynd, and R. J. Brodie,

‘‘The Influence of Advertising on Tobacco

Consumption: A Reply to Jackson and Ekelund,’’

British Journal of Addiction, vol. 84, pp. 1251–

1254, 1989; Raferty, J., ‘‘Advertising and Smoking—

A Smoldering Debate?’’, British Journal of

Addiction, vol. 84, pp. 1241–1246, 1989.

regulation. 173 The Smee Report

examined: (1) The relationship between

cigarette advertising, (2) the effects of

partial and complete advertising bans

on tobacco consumption, and (3) the

results of cross-national studies. The

study focused on countries for which

the most complete data exists—Norway,

Finland, Canada, New Zealand, and the

United Kingdom. One reported result of

this analysis was that in all five

countries, bans or restrictions on

cigarette advertising resulted in an

aggregate decrease in cigarette

consumption.

(19) The comments argued that the

WHO study contradicts the findings of

this report regarding Norway, Finland,

and Canada, stating that the findings do

not indicate that advertising restrictions

affect consumption. Several comments

stated their belief that the author’s

(Smee’s) ‘‘sweeping and unjustified’’

conclusions are based on ‘‘data

collected over a short time period’’ and

on a ‘‘limited and incomplete review of

the available evidence’’. They also

argued that Smee’s reliance on existing

studies linking advertising and

consumption is misplaced.

Furthermore, the comments specifically

criticized the report’s use of several of

the reviewed studies, which, they claim,

did not apply rigorous statistical

analysis. Finally, the comments stated

that the author’s model made no

allowances for the effect of externalities,

such as health shocks (the Royal College

of Physicians’ Report on Smoking in

1962, the Report of the Surgeon

General’s Panel on Smoking and Lung

Cancer in 1964, etc.). All the above

comments maintained that the Smee

Report should not be relied upon as

evidence of the causal relationship

between advertising restrictions and

teen smoking behavior.

FDA disagrees with the comments’

assessment and finds the Smee Report

to be unbiased and useful as a

comprehensive survey of the literature.

Upon examining the specific concerns

expressed by the comments in

connection with specific country

analyses, FDA has found that the

criticisms are without merit. For

example, the comments stated that the

reduction in tobacco consumption

found in Norway could be attributed to

externalities, such as to enforcement of

other provisions of the antitobacco

legislation package, e.g., health

warnings, health education, and sales

restrictions. However, Smee reported

that the share of reduction in tobacco

consumption attributable to the

advertising ban ‘‘is likely to account for

the great majority of the effect.’’ Another

comment expressed concern that Smee,

in reporting on the Canadian

experience, failed to include income as

an independent variable. The comment

stated that this could seriously bias the

results because real income was falling

in Canada at the time the advertising

ban went into effect. However, in the

initial Smee model, the income variable

was included, and it did not explain the

variation in tobacco consumption. In the

final model, Smee did not include the

income variable. However, removing the

income variable did not significantly

change the estimated coefficient and

would not have biased the estimates

from the model.

Finally, all econometric studies are

subject to limitations. As noted in

sections VI.D.4.d. and VI.D.5. of this

document, it would require controlled

studies to produce better results and it

is neither practical nor ethical to

conduct such studies. Empirical

research is always subject to the

criticism that some variables were

omitted, or that alternative

specifications would yield different

results. However, Smee collected many

studies, and hence his compilation

includes many different specifications

of tobacco demand. Thus, although it is

difficult to evaluate the causes of

variations in each study, an analysis of

all the existing studies should yield

more generalizable and robust results

than those of a single study. The

question here is not whether each of the

studies has limitations, but to what

extent those limitations impair the

findings of the overall survey. Smee’s

study represents the best attempt to date

to compile the numerous studies on the

effects of advertising restrictions on

tobacco use and to provide a coherent

analysis. His conclusion was that

restrictions on advertising did reduce

tobacco use.

A comment in support of the findings

of the Smee Report stated that this study

was unbiased and performed by a

credible organization. The comment

argued that advertising restrictions

produced the decline in the percentage

of young people who smoke in the

countries studied. In response to the

tobacco industry’s claim that the total

number of cigarettes consumed

continued to rise in several countries,

the comment said that ‘‘it takes a

number of years for the impact of the

fact that fewer people are starting to

smoke to show up in overall tobacco

consumption data.’’

ii. New Zealand Toxic Substances

Board Study. Several comments gave

considerable attention to the New

Zealand Government Toxic Substances

Board (‘‘TSB’’) Study which reviewed

the effect of advertising restrictions in

33 countries. 174 The study concluded

that there was a correlation between the

degree of restrictions imposed in each

country and decline in tobacco use.

(20) Comments submitted by those

opposing the proposed regulations

argued that the study lacked objectivity

because of methodological errors,

particularly in the collection, sorting

and selective use of data. The comments

argued that these errors removed all

probative value from the study.

Moreover, the comments noted that

FDA’s use of the study illustrates its

inconclusive nature. In addition, one

comment asserted that the drop-offs in

consumption and the number of

smokers may be related to events other

than legislated restrictions.

One comment argued that several

studies cited by FDA in the preamble to

the 1995 proposed rule, including

Chetwynd and Harrison, do not support

the claimed relationship between

advertising expenditures and

consumption because the studies have

flawed data and fundamental

methodological errors. For instance, the

comment argued that, in the Laugesen

study on tobacco consumption in 23

Organization for Economic Cooperation

and Development (OECD) countries

described below, 175 the qualitative

variables used were not relevant to the

regression model and biased the results.

Additionally, the comment criticized

the authors of the study for ignoring

contradictory findings.

One comment suggested that the

findings in several smaller studies cited

by FDA 176 do not indicate that
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44493

177Boddewyn, J. J., ‘‘Tobacco Advertising Bans

and Consumption in 16 Countries,’’ International

Advertising Association, 1986.

178Laugesen, M., and C. Meads, ‘‘Tobacco

Advertising Restriction, Price, Income, and Tobacco

Consumption in OECD Countries, 1960–1986,’’

British Journal of Addiction, vol. 86, pp. 1343–

1354, 1991.

179Even in the United States, only FTC has access

to company expenditure data and it is prevented

from disclosing information concerning advertising

expenditures except at the industry-agglomerated

level.

180Beales, J. H., ‘‘Advertising and the

Determinants of Teenage Smoking Behavior,’’ p. 44,

1993.

181Harrison, R., J. Chetwynd, and R. J. Brodie,

‘‘The Influence of Advertising on Tobacco

Consumption: A Reply to Jackson and Ekelund,’’

British Journal of Addiction, vol. 84, pp. 1251–

1254, 1989.

advertising affects consumption. The

comment argued that one of the

analyses failed to account for common

trends resulting from the diffusion of

information about health risks. The

comment further stated that Chetwynd

used a model in his study that was more

likely to indicate correlation than

causation. The comment also asserted

that the model suffers from poor data

and fails to take into account changing

social mores. In addition, the comment

argued that a comparable study

(Boddewyn) has not shown a decrease

in cigarette consumption in areas that

restrict advertising. 177

Industry comments uniformly

criticized the TSB study. This study was

also criticized by the Canadian courts in

the course of litigation over the validity

of Canada’s advertising restrictions, see

section VI.D.3.f. of this document. In

response, the TSB published a

modification of the original study that

recognized that mistakes had been made

in the initial report. The reissued report

was entitled ‘‘A Reply to Tobacco

Industry Claims about Health or

Tobacco,’’ ISBN–0–477–04574–X

(hereinafter referred to as the Reply).

According to one comment from a

public interest group:

The Reply re-analyzed the data of the

impact of advertising in a number of

countries based upon criticisms of the

original report by the tobacco industry. Even

after taking into account the criticisms of the

tobacco industry, the New Zealand

government found strong empirical evidence

of the link between tobacco advertising and

tobacco consumption.

In addition to the issuance of the

Reply, Laugesen and Meads 178 retested

the typology created by the TSB and

applied it to 22 OECD countries for a 15-

year period. In the preamble to the 1995

proposed rule, FDA referred to the

Laugesen study as providing affirmation

of the TSB’s analysis and conclusions,

that, as a group, countries prohibiting

tobacco advertising in most or all media

experienced more rapid percentage falls

in consumption than the group of

countries that permitted promotion (60

FR 41314 at 41334).

The industry comments’ major

criticism of the Laugesen study is that

the scale developed by Laugeson is

flawed. The comments criticized the

amount of weight accorded to different

types of advertising restrictions (i.e., TV

ban versus warning on package).

However, the rating scale accurately

reflects the level of restrictions in each

country. The steps between the ratings

in the scale may be smaller or larger

than the comments believe were

warranted, but the relative rankings

would remain the same regardless.

Finally, several comments found fault

with the smaller studies cited by FDA,

including ones by Chetwynd and

Harrison. Contrary to the comments’

assertions, the studies do include the

most relevant variables such as price,

income and advertising expenditures. A

major complaint of the industry

regarding studies done abroad is that the

advertising expenditures fail to be

totally inclusive. However, the solution

to that problem lies with the industry in

most cases. Advertising expenditures

are a closely guarded industry trade

secret, 179 which the companies state

cannot be released to the public because

of their commercial sensitivity.

However, the industry could release

older relevant data that are no longer

sensitive for the purposes of

investigation and study. Moreover,

researchers who have had access to

industry data have not released their

data sets for replication by other

research groups. 180

The final study criticized by the

industry, performed by Harrison, was

written in response to earlier criticism

by the industry about the Chetwynd

study, and it therefore provided some

answers to the comments’ concerns. For

example, the comments fault Chetwynd

for failing to take into account changing

social mores. Harrison stated that he

retested Chetwynd’s model and found

that the model was structurally stable

through time in the long term. He also

found that the long run analyses

indicated that the impact of cigarette

advertising on consumption may be

larger than was suggested in the original

work. 181

After reviewing the studies provided

by the comments and reevaluating the

studies relied upon in the preamble to

the 1995 proposed rule, FDA reaffirms

that the statement that it made in the

preamble is correct:

These studies provide insight into the

effects of advertising on the general appeal of

and demand for cigarettes and smokeless

tobacco products. They also provide

evidence confirming advertising’s effect on

consumption and the effectiveness of

advertising restrictions on reducing youth

smoking.

(60 FR 41314 at 41333)

Based on the foregoing, FDA finds

that the international experience

provides empirical evidence that

restrictions on tobacco advertising,

when given appropriate scope and when

fully implemented, will reduce cigarette

and smokeless tobacco use among

children and adolescents under the age

of 18. This experience provides strong

evidence that the restrictions that FDA

is imposing will directly advance its

interest in protecting the health of these

young people.

b. Case law considering the effect of

advertising and advertising restrictions

upon tobacco use by young people.

Virtually every court that has examined

the issue has held that there is a direct

connection between advertising and

demand for the product advertised. For

example, in Central Hudson Gas and

Electric, 447 U.S. at 569, the Supreme

Court stated: ‘‘[T]he State’s interest in

energy conservation is directly

advanced by the Commission order at

issue here. There is an immediate

connection between advertising and

demand for electricity.’’ See also

Posadas de Puerto Rico v. Tourism Co.

of Puerto Rico, 478 U.S. at 341–342. In

United States v. Edge Broadcasting Co.,

the Supreme Court carried its position

in Central Hudson one step further:

If there is an immediate connection

between advertising and demand, and the

federal regulation decreases advertising, it

stands to reason that the policy of decreasing

demand for gambling is correspondingly

advanced.

(509 U.S. 434)

Each circuit court that has considered

the issue has also concluded that the

regulation of advertising is reasonably

aimed at reducing demand. (See,

Anheuser-Busch, Inc. v. Schmoke, 63

F.3d 1305. 1314–15 (4th Cir 1995),

vacated and remanded 64 U.S.L.W.

3333 (May 20, 1996); Dunagin v. City of

Oxford, Miss., 718 F.2d at 750 (‘‘[W]e

hold that sufficient reason exists to

believe that advertising and

consumption are linked to justify the

ban, whether or not ’concrete scientific

evidence’ exists to that effect.’’); and

Oklahoma Telecasters Ass’n v. Crisp,

699 F.2d 490, 501 (10th Cir. 1983), rev’d

on other grounds sub.nom. Capital
44494 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

182Teague, C., Research Planning Memorandum

on Some Thought about New Brands of Cigarettes

for the Youth Market, 1973.

183Teague, C., Research Planning Memorandum

on the Nature of the Tobacco Business and the

Crucial Role of Nicotine Therein, 1972.

184Cohen, J. B., ‘‘Charting a Public Policy for

Cigarettes,’’ Marketing and Advertising Regulation:

The Federal Trade Commission in the 1990’s,

edited by Murphy, P. E., and W. L. Wilkie,

University of Notre Dame Press, Notre Dame, IN,

pp. 234–254 , 1990.

185Foote, E., ‘‘Advertising and Tobacco,’’ JAMA,

vol. 245, pp. 1667–1668, 1981.

186Weidner, D., ‘‘RJR Tobacco International Gets

New Chief,’’ Winston-Salem Journal, p. A1, Dec. 8,

1995. (Philip Morris, 45 percent, Reynolds 27

percent.); Antunes, S., ‘‘B & W Harassed Workers,’’

Evening Standard, p. 47, Nov. 16, 1994. (After

Brown & Williamson acquired American Tobacco,

it had 18 percent of the market.)

Cities Cable, Inc. v. Crisp, 467 U.S. 691

(1984)).) In Greater New Orleans

Broadcasting Ass’n v. United States, 69

F.3d 1296, 1301 (5th Cir. 1995), the

court said:

They cannot seriously dispute that a

prohibition of advertising of casino gambling

directly advances the governmental interest

in discouraging such gambling and fulfills

the [second] Central Hudson prong. It is

axiomatic that the purpose and effect of

advertising is to increase consumer demand.

To counter the weight of this case

law, comments that opposed FDA’s

advertising restrictions made two

arguments. First, several comments from

the tobacco and advertising industries

argued that the agency cannot rely on

the assumption of a link between

advertising and demand that is

embodied in these decisions and, citing

the Court’s more recent Coors decision,

contended that the agency’s evidentiary

record will be held to a higher standard

of proof.

However, as one comment correctly

noted, the Court in Coors wrote:

It is assuredly a matter of ‘common sense’

that a restriction on the advertising of a

product characteristic will decrease the

extent to which consumers select a product

on the basis of that trait.

(115 S.Ct. at 1592) Moreover, in 44

Liquormart, Inc., Justice Stevens quoted

with apparent approval Central

Hudson’s reliance on the ‘‘immediate

connection’’ between ‘‘promotional

advertising’’ and demand (116 S.Ct. at

1506, quoting Central Hudson 447 U.S.

at 569). Thus, the Supreme Court

continues to hold that there is a

connection between advertising and

demand, and FDA finds no merit to this

contention in the contrary argument in

the comments.

The second argument that these

comments made is that because tobacco

products constitute a ‘‘mature product’’

whose availability and qualities are

widely known to consumers, the

purpose and function of cigarette

advertising is to build market share and

to maintain brand loyalty, not to

stimulate demand. FDA considers these

comments in depth in the following

section of this document.

c. The function of advertising in the

‘‘mature’’ market. Comments from the

industry, advertisers, psychologists, and

economists argued that although it may

be true that advertising generally serves

the function of increasing demand for a

product category, that truism does not

work for tobacco, which, they claim, is

a mature market.

(21) The comments argued that

because tobacco is a mature product,

advertising serves to reinforce brand

loyalty and to induce current smokers to

switch brands. They stated that because

consumers are already aware of the

tobacco category, advertising does not

serve to inform potential consumers of

the product and to entice them to

become a user. One comment likened

tobacco to other mature products such

as soft drinks, deodorants,

antiperspirants, and appliances.

Moreover, this comment argued that

‘‘[b]ecause FDA lacks marketing

expertise,’’ it has been misled by the

size of the industry’s advertising

expenditures and assumed, incorrectly,

that this means that the industry is

attempting to expand its overall market.

Finally, several comments stated that

there are no data that clearly prove that

advertising and promotion increase

demand in the tobacco market.

Other comments took the opposing

view and agreed with FDA’s assessment

that tobacco advertisements make

tobacco products more appealing to

young people and affects tobacco use

among young people. Several comments

argued that the market for cigarettes and

smokeless tobacco is not mature but is

actually very dynamic. In addition to

brand switching and brand loyalty, they

argued that tobacco marketing generates

market expansion. The comment noted

that there is substantial movement at the

margins with new customers entering

the market, and many current customers

trying to leave.

FDA agrees with those comments that

expressed the view that labeling the

tobacco market as a ‘‘mature market’’ is

a simplistic denotation, which fails to

recognize the movement into the market

each day of new young smokers often

motivated in part by advertising. Even

‘‘mature’’ markets must replenish their

customer base as older consumers leave

the market. In fact, approximately one

million new young smokers enter the

tobacco market each year. These new

smokers are necessary to keep the

mature market stable and to prevent

decline. There is no evidence to suggest

that these new smokers are

predestined 182 to enter the market. RJR

acknowledged this in one marketing

memo,

‘‘[I]f we are to attract the nonsmoker or the

presmoker, there is nothing in this type of

product that he would currently understand

or desire. * * * Instead, we somehow must

convince him with wholly irrational reasons

that he should try smoking.’’ 183

They must be influenced by peers,

parents, and advertising, either to join

the market or to decline to enter.

The agency finds that regardless of

whether marketers and their advertising

agencies intentionally target children

and adolescents, young people are still

affected by advertising. Children are not

isolated from tobacco advertising’s

attractiveness or inducements. There is

no ‘‘magic curtain around children and

teenagers who seek to learn how to fit

into the adult world,’’ nor is there any

evidence to support a claim that young

people are immune from advertising’s

blandishments. 184

Comments asserting that tobacco

advertising fails to increase

consumption for the tobacco market run

contrary to the views of one well-known

advertising executive who stated:

I am always amused by the suggestion that

advertising, a function that has been shown

to increase consumption of virtually every

other product, somehow miraculously fails to

work for tobacco products. 185

Further, the view that advertising

does not affect consumption is

contradicted by industry experience,

logic, and evidence. It does not appear

credible that the industry spends more

than $6 billion annually merely to

maintain brand share and to try to

switch current smokers; this argument

defies common sense. The economics of

this argument are strained—five

manufacturers control almost 100

percent of the market, and three of these

have approximately 90 percent of the

market. 186

The courts have also expressed

skepticism about this argument. In

Dunagin v. City of Oxford, Miss., the

advertiser’s expert, a professor in

sociology who specialized in

alcoholism, testified that advertising

merely affected brand loyalty and

market share, rather than increasing

overall consumption or consumption of

individual consumers (718 F.2d at 748).

The court rejected this argument:

It is beyond our ability to understand why

huge sums of money would be devoted to the

promotion of sales of liquor without expected
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44495

187Siegel, M., et al., ‘‘The Extent of Cigarette

Brand and Company Switching: Results from the

Adult Use-of-Tobacco Survey,’’ American Journal of

Preventive Medicine, vol. 12, No. 1, pp. 14–16,

1996.

188Botvin, G. J., C. J. Goldberg, E. M. Botvin, and

L. Dusenbury, ‘‘Smoking Behavior of Adolescents

Exposed to Cigarette Advertising,’’ Public Health

Reports, vol. 108, pp. 217, 222, 1993.

189Pierce J. P., L. Lee, and E. A. Gilpin, ‘‘Smoking

Initiation by Adolescent Girls, 1944 through 1988,’’

Journal of the American Medical Association, vol.

271, No. 8, pp. 608–611, 1994.

190Roberts, M. J., and L. Samuelson, ‘‘An

Empirical Analysis of Dynamic, Nonprice

Oligoplistic Industry,’’ Rand Journal of Economics,

vol. 19, pp. 200–220, 1988.

191 Ippolito, P., and A. Mathios, Health Claims in

Advertising and Labeling: A Study of the Cereal

Market, p. 32, 1989.

192 Dourado, P., ‘‘Breakfast Cola Takes on

America’s Coffee Giants,’’ The Independent, p. 28,

April 15, 1990.

193Teague, C., Research Planning Memorandum

on Some Thoughts about New Brands of Cigarettes

for the Youth Market, p. 1, 1973.

194 Id.

195Overall Marketing Objectives-F88, 1988

Imperial Tobacco Ltd. Marketing Plan, p. 6; 60 FR

41314 at 41331.

results, or continue without realized results.

No doubt competitors want to retain and

expand their share of the market, but what

businessperson stops short with competitive

comparisons? It is total sales, profits, that pay

the advertisers and dollars go into advertising

only if they produce sales. Money talks: it

talks to the young and the old about what

counts in the marketplace of our society, and

it talks here in support of Mississippi’s

concern.

(718 F.2d at 749)

The court concluded: ‘‘We simply do

not believe that the liquor industry

spends a billion dollars a year on

advertising solely to acquire an added

market share at the expense of

competitors’’ (718 F.2d at 750). The

same reasoning applies here.

(22) One comment discussed the

results of a recent study that the

comment said had been accepted for

publication 187 which found that less

than 10 percent of adult smokers switch

brands each year, and that only 6.7

percent switch companies. The

commentary suggests that this amount

of ‘‘real’’ brand switching would not

justify $6.1 billion, an amount in annual

advertising and promotional

expenditures.

In addition to logic, there is empirical

evidence that advertising can expand

demand in a so-called mature market

and in fact has done so in the cigarette

market before. Smoking rates for teenage

girls rose from 8.4 percent in 1968,

when major promotional campaigns first

targeted women, to 15.3 percent in

1974, by which time other tobacco

companies had also begun marketing

women’s brands. 188 The same

phenomenon was captured differently

in a recent study 189 that tracked

initiation rates for girls and women over

a 40-year period. The study found that

smoking initiation rates rose for girls

under 18 during the period between

1967 and 1973 (women’s targeting

period), even though initiation rates did

not rise for women 18 and older.

Finally, as detailed more fully in the

preamble to the 1995 proposed rule (60

FR 41314 at 41345), another study

looked at the effect of variations in

advertising expenditures for low tar

cigarettes. Although the advertising did

not increase the advertiser’s brand

share, increased advertising for low tar

cigarettes caused the entire market for

cigarettes to increase. 190

The ability of advertising to expand

total demand for a particular class of

products through market segmentation

has also been demonstrated in other

markets when the breakfast cereal

industry first began making health

claims for their products, such as those

regarding the cancer-prevention benefits

of dietary fiber. The creation of a new

segment of the cereal market—healthy

cereal—through the use of advertising

resulted in an increase in the overall

adult cereal market. Advertising caused

an increase in aggregate demand by

giving consumers a ‘‘new’’ product that

met their needs, wants, and desires. 191

Thus, advertising can serve an

important role in meeting and

expanding desires in the marketplace. It

identifies consumers’ needs and desires

and then matches them with the

attributes of particular product

categories and brands. Advertising can

perform this function through its use of

explicit claims or through imagery, code

words, or psychosocial cues. And, in

doing so, it can both shift demand

across the entire product category and

create new demand.

Moreover, the industry’s mature

market categorization assumes that the

product category has no outside

competitors, i.e., that there is no other

product line that competes for the

consumers’ attentions and dollars. For

example, soft drinks are a mature

market, but more healthful drinks, such

as milk, juices, or even water, can

attempt to draw off part of the market.

In addition, soft drinks can try to

expand their own market share as Coca

Cola and later Pepsi did a number of

years ago 192 when they promoted cola

for breakfast.

Similarly, tobacco has competitors.

New users or ‘‘presmokers,’’ as one RJR

employee refers to them, 193 are faced

not only with tobacco imagery but also

with antismoking health messages in

commercial media and in schools.

Current smokers are faced with

alternatives to smoking, including overthe-counter and prescription drug

advertising for nicotine replacement

products and stop-smoking cures. The

tobacco market thus has to convince the

presmoker or new smoker to switch

from the nonuse category promoted by

health professionals, public service

announcements, and school messages,

to tobacco use. Also, it must constantly

convince the addicted smoker not to

leave the market by use of a competing

nicotine-delivery product, a nicotine

replacement source, or by other

voluntary means.

Finally, even the industry

acknowledges that young people are a

strategically important audience

because brand loyalty often develops

during this period of trying cigarettes

and becoming a smoker. In 1973, RJR’s

research and development officer wrote

‘‘Realistically, if our Company is to

survive and prosper over the long term,

we must get our share of the youth

market.’’ 194 And, as noted in the

preamble of the 1995 proposed rule,

these words reflect those uttered by the

Canadian sister company of the

American tobacco company, Brown and

Williamson Tobacco Corp.

If the last ten years have taught us

anything, it is that the industry is dominated

by the companies who respond most

effectively to the needs of younger

smokers. 195

FDA finds that there is no merit to the

industry’s claim that because the

tobacco market is a mature market,

advertising does not stimulate demand

but only reallocates the existing market

between companies. Not only is the

industry’s argument overly simplistic,

but, as shown, advertising plays an

important role in creating new

customers, including young people.

FDA shares the incredulity expressed by

the court in Dunagin, 718 F.2d at 750,

regarding this argument: ‘‘It is beyond

our ability to understand’’ why an

industry would spend billions a year

merely to acquire market share at the

expense of its competitors, when it has

a much harder job of convincing young

people to start a habit that is neither

easy to acquire nor pleasant.

Consequently, FDA finds that the

second prong of Central Hudson is

satisfied, i.e., the advertising restrictions

directly and materially advance the

substantial state interest.
44496 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

E. Provisions of the Final Rule

FDA selected each of the restrictions

that it included in the 1995 proposed

rule based on its tentative view that the

particular restriction is necessary to

providing a comprehensive response to

the appeal of tobacco advertising to

young people. Each proposed restriction

was intended to address an aspect of

this advertising that contributes to its

appeal. The agency tentatively

concluded that, together, these

restrictions will ensure that advertising

is not used to undermine the access

restrictions that FDA proposed and thus

will help to protect the health of

children and adolescents under the age

of 18.

In this section of the document, FDA

will respond to comments on each

element of this comprehensive

approach, including comments on

whether the regulations are legally

supportable. A key question about the

agency’s approach is whether there is a

reasonable fit between the agency’s

interest and the means that it has

chosen to accomplish it; that is, between

the agency’s interest and the specific

restrictions that it proposed. This

inquiry involves consideration of the

restrictions under the third and final

prong of Central Hudson.

FDA will first consider comments that

raised general concerns about its

approach under the third prong of

Central Hudson. It will then consider

comments that raised concerns about

specific restrictions under this aspect of

Central Hudson as part of its discussion

of the comments on each restriction.

1. Are FDA’s Regulations Narrowly

Drawn?

In the preamble to the 1995 proposed

rule, FDA stated that the regulations

that it was proposing met the final

prong of the Central Hudson test (60 FR

41314 at 41355). In Central Hudson, the

Supreme Court stated that the First

Amendment mandates that speech

restrictions be ‘‘narrowly drawn.’’ The

Court continued:

The regulatory technique may extend only

as far as the interest it serves. The State

cannot regulate speech that poses no danger

to the asserted State interest, * * * nor can

it completely suppress information when

narrower restrictions on expression would

serve its interest as well.

(447 U.S. at 565, n.7) FDA pointed out,

however, that: ‘‘The Supreme Court has

made it clear that this prong does not

require a ‘least restrictive means test,’

but rather that there be a ‘reasonable fit’

between the government’s regulation

and the substantial governmental

interest sought to be served’’ (Board of

Trustees of State University of New York

v. Fox, 492 U.S. 469, 480 (1989); (60 FR

41314 at 41355).

(23) This statement by FDA provoked

a significant amount of comment.

Several comments said that FDA had

mischaracterized its burden. These

comments argued that Fox did not

dilute the Central Hudson analysis, and

that any restriction on commercial

speech must be narrowly tailored. One

comment pointed out that, in Rubin v.

Coors, the Supreme Court made no

mention of reasonable fit. The comment

stated that in Rubin v. Coors, the

Supreme Court said that Central

Hudson requires that a valid restriction

be no more extensive than necessary to

serve the governmental interest (115

S.Ct. at 1591). Finally, one comment

said that FDA was arguing that courts

have applied a rational basis standard to

restrictions on commercial speech, but

the comment stated that FDA was wrong

because courts have rejected this notion.

In response to these comments, FDA

has carefully evaluated the relevant case

law. The agency does not agree that it

mischaracterized its burden in the 1995

proposed rule.

It is true that in Rubin v. Coors the

Supreme Court found that the

challenged statutory provision violated

the First Amendment’s protection of

commercial speech, at least in part,

because it was more extensive than

necessary (115 S.Ct. at 1594). However,

the Court also stated that its inquiry

under the last two steps of Central

Hudson involves ‘‘a consideration of the

’fit’ between the legislature’s ends and

the means chosen to accomplish those

ends’’ (Id. at 1391 (quoting Posadas De

Puerto Rico Associates v. Tourism Co. of

Puerto Rico, 478 U.S. at 341); (See also

44 Liquormart, Inc. v. Rhode Island, 116

S.Ct. at 1510 (‘‘As a result, even under

the less than strict standard that

generally applies in commercial speech

cases, the state has failed to establish a

reasonable fit between its abridgment of

speech and its temperance goal.’’)).

Moreover, the Court’s statement in

Rubin v. Coors that a restriction on

commercial speech must be no broader

than necessary, which was cited by a

comment, must be read in light of the

Court’s discussion of this requirement

in Board of Trustees of State University

of New York v. Fox, 492 U.S. at 476–

481. In Fox, the Supreme Court

concluded from its consideration of how

this phrase has been used in its case law

and in the related case law on time,

place, and manner restrictions, that

what is required, exactly as the agency

said in the 1995 proposed rule, is a fit

between the Government’s ends and the

means chosen to accomplish those ends

that is not necessarily perfect but

reasonable (492 U.S. at 480). The

Supreme Court reiterated this point in

Florida Bar v. Went For It, Inc., 115 S.Ct.

at 2380 (citations omitted):

With respect to this prong, the differences

between commercial speech and

noncommercial speech are manifest. In Fox,

we made clear that the ‘‘least restrictive

means’’ test has no role in the commercial

speech context * * * ‘‘What our decisions

require,’’ instead, ‘‘is a ‘fit’ between the

legislature’s ends and the means chosen to

accomplish those ends,’’ a fit that is not

necessarily perfect, but reasonable; that

represents not necessarily the single best

disposition but one whose scope is ‘in

proportion to the interest served’ that

employs not necessarily the least restrictive

means but * * * a means narrowly tailored

to achieve the desired objective.

Thus, FDA did not mischaracterize its

burden in the 1995 proposed rule.

Moreover, in any event, FDA has

narrowly tailored its provisions.

Before turning to the question of

whether there is a reasonable fit

between FDA’s interest in the health of

children and the restrictions that FDA

proposed on tobacco advertising, the

agency wishes to make clear that,

contrary to the claim of one comment,

it recognizes that courts have not

equated the reasonable fit test with

rational basis review. (See, e.g., Florida

Bar v. Went For It, Inc.) FDA recognizes

that the reasonable fit test requires that

the Government goal be substantial, and

that the cost of achieving that goal be

carefully calculated. (See Board of

Trustees of State University of New York

v. Fox, 492 U.S. at 480.) It also

recognizes that this test requires that the

agency consider whether there are less

burdensome alternatives to restrictions

on speech.

Having already established that its

goal is substantial (see section VI.C.4. of

this document), FDA will consider the

issues of the costs of the restrictions and

alternatives to these restrictions in its

analysis of the comments that follows.

(24) Several comments argued that the

restrictions on cigarette and smokeless

tobacco advertising that FDA proposed

are not narrowly tailored. One comment

said that the premise of the narrow

tailoring requirement is that commercial

speech is valuable, and that it may only

be restricted when it is necessary to do

so. Other comments argued that

restrictions on speech must attack only

problem speech, and that FDA had

failed to prove that this is what the

proposed restrictions did. These
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44497

196As discussed more fully elsewhere,

advertising for low-tar products is generally more

reliant on text than on imagery.

comments stated that FDA’s proposed

restrictions are more extensive than

necessary to achieve the agency’s

asserted interest, particularly because

the agency had failed to show that the

advertising restrictions will have any

effect on underage smoking. Some

comments argued that the restrictions

that FDA proposed were tantamount to

a ban because they will prevent the

advertiser’s message from reaching

consumers.

Other comments disagreed. These

comments said that FDA’s proposed

action is narrowly tailored. They argued

that FDA had steered clear of imposing

a categorical ban on tobacco advertising,

or even broad prophylactic rules. One

comment said that tailored prohibitions,

instead of all-out bans, are important

signposts indicating a measured

response.

FDA disagrees with the comments

that claimed that the restrictions were

not narrowly tailored. The agency

recognizes, as the Supreme Court said in

Zauderer v. Office of Disciplinary

Counsel, 471 U.S. 626, 646 (1985), that

it has the burden of distinguishing the

harmless from the harmful. FDA has

met this burden.

The restrictions that FDA is adopting

are not like those in Central Hudson,

which, even though the Public Service

Commission’s interest was limited to

energy conservation, reached all

promotional advertising, regardless of

the impact of the touted service on

energy use. (See 447 U.S. at 570.)

Rather, FDA’s restrictions are carefully

crafted to focus on those media and

aspects of advertising that children are

routinely exposed to and that the

available evidence shows has the

greatest effect on youngsters, while

leaving the informational aspects of

advertising largely untouched. FDA is

not banning outdoor advertising; it is

restricting it so that it does not

unavoidably confront children when

they play. It is not banning print

advertising. It is restricting the use of

images and color, which are particularly

appealing to children, in publications

that have a large number of young

readers under the age of 18 and in other

forms of advertising to which children

are routinely exposed but permitting

unrestricted advertising in adult

publications and adult venues. It is

restricting cigarette and smokeless

tobacco companies’ use of brand names

and product identifications in

sponsored events, but again in a way

that reflects the agency’s concern about

children and adolescents under the age

of 18. That is, it is permitting companies

to sponsor in the corporate name in

order to engender good will, but

preventing them from using the brand

specific attractive imagery that is

influential with young people. Finally,

it is prohibiting the use of branded

promotional items because it is the

young who find particular value in

these items. In each of these respects,

the agency has gone no further than it

has found, based on the evidence, is

necessary to meet its ends. (See Dunagin

v. City of Oxford, Miss., 718 F.2d at

751.)

Under the restrictions that FDA is

adopting, firms will remain free to

disseminate advertising that performs

all the informational functions that are

protected by the First Amendment.

They will be able to disseminate

information on what they are selling, for

what reason, and at what price. (See

Virginia State Board of Pharmacy v.

Virginia Citizens Consumer Council,

425 U.S. 748, 765 (1976); Bates v. State

Bar of Arizona, 433 U.S. 350, 364

(1977).) Thus, the situation here is

analogous to that in Friedman v. Rogers,

440 U.S. 1 (1979), where the Supreme

Court found that a restriction on the use

of optometrical trade names had only an

incidental effect on the content of

commercial speech. The Court said that

‘‘the factual information associated with

trade names may be communicated

freely and explicitly to the public’’ (440

U.S. at 16). So, here, any information

that firms wish to communicate to

adults may still be communicated by

use of words. Indeed, the tobacco

industry has used text-only advertising

successfully in the past. 196

It may be true, as some of the

comments state and as the agency

recognized above, that it will be more

difficult for adult consumers to find

cigarette and smokeless tobacco

advertising without images and color,

but willingness to search for

information is one of the things that

adults will do when they need

information about price, quality, or

product performance. Moreover, as

discussed above, adult tobacco users are

particularly interested in information on

price, ‘‘safer’’ cigarettes, and new

products, information that can be freely

conveyed under FDA’s regulations.

(25) The effect of the proposed

restrictions on cigarette and smokeless

tobacco product manufacturers’ ability

to communicate with adults was the

subject of a number of comments. These

comments argued that the proposed

restrictions would not only preclude

speech that may be perceived by young

people, it would preclude speech that

would be received by adults. The

restrictions, these comments asserted,

would deprive adults, who are legally

entitled to smoke, of their right to the

free flow of relevant commercial

information. Other comments, relying

on several cases, said that the First

Amendment does not countenance

wholesale censorship of speech for

adults under the guise of protecting

children. Many comments, for example,

quoted a statement from Butler v. State

of Michigan, 352 U.S. 380, 383 (1957)

(‘‘Surely, this is to burn the house to

roast the pig.’’) in support of this point.

One comment said that FDA’s purpose

of reducing tobacco use by minors

cannot support massive censorship

between tobacco advertisers and adults.

One comment, however, argued that

FDA’s proposed restrictions are

narrowly tailored to the specific types of

advertising that are most effective with

children. This comment said that these

restrictions permit companies to

continue marketing practices that do not

appeal to children.

FDA has considered the concerns

expressed in the comments. First, FDA

does not agree that its interest is limited.

As discussed above, the agency’s

interest is compelling. Nonetheless, the

agency has tried very hard to tailor the

restrictions on advertising in this final

rule to focus them in order to limit the

appeal of advertising to the young and

ensure that the restrictions on access to

cigarettes and smokeless tobacco will

not be undermined, while at the same

time, minimizing their effect on adults.

Given this approach, FDA’s restrictions

differ significantly from those struck

down in Butler v. State of Michigan,

where the Court overturned conviction

of a bookseller for selling a book to

adults that contained some portions that

might be objectionable to young people.

In that case, the Supreme Court stated:

We have before us legislation not

reasonably restricted to the evil with which

it is said to deal. The incidence of this

enactment is to reduce the adult population

of Michigan to only what is fit for children.

(352 U.S. at 383)

This statement clearly does not

describe the situation under the

restrictions FDA is adopting. Except for

limits on images and colors, the

restrictions that FDA is adopting do not

limit what cigarette and smokeless

tobacco manufacturers, distributors, or

retailers may say. As stated above, they

are free to put into words any

nondeceptive message that they would

have communicated by color or image.
44498 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

197The Court specifically distinguished FCC v.

Pacifica Foundation, 438 U.S. 726 (1978), because

that case did not involve a total ban on broadcasting

indecent material. The Court pointed out that the

FCC rule in that case sought to channel the indecent

material to times of the day when children most

likely would not be exposed to it (Sable

Communications v. FCC, 492 U.S. at 127). FDA’s

intention here is to impose a similar type of focused

and tailored restriction on tobacco advertising to

limit the appeal of such advertising to children.

FDA’s restrictions, as one comment

stated, restrict only those advertising

techniques that have the most appeal.

Thus, contrary to the situation in Butler

v. Michigan, these restrictions are

reasonably restricted to the harms they

are intended to address.

Nor are the restrictions that FDA is

imposing like the one struck down in

Bolger v. Youngs Drug Products Corp.,

463 U.S. 60 (1983), which was cited by

several comments. In that case, a

Federal statute prohibited the mailing of

unsolicited advertisements for

contraceptives. The Postal Service

sought to justify this restriction as

aiding parents’ efforts to discuss birth

control with their children. While the

Court found this interest to be

substantial, it found the restriction to be

more extensive than the Constitution

permits (463 U.S. at 73). The Supreme

Court struck down the restrictions,

stating: ‘‘The level of discourse reaching

the mailbox simply cannot be limited to

that which would be suitable for a

sandbox’’ (Id. at 74). It is in this respect

that FDA’s restrictions differ from those

in Bolger. While FDA may limit the type

of color or imagery, or the use of

noncommunicative media, i.e., hats,

FDA’s restrictions do not limit the types

of information that can be disseminated,

except within 1,000 feet of schools and

playgrounds.

(26) Other comments cited Sable

Communications v. FCC, 492 U.S. 115

(1989), in which the Supreme Court

struck down an outright ban on

indecent as well as obscene interstate

commercial telephone messages. This

case is not relevant here because FDA is

not imposing an outright ban on

cigarette and smokeless tobacco

advertising, 197 and because in contrast

to Congress’s failure to make findings

that would justify the ban in Sable, FDA

is fully explaining the basis for each of

the restrictions that it is adopting here.

Other comments cited Erznoznik v.

City of Jacksonville, 422 U.S. 205 (1975),

in which the Supreme Court struck

down an ordinance that, to protect

minors, made it illegal to exhibit a

motion picture visible from public

streets in which female buttocks and

bare breasts were shown. In doing so,

the Supreme Court stated that: ‘‘Speech

* * * cannot be suppressed solely to

protect the young from ideas or images

that a legislative body thinks unsuitable

for them’’ (422 U.S. at 213).

Again, however, FDA is imposing

restrictions on the manner and, to a

limited extent, places in which

cigarettes and smokeless tobacco are

advertised, not content restrictions.

Moreover, FDA is restricting

commercial speech, which, as stated in

section VI.C.1. of this document, is

subject to a subordinate position in the

scale of First Amendment values to the

noncommercial expressions involved in

Erznoznik. Thus, this case has no

application here.

(27) Finally, a few comments cited

Project 80’s, Inc. v. City of Pocatello, 942

F.2d 635 (9th Cir. 1991), a case in which

the U.S. Court of Appeals for the Ninth

Circuit struck down ordinances that

prohibited door-to-door solicitation

because they restricted both wanted and

unwanted solicitations. (See 942 F.2d at

638–639.) The municipalities sought to

defend these ordinances on the grounds

that they did not prohibit in-home sales.

However, the court said that residents

who wanted to receive unwanted

solicitors had to post a ‘‘Solicitors

Welcome’’ sign, and that the

Government’s imposition of affirmative

obligations on the residents’ First

Amendment rights to receive speech is

not permissible (Id. at 639).

Presumably, the comments cited this

case as evidence that FDA’s restrictions

on tobacco advertising sweep too

broadly because they affect the rights of

both minors and adults to receive

speech. Again, however, the case is

distinguishable. Under FDA’s

restrictions, adults will be able to

continue to receive tobacco advertising

without any obligation to take any

affirmative steps. They will have to look

a little harder because, to advance

FDA’s interest in protecting the health

of minors, advertisements will generally

not have images or color, and such

advertising will not be around schools

or playgrounds. However, the

advertising should otherwise continue

to be available in newspapers,

magazines, and billboards and appear

unrestricted in adult publications and

venues. There is no indication in Project

’80, Inc. v. City of Pocatello, that the

Ninth Circuit would find in such

restrictions an undue burden under the

First Amendment.

This review of the case law shows

that FDA’s effort to tailor the restrictions

that it is adopting for cigarette and

smokeless tobacco advertising that

clearly distinguishes them from the

governmental efforts to protect minors

that have been struck down as sweeping

too broadly and as impinging on the

rights of adults. Under FDA’s

restrictions, there will still be a free flow

of information to adults and not massive

censorship as some comments allege.

Thus, these comments do not provide a

basis to conclude that FDA’s restrictions

fail the third prong of the Central

Hudson test.

(28) Several comments pointed out

that the Supreme Court has stated on

several occasions that regulations that

disregard numerous and obvious less

restrictive and more precise means of

achieving the government’s asserted

objectives are not narrowly tailored.

These comments suggested that there

are several less restrictive alternatives to

the restrictions on advertising that FDA

had proposed. One alternative pointed

to by the comments was better

enforcement of laws prohibiting sales to

minors. The comments pointed out that

Congress passed legislation as part of

the Alcohol, Drug Abuse, and Mental

Health Administration (ADAMHA)

Reorganization Act of 1992, that

prohibits DHHS from providing block

grants for the prevention and treatment

of substance abuse unless the State

prohibits the sale and distribution of

tobacco products to persons under 18.

The comments said that FDA should

give this new law a chance to work

before imposing restrictions on speech,

particularly in light of the fact that

DHHS itself said in its 1995 proposed

rule to implement this new law that

‘‘[e]liminating virtually all sales [of

tobacco products] to minors does not

even present particularly difficult

enforcement problems’’ (see 58 FR

45156 at 45165, August 26, 1993).

The other alternative, according to the

comments, that exists to the restrictions

is an educational campaign that is

sponsored either by the Government or

that is provided through voluntary

counter speech by the tobacco industry.

The agency recognizes that the

various opinions by the Justices in 44

Liquormart reiterate the need to

consider nonspeech restrictions. Justice

Stevens, speaking for himself and

Justices Kennedy, Ginsburg, and Souter

stated that the legislature ‘‘cannot

satisfy the requirement that its

restriction on speech be no more

extensive than necessary,’’ given that

alternative forms of regulation, such as

taxation or limits on purchases that did

not involve restrictions on speech,

could achieve the goal of promoting

temperance as well as, or better, than,
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44499

198 ‘‘Teen Smoking, Marijuana Use Increase

Sharply, Study Shows; HHS Sees Alarming

‘Culturewide’ Change in Progress,’’ The Washington

Times, p. A2, December 16, 1995; quoting from

‘‘Results from the 1995 Monitoring the Future

Survey,’’ National Institute on Drug Abuse Briefing

for Donna E. Shalala, Ph.D., Secretary of Health and

Human Services, December 13, 1995.

199 It is true that in its August 25, 1993, proposal

(58 FR 45156), DHHS stated, as the comments say,

that eliminating virtually all sales to minors does

not present particularly difficult enforcement

problems. This statement did not imply, however,

that achieving this goal would be easy, nor did it

reflect consideration of what ancillary measures

would be useful to help to achieve this goal. It was,

rather, a statement of DHHS’ view that this goal

could be achieved.

its ban. Moreover, Justice O’Connor in a

concurrence, joined by the Chief Justice,

and Justices Souter and Breyer stated:

The availability of less burdensome

alternatives to reach the stated goal signals

that the fit between the legislature’s ends and

the means chosen to accomplish those ends

may be too imprecise to withstand First

Amendment scrutiny.

(116 S.Ct. at 1521)

(29) One comment, however, argued

that, for two reasons, there is no

plausible claim that FDA has

disregarded reasonable alternatives.

First, the comment pointed out that the

Federal Government has engaged in an

incremental effort for 30 years to strike

the appropriate balance in regulating the

sale of tobacco products. This effort was

successful in bringing down overall

smoking rates, but youth smoking rates

remained stable during the 1980’s and

have recently begun to rise. Because

previous measures have failed, the

comment said, it was now appropriate

for FDA to take stricter action to reduce

the use of tobacco products by minors.

Second, the comment noted that a lack

of narrow tailoring often manifests itself

in a restraint that is either grossly

underinclusive or overinclusive. The

comment said that FDA had been

neither here.

In Florida Bar v. Went For It, Inc., 115

S.Ct. at 2380, the Supreme Court made

clear that the question whether a

restriction on commercial speech is

reasonably well-tailored turns, at least

in part, on the existence of ‘‘numerous

and obvious less burdensome

alternatives to restrictions on

commercial speech * * *.’’ (See 115

S.Ct. at 2380 (citing Cincinnati v.

Discovery Network, Inc., 507 U.S. 410,

418 n.13 (1993)).) FDA has considered

the alternatives suggested by the

comments and finds that none of them

is an appropriate alternative to the

restrictions that FDA is adopting.

First, the Government has engaged in

a 30-year effort to eliminate young

people’s access to and use of tobacco

products. The industry, through its

voluntary code and various education

programs, has professed to be part of the

solution. However, tobacco can be easily

obtained by young people (between 516

million and 947 million packs of

cigarettes sold illegally per year to

children (1992–1993) (60 FR 41314 at

41315)). Moreover, although adult

smoking rates have declined

dramatically since the publication of the

first Surgeon General’s Report in 1964

(from over 42.4 percent in 1965 to 25

percent in 1993) (60 FR 41314 at 41317),

young people’s smoking rates failed to

decline during the decade of the 1980’s

and began to rise in 1991. Between 1991

and 1995, the proportion of 8th and

10th graders who reported smoking in

the 30 days before the survey had risen

by one-third, to about 19 percent and 28

percent, respectively. Smoking among

high school seniors had increased by

more than one-fifth since 1992, with

33.5 percent saying that they had

smoked in the 30 days before the

survey. 198 Thus, past efforts involving

age restrictions and warning messages

on packages and advertising have not

been sufficient to reduce the demand for

tobacco by young people. The

restrictions on advertising are designed

to affect the demand.

Second, the agency proposed a

sufficiently comprehensive set of

regulatory restrictions to address the

problem of tobacco use by young

people, to wit: (1) Provisions that

restrict and prevent sales of tobacco

products to young people; (2) provisions

that reduce the appeal of tobacco

products for young people that is

created by advertising and promotions;

and (3) a program to provide

educational messages for young people

to help them resist tobacco use. Thus,

the agency has not relied solely on

regulations that have an impact upon

the speech of the tobacco industry but

has included provisions to address the

activity itself.

Third, while it is true that better

enforcement of laws restricting sales to

minors is complementary to FDA’s

approach, it does not eliminate the need

for this action. As DHHS recognized in

its final rule implementing the

ADAMHA Reorganization Act of 1992,

DHHS’s action under that statute and

FDA’s regulations both address the need

to reduce minors’ access to tobacco

products. FDA’s action, however, in

addition to reducing access, attempts,

through the restrictions on advertising,

to reduce ‘‘the powerful appeal of

tobacco products to children and

adolescents’’ (61 FR 1492, January 19,

1996). 199

Advertising, as explained in sections

VI.B. and VI.D. of this document, plays

a role in the decision of children and

adolescents to use cigarettes and

smokeless tobacco. As long as

advertising continues to play that role,

young people will be motivated to

obtain access to tobacco products and to

attempt to circumvent any access

restrictions. Thus, the restrictions on

speech are necessary to prevent

advertising from undermining FDA’s

proposed restrictions on access. First,

the agency notes that the voluntary

educational campaigns conducted by

tobacco companies have not been

effective in reducing underage tobacco

use. This fact is evidenced by the

increase in prevalence of tobacco use

among young people. (See, e.g., 60 FR

41314 at 41315.) Second, the agency

finds that any educational campaign is

likely to be undermined if the young

people to whom it is aimed continue to

be the target of advertising that fosters

the perception that experimentation

with tobacco by young people is

expected and accepted.

The U.S. Court of Appeals for the

Fifth Circuit considered a suggestion

similar to that of an educational

campaign in Dunagin v. City of Oxford,

Miss. and found it not to be an

alternative to restrictions on advertising:

We do not believe that a less restrictive

time, place, and manner restriction, such as

a disclaimer warning of the dangers of

alcohol, would be effective. The state’s

concern is not that the public is unaware of

the dangers of alcohol * * * The concern

instead is that advertising will unduly

promote alcohol consumption despite known

dangers.

(See 718 F.2d at 751; see also Posadas

de Puerto Rico Ass’n v. Tourism Co. of

Puerto Rico, 478 U.S. at 344.) This is

exactly FDA’s concern about the effect

of advertising on underage tobacco use,

and why an educational campaign,

which may complement advertising

restrictions, is not an alternative to

them.

Thus, the agency concludes that there

are no less burdensome alternatives to

restrictions on advertising. In this

respect, this proceeding is

distinguishable from that considered in

Rubin v. Coors, which was cited by a

number of the comments. In Rubin v.

Coors, the Supreme Court pointed to the

fact that the respondent cited several

options that could advance the

Government’s asserted interest in a

manner less intrusive to respondent’s

First Amendment rights than the
44500 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

200One alternative that the respondents in Rubin

v. Coors advanced was prohibiting marketing efforts

emphasizing high alcohol strength (115 S.Ct. at

1593.) What FDA is doing here is analogous to that

alternative. It is restricting marketing efforts that

have particular appeal to the young.

statutory provision the Government had

adopted (115 S.Ct. at 1593). 200 Here, as

in section VI.E. of this document, there

are none believed to be nearly as

effective.

In U.S. v. Edge Broadcasting Co., 509

U.S. 418, 430 (1993), the Supreme Court

said that ‘‘the requirement of narrow

tailoring is met if ‘the * * * regulation

promotes a substantial Government

interest that would be achieved less

effectively absent the regulation,’

provided that it did not burden

substantially more speech than

necessary to further the government’s

legitimate interests.’’

FDA’s restrictions on cigarette and

smokeless tobacco advertising clearly

meet this test. FDA’s restrictions

directly and materially advance its

compelling interest in the health of

children and adolescents under the age

of 18. The discussion of the lack of less

restrictive alternatives demonstrates that

the agency’s goals would be achieved

less effectively in the absence of these

restrictions. Finally, as the discussion

on narrow tailoring and in the review of

the comments on each of the regulations

on advertising that follows makes clear,

FDA is restricting only those aspects of

advertising that have particular appeal

to the young. Thus, the agency has

crafted the advertising provisions with

specificity to allow unrestricted

advertising in those venues that are not

seen by or used by children and

adolescents. Accordingly, publications

with adult readership and adult

establishments may have unlimited

print advertising. Moreover, companies

are free to offer nontobacco items and

events in their corporate names or

unbranded. Companies, thus, can

reward adult usage by providing these

incentives but may not do so in a format

(with brand identification and imagery)

which is appealing to young people.

However, the agency has been unable

to determine additional areas for

unrestricted advertising. Thus, other

than adult establishments, such as bars,

there are no areas at other retail

establishments that are not visible to

young people. Billboards are ubiquitous

and accessible to all ages. Nontobacco

items can be restricted to dissemination

to adults, but they would still serve as

walking billboards. Finally, there are no

adult only sponsored events—children

are at the events or watching them on

television. As described more fully in

section VI.E.8. of this document, in the

case of auto racing, attendance by young

people is on the rise.

2. Section 897.30(a)—Permissible Forms

of Labeling and Advertising

Proposed § 897.30(a) would have

established the scope of permissible

forms of labeling and advertising for

cigarettes and smokeless tobacco.

Proposed § 897.30(a)(1) would have

defined permissible forms of advertising

as newspapers, magazines, periodicals,

or other publications (whether periodic

or limited distribution); billboards,

posters, placards; and nonpoint of sale

promotional material (including direct

mail). Proposed § 897.30(a)(2) would

have defined permissible forms of

labeling as point of sale promotional

material; audio and/or video formats

delivered at a point of sale; and entries

and teams in sponsored events.

In response to the comments, FDA has

revised § 897.30(a) so that it no longer

distinguishes between advertising and

labeling, deletes teams and entries as

permissible advertising, describes the

procedure that FDA will follow when it

is informed by advertisers of their intent

to advertise in a medium not listed in

the regulation.

In addition, the first sentence of

§ 897.30(a), which states that this

subpart does not apply to cigarette or

smokeless tobacco product package

labels, has been redesignated as

§ 897.30(c).

(30) Several comments were received

addressing the issue of permissible

advertising outlets. Comments from the

tobacco and advertising industries

opposed the 1995 proposed rule. These

comments criticized the 1995 proposed

rule for not defining the term

‘‘advertising’’ and called the 1995

proposed rule unprecedented in the

scope of its limitations on the forms of

media, a violation of the First

Amendment, a violation of the

Administrative Procedure Act (APA),

and beyond FDA’s statutory authority.

Supporters of the 1995 proposed rule,

including health and public interest

groups, stated that it is a reasonable

measure given the effect of advertising

on children and that it provides

manufacturers with a wide variety of

means for communicating with their

customers. Some supporting comments

urged that the prohibition of certain

media, such as the Internet, be stated

explicitly.

Several comments from the tobacco

industry expressed concern that FDA

did not define the term ‘‘advertising’’

‘‘because § 897.30(a)(1) would limit the

media in which cigarettes may be

‘advertised,’ the definition of

‘advertising’ as used by FDA is crucial;

yet the term is not defined in the

proposed regulations.’’

Moreover, they expressed concern

that the definition was so sweeping that

it could literally ‘‘include reports to

shareholders or potential shareholders;

communications among manufacturers,

wholesalers, distributors, and retailers;

or even communications to the news

media insofar as they might be deemed

a ’commercial use.’’’

Other comments requested that the

agency clarify the definition to ban

product placements in movies and

commercials shown in movie theaters.

Several comments stated that § 897.30

should be extended to include tobacco

product packages to reduce the means of

a child expressing affinity with the

image associated with a particular

brand. One comment recommended

tombstone packaging without an

identifiable logo.

The agency carefully considered

whether it should attempt to define the

term ‘‘advertising’’ more explicitly than

it did. ‘‘Advertising’’ as a term is

constantly evolving, as new media and

new techniques of marketing emerge.

Although its boundaries are understood

(and were provided in the preamble to

the 1995 proposed rule), there is no one

accepted definition. FTC is the Federal

agency with general responsibility for

regulating most consumer advertising.

Yet neither FTC nor any of its rules

define the general term ‘‘advertising.’’

The agency agrees with the approach

taken by FTC and continues to believe

that the term ‘‘advertising’’ should not

be defined any more specifically. Thus,

FDA finds that the description of

advertising in the preamble to the 1995

proposed rule is appropriate:

Labeling and advertising are used

throughout this subpart to include all

commercial uses of the brand name of a

product (alone or in conjunction with other

words), logo, symbol, motto, selling message,

or any other indicia of product identification

similar or identical to that used for any brand

of cigarette or smokeless tobacco product.

However, labeling and advertising would

exclude package labels, which would be

covered under proposed subpart C.

(60 FR 41314 at 41334)

The agency also agrees with

comments that state that it must provide

some context for the application of so

open ended a definition. For example,

comments contended that ‘‘commercial

use’’ could be interpreted to include

such items as trade advertising

(communication between
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44501

manufacturers, wholesalers,

distributors, and retailers), shareholder

reports, and possibly even

communications with the news media.

This was not FDA’s intent. This rule is

a consumer based regulation; it is not

the intention of FDA to include purely

business related communications. Thus,

noncommercial uses would not be

affected. These would include such uses

as unpaid press statements, signs on

factories noting locations, business

cards, and stockholder reports. While

many of these uses would be ordinary

and necessary business expenses, they

would not be commercial uses in the

context of the rule’s restrictions on

tobacco advertising affecting minors’

tobacco use.

Furthermore, the preamble to the

1995 proposed rule explained that the

agency intends to permit advertising

with imagery and color in publications

that are read primarily by adults. For

that reason, under § 897.32(a),

advertisements in publications (whether

periodic or limited distribution) with

primarily adult readership are not

restricted to a text-only format. Trade

advertising in trade press publications

and trade show publications, trade

catalogs, price sheets, and other

publications for wholesalers,

distributors, and retailers that will not

be seen by consumers, including

minors, are unaffected by the rule.

Also, the agency does not believe that

the term ‘‘advertising’’ needs to be

defined to clarify what is not a

permissible advertising outlet. The 1995

proposed rule clearly specifies what

advertising outlets are included within

the regulation’s coverage. However, the

agency has been persuaded to make

more clear its procedures for new or

uncovered media. These procedures are

described in this section.

The agency does not agree with

comments that the rule needs to be

clarified regarding infomercials or

advertorials (program length

commercials). Television infomercials

are not allowed under the statutory

broadcast ban, and magazine

advertorials would be treated like any

other magazine advertising. The agency

recognizes that commercial advertising

messages (videos) shown in a movie

theater are not addressed by the 1995

proposed rule. If this becomes a desired

medium, the companies would need to

notify FDA 30 days prior to using a new

medium. Finally, product placements in

movies, music videos, and television, if

not placed at the expense of a tobacco

manufacturer, distributor, or retailer,

would not be affected by this rule. The

agency does not intend to regulate a film

producer’s artistic expression—i.e.,

what the producer chooses to display in

movies.

The agency has decided not to

include restrictions on tobacco product

packaging. The agency has attempted to

narrowly tailor this rule and therefore

has not included packaging restrictions

at this time.

(31) Several comments from the

advertising industry expressed concern

that the wording of § 897.30(a)(1) would

ban all advertising for tobacco products

that is not expressly permitted. If so, the

comment states, the rule would be

arbitrary and capricious because the

agency did not present evidence that

these unnamed advertising techniques

influence young people. Another

comment pointed out that the channels

available to tobacco companies for

communicating with adults already

have been severely restricted by

Congress’ ban on television and radio

advertising.

In contrast, comments from

organizations of health professionals

and a public interest group supported

the scope of permissible advertising.

One specific comment stated that, ‘‘The

media listed in § 897.30 provide

manufacturers with a wide variety of

means for communicating with their

customers.’’

The agency has determined that the

scope of the permissible outlets for

tobacco advertising in the 1995

proposed rule is reasonable. The

permissible forms are the known current

forums for tobacco labeling and

advertising and account for the vast

majority of advertising expenditures.

While the format of much of current

tobacco advertising is being restricted to

a text-only format, almost all of the

current media outlets being used for

tobacco advertising will still be

permissible. Legal users will continue to

be able to receive information about

cigarettes and smokeless tobacco, in a

text-only format in most cases, in

virtually all the same media currently

used for tobacco advertising. Moreover,

if an advertiser intends to use a new

media outlet not included in the list of

permissible advertising, its

responsibility is to notify FDA and

provide the agency with information

about the media and the extent to which

the advertising is seen by young people.

FDA will review any submission and

make a determination whether

provisions of the final regulation

provide sufficient information for the

advertiser to know how to disseminate

its advertising or whether the

regulations need to be amended.

Advertising in any new media will be

subject to the text-only format

requirement if it is a medium used by

young people. Therefore, FDA has

created a new § 897.30(a)(2) to reflect

this new process.

The agency believes this approach is

reasonable and is fully consistent with

its statutory authority and with the First

Amendment. In Central Hudson Gas &

Electric Co., 447 U.S. at 571, n.13, the

Supreme Court suggested that the Public

Service Commission might consider a

system of previewing advertising

campaigns to ensure that they will not

defeat conservation policy. The Court

pointed out that ‘‘commercial speech is

such a sturdy brand of expression that

traditional prior restraint doctrine may

not apply to it’’ (Id.). Given the agency’s

significant interest in ensuring that the

restrictions on access that it is imposing

are not undermined, FDA finds that the

requirement that firms consult with it

before using a new advertising medium

is a limited means of regulating

commercial expression that is likely to

vindicate FDA’s public health interests.

This approach will not prohibit the

tobacco industry from advertising in

new media but will protect young

people by giving the agency an

opportunity to review the problems

presented by a new media and to design

new regulations or adapt current ones.

(32) One comment from a public

interest group concerned with electronic

media urged FDA to explicitly prohibit

tobacco advertising over the Internet,

Worldwide Web, and other on-line

services and interactive media. The

comment stated that children and

adolescents are increasingly using online services with up to 4 million

Americans under age 18 using, or with

access to, on-line services. The

comment stated further that the

interactive nature of the on-line services

gives advertisements numerous

advantages over traditional print

advertisements. The comment

emphasized that a ban on tobacco

advertising over these media is

necessary because the text-only format

would not be as effective in reducing

the appeal of tobacco advertising to

minors given the interactive nature of

these media.

One comment from an organization of

health professionals stated that one

tobacco company advertises its mailorder business through a Web site on

the Internet and offers links to other

tobacco-related sites. The comment

wondered why this type of

advertisement was not banned by FCC
44502 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

201 In addition to the substantive changes, the

following changes in language have been made: (1)

Deletion of ‘‘only’’ in § 897.30(a)(1); (2) substitution

of (a)(2) for (b) in 897.30; and (3) deletion of ‘‘and’’

before ‘‘in point of sale’’ in § 897.30(a)(1).

since the Internet operates over

telephone lines, a form of electronic

media that is regulated by FCC and from

which cigarette advertising is banned.

A few comments dealt with on-line

advertising and recommended that the

rule should limit format to black text on

a plain background, require advertisers

to demonstrate that significant numbers

of children do not access ad sites,

require use of any available blocking

technology, and define ‘‘conspicuous’’

and ‘‘prominent’’ as they pertain to

interactive media.

Some of these comments have

suggested that advertising of tobacco

products in on-line media should be

banned under the Federal Cigarette

Labeling and Advertising Act’s (the

Cigarette Act) (15 U.S.C. 1331) and the

Comprehensive Smokeless Tobacco

Health Education Act of 1996’s (the

Smokeless Act) (15 U.S.C. 4401)

prohibition of advertising on any media

subject to the jurisdiction of FCC. The

agency leaves the issue of jurisdiction

and the applicability of the broadcast

ban to the Department of Justice, which

has the appropriate jurisdiction over the

Cigarette Act, and to FTC, which has

along with the Department of Justice

jurisdiction over the Smokeless Act.

Were these agencies not to take action

and were, tobacco advertising to

continue in on-line media, then FDA is

available to meet with advertisers

regarding their responsibility under the

final rule.

The agency recognizes the growing

importance and use of on-line media

and the Internet for communications of

all sorts, including tobacco sales and

advertising. On-line media are not

included within the list of permissible

outlets for tobacco advertising because

the agency does not have sufficient

information on the technology to

include regulations in the final rule.

However, advertisers interested in

advertising on the Internet should notify

the agency, after the rule is final, and

provide the agency with sufficient

information about use by young people

so that the agency can make a proper

determination. This notification is for

discussion purposes only, and is not in

any way intended to imply, or create a

need for, prior approval.

The agency recognizes the concern

expressed by one comment that a textonly format, without additional

requirements, may not be as effective in

protecting young people from on-line

advertising as it would be for print

advertising because of the interactive

nature of on-line media. The agency

would consider the unique qualities of

on-line media and the Internet in

evaluating any requests to use these

media. Any other statement about

specific requirements for this new

media or any other media would

constitute speculation at this point. 201

Section 897.30(a)(1) provides a

comprehensive listing of the permissible

forms of advertising and labeling. The

evidence that FDA has gathered in this

proceeding establishes the need for and

importance of such a comprehensive

listing. In addition to the general

evidence and support provided by

expert opinion, advertising theory,

studies and surveys, empirical studies,

anecdotal evidence, industry

statements, and two consensus reports

(the IOM Report and the 1994 SGR)

described in section VI.D.5. of this

document, FDA has found specific

support for a comprehensive listing in:

Empirical Studies—Various economic

and econometric studies of international

and cross-country data show that

restrictions on advertising and

promotional activities can result in a

decline in tobacco use (see section

VI.D.6.a. of this document).

Country Experience—The experience

of countries, such as Norway and

Finland, shows that comprehensive

advertising restrictions can positively

affect the smoking rates of young people

over time (see section VI.D.6.a. of this

document).

Advertising Theory—Each separate

advertising media plays a critical role in

shaping young people’s beliefs about

tobacco use, and ultimately their use of

tobacco products (see sections VI.D.3.a.

through VI.D.3.e. of this document).

Therefore, regulation of advertising

must address each type of media. As

will be described in the following

sections of the regulation, the

restrictions on each media are necessary

to reduce the appeal of tobacco for

young people and to prevent

unrestricted tobacco advertising from

undermining the regulation’s access

provisions. Moreover, as international

experience indicates (see section VI.D.6.

of this document), when regulations that

are not comprehensive are

implemented, tobacco money can

migrate to unregulated advertising

venues (e.g., if publications are

prohibited, money expended on

sponsorship will increase) and can

undermine the force of the regulation.

Thus, in order to be effective,

restrictions must be as comprehensive

as possible.

Based on all of the foregoing, FDA

concludes that the comprehensive

listing of permissible advertising in

§ 897.30(a)(1) will directly and

materially advance the agency’s efforts

to reduce consumption of tobacco

products by children and adolescents

under the age of 18.

3. Section 897.30(b)—Billboards

The agency proposed in § 897.30(b) to

prohibit outdoor advertising, including

but not limited to billboards, posters, or

placards, placed within 1,000 feet of any

public playground or playground in a

public park, elementary school, or

secondary school. FDA proposed this

provision because these are places

where children and adolescents spend a

great deal of time and should therefore

be free of advertising for these products.

The agency tentatively concluded that

this was a reasonable restriction and

noted that the cigarette industry’s

voluntary ‘‘Cigarette Advertising and

Promotion Code,’’ (the Code) revised in

1990, contains a similar provision

concerning schools and playgrounds (60

FR 41314 at 41334 through 41335).

(33) FDA received over 2,500

comments concerning this part of the

1995 proposed rule. Comments

opposing this measure pointed out that

the tobacco industry has established a

voluntary code similar to the proposed

provision with which advertisers

already comply, and that therefore,

there is no reason to make this measure

mandatory. These comments also stated

that outdoor advertising does not target

children and adolescents, and that

parents, siblings, and friends have a

much greater influence than billboards

and posters on a young person’s desire

to start smoking. Further, they stated

that there is no evidence that this

measure would reduce any teenager’s

desire to smoke.

Most comments supported this

provision, stating that children and

adolescents should not be subjected to

visual images promoting tobacco use

around those areas where they attend

school or play. The comments argued

that children and adolescents want to be

like the attractive models in the

advertising, and, thus, the

advertisements directly influence them

to start using tobacco.

In the Federal Register of March 20,

1996 (61 FR 11349), the agency

reopened the comment period for the

August 1995 proposed rule to place on

the public record a memorandum that

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

advertising within 1,000 feet of schools

and playgrounds. The document

provided an additional 30 days in

which to comment on this new

information. The memorandum stated

that the agency was aware of the

industry’s voluntary 500-foot ban on

advertising from schools and

playgrounds but also that it was

cognizant, based on the experience of its

employees, that billboards can loom

large in the sight of children and

adolescents at that distance and thus

would be able to capture their attention.

The agency also noted that 1,000 feet is

about 3 blocks and that signage kept that

far away from schools and playgrounds

would not loom as large, if it would be

visible at all. Moreover, the 1,000 feet

will protect children as they travel to

and from these locations.

In response to the comments, FDA has

modified the provision to clarify the

coverage of the provision. Thus, the

final rule states that the 1,000-foot area

is to be measured from the perimeter of

the playground or school. Moreover, a

definition of playground is included as

well as an indication that the relevant

area of a playground in a larger public

park is limited to the play area itself.

Section 897.30(b) reads:

No outdoor advertising for cigarettes or

smokeless tobacco, including billboards,

posters, or placards, may be placed within

1,000 feet of the perimeter of any public

playground or playground area in a public

park (e.g., a public park with equipment such

as swings and seesaws, baseball diamonds, or

basketball courts), elementary school, or

secondary school.

(34) Several comments asked FDA to

define what is meant by the term

‘‘playground.’’ The comments stated

that the term could be construed to

include literally any place of outdoor

recreation where children may play (i.e.,

a paved parking lot, a tennis court, or

a city park), even places used primarily

by persons 18 years of age or older. One

of the comments noted that the industry

code refers to ‘‘children’s playgrounds’’

(i.e., playgrounds designed primarily for

use by children), but that § 897.30(b)

refers to ‘‘any playground.’’

Some comments suggested that the

term ‘‘playground’’ should include the

playgrounds of city parks, recreation

facilities, theme parks (e.g., Disneyland),

and national parks.

The agency agrees that it needs to

clarify what is meant by the term

‘‘playground.’’ A typical dictionary

definition of ‘‘playground’’ states that it

is: (1) An outdoor area set aside for

recreation and play, especially one

having equipment such as seesaws and

swings; or (2) a field or area of

unrestricted activity. The intent of the

proposal was not to preclude outdoor

advertising within 1,000 feet of any area

that would fall under this broad

definition, but to preclude cigarette and

smokeless tobacco advertising around

those areas where children and

adolescents are likely to spend a lot of

time. Clearly, areas around schools with

equipment such as swings and seesaws

are areas where children are likely to

play. Public parks for family

recreational purposes with play

equipment, and facilities for activities

such as baseball or basketball are also

areas where children and adolescents

are likely to be present for hours at a

time.

However, private enterprises, such as

theme parks and recreational facilities,

are not necessarily intended only for

children and adolescents. Those that

are, may require the presence of an

adult for entry. There are usually

entrance fees or required purchases for

use of these areas. In addition, children

and adolescents may not be present in

these areas on any regular basis (e.g., an

annual visit to a theme park). Therefore,

the agency will not include these areas

in the regulation. Moreover, because all

outdoor advertising must be in black

and white text, the agency sees no need

to extend the prohibition beyond

elementary and secondary schools and

public playgrounds at this time.

The concern expressed that a decision

by private parties to build a playground

could destroy the value of a billboard

sign should no longer exist. Because the

agency is limiting its definition of

playground to those publicly owned

playgrounds, any interested party could

object to the establishment of the

playground.

FDA is modifying § 897.30(b) to state

that outdoor advertising is prohibited

within 1,000 feet of the perimeter of any

public playground or playground area in

a public park (e.g., areas with

equipment such as swings and seesaws,

baseball diamonds, basketball courts),

elementary school or secondary school.

The agency concludes that this

modification in § 897.30(b) is adequate

to clarify the term ‘‘playground,’’ and

that a more specific definition for

‘‘playground’’ is not necessary at this

time.

The agency notes that the definition

makes clear that, when an area is set

aside for a playground within a public

park, the 1,000 feet is measured from

the perimeter of the play area and not

from the larger park.

(35) Several comments contended that

the regulation should specify that the

1,000-foot rule should be measured from

the perimeter of the property to avoid

confusion. One comment asked that the

provision be more clear as to what types

of schools would be included within the

definition.

The agency agrees with the first

comment. The intent of the 1995

proposed rule was that the distance

would be measured from the perimeter

of the school or playground. Any other

measurement could defeat the purpose

of the regulation. For example,

measuring from the edge of a building

or from the center of a playground could

allow outdoor advertising to be placed

closer to the perimeter where children

may be assembled or playing. In

addition, for large schools or

playgrounds, the outdoor advertising

could feasibly be near the perimeter of

the school or playground if the distance

is measured from somewhere other than

the perimeter. Therefore, to clarify the

intent of the provision, FDA is

modifying § 897.30(b) to state that no

outdoor advertising may be placed

within 1,000 feet of the perimeter of any

playground, elementary school, or

secondary school.

However, the agency does not believe

that it needs to provide a definition of

elementary and secondary schools, as

those terms, as commonly used, include

all such schools (kindergarten through

12th grade) whether public, private, or

parochial.

(36) One comment stated that the

tobacco industry Code of Advertising

Practices (the Code) applies to outdoor

advertising on billboards, and that

§ 897.30(b) applies to all outdoor

signage, including signage on the

exterior of retail establishments that sell

tobacco, and conceivably even to

advertising on buses, taxis, and other

vehicles that might venture within the

1,000-foot zone.

Another comment stated that FDA

should consider regulations that

eliminate tobacco advertising via

traveling vans and trailers because

trailers and vans are mobile billboards

and can be strategically placed to gain

maximum exposure among young

people.

FDA agrees that § 897.30(b) applies to

more forms of advertising media than

does the tobacco industry code (i.e., all

outdoor advertising, not just billboards).

FDA’s regulation restricts all outdoor

advertising of tobacco products,

including, but not limited to, billboards,

posters, and placards. However, the

intent and purpose of § 897.30(b) is not
44504 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

202Although this statute was overturned in

United States v. Lopez, 115 S.Ct. 1624 (1995), as

inappropriate under the Commerce Clause, the

congressional determination that 1,000 feet was an

appropriate distance was not disturbed.

203Rogers, T., E. C. Teighey, E. M. Tencoti, J. L.

Butler, and L. Weiner, ‘‘Community Mobilization to

Reduce Point-of-Purchase Advertising of Tobacco,’’

Health Education Quarterly, 1995, in press.

to prohibit signage on taxis and buses

that are not located in, but may pass

through, the school or play zone. Such

signage is usually temporary or transient

and does not present the same concern

of a permanent sign.

(37) Several comments questioned the

factual basis for the proposed ban on

outdoor advertising of cigarettes and

smokeless tobacco within 1,000 feet of

schools and playgrounds and stated that

‘‘employee’’ experience is not a

sufficient basis. One comment argued

that FDA should give little weight to

employee experience in light of the fact

that cigarette manufacturers submitted

expert testimony that children and

adolescents pay relatively little

attention to billboard advertising at any

distance. In addition, some comments

argued that FDA’s analysis related

solely to billboards, and that it had

presented no evidence or analysis

justifying a ban on store signage.

Finally, several comments stated that

the agency failed to take into account

the ‘‘visibility’’ of the outdoor

advertising. These comments suggested

that any regulation must take into

account whether obstructions exist (e.g.,

trees, winding roads, signage placed

facing away from the prohibited area).

The agency disagrees that it has not

provided an adequate basis for its

proposed regulation. In addition to the

analysis provided by the agency in its

March 20, 1996, Federal Register

document, the agency received two

comments during the comment period

with evidence regarding this issue. A

professor of biophysics and optometry

stated that he believed that there was a

rational and quantitative basis for

deciding on a given distance if that

distance was to be based on the

visibility of words on a billboard.

Specifically, he stated that children and

adolescents typically have 20/15 visual

acuity. Therefore, it is possible, using a

mathematical formula using a rightangled triangle and the definition of the

tangent trigonometric function to

compute the distance at which words

are visible. He computed the distances

from which it would be possible to see

both words 1 foot high and 2 feet high.

In addition, he computed the distances

for a ‘‘normal’’ visual acuity of 20/20. If

one were to average these numbers, the

result would be approximately 1,200

feet, which could be rounded to 1,000

feet.

Table 1a.

1-foot high

letters

2-foot high

letters

20/15 vision 917 feet 1,833 feet

20/20 vision 687.8 feet 1,376

(38) Another comment reminded the

agency that two separate laws passed by

Congress had provided for a 1,000-foot

zone around schools as a means to

protect youngsters from dangerous and

unsafe behavior. The Controlled

Substances Act (21 U.S.C. 860) provides

additional penalties for anyone

distributing or manufacturing drugs

within 1,000 feet of schools,

playgrounds, and universities, and 18

U.S.C. 922 prohibited possession of a

firearm within 1,000 feet of schools. 202

Moreover, the comment contained

scores of pictures of advertising

billboards and signs within 500 and

1,000 feet of school and playgrounds as

well as statements by children

indicating that the signs are ubiquitous

and attractive. The pictures and

statements may only be anecdotal

evidence of the proliferation of tobacco

advertising near schools and

playgrounds, but the number of children

who provided pictures in such a short

period of time indicates that the

problem of advertising in proximity to

schools and playgrounds is not isolated.

Moreover, the agency also disagrees

that it has no basis for including other

outdoor signage, including signs on

stores, in the regulation. The agency

provided evidence in the administrative

record and comments refer to

evidence, 203 which showed that in a

test area, those stores within 1,000 feet

of schools had a significantly greater

percentage of windows covered with

tobacco signs than those further away.

Moreover, the two RJR memoranda by

sales representatives, described in

section VI.D.3.d. of this document,

mention the importance of supplying

stores near high schools with ‘‘young

adult’’ material.

This provides sufficient support for

the agency’s concern with signage on

stores near schools. Young people are

more likely to frequent stores near

schools, especially older adolescents,

and these venues should therefore be

free of advertising for tobacco products.

The agency also finds that it cannot

address the comments’ concerns with

obstructions. It would not be possible to

qualify a regulation to account for the

fact that trees may obstruct a sign when

they are in full bloom but not in winter,

or that children may be able to see

signage as streets wind or that face away

from the school or playground as they

walk to and from school. The line that

the agency has drawn is narrowly

tailored (see Board of Trustees of State

University of New York v. Fox 492 U.S.

at 480) and consistent with how a

standard needs to be crafted for it to be

enforceable.

Finally, FDA finds that the expert

testimony referred to in the industry

comment that indicates that young

people do not pay attention to

billboards is contradicted by other

evidence in the record. The Roper

Starch study mentioned in section

VI.D.3.d. of this document, submitted by

RJR, reported that 51 percent of 10 to 17

year olds surveyed reported that they

had seen or heard of Joe Camel from a

billboard advertisement. For this reason,

FDA is not accepting the suggestion in

the comment.

(39) A number of comments from the

tobacco and outdoor advertising

industries stated that the tobacco

industry had adopted a code in 1990,

which encouraged all billboard

companies to establish and manage a

program to prohibit alcohol and tobacco

advertisements within 500 feet of places

of worship and primary and secondary

schools. They noted that over 16,000

billboards nationwide have been

voluntarily identified as ‘‘off limits’’ for

these categories of advertising. As a

consequence, the comments asserted

that Government action is unnecessary.

One of the comments stated that the

fact that members of an industry have

elected to submit to a code of

advertising practices does not make it

reasonable for the government to impose

mandatory advertising restrictions

backed by criminal sanctions. It stated

that private parties may voluntarily take

actions that the Constitution forbids the

Government to mandate. The comment

argued that few industries would risk

any self-regulation if their decision to

do so might establish a predicate for

even greater Federal regulation.

Conversely, several comments raised

concerns about the voluntary code and

cited numerous examples of violations

that continued after the sponsors and

the billboard companies had been

informed of the violations. One
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44505

204Levin, G., ‘‘Poll Shows Camel Ads are

Effective With Kids; Preteens Best Recognize

Brand,’’ Advertising Age, p. 12, April 27, 1992.

205 ‘‘Advertising Character and Slogan Survey,’’

pp. 10, 22.

comment stated that a survey found that

in California tobacco advertising is more

prevalent at stores within 1,000 feet of

schools than at stores farther from

schools. The comment asserted that

statewide findings also revealed that

there is more exterior store advertising

in areas where at least 30 percent of the

neighborhood is 18 years old or

younger, and that the advertisements are

placed near the candy or at a child’s eye

view (3 feet or below).

The agency is aware that the Code of

Advertising Practices has not been

uniformly observed, as several

comments pointed out. Moreover, the

industry code is significantly less

inclusive than the proposed regulation

as it covers only billboard advertising

and not other forms of outdoor

advertising such as posters and

placards. These other forms are likely to

be placed near retail establishments and

in some cases, according to comments,

have appeared on school fences. The

agency finds that all outdoor advertising

must be included in the regulation in

order to provide comprehensive

coverage. There is little difference

between a billboard and a large poster

to a child. Both are advertisements, and

both are visible, so that children see

them as they go to and from school and

play.

In addition, the Code prohibits

outdoor advertising only within 500 feet

of schools, an area only a block or a

block and a half from the school (there

are 10 to 12 city blocks to a mile). One

block will not provide sufficient

protection as it would not cover the

areas where many children congregate

with their friends. Moreover, a child’s

vision does not stop at one block from

school. A prohibition of 1,000 feet will

ensure the absence of signs for 2 to 3

blocks from a school or playground

which can be seen from these locations

where children spend a significant

amount of time each day. (Several

comments stated that FDA had misused

its math to calculate block distances in

its March 20, 1996, Federal Register

document (61 FR 11349).) If the

misstatement caused any confusion, the

agency regrets it but does not believe

that the one-half block difference

undermined the rationale.)

(40) One series of comments

supported FDA’s 1995 proposal, stating

that the restriction on billboards near

schools should not be compromised, nor

the distance reduced.

A number of comments argued that

the proposed regulation did not go far

enough. One comment recommended

excluding outdoor tobacco advertising

from neighborhoods where children

live. Another comment stated the belief

that the ban on billboards should be at

least double the proposed 1,000 feet

from schools, while others argued that

outdoor advertising should be

prohibited completely.

These comments stressed the

importance of billboards and other

outdoor advertising in creating cigarette

brand awareness among children. For

example, one comment discussed the

results of a survey conducted for

Advertising Age, which showed that 46

percent of children 8 to 13 years old

said they most often saw cigarette

advertising on billboards, outpacing

magazines. It stated that 34 percent of

children 14 to 18 years old cited

billboards as the predominant

advertising medium for tobacco

products. 204 The comment stated

further that all billboards, regardless of

placement, are seen by significant

numbers of children, therefore, it clearly

makes sense that, as a means to protect

children from tobacco advertising, such

advertisements should be prohibited

from billboards and other outdoor

advertisements. The comment

emphasized its point by quoting from

the billboard industry’s own marketing

material (‘‘Outdoor: It’s not a medium,

it’s a large’’), ‘‘You can’t zap it. You

can’t ignore it * * * It asks little time,

but leaves a long impression.’’ The

comment stated that the same

publication notes, ‘‘Outdoor is right up

there. Day and night. Lurking. Waiting

for another ambush.’’

One tobacco company presented

evidence of the effectiveness of

billboards in bringing tobacco

advertising to children. RJR, in its

comment on the 1995 proposed rule, as

stated in section VI.D.3.d. of this

document, attached a study conducted

for it to test children’s recognition of

advertising characters and slogans

(Roper Starch study). This study

involved 1,117 children 10 to 17 years

of age, with 86 percent of them

recognizing Joe Camel using aided and

unaided recall. When asked where they

had seen Joe Camel, 51 percent said on

billboards. 205 That amount of recall

shows that billboards represent a very

effective advertising medium and belies

the industry’s assertion that billboards

are not an effective source of advertising

information for children.

Finally, one comment from a public

interest group warned that, the more

complex a rule is, the more difficult

enforcement becomes. It stated that

spacing limitations, such as the

proposed 1,000-foot zone around

schools, begs a series of questions, for

example: How is that distance

measured, from what point to what

point. It stated that these questions

would make it virtually impossible for

citizens to play an active role in

enforcing this rule. The comment stated

that without citizen participation,

billboard control is extremely difficult,

and that this situation has, in fact,

contributed to the industry’s disregard

for local and State billboard control

laws.

The agency finds that the comments,

as well as the evidence spelled out in

the 1995 proposal, have provided ample

support to establish that outdoor

advertising has a significant impact on

children and adolescents. While the

comments have presented significant

evidence in support of a ban on all

outdoor advertising, the agency is not

convinced that a ban or a restriction on

tobacco advertising of more than 1,000

feet would be appropriate. As discussed

elsewhere in this document, the agency

is requiring that all permissible outdoor

advertising be in a black and white, textonly, format. Therefore, some of the

concerns raised by the comments

requesting a complete ban on outdoor

tobacco advertising or of expanding the

ban are addressed by that provision.

Moreover, the agency’s regulations are

an attempt to balance the rights of

adults to receive information about a

legal product with its desire to protect

children from the unavoidable appeal of

advertising. Thus, although the line

could be drawn elsewhere, the agency

finds that the 1,000 feet limitation

should ensure adequate protection from

visible advertising where children

spend a significant amount of time but

will permit adults to get information.

(41) One comment stated that FDA’s

action violated the APA because the

agency offered no evidence in support

of its claim that children spend a great

deal of time in areas as far as 1,000 feet

from the places specified in § 897.30(b).

It added that the justification for textonly advertising undercuts FDA’s

justification for its 1,000-foot ban.

Another comment stated that

although tobacco product advertising is

disseminated through a broad spectrum

of media, outdoor advertising is the only

such medium that is subject to

additional specific prohibitions under

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

product advertising. It stated that the

record does not contain evidence that

would establish either that these

prohibited outdoor advertising signs are

viewed more often by minors than other

advertising media, or that outdoor

advertising in general has a greater

impact on minors than other media.

There is nothing, the comments argued,

that indicates that the mandatory

content restrictions and affirmative

disclosure requirements imposed by the

proposal would be less effective in

outdoor advertising of tobacco products

than when such an advertisement is

placed in a rock and roll magazine, or

in an exempt publication with 1 million

adolescent readers.

One of the comments stated that

because the text-only requirement itself

is intended to render the advertising

unattractive to young people, the

additional ‘‘protection’’ offered by the

1,000-foot rule would be wholly

gratuitous.

Several comments argued that there is

no proof that this additional area of ban

will reduce any teenager’s desire to use

tobacco: a desire that has withstood the

ban of TV and radio advertisements and

a massive educational program. The

comment stated that the 1,000-foot rule

seems particularly gratuitous in view of

the fact that it would ban advertising

that FDA, by virtue of its proposed textonly requirement, already has stripped

of the features FDA deems make it

appealing to young people.

FDA disagrees with these comments.

The agency’s bases for the text-only

requirement for billboards and for the

1,000-foot ban are reasonable and

supportable, and they are not in

conflict. The text-only format

requirement will reduce the appeal of

cigarette and smokeless tobacco product

advertising to persons younger than 18

years of age without affecting the

information conveyed to adults (60 FR

41314 at 41335). It is an attempt to

narrowly tailor the restriction by

balancing the need to restrict

advertising’s appeal to children with the

preservation of the informational

function of advertising for adults.

The prohibition on outdoor

advertising within 1,000 feet of schools

and playgrounds is designed to address

a different problem. The concern is not

the appeal of the advertising. If the

problem were only appeal, the 1,000-

foot restriction would not be necessary

because the text-only requirement

would eliminate this concern. The

concern is the nature of billboards

themselves. Billboards near schools and

playgrounds ensure that children are

exposed to their messages for a

prolonged period of time. As the

Supreme Court recognized in Packer

Corp. v. Utah, 285 U.S. 105, 110 (1934),

billboards are seen without the exercise

of choice or volition, and viewers have

the message thrust upon them by all the

arts and devices that skill can produce.

This is particularly true of billboards

that are readily visible (i.e., within 1,000

feet) when children play or study at a

playground or school, places where by

design children spend a lot of time, or

when children walk to and from a

school or playground. Confronted daily

and unavoidably with the advertised

message, even in text-only, a child gets

a sense of familiarity, normalcy and

acceptability of the message and the

product that is advertised.

(42) Several comments stated that

placing a circle with a radius of 1,000

feet drawn from the perimeter of each

school and playground would establish

a ‘‘forbidden zone’’ that would be at

least 2,000 feet in diameter (i.e., over

one-third of a mile). They stated that in

many communities, this would be

tantamount to a de facto ban, for there

would be virtually no outdoor location

that could escape the rule’s prohibition.

Several comments pointed out that

even if advertisers wanted to

disseminate advertisements on

billboards that complied with the FDA

proposal, there would be virtually no

locations where such outdoor

advertising signs could be located in

some cities. They submitted results of

computer assisted surveys of nine cities

showing the areas where outdoor

advertising of tobacco products would

be allowed under the 1995 proposal.

The survey showed that outdoor tobacco

advertising would be prohibited in 94

percent and 78 percent of the respective

land mass of Manhattan and Boston

under the proposal. The comment stated

that this range approximates the high

and low percentages that could be

anticipated in other metropolitan areas

in the United States. Moreover, when it

correlated the data collected from the

study and other data regarding the

actual location of billboards, the

comment found that, even under the

most expansive view, not a single

billboard in Manhattan (including the

commercial corridor of Times Square),

and no more than 24 actual billboard

locations in the entire city of Boston,

would be permitted to display tobacco

advertisements.

The comment stated further that even

if the rule permits a few locations where

tobacco advertising would be allowed in

a given municipality, there is no

commercial utility in a limited number

of outdoor advertising signs where the

location of the advertisement is dictated

by the 1,000-foot rule, rather than by

market demographics and vehicle

circulation. According to the comments,

these latter factors are what actually

control billboard placement. It

concluded that, as a practical matter,

FDA’s proposed outdoor advertising

restrictions would eliminate billboards

as a medium for tobacco advertising

even in those jurisdictions where a

small number of such signs theoretically

would be available.

FDA has carefully considered the

possibility that its restrictions

effectively outlaw outdoor advertising

in most urban areas. The agency has

concluded, however, that if this

situation comes to pass, it would be a

consequence of the density of

population in cities. FDA’s intent in

adopting § 897.30(b) is to restrict the

accessible and intrusive communication

of information about cigarettes and

smokeless tobacco to children and

adolescents at school and at play. It was

not to provide for distances that would

have the effect of banning outdoor signs

from urban areas. By limiting the

restriction to 1,000 feet, FDA has tried

to make it no more extensive than

necessary to achieve its intended end.

FDA has considered the cost of its

restriction but concludes that a

narrower restriction would not

adequately advance its purpose of

protecting young people from

unavoidable advertising in settings in

which they are essentially a captive

audience.

The 1,000-foot restriction on outdoor

advertising will serve to remove what

has been shown is an effective means

for tobacco companies to communicate

with young people in a direct and

unavoidable manner. Eliminating such

billboards will thus mean eliminating a

means by which the industry has

influenced young people to engage in

tobacco use behavior. Therefore, the

agency concludes that § 897.30(b) is a

necessary part of its effort to reduce

underage use of tobacco products.

Several comments from the tobacco

industry and from retailers pointed out

that § 897.30(b) would prevent retail

establishments within the 1,000-foot

zone from informing potential

customers that tobacco (or particular

brands thereof) are available for

purchase therein and at what prices.

These comments stated that this

restriction not only would hurt the

retailers but would increase, in turn, the
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44507

206Moreover, cigarettes and smokeless tobacco

products are nicotine delivery devices. Congress

plainly provided for medical devices to be federally

regulated as indicated by the provision allowing

seizure of devices without proof of interstate

shipment (section 304 of the act) (21 U.S.C. 334))

and by a presumption that devices are in interstate

commerce (section 709 of the act (21 U.S.C. 379)).

search costs for adult smokers. The

comments stated that retailers in the

small slivers of a city in which outdoor

advertising would continue to be

permitted would be afforded an unfair

competitive advantage.

One comment added that convenience

stores located within 1,000 feet of a

school or playground would not even be

able to put a small black on white

placard on top of a gas pump that

merely indicates the price of tobacco,

but that a billboard across the street and

located a little over 1,000 feet away from

the same school or playground could

carry the brand name of a tobacco

product in black letters as tall as the

store’s front door. The comment urged

FDA to recognize this distinction.

The agency acknowledges that some

retailers may be prohibited from placing

advertising concerning tobacco products

on or around their retail establishments,

while others, perhaps just across the

street, can. Any minimum distance that

the agency establishes will preclude

some retailers from outdoor advertising

at their retail establishments but not

others. However, FDA has determined

that it is necessary to keep outdoor

advertising away from areas where

children are likely to congregate daily.

FDA notes that the Supreme Court

cases that have considered restrictions

on speech have recognized that such

restrictions may not be perfectly

tailored, see, e.g., Board of Trustees of

State University of NY v. Fox, 492 U.S.

at 479. Thus, while in a few instances

there may be inequities created by the

line FDA has drawn, because there is a

reasonable fit, as explained in section

VI.E.1. of this document, between FDA’s

ends and the restrictions that it is

adopting, these minor problems do not

doom FDA’s rule (Id. at 480).

FDA’s prohibition on signage on

stores within 1,000 feet of schools and

playgrounds will advance the agency’s

interest in protecting the health of

children. Several of the studies

submitted with comments showed that

there is more signage in and around

stores near schools and playgrounds

than in stores generally. The ban on

outdoor advertising within 1,000 feet of

schools and playgrounds will ensure

that signage near schools will be

removed and thus minimize any sense

of familiarity that would develop.

Thus, even though the agency has

carefully considered these comments, it

concludes that it is appropriate to

establish a minimum distance from

schools and playgrounds within which

all outdoor advertising is prohibited.

(43) A number of comments argued

that the prohibition on tobacco

billboards within 1,000 feet of schools

violates the Commerce Clause as

recently interpreted by the Supreme

Court in United States v. Lopez, 115

S.Ct. 1624 (1995). In Lopez, the

Supreme Court held that Congress

lacked the power under the Commerce

Clause to criminalize the possession of

a gun within 1,000 feet of a school. One

comment argued that the Congress’s

commerce power only permits it to

regulate, for example, the interstate

transit of advertisements, but that once

the advertisement is within a state, it is

private property and not subject to

regulation under the Commerce Clause.

The agency disagrees. Under the

Commerce Clause, Congress may

‘‘regulate those activities having a

substantial relation to interstate

commerce, * * *, i.e., those activities

that substantially affect interstate

commerce.’’ (See Lopez, 115 S.Ct. at

1629-30 (citation omitted).) As the

Supreme Court noted in Lopez, ‘‘the

possession of a gun in a local school

zone is in no sense an economic activity

that might, through repetition

elsewhere, substantially affect any sort

of interstate commerce’’ (Id. at 1634; see

also id. at 1640 (Kennedy, J.,

concurring)). As all advertising is

inherently commercial in that it

proposes a sale, the placement of

tobacco billboards in a local school zone

is economic activity that does

substantially affect interstate commerce

because it affects the demand for

tobacco and smokeless tobacco. That the

advertisements are private property after

transportation in interstate commerce

does not alter this analysis. Indeed,

‘‘[a]ctivities conducted within State

lines do not by this fact alone escape the

sweep of the Commerce Clause.

Interstate commerce may be dependent

upon them.’’ (See United States v. Rock

Royal Co-op., Inc., 307 U.S. 533, 569

(1939); see also Wickard v. Filburn, 317

U.S. 111, 127–28 (1942) (holding that,

under Commerce Clause, Congress

could control farmer’s production of

wheat for home consumption because

cumulative effect of such consumption

by many farmers might alter supply and

demand in interstate wheat market).) As

such, regulation of the placement of

billboards advertising tobacco products

does not violate the Commerce

Clause. 206

(44) A number of comments argued

that § 897.30(b) would violate the First

Amendment. These comments argued

that, given the requirement for black

text-only on a white background, the

restriction on billboards within 1,000

feet of schools and playgrounds would

not directly and materially advance a

substantial government interest. The

comments also argued that the billboard

restriction could not be considered to be

narrowly tailored. One comment from a

public interest group, however, argued

that FDA’s proposal is fully

constitutional because it is much more

limited than the restrictions on

billboards upheld in Penn Advertising v.

Mayor and City Council of Baltimore, 63

F.3d 1318 (4th Cir. 1995) vacated,

remanded 64 U.S.L.W. 3868 (U.S. July 1,

1996), and Metromedia, Inc. v. San

Diego, 453 U.S. 490 (1981). The

comment pointed out that in

Metromedia, Inc., the Supreme Court

held that the City’s interest in traffic

safety and aesthetics were sufficient to

justify a ban on commercial outdoor

advertising (453 U.S. at 551, n. 23).

Here, the comment said, the interest that

FDA has asserted is more weighty.

FDA disagrees with the comments

that argued that § 897.30(b) violates the

First Amendment. As explained, this

restriction does advance FDA’s interest

beyond what is accomplished by the

text-only restriction. As explained in

sections VI.B. and VI.D. of this

document, the regular exposure of

children to tobacco advertising, even in

text-only form, builds a sense of

familiarity and acceptability that,

reports and studies say, contributes

materially to the decisions of young

people to experiment with and use

tobacco products. Thus restrictions that

eliminate such exposure will eliminate

one factor that contributes to the process

by which children and adolescents

decide to smoke or use smokeless

tobacco and, consequently, will directly

advance FDA’s interest.

Moreover, the restriction that FDA is

adopting is narrowly tailored to advance

its interest. FDA’s concern is with the

advertising that can be seen from

schools and playgrounds, the place at

which children and adolescents spend a

significant amount of time each day.

Three blocks or 1,000 feet is about the

distance at which signs are readily

visible. Thus, FDA has restricted

outdoor advertising within this distance

of schools and playgrounds.
44508 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

207 In addition to the substantive changes made to

§ 897.32, the following changes in language have

been made: (1) Addition of ‘‘Except as

provided.* * * section,’’ to § 897.32(a); (2) addition

of ‘‘any’’ to § 897.32(a); (3) amended language in

§ 897.32(a)(2) starting with ‘‘any publication’’ and

ending with ‘‘an adult publication’’ and, in the last

sentence, ‘‘an adult publication,’’; (4) two changes

to § 897.32(a)(2)(i) ‘‘younger than 18 years of age’’

and ‘‘15 percent or less’’; and (5) deletion of

‘‘labeling’’ from § 897.32(c).

The result of FDA’s restriction is that

children will not be confronted with

tobacco advertising as they study and

play, and thus there will be a

corresponding reduction in the ability of

tobacco advertisers to create the

impression of acceptance and

familiarity that is influential with

youngsters. Consequently, there is a

reasonable fit between FDA’s interest in

protecting the health of children and the

restriction on outdoor advertising that it

is adopting (see City of Cincinnati v.

Discovery Network, Inc., 507 U.S. at 416;

Board of Trustees of State University of

New York v. Fox, 492 U.S. at 480).

Thus, FDA concludes that, in

fashioning the restriction on billboards,

it has fully met its obligations under the

First Amendment.

In summary, FDA finds that

§ 897.30(b) will contribute in a direct

and material way to reducing underage

tobacco use. The evidence establishes

that billboards are one of the most

effective forms of advertising for young

people, and that their elimination near

schools and playgrounds will directly

and materially advance FDA’s goals.

Studies—A Roper Starch survey

submitted by R. J. Reynolds found that

billboards were the most mentioned

source of information about Joe Camel

for children (see section VI.D.3.d. of this

document), and a study conducted for

Advertising Age (April 27, 1992)

discussed in this section showed that 46

percent of children 8 to 13 and 34

percent of children 14 to 18 said that

billboards are a predominant form of

advertising for tobacco.

Advertising Theory—Billboards near

schools and playgrounds give the child

a sense of familiarity, normalcy, and

acceptability of the message on the

product. Therefore, regulation of the

format and even the location of some

billboards and other outdoor signs

within 1,000 feet of a school or

playground, is essential. As discussed in

this section, comments submitted in this

rulemaking include photographs that

evidence the intrusive effect of

billboards and signage around schools

and playgrounds.

Evidence of Children’s Visual

Range—Data provided by a professor of

biophysics and optometry, detailed in

this section, support a finding that 1,000

feet is an appropriate distance to remove

signage that would be visible and

readable to students.

Congressional Finding—As detailed

in this section, Congress mandated a

1,000 foot drug free zone around schools

and playgrounds (Controlled Substances

Act (21 U.S.C. 860)) as an appropriate

area in which to protect young people

from drug dealing near schools and

playgrounds.

Finally, the agency has tailored the

ban as narrowly as possible by defining

playgrounds narrowly and, as noted

above, by restricting the area of the ban

to that consistent with children’s visual

range.

4. Section 897.32(a)—Text-Only Format

Under proposed § 897.32(a), cigarette

and smokeless tobacco product labeling

and advertising, as described in

§ 897.30(a) and (b), would be required to

use black text on a white background

and nothing else. The agency tentatively

concluded that this text-only

requirement would reduce the appeal of

cigarette and smokeless tobacco product

labeling and advertising to persons

younger than 18 years of age and

preserve advertising’s informative

aspects—that is, to provide useful

information to consumers legally able to

purchase these products.

In response to comments, the agency

has decided to permit another exception

to the requirement that all permissible

advertising appear in text-only. Thus, it

has created an exception for advertising

in adult facilities that meet the criteria

of § 897.16(c)(2)(ii) provided the

advertising is affixed to the wall or

fixture in the facility and is not visible

from outside the facility. FDA has added

this provision, as paragraph (a)(1) of

§ 897.32 and renumbered the exception

for adult publications as § 897.32(a)(2)(i)

and (a)(2)(ii).

Several comments suggested that FDA

should provide an appropriate

definition of ‘‘text-only’’ for permissible

audio and video advertising, specifically

static black text on a white background

with no music or sounds. Therefore,

proposed § 897.32 has been revised in

consideration of comments received. A

new § 897.32(b) has been added to

provide guidance for audio/video

advertising. Proposed § 897.32(b) has

been redesignated as (c), and proposed

§ 897.32(c) and (d) have been

eliminated. New § 897.32(b) has been

added to provide explicit format

requirements for one form of

permissible advertising that had been

left out of the proposed regulation. 207

Many comments were received

specifically addressing the text-only

proposal. That children and adolescents

should not use tobacco products was the

one point of agreement among them.

However, many comments from adult

smokers and nonsmokers, retailers,

tobacco farmers, elected officials, and

the tobacco, advertising, newspaper,

and magazine industries strongly

objected to the text-only requirement.

Their major objections were that: (1)

Cigarette advertising does not cause

young people to start smoking; (2) the

proposed advertising restrictions would

violate the First Amendment; and (3)

the restrictions would have the effect of

a virtual ban on cigarette advertising.

Some comments expressed the concern

or suspicion that FDA was using this

proposal, ostensibly directed at minors,

as a pretext to try to ban cigarette

advertising generally.

In contrast, nearly three-quarters of

the comments—mostly from parents,

teenagers, public health officials,

teachers, doctors, public interest groups,

medical organizations, and some

individuals in the advertising

business—supported the proposal for

text-only advertisements. The major

reason presented for their support was

the need to eliminate the appeal for

tobacco that the advertising creates

among children and adolescents. Some

supporters urged even stronger action

such as a total ban on all tobacco

advertising. Some comments expressed

the opinion that even though the

proposed regulations may also affect

adults, any resulting reductions in

smoking by adults would not

necessarily be bad.

(45) A number of comments

questioned the validity of the evidence

cited by FDA as support for the

proposal. Many of these comments came

from groups representing the tobacco,

advertising, and publishing industries.

These comments argued that there is no

evidence that advertising with color and

images encourages use of tobacco by

minors or that advertising converts

nonsmokers or nonchewers into

smokers or chewers. Moreover, these

other comments argued that there is no

evidence that limiting advertisements to

text-only is essential to reduce youth

smoking and that there is no evidence

that black and white text will reduce

underage smoking.

In contrast, a number of supportive

comments stated that the evidence cited

by FDA, as well as studies published
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44509

208One such study tested the effect of different

forms of advertising on children and found that

they preferred pictures to text-only. (See Huang, P.

P., D. Burton, H. L’Howe, and D. M. Sosin, ‘‘BlackWhite Differences in Appeal of Cigarette

Advertisements Among Adolescents,’’ Tobacco

Control, vol. 1, pp. 249–255; 1992.)

209 ‘‘Changes in the Cigarette Brand Preferences of

Adolescent Smokers—United States, 1989–1993,’’

in MMWR, CDC, DHHS, vol. 43, pp. 577–581, 1994.

210Teinowitz, I., ‘‘Add RJR to List of Cig Price

Cuts,’’ Advertising Age, pp. 3, 46, April 26, 1993.

since the proposal, demonstrate the

special susceptibility of children and

adolescents to pictures, cartoons,

photographs, other graphic images and

colors.

Specifically, many comments

observed that the appearance of Joe

Camel in traditional advertising forums

(magazines, billboards) attracts children

and adolescents. One child wrote that

his father gave him two sports

magazines. ‘‘There were eight smoking

ads in them * * * the last one had two

pictures of Joe Camel smoking. This can

attract kids to start smoking.’’

Studies cited in the preamble to the

1995 proposed rule and in section IV.B.

of this document, demonstrate the

impact that images and colors, cartoons,

and pictures and other graphic material

have on children and adolescents. This

does not mean that the same

characteristics of advertising do not

appeal to or affect adults. However, the

effect of these techniques on children

and adolescents is magnified because of

their usual level of involvement in

advertising as in everything else. 208 As

detailed more fully in section VI.B. of

this document, children and adolescents

respond to stimuli that interest them,

and that provides them with

information that is important. Young

people do not have the information

processing skills that adults possess,

and as a result more often than not, the

information that is relevant to them

comes in the form of images and colors

rather than with a lot of words. This fact

provides an explanation why 86 percent

of children and adolescents smoke the

three most heavily advertised brands

(all are promoted with attractive

imagery), even though they are generally

price sensitive. 209 Adults buy generic

products for price reasons or low tar

brands for health concerns. 210

Advertising’s colorful images are not as

relevant to them as cost. Given these

factors, FDA finds that the text-only

requirement will significantly reduce

the appeal of cigarette and smokeless

tobacco advertising to young people and

reduce its influence on them.

(46) Many comments, especially from

the magazine, newspaper, advertising,

and tobacco industries, stated that the

proposal will operate as a virtual ban on

most types of cigarette and smokeless

tobacco advertisements. These

comments argued that the text-only

format requirement will eliminate

tobacco companies’ ability to attract the

attention of potential customers and to

convey brand messages and will render

advertising invisible to adults.

Therefore, tobacco advertisers would be

far less likely to advertise in the textonly format. Also, not having a clear

standard for when the text-only

requirement applies (see also definition

of adult publication) will cause tobacco

advertisers to avoid more publications

than may be necessary to ensure that

they do not violate the rule. Many of

these comments also argued that

advertising would become ineffective.

One comment said that advertising that

passes unnoticed amounts to no

advertising at all. This comment also

asserted that, as a result of the text-only

proposal, no viable alternative channels

of communication would exist.

Comments from the tobacco and

advertising industry suggested that the

advertising industry would suffer

revenue, profit, and job losses as a result

of the text-only format; employees

involved in graphics arts would

especially be affected; and suppliers

providing services and products to

advertising agencies would also be

adversely affected.

A number of comments supporting

the proposal recommended a total ban

on all tobacco advertising. Many

comments stated that a ban on all

tobacco advertising and marketing

would be reasonable because the

tobacco industry will use any available

loopholes to market tobacco products

and will test any partial ban.

Tobacco companies will be able to

continue advertising in most of the same

forums in a text-only format.

Advertising with colors, pictures, and

graphics will still be allowed in adult

publications. Tobacco advertisers will

still be able to convey information to

adults about taste, price, and product

development using text-only

advertising. Many current

advertisements for low tar cigarettes rely

heavily on text formats.

The agency is not limiting fonts, font

styles, or size of type because it believes

that the tobacco industry and its

advertising firms can use their creativity

with a variety of print formats to

produce text-only advertising that will

effectively communicate their messages,

including brand messages, to adults.

However, the agency is also convinced

that print advertising, no matter how

creative, will not be able to provide the

attractive imagery that young people

look for in advertising to explain the

importance of a product to them, e.g.,

what to wear, whom to hang out with,

how to look cool (see discussion of the

importance of color and imagery in the

introduction to this section).

Moreover, although the restriction to

text-only advertisements may tend to

solidify market position, it will not give

any one company new competitive

advantage over another since all

companies must play by the same rules.

Thus, the economic impact of the rule

on the advertising business will be

mitigated by a shifting of resources to

create new advertising in compliance

with the rule and to advertising for

other businesses (see section XV. of this

document entitled ‘‘Analysis of

Impacts’’ for more information).

The agency does not support a total

ban on all tobacco advertising as was

suggested by a number of comments.

The agency has been able to tailor the

restrictions that it is adopting, by

requirements such as the text-only

advertisements requirement, to

eliminate the appeal of tobacco

advertising for children and adolescents

while still allowing a means for

companies to communicate with adult

tobacco users. The use of text-only will

mean that there can be continued

advertising that is less likely to attract

young people but that can convey

information to adults.

(47) Several comments stated that

limiting point of sale advertising to textonly would effectively ban point of sale

advertising and impair retailers’ ability

to market tobacco products to adult

customers.

Many comments noted the places one

sees (and placement of) Joe Camel at

point of sale, the nature of the items on

which his image appears, and his

ubiquitousness in and around stores, as

evidence of the intent of at least one

tobacco company to try to attract young

people. A physician commented that he:

recently was returning from an evening [of]

helping to care for [a] patient who was dying

of emphysema [a lung ailment caused by

cigarette smoking]. I decided to stop at a

convenience store * * * I was confronted

with no less than 14 advertisements for

cigarettes. From the Camel Joe sign

beckoning in the parking lot * * * a

customer is bombarded with ads urging them

to buy cigarettes.

Another comment stated that

‘‘advertisements on convenience store

doors are placed well below adult eyelevel and features such popular

advertising cartoons as Joe and
44510 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

Josephine Camel. It seems counterintuitive to assume that such advertising

is intended for adults.’’ Another

comment stated, ‘‘Tobacco companies

say they do not want to entice our

children to smoke, then why are Joe

Camel ads above the candy counters?’’

One comment noted that at a major

retailer near the commenter’s

neighborhood, Joe Camel posters are

right behind an exhibit of pogs, a

popular children’s collectible toy.

Manufacturers and retailers are not

prohibited from promoting tobacco

products at the retail level. Adult

consumers looking for price and

product information about cigarettes

and smokeless tobacco will be able to

find that information by searching even

without the images to attract them. Textonly point of sale advertising, like

magazines or billboards, will be

effective in communicating this

information. Thus, FDA is not banning

point of sale advertising.

While text-only point of sale

advertising can be effective with adults,

it will have less allure and be less

appealing to children and adolescents.

Children and adolescents, who are less

willing to process print information in

a leisurely setting (such as reading a

magazine), will not find textual material

appealing in the momentary time setting

of a retail purchase.

(48) A comment from an advertising

industry association stated that:

* * * FDA’s prohibition on all direct mail

promotion of tobacco products except for

‘‘tombstone’’ messages * * * is even more

onerous than that imposed on publications,

since at least some publications will be

permitted to carry non-tombstone

advertising. The disparate treatment of direct

mail exposes the real purpose of the FDA to

censor messages to adults, because that

medium by definition can be addressed to a

specific audience, i.e., adults, with little risk

of inadvertent viewing by minors.

This comment also noted that this form

of direct advertising is not insignificant

to the industry and given the small

likelihood of youth access to it, should

not be severely restricted. The comment

noted that total industry spending on

direct mail advertising was $33 million

in 1993.

Some comments from mail-order

firms noted that the text-only

requirement would adversely affect

catalogs for tobacco and related

products, making them less appealing

and less effective for marketing to adult

smokers. One comment from the owner

of a small (55 employees) tobacco

products manufacturing business said

the text-only requirement for its catalog,

along with several other aspects of the

1995 proposed rule, would destroy his

business:

It offends me as a good American running

a clean, honest business that a cadre of

bureaucrats in Washington, DC would

propose a rule that could ruin my life’s work.

FDA has given no more thought to the impact

on my business than I might give to swatting

a mosquito.

A supportive comment stated that the

tobacco industry has made increasing

use of direct mail promotions, including

contests, questionnaires, coupons,

offers, and even birthday cards. It stated

that no company can be certain its

mailing lists do not include minors. In

a 1993 survey of 12 to 17 year olds, 7.6

percent indicated they had received

mail personally addressed to them from

a tobacco company. This could project

out to 1.6 million persons aged 12 to 17.

This comment noted that a major

tobacco company sent free packs of

cigarettes to people on its mailing list as

a holiday present ‘‘from the Camel

family’’ and has not changed its practice

despite the fact that as many as 1.6

million 12 to 17 year olds could be on

tobacco company mailing lists.

Direct mail is a high involvement

medium, that is, it requires the recipient

to study the text in order to get the

central message. In those circumstances,

text-only can be effective with

recipients who have an interest in the

offer. There is less of a need to attract

a consumer’s attention with a direct

mail promotion, including a catalog,

than with a point of sale or magazine

advertisement. A consumer opening a

direct mail promotion he/she is

interested in is in a high-involvement

mode and is prepared to read the

enclosed material and catalog. Although

the material may be more easily ignored,

current tobacco users who want to buy

by direct mail can get the information

from textual material.

Mailings in text-only to current

customers and to other adult smokers

are permitted under the rule. On the

other hand, if a direct mail promotion

or catalog is seen by a child, the textonly format would make it much less

appealing and less interesting. This is

especially important since there is

evidence that as many as 1.6 million

children aged 12 to 17 receive direct

mail tobacco promotions. Thus, textonly direct mail is important to

accomplish the purpose of this

rulemaking. Moreover, contrary to being

censorship, as some comments stated,

the text-only format for direct mail will

allow advertisers to send adults an

encyclopedia of information about any

aspect of smoking or tobacco products

while protecting children from the

effects of advertising.

Although direct mail catalog

advertising will be less interesting, sales

should only be minimally affected. As

the final rule does not include a

prohibition on mail-order sales, the only

restriction will be the text-only format.

In addition, this should be less of an

impediment than a total ban to small

mail order company owners such as the

commenter.

This compromise represents the

agency’s attempt to narrowly tailor its

rule. Based on comments received from

the industry, most mail-order customers

purchase tobacco products for price,

convenience, and uniqueness and to

stockpile a long term supply. The

agency believes that creative and

effective advertising for adults can be

designed in the text-only format for

catalogs, especially for catalogs targeted

to consumers purchasing tobacco

products for these reasons. Therefore,

FDA is not exempting direct mail

promotion of tobacco products from the

text-only requirement.

(49) One comment suggested that FDA

create an exception for direct mail

similar to that for publications. The

comment said that direct marketers can

target mailings so that children and

adolescents are protected to, at the very

least, the same degree that the

regulations provide for the publishing

industry.

FDA has considered this request but

finds that it cannot grant it. The agency

based the threshold for publications on

the ground that publications with youth

readership of less than 15 percent are

not of interest to young people and thus

would be unlikely to be read by them.

The same cannot be said of direct mail

advertisements that come addressed

with the child’s name on it. (As

explained in this section, surveys show

that a significant portion of tobacco

direct mail advertising is sent directly to

individuals under the age of 18.) The

appearance of the child’s name in the

address will cause the child to look at

the advertisement and thus will cause

the message to be thrust on the child in

a manner similar to messages on

billboards or point of purchase (see

Packer Corp. v. Utah, 285 U.S. 105, 110

(1934)). Thus, direct mail advertising is

more similar in nature to billboards and

point of purchase advertising than are

publications. Consequently, as with the

former types of advertising, FDA has

concluded that to reduce the appeal of

direct mail advertising to those

youngsters who view it, it is appropriate
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44511

211Focus group report in administrative record,

December 1, 1995, 60 FR 61670.

to require that this type of advertising be

in the text-only format.

(50) A few comments said that in the

same way the agency attempted to carve

out an exception for publications with

primarily adult readers, it should permit

a similar exception for advertising in

bars, clubs, etc., with customers over 21

years of age.

The agency agrees with these

comments. The agency recognizes the

need to precisely tailor its regulations

and thus, has created an exception for

advertising in adult only (18 years of age

and older) facilities permitted to sell

tobacco products from vending

machines and self-service under

§ 897.16(c)(2)(ii). These facilities, which

are required to ensure that no one under

the age of 18 is present, or permitted to

enter, the facility at any time, may

display permissible advertising, i.e.,

with color and imagery, provided that

the advertising is not visible from

outside the facility and is affixed to a

wall or fixture within the facility. These

conditions will ensure that the

advertising does not become a surrogate

for outdoor advertising and is not

carried from the facility.

(51) The agency received some

comments from opponents and

supporters of the 1995 proposed rule

that stated that this provision might be

counterproductive and result in

increased demand for cigarettes and

smokeless tobacco by minors. One

comment from an association of

advertising agencies stated that a

reduction in spending on cigarette

advertising, resulting from the proposal,

could make cigarettes less expensive

and increase demand for these products.

In contrast, another comment from a

tobacco company stated that reduced

competition due to the text-only

restrictions could lead to price increases

for some brands which would harm the

adult purchasers of those brands.

Some comments stated that the health

warnings in cigarette advertising would

become less effective in the proposed

text-only format. This consequence

could result in fewer people giving up

smoking because of information in the

health warnings. Some comments

argued that the text-only format might

actually attract more attention from

minors because these advertisements

would be so different from most

advertising.

The agency finds that, on balance, the

evidence does not support a conclusion

that the text-only requirement will be

counterproductive. This finding is based

in part on the contradictory comments

regarding the price of cigarettes. Some

comments from the advertising industry

argued that tobacco companies would

use the savings from doing less

advertising to reduce the price of

cigarettes, which would increase

demand especially among young people

who are price sensitive. Other

comments from the tobacco industry

argued that the requirement would

reduce competition, which could lead to

higher prices for adult consumers. This

conflict points out the speculative, and

therefore unconvincing, nature of the

claims that the restrictions will be

counterproductive.

Also, despite concerns expressed by

the tobacco industry and others that the

text-only format would make the

Surgeon General’s health warning less

effective, there is evidence from the

focus groups conducted by the agency

that this warning is not very effective

with young people now. 211 The textonly format will not interfere with the

ability of the Surgeon General’s warning

to warn adults of the health hazards of

smoking. This format will, however,

reduce the appeal to young people that

advertising creates and therefore will

lessen the need for the warning for

young people.

The agency has considered the

concern of some comments that the textonly format will be so unlike most

advertising that young people will be

attracted to it. Whatever attraction the

novelty has for young people, the

agency has concluded that it should be

less than the attraction of the current

imagery in tobacco advertising.

(52) A number of comments,

especially from the tobacco industry,

expressed concern about the 1995

proposed rule’s adverse impact on

competition. Many comments stated

that advertising is critical to

competition, brand choice, and product

innovation. Comments from the tobacco

industry stated that the primary

purposes of its advertising are to

promote brand competition and to

maintain brand loyalty. Many of these

comments argued that the text-only

format would stamp out competition

and freeze market shares. Some

comments also stated that the 1995

proposed rule would serve as a barrier

to new and improved products and

product innovation, especially to

products like lower tar cigarettes.

Although all firms will be subject to

the same rules, some firms may still

gain an advantage by dominant market

position or by being more creative in

their text-only advertising or more

effective in their placement of

advertising. Tobacco companies will

still be able to advertise in virtually all

the same forums they use now, but

companies may gain competitive

advantages by developing new

marketing techniques aimed at adults

that are within the rules. All industries

have to adapt to changing competitive

circumstances, whether caused by

government regulations, demanded by

the public, self-imposed as in

professional sports, affected by

international competition and changing

technologies, or in reaction to changes

in consumer preferences. Creative

companies can succeed by adapting

better than their competitors within the

new framework.

Additionally, these advertising

restrictions could make it more difficult

for a new competitive tobacco company

to be formed and to enter the market.

But, there are much greater barriers to

entry for a new firm in terms of the

nature of the tobacco business, capital

requirements, and the existing large

firms already in the business.

Nevertheless, to the extent that the

regulations do produce anticompetitive

effects, these are outweighed by the

public health benefits of the rule.

Finally, information on new products

and on product innovations need not be

‘‘stamped out.’’ This kind of information

can be conveyed in the text-only format.

One example of a new product that the

tobacco industry claims might not have

been developed if this rule had been in

effect is the low tar cigarette. Yet

advertising for low tar brands tends to

use much more text than regular brands

because the information is factual and

specific. Therefore, the agency

continues to find the text-only

requirement to be an appropriately

tailored remedy.

(53) Comments offered differing views

on the function of advertising. Some

stated that imagery is necessary to

attract and hold the attention of adult

smokers in order to convey useful

information about the product and to

effectively differentiate brands, while

others saw images as being too

appealing to children. These latter

comments argued that FDA’s rule is

seeking to regulate only the presentation

of the advertising that attracts children

(the imagery), not its content.

One small business owner said the

proposed ban on imagery would make

established advertising logos with

pictures worthless, not just for the major

tobacco companies but also for small

firms in tobacco related businesses.

Others stated that the 1995 proposed
44512 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

212Zauderer actually states ‘‘* * * through the

least restrictive available means.’’ However, in

Board of Trustees of State University of N.Y. v. Fox,

492 U.S. at 479–481, the Court clarified this phrase

as requiring narrowly tailored means.

213See, e.g., Petty, R. E., and J. T. Cacioppo,

Communication and Persuasion: Central and

Peripheral Routes to Attitude Change, SpringerVerlag, New York, 1986.

rule is not strong enough. One comment

said that FDA is mistaken in asserting

that the black and white text format

removes imagery and emotive content

from the advertisement. It said that the

regulation should also limit the type

styles, font sizes, and shapes of borders

and letters.

The agency continues to believe that

it has created an appropriately tailored

remedy. The tobacco and advertising

industries argue that FDA’s ban on

imagery and color is overinclusive and

not narrowly tailored. FDA disagrees,

however. The restriction on the use of

images and color preserves

informational advertising because of its

utility to adults while eliminating the

aspects of advertising that are most

attractive to young people. The agency

is regulating only the manner in which

advertising is presented, not the

information contained in it. Also, the

agency is allowing imagery in

advertising in adult publications.

There is undoubtedly an impact on

businesses that have established logos,

pictures, and other graphics associated

with their businesses or products.

However, all businesses are subject to

the same requirements, and thus no one

business should receive any competitive

advantage.

The agency does not agree with

comments recommending restrictions

on type styles, fonts, etc. Such a

restriction on advertising is, given the

currently available evidence, more

restrictive than necessary. Text-only

advertising should be sufficient to

reduce the appeal of advertising based

on imagery to children and adolescents,

however creatively the text is displayed.

The agency concludes that the

elimination of imagery and color

directly and materially advances its

interest in protecting the health of

young people by making tobacco

advertising much less appealing to them

and, therefore, it makes it less likely that

they will be influenced to use tobacco

products.

(54) Several comments requested that

FDA provide specific regulation for

audio and video formats. Specifically,

the comments requested that audio be

confined to a text-only format

appropriate for audio (words)

unaccompanied by music or sound and

that video be limited to black text on a

white background only. Restrictions,

such as these, the comments continued,

would apply the spirit of the text-only

format to these media. Finally, one

comment expressed the concern that

without these restrictions, tobacco

companies might create and disseminate

music tapes, similar to one distributed

by RJR with music by ‘‘The Hard Pack.’’

This would, the comment stated,

provide aural imagery for young people.

The agency agrees that it should

provide more specific guidance for

permissible audio and video media and

that this guidance should be a logical

application of the text-only requirement.

Therefore, the agency has amended

§ 897.32 to add a new paragraph (b),

which requires text-only black and

white text in video advertising, which

should be static, and text-only, no

music, in audio advertisements.

(55) Several comments challenged

FDA’s proposal to limit most advertising

to the use of the text-only, black print

on white background format on the

grounds that this limitation would

violate the First Amendment. These

comments relied most heavily on three

cases: Zauderer v. Office of Disciplinary

Counsel, 471 U.S. 626 (1985), in which

the Supreme Court struck down a

restriction on the use of pictures in

attorney advertising; Shapero v.

Kentucky Bar Association, 486 U.S. 466

(1988), in which the Supreme Court

held that the State may not restrict

lawyer solicitations to those least likely

to be read by the recipient; and In re R.

M. J., 455 U.S. 191 (1984), a case in

which the Court struck down a

requirement that lawyers use a fixed

format in their advertising. One

comment, however, argued that FDA’s

restriction is fully consistent with the

First Amendment.

In Zauderer v. Office of Disciplinary

Counsel, 471 U.S. at 647, the Supreme

Court said that ‘‘the burden is on the

State to present a substantial

governmental interest justifying the

restriction * * * and to demonstrate

that the restriction vindicates that

interest through [narrowly tailored]

means.’’ 212 FDA will apply this test

here.

As explained in section VI.C.4. of this

document, FDA has not merely a

substantial, but a compelling, interest in

the health of minors. It is this interest

that led it to propose the restriction on

the use of images and color in cigarette

and smokeless tobacco advertising.

Several comments argued, however,

that the restriction on images and color

do not further FDA’s interest. These

comments argued that there is no

evidence that the use of color and

images in advertising increases tobacco

use among young people.

FDA has fully addressed this

assertion. The available evidence

demonstrates that pictures and colors

have particular appeal to children and

adolescents under 18 years of age, and

that they are more important to

underage individuals than other aspects

of the advertisement. 213 Young people

pay attention to peripheral cues in an

advertisement, such as the models that

appear in them, color, and scenery, and

it is these components that tobacco

advertisers use to create the images that

are so important to people under the age

of 18. Thus, the restriction on images

and colors will have a particular effect

on the appeal of advertisements to

young people and make these

advertisements a significantly less

effective means of communicating to

this group.

(56) Several comments also argued

that FDA’s restriction on the use of

colors and images is not narrowly

tailored, pointing to the fact that the

agency proposed to eliminate the use of

all visual images and graphic designs in

cigarette and smokeless tobacco

advertisements.

These comments misinterpret the

rule. FDA has not restricted all use of

color and images. FDA has provided

that these mechanisms may continue to

be used in publications with primarily

adult readership and in adult-only

establishments. The agency has

endeavored to restrict as little speech as

possible. FDA has found, however, that

it could not limit the appeal of cigarette

and smokeless tobacco advertising to

the young if it did not restrict the use

of image and color.

Each of the cases relied upon by the

comments is fundamentally

distinguishable from the current

situation. In each of these cases, the

body seeking to restrict the advertising

in question failed to present any

evidence that the restriction was

addressing an actual harm (see

Zauderer, 471 U.S. at 648–649; Shapero,

486 U.S. at 479–80; (see also Florida Bar

v. Went For It, Inc., 115 S.Ct. at 2378

(‘‘Finally, the State in Shapero

assembled no evidence attempting to

demonstrate any actual harm caused by

targeted direct mail.’’); In re R. M. J., 455

U.S. at 206). Here, in contrast, the

record fully establishes the reality of the

harm, and that FDA’s interest will be

directly and materially advanced by the
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44513

214This portion of the definition was edited in

the final rule to make the two provisions parallel.

Thus, § 897.32(a)(2)(i) now reads, ‘‘whose readers

younger than 18 years of age constitute 15 percent

or less of the total readership as measured by

competent and reliable survey evidence.’’

restriction on colors and images. For

these reasons, FDA finds no merit to

these comments.

In summary, FDA finds that the

evidence amassed during this

investigation and provided by

comments provides ample support for

its requirement that all forms of

advertising that children see and are

exposed to can have an effect upon their

attitudes about tobacco use.

The empirical studies and surveys,

expert opinion, anecdotal evidence,

industry statements, and consensus

report described in section VI.D.5. of

this document implicate advertising as

an important source of information for

young people’s attitudes about, and use

of, tobacco products. This evidence

shows that any regulation that hopes to

be successful must be comprehensive

and include some type of restriction

upon all forms of advertising and

promotions. FDA’s regulation provides

restrictions that will contribute directly

and materially to that end but that are

tailored as narrowly as possible. Except

in the limited case of outdoor

advertising within 1,000 feet of schools,

no informational advertising will be

disturbed. However, those aspects of

advertising that have particular appeal

to young people will be banned.

Color and Imagery—Color and

imagery are necessary ingredients for

advertising in conditions of ‘‘low

involvement,’’ such as occurs when

skimming a magazine or seeing a

billboard (see sections VI.B.1.b. and

VI.B.1 c. of this document).

FDA’s restriction will eliminate the

color and imagery but will permit

information to be communicated. This

requirement is as important for in-store

advertising, billboards, and direct mail,

as it is for traditional publications. As

discussed in this section, young people

get their information and product

imagery from all these sources: (1) Point

of sale advertising confronts young

people when they go to make a

purchase. The imagery is as large as life

and presents the child with an

enticement at the time when purchase is

immediately available. It can as

effectively impart information to adults

with words. (2) Direct mail can

frequently wind up in the hands of a

young person or be addressed

personally to the child or adolescent.

One study found that 7.6 percent of

children 12 to 17 years questioned had

received mail personally addressed to

them from a tobacco company (1.6

million teens).

Billboards—Billboards provide a

major source of information about

tobacco for young people. One study

published in Advertising Age (April 27,

1992), found that 46 percent of children

8 to 13 years old and 34 percent of

children 14 to 18 cited billboards as the

predominant advertising medium for

tobacco products (see section VI.E.3. of

this document). The Starch Survey

conducted for R.J. Reynolds found that

51 percent of children 10 to 17 who

recognized Joe Camel as a tobacco

mascot, reported seeing him on

billboards (see section VI.D.3.d. of this

document).

Cross-Country and International

Studies—Studies described evidence

that regulations that are stringent and

comprehensive will have a greater

impact on overall tobacco use and

young people’s use than weaker or less

comprehensive ones (see section

VI.D.6.a. of this document). The textonly requirement, while not as stringent

as a ban, will accomplish its purpose

while preserving the informational

function of advertising.

Finally, the regulation is narrowly

tailored. It permits adult publications

and adult locations to display

advertising with images and colors. The

agency has attempted to define these

venues with as much precision as

possible but recognizes that there may

be some difficulties in application. It,

therefore, has made it clear that it will

work with the industry to try to

establish as clear rules as possible. Instore, outdoor, and direct mail

advertising do not lend themselves to

such tailoring. Nonetheless, the agency

is confident that adults seeking

information about products can be

adequately informed at time of purchase

or by mail order catalogue using textonly.

5. Section 897.32(a)—Definition of

‘‘Adult Publication’’

The preamble to the 1995 proposed

rule explained that the agency was

interested in permitting advertising in

publications that are read primarily by

adults to continue to use imagery and

color. For that reason, under proposed

§ 897.32(a), advertisements in

publications with primarily adult

readership would not be restricted to a

text-only format. The agency proposed

to define such publications as those: (1)

Whose readers age 18 or older constitute

85 percent or more of the publication’s

total readership, 214 or (2) that are read

by fewer than 2 million people under

the age of 18, whichever method

ensures the fewest young readers. The

agency defined the readership of a

publication as the total number of

people that read any given copy of that

publication and stated in the preamble

that it should be measured according to

industry standards and, at a minimum,

by asking a nationally projectable

survey of people what publications they

read or looked at during any given time.

The preamble to the 1995 proposed rule

noted that a reader is one who said that

he or she read the last issue of a

publication. The 1995 proposed rule

provided that before disseminating

advertising containing images and

colors, it would be the company’s

obligation to establish that the

publication meets the criteria for a

primarily adult readership.

Numerous comments were received

by the agency regarding the exception

from the text-only requirement for adult

publications and the definition of an

adult publication. Comments from the

newspaper, magazine, and advertising

industries were particularly critical of

the readership thresholds chosen for the

definition of an adult publication and

were especially concerned about

whether there would be any reliable and

practical way to determine readership

levels for most publications. Many

comments from individuals who

supported the text-only requirement

saw this exception as a possible

loophole for the tobacco industry to

escape the text-only restrictions.

In a notice published in the Federal

Register of March 20, 1996 (61 FR

11349), the agency reopened the

comment period to place on the public

record a memorandum that provided

further explanation of the agency’s

proposal to exempt publications with

primarily adult readership from the textonly requirement. The document

provided an additional 30 days to

comment on this new information. The

memorandum stated that the agency had

selected the 85 percent per 2-million

threshold based on the public

perception that certain magazines are

likely to be of interest to young people

under the age of 18. The agency

extrapolated from the readership

percentages for those publications to the

proposed threshold levels. Data

supporting this line had been placed in

the administrative record for the

proposed rule (vol. 105, document 1550)

and additional readership data was
44514 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

215See section XV. of this document, Analysis of

Impacts, for a discussion of publications that would

be affected.

216Barents Group, LLC, citing Publishers

Information Bureau and Mediamark Research, Inc.,

pp. 53–54.

217 Id.

provided during the comment period.

The agency noted additionally that at

some point the number of underage

readers is so great that the publication

can no longer be considered to be of no

interest to those under 18, regardless of

the percentage of the readership. The

agency selected 2,000,000 as that

level. 215

(57) Some comments objected to the

proposed readership thresholds, calling

them arbitrary and stating that FDA

provided no basis, no rational

justification, and no evidence for them.

One tobacco industry comment stated

that it used an FTC methodology based

on readership and the number of pages

of advertising to conclude that

magazines with greater readership by

minors tend to have less cigarette

advertising than other publications.

Some comments also objected to the

2 million minor readers threshold

because it would subject some adultoriented magazines to the tombstone

format even though their percentage of

minor readers is very low. One

comment cited the following examples

and readership figures: People Magazine

(3,020,000 minors: 7.8 percent of all

readers) and Better Homes and Gardens

(2,042,000 minors: 5.5 percent of all

readers); Time (1,972,000 minors; 7.66

percent of all readers) and Newsweek

(1,911,000 minors; 8.01 percent of all

readers) are also close to the threshold.

In addition, some comments suggested

that FDA’s explanation that 2,000,000 is

a large number is not adequate basis for

regulation.

Some comments stated that the

proposed thresholds were unfair to the

up to 85 percent, or more in some cases,

of a publication’s readers who were

adults. ‘‘Such a regulation is

inconsistent with the principle that the

government may not ’reduce the adult

population * * * to reading only what

is fit for children.’’’

In contrast, comments supporting the

proposal stated that just because the line

(i.e., thresholds) could be drawn

differently was not important as long as

FDA can rationally explain why it drew

the line where it did. One comment

suggested that FDA should require the

text-only format in the 10 most read

magazines by young people in addition

to the present proposal. Some comments

recommended requiring the text-only

format for advertisements in all

publications.

One comment stated that no tobacco

advertising, even text-only, should be

allowed whatsoever in publications

with youth readership, and adult

publications should have text-only

tobacco advertisements. This comment

also said that the agency should monitor

this exception to ensure that tobacco

companies don’t increase advertising in

national adult publications that are

widely read by the entire family

including children and adolescents and

to be wary of tobacco companies

creating their own adult publications

saturated with tobacco advertising.

Other comments supporting the

proposal stated that some degree of

overinclusiveness is acceptable and

expected because of the difficulties in

fine-tuning any regulation. Other

comments saw any exception for any

publications as a potential loophole that

could be used by tobacco companies to

continue using imagery in advertising.

They said that experience in other

countries with tobacco advertising

restrictions showed that ‘‘the tobacco

industry used all of its creativity to

manipulate the system to take advantage

of whatever opportunities were still

available to reach their target audience,

particularly young, impressionable

individuals.’’

The comments received, especially

from the magazine and newspaper

industries, made clear that both defining

an adult publication and determining

whether a particular publication meets

the definition are difficult issues.

However, while these comments were

helpful in pointing out the difficulty of

defining an adult publication, they did

not offer any realistic alternative

definition in terms of a readership-byminors threshold. Because of the

concern about tobacco use by children

and adolescents, which was voiced by

virtually all comments pro or con, the

agency believes it has sufficient

evidence to justify a text-only

requirement. However, the agency’s

concern is with advertising that affects

minors and with tailoring the

restrictions in this final rule to burden

as little speech as possible. Therefore,

FDA concludes that an exception from

the text-only requirement for

publications that are read primarily by

adults is still reasonable and feasible.

The agency has decided to retain the

exception for adult publications and to

retain the readership thresholds in this

final rule. The 15 percent young readers

threshold is reasonable based on

readership data submitted with

comments. The 15 percent threshold

would require text-only advertising in

the following sports and racing

magazines: Sports Illustrated (18

percent), Car and Driver (18.3 percent),

Motor Trend (22.1), and Road & Track

(20.6 percent) and in the following

general circulation magazines: Rolling

Stone (18.5 percent), Vogue (18

percent), Mademoiselle (19.7 percent),

and Glamour (17.1 percent). 216 The

agency’s judgment is based on common

public perception that these are the

types of magazines that young people

under the age of 18 will find of interest

and read. Thus, based on public

perceptions and inductively given the

nature of the magazines involved, FDA

finds a 15 percent cut-off to be

appropriate.

The 2 million number is justified

based upon the agency’s concern for

young people. The agency finds that at

some point, the number of underage

readers is so great that the magazine can

no longer be considered to not be of

interest to children and adolescents

under 18 years of age. This threshold

would require text-only advertising in a

publication like People, where the

percentage of readers who are minors is

only 7.8 percent, but where the number

of readers under 18 years of age is

3,020,000. Publications like Time,

Newsweek, Family Circle, and Popular

Mechanics, however, would not be

subject to the text-only format under

either threshold; based on how these

publications are affected, FDA

concludes that, on balance, the

thresholds are reasonable. 217 The

agency’s concern is not with the

‘‘intended’’ audience of the publication

because there is no magic curtain

between the interests of young adults

and adolescents. The agency’s concern

is to protect children from the appeal of

advertising that they cannot avoid.

Fifteen percent youth readership or 2

million young readers narrowly

addresses this concern.

The agency does not agree with

comments that the rule should be made

more restrictive by, for example,

allowing only text-only advertising in

adult publications and no advertising at

all in other publications. The text-only

format will reduce the appeal of tobacco

advertising to young people while

allowing communication of important

information to adults. The agency will

continue to monitor the effect on young

people of text-only advertising as well

as the exception created for adult

publications and will consider taking

any additional action that is

appropriate.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44515

218See memorandum of March 11, 1996, added

to the administrative record in the March 20, 1996,

Federal Register.

Finally, the agency finds no basis to

the comments’ concern that the

regulations will reduce the reading level

of adults to those of children. The

agency has crafted the exception for

adult publications specifically to

minimize the effect of the regulations on

adults. Moreover, text-only, or the

absence of color and imagery, will have

significantly less impact on adults than

on young people. As discussed more

fully in the introduction to this section,

adults generally have more capacity to

engage in high involvement search than

do young people. Furthermore, full

information will be available to them in

the text format. The First Amendment

demands no more.

(58) Several comments recognized

that FDA made the March 20, 1996,

Federal Register document and the

associated data in the record publicly

available to meet its obligation under

the APA to provide interested parties

with an opportunity to comment

meaningfully on the proposed rule.

These comments stated, however, that

one of the memoranda, dated March 11,

1996, placed on the public record by the

Federal Register document makes clear

that FDA had readership numbers in

mind when it developed the proposal,

but that the agency had failed to

disclose those numbers to the public.

The comments said that these numbers

are neither reflected in the

memorandum added to the record in the

March 20, 1996, Federal Register

document nor the administrative record

that FDA has made publicly available.

The comments said that the

memorandum in question refers to

readership numbers that were in

comments submitted by the tobacco

industry, and thus these numbers could

not have been the numbers that FDA

considered in developing its proposal.

The comments said that FDA’s failure to

disclose this information rendered the

proceeding arbitrary and capricious.

These comments are in error. FDA

placed the information that it relied

upon in developing the tentative 15-

percent threshold on public display at

approximately the time that it published

the proposed rule. The data appear at

pages 95T030074–75 of the

administrative record (vol. 105, number

1550). (The numbers are similar but not

identical to those supplied by the

industry.) As one comment pointed out,

in Connecticut Light and Power Co. v.

Nuclear Reg Com’n., 673 F.2d 525, 530

(D.C. Cir.), cert. denied 459 U.S. 835

(1982), the United States Court of

Appeals for the District of Columbia

Circuit stated, ‘‘In order to allow for

useful criticism, it is especially

important for the agency to identify and

make available technical studies and

data that it has employed in reaching

the decisions to propose particular

rules.’’ The agency fully complied with

this expectation by including the data

that it had reviewed in the material that

it made publicly available. Thus, the

agency finds the claims in the

comments summarized here to be

without any basis in fact.

(59) Several comments asserted that

the memorandum added to the record in

the March 20, 1996, Federal Register

document did not provide a reasoned

explanation for the threshold that FDA

had proposed. Several comments argued

that there is no principle in, or

discernible from, the memorandum that

leads to the choice of 15 percent, as

opposed to 49 percent, as the ceiling for

the percentage of underage readers a

publication could have and still be

considered primarily adult. One

comment said that FDA’s reasoning was

circular. Other comments said that FDA

had pointed to no facts in the March 20,

1996, Federal Register document or the

attendant memorandum that supports

its judgment. These comments stated

that FDA merely applied an arbitrarily

chosen 15 percent figure to readership

data and concluded that it had hit the

right number. Some comments

questioned why a publication with 84

percent adult readership was

problematic, while a publication with

86 percent adult readership was not. Of

all the comments that criticized FDA’s

proposed threshold, only one provided

any alternative. This comment cited the

tobacco industry’s voluntary Cigarette

Advertising and Promotion Code,

Advertising 1(a), which prohibits

advertising in publications directed

primarily to those under 21 years of age.

In contrast to the foregoing comments,

which were from the tobacco and

advertising industries, a comment from

a coalition of groups concerned about

smoking and health stated that the

agency’s tentative judgment was

unbiased, reasonable, and narrowly

tailored to meet FDA’s stated goal of

limiting the specific forms of advertising

that have the greatest impact on

children to those publications that do

not have a regular heavy readership of

children.

FDA has carefully reviewed these

comments. Based on this review, FDA

first considered whether its March 20,

1996, Federal Register document and

the memorandum added to the record

under that notice had adequately

explained the basis for the proposed

threshold.

The legislative history of the APA

states that agency notice must be

sufficient to fairly apprise interested

parties of the issues involved, so that

they may present responsive data or

arguments thereto (S. Doc. 248, 79th

Cong., 2d sess. 200 (1946)). The notice

must disclose in detail the thinking that

has animated the form of the proposed

rule and the data on which that rule is

based. (See Home Box Office, Inc. v.

FCC, 567 F.2d 9 (D.C. Cir. 1977).) In

Connecticut Light & Power v. Nuclear

Reg. Com’n, 673 F.2d at 530, the court

held that a notice of proposed

rulemaking should provide an accurate

picture of the agency’s reasoning, so that

interested persons may comment

meaningfully on the proposed rule.

The March 20, 1996, Federal Register

document and the associated data in the

record clearly meet this standard. As

stated in this section, FDA made clear

that its tentative judgment was based on

a review of available data (from Simons

Market Research) on the readership

profiles of various publications. By

dividing the publications based on

whether, in the FDA employees’

experience, the publications were

publicly perceived as being of interest to

minors or not and then examining

readership information on each

publication, FDA employees found that

the publications that were viewed as

being of interest to young people had

readerships that included individuals

under the age of 18 at a level of 15

percent or higher. FDA also found that

the information on additional

publications that it received during the

comment period produced results that

were consistent with the pattern that

emerged from its initial review. 218

Thus, FDA’s reasoning is not circular.

FDA based the threshold on its tentative

finding, from the work that its

employees had done, that the

publications viewed as of interest to

young people had readerships that were

more than 15 percent under 18.

Significantly, while the comments of the

tobacco and advertising industry

disagreed with the basis for the

proposed threshold in various ways,

none presented any data showing that

publications with a youth readership of

15 percent or more are not viewed by

consumers as of interest to young

people.

It is important to keep in mind that

the purpose of the threshold is to ensure
44516 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

219U.S. Bureau of the Census, Population Paper

Listing 21, 1994.

that no more speech than necessary is

burdened by FDA’s restriction on

advertising. Given that FDA wants to

ensure that its restriction is as narrowly

tailored as possible, in response to the

criticisms in the comments, FDA

considered whether there was a more

appropriate basis on which to craft the

restriction. Unfortunately, the

comments criticizing the proposal were

not helpful. The only suggested

alternative to the proposed threshold

that they put forward was the provision

in the Code. This provision is

inadequate on its face, however, because

it is based on a minimum age of 21,

rather than 18, which is the minimum

provided in the laws of all the States

and section 1926 of the PHS Act.

Moreover, the comment that suggested

this alternative gave no indication of

how the age group to which a

publication is primarily directed would

be determined.

As a matter of common sense, FDA

focused on the percentage of readers

under the age of 18 in the general

population and on comparing that

percentage to the percentage of readers

under 18 years of age for a particular

publication. Certain conclusions can

logically be drawn on the basis of such

a comparison. If the percentage of young

readers of a publication is greater than

the percentage of young people in the

general population, the publication can

be viewed as having particular appeal to

young readers. A publication with a

youth readership percentage that is

approximately equal to the percentage

of young people in the general

population can be viewed as one of

general appeal, including appeal to

young readers. A publication with a

lower percentage of young readers than

in the general population, however,

would obviously be one of limited

appeal to young people, and thus one

that could appropriately be considered

of interest primarily to adults.

Given the logic of this approach, FDA

turned to the U.S. census. What the

agency found is that young people

between the ages of 5 and 17 constitute

approximately 15 percent of the U.S.

population. 219 Since this percentage is

the same as the one that FDA used in

developing the proposal, this approach

fully supports the approach that FDA

proposed. (Although 5 and 6 year olds

may not be reading magazines, utilizing

this age group builds in a margin for

error.) It ratifies the judgments that FDA

employees made in arriving at the

proposed threshold.

Some may assert that it is mere

coincidence that the two approaches

produce the same result. FDA disagrees.

The congruence of the two approaches,

the FDA employee anecdotal search and

the use of the census data, is attributable

to the basic validity of the premise

underlying FDA’s initial approach.

Magazines have reputations as to the

audiences to which they appeal, and

those reputations are generally earned

based on the nature of their contents.

Thus, contrary to the assertions in some

of the comments, the 15 percent

threshold is well-supported and

appropriate.

As for the question as to why a

publication with 84 percent adult

readership would be problematic, while

a publication with 86 percent adult

readership would not, the agency turns

to the case law on narrow tailoring,

which is, as stated in section VI.E. of

this document, what this exercise is

about. In Board of Trustees of State

University of N.Y. v. Fox, the Supreme

Court stated:

In sum, while we have insisted that ‘‘the

free flow of commercial information is

valuable enough to justify would-be

regulators the costs of distinguishing * * *

the harmless from the harmful,’’ * * * we

have not gone so far as to impose upon them

the burden of demonstrating that the

distinguishment is 100% complete, or that

the manner of restriction is absolutely the

least severe that will achieve the desired end.

What our decisions require is a ‘‘fit between

the legislature’s ends and the means to

accomplish those ends,’’ * * * —a fit that is

not necessarily perfect but reasonable * * *.

(492 U.S. at 480 (citations omitted))

FDA has done its best to distinguish

publications that are likely to be read by

children and adolescents from those

that are not. FDA finds that, if its

restriction on advertising is to be

meaningful, it must be based on a line

that is enforceable. While only 2

percentage points separate a publication

with 84 percent adult readership from

one with 86 percent (although those 2

percentage points can mean a difference

of tens of thousands of youngsters), the

underrepresentation of underage readers

in the readership of the latter

publication establishes its limited

appeal to young readers, and thus that

it is less likely to be read by them.

For the foregoing reasons, FDA is

adopting the 15-percent threshold.

(60) Comments from an association of

magazine publishers and others

expressed a number of concerns about

the adequacy of current data for

determining whether a publication met

the definition of an adult publication.

Some comments said that current data

and methodology to determine youth

readership, while adequate for

marketing purposes, are totally

inadequate to justify their use as

measuring devices for the imposition of

criminal or civil liability on the exercise

of First Amendment rights. These

comments noted that the vast majority

of magazines do not subscribe to either

adult or youth surveys. Two comments

stated that only about 2 percent of all

magazines participate in the two major

adult audience surveys. One comment

stated that participation in the youth

readership surveys, Simmons’s STARS

and MediaMark Research Inc.’s (MRI’s)

TEENMARK, is even more limited, just

over one-half of one percent of all

magazines.

One comment noted that to comply

with the 1995 proposed rule,

publications must identify readers of all

ages but that current audience

measurement systems do not provide

this comprehensive coverage especially

for readers younger than 12 years of age.

Another comment noted that since the

survey organizations do not survey

individuals on college campuses, in the

armed services, or in institutional

settings, adult readership would be

underestimated. Several comments

noted the difficulty in determining

readership data for any one issue of a

magazine. Another comment noted that

multi-issue advertisements would be a

problem for publications right around

the threshold if the publication crosses

back and forth.

Several comments noted that the

survey organizations would have to

make substantial methodological

changes to the surveys to meet the 1995

proposed rule’s standard. One comment

said that some problems would include

adding magazines to the surveys, and

dealing with unreliable results. Another

comment asked who would decide the

research design for the surveys since

different research methodologies could

be competent and reliable yet result in

different conclusions. Another comment

said that it could be prohibitively

expensive to increase audience samples

to create a legally enforceable standard,

and that changes to audience

measurement procedures could

undermine the usefulness of the surveys

for their designed marketing

information purpose.

One supporting comment from an

association of addiction specialists

stated that ‘‘the agency should require

the industry to monitor with surveys of

ad recall (correlated with tobacco use
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44517

220 Interview on ‘‘The News Hour With Jim

Lehrer,’’ Public Broadcasting Systems, May 16,

1996.

and intention to use patterns) among the

population under age 18 years to help

the agency understand the extent to

which image-based messages continue

to reach the young.’’

One comment pointed out that it

would be virtually impossible to

determine a legally enforceable standard

for the 15 percent youth readership

threshold since there is substantial

variation in audience estimates between

survey organizations and over time.

Several comments noted that FDA’s

definition of a reader is not consistent

with the definition used by Simmons

and MRI.

Some comments suggested that a

more realistic measure of who reads a

publication would be who subscribes to

it. Other comments opposed this

alternative stating that the key criteria

should be regular readership, not paid

subscribers. One comment said that

‘‘[t]his alteration of the proposed

exemption would destroy the intent and

purpose of the advertising limitation.’’

Several comments said that the

proposal would violate due process by

punishing publishers or advertisers who

are unable to determine whether their

conduct violates the law because the

survey data are not sufficiently

comprehensive and reliable. Several

comments, including one from an

association of newspaper publishers,

expressed concern about who would

determine readership. One comment

asked whether a newspaper would be

subject to criminal liability based on

readership data it supplies, and whether

the responsibility for ascertaining

whether a publication qualifies as an

adult publication would be on those

running the advertisements.

The agency recognizes the limitations

of current readership data and the

difficulties of using current readership

surveys to meet the requirements of this

rule. However, the agency concludes

that the exception from the text-only

format for adult publications is feasible

as well as reasonable. First of all, the

burden of proof for determining youth

readership is placed by the rule on the

tobacco company doing the advertising,

not on the publication or the advertising

agency. Under § 897.32(a)(2), the

tobacco company will need to be able to

demonstrate that a publication in which

it is running an advertisement with

images and colors meets the definition

of an adult publication. Therefore, only

the tobacco company will be subject to

any penalties for improperly placing

advertisements, even if it used data

provided by the publication as part of

its determination.

Second, either of the two

methodologies can be used to measure

readership. In addition, the agency has

modified § 897.32(a)(1) and (a)(2) to

make clear that any other competent

and reliable private sector survey

evidence may be used. A tobacco

company may use one of the two major

customary and reasonable readership

surveys (such as MRI and Simmons).

The agency does not believe that there

is only one acceptable methodology.

The agency is willing to accept the

standard methodology currently used by

MRI and Simmons as evidence.

Moreover, the agency is willing to use

the age range of 12 to 17, which appears

to be the current standard for defining

youth, in determining youth readership.

If a particular publication is not

currently covered by one of the major

surveys, it is the tobacco company’s

responsibility to develop the readership

data necessary to justify a decision to

advertise in that publication. The

company could request a survey by one

of the major survey firms, or it could

develop an acceptable alternative. In

either case, the agency will be available

to work with the company. The

company will always have the

alternative to advertise in any

publication in the text-only format.

The agency also acknowledges the

difficulty in determining the youth

readership for any particular issue of a

publication. Thus, data from a survey

for the most recent issues of a

publication can serve as proof of

readership for comparable upcoming

issues unless a particular upcoming

issue is being targeted at younger

readers. The survey schedule used by

the major survey organizations would be

acceptable to the agency. A tobacco

company could utilize a more frequent

survey schedule if it believed the

readership had changed in its favor. A

rolling average of a certain number of

issues could be used, for example, to

determine youth readership. The

problem of multi-issue contracts for

advertising could be solved by a survey

for a comparable period of time (e.g.,

winter months) preceding the contract.

The agency is willing to accept the

definitions of a reader that are

customarily used by the major survey

organizations. The agency does not

agree that using subscribers to a

publication in lieu of readers is a better

measure. Many children who read a

publication will not be listed as

subscribers (for example, Sports

Illustrated has a youth readership of 18

to 20 percent but a youth subscriber rate

of only 6.5 or 7 percent). 220 Also, adults

are more likely to subscribe for their

families, thereby creating an

underestimation of youth exposure.

(61) Several comments assumed that

the purpose of the March 20, 1996,

Federal Register document was to

justify the restriction on advertising

format that the agency had proposed for

other than adult-oriented publications.

These comments argued that explaining

how the agency arrived at the 15 percent

and 2 million readership thresholds

does not approach the factual

justification necessary to restrict First

Amendment freedoms.

Other comments asserted that FDA’s

assumption that certain magazines were

of interest to those under 18, as the

starting point in arriving at the 15

percent threshold, shows that the limits

were content based. These comments

argued that basing restrictions on

content violated the First Amendment.

The comments misunderstood FDA’s

purpose in proposing, and in adopting,

the 15 percent and 2 million under 18

readership thresholds and of the

memoranda added to the public record

in the March 20, 1996, Federal Register

document that indicated how the

agency tentatively arrived at those

thresholds. As discussed in section

VI.D. of this document, the evidence in

this proceeding establishes the effect of

cigarette and smokeless tobacco

advertising on those under 18 years of

age. This evidence fully justifies FDA’s

decision to restrict the advertising for

these products.

However, in imposing such a

restriction on commercial speech, FDA

has an obligation to ensure that the

restriction is no more broad than

necessary to serve the agency’s

substantial interests (Board of Trustees

of State University of N.Y. v. Fox, 492

U.S. at 476). The purpose of the

memorandum was to document FDA’s

efforts to tailor the restriction to ensure

that it did not restrict advertising in

those publications that were not likely

to be read by children or adolescents

and thus were not likely to have an

effect on the group that FDA is trying to

protect. Consequently, contrary to the

claims of the first group of comments,

the agency’s goal in the memorandum

was not to justify a restriction on First

Amendment freedoms but to explain

how it sought to ensure, and why its

tentative decision was that, the limits it

proposed to place on the coverage of the
44518 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

221Barents Group, LLC, citing Publishing

Information Bureau and Mediamark Research, Inc.,

pp. 53–54.

restriction are reasonable (see Id. at

480).

On the other hand, other comments

that opposed FDA’s proposed restriction

on format said that the threshold would

have different impacts on similar

publications. One comment provided

the following examples of publications

that would be considered ‘‘youth

oriented’’ or primarily adult under the

15 percent threshold (the comment

argued that the effects of the 2 million

readership threshold were not relevant

to the rationality of the 15 percent

threshold):

Table 1b.—Examples of Publications

Youth Oriented PublicationsPrimarily Adult Oriented Publications

Popular Science ........ Popular Mechanics

Soap Opera Weekly Soap Opera Digest

Outdoor Life .............. Field and Stream

Cable Guide .............. TV Guide

Mademoiselle ............ Cosmopolitan

The positions taken by these

comments makes clear that the

thresholds were not content based. If the

thresholds were content based, then

publications that have similar content

would be subject to the same restriction.

They are not. The reason they are not is

that FDA’s goal in arriving at the

thresholds was to ensure that cigarette

and smokeless tobacco advertisements

that are likely to be seen by children

and adolescents are the kinds of

advertisements that are likely to appeal

to them. The agency’s only way of

judging the likelihood that an

advertisement that appears in a

publication will be seen by those under

the age of 18 is by considering the

readership profile of that publication.

Thus, the agency has tailored the

threshold to either reflect the percentage

of readership that are under 18 years of

age or to ensure that publications with

an extensive youth readership are

covered.

The comments that complained about

the differing impact of FDA’s threshold

on similar publications, given the

purpose of the threshold, serve to

underline its significance. The

information submitted by the comments

shows that there are significant

differences in the readership of similar

publications and thus in the likelihood

that the material contained in these

publications will be seen by young

people. The treatment of publications

under the agency’s restriction reflects

the latter fact, not the former.

Popular Science magazine has a

readership that is 6 percent more

youthful than Popular Mechanics; Soap

Opera Weekly has a 3 percent more

youthful readership than Soap Opera

Digest; and there is a 9 percent bigger

youth audience for Outdoor Life than for

Field and Stream. These differences are

not minor or meaningless and

demonstrate that, although the 15

percent threshold is not perfect, it will

serve, as it was designed to, protect

those under 18. TV Guide and

Cosmopolitan are not excluded

although, as mass distribution

magazines the percentage of young

readers is less than 15 percent, because

they attract over 2 million young

readers—a number of young people too

large to ignore. 221

(62) Many comments, especially from

the magazine and newspaper industries,

expressed concerns about the impact of

this proposal on their way of doing

business. One comment stated that the

proposed text-only format would

provide financial disincentives for

magazines and newspapers to attract

young readers, especially if the

publication were near the borderline of

being required to use the text-only

format. This comment suggested that the

provision would affect editorial and

content decisions regarding young

readers.

Some comments noted that

newspapers have been struggling to

attract young readers raised on

television, but that success in doing this

might cause the loss of significant

tobacco advertising revenue. One

newspaper industry association

comment stated that the rule would

discourage newspaper programs

promoting youth reading and literacy.

Some comments stated that the loss of

advertising revenue could cause

publications to decrease content and

increase prices. Some comments

thought the result of these effects of the

rule would be losses in jobs in the

newspaper and magazine industries.

The agency is not sure what impact

the exception for adult publications will

have on incentives for magazines and

newspapers to attract young readers, on

editorial content, and on youth literacy

programs. The comments that raised

these issues mostly speculated about

these effects and did not provide any

data as to how many of the thousands

of newspapers and magazines in the

United States carry tobacco advertising,

or on what portion of their total

advertising revenue comes from tobacco

companies. Many business factors affect

a publication’s decisions regarding its

target audience and editorial content,

and these are likely to change for a

variety of reasons. Those publications

affected by this regulation will have to

adjust just as they would if a major

advertiser reduced its advertising.

Under the rule, all publications could

still accept text-only advertising. The

cigarette and smokeless tobacco

industries are capable of designing their

advertising to be attractive to adult

readers (see section VI.E.4. of this

document). Thus, it seems as likely that

the effects of the rule in these areas will

be minimal and will be far outweighed

by the overall benefits of reducing youth

smoking. The effect of the rule on prices

and jobs in the magazine and newspaper

industries is addressed in the section on

the economic impact of the rule.

(63) Several comments argued that

FDA’s restrictions on the format of

advertising, and the standard that it

proposed for deciding whether a

publication has a predominantly adult

readership, interfere with the rights of

newspapers and magazines to decide

what to print. One comment said that

some publications will not want to give

up revenue from tobacco advertising.

Therefore, the comment continued,

these publications will base decisions

about editorial content on how

appealing a particular story would be to

readers under the age of 18. Because of

the impact of the restrictions on

editorial content, the comment

concluded, they should be subject to

strict scrutiny rather than the more

limited scrutiny given to commercial

speech.

FDA finds no merit to this argument.

A similar argument was made in

Pittsburgh Press Co. v. Pittsburgh Com’n

on Human Relations, 413 U.S. 376

(1973). The newspaper company in that

case, which involved a First

Amendment challenge to a municipal

ordinance that prohibited a newspaper

from carrying gender-designated

advertising for nonexempt job

opportunities, argued that the focus of

the case must be on the exercise of

editorial judgment by the newspaper

rather than on the commercial nature of

the ads in question.

The Supreme Court rejected this

argument. The Court said that under

some circumstances, at least, a

newspaper’s editorial judgments in

connection with an advertisement take

on the character of the advertisement. In

those cases, ‘‘[t]he scope of the

newspaper’s First Amendment

protection may be affected by the

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).

The Court said that, at least under some

circumstances, a commercial

advertisement remains commercial in

the hands of the media (Id. at 387). The

Court found that nothing about the

decision to accept a commercial

advertisement for placement in a

gender-designated column lifts the

newspaper’s actions from the category

of commercial speech. The Court said

that the ad was in practical effect a

commercial statement (Id. at 387–88; see

also United States v. Hunter, 459 F.2d

205, 212 (4th Cir. 1972) (‘‘But it has

been held that a newspaper will not be

insulated from the otherwise valid

regulation of economic activity merely

because it also engages in

constitutionally protected dissemination

of ideas’’)).

Here, the question that is raised is

whether or not a publication will decide

to put itself in a position of being able

to accept an advertisement that is

particularly appealing to individuals

under 18 years of age or not. Nothing

about this judgment distinguishes it

from the commercial speech itself.

Because nothing about FDA’s

restrictions would prevent the

publication from carrying a cigarette or

smokeless tobacco advertisement no

matter what judgment the publication

makes, essentially the editorial

judgment comes down to the question of

what will be the format of the

advertisement that it will carry. This

judgment clearly comes within the

category of commercial speech, and

FDA has fully justified its regulation of

commercial speech under the Central

Hudson test.

6. Advertising—§ 897.32 Requirements

for Disclosure of Important Information

a. Established name and intended

use—§ 897.32(c). Proposed § 897.32(b)

(now renumbered as § 897.32(c))

provided that each manufacturer,

distributor, and retailer (of tobacco and

smokeless tobacco) advertising or

causing to be advertised, disseminating

or causing to be disseminated,

advertising, but not labeling, permitted

under § 897.30(a), shall include, as

provided in section 502(r) of the act, the

product’s established name and a

statement of its intended use as follows:

‘‘Tobacco—A Nicotine Delivery

Device,’’ ‘‘Cigarette Tobacco—A

Nicotine-Delivery Device,’’ or ‘‘Loose

Leaf Chewing Tobacco,’’ ‘‘Plug Chewing

Tobacco,’’ ‘‘Twist Chewing Tobacco,’’

‘‘Moist Snuff’’ or ‘‘Dry Snuff,’’

whichever is appropriate for the

product, followed by the words ‘‘A

Nicotine-Delivery Device.’’

The preamble to the 1995 proposed

rule explained that section 502(r)(1) of

the act requires, for any restricted

device, that all advertising or other

descriptive printed material contain a

true statement of the device’s

established name. Under section

502(r)(2) of the act, a restricted device

is misbranded unless all advertising

contains ‘‘a brief statement of the

intended uses of the device.’’ The

agency explained in the preamble to the

1995 proposed rule that it is necessary

to require that the product’s established

name and intended uses be placed on

all advertising, under section 520(e) of

the act, as a measure that affirmatively

identifies the products to persons

reading the advertising (the other brief

statement requirements under section

502(r)(2) of the act are discussed in

section IV.E.6.b. of this document).

The agency did not receive any

comments on the ‘‘established name’’

provision and has thus codified the

provision in the final rule as § 897.32(c).

The agency has modified the ‘‘intended

use’’ provision in this final rule to

require that cigarette and smokeless

tobacco advertising contain the

statement ‘‘A Nicotine-Delivery Device

for Persons 18 or Older.’’ For clarity, the

agency has referenced subpart D

generally rather than § 897.30(a)

specifically. As stated in the 1995

proposed rule, the established name

requirement applies to both tobacco and

smokeless tobacco.

(64) Several comments opposed the

proposed ‘‘intended use’’ provision.

One tobacco industry comment stated

that FDA’s proposal is not authorized

under section 502(r) of the act because:

(1) The ‘‘intended use’’ of tobacco

products is for smoking taste and

pleasure, not a ‘‘nicotine delivery

device;’’ (2) the ‘‘intended use’’

provision of the act does not require that

manufacturers list all information

related to all purposes for which a drug

is intended; and (3) FDA is not free to

prescribe an ‘‘intended use’’ of its own

invention. The comment also argued

that FDA’s statement, which

communicates only that a cigarette

yields nicotine, is not a statement of

‘‘intended use’’ and is of no value to

consumers who obtain more complete

nicotine information that cigarette

manufacturers already provide in

advertising.

The agency disagrees with the

comments stating that it is not free to

prescribe an intended use. As discussed

in this section, the agency is required by

section 502(r)(2) of the act to require a

brief statement of intended use for all

restricted devices.

Additionally, it is within FDA’s

primary jurisdiction and expertise to

determine a device’s intended use. FDA

has decades of experience evaluating

the intended uses of FDA-regulated

products, including restricted devices,

prescription and over-the-counter drugs,

biological products, and dietary

supplements through its review and

approval process for those products.

As described in the 1996

Jurisdictional Determination annexed

hereto, the available evidence

demonstrates that manufacturers intend

to affect the structure and function of

the body by delivering

pharmacologically active doses of

nicotine to the consumer. Although the

agency proposed that the intended use

include the language ‘‘Nicotine Delivery

Device,’’ the agency has determined,

based on the comments received, that a

more accurate statement of the intended

use would provide more value to

consumers. Because cigarettes and

smokeless tobacco products can legally

be sold only to those persons 18 years

of age and older, the agency believes the

intended use statement should reflect

the target population for which the

product is intended. Often, the intended

use statement for a drug or device

includes the patient population by

whom the product may be used.

Accordingly, the intended use statement

has been revised to require the

following language on all

advertisements for cigarette and

smokeless tobacco: ‘‘A NicotineDelivery Device For Persons 18 or

Older.’’

b. Section 897.32(d) Brief statement.

Proposed § 897.32(c) and (d) would

have required that each manufacturer,

distributor, and retailer of cigarettes

include in all advertising, but not

labeling, a brief statement, printed in

black text on a white background that

was readable, clear, conspicuous,

prominent, and contiguous to the

Surgeon General’s warning. Because the

Smokeless Act preempts other

statements about tobacco use and health

in advertising, the 1995 proposed rule

stated that the provision only applied to

cigarettes (and not smokeless tobacco).

The 1995 proposed rule provided one

brief statement as an example (‘‘ABOUT

1 OUT OF 3 KIDS WHO BECOME

SMOKERS WILL DIE FROM THEIR

SMOKING’’) (60 FR 41314 at 41338).

The agency requested comment on what

other information should be included in

the brief statements concerning relevant
44520 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

warnings, precautions, side effects, and

contraindications and on how best to

ensure that the statement will be clear,

conspicuous, and prominently

displayed. The agency also requested

comment on whether it should require

a listing of the component parts or

ingredients of these restricted devices.

The preamble to the 1995 proposed

rule explained that the agency was

proposing to require this brief statement

under section 502(r)(2) of the act. The

preamble stated that the act specifically

excludes labeling from the requirements

in section 502(r) of the act. The 1995

proposed rule stated that the agency

would specify the design, content, and

format of the brief statements, in part

based on focus groups with young

people, to ensure that the information

would be communicated effectively to

young people.

The agency received numerous

comments on this brief statement, and

about half of the comments supported

the provision and half opposed it. Most

of the comments that supported the

brief statement requirement

recommended other information to be

included in the brief statement, and

offered suggestions on how best to

ensure that the statement will be clear,

conspicuous, and prominently

displayed.

During the comment period, FDA

performed extensive focus group testing

on the brief statement to evaluate the

content and various formats for the brief

statement to determine if the

information would be communicated

effectively to young people. Those

results were placed on the public record

and made available for comment, 1

month prior to the close of the comment

period. FDA received a few comments

on the focus group results from the

tobacco industry and concerned

individuals.

The final rule does not specify a

particular statement to be placed in all

cigarette advertisements, as proposed in

§ 897.32(c), nor does it require the brief

statement to be targeted to young

people. Rather, the agency has

concluded that the current Surgeon

General’s warnings contain important

health information, concerning the risks

related to the use of cigarettes, of the

sort required under section 502(r) of the

act and, consequently, has decided not

to require a specific, different statement.

Specifically, the Surgeon General’s

warnings currently required to be

included in cigarette advertisements

and on cigarette packages contain the

following information: Cigarettes cause

lung cancer, heart disease and

emphysema, may complicate

pregnancies, and contain carbon

monoxide; smoking by pregnant women

may result in fetal injury, premature

birth and low birth weight; and quitting

reduces serious risks.

The agency has also considered the

fact that there is a heightened public

awareness by adults of the addictiveness

of cigarettes, as well as the serious

health effects that can result from their

use. Much of this awareness stems from:

(1) The publicity of the numerous

Surgeon General’s reports that have

issued in the last few decades, (2) the

campaigns supported by health groups

and State and local governments, as

well as (3) the attention generated by the

agency’s investigation of these products.

Under the current circumstances, the

agency has determined that the current

Surgeon General’s warnings, which

must be in virtually all advertisements,

contain the type of important health

information required under section

502(r) of the act. Accordingly, the

agency has determined that

advertisements that contain the current

Surgeon General’s warnings meet

section 502(r) of the act.

Finally, because the agency has

determined that the Surgeon General’s

warnings are adequate, and those

warnings must be displayed in a format

prescribed by law, there is no longer any

need for proposed § 897.32(d), which

required that the brief statement be

readable, clear, conspicuous, prominent,

and contiguous to the Surgeon General’s

warning.

(65) One comment argued that the

proposed warning requirement for

tobacco is not a warning, nor is it part

of a brief statement, as those terms are

used in section 502(r) of the act. The

comment stated that because FDA

proposes to allow tobacco to be

marketed as devices subject only to

general controls, one of which is the

brief statement provision, then the

‘‘brief statement’’ must be capable of

providing, with other general controls,

‘‘reasonable assurance of the safety and

effectiveness’’ of tobacco under the act.

The comment argued that because FDA

regards tobacco as having ‘‘dangerous

health consequences’’ (60 FR 41314 at

41349), and does not believe that

tobacco can be ‘‘safe and effective’’ for

anyone, then FDA’s proposed ‘‘brief

statement’’ provision is not within the

scope of the act. The comment stated

that the only warning that is consistent

with FDA’s view would be one that

warned against anyone using the device

at all.

The comment miscomprehends the

purpose of the brief statement, which is

to provide information about the risks

and benefits regarding the product. This

provision is not intended to serve, on its

own, as a mechanism to provide

reasonable assurance of safety for these

products.

(66) One comment argued that even if

FDA could validly require a brief

statement for tobacco as an exercise of

its statutory authority, the imposition of

a warning requirement as part of the

brief statement is invalid because

advertisements for tobacco are already

required to bear the Surgeon General’s

warning under 15 U.S.C. 1333(a)(2) and

(a)(3). In addition, the comment stated

that FDA is not authorized to require

that the information be presented ‘‘in a

lurid fashion to achieve an ulterior

purpose’’ or as ‘‘a threat intended to

scare people,’’ and that the warning

information is meant only for the

purposes of enabling the physician or

patient to make a rational risk/benefit

judgment.

Another comment argued that the

contention that the Surgeon General’s

warning is ‘‘ineffective’’ is without

merit. The agency agrees that the

current Surgeon General’s warnings

contain the type of important health

information that advertisements must

contain under section 502(r)(2) of the

act. Accordingly, the agency has

determined that advertisements that

contain the current Surgeon General’s

warnings sufficiently meet the brief

statement requirement of the act.

(67) One comment stated that the brief

statement provision would ‘‘cause so

much visual clutter in tobacco

advertising as to render effective

communication nearly impossible.’’

Another comment stated that FDA

will be unable to justify the economic

burdens on communication with adults

that are created by the brief statement

requirement because, in order to include

all the mandated statements, advertisers

would be required to purchase

additional space and thus would have to

reduce, because of budgetary pressures,

the number of advertisements they

could place.

Because the agency has determined

that the current Surgeon General’s

warnings will be sufficient as a brief

statement, the issue raised by these

comments is no longer pertinent.

(68) Several comments which

supported the 1995 proposed rule

suggested alternative statements and

submitted recommended language for

the brief statement. Many comments

suggested specific types of information
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44521

222 IOM Report, p. 109.

for inclusion in the brief statement.

Several comments provided

recommendations on how the statement

could be ‘‘clear and conspicuous.’’ One

comment stated that messages must be

carefully pretested on members of the

target audience to ensure that labels: (1)

Attract attention; (2) are personally

relevant; and (3) do not elicit

psychological reactance, i.e., behaviors

directly counter to those desired due to

irritation, rebellion, or

misinterpretation. The comment

recommended that messages be varied

periodically to ensure that they remain

attention-getting and pertinent.

Several comments recommended that

the rule be more specific in what is

meant by ‘‘readable, clear, conspicuous,

prominent’’ by giving either a detailed

set of format specifications of the

lettering and background or by giving a

set of performance criteria. One

comment enclosed an unpublished

review on warnings, which

recommended that warnings should

attract attention of the target audience

by using high contrast and color;

separating warnings from other

information; considering size (relative to

other information in the display) and

location (since people tend to scan left

to right and top to bottom warnings

should be located near the top or to the

left, depending on the overall design of

the display); and by using signal words

to capture attention, such as

‘‘CAUTION,’’ OR ‘‘WARNING,’’

pictorials, rotational warnings to avoid

habituation, and auditory warnings. In

addition, the review stated that

warnings should describe the hazard,

without ‘‘overwarning,’’ and describe

the nature of the injury, illness or

property damage that could result from

the hazard. The review recommended

that written warnings should be

organized with an attention getting icon

and signal word at the top, then hazard

information, then instructions. Finally,

the review recommended that warnings

should instruct about appropriate and

inappropriate behaviors, motivate

people to comply, be as brief as

possible, and should last and be

available as long as needed.

One comment recommended that the

relevant warnings, precautions, side

effects, and contraindications be in a

language understandable and appealing

to even the youngest potential tobacco

user. Several comments recommended

that a minimum size should be required,

expressed as a percentage of the

advertisement (e.g., 25 percent of the

advertisement). Several comments

recommended that a border be placed

around the brief statement and

suggested other graphic enhancements

to make the information in the brief

statement more noticeable.

The agency recognizes that there are

several ways to communicate the

requirement for ‘‘relevant warnings,

precautions, side effects, and

contraindications’’ set forth in section

502(r) of the act. In this case, however,

the agency has determined that the

current Surgeon General’s warnings are

sufficient as at least one way of

complying with section 502(r) of the act.

In addition, the agency appreciates the

numerous suggestions on how to make

the brief statement readable, clear,

conspicuous, and prominent. However,

since no additional information will be

required at this time, and the format for

the Surgeon General’s warnings is

determined by law, the agency has

deleted proposed § 897.32(d).

(69) One comment stated that FDA’s

attempt to gather information through

the focus group studies about

adolescents’ perceptions of the

adequacy of the Surgeon General’s

warnings for use in designing its own

additional warning underscores the

direct conflict between the Cigarette Act

and the proposed regulation.

This comment has misinterpreted the

purpose and the results of the focus

group testing. FDA’s focus groups were

intended to explore how adolescents

perceive various messages. The Surgeon

General’s warnings, as well as other

warnings, were tested with the focus

groups merely to serve as a basis for

reactions to messages that currently

exist in the public domain.

(70) FDA received few comments

concerning the focus group results. In

general, these comments questioned the

validity and usefulness of focus groups.

Further, some comments asserted that

the warnings preferred by the young

people in the focus groups may have

unintended consequences.

As discussed in this section, the focus

groups tested a variety of specific brief

statements that were intended to be

directed towards young people.

However, the agency has decided that

the final rule will not specify a

particular brief statement, but will

accept the current Surgeon General’s

warnings as sufficient. Moreover,

section 502(r) of the act does not require

that the brief statement be directed to

young people, but rather that it provide

‘‘a brief statement of the intended uses

of the device and relevant warnings,

precautions, side effects, and

contraindications.’’ This function is

adequately filled by the intended use

statements required by § 897.32(c) and

the Surgeon General’s warnings. Thus,

because the final rule is not based on

the focus group results, the agency need

not address the previous comments

concerning the focus group results.

7. Section 897.34(a) and (b)—

Promotions, Nontobacco Items, and

Contests and Games of Chance

The agency proposed in § 897.34(a) to

prohibit the sale or distribution of all

nontobacco items that are identified

with a cigarette or smokeless tobacco

product brand name or other identifying

characteristic. FDA stated in the 1995

proposal that this requirement is

intended to reach such items as tee

shirts, caps, and sporting goods and

other items bearing tobacco brand

names or other indicia of product

identification (60 FR 41314 at 41336).

As discussed in the preamble to the

1995 proposed rule (60 FR 41314 at

41336), a Gallup survey found that

about one-half of adolescent smokers,

and one-quarter of all nonsmokers, own

at least one promotional item. The IOM

found that this form of advertising is

particularly effective with young

people. Young people have relatively

little disposable income, so promotions

are appealing because they represent a

means of ‘‘getting something for

nothing.’’ In many cases, the items—tee

shirts, caps, and sporting goods—are

particularly attractive to young people.

Some items, when used or worn by

young people, also create a new

advertising medium—the ‘‘walking

billboard’’—which can come into

schools or other locations where

advertising is usually prohibited (60 FR

41314 at 41336). Moreover, this form of

advertising has grown in importance

over the last 20 years. The portion of

annual expenditures of the cigarette

industry devoted to these promotions

rose from 2.1 percent in 1975 to 8.5

percent in 1980. 222

On the basis of the evidence before it,

the agency tentatively concluded that

the ban on nontobacco items was

necessary to eliminate the somethingfor-nothing appeal of these items, as

well as to prevent wearers or users of

these items from becoming image-laden

walking advertisements.

FDA proposed in § 897.34(b) to

prohibit all proof of purchase

transactions of nontobacco items as well

as all lotteries, contests, and games of

chance associated with a tobacco

purchase. The agency stated that,

because contests and lotteries are
44522 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

223The FTC comment also indicated that

although nontobacco items are ‘‘advertising’’ under

the Smokeless Act, a different legislative history

exempts these items from the Cigarette Act. The

comment stated that the definition of advertising

under the Cigarette Act is understood to exempt

utilitarian items because of legislative history

expressly stating Congress’s intent to preserve the

arrangement under consent agreements entered into

by the tobacco industry in 1972 and 1981 (Public

Citizen, 869 F.2d at 1555).

usually conducted through the mail, it

was not able to devise regulations that

would reduce a young person’s access to

contests or lotteries.

(71) FDA received a substantial

number of comments concerning the

1995 proposed rule to prohibit these

promotional activities. Comments

opposing these provisions argued that

tobacco companies should be allowed to

advertise in a fair manner however they

wish. Many comments from individuals

stated that they like the ‘‘freebies.’’ They

contended that the agency does not have

authority to regulate the clothes people

wear or to ban contests and promotional

activities that are only available to

adults. A number of comments from

individuals stated that what they did

with their lives was their business.

Comments also objected to the

agency’s proposed ban on contests and

games of chance. These comments

stated that existing laws and regulations

already provide a sufficient regulatory

framework.

The majority of comments, however,

supported these provisions and stated

that children and adolescents should

not be ‘‘walking billboards.’’ Moreover,

these comments argued that even

though young people cannot participate

in the contests, they can easily get

caught up in the excitement of

promotional activities. Comments

declared that prohibiting tobacco

product-related gifts, items, contests,

and games of chance will break the

enticing connection between sports and

tobacco use.

The agency agrees with the comments

that said that existing laws and

regulations of lotteries, contests, and

games of chance are sufficient. First,

there appears to be little evidence about

these practices and young people’s

participation in them. Secondly, current

laws prohibit all games of chance and

the like that are advertised on a product

label or that are conditioned on the sale

of the product. Therefore, participation,

if any, by minors is not necessarily

related to a purchase. Third, any

promotional material associated with

the advertising of the games, which is of

primary concern, will be required to

appear in text-only format. Therefore,

the agency has modified this section to

delete the ban on these practices. In

addition, the agency has modified

§ 897.34(a) to clarify that responsibility

for complying with this provision rests

with the manufacturer and the

distributor of imported tobacco, but not

other distributors or retailers.

(72) Comments differed on whether

proposed § 897.34(a) is beyond FDA’s

authority under the act. The comments

addressed a number and variety of legal

issues. One comment stated that FDA

has no authority to ban the items and

services covered by § 897.34(a). It stated

that items and services (e.g., travel

agencies) bearing indicia of tobacco

product identification are not foods,

drugs, cosmetics, or devices as defined

in the act and, therefore, are outside the

agency’s jurisdiction.

Another comment stated that

nontobacco items cannot be regulated as

advertising in the way FDA proposes

because: (a) The 1995 proposed rule

extends to goods and services provided

to product users in connection with

cigarette purchases, most of which are

not displayed or disseminated to the

general public, and thus do not

constitute advertising (see Marcyan v.

Nissen Corp., 578 F. Supp. 485, 507

(N.D. Ind. 1982), aff’d sub nom.

Marcyan v. Marcy Gymnasium Equip.

Co., 725 F.2d 687 (7th Cir. 1983)); and

(b) many of the types of items covered

by § 897.34(a) are promotional items but

not advertising (e.g., a logo-bearing mug

given away or sold by a manufacturer is

not an advertisement).

One comment, which favored the

provision, provided support for the

classification of promotional items as

advertising. The comment referenced

Public Citizen v. FTC, 869 F.2d 1541 at

1556 (D.C. Cir. 1989), in which the U.S.

Court of Appeals for the D.C. Circuit

held that the Smokeless Act

requirement that ‘‘advertisements’’ carry

health warnings ‘‘plainly covers

utilitarian items [nontobacco items] that

are distributed for promotional

purposes.’’ FTC defined utilitarian

objects as items that are sold or given or

caused to be sold or given by any

manufacturer, packager, or importer to

consumers for their personal use and

that display the brand name, logo, or

selling message of any tobacco product

(16 CFR 307.3n). FDA’s interpretation of

what is covered by § 897.34(a) and (b) is

consistent with this definition. The

comment also stated that as a result of

that court case, FTC’s smokeless tobacco

rules now require that utilitarian items

promoting smokeless tobacco bear

specific health warnings required of all

smokeless tobacco advertising (16 CFR

307.9). 223

Another comment pointed out that

the Public Citizen case provides ample

legal precedent not only for the

conclusion that promotional materials

are advertising, but also that they have

a direct impact on a minor’s tobacco

use. The court, relying on evidence

compiled by the FTC, found that ‘‘in the

case of adolescents, utilitarian items

might be among the most effective forms

of promotion’’ (869 F.2d at 1549 n. 15).

In addition, the lower court provided an

additional rationale for restriction based

upon the items’ longevity and

durability.

[P]rinted advertising is customarily quickly

read (if at all) and discarded (as, of course,

are product packages) by typical consumers.

‘‘Utilitarian objects,’’ on the other hand

* * * are retained, precisely because they

continue to have utility. They are also likely

to be made of durable substances: fabric,

plastic, glass, or metal. They may be around

for years. And each use of them brings a new

reminder of the sponsor and his product

* * *

(688 F. Supp. 667, 680 (D.D.C. 1988),

aff’d, 869 F.2d 1541 (D.C. Cir. 1989))

The agency finds that the reasoning in

the Public Citizen case is persuasive and

compels the conclusion that branded

nontobacco items are advertising. It also

finds that young people acquire and use

these products.

Moreover, the agency finds nothing in

the Marcyan v. Nissan Corp. case is to

the contrary. In relevant parts, that case

involved an endorsement that appeared

in the front of a users’ manual. The

court held that this endorsement did not

constitute ‘‘advertising’’ because it is

not ‘‘distributed to the general public for

the purpose of promoting plaintiffs’

products: it is a user’s manual and is

provided to a purchaser of the

defendants’ equipment together with the

equipment in order to describe its

proper use’’ (578 F.2d at 507).

Promotional items are distributed or

sold to the general public. They are

festooned with the product’s brand

name or identification, and they are

intended to remind the user and others

who see the item about the product. As

the court in Public Citizen found, ‘‘each

use of them brings a new reminder of

the sponsor and his product’’ (688 F.

Supp. at 670). Therefore, the comments’

suggestion that these advertising items

are beyond FDA’s jurisdiction is plainly

wrong.

(73) One comment, which had argued

that promotional items were not drugs

or devices nor were they advertising,

objected as well to FDA’s alternative
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44523

224Evans, N., et al., ‘‘Influence of Tobacco

Marketing and Exposure to Smokers on Adolescent

Susceptibility to Smoking,’’ Journal of the National

Cancer Institute, vol. 87, pp. 1538–1545, 1995.

225Slade, J., et al., ‘‘Teenagers Participate in

Tobacco Promotions,’’ presented at the 9th World

Conference on Tobacco and Health, October 10–14,

1994.

categorization of these items as labeling.

The comment stated that nontobacco

items could constitute ‘‘labeling’’ only if

there were a ‘‘textual relationship’’

between them and the product (Kordel

v. United States, 335 U.S. 345, 350

(1948)). The comment argued further

that items that provide no more

substantive information than a brand

name, logo, or recognizable color or

pattern of colors simply do not explain

the use of the product, and therefore do

not constitute labeling. The comment

concluded that if the items are not

advertising or labeling, FDA would not

have authority to take the actions

required by this provision.

The agency agrees that these

promotional items are neither devices

nor drugs; however, this fact is not

relevant to the agency’s authority to

proscribe their use. As explained earlier

in this document, FDA has authority to

impose restrictions on the access to and

promotion of devices under section

520(e) of the act, and this authority

provides the basis for restrictions on

advertising, including those that FDA is

imposing on promotional items. FDA

also derives authority for these

restrictions from section 502 of the act.

Likewise, it is not relevant in this

instance whether the items are

described as advertising or labeling. The

agency has the authority to restrict them

because they promote the use of

restricted devices, cigarettes and

smokeless tobacco, by young people and

thus undercut the restrictions on access

to these products that FDA has imposed.

Therefore, FDA has authority to regulate

how these promotional items are used

by manufacturers, distributors, and

retailers of the restricted devices.

(74) Many comments challenged

FDA’s evidentiary basis for this

provision. Those opposing the provision

made the point that promotional items

do not cause young people to use

tobacco, and that banning them will not

reduce tobacco use. These comments

fall into two categories: Those that rely

on theoretical or policy arguments and

those that provide or criticize studies or

other evidence.

a. Theoretical or policy

considerations. Several comments

argued generally that it is welldocumented that the significant factors

associated with regular underage

tobacco use are peer pressure and

smoking by friends, older siblings and

parents. They noted that FDA cited no

evidence that the use of a tobacco

trademark on a nontobacco product,

such as a lighter or jacket, has any

impact on underage tobacco

consumption, or that its removal will

reduce youth tobacco use.

Consequently, they argue, banning the

use of tobacco brand names on

nontobacco products will fail to achieve

FDA’s goal of curbing teen smoking.

One comment maintained that people,

including those under age 18, do not

wear these items in order to advertise

anything or to be ‘‘walking billboards.’’

Rather, according to this comment, they

wear them to make a public statement,

because they find the items aesthetically

pleasing, or for other reasons. Moreover,

the comment argued, FDA has no

authority to regulate the attire of adults,

school students, or anyone else.

In addition, the comment argued, the

goal of these programs is to reinforce

brand loyalty among existing customers.

Their purpose is to expand market share

among existing smokers, not to induce

nonsmokers to start smoking. These

programs are, by their very nature,

aimed at people who already are

smokers, that is, the merchandise is

provided only to consumers who have

accumulated and submitted significant

numbers of proofs of purchase. No one

would be persuaded to start smoking by

a cents-off coupon or by the offer of a

free cigarette lighter, but a smoker might

be tempted by the offer. The comment

argued that in the hard fought battles for

market share among cigarette

companies, discounts and premiums

represent a way to promote and retain

brand loyalty and to weaken loyalty to

competitors’ brands.

Some comments bolstered their

arguments with a citation to the

decision of the Supreme Court of

Canada, which, they claimed,

invalidated a similar ban. The Canadian

court concluded that there was no direct

or indirect evidence of any causal

connection between the objective of

decreasing tobacco consumption and

the absolute prohibition on the use of a

tobacco trademark on articles other than

tobacco products. These comments

argued that FDA should follow the

Canadian judgment (see section VI.D.3.f.

of this document for a complete

discussion of this case).

On the other hand, one comment

stated that U.S. and international

experience provide substantial support

for a ban. It stated that in the United

States, nontobacco items were heavily

used by RJR to market its Camel tobacco

to young people.

In addition, one comment that

supported FDA’s action stated that

young people participate to a marked

extent in tobacco company promotions.

It noted that these promotions all use

attractive imagery and prizes that are

intrinsically interesting to adolescents.

Other comments stated that these

promotions are particularly effective

with young people, who have less

disposable income. The items are a way

for young people to get something for

nothing and provide added incentive for

young people to purchase tobacco

products. One comment that supported

this provision stated that these items

can become ‘‘walking billboards,’’ that

can come into schools and other places

where tobacco advertising is generally

prohibited.

Another comment stated that the ban

serves as an important corollary to the

advertising restrictions, specifically, it

argued that the impact of removing

tobacco product advertisements from

minors’ magazines would surely be

reduced if minors themselves continued

wearing the advertisements on their

heads and bodies. The comment

asserted that there is a correlation

between participation in a promotion

and susceptibility to tobacco use.

b. Studies and evidence. One

comment referenced a new study 224

that found that participation in tobacco

company promotions by 12 to 17 year

olds is more predictive of susceptibility

to use tobacco products than smoking

by those close to the individual. The

measure of ‘‘participation’’ was the

possession of a catalog, the ownership

of any promotional item, or the saving

of coupons that could be redeemed for

promotional items. The study found that

catalog ownership was the most

common form of participation in

tobacco company promotions.

A comment that opposed this

provision argued that FDA had cited no

credible studies that demonstrate either

that these items are especially appealing

to young people, or that possessing

these items causes young people to start

smoking or to smoke more. It stated that

although FDA relied on a study by Dr.

John Slade 225 that reported that there is

an association between participating in

promotions and a person’s susceptibility

to tobacco use, FDA did not describe the

study thoroughly. The comment stated

that the notion of susceptibility is itself

problematic. It stated that even if this

study is taken at face value, it does not

support FDA’s conclusions. While the

study reported that 83.5 percent of
44524 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

226 ‘‘Teenage Attitudes and Behavior Concerning

Tobacco—Report of the Findings,’’ the George H.

Gallup International Institute, Princeton, NJ, p. 59,

September 1992.

respondents age 12 to 17 were aware of

at least one tobacco company

promotion, it also reported that only

10.6 percent of respondents owned a

nontobacco promotional item. These

numbers, the comment asserted, do not

support the theory that nontobacco

items are appealing to youth or have a

discernible impact on youth smoking

rates.

Moreover, the comment took

exception with Dr. Slade’s finding that

25.6 percent of 12 to 13 year olds and

42.7 percent of 16 to 17 year olds

participate in promotional programs

such as Camel Cash or Marlboro miles.

The comment stated:

the reason for these apparently high

percentages is clear from the most cursory

analysis of the data * * * [I]n this

supposedly random survey, fully 45.7

percent of the households of 12–13 year olds

interviewed had someone at home who

smoked (37.9 percent in households of 16–

17 year olds), and yet, in reality only 25

percent of the American public—half the rate

of the population relied upon by Dr. Slade—

smoke. [Thus], the unrepresentative sample

population Dr. Slade employed created a

significant bias, which distorts the results of

this survey and renders them entirely

unreliable.

Finally, one comment stated that the

primary basis for the provision appeared

to be data 226 that allegedly show that 44

percent of teenage smokers and 27

percent of teenage nonsmokers have

received nontobacco promotional items.

The comment stated that the study is

irrelevant because it drew no conclusion

as to the significance of the number, nor

did it indicate how the teenagers

received the items.

In response, the agency concludes

that the evidence presents a compelling

case to prohibit the sale and distribution

of all nontobacco items that are

identified with a cigarette or smokeless

tobacco product brand name or other

identifying characteristic. The evidence

establishes that these nontobacco items

are readily available to young people

and are attractive and appealing to them

with as many as 40 to 50 percent of

young smokers having at least one item

(60 FR 41314 at 41336). The imagery

and the item itself create a badge

product for the young person and

permit him/her the means to portray

identification.

FDA has shown that tobacco

advertising plays out over many media,

and that any media can effectively carry

the advertising message. Moreover, the

agency recognizes that the tobacco

industry has exploited loopholes in

partial bans of advertising to move its

imagery to different media. When

advertising has been banned or severely

restricted, the attractive imagery can be

and has been replicated on nontobacco

items that go anywhere, are seen

everywhere, and are permanent,

durable, and unavoidable. By

transferring the imagery to nontobacco

items, the companies have ‘‘thwarted’’

the attempts to reduce the appeal of

tobacco products to children.

In addition, items, unlike

advertisements in publications and on

billboards, have little informational

value. They exist solely to entertain, and

to provide a badge that, as the Tobacco

Institute asserted, allows the wearer to

make a statement about his ‘‘social

group’’ for all to see. But because

tobacco is not a normal consumer

product, it should not be treated like a

frivolity. Advertising that seeks to

increase a person’s identification with

and enjoyment of an addictive deadly

habit has the ability, particularly among

young people, to undermine the

restriction on access that FDA is

imposing. For these reasons, the agency

continues to find sufficient evidence to

support a ban on these items.

Finally, regarding the unpublished

paper by Dr. Slade, the comment has

confused the household smoking rate

with the overall population smoking

rate. The smoking rate per household

can be as high as twice the overall adult

smoking rate. For example, if the

smoking rate for adults were 25 percent

and assuming two adults per household

and only one of the pair smokes, then

the household smoking rate could be as

high as double that of the individual

rate. Therefore the range of possible

household smoking rates would be 25

percent to 50 percent, with 44 percent

being quite plausible.

Lastly, the comments that state that

peer pressure and smoking by friends

and family are significant factors in

influencing a young person’s tobacco

use, rather than promotional items, fail

to recognize that if a young person is

influenced by what a peer says about

tobacco use, he or she will also likely be

influenced by that same peer wearing a

tobacco promotional item.

(75) One comment from a small

smokeless tobacco company expressed

concern because much of the packaging

used for its products also bears its

corporate logo. Moreover, several of its

brand names include words in its

corporate logo. Thus, the comment

argues that FDA might find that its

corporate logo is an ‘‘indicium of

product identification’’ covered by the

restrictions in § 897.34. The comment

stated that promotional items are a

small but important part of its

advertising and promotional activity,

and these items allow its customers to

feel like a part of an extended family. It

would be unfair, the comment argued,

as well as harmful to the company, if

FDA were to determine that a corporate

logo may not be used on promotional

items.

One comment stated that the total

merchandising and ban in § 897.34(a) is

unreasonably broad in scope. It stated

that it virtually limits all

merchandising, because all colors or

patterns of colors are associated with

some brand or another of tobacco

product. The comment stated that the

proposed regulation is so confusingly

vague that one could argue that a

‘‘distributor’’ would be prohibited from

using the color red in any event for any

product category, brand, or corporation

because Marlboro brand tobacco

products utilize the color red.

Another comment stated that because

the definitions of ‘‘cigarette’’ and

‘‘smokeless tobacco product’’ are

limited to tobacco products with

nicotine, the agency should consider the

possibility that a tobacco company

could market a nicotine-free brand

extension of a cigarette or a smokeless

tobacco product and advertise this

product free of restrictions. The

comment stated that the advertising for

such a product could have carryover

value for the nicotine containing

versions of the product thereby

undermining the intent of the

regulations.

The agency agrees that it needs to

clarify the scope of § 897.34(a). The

regulation covers any item with indicia

of the brand identity. If the corporate

logo is not an indicium of a brand

identity, its use would not be prohibited

in nontobacco labeling or advertising.

On the other hand, if a corporate logo

includes an identifiable brand name or

image, it must comply with the

restrictions. Any other position would

permit a company to evade the intent of

this regulation by using a corporate logo

to continue to display brand imagery.

For example, RJR may continue to sell

or distribute hats and tee shirts with the

name ‘‘R. J. Reynolds’’ on them, but not

the name ‘‘Camel.’’ Nor can it put the

Camel inside the Reynolds logo. The

agency, therefore, has amended

§ 897.34(a) to state that the indicia of

product identification cannot be

identical or similar to, or identifiable
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44525

227The fact that individuals would be free to

make their own articles of clothing with brand

names of tobacco products on them does not make

the regulations fatally underinclusive. (See U.S. v.

Edge Broadcasting Co., 509 U.S. 434 (‘‘Accordingly,

the Government may be said to advance its purpose

by substantially reducing lottery advertising, even

where it is not wholly eradicated.’’).)

228 ‘‘Teenage Attitudes and Behavior Concerning

Tobacco—Report of the Findings,’’ The George H.

Gallup International Institute, Princeton, NJ, pp. 17,

59, September 1992.

229Bolger, M. R., Marketing Research Report,

entitled Camel ‘‘Big Idea’’ Focus Groups-Round II,

September 21, 1988.

230 IOM Report, p. 110.

231 Id., p. 133.

232 Id., p. 110.

233The Cigarette Advertising and Promotion

Code, subscribed to by the major cigarette

manufacturers, contains three provisions that

Continued

with those used ‘‘for any brand of

ciagarettes or smokeless tobacco’’.

In addition, it is not the agency’s

intention to ban the use of registered or

recognizable colors for all advertising.

Only the owner or user of the brand

identification is prohibited from using

that color or pattern of colors in a

manner so as to advertise tobacco or

smokeless tobacco. For example, Philip

Morris would be prohibited from using

the distinctive red, black, and white

pattern of colors which identify

Marlboro, but neither RJR nor Joe’s

Garage would be prohibited by the

regulations from using those colors.

Finally, in response to the last

comment, the agency has restricted the

coverage of this regulation to

promotions of cigarettes and smokeless

tobacco products containing nicotine. It

has no evidence justifying a broader

coverage of the regulation to nicotinefree products at this time. However, a

company could not give a nontobacco

product (a nicotine free product) a

tobacco brand name. This is exactly

what this section of the final rule

forbids.

(76) Several comments argued that

§ 897.34(a) constituted a restriction on

symbolic expression that cannot be

characterized as commercial speech.

The comments argued that these items

do not propose a commercial

transaction. One comment argued that

in Cohen v. California, 403 U.S. 15

(1971), the Supreme Court recognized

that otherwise objectionable words

worn on a jacket are fully protected

speech.

FDA finds no merit to these

comments. Section 897.34(a) on its face

is limited only to manufacturers and to

distributors of imported cigarettes or

smokeless tobacco. It does not limit the

rights of individuals to express

themselves by wearing an article of

clothing that bears a picture of a

cigarette or a logo. 227 What it does limit

is the ability of manufacturers and some

distributors of tobacco and smokeless

tobacco to do what is the essence of

commercial speech—to take actions to

call public attention to the products

whose logo the items bear, so as to

arouse a desire to buy those products.

(See Public Citizen v. FTC, 869 F.2d at

1554.) Because this is what the

nontobacco items that are the subject of

§ 897.34(a) are designed to do, they

share all the characteristics of the

pamphlets that the Supreme Court in

Bolger v. Youngs Drug Products Corp.,

463 U.S. 60, 66–67 (1983), found to be

commercial speech. Consequently, FDA

may regulate the nontobacco items as

commercial speech, as long as its

regulation passes muster under the

Central Hudson test (see 463 U.S. at 68).

(77) Some comments challenged the

constitutionality of the prohibition on

the use of a cigarette or smokeless

tobacco brand logo on nontobacco

products under the Central Hudson test.

The comments argued that the

prohibition does not directly advance

FDA’s interest because the prohibition

is unrelated to the goal of protecting

children. The comments also argued

that the prohibition is not narrowly

tailored because it is not limited to

children and not limited to products

that are particularly attractive to

children.

Several comments disagreed and

argued that the prohibition is a

constitutionally permissible restriction

on speech. One of these comments

pointed to the finding in the IOM’s

Report Growing Up Tobacco Free of the

effectiveness of this type of advertising

with young people. The comment said

that FDA would therefore be justified in

prohibiting its use.

FDA has carefully considered these

comments. The agency concludes that

the prohibition on the use of a cigarette

or smokeless tobacco brand logo on

nontobacco items is a permissible

restriction under the First Amendment.

First, this restriction will directly

advance FDA’s interest in protecting the

health of people under 18 years of age.

In Public Citizen v. FTC, 869 F.2d at

1549 n. 15, the Court of Appeals for the

D.C. Circuit recognized that the

nontobacco ‘‘utilitarian items might be

among the most effective forms of

promotion with respect to adolescents.’’

This judgment is consistent with much

of the other evidence in the

administrative record. A 1992 Gallup

survey found that 44 percent of all

adolescent smokers and 27 percent of

adolescent nonsmokers owned at least

one promotional item from a tobacco

company. 228 Testing by RJR in 1988

found that nontobacco items performed

best among young adults. 229

The IOM Report pointed out that the

ubiquity of nontobacco items conveys

the impression that tobacco use is the

norm. 230 As stated in section VI.D.3.c.

of this document, this impression, that

tobacco use is widespread and accepted,

fosters experimentation with tobacco

and smokeless tobacco by young people.

This fact led the IOM to recommend

that the use of tobacco product logos on

nontobacco items be prohibited. 231 The

IOM said that this and several other

related steps (including requiring the

use of the text-only format) were

necessary to eliminate those features of

advertising that tend to encourage

tobacco use by children and youths.

Thus, the prohibition on the use of

these logos will directly advance FDA’s

interest. The IOM’s recommendation

provides significant evidence of this

fact.

Second, even though FDA is

prohibiting the use of brand logos on

nontobacco items, this restriction meets

the requirement of narrow tailoring. The

Supreme Court has held that a ban may

satisfy this requirement if the agency’s

judgment is that it is ‘‘perhaps the only

effective approach’’ (Board of Trustees

of the State of N.Y. v. Fox, 492 U.S. at

479). In this case, FDA has determined

that a ban of these items is necessary for

several reasons. The appeal of

something for nothing items for

youngsters is great, and the extent of the

appeal makes it virtually impossible to

distinguish among items, as suggested

by one comment. As the IOM pointed

out, these items, when worn or used by

children, are capable of penetrating

areas of a child’s world that might be

off-limits to other forms of

advertising. 232 Because they penetrate

the young persons’ world, they are very

effective in creating the sense that

tobacco use is widely accepted, which,

as stated in section VI.D.3.c. of this

document, is extremely important to

children and adolescents. These items

act like a badge that marks an individual

as a member of a group, another

attribute that makes them particularly

attractive for young people. There is no

way to limit the distribution of these

items to adults only. The industry

claims that it already is taking sufficient

action to ensure that only adults get

these items 233 but as the evidence
44526 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

address the necessity of preventing anyone under

the age of 21 from getting promotional items.

indicates, a substantial number of young

people have them. As noted in this

section, almost one-half of young

smokers and one-quarter of nonsmokers

have one or more items. Moreover, even

were items to be distributed to adults

only, this would not prevent the wearers

from becoming walking advertisements

that would continue to display the

attractive imagery.

For all these reasons, FDA finds that

all nontobacco items that bear cigarette

or smokeless tobacco brand logos are

capable of playing a significant role in

a young person’s decision to engage in

tobacco use. Because no distinction

among these products is apparent, and

no way of limiting their availability to

adults is possible, FDA finds that the

most direct and effective means of

controlling their appeal to adolescents

and children under the age of 18 is to

prohibit manufacturers, distributors,

and retailers of tobacco products from

distributing or selling them.

(78) One comment opposed

§ 897.34(a) because the comment argued

that the provision would impose

restrictions on an otherwise lawful use

of trademarks. It stated that § 897.34(a)

would prohibit the right of any

trademark owner to use a trademark for

the sole reason that the trademark is

used by another party on tobacco

products. The comment stated that

§ 897.34(a) also would prevent large

distributors and retailers, who handle a

wide variety of both tobacco and

nontobacco products, from distributing

or selling any product which happened

to bear the same or similar mark as that

used on a tobacco product. The

comment stated that, for example,

grocery markets could not stock or sell

Beechnut baby food or chewing gum

because Beechnut also is used as a

trademark for chewing tobacco even

though the manufacturers are two

different companies with the same

name. It stated that the Lanham Act (15

U.S.C. 1051 (1996)) would, and in fact

does, permit such identically branded

products to coexist in the marketplace

because of the absence of any likelihood

that these products would be associated

or confused with each other.

FDA recognizes that § 897.34(a) as

proposed created unintended confusion

and therefore will amend the provision

to clarify the agency’s meaning. Changes

have been made that are intended to

clarify § 897.34(a) so that retailers and

distributors of domestic tobacco

products are not included, thus

avoiding the problem identified with

the comment and making it possible for

grocers to sell Beechnut baby food and

Beechnut tobacco products.

(79) Several comments stated that

§ 897.34(a) would unlawfully constrain

the separate and distinct activity of

trademark diversification in connection

with products that are unrelated to the

marketing of tobacco products by

cigarette manufacturers. One comment

contended that general bans on the

licensing of brand logos pertaining to

tobacco products are incompatible with

long-established principles of

international trademark law. The

comment asserted that the use of such

trademarks in a nontobacco context is

not an indirect means of advertising or

promoting tobacco products. The

comment stated further that it is an

increasingly common practice in many

industries to ‘‘spin off’’ new products by

marketing them under a trademark that

has acquired some cachet or represents

quality. It stated that such licensed

products are not marketed in an effort

to sell the ‘‘root’’ product, rather, the

trademark has some ‘‘detachable’’

qualities that help build demand for the

licensed goods. It stated that the same

is true of marketing a nontobacco

product under the trademark of a

tobacco product.

FDA cannot agree with the comments’

claims. While the agency recognizes that

the use of these trademarks on hats and

tee shirts promotes the underlying

tobacco product by continuing the

extensive imaging in these venues.

Moreover, as the court in Public Citizen,

869 F.2d at 1549, n. 15, recognized,

branded nontobacco items might be the

most effective type of promotion to

young people. Therefore, failure to

include this form of advertising and

promotion in the regulation, would

weaken considerably FDA’s efforts to

reduce the appeal of these products to

young people under 18, and would

undermine the agency’s access

restrictions.

The agency also disagrees with the

comment’s suggestion that § 897.34(a)

effects a taking (or deprivation of a

property right) by prohibiting the use of

tobacco trademarks to market

nontobacco products. Section 897.34(a)

clearly relates to commercial speech and

the comment is merely attempting to

cloak commercial messages with the

issues of registrability and value of wellknown trademarks. As discussed in

section XI. of this document, the agency

has determined that this regulation does

not effect a taking compensable under

the Fifth Amendment.

One comment that supported FDA’s

proposal stated that smokeless tobacco

makers circumvent the FTC regulation

that covers the use of brand names of

smokeless tobacco products on

promotional items such as caps and teeshirts. For instance, rather than stop

making such items, U.S. Tobacco has

registered Skoal Bandit Racing, Skoal—

Copenhagen Pro Rodeo, and Skoal

Music as service marks and places these

names on many of the items it offers the

public, thereby evading FTC’s

regulation. The comment stated that this

experience demonstrates the need for

regulations of this sort to be

comprehensive.

The comment stated further that there

may be other relatively easy ways

around § 897.34(a). It stated that if the

rights to a brand name were transferred

to an entity that was not a manufacturer,

distributor, or retailer that this separate

entity could then license back the use of

the brand name to the tobacco company

and proceed to market, license,

distribute, or sell other goods and

services using that same brand name.

The comment stated that one way to

close this loophole would be to require

manufacturers to own the trademarks

and the rights to all associated symbols

for each brand they produce.

FDA disagrees with these comments

and believes that the concerns

expressed are misplaced. Section

897.34(a) prohibits all use of the Skoal

brand name on nontobacco items,

whether used alone, i.e., ‘‘SKOAL,’’ or

with other words, such as ‘‘Skoal Racing

Bandit.’’ In addition, the provision

forbids not just the use of the brand

name, logo, etc. by the manufacturer but

also the marketing, licensing,

distributing, selling of them, or the

causing of any of those activities; thus,

effectively preventing the type of

license-transfer arrangement described

in the comment.

(80) Several comments stated that

FDA cannot ban contests and lotteries

under section 520(e) of the act, because

they are not devices. Moreover, the

comments stated that existing laws and

regulations provide adequate protection

and to the extent that the participation

of minors in these activities is a problem

the States already have ample power to

regulate them.

In addition, a comment stated that

FDA offered no evidence, or citation to

studies, that contests, lotteries, or games

involving tobacco products have

particular appeal to adolescents.

Moreover, the comment stated, that any

inability to quantify participation by

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

adults.

One comment pointed out that, by

law, customers wishing to participate in

games of chance or similar promotional

activities must be adults. The comment

stated that banning such activity bears

no relationship to achieving FDA’s

stated purpose. The sole effect of FDA’s

ban would be to unjustly impair the

relationship between tobacco

manufacturers, retailers, and their adult

customers.

One comment stated that the agency

should not prohibit all use of contests

or games of chance by the tobacco

industry because regulations already

exist and are enforced by the Bureau of

Alcohol, Tobacco, and Firearms (BATF).

Another comment stated that the

proposed rule misunderstands the

nature of such activities, misrepresents

the appeal of promotions, and assumes

without proof that promotions induce

young people to smoke. It stated that

promotional activities are not

undertaken to encourage people, young

or old, to smoke, but rather to introduce

existing smokers to the brand being

promoted and to provide them with

incentives to choose that brand over

others. Moreover, participation in such

games is expressly limited to smokers

who are 21 years of age or older.

Conversely, one comment provided

support for the 1995 proposed rule. It

stated that, while it is unlikely that

anyone under 18 years of age actually

has ever received any of the major

prizes or offers from the give-aways, the

award of prizes is not the point of these

marketing tools. It stated that the

consumer’s participation in the fantasy

of the prize in association with the

brand being promoted is the reason

these contests are used.

FDA has been persuaded by the

comments to modify § 897.34(b)

regarding lotteries and games of chance

in connection with nontobacco items.

Federal law already prohibits ‘‘any

certificate, coupon, or other device

purporting to be or to represent a ticket,

chance, share, or an interest in, or

dependent on, the event of a lottery to

be contained in, attached to, or stamped,

marked, written, or printed on any

package of tobacco products’’ (26 U.S.C.

5723(C)). BATF has issued regulations

enforcing this provision (27 CFR

270.311).

In addition, although no Federal

agency has issued specific restrictions

on games of chance and lotteries in

connection with advertising of tobacco

products, Federal and State law prohibit

games, contests, and lotteries if based on

product purchase (18 U.S.C. 1302–1307,

1341 (1995)). Given these existing

Federal requirements, the agency has

concluded that there is no need to add

FDA regulations. Therefore, § 897.34(b)

has been modified to delete the

provision concerning lotteries and

games of chance but to continue to the

prohibition of gifts and proof of

purchase acquisitions.

It must be understood, however, that

advertising for games, lotteries, or

contests may not contain any indicia of

product identification other than black

text on a white background, since the

advertisement for a contest in the name

of a tobacco brand, or identifiable as a

tobacco brand, is restricted to text-only

format as required in § 897.32(a). The

agency points out that, as part of the

review of the regulation that it plans to

undertake in 2 years, FDA intends to

consider the effect of games of chance

and lotteries on young people and

determine whether additional

regulations are necessary.

Based on the evidence amassed

during its investigation, and the surveys

described in the preamble to the 1995

proposed rule (60 FR 41314 at 41336)

and submitted during the comment

period, FDA has concluded that

nontobacco items (identified with a

tobacco brand), either sold, given away,

or provided for proof of purchase are an

instrumental form of advertising in

affecting young people’s attitudes

towards and use of tobacco. Moreover,

banning this form of advertising is

essential to reduce tobacco consumption

by young people. This form of

advertising has grown in importance

over the last 20 years. As discussed in

this section, expenditures rose from 2.1

percent in 1975 to 8.5 percent in 1980

(60 FR 41314).

Studies—A Gallup survey found that

about one-half of young smokers and

one quarter of all non-smokers, own at

least one promotional item (60 FR 41314

at 41336). Another study, detailed more

fully in this section, found that

participation in tobacco company

promotions (owning an item, collecting

coupons for gifts, or having a catalogue)

by 12 to 17 year olds is more predictive

of susceptibility to use of tobacco

products than smoking by those close to

the individual. Another study, by Slade,

found that 25.6 percent of 12 to 13 year

olds and 42.7 percent of 16 to 17 year

olds participate in promotional

programs such as Camel Cash and

Marlboro miles (60 FR 41314 at 41336).

Evidence Provided by Industry

Members—Two separate studies done

for R.J. Reynolds, and described in this

section, found that tee shirts were a

significant source of information about

tobacco for some young people and that

these items performed best among

young people.

A ban on this type of advertising will

prevent the ‘‘something for nothing

appeal’’ of give aways and proofs of

purchase and will eliminate the walking

billboard, who can enter schools and

other locations where advertising is

inappropriate. Thus, FDA concludes

that the restriction it is adopting on this

type of promotional material will

directly advance FDA’s efforts to

substantially reduce consumption of

tobacco products by children and

adolescents under 18.

8. Section 897.34(c)—Sponsorship of

Events

Proposed § 897.34(c) provided that

‘‘no manufacturer, distributor, or retailer

shall sponsor or cause to be sponsored

any athletic, musical, artistic or other

social or cultural event, in the brand

name, logo, motto, selling message,

recognizable color or pattern of colors,

or any other indicia of a product

identification similar or identical to

those used for tobacco or smokeless

tobacco products.’’ Proposed § 897.34(c)

would have permitted a manufacturer,

distributor, or retailer to sponsor or

cause to be sponsored any athletic,

musical, artistic or other social or

cultural event in the name of the

corporation that manufactures the

tobacco product, provided that both the

registered corporate name and the

corporation were in existence before

January 1, 1995.

The preamble to the 1995 proposed

rule explained that sponsorship by

cigarette and smokeless tobacco

companies associates tobacco use with

exciting, glamorous, or fun events such

as car racing and rodeos, and provides

an opportunity for ‘‘embedded

advertising’’ that actively creates a

‘‘friendly familiarity’’ between tobacco

and sports enthusiasts, many of whom

are children and adolescents. The

preamble to the 1995 proposed rule

cited several studies that demonstrate

the impact of sponsorship on consumer

attitudes (60 FR 41314 at 41337 through

41338). The proposed restriction was

intended to break the link between

tobacco company-sponsored events and

use of tobacco and reduce the ‘‘friendly

familiarity’’ that sponsorship generates

for a brand.

(81) FDA received a substantial

number of comments concerning the

agency’s 1995 proposal on sponsorship,

including comments submitted by the
44528 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

234 ‘‘Diamond Ridge Motorsports and HannaBarbera, Inc., to form Wacky Racing Team Changing

Face of NASCAR; Deal Launches Cartoon Network

Consumer Branding Initiative,’’ Business Wire,

November 10, 1995.

235 ‘‘Automobile Racing’s Widening Appeal Gets

the Flintstones in Sponsor Table,’’ The Times

Union, p. B11, March 30, 1996.

236Moore, S., ‘‘Ladies and Gentlemen, Start Your

Televisions,’’ Washington Post, May 26, 1996.

tobacco industry, motorsport industry,

advertising agencies, adult smokers,

medical professionals, public interest

groups, and racecar drivers.

Approximately 300,000 individuals

submitted a form letter that was

produced by 1 tobacco manufacturer.

The form letter inaccurately referred to

the 1995 proposal as a ‘‘ban on tobacco

sponsorship of events including

concerts, State fairs and consumer

promotions’’ whereas the agency

proposed to permit tobacco company

sponsorship of all events to continue as

long as they are in the corporate name.

Other comments submitted by the

tobacco industry, adult smokers, and

motorsport industry strongly objected to

the provision. In contrast, those

comments submitted by public interest

groups, medical professionals, and some

racecar drivers strongly supported the

provision.

In response to comments, the agency

has modified this provision to prohibit

all sponsored entries and teams using

the brand name in addition to the

prohibitions that were proposed.

Moreover, the final rule clarifies that the

corporate entity that can sponsor events,

teams and entries must not only be

registered but that the registration must

be in active use in the United States,

and the corporate name cannot include

any indicia of product identification

‘‘that are identical or similar to, or

identifiable with, those used for any

brand of cigarettes or smokeless

tobacco.’’

(82) Several comments addressed the

issue of whether young people attend,

or even see, sponsorship events. Some

comments opposed the provision,

arguing that sponsored events (such as

motorsport events and seniors golf

tournaments) are created for and

attended by adult smokers, and that

there is no credible evidence that these

events are targeted at, created for,

attended by, or even seen by significant

numbers of children and adolescents.

One comment stated that ‘‘contrary to

FDA’s assertions,’’ the industry takes

special steps to ensure that material

distributed at events is not attractive to

minors. One comment stated that

‘‘[r]ecent industry studies demonstrate

that the overwhelming majority of fans

at motorsports events are adults,’’ and

that ‘‘for example, 97 percent of

NASCAR Winston Cup Series race

attendees are 18 years of age and older

[and] [m]ore than 90 percent of NHRA

Winston Drag Racing Series attendees

are 21 years old and older.’’ The

underlying studies were not, however,

cited or attached to the comment.

One comment added that motorsport

events are not seen by ‘‘significant’’

numbers of children under the print

media standard proposed by FDA (i.e.,

the ‘‘15 percent/2 million benchmark’’).

The comment argued that:

[o]n the one hand, the agency concedes

that image advertising is permissible in

publications with a primarily adult

readership because ‘‘the effect of such

advertising on young people would be

nominal,’’ but on the other hand, it attempts

to measure the impact of cigarette brand

sponsorships * * * by using statistics on the

viewing audience of sponsored motorsport

events without recognizing that these figures

demonstrate the fact that the vast majority of

viewers of such events are adults.

The comment stated that:

[I]n fact, the 64.05 million underage

viewers of the 354 motorsport broadcasts

studied represents only 7 percent of the total

viewing audience of these broadcasts. This

averages out to 180,806 underage viewers per

event. These figures are far below the 15

percent and two million readership

benchmarks that are permitted for image

advertising in print media.

* * *

The comment also stated that FDA

made no attempt to measure the

percentage of adolescents in the live

gate of sponsored events, and that

industry estimates indicate that the

overwhelming percentage of fans

attending motorsport events are adults.

One comment stated that the price of

a typical ticket to a stock car race event

is expensive enough to preclude adults

from taking their children to events and

to preclude children themselves from

attending these events.

Other comments supported the

provision, stating that tennis

tournaments, sports car, motorcycle and

powerboat racing, and rodeos all are

aimed at sports enthusiasts, many of

whom are children or teenagers, and

that rock concerts and country music

festivals are ‘‘magnets’’ for adolescents.

One comment stated that:

[it] is also no coincidence that when the

tobacco industry sponsors events where the

audience is almost entirely educated adults,

the sponsorship is in the name of the

corporation (i.e., art exhibits, modern dance

companies), but when the event fits the

psychological image the tobacco industry

needs to attract adolescents, the sponsorship

is in the name of the brand most likely to

appeal to those children (Virginia Slims,

Marlboro, Winston, Skoal Bandit).

The agency, which acknowledges the

comments’ reports on the number of

young people at events, did not receive

any data to support or refute these

numbers. However, recent reports in the

press indicate that the number of young

people attending these events may be

growing.

In NASCAR we found a great kids’

business. I was astounded by their

information, statistics and demographics

regarding kids. [Fred Siebert, president of

Hanna-Barbera, Inc., explaining why the

company is sponsoring a cartoon race car to

appear in NASCAR races emblazoned with

Fred Flintstone and other cartoons on the

hood.] After reviewing the 1995 NASCAR

season, we concluded that a sizable number

of attendees at NASCAR events were families

with kids ages 6–11. Yet we felt NASCAR

was not specifically serving that audience.

[Gary Bechtel, owner Diamond Ridge

Motorsports, who will field a NASCAR car

and team named Cartoon Network Wacky

Racing.] 234

* * * * *

We looked at NASCAR and saw how

quickly it was growing nationally and the

fact that so many families go to the races it

seemed like a natural fit. 235

Moreover, the agency finds that 64.05

million underage viewers (or 180,806

underage viewers per event) is clearly

not ‘‘insignificant.’’ As discussed in the

preamble to the 1995 proposed rule, the

‘‘Sponsor’s Report,’’ which estimated

the value of all product exposure for

most U.S. automobile races, found that

354 motorsport broadcasts ‘‘had a total

viewing audience of 915 million people,

of whom 64 million were children and

adolescents.’’ The preamble to the 1995

proposed rule stated: ‘‘the impact of

sponsoring televised events such as

these automobile races is perhaps most

apparent when one realizes that over 10

million people attended these events,

while 90 times that number viewed

them on television’’ (60 FR 41314 at

41337). In addition, recent news

accounts indicate that televising of races

has increased both in volume and

diversity. For example, television can

often support three major races in 1 day.

The two cable ESPN channels had 150

hours of auto racing programming in

May, 1996, including 95 hours of live

races, time trials, qualifying and

practice laps. 236

The effect of sponsored events on the

young people who attend or see these

events is enormous. Advertising affects

young people’s opinion of tobacco

products, first, by creating attractive and

exciting images that can serve as a

‘‘badge’’ or identification, second, by

utilizing multiple and prolonged

exposure in a variety of media, thereby
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44529

237Williams, S., ‘‘NASCAR Races into Kid’s

Licensing, National Association for Stockcar Auto

Racing Seeking Promotional Appeal and Other

Products,’’ Children’s Business, vol. 9, No. 7, p. 28,

July 1, 1994.

238Fischer, P., J. Richards, and E. Berman, ‘‘Recall

and Eye Tracking Study of Adolescents Viewing

Tobacco Advertisements,’’ JAMA, vol. 261, pp. 84–

89, 1989.

239The comment stated that ‘‘[t]he need to

establish a ‘friendly familiarity’ with a brand name

is not about deciding to smoke * * * nor about

deciding to use a commodity at all—the decision to

make a category purchase within a mature product

category is ALREADY made before advertising

affects the brand choice within the category.’’

creating an impression of prevalence

and normalcy about tobacco use, and

finally, by associating the product with

varied positive events and images. The

sponsorship of events by tobacco

companies uniquely achieves all three

objectives. Sponsorship creates an

association between the exciting,

glamorous or fun event with the

sponsoring entity. Whether at the live

gate, or on television, young people will

repeatedly see and begin to associate the

event, which they are enjoying, with the

imagery and appeal of the product. All

of the attendant concerns of hero

worship of the sports figures and

glamorization of the product by

identification with the event are

present, whether there are thousands or

hundreds of thousands of young people

in attendance. Race car drivers are

extremely popular with young people

and often are looked up to as heroes.

According to one promoter of NASCAR

properties, ‘‘We’ve found that boys look

to NASCAR drivers the same way they

do to heroes, such as firemen,

policemen, professional fighters, or

astronauts.’’ 237

Furthermore, sponsorship events

present a prolonged period of time in

which to expose the audience, including

young people, to the imagery.

Sponsorship events do not provide

people with a momentary glimpse at the

imagery, but from 1 to 2 or 3 hours of

constant attractive imagery. The

audience has more than enough time to

associate the images of the sporting

event or the concert with the product.

The agency agrees that there may be

some events (such as seniors golf

tournaments) that are primarily

attended by adult audiences. The

agency also does not claim that all

sponsorship events are attended

primarily by young people, but that the

exposure (which includes television

broadcasts) of young people to

sponsored events is substantial. Even if

a small percentage of young people

attend certain sponsorship events, the

amount of television exposure that

young people receive is substantial.

In addition, the agency recognizes

that numbers or percentages of the

audience less than 18 may be lower than

the threshold established for ‘‘adult’’

publications. However, the type of

exposure in these two media are

dramatically different. Young people

reading or flipping through a magazine

may momentarily glance at

advertisements if they are interesting or

eye-catching, and as a result, the

exposure, if any, to one particular

advertisement may be brief (the average

time spent viewing an advertisement is

about 9 seconds 238). However, young

people who attend sponsorship events

or view them on television are

unavoidably bombarded with posters,

signs, hats, t-shirts, cars, and the like,

linked with a fun, exciting, or

glamorous event that they enjoy for a

prolonged period of time. Often,

celebrities participating in these events

are wearing clothes and hats bearing the

brand name and attractive imagery, and

young people come to associate athletes

who they admire with tobacco products.

The amount of time viewed and the

positive association with the event are

incalculable as persuasive messages.

Thus, the agency rejects the idea of

setting a minimum attendance threshold

for brand name advertising.

(83) FDA received many comments

addressing its use of the concept of

‘‘friendly familiarity’’ in connection

with tobacco sponsorship of events.

Several comments stated that FDA

misunderstood the theory, 239 arguing

that sponsorships and promotions do

not cause young people to smoke, and

that FDA has failed to meet its burden

of demonstrating that a ban of such

activities will result in any decrease in

underage smoking. In fact, according to

this comment, the studies demonstrate

that young people are most familiar

with the brands of tobacco that are most

heavily advertised.

One comment asserted that since

motorsport advertising and promotion

comprises a small percentage of overall

tobacco advertising (on the order of 4 or

5 percent of total tobacco advertising),

there is little support for the conclusion

that tobacco sponsorship of motorsports

has any significant effect on the rate of

youth smoking.

One comment from a 26-year old exsmoker (who began smoking at age 10,

and smoked for 13 years) and NASCAR

racing fan stated:

[M]y favorite driver is sponsored by a beer

company. I don’t drink and I’m not going to

start because my favorite driver has that

sponsor. However- if I DID drink already, I

may switch brands to support my driver. All

the advertising in the world will not sway me

(or most-intelligent people) to do something

I wouldn’t do anyway.

In contrast, several comments labeled

the 1995 proposed rule a ‘‘reasonable

measure’’ and stated that ‘‘the evidence

cited by FDA in support of this proposal

is substantial and entirely consistent

with the best available evidence.’’ One

comment supported FDA’s sponsorship

restrictions because sponsorship

heightens product visibility, molds

consumer attitudes, links the product

with a particular lifestyle, and thus

increases sales.

One comment commended FDA for

drawing a ‘‘reasonable line—one that

allows tobacco companies to continue to

sponsor events and therefore to reap the

corporate good will that flows from

sponsorship, but compels the

companies to jettison the hard-sell

message that now typifies these events.’’

Several comments stated that the

events sponsored by tobacco companies

have a direct and powerful impact on

young people because they are fun,

exciting, and glamorous, and events

such as tennis tournaments (Virginia

Slims), sports car (NASCAR),

motorcycles and powerboat racing,

rodeos, rock concerts, and country

music festivals are aimed at sports and

music enthusiasts, including children or

teenagers. The comment stated that

when minors view these events, either

in-person or on the television, they are:

‘‘inundated with images of the

brandname or product logo (which are

pasted on uniforms, vehicles, signs and

virtually every surface imaginable),

creating a direct and compelling

association between the product and an

enjoyable event.’’

The comment stated that children and

young adults are particularly vulnerable

to this sort of product advertising,

because adolescence is the time of life

during which identities are shaped. The

comment further stated that there is

ample evidence that demonstrates that

the sponsorship of events leads to strong

associations between the event and the

brandname, that in turn influences the

purchasing decisions of minors.

One comment stated that Virginia

Slims’ sponsorship of tennis was vital to

the image advertising Philip Morris

used to sell Virginia Slims tobacco to

adolescent girls, and that Marlboro

sponsorship of racing events is no less

effective with adolescent boys. The

comment stated that sports sponsorship

has a secondary impact because ‘‘[the

athletes who participate in the

sponsored event, whether they be race
44530 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

240Cigarette Advertising and Promotion Code,

1990.

241 60 FR 41314 at 41337, n. 225; citing Slade, J.,

‘‘Tobacco Product Advertising During Motorsports

Broadcasts: A Quantitative Assessment,’’

presentation at the 9th World Conference on

Tobacco and Health, October 10–14, 1994.

242See, e.g., Rosewater, A., ‘‘Retirement is no

Drag for Prudhomme,’’ Plain Dealer, p. 7D, June 4,

1996; ‘‘Fun Book 96/ This Spectator Sport: Easy

Over,’’ Newsday, p. 80, May 19, 1996; Schmiedel,

M., ‘‘Motor Sports World Motorcycle Trials in

Exeter Next Weekend,’’ The Providence JournalBulletin, p. 13D, May 19, 1996.

243 60 FR 41314 at 41337, n. 226; citing Aitken,

P. P., D. S. Leathar, and S. I. Squair, ‘‘Children’s

Awareness of Cigarette Brand Sponsorship of Sports

and Games in the UK,’’ Health Education Research,

Theory and Practice, vol. 1, pp. 203–211, 1986.

car drivers or tennis players, become

walking advertisements and role

models.’’ The comment stated that ‘‘[a]s

reflected by the Industry’s own Code,

everyone agrees that athletes should not

endorse tobacco products because of her

potential impact on children, but being

a spokesperson for the Virginia Slims

Tennis Tournament, NASCAR racing,

etcetera is no less effective.’’

The agency finds that the evidence

regarding the effect of advertising and

sponsorship on children’s smoking

behavior is persuasive and more than

sufficient to justify this regulation. The

preamble to the 1995 proposed rule

described the available evidence and

explained why the agency is regulating

sponsored events. The evidence

demonstrates that sponsorship of

sporting events by tobacco companies

can lead young people to associate

brand names with certain life styles or

activities and can affect their purchasing

decisions (60 FR 41314 at 41336

through 41338). The industry, in its

comments, has questioned the relevance

of the evidence but has failed to

demonstrate that FDA’s tentative views

were wrong (the industry’s criticisms of

the individual studies are described

below).

Sponsorship events actively create an

association between tobacco and event

enthusiasts. People under the age of 18

are still forming attitudes and beliefs

about tobacco use, see smoking and

smokeless tobacco use as a coping

mechanism, a gauge of maturity, a way

to enter a new peer group, or as a means

to display independence (60 FR 41314

at 41329). This final rule is intended to

break the link between tobacco brandsponsored events and images and use of

tobacco by young people. In addition,

the tobacco industry itself has

recognized the vulnerability of young

people to advertising featuring sports

heroes and other celebrities. In its 1994

Code, the cigarette industry promised

that ‘‘No sports or celebrity testimonials

shall be used or those of others who

would have special appeal to persons

under 21 years of age.’’ 240 The impact

of tobacco’s association with the race

driver, the car, or the event is no less

powerful and no less persuasive.

Finally, although motorsport

advertising comprises only a small

percent of overall tobacco advertising,

its effect, like that of magazines, or hats

and tee shirts, is cumulative. Each

separate advertising venue, in and of

itself, does not produce the entire effect.

However, taken together, the effect of

each advertising exposure is magnified

beyond each discrete exposure, to create

the impression that cigarette and

smokeless tobacco use is widespread

and widely accepted. These

impressions, as stated in section

IV.D.3.c. of this document, are very

influential to children and adolescents.

(84) Several comments criticized in

detail the studies relied on by FDA to

show the effect that sponsorship has on

young people.

One comment stated that the studies

relied on by FDA (40 FR 41331 and

41332) do not provide scientifically

valid support for the conclusion that

there is a causal relationship between

the promotional and sponsorship

activities banned under § 897.34(c) and

the problem of underage smoking.

The agency proposed to regulate

sponsored events based upon its

tentative finding that the best evidence

supported such regulation. Although the

comments argued that the studies are

inadequate, the comments offered no

new evidence to suggest that the

conclusions are invalid.

(85) One comment argued that

although the conclusion reached by an

unpublished paper by John Slade 241 is

that 7 percent of the viewing audiences

for NASCAR races are youths, the

NASCAR Demographics brochure states

that ‘‘NASCAR records of the age of

persons who attend motorsport events

show that only 3 percent are youths.’’

The comment stated that this does not

constitute a principled basis for

outlawing tobacco company

sponsorship of these races even if every

other assumption FDA makes about the

impact of event sponsorship were true.

The agency disagrees with the

comments on the paper by Dr. Slade.

Slade’s paper established that these

events are attended by and seen by a

large number of young people. The

study measured its stated objective, it

establishes the important fact that

children are being unavoidably exposed

over and over again to attractive and

appealing images associated with

tobacco products at NASCAR events.

The study establishes that young people

are present at events where a popular

sport is associated with tobacco on

signs, cars, people, etc.

The agency also disagrees with the

comment that suggested that the price of

tickets to motorsport events was

sufficiently high to preclude adults from

taking their children to see them. In fact,

some motorsport events allow children

to attend free of charge or offer discount

tickets for children. 242

(86) One comment stated that the

study performed by Aitken, et al. 243 (the

Aitken study) did not attempt to gauge

whether exposure to tobacco-sponsored

events or teams engendered favorable

feelings for tobacco products in the

surveyed young people and stated that

the study only addressed the effect of

factors such as sex, age, and

socioeconomic status on awareness of

cigarette sponsorships. The comment

also stated that the Aitken study did not

test the effect of sponsorship activities

in this country, and that FDA ignores

the fact that tobacco companies sponsor

a wider variety of more popular sports

in the United Kingdom, such as

‘‘snooker, cricket and darts.’’ Finally,

the comment accused FDA of ‘‘selective

reading,’’ citing FDA’s omission of a

statement made by the authors when

discussing past studies that even though

minors may be aware of the

sponsorships, ‘‘[t]his of course does not

mean that cigarette advertising plays a

part in inducing children to start

smoking.’’ The comment also criticized

the author of the study for stating that

even though very few of the primary

schoolchildren named John Player

Special or Marlboro as being associated

with racing, ‘‘[t]his suggests that

linkages or associations between brand

names (or their visual cues) and exciting

sports are often unconscious, or at the

very least, not readily retrieved by

consciousness (Aitken et al., p. 209).’’

The comment claims ‘‘[t]hat

astonishingly biased hypothesis was not

tested by any questions that attempted

to probe the ‘‘unconscious’’ or the

‘‘consciousness’’ of the interviewees.’’

The agency disagrees with the

comment’s criticism of the Aitken

study. This study conducted in the

United Kingdom demonstrated that

primary schoolchildren who said that

they intended to smoke when they were

older tended to be more favorably

disposed to cigarette advertising.

Moreover, Aitken’s comment that this
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44531

244 60 FR 41314 at 41338, n. 227; citing Ledworth,

F., ‘‘Does Tobacco Sports Sponsorship on

Television Act as Advertising to Children,’’ Health

Education Journal, vol. 43, no. 4, 1984.

245Hock, J., P. Gendall, and M. Stockdale, ‘‘Some

Effects of Tobacco Sponsorship Advertisements on

Young Males,’’ International Journal of Advertising,

vol. 12, pp. 25–35, January 1993.

246 60 FR 41314 at 41338, n. 228; citing

memorandum from Gray, N., (Anti-Cancer Council

of Victoria), to all members of the Federal

Parliament, December 15, 1989.

study did not mean that advertising

plays a part in inducing children to start

smoking‘‘ is an accurate statement of the

study. The purpose of the study was to

examine the effect of sponsorship on

children’s awareness of tobacco

sponsorship and brand name

identification with that sport, not on

their smoking behavior. This fact is not

a flaw but a description of the study

design and the study’s limitations. The

study, however, is quite useful in

showing the effect of sponsored events

on young people’s awareness of brands.

In addition, the comment selectively

quoted a portion of the Aitken study

(regarding linkages), while ignoring the

reason the statement was made. The

author of the study made this statement

in the context of the finding that

whereas only 9 percent of the primary

schoolchildren named John Player

Special or Marlboro as sponsoring or

being associated with racing cars, 47

percent of primary schoolchildren chose

John Player Special or Marlboro as being

liked by ‘‘someone who likes excitement

and fast racing cars.’’ The authors also

found that linkages or associations

between cigarette brand names (or their

visual cues) and exciting sponsored

sports can be elicited by simple

advertisements, even among children

who do not have a critical awareness of

the purpose of commercial sponsorship.

This type of linkage is the primary

issue, rather than whether such

information is ‘‘conscious’’ or

‘‘unconscious’’ in nature.

(87) One comment stated that the

study performed by Ledworth 244 (the

Ledworth study), which found that even

a fairly brief exposure to tobacco

sponsored sporting events on television

may increase children’s brand

awareness, failed to control for other

sources of information that could result

in brand awareness (i.e., if a family

member smokes), and that even the

author of the study stated that further

investigation needed to be done to

determine whether tobacco sports

sponsorship persuades children to

smoke. The comment also stated that

FDA cannot extrapolate the study

results to the United States because the

study was based on foreign sponsorship

and viewership practices, which differ

significantly from those in this country.

The comment stated that the differences

are highlighted by the fact that 74

percent of the surveyed children

watched at least part of the snooker

match, and that the child viewership of

NASCAR is ‘‘* * * significantly more

limited, at most, even by Slade’s

number, to 7 percent.’’

The agency disagrees with the

comment’s criticism of the Ledworth

study. The Ledworth study

demonstrates the power of association

between an event and brand awareness

among young people. The study is

evidence of the important link formed

by that association.

(88) One comment stated that the

study performed by Hock et al. 245 (the

Hock study), which showed that

nonsmoking boys who saw a tobacco

sponsorship advertisement had a

diminished concern that tobacco hurt

sports performance, ‘‘has no real

relevance to the issue of event

sponsorship and suffers from obvious,

significant methodological flaws.’’ The

comment explained that the video

viewed by one of the groups contained

an advertisement promoting a cigarette

company’s sponsorship of a sporting

event and thus reports the effect of a

particular advertisement, not the effects

of the types of sponsorships at issue

here. The comment also stated that

American tobacco companies are not

permitted to advertise sponsorships in

this fashion under 15 U.S.C. 1335 (the

television advertising ban). The

comment argued that the portion of the

conclusion quoted by FDA overstates

the results of the flawed research

because the authors themselves

emphasized that ‘‘nonsmokers’’’ general

attitudes to smoking were not

significantly affected by exposure to

sponsorship events. Finally, the

comment argued that, among the group

of smokers, the authors reported that

exposure to the sponsorship

advertisement did not affect the

smokers’ brand choices, and that the

authors cautioned that ‘‘these findings

do not, in themselves, constitute a case

for legislation.’’

The agency disagrees with the

comment’s criticism of the Hock study.

Although the advertisement used in the

Hock study may have been different

than advertisements that appear in the

United States, and only a single

advertisement was tested, these factors

alone do not render the author’s

conclusions invalid. Again, most

importantly, the study provides

evidence that brand sponsorship

produces awareness of the product and

the brand in young viewers. The agency

also disagrees with the comment’s

assertion that FDA overstated the

findings of the study. The agency

specifically acknowledged in the

preamble to the 1995 proposed rule that

exposure to the particular advertisement

did not affect overall attitudes toward

smoking (60 FR 41314 at 41338).

Moreover, the agency disagrees with

the comment regarding brand

preferences of smokers. As the study

authors noted, the study primarily

focused on nonsmokers. Thus, the fact

that there were few smokers in the study

makes it more difficult to find

significant effects on smokers. In

addition, the authors note more than

once that the effects of sponsorship

appear to be primarily on nonsmokers.

The important point of this study and

the others cited by the agency is that

sponsorship of events helps create a

positive association between the event

and the tobacco company. The child

relates the event to the product and this

contributes to the perception that

tobacco use is acceptable and not

dangerous. This attitude helps an

environment that fosters

experimentation with tobacco products.

Finally, the comment asserted that

FDA’s reliance on the two-page

memorandum from Nigel Gray 246 is

‘‘not only disingenuous, but

demonstrates that FDA has not

evaluated the data on which it purports

to rely.’’ The comment stated that ‘‘the

statistics cited in this study lack any

explanation or support.’’ The comment

also states that ‘‘[the conclusions stated

in the memorandum are at odds with

those in the studies by Aitken and Hock

cited by FDA.’’ The comment stated that

the author cited a ‘‘Western Australian

survey’’ that found that 65 percent of 10

to 11 year olds surveyed believed that

tobacco sponsorship of sports is

advertising for tobacco, whereas the

Aitken study ‘‘found that only 4 percent

of 10 to 11 year olds identified

advertising as a component of sports

sponsorships by tobacco companies.’’

The comment also argued that the study

by Hock found no effect of the

sponsorship advertisement on brand

choice, whereas the memorandum by

Gray revealed that sponsorship did

effect brand choice.

The agency recognizes that there are

problems with the two-page

memorandum from Nigel Gray because

the data on which it was based have not

been made available. Therefore, the
44532 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

agency has placed no weight on its

findings and does not rely on it in the

final rule.

On the other hand, the memorandum

cannot be used to diminish the

usefulness of the other studies that have

been cited. A careful reading of the data

presented by the Aitken study reveals

that indeed 17 percent of 10 to 11 year

olds identified advertising as a

component of sports sponsorship by

tobacco companies. While it is true, as

the comment indicated, that 4 percent

mentioned only the advertising

component, the comment has

overlooked the fact that an additional 13

percent of 10 to 11 year olds mentioned

both advertising and economic

components.

In summary, these studies provide

ample support that brand name sports

sponsorship produces, for young

people, memorable associations

between the sport and the tobacco

product and brand name. As shown in

section VI.B.1. of this document, young

people pay attention to and rely on

peripheral cues such as the color and

the imagery of advertising for some of

their information about products.

Tobacco sponsorship creates powerful

images of fun and excitement to add to

that ‘‘information’’ mix.

(89) FDA had proposed that entries,

such as racing cars, or events or teams

that participate in events be permitted

to display a brand name in a black and

white text only format. Thus, although

the Skoal 500 would be prohibited, the

Skoal Bandit racing car could

participate in a race event.

Several comments supported the

provision’s requirement for teams and

entries but recommended that the

agency go further to restrict labeling on

entries and teams in sponsored events.

One comment, which was submitted by

a ‘‘participant in motorsport events,’’

stated that ‘‘even when the Marlboro

name, for example, is removed from a

racing car body, the distinctive color

scheme still sends the Marlboro

message, loud and clear.’’

One comment stated that ‘‘under the

rationale applied to the regulation on

event sponsorship, * * * FDA would be

justified in restricting tobacco

companies from entry and team

sponsorship.’’ The comment

recommended that FDA ‘‘limit the scope

of the terms ‘entries’ and ’sponsored

events,’ for the breadth of possible

entries and possible events is

enormous.’’ The comment stated that for

instance, professional sporting events

such as football, basketball, baseball,

and hockey games, should be excluded

from ‘sponsored events,’ so that tobacco

product brand names cannot be used as

the name of a professional sports team.’’

The comment stated that the term

‘‘entries’’ is ambiguous because, for

example, a race car competing in a

sponsored race would qualify as an

‘‘entry’’ under the proposed rule, ‘‘but

would the Company X Choir be

considered an ‘entry’ when it appears in

a sponsored concert?’’

The agency has carefully considered

the comments and has decided to delete

‘‘entries and teams in sponsored events’’

from the list of permissible advertising

media in § 897.30(a) and to specifically

include teams and entries within the

scope of the ban on sponsored events.

The agency is persuaded that sponsored

teams and entries, such as cars: (1)

Create the same associations with sports

figures and other ‘‘heroes,’’ (2) create a

linkage between a tobacco product and

an enjoyable and exciting event when

they appear as part of an event, (3) are

displayed for a significant period of

time. They have the same potential to

create images and influence children

and adolescents as does sponsorship of

events, and (4) are able to leave the

event and be seen at fairs and malls and

other places frequented by young

people.

The agency appreciates the

comment’s suggestions that color and

imagery are as problematic as the brand

name but advises that the comment has

misinterpreted the 1995 proposed rule.

Proposed § 897.34(c) stated that

sponsorship would be prohibited in

‘‘the brand name, logo, motto, selling

message, recognizable color or pattern of

colors, or any other indicia of a product

identification similar or identical to

those used for tobacco or smokeless

tobacco products.’’ Thus, a car

sponsored by Philip Morris may not be

named after the Marlboro brand nor be

painted in the distinctive tri-color

pattern.

(90) Some comments addressed the

issue of whether sponsorship is

advertising. One comment argued that

the International Events Group’s (IEG)

‘‘IEG Complete Guide to Sponsorship’’

states that sponsorship is not

advertising, and that the guide explains

that advertising involves the delivery of

messages about specific product

attributes, while sponsorship merely

shapes the consumer’s image of the

brand. Moreover, to the extent the IEG

is identifying sponsorship as

advertising, the comment asserted that

the IEG guide is a publication by an

organization that depends on sponsored

events for its existence, and is not in the

business of conducting objective,

statistically sound studies on the effects

of sponsorship. Thus, the comment

asserted, FDA has not cited any

scientific study supporting the theory

that sponsorship is advertising.

The comment argued that the position

that sponsorship and advertising are one

and the same is inconsistent with

pronouncements from Congress and

from the FTC. The comment argued that

both Congress and the FTC have

recognized that advertising includes

messages about product attributes or

appealing visual imagery, and the use of

a brand name to identify an event

includes neither. The comment asserted

that ‘‘nothing in the [FTC]’s findings

suggests a rationale that would apply to

the mere display of a logo, trademark, or

other product identifier when divorced

from a selling message.’’ The comment

asserted that Congress has never

classified sponsorship of events using

brand names as advertising, and that the

few times it has addressed this issue,

Congress has issued laws that

distinguish advertising from other forms

of promotion that do not have the same

impact as advertising.

The comment referred to an FTC

order In the Matter of Lorillard Tobacco,

80 FTC 455, 457 (1972), which the

comment argues defines ‘‘advertising’’

to include only those practices that

typically contain a selling message; and

United States v. R.J. Reynolds Tobacco

Company, No. 76-Civ-814 (JMC) (SDNY

1981), which the comment argued

confirms the Government’s view that

the selling message in advertising, not

the mere display of a logo, was the focus

of its concern.

In addition, the comment argued that

another Federal agency agrees with this

interpretation. The comment stated that

the FCC, expressly permits ‘‘logos or

logograms’’ as long as such

announcements do not contain

‘‘comparative or qualitative

descriptions, price information, calls to

action, or inducements to buy, sell, rent

or lease.’’

In contrast, some comments

supported the assertion that

sponsorship is very effective

advertising. One comment included in

its appendices the transcript of an ABC

News Day One story broadcast August

10, 1995, that reported on the

commercial value of sponsorship. The

comment also included a recent story in

Winston Cup Scene (October 19, 1995)

which describes the advertising value

that sponsors expect to receive from

their sponsorships.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44533

247See e.g., Aitken, P. P., D. S. Leathar, and S.

I. Squair, ‘‘Children’s Awareness of Cigarette Brand

Sponsorship of Sports and Games in the U.K.,’’

Health Education Research, vol. 1, pp. 203–211,

1986.

248 IOM Report, p. 112.

249Hock, J., P. Gendall, and M. Stockdale, ‘‘Some

Effects of Tobacco Sponsorship Advertisements on

Young Males,’’ International Journal of Advertising,

vol. 12, No. 1, January 1993.

Contrary to the comments cited, the

FTC asserted, in its comment, that

sponsorship is advertising, citing its

1992 consent order involving the

Pinkerton Tobacco Co., (Consent Order)

C–3364 (1992).

The comment also stated that in 1995,

the Department of Justice announced

consent decrees resolving allegations

that Philip Morris, Inc., and the owners

of Madison Square Garden in New York

City violated the Cigarette Act’s ban

prohibiting advertising for tobacco on

television and other media regulated by

FCC through the display of cigarette

brand names and logos at live sporting

events that were broadcast on television

(United States v. Madison Square

Garden, L. P., No. 95–2228 (S.D.N.Y.,

April 7, 1995); United States v. Philip

Morris, Inc., No. 95–1077 (D.D.C. June 6,

1995)). The consent decrees prohibit

Philip Morris and Madison Square

Garden from placing cigarette

advertising in places regularly in the

camera’s focus where they might be

seen on television.

The agency finds that sponsorship is

advertising within the scope of this

regulation. The claim by the comments

that the Lorillard and Reynolds Tobacco

consent orders demonstrate that the FTC

does not find sponsorship to be

advertising is incorrect. The two cited

cases are consent orders that did not

provide a definition of advertising but

limited the coverage of the consent

order to the specific types of advertising

mentioned in the order. The two orders

clearly excluded categories of obvious

advertising from the coverage of the

order (see, e.g., point of sale

advertisements less than 36 square

inches).

Although the agency acknowledges

that the ‘‘IEG Complete Guide to

Sponsorship’’ (IEG guide) states that

sponsorship is not advertising, IEG is

creating a semantical distinction

between one form of advertising

(traditional media advertising) from

other types of advertising (e.g.,

promotional items, sponsorship). The

IEG guide states that ‘‘[w]hat

sponsorship generally accomplishes

better [emphasis added] than

advertising is establishing qualitative

attributes, such as shaping consumers’

image of a brand, increasing favorability

ratings, and generating awareness.’’ In

addition, the IEG guide states that

sponsorship is more effective than

advertising in increasing ‘‘propensity to

purchase.’’ This latter description of

sponsorship falls within the courts

definition of advertising in Public

Citizen v. FTC, 869 F.2d at 1554, as

‘‘any action to call attention to a product

so as to arouse a desire to buy.’’

The agency finds for all these reasons

that sponsorship can be regulated as

advertising under the act.

(91) Several comments argued that

FDA does not have the authority to

restrict sponsorship events. One

comment stated that FDA has no

authority to regulate cigarette

advertising to ‘‘break the link’’ between

sponsored events and use of tobacco,

and reduce the ‘‘friendly familiarity’’

that sponsorships generate among young

people. The comment stated that FDA

can prohibit only false or misleading

restricted device advertising and cannot

prohibit advertising that simply links a

name to a product. One comment stated

that it is difficult to understand how the

sponsorship of the IndyCar Marlboro

500 or the National Hot Rod Association

Winston Drag Racing Series,

promotional activities that would be

prohibited under the 1995 proposed

rule, involve the ‘‘misbranding’’ of

tobacco products.

Several comments addressed the issue

of whether FDA’s proposed ban on

brand name sponsorship violates the

First Amendment. Several comments

argued that the proposed restrictions on

advertising and promotional activities

are overly broad and violate the First

Amendment because the 1995 proposed

rule would prohibit virtually all forms

of tobacco sponsorship and advertising

at motorsport events, and FDA made no

attempt to limit the restrictions to

advertisements directed at minors. One

comment argued that the provision

would not directly and materially

advance the government’s interest,

because there is no reasonable basis for

asserting that sponsorship causes youth

tobacco use. The comment stated that

FDA did not attempt to differentiate

between those events that attract

children and adolescents and those that

attract adults. Thus, according to the

comment, a ban on tobacco sponsorship

of an event that few or no children or

adolescents attend will not directly and

materially advance a reduction in

underage tobacco use.

In contrast, one comment which

supported the provision stated that

sponsored events have a direct and

powerful impact on young people, and

thus there is a ‘‘reasonable fit’’ under

the final two prongs of the Central

Hudson test. The comment argued that

the 1995 proposed rule is narrowly

tailored because ‘‘FDA has selected the

approach that best effectuates its goal of

reducing tobacco consumption by

minors, without needlessly restricting

the industry’s ability to sponsor events

and garner the good will that flows from

such sponsorship.’’

FDA concludes that sponsorship of

events and sponsored teams and events

is an advertising medium that is

effective in influencing young people’s

decision to engage in smoking behavior

and tobacco use.

As explained in this section, the

agency has authority to restrict

advertising of restricted devices like

tobacco and smokeless tobacco under

sections 520(e) and 502(q) of the act. As

the studies described in this section 247

demonstrate, sponsorship associates the

advertised brand with the event and

thus shapes the image of the brand and

the individual’s image of tobacco use.

Sponsorship of rodeos and car racing,

for example, associates the product with

events where risks are high but socially

approved and are taken by individuals

who brave the odds. 248 This type of

situation fits in very well with the image

concerns of adolescent males described

in section VI.D.4.a. of this document.

Youths who attend the sponsored

event are directly and unavoidably

confronted with messages for the

sponsoring product. This exposure

creates a sense of familiarity and

acceptance similar to that created by

billboards near schools and

playgrounds.

In addition, the sponsored events are

televised. As a result of this fact,

through mention of the sponsor and

camera shots that pan the place where

the event is held, awareness of the

brand is created, along with the

associations described above.

Given these factors, a restriction on

sponsorship will be effective in limiting

the influences on children and

adolescents to use tobacco products and

thus in protecting their health.

Moreover, there is a reasonable fit

between the restriction and FDA’s

interest. The restriction focuses on the

use of the brand because of the

association between the brand and

tobacco use. 249 By building associations

with the brand, sponsorship and the

advertising displayed at the event

creates a desirable image for young

people that contributes to a positive

feeling about the product that sponsors
44534 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

the event. This positive image not only

provides a brand that the young person

might select but also adds to the young

person’s positive feelings about using

the product. It is the creation of this

association that FDA will prevent by

restricting sponsorship.

FDA is not aware of any way to limit

the restriction to events that are

attended by young people. However,

FDA has no desire to restrict

manufacturers’ abilities to contribute to

the community by sponsoring athletic,

cultural, or other events. Thus, the

agency has narrowly tailored the

restriction on sponsorship to use of

brand identification because it presents

the harm that FDA is trying to eliminate.

For these reasons, FDA concludes that

its restrictions on sponsorship are

consistent with its legal authority and

with the First Amendment.

(92) Several comments (including one

from a participant in motorsport events)

argued that allowing tobacco companies

to place brand names and logos at

highly visible locations during

broadcast sporting events has afforded

tobacco companies the opportunity to

circumvent the Cigarette Act, which

prohibited broadcast advertising of

cigarettes. One comment stated that

tobacco companies receive millions of

dollars of free brand name television

and radio exposure during these events

and use messages in these

advertisements that are particularly

effective with children. One comment

stated that ‘‘the degree to which

sponsoring events gives tobacco

companies television time is

staggering,’’ and ‘‘[j]ust in the televising

of the Indiana 500 [sic], Marlboro

received almost 31⁄2 hours of television

exposure and 146 mentions of its brand

name.’’ The comment cited cases where

Congress and the courts have already

recognized and upheld the importance

and the constitutionality of keeping

tobacco advertising off the airwaves

(Capital Broadcasting Co. v. Mitchell,

333 F. Supp. 582 (D.D.C. 1971), aff’d sub

nom. Capital Broadcasting Co. v. Acting

Attorney General, 405 U.S. 1000 (1972)),

and concluded that a reviewing court

would likely sustain the provision

regarding event sponsorship simply

because it has become a pervasive tool

used by the tobacco industry to evade

the restriction on television advertising.

The agency finds that there is

adequate support for its ban on brand

name sponsorship of events. As stated

in the preamble to the 1995 proposed

rule and in response to an earlier

comment, ‘‘[t]he amount and financial

value of television exposure gained by

a firm can be substantial.’’ The preamble

to the 1995 proposed rule cited two

studies which discussed the impact of

sponsoring televised events and

concluded that:

[t]he impact of sponsoring televised events

such as these automobile races is perhaps

most apparent when one realizes that over 10

million people attended these events, while

90 times that number viewed them on

television.

(60 FR 41314 at 41337)

By restricting brand name

sponsorship of events, the final rule will

eliminate those brand name sponsored

events that continue to permit tobacco

product brand names to appear on

television.

(93) Several comments expressed

concern that the 1995 proposed rule was

not sufficiently inclusive; specifically, it

did not prohibit the incorporation of an

event in a brand name by someone other

than the tobacco company and did not

explicitly ban the use of the name of a

foreign tobacco company in U.S. sport

events. Some comments stated that

restricting sponsorship of entertainment

and sporting events to corporate name

only for corporate sponsors that had

been in existence prior to January 1,

1995, ‘‘leaves open many shadow

entities incorporated under tobacco

brand names because tobacco

transnationals have been creating these

front groups for years to escape

promotion restrictions in other

countries.’’

One comment stated that Canada,

after it had banned brand name

sponsorship, found that industry used

new ‘‘corporations’’ such as Camel

Racing PLC to continue sponsoring in a

brand name. Thus, the comments

recommended that the regulation ensure

that corporate sponsorship of events be

allowed only if the corporate name is

the name of the manufacturing entity

and that the name has no similarity to

a brand name of any of that

manufacturer’s tobacco products.

Several comments expressed concern

about a recent trend among U.S.

manufacturers to develop brands that

are made by a corporate entity. For

example, one comment stated that RJR

has developed a series of brands with an

art deco style of pack design and is

selling them through a wholly owned

subsidiary named Moonlight Tobacco.

Another comment stated that Philip

Morris has been test marketing a brand

called ‘‘Dave’s,’’ which it produces

through a boutique company named

‘‘Dave’s Tobacco Company.’’ These

comments stated that the agency should

amend the 1995 proposed rule to

prohibit any corporate name or logo that

had a brand name or product

identification within it.

Finally, a comment stated that there

are many other existing brand names

that are also corporate names, such as

‘‘Rothmans’’ and ‘‘Sampoerna’’ (a brand

of clove cigarette (Kretek) imported from

Indonesia) that are manufactured

overseas. This comment argued that

non-U.S. corporate names must also be

included in the final rules proscription.

The agency recognizes the concern

expressed by the comments. As stated in

the preamble to the 1995 proposed rule,

the requirement that the corporation be

in existence on January 1, 1995, is

intended to prevent manufacturers from

circumventing this restriction by

incorporating separately each brand that

they manufacture for use in sponsorship

(60 FR 41314 at 41336). The comments

have suggested that manufacturers may

circumvent this restriction by the use of

shadow entities, many of which have

already been incorporated under

tobacco brand names in other countries

(or have been incorporated as events).

The agency agrees that the proposed

restrictions do not prevent this type of

circumvention.

Thus, in response to the comments’

suggestions, the agency has modified

the proposed regulations to reflect that

the registered corporate name and

corporation must have been in existence

and registered in the United States and

have been in active use in this country

before January 1, 1995. Thus, FDA has

modified § 897.34(c) to state: ‘‘Nothing

in this paragraph prevents a

manufacturer, distributor, or retailer

from sponsoring or causing to be

sponsored any athletic, musical, artistic,

or other social or cultural event, or team

or entry, in the name of the corporation

which manufactures the tobacco

product, provided that both the

corporate name and the corporation

were registered, and in use in the

United States prior to January 1, 1995,

* * *.’’ This provision makes clear that

manufacturers are free to sponsor events

in their corporate name but contains

language that will prevent the type of

circumvention of the restriction that

was posited by the comments.

The agency also agrees with the

comments that suggest that

manufacturers may also attempt to

circumvent this restriction by placing

within the corporate name or logo

elements of brand identification such as

names (Smokin’ Joe), colors (the tricolor

decoration), etc. Tobacco products can

be promoted using more than just the

brand name. In fact, the name may be

less important than the attractive
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44535

imagery, recognizable colors and

patterns of colors (Marlboro), characters

and heroes (Joe Camel racecar drivers)

all of which provide the user with a

desired image. A yellow motorcross bike

with a head of a Camel conveys the

image of Joe Camel without the name of

the product. Therefore, it is necessary in

order to break the link between the

event and the product to restrict the

images in addition to the name. Thus,

FDA has modified § 897.34(c) so that it

concludes with the following statement:

‘‘* * * and that the corporate name does

not include any brand name (alone or in

conjunction with any other word), logo,

symbol, motto, selling message, recognizable

color or pattern of colors, or any other indicia

of product identification identical or similar

to, or identifiable with, those used for any

brand of cigarettes or smokeless tobacco

products.

The agency also recognizes that at

some time in the future, corporate

entities may be formed to sell tobacco

products, which are new to the tobacco

business and in no way associated with

current manufacturers. Should those

entities desire to sponsor events, they

would be precluded by the language of

§ 897.34(c) from doing so. The agency

envisions that such entities could

petition the agency, under 21 CFR part

10, for an exemption from this

provision.

(94) One comment stated that FDA’s

proposed ban on brand-name

sponsorship is an unjustified limitation

on the right of private individuals to

select their own sponsors.

This comment has misinterpreted the

1995 proposed rule. The rule does not

limit the ‘‘right’’ of private individuals

to select sponsors. Individuals are free

to select any sponsor they choose. The

rule, however, prohibits the event from

including any brand name, logo,

symbols, motto, selling message, or any

other indicia of product identification

similar or identical to those used for any

brand of cigarette or smokeless tobacco.

However, the final rule does not prevent

corporate sponsors that were in

existence and registered in the United

States before January 1, 1995, from

advertising in their registered corporate

names.

(95) Several comments stated that

sponsorship restrictions would have a

negative impact on sports events.

Approximately 300,000 copies of one

form letter were submitted as

comments. All included the statement:

‘‘I am 21 years of age or older and

oppose the new regulations proposed by

the Food and Drug Administration

(Docket No. 95N–0253) that would

prohibit tobacco company sponsorship

of entertainment and sporting events.’’

The form letter also stated that ‘‘If FDA

gets control of tobacco and bans tobacco

sponsorships, ticket prices could rise as

well. And there might be fewer events.

All this adds up to consumers being the

big losers.’’

One comment stated ‘‘I oppose any

attempt by President or FDA to deny

RJR the right to sponsor the Winston

Cup Racing Series!’’ One comment

stated ‘‘[b]y banning the sponsorship of

NASCAR, the races won’t get any

money, and if they have to stop racing,

that will make me mad, and I am too old

to be getting mad—75 years [old].’’

One comment stated that because of

the potential loss of economic support,

many events will not be viable if

cigarette company sponsorship is no

longer available. Several comments

argued that FDA’s proposed ban on

sponsorship, promotional programs, and

contests would eliminate events enjoyed

primarily by adults. One comment

stated that ‘‘[w]e believe that we and

millions of other middle class fans like

us, will no longer be able to afford the

NASCAR we love.’’ One comment stated

that the provision ‘‘will adversely affect

the economy of the tobacco industry

and that affects many people in many

States, not just the racing industry and

communities.’’

One comment stated that the loss of

sponsorship revenue to race track

owners, operators, and promoters would

negatively affect the motorsports

industry because racing fans will suffer

in the form of increased ticket prices or

decreased services at motorsports

events, and increased ticket prices will

decrease attendance at race events,

forcing racetrack operators to cut jobs

and other employee benefits, further

depressing the economies of hundreds

of communities around the nation. The

comment also stated that since

motorsports injects hundreds of

millions of dollars into local and

regional economies, particularly in rural

and suburban communities that have

been the hardest hit by recession and

job losses, FDA’s proposed regulation

would have a substantial impact on

local and regional economies across the

country and hurt the future of

motorsports.

In contrast, one comment that

supported the proposal was from a

‘‘dedicated car racer,’’ and stated that

‘‘the truth is that car racing will do just

fine without tying its wonderful image

to the interest of the cancer promoters.’’

The comment stated that:

in Europe where racing cars run without

any cigarette advertising whatsoever, people

camp out for days trying to get into the

events, and that the recent Formula One

European Grand Prix was run in cold

miserable, weather with packed stands and

not a single cigarette logo in sight.

The comment stated that ‘‘I hope

[FDA] will look out for the rest of us and

stand firm in favor of a ban on tobacco

advertising at all sporting events.’’

One comment stated that ‘‘many of

the millions of dollars spent on these

promotions are available to the cigarette

industry only because 3,000 children

start smoking each day,’’ and ‘‘[t]his

situation can be viewed as an industry

demanding a bounty of 3,000 lives per

day in exchange for its financial support

of the sports, music, and other

entertainment appealing to children and

youth.’’

One comment stated that:

the abundance of other sponsors indicates

that auto racing would not fail if tobacco

products are not allowed to be event

sponsors and if teams sponsored by tobacco

products are restricted to black and white

uniform and car designs. Similar fears were

expressed when cigarette commercials were

banned from electronic media, but they

proved groundless.

The comment stated that sponsors do

not make a sport such as auto racing or

rodeo popular because auto racing and

rodeo are ‘‘compelling, popular

spectator sports in their own right.’’ The

comment stated that ‘‘popular sports

attract sponsors who want to advertise.’’

The comment stated that ‘‘[t]he

Olympics would remain a premier

sporting event without Coca-Cola or

Kodak’’ and ‘‘NASCAR stock car racing

is among the most popular spectator

sports to thrive.’’ The comment stated

that ‘‘the audience is not there because

of tobacco: tobacco is there because of

the audience.’’

The agency advises that the concerns

expressed by some of these comments

have misinterpreted the rule. The rule

does not ‘‘prohibit tobacco company

sponsorship of entertainment and

sporting events’’ or ‘‘ban tobacco

sponsorships, promotional programs,

and contests.’’ The rule prohibits a

sponsored event from being identified

with a cigarette or smokeless tobacco

product brand name or any other

cigarette or smokeless tobacco brand

identifying characteristic. All athletic,

musical, artistic, or other social or

cultural events would be permitted to be

sponsored in the name of the tobacco

company as long as the other conditions

in § 897.34(c) are met.

In addition, the tobacco industry

accounts for only 4 percent of all

sponsored events. This rule does not

prohibit the other 96 percent of
44536 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

250Quoting Ardy Arani, a director of the Atlantabased Championship Group, a sports marketing

agency in Jacobsen, G., ‘‘Mass Merchandisers Jostle

With Tobacco Companies to Cash in on the Auto

Racing Craze,’’ The New York Times, p. D71,

February 21, 1996.

nontobacco forms of sponsorship (60 FR

41314 at 41337). Thus, even if the

restriction on sponsorship of tobacco

products resulted in a decrease of

tobacco company sponsored events, the

events will still exist through the

support of the nontobacco forms of

sponsorship. The agency agrees with the

comment that ‘‘auto racing would not

fail if tobacco products are not allowed

to be event sponsors.’’ Thus, restricting

tobacco product brand name

sponsorship clearly will not ‘‘ban all

sponsorship events.’’

Finally, recent news stories quote

persons knowledgeable about car racing

saying racing would survive without

tobacco sponsorship, for example, one

quote: ‘‘If this happened 10 years ago, it

would have been crushing to the racing

industry. Now people are lining up to

take Winston’s place.’’ 250

In conclusion, FDA finds that

sponsorship of events (such as car races,

tennis matches, and rodeos) and entries

in those events (race cars and drivers,

tennis players) can have a profound

effect on young people’s attitude about

and use of tobacco by providing

multiple and prolonged exposure to the

brand name and logo in a variety of

media, thereby creating an impression

of prevalence and normalcy about

tobacco use (see section VI.D.3.c. of this

document), by associating the product

with varied positive events, images, and

heroes, and by creating attractive and

exciting images that can serve as a

‘‘badge’’ or an identification (see section

VI.D.4.a. of this document). The

industry itself recognizes the concern

that sports figures as endorsers can

create problems of hero worship and

emulation; its Code promises not to

employ sports or celebrity testimonials

or those of others ‘‘who would have

special appeal to persons under 21 years

of age.’’ Sponsorship creates no less of

an association than an endorsement.

Moreover, FDA finds that restrictions on

sponsorship identified with a tobacco

brand are necessary to reduce tobacco

use by young people. These findings are

based on studies and recent reports that

the number of young people who attend

these events or see them on television

is significant and growing.

Studies—Four different studies, one

each by Slade, Aitken, Ledworth, and

Hock (60 FR 41314 at 41337 and 41338)

and described further in this section,

provide evidence that sponsored events

of all types are attended, and seen on

television, by a substantial number of

young people, and that the effect of the

exposure is to increase brand awareness

and association between the brand and

the event. This attitude contributes to a

sense of friendly familiarity about

tobacco use and a perception that

tobacco use is acceptable and common

place.

Surveys on attendance and TV

audience, described further in this

section, establish that attendance by

children at events and viewership by

children and adolescents on television

are significant. The preamble to the

proposed rule used the number 64

million as an annual approximation of

underage viewers of motorsport events

in addition to those at the event (60 FR

41314 at 41337). In addition, newspaper

articles detailed in this section describe

the increasing importance of young

people to sponsored events as a growing

part of the live audience. Moreover,

although less data is available on other

types of sponsored events, comments

received by the agency in response to

the proposed rule, and described further

in this section, state that many children

and teenagers watch tennis, motorcycle

and powerboat racing, and rodeos on

television and attend and watch on

television rock concerts and country

music festivals.

Finally, the agency has tailored the

restriction narrowly. The agency

recognizes the importance of corporate

sponsorship in engendering goodwill for

a company with its customers and in

providing support to sports, the arts,

and music. Therefore, the agency has

crafted the regulation to not interfere

with this aspect of sponsorship but has

merely denied the companies the right

to use brand and product identification,

which are most appealing to young

people.

9. Proposed § 897.36—False or

Misleading Statements

The agency proposed in § 897.36 that

labeling or advertising of any cigarette

or smokeless tobacco product:

is false or misleading if the labeling or

advertising contains any express or implied

false, deceptive, or misleading statement,

omits important information, lacks fair

balance, or lacks substantial evidence to

support any claims made of the product.

This provision would have explicitly

implemented sections 201(n), 501(a) (21

U.S.C. 351), and 502(q)(1) of the act.

Section 897.36 was meant to be

illustrative rather than exhaustive.

The agency stated in the 1995

proposed rule that its regulations

concerning prescription drug

advertising provide great specificity as

to what constitutes violative advertising

(part 202 (21 CFR part 202)) but that this

same degree of specificity is not

practical in the case of a widely used

consumer product like tobacco because

the advertising for it contains an

unlimited variety of claims that make

categorization difficult. Therefore, the

agency tentatively concluded that it

would provide general guidance for the

types of advertising claims that will be

considered violative, rather than to

attempt to identify every possible type

of false and misleading claim (60 FR

41314 at 41339 and 41340).

(96) Several comments objected to

various portions of the definition, for

example the phrases ‘‘omits important

information’’ and ‘‘lacks fair balance.’’

They asserted that the phrases expand

the definition of what constitutes

‘‘misleading’’ advertising, are subjective,

and make compliance burdensome

because the phrases are not defined.

Moreover, the comment complained

that neither ‘‘fair balance’’ nor

‘‘substantial evidence’’ were

appropriately included in the definition

of false and misleading.

Additionally, the comments argued

that laws regarding false and misleading

advertising are well established, and

that false and misleading advertising is

subject to the jurisdiction of the FTC.

The comment stated that it was,

therefore, inappropriate for FDA to

establish vague and overreaching

parameters of ‘‘unfair and deceptive’’

advertising.

One comment stated that what

‘‘information’’ is important is

undefined. It stated that there is always

information that someone may consider

‘‘important’’ (e.g., price, availability,

freshness, taste research), and that it

would be unreasonable to allow FDA, or

any regulatory organization or entity, to

review tobacco advertising in the

capacity of determining information that

should have been included. This

comment argued that the legal

precedent defining deceptive

advertising is already established and

should not be changed by FDA.

One comment stated that by

introducing the word ‘‘important’’ into

the proposed standard for misbranding

of tobacco, FDA has impermissibly gone

beyond the ‘‘materiality’’ test for

misbranding set forth by Congress in

section 201(n) of the act, acted

arbitrarily and capriciously, and

proposed a new standard that is

unconstitutionally vague.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44537

One comment stated that FDA also

proposes that labeling or advertising

would be false or misleading if it ‘‘lacks

fair balance.’’ It stated that FDA has

obviously borrowed this concept from

the prescription drug regulations

(§ 202.1(e)(5)(ii)), but it is inapplicable

to tobacco. The comment stated that,

first, the ‘‘fair balance’’ requirement for

drugs is based not on the section 502

‘‘false or misleading’’ prohibition but

rather on section 502(n)(3), which

requires that prescription drug

advertising contain a ‘‘true statement’’

relating to ‘‘side effects,

contraindications, and effectiveness.’’

The comment stated that, second, as

the drug regulation makes clear, the

‘‘fair balance’’ required is between

information about a product’s

therapeutic benefits and information

about its adverse effects when used. It

stated that because no therapeutic

claims are made for tobacco, the ‘‘fair

balance’’ concept is simply

inapplicable.

One comment, however, stated that,

under this regulation, advertising for

cigarettes and smokeless tobacco will be

considered false or misleading if it

‘‘omits important information.’’ It stated

that this is a reasonable rule, and that

it should be part of the final rule, but

it is one that may be difficult for

manufacturers to comply with absent

guidance from FDA.

FDA has been persuaded that the

proposed general guidance in proposed

§ 897.36 on what might constitute false

and misleading advertising has created

unintended confusion. Under section

502(a) and (q)(1) of the act, any

restricted device is misbranded if its

advertising or labeling is false or

misleading in any particular. Section

201(n) of the act states that:

If an article is alleged to be misbranded

because the labeling or advertising is

misleading, then in determining whether the

labeling or advertising is misleading there

shall be taken into account (among other

things) not only representations made or

suggested by statement, word, design, device,

or any combination thereof, but also the

extent to which the labeling or advertising

fails to reveal facts material in the light of

such representations or material with respect

to consequences which may result from the

use of the article to which the labeling or

advertising relates under the conditions of

use prescribed in the labeling or advertising

thereof or under such conditions of use as are

customary or usual.

After review of the applicable

provisions of the act concerning labeling

and advertising, the agency has

determined that those provisions are

adequate and that the definition in

proposed § 897.36 is unnecessary.

Because cigarette and smokeless tobacco

advertising remains subject to regulatory

action if it is false or misleading in any

particular, FDA has decided to delete

§ 897.36 from the final rule.

(97) Some comments supporting

proposed § 897.36 recommended that

specific restrictions be placed on

advertising that emphasizes tar and

nicotine levels and implies a weight

benefit to tobacco products.

Other comments suggested requiring

the disclosure of ingredients. These

comments argued that consumers do not

know the ingredients of these products

or the functions that these ingredients

serve. It added that consumers do not

know the doses of nicotine and other

critical materials that they ingest with

these products. The comment stated that

terms such as ‘‘light’’ and ‘‘low tar’’

have little meaning in view of the

tendency of consumers to smoke

cigarettes differently depending upon

the way nicotine delivery has been

engineered. A comment from a tobacco

company opposed disclosure of

ingredients fearing loss of valuable trade

secret information.

The agency has decided that these

comments fall outside the scope of this

rulemaking. The agency did not propose

labeling or advertising restrictions

concerning the levels of tar, nicotine, or

other components of cigarettes or

smokeless tobacco, or perceived benefits

of tobacco products, only that labeling

or advertising not be false or misleading.

It did not receive comments sufficient to

warrant restrictions addressing these

issues. Consequently, advertising and

labeling claims will be evaluated on a

case by case basis for compliance with

sections 201(n), 502(a), (q), and (r),

510(j) (21 U.S.C. 360(j)), and 520(e) of

the act. Therefore, FDA is not modifying

part 897 to address these concerns at

this time.

F. Additional First Amendment Issues

Finally, several general issues were

raised by commenters concerning the

nature of the protection afforded

commercial speech by the First

Amendment.

(98) One comment argued that the

original understanding of the First

Amendment was that truthful

commercial messages are fully

protected.

In response to this comment, FDA

points out that the Supreme Court took

the position that the First Amendment

does not protect commercial speech (see

Valentine v. Chrestensen, 316 U.S. 52

(1942)), until it repudiated that position

in Virginia State Bd. of Pharmacy v.

Virginia Citizens Consumer Council,

Inc., 425 U.S. 748 (1976). Since 1976,

the Court has decided numerous cases,

most recently Rubin v. Coors, Florida

Bar v. Went For It, Inc., and 44

Liquormart Inc. v. Rhode Island, that

address the level of protection afforded

commercial speech by the First

Amendment. FDA has followed that

case law in its development of this final

rule. Therefore, FDA has developed this

final rule in accordance with the

applicable law.

(99) A comment filed by an

association of advertising agencies

warned that the proposed regulations

‘‘establish a dangerous precedent that

could open the floodgates to dramatic

government intrusion into the process of

communication * * * and [are] a

dangerous blueprint for government

censorship of other kinds of

advertising.’’ The comment expressed

concern that regulations of advertising

for tobacco products will permit, in fact

will encourage, the future regulation of

other ‘‘controversial products.’’

Tobacco products are not

‘‘controversial’’ products as these

comments contend. They represent the

single most preventable cause of death

in the United States (1989 Report to the

Surgeon General at p. i). Not only is the

harm caused by tobacco use real (the

comment refers to ‘‘imagined harm’’),

but the product that produces the

disease and death is addictive.

Moreover, tobacco use begins among

young people, who may be able to

describe the risks of tobacco use, but

who do not personalize that risk to

themselves. These young people begin

to use tobacco before they can

adequately weigh the consequences of

use and thus, become addicted and

subject to the real long term harms

caused by tobacco use. That is why all

50 States and the District of Columbia

outlaw the sale of tobacco products to

those under 18 years of age. Finally, as

discussed in section VI.D. of this

document, advertising does affect young

people’s decision to use tobacco

products in a significant and material

way. This is not an ‘‘assertion’’ made

out of whole cloth but a reality. Thus,

regulation of tobacco advertising may

set a precedent for future government

action, but it sets a high threshold for

such regulation.

The Supreme Court has granted ample

protection to commercial speech, but

the Court has also stressed, nothing in

the First Amendment prevents the

Government from ensuring ‘‘that the

stream of commercial information flows

cleanly as well as freely.’’ (See Edenfield
44538 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

251Simonich, W. L., ‘‘Government Antismoking

Policies,’’ Peter Lang Publishing, Inc., 1991.

252Simonich modeled the effect of the FD as: %

∆ Consumption = -0.063(Xt + .46416Xt-1 +

.464162Xt-2 + .464163Xt-3) where Xt represents

antismoking advertising expenditures in quarter t

and -0.063 is the coefficient for the FD stock

variable obtained from the analysis (Id., p. 153).

FDA used Simonich’s model and his ‘‘Estimated

Fairness Doctrine Real Advertising Expenditure per

Capita 14+’’ data series (Id., pp. 250, and 259-260)

to calculate the quarterly percent reduction in per

capita cigarette consumption from March 1967

through April 1970. The average percent reduction

in consumption for this period was 4.5 percent.

v. Fane, 506 U.S. 761, 768.) One

comment noted: ‘‘This concern takes on

special force where, as here, crucial

public health concerns are implicated,

and where a particularly powerful seller

* * * has used its virtually limitless

resources to saturate the marketplace

with its promotional messages.’’

The Government’s interest in

protecting the health of children and

teenagers through measures designed to

prevent them from beginning a lifetime

of addiction and disease is of the

highest order and is sufficient

justification for the restrictions finalized

here.

VII. Education Campaign

In the Federal Register of August 11,

1995 (60 FR 41314), the Food and Drug

Administration (FDA) proposed to

require that tobacco companies establish

a national education program, using

television as its predominant medium,

to discourage children and adolescents

from using cigarettes and smokeless

tobacco (the 1995 proposed rule). The

agency received more than 1,500

comments concerning the program,

nearly three-quarters of which favored

going forward with it. The comments

raised many issues concerning the

program as proposed, including whether

the proposed funding would be either

equitable or sufficient, whether

industry’s level of involvement would

jeopardize its effectiveness, whether

current industry educational programs

are sufficient, about the design of the

educational programs, the

manufacturer’s obligations to carry them

out, the agency’s statutory authority to

require an education campaign under

section 520(e) of the Federal Food, Drug,

and Cosmetic Act (the act)(21 U.S.C.

360j(e)), and the constitutionality of the

campaign as proposed.

The agency has reexamined its

statutory authority for requiring an

education campaign and believes that

section 518(a) of the act (21 U.S.C.

360h(a)) is more appropriate and

practicable than the restricted device

authority in section 520(e) of the act

under which FDA had proposed the

education campaign. Under section

518(a) of the act, if the agency finds that

a device presents an unreasonable risk

of substantial harm to the public health,

that notification is necessary to

eliminate this risk, and that no more

practicable means is available under the

act, then, after consultation with device

manufacturers, the agency may issue a

notification order that requires them to

notify the appropriate persons in a form

appropriate to eliminate the risk. The

agency has used section 518(a)’s

separate, affirmative grant of statutory

authority on a number of occasions to

compel medical device manufacturers to

provide notice to users or potential

users of their products about risks

presented by their use or misuse.

The agency believes that, with respect

to cigarettes and smokeless tobacco, it

could make the findings required by

section 518(a) of the act and so could

order tobacco manufacturers to notify

young people about the substantial

health risks that tobacco products

present in a form appropriate to

eliminate the risk. That is, the agency

believes that it could find that cigarettes

and smokeless tobacco present an

unreasonable risk of substantial harm to

the public health, that notification is

necessary to eliminate this risk, and that

no more practicable means is available

under the act.

The agency has concluded, therefore,

that it will not require an education

campaign as part of this tobacco rule.

The agency intends, however, to send

letters that indicate that the agency

believes that it could make the statutory

findings necessary to issue notification

orders under section 518(a) of the act to

cigarette and smokeless tobacco

manufacturers. As section 518(a) of the

act requires, these consultation letters

will offer tobacco companies an

opportunity to consult with the agency

about the necessity for, and specific

requirements of, any notification orders

before the agency issues any orders to

the companies.

Because the education campaign will

not be a requirement of this final rule,

the agency need not respond to the

many comments that it received

concerning the proposed campaign.

Nevertheless, because the agency

intends to pursue implementation of an

education campaign using the

notification provision of section 518(a)

of the act, the agency will respond

briefly to comments that questioned the

effectiveness and design of the proposed

education campaign.

(1) The agency received comments

questioning the effectiveness of other

educational campaigns and the agency’s

use of these campaigns to support the

position that a national educational

campaign would be effective in helping

reduce tobacco use among young

people. Comments from the tobacco

industry argued that studies cited by

FDA are scientifically flawed and

therefore that the agency overstated the

likely effects of the provision. One

industry comment argued that FDA

misinterpreted a study by Simonich 251

(the Simonich study), cited in the

preamble to the 1995 proposed rule to

demonstrate that the media campaign

conducted under the Fairness Doctrine

(FD) reduced cigarette consumption by

6.2 percent (60 FR 41314 at 41327). The

comment concluded that the data from

the Simonich study indicated that the

overall effect of the Fairness Doctrine

was merely a 0.4 percent decline in per

capita consumption.

FDA disagrees with the industry’s

interpretation of the Simonich study.

The agency believes that the Simonich

study results, correctly interpreted,

indicate that the FD education campaign

reduced per capita cigarette

consumption an average of 4.5

percent, 252 that is, a 4.5 percent

reduction in consumption over the

period of time over which the FD was

in effect for entire quarters. Thus, the

FD education campaign did play an

important role in reducing per capita

cigarette consumption.

(2) Comments also questioned the

effectiveness of education programs

cited by the agency. The tobacco

industry’s comment argued that

California’s $26 million multi-year

media campaign actually confirmed that

televised education campaigns do not

influence youth smoking. Further, the

comment stated that it was not possible

to say what impact, if any, a national

media campaign’s introduction or

termination had on consumption in

Greece because Greece’s educational

television and radio advertising

campaign was only one element of an

overall education campaign.

With regard to the California media

campaign, FDA notes that this campaign

was directed to adults, not young

people. Moreover, the media campaign

was countered by increased per capita

spending by the tobacco industry in the

types of imagery-based advertising that

influences children and adolescents.

Therefore, the agency would have

expected the media campaign to have

had a greater negative impact on tobacco

use by adults than by children and
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44539

adolescents. FDA continues to believe

that California’s efforts indicate that

education campaigns, over time, can

counter and reduce the impact of

prosmoking efforts.

Further, while the comment correctly

notes that Greece’s national effort to

reduce smoking included posters,

booklets, and similar educational

materials distributed through schools,

health centers, and other channels, the

primary and most significant element of

its program consisted of antismoking

messages broadcast on television and

radio. FDA continues to believe the

Greek experience indicates, as stated in

the preamble to the 1995 proposed rule,

that intensive education and media

messages about the health risks

associated with tobacco use can be

effective.

(3) Many comments from the tobacco

and media industries and from adult

smokers argued that an education

campaign is unnecessary because

cigarette manufacturers, individually

and through the Tobacco Institute, have

undertaken voluntarily a variety of

educational programs aimed at

discouraging underage smoking, and

because antismoking lessons are taught

in schools.

By contrast, other comments

questioned industry’s commitment to

reduce underage use of tobacco

products. For example, several

comments emphasized that a voluntary

program run by industry in the mid

1980’s failed to acknowledge that

tobacco is addictive or causes disease.

FDA agrees with comments that the

tobacco industry has failed to include in

its voluntary youth educational

programs important information, such

as the addictive nature of tobacco and

the association between tobacco use and

disease. FDA further agrees that this

lack of complete information about

tobacco products makes it necessary to

require that messages about the risks of

tobacco use be directed to children and

adolescents. The recently observed

decline in the proportion of youth who

see smoking as dangerous, despite the

widespread dissemination through

schools of information about the health

hazards associated with tobacco use,

supports the need for an immediate

response to this problem. Moreover,

recent evidence suggests that schoolbased education programs most

effectively reduce underage smoking

when used in conjunction with media

messages.

VIII. Additional Regulatory

Requirements

Subpart E of part 897 in the Food and

Drug Administration’s (FDA’s) August

11, 1995, proposed rule (60 FR 41314)

would have consisted of three

provisions: § 897.40 would have

required manufacturers to submit

certain reports and would have required

manufacturers, distributors, and

retailers to make records available to

FDA upon inspection; § 897.42 would

have instructed manufacturers,

distributors, and retailers to comply

with any more stringent State or local

requirements relating to the sale,

distribution, labeling, advertising, or use

of cigarettes and smokeless tobacco and

would have notified State and local

governments how to request an advisory

opinion concerning the preemptive

effect of part 897 on any particular State

or local requirement; and § 897.44

would have required the agency to take

additional regulatory measures if, 7

years after the date of publication of the

final rule, the percentage of people

under age 18 who smoke cigarettes had

not decreased by 50 percent since 1994

and/or the percentage of males under 18

who use smokeless tobacco had not

decreased by 50 percent since 1994.

Proposed § 897.40 Records and

Reports, would have implemented

sections 510(j) and 704(a) of the act (21

U.S.C. 360(j) and 374(a)) with respect to

cigarettes and smokeless tobacco.

Section 510(j) of the act requires the

submission of labels, labeling, and a

representative sampling of advertising

to FDA, and section 704(a) of the act

gives the agency inspection authority,

which also includes the authority to

examine records, files, papers,

processes, controls, and facilities:

bearing on whether * * * restricted

devices which are adulterated or misbranded

within the meaning of this Act, or which may

not be manufactured, introduced into

interstate commerce, or sold, or offered for

sale by reason of any provision of this Act,

have been or are being manufactured,

processed, packed, transported, or held in

any such place, or otherwise bearing on

violation of this Act.

Proposed § 897.42 Preemption of State

and Local Requirements and Requests

for Advisory Opinions, was intended to

reflect the preemption provision in

section 521(a) of the act (21 U.S.C.

360k(a)); that section states, in relevant

part, that:

no State or political subdivision of a State

may establish or continue in effect with

respect to a device intended for human use

any requirement--(1) which is different from,

or in addition to, any requirement applicable

under this Act to the device, and (2) which

relates to the safety or effectiveness of the

device or to any other matter included in a

requirement applicable to the device under

this Act.

Proposed § 897.42 was also intended to

recognize that many States and local

governments have enacted innovative

and effective laws and regulations

pertaining to cigarettes and smokeless

tobacco and to encourage further

activity in these areas (60 FR 41314 at

41340).

In proposed § 897.44 Additional

Regulatory Measures, FDA recognized

that many different factors influence a

young person’s decision to start

smoking or to use smokeless tobacco

and that the affected industries have

historically shown their ability to find

new ways of promoting their products

whenever restrictions were imposed (60

FR 41314 at 41341). Consequently, to

guard against the possibility that its

comprehensive regulations might be

circumvented and to give firms an

incentive to take appropriate actions to

discourage cigarette and smokeless

tobacco sales to people under 18, the

agency proposed to require additional

regulatory measures if the outcomebased objectives specified in proposed

§ 897.44 were not met.

In response to comments and upon

further examination of existing statutory

and regulatory requirements, the agency

has deleted §§ 897.40, 897.42, and

897.44 from the final rule.

§ 897.40—Records and Reports

Proposed § 897.40(a) would have

required each manufacturer to submit,

on an annual basis, copies of all labels

(or a representative sample of labels if

the labels would be similar for multiple

products), copies of all labeling, and a

representative sample of advertising.

Proposed § 897.40(b) would have

provided an address for such materials.

(1) The agency received a number of

comments from distributors,

wholesalers, and retailers stating that it

would be too costly and timeconsuming, and thus too burdensome

for small businesses to submit the

information required by proposed

§ 897.40(a) and further, that the

information collected would not be

useful in prohibiting young people from

using tobacco products.

These comments misread proposed

§ 897.40(a) by interpreting the section to

apply to distributors of tobacco

products. By its terms, this provision

only applied to manufacturers of

cigarettes and smokeless tobacco. FDA

agrees with the comments that it is

unnecessary for the agency to receive

labels, labeling, and a representative
44540 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

sampling of advertising for cigarettes

and smokeless tobacco handled by

distributors. In order to clarify this point

further, FDA has deleted proposed

§ 897.40(a) and (b), and is explicitly

exempting distributors of cigarettes and

smokeless tobacco from the registration

requirement in section 510 of the act.

Exempting distributors from the

registration requirement results in their

exemption from the record submission

requirements in section 510(j) of the act.

The agency has amended the existing

device registration and listing

regulations in part 807 by adding a new

provision, at § 807.65(j), to reflect this

exemption.

FDA is authorized, under section

510(g)(4) of the act, to exempt persons

from the requirement of registering

under section 510 of the act. The agency

agrees with the comments discussed

above that stated that reporting by

distributors would be too burdensome

and would not result in any useful

information. FDA believes that it will

receive all the information it needs from

manufacturers, who are required to list

information with FDA under section

510 of the act. Further, there was

virtually no public comment supporting

a registration and listing requirement for

distributors. Based on these

considerations, FDA finds that it is

appropriate to exempt distributors of

cigarettes and smokeless tobacco, as

defined in § 897.3(c), from the

registration requirement in section 510

of the act as originally proposed because

compliance with section 510 of the act

by distributors ‘‘is not necessary for the

protection of the public health.’’

A comment from the cigarette

industry argued that § 897.40(a) was

inconsistent with the recordkeeping

requirements in part 807 (21 CFR part

807) (the device registration and listing

regulations) by requiring annual

submissions. A comment from a public

health organization supported proposed

§ 897.40, and stated that the reporting

requirements were the same as those

faced by other manufacturers of drug

delivery devices.

Cigarette and smokeless tobacco

manufacturers are required to register

and list under section 510 of the act.

Upon consideration of the industry

comment, the agency believes it is more

appropriate for manufacturers to comply

with the existing device registration and

listing requirements in part 807 than to

create new requirements in this

regulation. Therefore, as stated earlier,

FDA has deleted proposed § 897.40(a)

and (b) from the rule.

(2) A comment from the country’s

largest association of health

professionals supported proposed

§ 897.40, but suggested that FDA expand

the reporting requirements to have each

manufacturer monitor brand-specific

uptake by children and adolescents. The

comment suggested that these data

could be used to supplement

information from the Monitoring the

Future project and other surveys that do

not currently contain brand-specific

data. The comment also stated that cigar

and loose-leaf tobacco manufacturers

should be required to monitor and

report on use of their products by

people under 18.

The agency declines to accept the

comment’s suggestions. FDA believes it

is not necessary to obtain such data at

this time. Rather, it is more appropriate

to allow the provisions of the final rule

to become effective and to monitor the

effectiveness of the program before

considering the addition of new

requirements. FDA also notes that it is

not asserting jurisdiction over cigars;

cigar manufacturers are not subject to

the requirements of this rule.

Proposed § 897.40(c) would have

required manufacturers, distributors,

and retailers to make records and other

information available to FDA inspectors

for purposes of inspection, review,

copying, or any other use related to the

enforcement of the act.

(3) An industry comment argued that

proposed § 897.40(c)—which required

manufacturers, distributors, and

retailers to ‘‘make all records and other

information collected under this part

and all records and other information

related to the events and persons

identified in such records’’ available to

FDA officials—so exceeds FDA’s

authority that it fails the test set out in

United States v. Morton Salt Co., 338

U.S. 632, 652 (1950), and, therefore,

violates the Fourth and Fifth

Amendments to the Constitution. The

comment argued that § 897.40(c) may

require the release, for example, of

marketing strategies, sales figures,

profits, personnel data, and proprietary

information.

FDA disagrees with this comment, but

nevertheless, the agency has deleted

§ 897.40(c). Part 897 does not add

records requirements beyond those

applicable to devices generally under

existing regulations, e.g., part 803 (21

CFR part 803) (medical device

reporting), part 804 (21 CFR part 804)

(medical device distributor reporting),

part 807 (registration and listing), and

part 820 (21 CFR part 820) (good

manufacturing practice). Section

897.40(c), as proposed, is therefore

unnecessary, since FDA retains the

records, reports, and inspection

authority with respect to cigarettes and

smokeless tobacco that it has with

respect to other restricted devices. This

authority is found, for example, in

sections 510, 519, 702, 703, and 704 of

the act (21 U.S.C. 360, 360i, 372, 373,

and 374). In particular, section 704 of

the act explicitly authorizes the agency

to inspect records regarding restricted

devices, including records and reports

(and the related research) required

under section 519 of the act, shipment

data, and data as to the qualifications of

technical and professional personnel

performing functions subject to the act,

except that such inspections may not

extend to financial, sales, pricing, or

other personnel and research data.

Warrantless inspections of drug and

device manufacturers authorized by

section 704 of the act are ‘‘reasonable’’

and therefore consistent with the Fourth

Amendment, in part because section

704 delineates the scope of inspections

with respect to prescription drugs and

restricted devices. (See United States v.

Jamieson-McKames Pharmaceuticals,

651 F.2d 532, 538 and n.9 (8th Cir.),

cert. denied, 455 U.S. 1016 (1981).)

In particular, section 704 of the act

meets the test established by the

Supreme Court, and cited in the

comment, that is applied to scrutinize

administrative subpoenas under the

Fourth Amendment’s proscription of

unreasonable searches and seizures and

the Fifth Amendment’s Due Process

Clause: ‘‘the inquiry is within the

authority of the agency, the demand is

not too indefinite and the information

sought is reasonably relevant’’ (Morton

Salt, 338 U.S. at 652 (regarding order

requiring report about compliance with

earlier agency order); see also EEOC v.

Shell Oil Co., 466 U.S. 54, 72 n.26

(1984) (citing Morton Salt regarding

administrative subpeona); Reich v.

Montana Sulphur and Chem. Co., 32

F.3d 440, 448 (9th Cir. 1994) (same),

cert. denied, 115 S.Ct 1355 (1995);

Resolution Trust Corp. v. Walde, 18

F.3d 943, 946 (D.C. Cir. 1994) (same)).

The comment stressed that § 897.40(c)

as proposed failed to satisfy the first

part of the Morton Salt test because the

act does not grant FDA authority to

regulate tobacco products and because

Congress has repeatedly refused to give

FDA such authority. As discussed in

detail in the 1996 Jurisdictional

Determination annexed hereto, FDA is

extending jurisdiction over tobacco

products by a lawful application of the

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,

519, 702, 703, and, in particular, section

704 of the act, clearly specify the

agency’s authority to inspect regarding

restricted devices, including records

and reports required pursuant to section

519 of the act. An inspection of records

from manufacturers, distributors, or

retailers regarding tobacco products—

which are restricted devices and which

pursuant to this rule are subject to the

reporting requirements of parts 803 and

804—is therefore ‘‘within the authority

of the agency’’ as required by the

Supreme Court in Morton Salt (338 U.S.

at 652). Moreover, because sections 704

and 519 of the act define the scope of

such requests, by their terms, such

requests would meet the second and

third parts of the Morton Salt test, since

they would not be ‘‘too indefinite and

the information sought [would be]

reasonably relevant’’ to enforcement of

the provisions of part 897 (Id.).

Even in the absence of proposed

§ 897.40(c), manufacturers, distributors,

and retailers of cigarettes and smokeless

tobacco are subject to the same records

access and inspection requirements as

are any manufacturers, distributors, and

retailers of restricted medical devices.

As discussed in this section, these

requirements are fully consistent with

the Fourth and Fifth Amendments.

(4) Several comments from

distributors and retailers asserted that

the recordkeeping requirements in

proposed § 897.40(c) would be

expensive and especially hard on small

businesses. A few comments also

claimed that proposed § 897.40(c)

would not affect sales to children and

adolescents, but would instead result in

lost business as distributors or retailers

would have to take the time to prepare

and to maintain records. A small

number of comments simply opposed

proposed § 897.40(c) without providing

any reason or said it was ‘‘offensive,’’

‘‘intrusive,’’ or would not produce any

useful information during an inspection.

As stated previously in this section,

FDA has revised the rule to delete

§ 897.40(c) entirely. The agency believes

that the existing reporting requirements

in other regulations (such as part 803 for

medical device reporting (as amended

by this rule), part 804 for medical device

distributor reporting (as amended by

this rule), part 807 for registration and

listing (as amended, to exclude

distributors of cigarettes and smokeless

tobacco), and part 820 for good

manufacturing practices) make

proposed § 897.40(c) unnecessary. The

agency has also amended the rule to

exempt distributors of cigarettes and

smokeless tobacco from part 807. Thus,

distributors are only expected to comply

with the medical device distributor

reporting requirements in part 804.

Retailers have no recordkeeping or

reporting requirements under part 897.

Notwithstanding these changes to the

rule, FDA believes that the comments

misunderstand the purpose of

recordkeeping and reporting. The

records and reports that were described

in the 1995 proposed rule were never

intended to have a direct role in

reducing illegal sales to children and

adolescents. Neither were they intended

to divert distributor or retailer staff to

ministerial functions or to intrude into

business activities. To the contrary,

records and reports can help firms and

FDA ensure compliance with the

regulations. For manufacturers,

distributors, and retailers, records and

reports demonstrate whether they have

complied with a particular requirement.

Records are especially valuable in this

respect because FDA’s enforcement

strategy relies heavily on site

inspections to determine whether a

party has complied with a statutory or

regulatory requirement, and records can

show or help an agency inspector

determine whether a firm has a good

compliance history. Firms that have

good compliance histories usually are

inspected less frequently than others,

whereas firms with poor compliance

histories may be inspected more

frequently or more rigorously.

Inspections have other important

benefits for firms. Inspections can reveal

areas where firms can improve their

operations. Inspections also apply to

firms equally, regardless of their size, so

firms that manufacture, distribute, or

sell the same or similar products meet

the same conditions or requirements.

Furthermore, inspections, and FDA

enforcement generally, give consumers

greater assurance in the products they

purchase because those products are

held to the same standards or

requirements.

For FDA, records and reports can

provide information on current industry

practices and trends, help identify

potential problems in a regulatory

program or in a firm’s or industry’s

practice, and even conserve agency

resources by letting the agency

concentrate its inspection efforts on

firms with poor compliance histories.

Thus, for these reasons, FDA

disagrees with those comments

suggesting that recordkeeping and

reporting requirements or FDA

inspections will have no useful purpose.

§ 897.42—Preemption of State and Local

Requirements and Requests for

Advisory Opinions

(5) FDA received several comments

that opposed proposed § 897.42,

claiming that it was inconsistent with

the process for requesting exemptions

from the preemption requirement in

section 521 of the act. The agency also

received some comments supporting

proposed § 897.42 precisely because it

would have recognized and would have

preserved more stringent State and local

requirements.

After careful consideration and closer

review of the act, the agency has deleted

proposed § 897.42 from the rule. This

issue is addressed in greater detail in

section X. of this document.

Under § 897.44 of the 1995 proposed

rule, FDA would have established goals

of a 50-percent reduction in cigarette

use by individuals under the age of 18

years; a 50-percent reduction in

smokeless tobacco use by males under

the age of 18 years; and no increase in

smokeless tobacco use by females under

the age of 18 years. The agency stated

it would take additional regulatory

measures if these goals were not met 7

years after the publication date of the

final rule.

FDA derived its outcome-based goals

from the ‘‘Healthy People 2000’’

objectives. ‘‘Healthy People 2000’’ sets

national health promotion and disease

prevention objectives for Americans.

The report was a joint effort by the U.S.

Public Health Service (PHS), the

Institute of Medicine (IOM) at the

National Academy of Sciences (NAS),

almost 300 national membership

organizations such as the American

Medical Association (AMA), the

American Academy of Pediatrics (AAP),

and the Blue Cross and Blue Shield

Association, and all State health

departments. ‘‘Healthy People 2000’’

established a basic goal to reduce by

half the initiation of cigarette smoking

by children and youth by the year 2000.

The agency proposed measuring

progress toward the stated goals by use

of an objective, scientifically valid, and

generally accepted survey, such as the

Monitoring the Future Project (MTFP).

MTFP, funded by the National Institute

on Drug Abuse (NIDA) and

administered by the Institute for Social

Research at the University of Michigan,

has collected data on daily smoking by

12th graders every year since 1976 and

on smokeless tobacco use by 12th

graders for the years 1986 to 1989 and

1992 to 1995.

The agency did not include any

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

would propose specific additional

measures when it publishes a final rule

and invited public comment on what

additional requirements should be

considered.

The agency received a number of

comments arguing that the agency

should wait until it knows specifically

what progress has been made toward the

goals before proposing additional

regulatory measures. This approach

would allow the agency to identify

specific barriers to achieving the goals

and to tailor any additional

requirements to these barriers. Other

comments argued that FDA must

provide the public an opportunity to

comment on specific additional

regulatory measures before they would

take effect. FDA has decided that there

is merit to these comments. At this time,

therefore, the agency is not proposing

additional regulatory measures beyond

the restrictions in this regulation and

the requirements under section 518 of

the Federal Food, Drug, and Cosmetic

Act (the act) (21 U.S.C. 360h). The

agency instead plans to monitor

industry compliance with the agency’s

requirements as well as the progress

made toward meeting the stated goals of

reducing the use of tobacco products by

individuals under the age of 18 within

7 years. In the event that additional

measures are necessary to achieve the

goals, the agency retains the authority to

propose and issue additional regulatory

requirements in a future rulemaking

proceeding.

FDA received approximately 60

individual comments related to this

provision, about evenly divided in

support and opposition. Opposition

came primarily from the tobacco

manufacturing and advertising

industries and from tobacco retailers.

Comments from several State legislators

also opposed additional measures, as

did one from a State department of

agriculture. Some comments maintained

the provision was invalid and

unconstitutional; others objected that

‘‘when regulations fail, the answer is not

more regulations.’’

Support for the measure came from

national health organizations, State

health departments, and individuals

who identified themselves as parents,

public health professionals, educators,

and former smokers. Supporters stressed

the importance of effective measures to

improve the health of current and future

generations.

(6) One comment opposing the

proposed provision contended that

imposing additional regulatory

measures at the time that the final rule

is published would be unreasonable

because it would not permit a flexible

response to future circumstances. It

argued, for example, that the same

additional regulatory measures

‘‘apparently would be triggered at the

specified date regardless of whether the

reduction in the next 7 years is 49.8

percent or 2 percent.’’

Several comments in support of the

provision also advocated greater

flexibility, but for different reasons.

Because of the serious adverse health

effects linked to the use of tobacco

products, these comments urged the

agency not to wait 7 years to evaluate

progress and institute corrective

measures. Instead, they recommended

interim or ongoing review of

compliance with the regulations and

progress toward achieving the goals.

FDA agrees it is useful to put in place

a system that will allow flexibility in

responding to future circumstances.

Therefore, the agency has decided to

review on an ongoing basis the

effectiveness of specific provisions. It

will rely on data from the MTFP and

other surveys recognized as using sound

methodology to help measure

compliance with the provisions, detect

loopholes, and evaluate progress in

achieving the goals. This will permit

FDA to identify problem areas in a

timely manner and seek public

comment on whether additional

measures should be considered.

(7) Some comments objected to any

further restrictions. Others argued

specifically against further advertising

restrictions, saying it is illogical to

impose such additional measures

without first considering and attacking

other causes for continued smoking

among youth. A few comments were

concerned that the proposed provision

would inevitably result in a complete

ban of all tobacco products, with a few

of those charging that this was FDA’s

true intent.

One comment objected to the agency

announcing as part of a final rule

specific measures it will impose, rather

than simply propose, some time in the

future, maintaining that ‘‘ * * * the

agency will have failed to provide

meaningful notice and opportunity to

comment.’’

Many comments supported additional

regulatory measures, if needed, to

achieve the desired reductions in

tobacco use by young people. Some

advocated further restrictions on

advertising, including: (1) Eliminating

all tobacco product advertising except

for point-of-purchase announcements of

product availability limited to black and

white text only; (2) prohibiting all point

of purchase advertising; (3) eliminating

direct mail marketing for cigarettes and

smokeless tobacco; (4) prohibiting all

outdoor advertising; (5) prohibiting

advertising in publications marketed to

youths, and possibly revising the

definition of ‘‘adult publications’’; and

(6) outlawing all marketing of cigarettes

and smokeless tobacco. One comment

recommended plain packaging of

cigarettes, and one suggested

broadening the proposed education

program.

Comments also proposed additional

sales restrictions on tobacco products,

including stringent licensing

requirements, increasing the age of sale

to 19, and selling cigarettes in cartons

only.

FDA rejects the comments suggesting

that the agency intends to eventually

ban all tobacco products, as the agency

has repeatedly stated that such an

outcome is not the appropriate public

health response under the act. FDA is

not proposing the additional restrictions

on advertising or access suggested in the

comments because FDA does not

anticipate at this time that these

additional measures will be required.

IX. Implementation Dates

The Food and Drug Administration

(FDA) has concluded that the provisions

of this rule should become effective 1

year after its date of publication in the

Federal Register, with three exceptions.

A 6-month effective date is established

for the requirements in § 897.14(a) and

(b) prohibiting retailers from selling

cigarettes or smokeless tobacco to

persons under age 18 and requiring

retailers to check photographic

identification of young purchasers for

proof of age. The requirement in

§ 897.34(c) prohibiting sponsorships

using cigarette or smokeless tobacco

brand names or other indicia of product

identification will be effective 2 years

from the date of publication of this final

rule. Finally, manufacturers will be

required to comply with the registration

and listing requirements in part 807,

and the good manufacturing practice

requirements in part 820, 2 years from

the date of publication of this final rule.

Although the agency specifically

requested comment on when the various

provisions in the proposed rule should

become effective, FDA received

relatively few comments on this subject.

(1) One comment that opposed the

rule argued that FDA should give

industry an opportunity in a hearing to

challenge the ‘‘factual underpinnings’’
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44543

of the rule before proceeding to

implementation. In contrast, a

supporting comment strongly favored

immediate action to implement the rule,

and a second comment stated that

postponing implementation by even a

year ‘‘means that another 500,000 young

people will become regular users of

tobacco products.’’ Another supporting

comment recommended that the

effective date for provisions that

prohibit sales to persons under 18 be no

more than 90 days from the date the

final regulations are issued, and that the

effective date for provisions affecting

advertising and labeling be 6 months

from the date the final regulations are

issued.

FDA is not persuaded that a hearing

is needed on the ‘‘factual

underpinnings’’ of the rule. In the

preamble to the 1995 proposed rule, the

agency provided its rationale and

evidentiary basis for each provision of

the regulation; interested persons have

had a full opportunity to submit their

comments and any factual supporting

data for the agency to consider. Informal

notice and comment rulemaking does

not require more. Moreover, the agency

believes that there would be little to

gain from holding such a hearing, and

that this step would needlessly delay

implementation of the final rule. Full

responses to the challenges made by this

and other comments on the factual bases

for the rule are provided in this

document.

Because FDA has found that

thousands of children purchase

cigarettes every day, the agency agrees

with the supporting comments that

restrictions on such sales should be put

into effect as soon as possible. FDA

recognizes, however, that the States also

have laws restricting youth access to

tobacco products, some of which may be

preempted under section 521 of the act

by this final regulation. The agency

intends to allow sufficient time for

applications for exemption from

preemption to be requested, considered

by the agency, and acted upon.

Therefore, FDA has determined that

§ 897.14(a) and (b), which prohibit the

sale of tobacco products to individuals

under the age of 18 and require retailers

to examine a photographic

identification to ensure that the

purchaser is at least 18 years of age, and

is basic to the goals of this final rule,

will become effective 6 months from the

date of publication of this final rule in

the Federal Register. This should allow

adequate time for the agency to process

the applications for exemption from

preemption while not unduly delaying

the implementation of a very important

part of the regulation.

(2) As for the recommendation by one

comment that the advertising and

labeling provisions of the rule become

effective 6 months after the final rule is

issued, FDA believes that this period of

time is not consistent with the agency’s

policy of allowing sufficient time for

affected entities to learn about and

comply with new regulatory

requirements. Instead, based on its own

experience and that of other

Government agencies in regulating

product advertising and labeling, FDA

has arrived at a period of 1 year from the

date of publication of this final rule in

the Federal Register for manufacturers,

distributors, and retailers to meet most

of the requirements of the rule. In

reaching this conclusion, FDA has taken

into consideration the time needed to

comply with all the requirements of the

rule, including time for designing new

labeling and advertising, for printing or

filming these new materials, for affixing

new product labels and disseminating

new advertising materials, and for using

up existing inventories of products,

supplies of promotional materials, and

coupons that do not comply with the

new requirements.

Examples of activities that will

become violative and must cease 1 year

from the date of publication of this rule

in the Federal Register include vending

machine sales of cigarettes and

smokeless tobacco and sales from selfservice displays (except in the narrowlydefined locations that are exempted),

sales of single cigarettes from opened

packages (‘‘loosies’’), sales of packages

with fewer than 20 cigarettes, mail-order

redemption of coupons for tobacco

products, distribution of free tobacco

samples, and the sale or distribution of

nontobacco items showing the brand

name (alone or in conjunction with any

other word), logo, symbol, motto, selling

message, recognizable color or pattern

or colors, or any other indicia of product

identification identical or similar to, or

identifiable with, those used for any

brand of cigarettes or smokeless tobacco.

Examples of additional requirements

that must be met 1 year from the date

of publication include all advertising

requirements (except as noted below),

and the requirement that manufacturers

not use a trade or brand name of a

nontobacco product on a cigarette or

smokeless tobacco product except as

specified in § 897.16(a).

The agency is excepting from the 1-

year implementation period the

requirement that manufacturers comply

with the existing registration and listing

requirements, found in part 807. The

agency recognizes that manufacturers

are not accustomed to complying with

these recordkeeping and reporting

requirements and will require

additional time in which to develop

appropriate compliance procedures.

Therefore, FDA is granting

manufacturers 2 years from the date of

publication of this final rule to begin

complying with the requirements under

part 807. The same reasoning has led

the agency to allow manufacturers the

same 2-year-period to prepare before

they are required to comply with the

good manufacturing practice

requirements in part 820.

Finally, the agency is also excepting

from the 1-year implementation period

the prohibitions in § 897.34 (c) of

sponsorship using cigarette or

smokeless tobacco brand names or other

indicia of product identification. The

agency recognizes that sponsorship of

events is often arranged well in advance

and that some event promoters may be

disadvantaged if they are not allowed

adequate time to replace tobacco

sponsors who elect to cease sponsoring

the event, rather than switch to their

corporate name. Accordingly, this final

rule provides that § 897.34(c) will

become effective 2 years from the date

of publication of this final rule.

X. Relationship Between the Rule and

Other Federal and State Laws

This section of the document

discusses issues concerning the

relationship between this rule and other

Federal and State laws. More

specifically, sections X.A. and X.B. of

this document analyze comments that

addressed the potential effect upon this

rule of other Federal statutes that

contain express provisions that restrict

some areas of Federal regulation of

tobacco products. Section X.C. of this

document analyzes comments that

raised the issue of whether this rule

conflicts with the congressional purpose

behind the current regulatory scheme

for tobacco products. Section X.D. of

this document analyzes comments that

addressed the issue of whether Congress

intended for the current regulatory

scheme for tobacco products to be

exclusive, such that this rule might be

foreclosed. Finally, sections X.E. and

X.F. of this document analyze

comments that addressed the

preemptive effect under the Federal

Food, Drug, and Cosmetic Act (the act)

that the Food and Drug Administration’s

(FDA’s) regulation of tobacco products

as drug delivery devices will have upon
44544 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

253Some of the comments take issue with FDA’s

application of Federal-State preemption law,

pointing out that the Supremacy Clause and Tenth

Amendment upon which this law is based have no

application in determining the relationship between

different Federal statutes. FDA is fully aware that

Federal-State preemption law, as well as those cases

such as Cipollone that apply it, do not directly

govern the present situation concerning preclusion

of Federal regulations by Federal law. However, the

principles contained in Federal-State preemption

law provide some general guidance for determining

the scope of preclusion intended by Congress,

regardless of whether that preclusion is directed at

State or Federal law.

State and local requirements and upon

State product liability claims.

A. The Federal Cigarette Labeling and

Advertising Act

(1) A number of comments argued

that FDA’s August 11, 1995, proposed

rule (60 FR 41314) (the 1995 proposed

rule) is precluded by section 5 of the

Federal Cigarette Labeling and

Advertising Act (the Cigarette Act (15

U.S.C. 1334)). Other comments

expressed the opposite view, stating that

15 U.S.C. 1334 did not preclude the

1995 proposed rule. Some of the

comments that found no preclusion

noted that the scope of 15 U.S.C. 1334

is narrow, and applies only to cigarette

packages, thereby allowing for

regulation of cigarette advertising and

promotion as contemplated by the 1995

proposed rule. After considering all of

the comments, FDA has concluded that

none of the rule’s provisions, as

embodied in the final rule, is expressly

precluded by the Cigarette Act. The

following analysis explains this

conclusion.

The Cigarette Act contains the

following provisions pertaining to

regulation of cigarettes:

(a) No statement relating to smoking and

health, other than the statement required by

[15 U.S.C. 1333], shall be required on any

cigarette package.

(b) No requirement or prohibition based on

smoking and health shall be imposed under

State law with respect to the advertising or

promotion of any cigarettes the packages of

which are labeled in conformity with the

provisions of this chapter.

(15 U.S.C. 1334 (emphasis added))

15 U.S.C. 1334(b) is expressly limited

to requirements or prohibitions imposed

under State law, that relate to

advertising or promotion of cigarettes.

Thus, 15 U.S.C. 1334(b) is inapplicable

to FDA’s regulation under part 897 and

does not foreclose FDA from regulating

cigarette advertising or promotion.

15 U.S.C. 1334(a), which applies to

statements on the cigarette package,

extends to both Federal and State

regulation. However, the scope of 15

U.S.C. 1334(a) is narrow, precluding

Federal and State regulation of

cigarettes only to the extent that such

regulation would require any statement

(other than the statement required by 15

U.S.C. 1333) ‘‘relating to smoking and

health’’ to appear on the cigarette

package.

There are two types of information

that the final rule requires on cigarette

packages. The first is the ‘‘established

name,’’ such as ‘‘Cigarettes,’’ which is

required by section 502(e)(2) of the act

(21 U.S.C. 352(e)(2)), and which the

agency is implementing under § 897.24.

The established name requirement is

applicable to all devices regulated under

the act, and it serves merely to aid

consumers in the identification of the

product.

The second type of information that

the final rule requires on cigarette

packages is the statement of intended

use and age restriction required under

§ 897.25. This statement informs

consumers about the products’ intended

uses and that the products may not be

sold to persons under the age of 18.

Neither the established name nor the

statement of intended use and age

restriction is ‘‘relat[ed] to smoking and

health.’’ Any indirect relationship these

requirements might have to smoking

and health is incidental and would be

too ‘‘tenuous, remote, or peripheral’’ to

trigger preclusion under 15 U.S.C.

1334(a). (See District of Columbia v.

Greater Washington Bd. of Trade, 113 S.

Ct. 580, 583 n.1 (1992) (‘‘Pre-emption

does not occur * * * if the [law at

issue] has only a ‘tenuous, remote, or

peripheral’ connection with [the subject

to which preemption is applicable], as

is the case with many laws of general

applicability’’) (citations omitted).) To

find otherwise could render the limiting

language of 15 U.S.C. 1334(a)

meaningless. (See New York State

Conference of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 115 S. Ct.

1671, 1677 (1995) (finding that overly

broad construction of the phrase ‘‘relate

to’’ ‘‘would * * * read Congress’s

words of limitation as mere sham, and

[would] read the presumption against

pre-emption out of the law whenever

Congress speaks to the matter with

generality’’).)

The agency notes that the established

name requirement under § 897.24 is

analogous to requirements imposed by

the Bureau of Alcohol, Tobacco and

Firearms (BATF) on cigarette packages.

Under 26 U.S.C. 5723(b), ‘‘[e]very

package of tobacco products * * * shall

* * * bear the marks, labels, and

notices, if any, that the Secretary by

regulation prescribes.’’ Under this

statutory provision, BATF has issued

regulations requiring, for instance, that

‘‘[e]very package of cigarettes shall

* * * have adequately imprinted

thereon, or on a label securely affixed

thereto, the designation ‘cigarettes’, the

quantity of such product contained

therein, and the classification for tax

purposes, i.e., for small cigarettes, either

‘small’ or ‘Class A’, and for large

cigarettes, either ‘large’ or ‘Class B’.’’

(See 27 CFR 270.215.) In the same way

that the requirement under 27 CFR

270.215 does not run afoul of 15 U.S.C.

1334 because it does not relate to

smoking and health, the established

name requirement under § 897.24 is

also not precluded.

Further guidance on the scope of

preclusion under the Cigarette Act can

be found in the legislative history and

purpose behind the Cigarette Act. The

history and purpose make clear that

Congress intended 15 U.S.C. 1334 to

preclude only those ‘‘statements’’ that

constituted warning or cautionary

statements on cigarette packages. (See

Cipollone v. Liggett Group, Inc., 112 S.

Ct. 2608, 2618–19 (1992) (finding that

‘‘no statement relating to smoking and

health’’ language in 1965 version of the

Cigarette Act referred to the sort of

warning provided for in section 4 of that

statute).) 253 (See also H. Rept. 449, 89th

Cong., 1st sess. (1965), reprinted in 1965

U.S. Code Cong. & Admin. News 2350,

2350 (the Cigarette Act prohibits ‘‘the

requirement of any other caution

statement on the labeling of cigarettes

under laws administered by any

Federal, State, or local authority’’).)

Clearly, neither § 897.24 nor § 897.25

is a warning or cautionary statement of

the type Congress intended to preclude

under 15 U.S.C. 1334. Accordingly, the

requirements under these sections of the

final rule are not foreclosed by the

Cigarette Act.

B. The Comprehensive Smokeless

Tobacco Health Education Act

(2) Several comments noted that the

1995 proposed rule would prohibit

advertisements for smokeless tobacco

from appearing in certain locations and

media. One comment stated that any

prohibition on advertising under the

1995 proposed rule amounts to a

‘‘compelled absence of advertising,’’ and

is as much a ‘‘statement relating to the

use of smokeless tobacco and health’’ as

is an explicit message requirement.

Thus, the comment asserted that such

restrictions are expressly precluded by

the Comprehensive Smokeless Tobacco

Health Education Act (the Smokeless

Act).
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44545

Another comment stated that FDA’s

proposed restrictions on the advertising

of smokeless tobacco are foreclosed

because they directly affect such

advertising in a manner that is ‘‘so

nearly identical’’ ‘‘in purpose and

effect’’ to the advertising requirements

mandated by the Smokeless Act that

they fall within that statute’s express

prohibition of any other Federal

‘‘statement’’ related to smoking and

health. In contrast, some comments

stated the position that the 1995

proposed rule is not expressly

precluded by the Smokeless Act.

After considering all comments, FDA

has concluded that none of the 1995

proposed rule’s provisions, with one

exception, is expressly precluded by the

Smokeless Act. The following analysis

explains this conclusion.

The Smokeless Act contains the

following provision pertaining to

regulation of smokeless tobacco:

No statement relating to the use of

smokeless tobacco and health, other than the

statements required by [15 U.S.C. 4402], shall

be required by any Federal agency to appear

on any package or in any advertisement

(unless the advertisement is an outdoor

billboard advertisement) of a smokeless

tobacco product.

(15 U.S.C. 4406(a) (emphasis added))

15 U.S.C. 4406(a) precludes only

‘‘statement[s].’’ Most requirements

under the final rule, such as those that

limit the locations or media in which

smokeless tobacco may be advertised,

do not constitute ‘‘statements’’ within

the meaning of 15 U.S.C. 4406(a). (See

Banzhaf v. Federal Communications

Commission, 405 F.2d 1082 (D.C. Cir.

1968) (holding that the FCC ruling was

not precluded by the Cigarette Act

because the ruling did not require

inclusion of any ‘‘statement * * * in

the advertising of any cigarettes’’), cert.

denied, 396 U.S. 842 (1969).) Thus,

those sections of the final rule that limit

the location or media in which

smokeless tobacco may be advertised, as

well as other requirements in the final

rule that do not actually mandate an

affirmative statement, are not expressly

precluded by the Smokeless Act.

Only three sections of the final rule

actually require inclusion of a

‘‘statement’’ on the packaging or in the

advertising of smokeless tobacco. These

sections are §§ 897.24, 897.25, and

897.32(c). In addition, proposed

§ 897.36, which is being omitted from

the final rule for reasons discussed later

in this section, would have required

such a statement.

As with cigarettes, § 897.24 requires

that packages of smokeless tobacco bear

the products’ established names.

Section 897.25 mandates, in part, that

packages of smokeless tobacco bear a

statement of the products’ intended uses

and age restriction. Section 897.32(c)

requires that advertising for smokeless

tobacco include the products’

established names and statements of

their intended uses. (See section

502(r)(1) and (r)(2) of the act.)

For reasons similar to those discussed

with regard to the Cigarette Act, none of

the statements required under §§ 897.24,

897.25, and 897.32(c) are precluded

under 15 U.S.C. 4406(a). (See section

X.A. of this document.) First, the

required statements do not directly

‘‘relat[e] to the use of smokeless tobacco

and health.’’ Second, the required

statements are not ‘‘statements’’ of the

sort precluded by 15 U.S.C. 4406(a)

because they do not convey any type of

cautionary message or warning of the

sort Congress intended to foreclose.

Accordingly, the statements are not

precluded by 15 U.S.C. 4406(a).

Proposed § 897.36 would have

declared the labeling or advertising of

cigarettes and smokeless tobacco to be

false or misleading if it contained ‘‘any

express or implied false, deceptive, or

misleading statement, omit[ted]

important information, lack[ed] fair

balance, or lack[ed] substantial evidence

to support any claims made for the

product.’’ Upon review of the comments

and reconsideration of this provision,

FDA believes that, in some instances,

manufacturers of smokeless tobacco

might have been required under FDA’s

proposed rule to incorporate a statement

relating to the use of smokeless tobacco

and health on the package or in the

advertising of a smokeless tobacco

product in order to correct an omission

of important information or a lack of fair

balance. Similarly, cigarette

manufacturers might have been required

to include a statement relating to

smoking and health on the cigarette

package. Such requirements would be

precluded under the Smokeless Act or

the Cigarette Act. Thus, FDA has

omitted § 897.36 from the final rule.

The agency notes, however, that

tobacco products, like other products

regulated under the act, are still subject

to section 502(a) of the act, which

provides, in part, that a device shall be

deemed to be misbranded ‘‘[i]f its

labeling is false or misleading in any

particular.’’ Any requirement imposed

under section 502(a) of the act upon

tobacco products is limited, however, to

the extent that it is precluded by the

Smokeless Act or the Cigarette Act.

C. Conflict With Congressional Purpose

Behind Current Regulatory Scheme For

Tobacco Products

A number of comments asserted that

the 1995 proposed rule conflicts with

other Federal statutes that regulate

tobacco products. These comments

focused on three specific statutes: The

Cigarette Act, the Smokeless Act, and

the Public Health Service Act (the PHS

Act)

1. The Cigarette Act and The Smokeless

Act

(3) A number of comments argued

that the 1995 proposed rule would

conflict with, and would nullify, some

of the congressional objectives behind

the Cigarette Act and the Smokeless Act.

Based on the alleged conflict, some of

the comments asserted that the general

provisions of the act must give way to

the specific provisions of the Cigarette

Act and the Smokeless Act.

FDA disagrees. As explained in

sections X.A. and X.B. of this document,

FDA regulation of tobacco products

under the authority of the act does not

conflict with the Cigarette Act or the

Smokeless Act, and thus such regulation

is clearly capable of coexisting with

these statutes. (See Connecticut

National Bank v. Germain, 112 S. Ct.

1146, 1149 (1992) (‘‘so long as there is

no ‘positive repugnancy’ between two

laws, a court must give effect to both’’)

(citation omitted); Morton v. Mancari,

417 U.S. 535, 551 (1974) (‘‘The courts

are not at liberty to pick and choose

among congressional enactments, and

when two statutes are capable of

coexistence, it is the duty of the courts,

absent a clearly expressed congressional

intention to the contrary, to regard each

as effective’’).)

The comments asserted a number of

areas in which the 1995 proposed rule

would allegedly conflict with Federal

law and congressional intent:

(4) Numerous comments argued that

the 1995 proposed rule is precluded

because Congress, through enactment of

the Cigarette Act and the Smokeless Act,

intended to foreclose all Federal

agencies other than the Federal Trade

Commission (FTC) and the Federal

Communications Commission (FCC)

from regulating the labeling and

advertising of tobacco products. Some of

the comments criticized the 1995

proposed rule, asserting that it would

cause tobacco product manufacturers to

be held to separate and conflicting

standards of conduct by different

agencies, thus conflicting with

congressional intent to prevent ‘‘diverse,

nonuniform, and confusing cigarette
44546 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

labeling and advertising regulations.’’

As a specific example of potential

separate and conflicting Federal

standards, some of the comments noted

that proposed § 897.34 would

completely prohibit the use of some

promotional items that are exempted by

FTC from the congressionally mandated

warning under the Cigarette Act.

FDA disagrees with these comments.

When Congress enacted the Cigarette

Act and the Smokeless Act, it very

carefully considered the proper scope of

preclusion applicable to Federal

agencies in the regulation of tobacco

products. The express terms of 15 U.S.C.

1334(a) and 15 U.S.C. 4406(a) clearly

reflect the full scope of preclusion of

Federal agencies intended by Congress.

Had Congress believed more

preclusion to be necessary, it could have

easily expanded the express scope of 15

U.S.C. 1334(a) and 15 U.S.C. 4406(a).

(See Banzhaf, 405 F.2d at 1089 (Had

Congress intended to foreclose other

types of Federal regulation, ‘‘it might

reasonably be expected to have said so

directly—especially where it was

careful to include a section entitled

‘Preemption’ specifically forbidding

designated types of regulatory action’’);

Central Bank of Denver v. First

Interstate Bank, 114 S. Ct. 1439, 1448

(1994) (Congress knows how to enact

legislation expressly).) Indeed, Congress

took this very approach with respect to

the scope of preemption applicable to

States under the Cigarette Act when it

drafted 15 U.S.C. 1334(b) in a broad

manner to encompass ‘‘requirement[s]’’

and ‘‘prohibition[s].’’

The discrepancy in Congress’ choice

of words with regard to the scope of 15

U.S.C. 1334(a) and (b) is significant in

its implications. By not including

‘‘requirement or prohibition’’ in 15

U.S.C. 1334(a) and expressly foreclosing

only ‘‘statements’’ relating to smoking

and health, Congress clearly intended to

narrowly limit the scope of foreclosure

of regulation applicable to Federal

agencies. (See Brown v. Gardner, 115 S.

Ct. 552, 556 (1994) (‘‘‘[w]here Congress

includes particular language in one

section of a statute but omits it in

another section of the same Act, it is

generally presumed that Congress acts

intentionally and purposely in the

disparate inclusion or exclusion’’’)

(citation omitted).) In a similar fashion,

Congress demonstrated an intent to

restrict the scope of Federal preclusion

under 15 U.S.C. 4406(a) by narrowly

tailoring the language of that subsection.

Thus, given the narrow scope of 15

U.S.C. 1334(a) and 15 U.S.C. 4406(a),

the Cigarette Act and the Smokeless Act

do not foreclose ‘‘separate’’ Federal

requirements, other than cautionary

health-based statements as discussed in

sections X.A. and X.B. of this document.

Although the final rule imposes

requirements on tobacco product

manufacturers, these requirements do

not conflict with the Cigarette Act or the

Smokeless Act and, consequently, are

not precluded by those statutes.

Moreover, that FTC might allow certain

actions under its statutory mandate does

not preclude FDA from prohibiting such

actions under a different statutory

mandate. (See New York Shipping Ass’n

v. Federal Maritime Comm’n, 854 F.2d

1338, 1367 (D.C. Cir. 1988) (‘‘there is no

anomaly if conduct privileged under

one statute is nonetheless condemned

by another’’), cert. denied, 488 U.S.

1041 (1989).)

(5) Some of the comments asserted

that Congress intended that the sole

health-based restraints that were to be

imposed on the commerce of tobacco

products were to be those provided in

the Cigarette Act and the Smokeless Act.

FDA disagrees with this assertion.

First, FDA clearly may exercise legal

authority to regulate tobacco products

when the evidence establishes that the

products have intended uses that fall

within the act’s definition of a ‘‘drug.’’

Indeed, the agency has done so in

several instances. (See, e.g., United

States v. 354 Bulk Cartons * * * Trim

Reducing-Aid Cigarettes, 178 F. Supp.

847, 851 (D.N.J. 1959) (cigarettes

claimed to reduce weight were drugs

because they were intended to affect the

structure or function of the body);

United States v. 46 Cartons, More or

Less, Containing Fairfax Cigarettes, 113

F. Supp. 336, 338–39 (D.N.J. 1953)

(cigarettes claimed to prevent

respiratory diseases were drugs because

they were intended to treat or prevent

disease).) Moreover, the comments’

assertion that health-based constraints

can be imposed upon tobacco products

only under the Cigarette Act and the

Smokeless Act necessarily leads to the

erroneous conclusion that much Federal

and State regulation, such as healthbased workplace smoking restrictions

and health-based age limits on access, is

foreclosed. As other comments

recognized, Congress obviously did not

intend for such broad preclusion to be

the case. (See Banzhaf, 405 F.2d at 1089

(finding that ‘‘[n]othing in the [Cigarette

Act] indicates that Congress had any

intent at all with respect to other types

of regulation by other agencies—much

less that it specifically meant to

foreclose all such regulation’’).)

(6) Some comments asserted that

FDA’s proposed restrictions on certain

advertising for tobacco products are at

odds with congressional intent to allow

the continued use of advertising for

these products in conjunction with the

statutorily required warnings.

FDA disagrees. As discussed in

sections X.A. and X.B. of this document,

preclusion of Federal regulation of

advertising for tobacco products is very

narrow in scope and does not

encompass FDA’s final rule. Moreover,

as one court has noted:

[T]here is no anomaly if conduct privileged

under one statute is nonetheless condemned

by another; we expect persons in a complex

regulatory state to conform their behavior to

the dictates of many laws, each serving its

own special purpose.

(New York Shipping Ass’n, 854 F.2d at

1367)

Thus, the mere fact that certain

advertising for tobacco products is

permitted under the current regulatory

scheme for those products does not

preclude FDA from placing restrictions

on such advertising.

(7) Some comments alleged that the

1995 proposed rule would conflict with

Federal law and congressional intent

because it would have an impact on the

commerce of tobacco products.

FDA disagrees. Any proscriptive

regulation of tobacco products

inevitably imposes economic burdens

upon commerce of those products.

Thus, following the comments’ line of

argument, all proscriptive regulation of

cigarettes is foreclosed by the Cigarette

Act and the Smokeless Act. As

explained in this section, however, by

enacting 15 U.S.C. 1334(a) and 15 U.S.C.

4406(a), Congress chose the proper level

of limitation on Federal regulations that

it concluded was necessary to protect

the commerce of tobacco products from

being unduly economically burdened.

Because requirements contained in the

final rule are not precluded under those

provisions, the fact that the

requirements will have economic

consequences upon the commerce of

tobacco does not mean those

requirements are foreclosed.

(8) One comment argued that the 1995

proposed rule is precluded because

Congress could not have intended for

any agency to have the authority to

prohibit the sale of cigarettes. The

comment derived this ‘‘intent’’ from

pieces of legislation enacted by

Congress that provide for the regulation

of specific aspects of cigarettes but do

not prohibit their sale.

FDA disagrees. Enactment of

legislation giving other agencies

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

decided to take those particular actions;

it does not imply that Congress has

determined that other Federal regulation

is prohibited. Congress can implement

policy in only one way: passage of a bill

by the House and the Senate that is

either signed by the President or

approved by an overridden veto. (INS v.

Chadha, 462 U.S. 919, 954–58 (1983);

Central Bank, 114 S. Ct. at 1453.)

Because Congress has not adopted any

legislation that specifically prohibits

FDA from regulating tobacco products,

the final rule is not precluded.

In summary, FDA’s final rule has been

narrowly tailored so that it does not

conflict with the existing statutory

scheme governing tobacco products, and

the final rule is not precluded.

2. The PHS Act

Section 1926 of the PHS Act

conditions a State’s receipt of the full

amount of Federal block grants (to be

used for prevention and treatment of

substance abuse) upon the recipient

State having in effect a law that makes

it ‘‘unlawful for any manufacturer,

retailer, or distributor of tobacco

products to sell or distribute any such

product to any individual under the age

of 18’’ (42 U.S.C. 300x-26(a)(1)).

(9) Some of the comments argued that

section 1926 of the PHS Act

demonstrates an intent on the part of

Congress to preserve, and encourage

enforcement of, State youth access

restrictions. The comments asserted that

because FDA regulation of youth access

to tobacco products would have a

preemptive effect upon some State

regulation in this area, the 1995

proposed rule conflicts with this

congressional intent. Accordingly,

argued the comments, section 1926 of

the PHS Act precludes FDA from

regulating youth access.

While FDA agrees that section 1926 of

the PHS Act indicates a congressional

intent to encourage States to establish

age limits on the purchase of tobacco

products, neither the statute’s language

nor its legislative history prohibits

Federal regulation of youth access. The

restrictions in the final rule regarding

the sale and distribution of tobacco

products do not conflict with section

1926 of the PHS Act, and, in fact,

facilitate the end result that Congress

sought—reducing youth smoking—by

‘‘reducing the appeal of cigarettes and

smokeless tobacco to, and limiting

access by, persons under 18 years of

age.’’ (See 60 FR 41314 at 41321.)

Accordingly, FDA’s regulation of youth

access is not precluded by the existence

of section 1926 of the PHS Act. (See 61

FR 1492, January 19, 1996.)

(10) One comment asserted that the

1995 proposed rule is precluded by

section 1926 of the PHS Act because,

‘‘in the legislative process that led to

enactment of [section 1926], Congress

considered and rejected a variety of

specific requirements of the very type

that FDA now proposes.’’ The Supreme

Court, however, has made clear that

courts are ‘‘‘reluctant to draw inferences

from Congress’ failure to act.’’’ (Brecht

v. Abrahamson, 113 S. Ct. 1710, 1719

(1993) (citations omitted).) The mere

fact that Congress, in enacting section

1926 of the PHS Act, did not

incorporate requirements of the type

FDA is now imposing in no way

precludes FDA’s final rule which was

issued under the agency’s regulatory

authority under the act.

D. Occupation of the Field

(11) Numerous comments asserted

that the 1995 proposed rule is impliedly

precluded by the comprehensiveness of

existing legislation relating to regulation

of tobacco products. Several comments

argued that Congress has specifically

reserved the power to regulate tobacco

for itself, and thereby has occupied the

field. A number of comments asserted

that the present system of congressional

control over tobacco products precludes

FDA regulation absent a new mandate

from Congress.

FDA disagrees with these comments.

The statutes enacted by Congress for

regulation of tobacco products do not

amount to a comprehensive scheme.

Rather, they address only a few specific

aspects relating to regulation of tobacco

products. Moreover, even if Congress’

actions in this area were

‘‘comprehensive,’’ Congress clearly did

not intend for regulation under the

Cigarette Act and the Smokeless Act to

be exclusive. (See Banzhaf, 405 F.2d at

1089 (finding that Congress did not

intend to foreclose Federal regulation of

cigarettes outside the narrow scope of

preclusion contemplated by the

Cigarette Act).) As explained in greater

detail in sections X.A., X.B., and X.C. of

this document, the statutes that the

comments cite, whether viewed

individually or collectively, do not

preclude FDA from regulating tobacco

products.

First, as some comments noted,

Congress has not taken action to exclude

from FDA’s jurisdiction tobacco

products that fall within the act’s

definitions of ‘‘drug’’ and ‘‘device.’’ The

face of the statute is the first place that

a court must look to determine whether

Congress has spoken to a particular

issue and whether congressional intent

in regard to that issue is clear. (Kofa v.

INS, 60 F.3d 1084, 1088 (4th Cir. 1995);

Metropolitan Stevedore Co. v. Rambo,

115 S. Ct. 2144, 2147 (1995).) Under the

act, FDA has jurisdiction over products

that are intended to address disease or

to affect the structure or any function of

the body. (See section 201(g) and (h) of

the act, 21 U.S.C. 321(g) and (h); 60 FR

41314 at 41463.) Thus, the relevant

language of the act—‘‘intended to affect

the structure or any function of the

body’’—does not on its face exclude

tobacco products.

Congress is able to exclude and has

excluded specific products, including

tobacco products, from a statute’s reach

when it wishes to do so. For example,

Congress has expressly excluded other

products from FDA’s jurisdiction under

the act. (See, e.g., section 201(i) of the

act (21 U.S.C. 321(i)) (excluding ‘‘soap’’

from definition of ‘‘cosmetic’’); section

201(s) of the act (excluding ‘‘color

additive’’ from definition of ‘‘food

additive’’).) Moreover, Congress has

expressly excluded tobacco products

from the reach of other regulatory

statutes. (See, e.g., 15 U.S.C.

2052(a)(1)(B) (Consumer Product Safety

Act); 15 U.S.C. 1261(f)(2) (Federal

Hazardous Substances Act); 15 U.S.C.

2602(2)(B)(iii) (Toxic Substances

Control Act); 21 U.S.C. 802(6)

(Controlled Substances Act); 15 U.S.C.

1459(a)(1) (Fair Packaging and Labeling

Act).) Indeed, tobacco is excluded from

the definition of ‘‘dietary supplement’’

under the act, but no similar exclusion

appears in the definition of ‘‘drug’’ or

‘‘device.’’ See section 201(g), (h), and (ff)

of the act (21 U.S.C. 321(g), (h), and (ff)).

The absence of an express exclusion for

tobacco products from the act’s

definitions of ‘‘drug’’ and ‘‘device’’

eviscerates the contention that Congress

clearly intended to preclude FDA from

regulating tobacco products.

Second, as recognized by some

comments, the fact that statutes such as

the Cigarette Act and the Smokeless Act

delegate some regulatory authority over

tobacco products to other Federal

agencies does not preclude FDA’s rule.

Numerous Federal agencies have

overlapping and complementary

jurisdiction that arises from their

differing missions and expertise. (See,

e.g., Rueth v. EPA, 13 F.3d 227, 228 (7th

Cir. 1993) (EPA and Army Corps of

Engineers have concurrent jurisdiction

under the Clean Water Act); Public

Utility Dist. No. 1 v. Bonneville Power

Admin., 947 F.2d 386, 395 (9th Cir.

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

States over hydroelectric projects), cert.

denied, 112 S. Ct. 1759 (1992); United

Packinghouse, Food and Allied Workers

Int’l Union v. NLRB, 416 F.2d 1126,

1133–34 n.11 (D.C. Cir.) (NLRB and

EEOC have concurrent jurisdiction over

racial discrimination claims), cert.

denied, 396 U.S. 903 (1969).) As

discussed in section X.C. of this

document, the fact that several agencies

are already charged with regulating

certain aspects of tobacco does not

preclude FDA from asserting

jurisdiction for different purposes. (See

Banzhaf, 405 F.2d at 1089 (‘‘Nothing in

the [Cigarette Act] indicates that

Congress had any intent at all with

respect to other types of regulation by

other agencies—much less that it

specifically meant to foreclose all such

regulation’’).)

In conclusion, FDA’s final rule is not

precluded by the existing regulatory

scheme for tobacco products.

E. Preemption of State and Local

Requirements Under Section 521(a) of

the Act

Under proposed § 897.42, State or

local requirements that are more

stringent than, and do not conflict with,

requirements imposed under FDA’s

final rule would not have been

preempted under section 521 of the act

(21 U.S.C. 360k).

(12) Several comments supported the

intended exclusion from preemption

under proposed § 897.42, noting that it

is essential that State and local officials

retain the ability to enact and enforce

laws which they believe are most

effective when actively enforced at the

local level.

In contrast, several comments took

issue with the proposed exclusion and

asserted that regulation of tobacco

products by FDA as drug delivery

devices would result in the preemption

of State and local laws. The comments

characterized the ‘‘blanket’’ exclusion

from preemption under proposed

§ 897.42 as being at odds with the

statutory preemption established by

section 521(a) of the act and with the

exemption procedures established by

section 521(b) and by FDA’s regulations.

Several comments argued that

proposed § 897.42 would conflict with

congressional intent behind the act. One

comment noted that preemption under

section 521(a) of the act was intended to

establish national uniformity in medical

device regulation, protecting such

products from onerous burdens on

interstate commerce created by a

patchwork of State and local

requirements. The comment argued that

the proposed exclusion from

preemption would cause uniform

Federal standards to become displaced

by diverse State and local requirements.

Another comment asserted that, by

allowing more stringent State and local

requirements, proposed § 897.42 was at

odds with the act because Congress did

not intend for FDA’s device regulations

to be minimum standards; rather, it

intended for those regulations to be the

governing standards unless local

circumstances justified an exception.

Finally, one comment pointed out

that the 1995 proposed rule would

permit only those State and local

requirements that are at least as

‘‘stringent’’ as the requirements imposed

under FDA’s rule. The comment

asserted that FDA may not preempt any

State laws, however, without first

showing a ‘‘clear and manifest

congressional intent’’ to authorize

preemption of those State laws.

As a preliminary matter, two points of

clarification are necessary. First,

proposed § 897.42 would not have

caused State and local laws to become

Federal requirements, as one of the

comments anticipated. Rather, the 1995

proposed rule would have allowed State

and local laws to remain in force subject

solely to State or local enforcement.

Second, proposed § 897.42 would not

have ‘‘resuscitated’’ State and local laws

that would otherwise be preempted by

the Cigarette Act or the Smokeless Act,

as some of the comments anticipated.

Instead, the exclusion from preemption

in proposed § 897.42 would have

applied only to preemption under

section 521 of the act.

Upon consideration of all of the

comments relating to proposed § 897.42,

the agency recognizes that significant

concerns have been raised with regard

to the validity of FDA’s proposed

preemption exclusion for all more

stringent State and local legislative

enactments. Most notably, the agency

concurs that the notice and comment

process of the current rulemaking does

not provide the type of opportunity for

an oral hearing contemplated under

section 521(b) of the act. In light of this

concern, FDA has deleted proposed

§ 897.42.

The agency’s 1995 proposed rule to

exclude all more stringent State and

local requirements from any preemptive

effect under this rule was based on a

recognition of the pioneering and

continuing role in the area of regulation

of youth access to tobacco products that

States have played, particularly certain

active tobacco-control States. Federal

cooperation with, and continued

reliance upon, innovative and

aggressive State and local enforcement

efforts is essential.

FDA believes the requirements it is

establishing in this final rule set an

appropriate floor for regulation of youth

access to tobacco products but do not,

as a policy matter, reflect a judgment

that more stringent State or local

requirements are inappropriate. For

example, FDA chose 18 as the age below

which cigarettes and smokeless tobacco

may not be marketed to children and

adolescents. This choice reflected a

finding that all but four States have a

comparable restriction which addresses

the most vulnerable population.

However, many comments argued that a

higher age would be more effective.

While FDA has decided not to establish

an age above 18 in the final rule, the

agency may, under the exemption

process established under section 521(b)

of the act, defer to those States that

conclude that a higher age is more

effective and that apply for an

exemption.

In implementing section 521 of the

act, FDA has historically interpreted

that provision narrowly and found it to

have preemptive effect only for those

State and local requirements that in fact

clearly impose specific requirements

with respect to specific devices that are

manifestly in addition to analogous

Federal requirements. (See § 808.1(d)

(21 CFR 808.1(d)).) Moreover, section

521 of the act ‘‘does not preempt State

or local requirements that are equal to,

or substantially identical to,

requirements imposed by or under the

act’’ (§ 808.1(d)(2)).

The agency’s assertion of jurisdiction

over tobacco products does not preclude

any State or local requirements other

than those expressly preempted by

section 521(a) of the act. Moreover,

consistent with FDA’s interpretation of

section 521(a) of the act, only a limited

number of State and local requirements

are preempted and even those may

qualify for exemption from preemption

under section 521(b) of the act.

Examples of State and local laws FDA

believes are preempted, consistent with

its longstanding approach to

implementing section 521 of the act, are

the following:

• More stringent age restrictions—Three

States restrict cigarette sales to anyone

under 19 years of age, and one State has

21 years as the minimum age. These

restrictions are preempted because they

are more stringent than the final rule,

which prohibits sales only to

individuals under age 18.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44549

254State Legislated Actions on Tobacco Issues,

Coalition on Smoking OR Health, Bartelt, J., ed.,

December 31, 1995.

• Restrictions on the distribution of free

samples of tobacco products—

Approximately 40 States, the District of

Columbia, and many local governments

restrict the distribution of free samples

of tobacco products. For example,

Nebraska bans samples, coupons, and

rebate offers for smokeless tobacco.

Oklahoma and several other States

prohibit the free distribution of tobacco

to individuals under 18 and within 500

feet of schools, playgrounds, or other

locations used primarily by individuals

under 18. Approximately 12 States

restrict where free samples may be

distributed. These restrictions are

preempted to the extent that they are

different from, or in addition to, the

final rule, which prohibits any

distribution of free samples.

• Restrictions on placement of vending

machines—Most States, the District of

Columbia, and several local

governments impose restrictions on the

placement of vending machines. These

restrictions are preempted to the extent

that they are different from, or in

addition to, the final rule, which

prohibits the use of vending machines

except in certain locations and under

certain conditions.

• Restrictions on outdoor advertising—

Restrictions on outdoor advertising are

preempted to the extent that they are

different from, or in addition to, the

final rule, which restricts the location,

format, and content of such advertising.

For example, Ordinance 307, which was

enacted by the Mayor and City Council

of Baltimore, MD, prohibits the

placement of any sign that ‘‘advertises

cigarettes in a publicly visible location,’’

i.e., on ‘‘outdoor billboards, sides of

building[s], and free standing

signboards.’’ This ordinance was upheld

by the Fourth Circuit in the face of a

challenge based on preemption under

the Cigarette Act and on First

Amendment grounds. (See Penn

Advertising of Baltimore, Inc. v. Mayor

and City Council of Baltimore, 63 F.3d

1318 (4th Cir. 1995), vacated and

remanded, 116 S. Ct. 2574 (1996).)

Subsequently, the Supreme Court

vacated judgment in Penn Advertising

and remanded the case to the United

States Court of Appeals for the Fourth

Circuit for further consideration in light

of 44 Liquormart, Inc. v. Rhode Island,

116 S. Ct. 1697 (1996). If Ordinance 307

is ultimately upheld in its present form,

it will be preempted under section 521

of the act to the extent that it is different

from, or in addition to, the final rule.

• Prohibitions and restrictions relating

to free-standing displays—Prohibitions

and restrictions relating to free-standing

displays are preempted to the extent

that they are different from, or in

addition to, the final rule, which allows

free-standing displays but restricts the

location, format, and content of such

displays.

• Requirements relating to identification

checks for purposes of age verification—

Requirements relating to identification

checks for purposes of age verification

are preempted to the extent that they are

different from, or in addition to, the

final rule, which requires identification

checks for anyone under the age of 26.

Examples of State or local laws or

regulations that are not preempted

include:

• Equivalent age restrictions—Most

States establish 18 years as the

minimum age for purchasing cigarettes

or smokeless tobacco. These restrictions

are not preempted because they are

equal to, or substantially identical to,

requirements imposed under the final

rule. (See § 808.1(d)(2).)

• Restrictions on the sale or distribution

of tobacco products—Several local

governments restrict the locations (such

as public parks, public buildings, etc.) at

which tobacco products may be sold or

distributed. These restrictions are not

preempted because the final rule does

not establish specific counterpart

regulations or other specific

requirements relating to the locations at

which tobacco products may be sold or

distributed.

• Restrictions on smoking in public

places—Approximately 48 states, the

District of Columbia, and many local

governments have some restrictions on

smoking in public places. These

restrictions are not preempted because

the final rule does not establish specific

counterpart regulations or other specific

requirements relating to restrictions on

smoking in public places.

• Penalties on underage persons who

purchase tobacco products—These

penalties are not preempted because the

final rule does not establish specific

counterpart regulations or other specific

requirements relating to penalties on

underage persons who purchase tobacco

products.

• Prohibition on use or possession of

tobacco products by underage persons—

These prohibitions are not preempted

because the final rule does not establish

specific counterpart regulations or other

specific requirements relating to

prohibitions on the use or possession of

tobacco products by underage persons.

• Age restrictions on persons who sell

tobacco products—Some local

governments have statutes or

regulations that establish a minimum

age for persons selling tobacco products.

These restrictions are not preempted

because the final rule does not establish

specific counterpart regulations or other

specific requirements relating to age

restrictions on persons who sell tobacco

products.

• Tobacco excise taxes—All 50 States

and the District of Columbia have excise

taxes on cigarettes, and 42 States have

excise taxes on smokeless tobacco.

These excise taxes are not preempted

because they are not ‘‘requirements

applicable to a device’’ within the

meaning of section 521(a) of the act.

(See § 808.1(d)(8).)

• Access-control mechanism

requirements for vending machines—

Approximately six States and some

local governments require accesscontrol mechanisms on vending

machines, such as locking devices or

token acceptors. These requirements are

not preempted because the final rule

does not establish specific counterpart

regulations or other specific

requirements relating to access-control

mechanisms for vending machines.

• Posting of signs—Approximately 24

States have statutes requiring certain

parties to post signs at vending

machines stating that sales to underage

persons are prohibited. One State

requires owners or operators of vending

machines to post signs warning of the

dangers of cigarette use during

pregnancy. In addition, many local

governments require that signs be

posted in areas in which smoking is

prohibited by law. These requirements

are not preempted because the final rule

does not establish specific counterpart

regulations or other specific

requirements relating to the posting of

signs.

• License requirements—Some local

governments impose license

requirements upon retailers of tobacco

products. These requirements are not

preempted because they are not

‘‘requirements applicable to a device’’

within the meaning of section 521(a) of

the act. (Cf. § 808.1(d)(3).)

The examples set forth above reflect

the types of State or local requirements

of which the agency is currently

aware. 254 There may be other State or

local requirements pertaining to

cigarettes and smokeless tobacco. With

regard to particular State or local

requirements that are not described

above, any State, political subdivision,

or other interested party may, in

accordance with § 808.5 (21 CFR 808.5),
44550 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

request an advisory opinion from the

agency as to whether such State or local

requirements are preempted.

State and local requirements that are

preempted by the requirements of FDA’s

final rule may be exempted from

preemption in accordance with section

521(b) of the act and its implementing

regulation, part 808 (21 CFR part 808).

Section 521(b) of the act and part 808

provide that FDA may, by regulation

issued after notice and an opportunity

for an oral hearing, exempt a State or

local device requirement from

preemption under such conditions as

the Commissioner of Food and Drugs

(the Commissioner), may prescribe if the

requirement is: (1) More stringent than

Federal requirements applicable to the

device under the act; or (2) required by

compelling local conditions, and

compliance with the State or local

requirement would not cause the device

to be in violation of any requirement

applicable under the act.

By a separate document to be

published in the Federal Register, FDA

will be informing all State and local

governments that they may submit

applications to exempt from preemption

under section 521(b) of the act those

State and local requirements pertaining

to cigarettes and smokeless tobacco that

are preempted by the final rule. A State

or local requirement will be exempted

from preemption under section 521(b) of

the act if the State or local requirement:

meets the exemption requirements

established under that section and is

consistent with the goals in the final

rule. Exemptions from preemption that

FDA grants apply only to preemption

under section 521 of the act.

Because the issues raised by these

applications for exemption will be

similar or related, the Commissioner has

determined that it would be

advantageous for all concerned to

propose a single regulation granting or

denying exemptions for each particular

State or local requirement, and, if

necessary, to hold a single hearing

covering all applications for exemption

from preemption for requirements

pertaining to cigarettes and smokeless

tobacco. Although each application will

be considered as part of a single

proceeding, each individual application

will be evaluated on its merits and the

circumstances applicable to the

particular submitting jurisdiction.

F. Preemption of State Product Liability

Claims Under Section 521(a) of the Act

(13) Several comments asserted that,

under section 521(a) of the act, State

product liability claims would be

preempted if FDA asserts jurisdiction

over tobacco products as drug delivery

devices.

Based on FDA’s understanding of the

theories of recovery advanced in

tobacco product liability cases, and the

nature of the Federal requirements being

established in the final rule, FDA does

not expect any of these Federal

requirements to preempt any tort claims

relating to tobacco products. The

following analysis explains this

conclusion.

The Supreme Court recently held that

the scope of preemption under section

521(a) with regard to State product

liability claims is very narrow. Indeed,

a plurality of the Court noted that ‘‘few,

if any, common-law duties have been

pre-empted by [section 521(a)].’’

Medtronic, Inc. v. Lohr, 64 U.S.L.W.

4625, 4634 (U.S. June 26, 1996) (Nos.

95–754 and 95–886) (plurality opinion).

Preemption occurs ‘‘only where a

particular state requirement threatens to

interfere with a specific federal

interest.’’ Medtronic, 64 U.S.L.W. at

4634. Thus, State requirements of

‘‘general applicability’’ such as State

product liability claims are not

preempted, except where they have ‘‘the

effect of establishing a substantive

requirement for a specific device’’ that

is ‘‘different from, or in addition to,’’ a

specific requirement imposed under the

act (§ 808.1(d); Medtronic, 64 U.S.L.W.

at 4633–34). Moreover, Federal

requirements must be ‘‘applicable to the

device’’ in question, and they preempt

State product liability claims only if the

Federal requirements are ‘‘specific

counterpart regulations’’ or ‘‘specific’’ to

a ‘‘particular device’’ (§ 808.1(d);

Medtronic, 64 U.S.L.W. at 4634).

In summary, FDA is aware of no tort

claims against tobacco products that

will be preempted by the Federal

requirements being established in the

final rule.

XI. Miscellaneous Constitutional Issues

A. Takings Under the Fifth Amendment

(1) Several industry, retail, and

individual comments argued that parts

of the regulations effect takings

compensable under the Fifth

Amendment’s Takings Clause (the

Takings Clause), which provides that

‘‘private property [shall not] be taken for

public use, without just compensation.’’

For example, comments argued that

proposed § 897.34 will restrict or even

prohibit tobacco manufacturers’ use of

their trademarks and copyrighted

property, or that it will deprive industry

members both of the goodwill generated

by their sponsorship of sports and

cultural events and of valuable tobacco

trademarks. Comments argued that

§ 897.16(a) effects a taking of

intellectual property because it

prohibits the use of nontobacco

trademarks (with grandfathered

exceptions) to market tobacco products.

Several comments argued that

§ 897.16(c) effects a taking of vending

machines and self-service displays, as

well as contractual rights to place

tobacco vending machines on other

people’s property. Comments argued

that the requirement that advertising use

only black text on white background in

§ 897.32(a) effects a taking because

nonconforming signs—for buses and on

billboards, for example—will have to be

destroyed, as would tobacco

advertisements on billboards and signs

within 1,000 feet of schools and public

playgrounds under § 897.30(b).

Comments also argued that the

proposed ban on mail-order sales of

tobacco products would effect a taking

of mail-order businesses. Mail-order

sales, however, are not prohibited under

the final rule. Many retailers argued that

the prohibition of self-service displays

and the corresponding requirement that

tobacco products be shelved behind

sales counters violate the Fifth

Amendment.

The Food and Drug Administration

(FDA) disagrees that any of these

provisions effects a taking in violation

of the Fifth Amendment.

In its final form, § 897.16(a) prohibits

manufacturers from using the trade or

brand name of a nontobacco product as

the trade or brand name of a cigarette or

smokeless tobacco product, with the

exception of those names on both

tobacco and nontobacco products that

were sold in the United States on

January 1, 1995. In its final form,

§ 897.16(c) prohibits the use of vending

machines and self-service displays to

sell cigarettes and smokeless tobacco,

except that vending machines

(including those that sell packaged,

single cigarettes) and self-service

displays may be used to sell these

tobacco products in adult-only

establishments. (As proposed in the

1995 proposed rule, § 897.16(c) would

have prohibited their use entirely.)

In its final form, § 897.30(b) prohibits

tobacco product advertisements within

1,000 feet of a public playground or a

secondary or elementary school. In its

final form, § 897.32(a) permits only

advertising that uses black text on a

white background (except in adult

publications and in facilities where

persons under 18 are not present or

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

services that bear the brand names or

other indicia of identification for

cigarettes or smokeless tobacco. In its

final form, § 897.34(c) prohibits the

sponsorship of athletic, musical,

cultural, or other social or cultural

events in the brand names or other

indicia of identification for cigarettes or

smokeless tobacco.

A takings analysis begins with a

determination of what interest a person

has in the thing that is allegedly taken—

in this case, in vending machines and

self-service displays, copyrighted

material, and trademarks and

goodwill—and whether that interest

‘‘can be considered property for the

purposes of the Taking Clause of the

Fifth Amendment.’’ (See Ruckelshaus v.

Monsanto Co., 467 U.S. 986, 1001

(1984).) If a cognizable property interest

is identified, the Supreme Court has

developed three factors for courts to

consider in assessing whether a

regulatory taking has occurred: (1) The

character of the governmental action; (2)

its economic impact; and (3) its

interference with reasonable

investment-backed expectations (Id. at

1005).

1. The Interests at Issue

Some of the interests affected by the

final rule—vending machines, selfservice displays, and existing

nonconforming advertising on signs and

billboards, for example—is tangible

property, whereas contract rights,

trademarks and goodwill, and

copyrighted material (e.g., the

nonconforming copyrighted material on

signs and billboards) affected by these

provisions are intangible property

interests.

Tangible personal property—such as

vending machines, self-service displays,

and signs and billboards advertising

tobacco products—is property for

purposes of the Takings Clause (see

United States v. General Motors Corp.,

323 U.S. 373, 383–84 (1945)), although

personal commercial property is

afforded less protection than real

property under the Takings Clause (see,

e.g., Lucas v. South Carolina Coastal

Council, 112 S. Ct. 2886, 2899 (1992)).

Intangible interests may be

compensable under the Takings Clause

as well. For example, in Ruckelshaus,

the Supreme Court determined that

trade secret information—which is

intangible—was property compensable

under the Takings Clause. The Court

noted that the extent of the property

right in trade secret information ‘‘is

defined by the extent to which the

owner of the secret protects his interest

from disclosure to others,’’ (that is, it is

property only insofar as others are

excluded from its use) and that it has

‘‘many of the characteristics of more

tangible forms of property’’—for

example, trade secret information is

assignable, it can form the res of a trust,

and it passes to a trustee in bankruptcy

(Ruckelshaus, 467 U.S. at 1002).

Vending machine owners may have

contracts that give them exclusive rights

to sell tobacco products at a particular

location. These contract rights would

typically be assignable, they may form

the res of a trust (see, e.g., Wadsworth

v. Bank of California, 777 P.2d 975, 978

(Or. Ct. App. 1989)), and rights of action

based upon them can become part of a

bankruptcy estate (e.g., In re Ryerson,

739 F.2d 1423, 1425 (9th Cir. 1984)).

(See also U.C.C. 9–106.) Such vending

machine owners’ contracts may

therefore create contract rights that

would be compensable property under

the Takings Clause.

Material can be copyrighted if it is an

original work of authorship—such as

written, musical, pictorial, or graphic

work—that is fixed in a tangible

medium of expression from which the

work can be reproduced (17 U.S.C.

102(a)). By Federal statute a copyright is

assignable (17 U.S.C. 201), and there are

rights to exclusive use (17 U.S.C. 106),

subject to certain limitations (17 U.S.C.

107–20) and enforceable through

infringement actions (e.g., 17 U.S.C.

501). A copyright can form the res of a

trust (Bartok v. Boosey & Hawkes, Inc.,

523 F.2d 941, 948 (2d Cir. 1975)) and it

can become property of an estate in

bankruptcy (United States v. Inslaw,

Inc., 932 F.2d 1467, 1471 (D.C. Cir.

1991), cert. denied, 502 U.S. 1048

(1992)). Sharing many of the

characteristics of more tangible

property, a copyright is also

compensable property under the

Takings Clause.

Trademarks are words, names,

symbols, devices, or combinations

thereof that a person uses, or intends to

use and has applied to register, to

identify or distinguish his or her goods

from others on the market and to

identify their source (15 U.S.C. 1127).

The primary purpose of trademarks is to

protect consumers by preventing

deceitful marketing of one product or

service as another. As the Supreme

Court has stated,

[t]he law of unfair competition has its roots

in the common-law tort of deceit: its general

concern is with protecting consumers from

confusion as to source. While that concern

may result in the creation of ‘‘quasi-property

rights’’ in communicative symbols, the focus

is on the protection of consumers, not the

protection of producers as an incentive to

product innovation.

(Bonito Boats, Inc. v. Thunder Craft

Boats, Inc., 489 U.S. 141, 157 (1989))

When associated with goodwill,

trademarks also share—with trade secret

information and copyrights—the

features of more tangible property. For

example, the Lanham Act (15 U.S.C.

1053 et seq.) allows assignment of a

trademark only ‘‘with the goodwill of

the business in which the mark is used

or with that part of the goodwill of the

business connected with the use of and

symbolized by the mark’’ (15 U.S.C.

1060). Indeed, when Congress amended

the Lanham Act in 1988 to allow intentto-use applications for registration of

trademarks, it prohibited assignment of

such applications to be ‘‘consistent with

the principle that a mark may be validly

assigned only with the business or

goodwill attached to the use of the

mark’’ (S. Rept. 515, 100th Cong., 2d

sess. 31 (1988), reprinted in 1988

U.S.C.C.A.N. 5577, 5593–5594).

Owners of trademarks also have rights

of exclusive use of marks—that is,

against infringement—because ‘‘[b]y

applying a trademark to goods produced

by one other than the trademark’s

owner, the infringer deprives the owner

of the goodwill which he spent energy,

time, and money to obtain’’ (Inwood

Laboratories, Inc. v. Ives Laboratories,

Inc., 456 U.S. 844, 854 n.14 (1982)).

‘‘Registration bestows upon the owner

of the mark the limited right to protect

his goodwill from possible harm by

those uses of another as may engender

a belief in the mind of the public that

the product identified by the infringing

mark is made or sponsored by the owner

of the mark’’ (Societe Comptoir de

L’Industrie Cotonniere Etablissements

Boussac v. Alexander’s Dep’t Stores,

Inc., 299 F.2d 33, 36 (2d Cir. 1962)).

Like trade secret information, a

trademark can be the res of a trust (see

Coca-Cola Bottling Co. v. Coca-Cola Co.,

988 F.2d 414, 430–432 (3d Cir. 1993))

and it can pass to the trustee in

bankruptcy (Inslaw, 932 F.2d at 1471).

The agency notes that a trademark

itself, unaccompanied by goodwill,

lacks these characteristics of property.

The agency therefore believes that a

trademark itself is not property

cognizable under the Takings Clause.

Based on the foregoing analysis,

however, the agency believes that a

trademark and the accompanying

goodwill together are property

cognizable under the Takings Clause.

These conclusions are consonant with

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

the sense that a man’s right to the

continued enjoyment of his trade

reputation and the good will that flows

from it, free from unwarranted

interference by others, is a property

right, for the protection of which a

trademark is an instrumentality’’

(Hanover Star Milling Co. v. Metcalf,

240 U.S. 403, 413 (1916); see also S.

Rept. 1333, 79th Cong., 2d sess. (1946),

reprinted in 1946 U.S. Code Cong. &

Admin. News 1274, 1277 (‘‘the

protection of trade-marks is merely

protection to goodwill’’)).

Nevertheless, this conclusion must be

reconciled with Supreme Court

precedent on takings of goodwill. In

particular, the comments cited Kimball

Laundry Co. v. United States, 338 U.S.

1 (1949), for the proposition that the

Takings Clause requires compensation

for a regulatory taking of goodwill. The

general rule is that the Takings Clause

does not require compensation for

goodwill when the Government takes a

place of business because the business’s

goodwill may be transferred to a new

place of business (338 U.S. at 11–12 and

15; see also General Motors, 323 U.S. at

379 (when Government permanently

takes land, ‘‘compensation for that

interest does not include * * * [even]

the loss of goodwill which inheres in

the location of the land’’)). In Kimball,

however, the Court allowed

compensation for loss of a laundry

business’s goodwill, or going-concern

value, incident to the physical taking of

the laundry. It did so because the

Government intended to operate the

laundry temporarily during wartime,

after which the laundry would revert to

the business; the business could not

invest in a new laundry because it

would someday be the owner of two

laundries, neither of which it could then

operate profitably (338 U.S. at 14–15).

The Court therefore likened the

situation to those in which the

Government takes a utility with the

intention of operating it itself; the goingconcern value of the utility is taken in

those cases and is therefore

compensable (Id. at 12–13).

Kimball and General Motors therefore

indicate that goodwill is compensable

under the Takings Clause only when no

business remains after a taking to whose

benefit the goodwill may inure. (See

also District of Columbia v. 13 Parcels

of Land, 534 F.2d 337, 349 & n.7 (D.C.

Cir. 1976).) With respect to goodwill

associated with a trademark, use of

which is limited by a regulation, these

cases indicate that the property interest

may be compensable only if the

regulation allows no goodwill to inure

to the benefit of the owner.

For purposes of the following analysis

of whether the regulations effect a

taking, the agency assumes that

copyrighted material, the interests in

trademarks and associated goodwill,

contracts, self-service displays, vending

machines, and tobacco advertising on

signs and billboards are property

interests that may be compensable

under the Takings Clause if taken.

2. The Takings Analysis

[W]hat constitutes a ‘‘taking’’ for purposes

of the Fifth Amendment has proved to be a

problem of considerable difficulty. While this

Court has recognized that the ‘‘Fifth

Amendment’s guarantee * * * [is] designed

to bar Government from forcing some people

alone to bear public burdens which, in all

fairness and justice, should be borne by the

public as a whole,’’ this Court, quite simply,

has been unable to develop any ‘‘set formula’’

for determining when ‘‘justice and fairness’’

require that economic injuries caused by

public action be compensated by the

government, rather than remain

disproportionately concentrated on a few

persons.

(Penn Central Transp. Co. v. City of New

York, 438 U.S. 104, 123–24 (1978)

(citation omitted) (alterations and

deletions in original); Ruckelshaus, 467

U.S. at 1005)

Still, the Supreme Court has identified

three factors for courts to consider in

assessing whether a regulatory taking

has occurred: (1) The character of the

governmental action; (2) its economic

impact; and (3) its interference with

reasonable investment-backed

expectations (Ruckelshaus, 467 U.S. at

1005; Penn Central, 438 U.S. at 124).

The force of any one of these factors

may be ‘‘so overwhelming * * * that it

disposes of the taking question’’

(Ruckelshaus, 467 U.S. at 1005 (finding

interference with reasonable

investment-backed expectations by use

of trade secret information in pesticide

approval process to be decisive)). So, for

example, if the economic impact is to

rob real property of ‘‘all economically

beneficial uses,’’ the regulation effects a

taking (Lucas, 505 U.S. at 1019

(emphasis in original); see also id. at

1027–1028 (limiting holding to real

property)). When examined in light of

these three factors, FDA’s proposed

regulations do not effect a compensable

taking under the Fifth Amendment of

the Constitution.

3. The Character of the Governmental

Action

With respect to the first factor, courts

are more likely to find a taking when the

interference with property can be

characterized as a physical invasion by

the Government (e.g., United States v.

Causby, 328 U.S. 256, 261–62 (1946)

(characterizing Government’s use of

flight path just over property as physical

invasion)) than when the interference is

caused by a regulatory program that

‘‘adjust[s] the benefits and burdens of

economic life to promote the common

good’’ (Penn Central, 438 U.S. at 124).

Courts have accorded particular

deference to governmental action taken

to protect the public interest in health,

safety, and welfare. (See Keystone

Bituminous Coal Ass’n v. DeBenedictis,

480 U.S. 470, 488 (1987); Penn Central,

438 U.S. at 125–26; Atlas Corp. v.

United States, 895 F.2d 745, 757–58

(Fed. Cir.), cert. denied, 498 U.S. 811

(1990).) In addition, the Supreme Court

has repeatedly rejected compensation

claims when the Government has

regulated in order to prevent harmful

activity:

The power which the States have of

prohibiting such use by individuals of their

property as will be prejudicial to the health,

the morals, or the safety of the public, is

not—and, consistently with the existence and

safety of organized society, cannot be—

burdened with the condition that the State

must compensate such individual owners for

pecuniary losses they may sustain, by reason

of their not being permitted, by noxious use

of their property, to inflict injury upon the

community.

(Mugler v. Kansas, 123 U.S. 623, 669

(1887) (holding that State law

prohibiting manufacture or sale of

alcohol effected no taking of brewery

even though law entirely destroyed

brewery’s beneficial use); see also

Keystone, 480 U.S. 470 (1987) (no taking

by law prohibiting mining of coal);

Goldblatt v. Town of Hempstead, 369

U.S. 590 (1962) (no taking effected by

regulation that closed gravel pit); Miller

v. Schoene, 276 U.S. 272 (1928) (no

taking effected by State-ordered felling

of cedar trees); Hadacheck v. Sebastian,

239 U.S. 394 (1915) (no taking effected

by ordinance prohibiting operation of

brickyard in residential area); Reinman

v. City of Little Rock, 237 U.S. 171

(1915) (no taking effected by ordinance

prohibiting stable in residential area);

Powell v. Pennsylvania, 127 U.S. 678

(1888) (no taking effected by law

preventing manufacture of margarine)).

First, the final rule’s interference with

property interests cannot be

characterized as a physical invasion of

property. The final rule prohibits some

uses of some types of property, but the

Government is neither using nor

acquiring property under the regulations

(Penn Central, 438 U.S. at 128). For

example, certain uses of vending
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44553

machines, self-service displays, and

signs and billboards are prohibited, but

the Government is itself neither using

nor acquiring them. The same is true of

the intangible property at issue,

contracts, copyrights, and trademarks

and the associated goodwill: The agency

is prohibiting certain uses—indeed, all

uses of tobacco trademarks on

nontobacco items, including when

tobacco companies have also registered

the tobacco mark as a mark for

nontobacco products or services—but

the Government is not itself using these

contract rights, copyrights, or

trademarks (and thereby tobacco

companies’ goodwill). It ‘‘has taken

nothing for its own use’’ (Connolly v.

Pension Benefit Guar. Corp., 475 U.S.

211, 224 (1986)).

Second, these final regulations seek to

promote the public health by limiting

access to tobacco products by

consumers in the age group most likely

to become addicted to them: Those

under the age of 18. The regulations are

intended to help reduce significantly

the harms that use of tobacco products

among this age group causes. They do

so by prohibiting the sale of tobacco

products to persons under the age of 18;

that is, the regulations require modes of

sale through which the retailer can

verify the age of the purchaser or to

which only those 18 or over will have

access. In particular, the final rule

permits vending machines and selfservice displays and accompanying

advertising only in places to which

young people do not have access.

The final regulations also limit

promotion of tobacco products to

persons under the age of 18. They do so

by prohibiting certain venues for

tobacco advertising, namely, within

1,000 feet of schools and public

playgrounds. They also require black

text/white background advertisements

in remaining venues with the exception

of adult newspapers, magazines,

periodicals, and other publications, and

in adult-only establishments. They also

prohibit use of tobacco trademarks on

nontobacco products and in the

sponsorship of events. As a

consequence, use of tobacco industry

trademarks, copyrights, and advertising

techniques is limited, although not

ended. Nonconforming signs and

billboards will be prohibited, thereby

reducing the remaining useful life of

those currently in use when the

regulations become effective. Use of

nontobacco trademarks is limited only

by prohibiting their use on tobacco

products (except for nontobacco

trademarks used on tobacco products in

the United States on January 1, 1995).

These regulations substantially

advance, and are rationally related to,

FDA’s legitimate interest in promoting

the public health and reducing harm by

limiting both youth access to tobacco

products and, as discussed in the

context of the First Amendment, their

promotion to youth. (See Keystone, 480

U.S. at 485; see also Pace Resources,

Inc. v. Shrewsbury Township, 808 F.2d

1023, 1030 (3d Cir.) (‘‘[T]he

governmental action is entitled to a

presumption that it does advance the

public interest.’’), cert. denied, 482 U.S.

906 (1987).) Moreover, they are directed

at stopping activity that is illegal in

every State: Sales of tobacco products to

those under the age of 18 (Keystone, 480

U.S. at 492 n.22). This factor of the

takings analysis indicates that these

regulations effect no takings.

4. The Economic Impact of the

Governmental Action

The second factor to consider is the

economic impact of the governmental

action. ‘‘There is no fixed formula to

determine how much diminution in

market value is allowable without the

fifth amendment coming into play’’

(Florida Rock Indus., Inc. v. United

States, 791 F.2d 893, 901 (Fed. Cir.

1986), cert. denied, 479 U.S. 1053

(1987)). It is clear, however, that a

regulation’s economic impact may be

great without rising to the level of a

taking. (See Pace Resources, 808 F.2d at

1031 (citing Hadacheck v. Sebastian,

239 U.S. 394 (1915)) (no taking even

given reduction in value from $800,000

to $60,000); Village of Euclid v. Ambler

Realty Co., 272 U.S. 365 (1926) (no

taking despite 75 percent diminution in

value).) Mere denial of the most

profitable or beneficial use of property

does not require a finding that a taking

has occurred. (See Florida Rock, 791

F.2d at 901; see also Andrus v. Allard,

444 U.S. 51, 66 (1979).) Rather, courts

look for drastic interference with a

property’s possible uses. (See Pace

Resources, 808 F.2d at 1031.)

In assessing whether a regulation

effects a taking, the Supreme Court has

considered whether the regulation

denies an owner the ‘‘economically

viable use’’ of his property. (See, e.g.,

Keystone, 480 U.S. at 499.) Courts focus

on the remaining uses permitted and the

residual value of the property. (See Pace

Resources, 808 F.2d at 1031.)

Although certain uses of copyrights

and copyrighted material developed by

tobacco companies and of tobacco and

nontobacco trademarks will be

prohibited or curtailed, other uses will

remain once the final rule takes effect.

That is, under § 897.16(a), nontobacco

trademarks may not be used to market

tobacco products (with the exception of

trademarks that had such uses before

January 1, 1995) and so they may lose

the (speculative) value of such licensing

arrangements, but they retain the vast

bulk of their value as trademarks for the

product or brand for which they were

originally developed, and they retain

the value of their potential use to market

all legal, nontobacco products. Under

§§ 897.30(b) and 897.32(a), some

copyrighted advertising material that

appears on billboards or signs within

1,000 feet of a school or playground or

that is not black text/white background

may be rendered useless when the rule

becomes effective (the copyrighted

design itself may be used in other

venues, such as adult publications or in

adult-only establishments). Under

§ 897.34(a), tobacco product brand

names and logos may be used only to

market tobacco products; they therefore

lose the value of any use on nontobacco

products and, under § 897.34(c), they

lose the value of any use to sponsor

events when the rule becomes effective.

By and large, however, tobacco

copyrights and trademarks will retain

significant, economically viable uses

when the rule becomes effective.

Tobacco companies have, however,

registered some of their tobacco

trademarks (e.g., Skoal Bandit on a race

car as an entertainment service mark,

Marlboro on tennis caps), or marks that

incorporate a tobacco trademark (e.g.,

The Marlboro Country Store on, for

example, hats and boots; Skoal Pro

Rodeo promoting and sponsoring

rodeos; Winston West promoting and

sponsoring auto racing events), as marks

for nontobacco products, services, or

events. Under § 897.34, all use of these

registered nontobacco marks will be

prohibited when the rule becomes

effective. With respect to these

registered nontobacco trademarks, and

indeed with respect to all tobacco

company trademarks, their associated

goodwill will remain with the tobacco

companies and will inure to their

benefit in the sale of tobacco products.

Accordingly, this factor of the takings

analysis indicates that the final rule

effects no taking of these interests.

Section 897.16(c) prohibits the use of

tobacco product vending machines and

self-service displays except in adultonly establishments (where graphic

advertisements will also be permitted).

This restricted use may limit the

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

displays may be used and may exclude

venues where their use is most

profitable. The value of vending

machines and self-service displays may

therefore drop. But diminutions in

property value do not establish a taking.

(See Penn Central, 438 U.S. at 131.)

Indeed, ‘‘[g]overnment hardly could go

on if to some extent values incident to

property could not be diminished

without paying for every such change in

the general law’’ (Pennsylvania Coal Co.

v. Mahon, 260 U.S. 393, 413 (1922)).

Vending machines and self-service

displays may have to be moved from

currently legal venues to adult-only

establishments or to warehouses, or they

may need to be retrofitted for use with

other products if retrofitting is possible.

Although compliance may require

vending machine and self-service

display owners to spend money,

‘‘[r]equiring money to be spent is not a

taking of property’’ (Atlas Corp., 895

F.2d at 756 (discussing regulatory

requirement that mining corporations

reclaim uranium and thorium tailings

and decommission mills)). Finally, if

there are not sufficient numbers of

adult-only establishments, some

vending machines and self-service

displays may have no economically

viable use because of the final

regulation, but a regulation that makes

personal commercial property

‘‘economically worthless’’ does not

effect a per se taking, as it would with

real property. (See Lucas, 505 U.S. at

1027–1028.) Contracts to offer

exclusively tobacco products in vending

machines at nonadult-only

establishments may also become

‘‘economically worthless’’ once the

regulation becomes effective. Likewise,

although §§ 897.32(a) and 897.30(b) may

shorten the useful life of advertising

materials on placards and billboards

that are not black text/white background

or that are near schools and playgrounds

(albeit with a grace period of at least the

delayed effective date) and such

materials may be ‘‘economically

worthless’’ as a result, this does not

effect a taking per se.

In summary, examination of the

economic impact factor of the takings

analysis suggests that the regulations,

when they finally become effective, will

effect no takings of trademarks and

goodwill, copyrights, and many vending

machines and self-service displays. It

leaves open the possibility, however,

that the rule may effect a taking of some

vending machines and contracts, and of

some self-service displays and of

nonconforming signs and billboards.

5. Interference with Reasonable

Investment-backed Expectations

The final factor to consider is whether

a company has a reasonable investmentbacked expectation in continuing to use

the property at issue, whether it be

vending machines, self-service displays,

nonconforming signs and billboards,

copyrighted material, or trademarks and

goodwill. To be reasonable, expectations

must take into account the power of the

State to regulate in the public interest.

(See Pace Resources, 808 F.2d at 1033.)

Reasonable expectations must also take

into account the regulatory

environment, including the

foreseeability of changes in the

regulatory scheme. ‘‘In an industry that

long has been the focus of great public

concern and significant government

regulation,’’ Monsanto, 467 U.S. at 1008,

the possibility is substantial that there

will be additional regulatory

requirements. ‘‘Those who do business

in the regulated field cannot object if the

legislative scheme is buttressed by

subsequent amendments to achieve the

legislative end’’ (Connolly, 475 U.S. at

227 (citation omitted)). Given a long

history of Government regulation of an

industry, its members are ‘‘on notice

that [they] might be subjected to

different regulatory burdens over time’’

(California Hous. Sec., Inc. v. United

States, 959 F.2d 955, 959 (Fed. Cir.),

cert. denied, 506 U.S. 916 (1992)).

Commerce in tobacco products has

been regulated for years on the Federal,

State, and local levels. For example,

States first began restricting tobacco

sales to minors, distribution of free

samples, and vending machine sales in

the 1970’s. By 1994 all 50 States

prohibited tobacco sales to young

people, 38 States restricted the

distribution of free tobacco products,

and 28 States imposed restrictions on

vending machine sales (‘‘State

Legislated Actions on Tobacco Issues,’’

Coalition on Smoking OR Health

(Washington, DC 1994)). Tobacco

manufacturers as well as distributors

and retailers who have chosen to

distribute or sell tobacco products have

therefore had reasonable notice that the

regulatory scheme to limit use of

tobacco products by minors might

change.

Moreover, the particular restrictions

on access and on promotion adopted in

these regulations, or variations thereof,

have been proposed or considered for

several years by Government bodies,

including Congress, the States, and

public health agencies. (See, e.g., H.

Rept. 5041, 101st Cong., 2d sess. (1990);

H. Rept. 1250, 101st Cong., 1st sess.

(1989).) For example, on at least two

occasions a tobacco industry

representative testified before Congress

that pending legislation would, like

several previous legislative proposals,

effectively ban advertisements for

tobacco products (‘‘Tobacco Control and

Marketing: Hearings on H. Rept. 5041

Before the Subcommittee on Health and

the Environment of the House

Committee on Energy and Commerce,’’

101st Cong., 2d sess. 491–494 (1990)

(statement of Charles O. Whitley on

behalf of The Tobacco Institute);

‘‘Tobacco Issues: Hearings on H. Rept.

1250 Before the Subcomm. on Transp.

and Hazardous Materials of the House

Comm. on Energy and Commerce,’’

101st Cong., 1st sess. 302 (1989)

(statement of Charles O. Whitley on

behalf of The Tobacco Institute)),

making for far more restrictive limits on

advertisements and promotion than

those imposed by this rule. Given these

facts, a reasonable person should have

expected the possibility of regulations

such as these. In addition, when sales to

young people are illegal, investments in

promotions designed to appeal to young

people cannot be considered reasonable

(see discussion of R. J. Reynolds’ use of

promotional materials in the Joe Camel

Campaign in section VI. of this

document). In any case, once the agency

gave notice of its proposed rulemaking

with respect to tobacco, tobacco

manufacturers, distributors, and

retailers had notice that certain

investments were risky, and they will

enjoy the economic benefit of those

investments and of investments that

they had previously made until the rule

is finally effective.

As discussed in section IV. of this

document, the number of tobacco

product vending machines fell by half

between 1988 and 1993 and, since 1990,

virtually no new tobacco product

vending machines have been

manufactured (60 FR 41314 at 41325);

because the market in tobacco product

vending machines is declining,

investment-backed expectations in both

vending machines and vending machine

contracts are not reasonable. Moreover,

many self-service displays were given to

retailers by tobacco manufacturers (see

60 FR 41314 at 41323); to that extent,

the retailers have no investment-backed

expectation in them.

Finally, the Supreme Court has stated

that it is unreasonable to have high

investment-backed expectations in

personal property:

[I]n the case of personal property, by

reason of the State’s traditionally high degree

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

possibility that new regulation might even

render his property economically worthless

(at least if the property’s only economically

productive use is sale or manufacture for

sale).

(Lucas, 505 U.S. at 1027–1028)

Since all of the property at issue

here—vending machines, self-service

displays, the advertising material on

signs and billboards, contract rights,

copyrights, and trademarks and

associated goodwill—is personal

property, there can be no reasonable

investment-backed expectation that

regulation will not render them

economically worthless. Consideration

of this factor of the takings analysis

indicates that the final rule effects no

takings of any property.

6. Summary

With respect to trademarks and

goodwill and copyrights, the three

factors in a takings analysis indicate that

these regulations will effect no takings.

Only the economic impact of the rule on

advertising materials on signs and

billboards and on some vending

machines and related contract rights

and some self-service displays leaves

open the possibility that a taking may

occur, but the impossibility of

reasonable investment-backed

expectations with respect to personal

property used for sale strongly counters

this factor, as stated by the Supreme

Court in Lucas, as does the harmprevention character of this regulation.

Analysis of the three factors considered

together shows that these final

regulations do not effect a taking of

vending machines, self-service displays,

signs and billboards advertising tobacco

products, contract rights, or copyrights

and trademarks and goodwill. The

agency concludes that the comments

that argued that the regulation effects

takings are, for the above-stated reasons,

unpersuasive.

B. Substantive Due Process, Equal

Protection, and Restrictions on Use of

Trade Names

(2) Comments argued that § 897.16(a)

(which restricts the use of nontobacco

trade or brand names as the trade or

brand name of cigarettes or smokeless

tobacco) and § 897.34(a) (which

prohibits the marketing of nontobacco

items and services that bear tobacco

brand names and other symbols of

cigarettes and smokeless tobacco)

violate the Due Process Clause of the

Fifth Amendment to the Constitution

and the Equal Protection Clause of the

Fourteenth Amendment. One comment

asserted that each of these provisions

prevents companies from entering a

completely legal business using their

own trade names but provided no

further explanation of its reasoning;

FDA therefore understands it to suggest

that these provisions classify companies

as either tobacco or nontobacco

companies, that this classification

violates equal protection, and that these

provisions violate due process in that

they infringe on property interests in

trade names by prohibiting companies

from entering legal businesses using

their own trade names. Another

comment echoed this latter point and

argued that the agency was denying

tobacco companies due process because

it has no authority to prohibit the lawful

use of tobacco trademarks on other

products.

The agency disagrees with these

comments. The Fifth Amendment Due

Process Clause states that ‘‘[n]o person

shall * * * be deprived of life, liberty,

or property, without due process of

law.’’ Under due process as applied to

economic regulation, ‘‘[i]t is enough that

there is an evil at hand for correction,

and that it might be thought that the

particular legislative measure was a

rational way to correct it’’ (Williamson

v. Lee Optical of Oklahoma, Inc., 348

U.S. 483, 488 (1955)). (The agency has

addressed why it has the statutory

authority to issue this rule in section II.

of this document.)

The Fourteenth Amendment’s Equal

Protection Clause states that ‘‘[n]o State

shall * * * deny to any person the

equal protection of the laws.’’ By its

terms, the Fourteenth Amendment does

not apply to action by the Federal

Government, as it is directed at the

States. But the Supreme Court has held

that the Fifth Amendment’s Due Process

Clause includes an equal protection

component equivalent to the Fourteenth

Amendment’s Equal Protection Clause.

(See Bolling v. Sharpe, 347 U.S. 497

(1954); see also Buckley v. Valeo, 424

U.S. 1, 93 (1976) (per curiam) (‘‘Equal

protection analysis in the Fifth

Amendment area is the same as that

under the Fourteenth Amendment’’).)

Under equal protection review, an

economic regulation is valid as long as

the classification that it makes is

‘‘rationally related to a legitimate state

interest’’ (City of New Orleans v. Dukes,

427 U.S. 297, 303 (1976)).

Sections 897.16(a) and 897.34(a)

easily pass muster under the

requirements of both due process and

equal protection. FDA’s interest in the

health and well-being of children and

adolescents is certainly legitimate

(indeed, it is a compelling interest). (See

New York v. Ferber, 458 U.S. 747, 757–

58 and n.9 (1982).) Moreover, because

they limit trade and brand name uses

that enhance the appeal and promote

the use of cigarettes and smokeless

tobacco to young people, the provisions

are rationally related to this interest and

are a rational way to reduce addiction

to tobacco products and the health

consequences that follow.

C. Procedural Due Process Under the

Fifth Amendment

(3) An industry comment asserted that

the regulation of tobacco manufacturers’

use of their copyrights and trademarks

affects a property interest so as to

require an adjudication; put another

way, the comment argued that use of

rulemaking to adopt a regulation

effecting these property interests

violates the Fifth Amendment Due

Process Clause, which states that ‘‘[n]o

person shall * * * be deprived of life,

liberty, or property, without due process

of law.’’

The agency disagrees. The agency has

issued this final rule under its

‘‘authority to promulgate regulations for

the efficient enforcement of the Act’’

under section 701(a) of the Federal

Food, Drug, and Cosmetic Act (the act)

(21 U.S.C. 371(a)) and its authority

under section 520(e) of the act (21

U.S.C. 360j(e)) to issue regulations to

restrict the sale, distribution, or use of

a device. The agency issues such

regulations under the rulemaking

procedures established by the

Administrative Procedure Act (APA) in

5 U.S.C. 553 and its own regulations in

part 10 (21 CFR part 10), in particular

§ 10.40. Neither the act, the APA, nor

the agency’s regulations require a

hearing for a rulemaking under sections

701(a) and 520(e) of the act.

The comment nevertheless contended

that due process requires that tobacco

manufacturers be provided the

opportunity for a formal hearing (i.e.,

more than just an opportunity to

provide written comments). A formal

hearing is required, according to the

comment, because FDA is asserting

jurisdiction over cigarettes and

smokeless tobacco based upon a

determination of the intent of all

tobacco manufacturers, but it is relying

on evidence of intent with regard to

only a subset of tobacco manufacturers.

As discussed in the 1996

Jurisdictional Determination annexed

hereto, the evidence shows that

cigarettes and smokeless tobacco are

highly addictive, cause other

psychoactive effects (such as relaxation

and stimulation), and affect weight
44556 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

255Statement by the Commissioner on NicotineContaining Cigarettes, before the Subcommittee on

Health and the Environment, Committee on Energy

and Commerce, U.S. House of Representatives (Mar.

25, 1994); Statement by the Commissioner on the

Control and Manipulation of Nicotine in Cigarettes,

before the Subcommittee on Health and the

Environment, Committee on Energy and Commerce,

U.S. House of Representatives (June 21, 1994).

regulation, and that these effects are

widely accepted in the scientific

community. Based on this evidence, it

is foreseeable to any reasonable

manufacturer that consumers will use

such products for their addictive,

psychoactive, and other

pharmacological effects. The evidence

also shows that actual consumer use of

these products for their pharmacological

effects is predominant and, in fact,

nearly exclusive. Based on this evidence

of the foreseeable and actual consumer

use of these products for their

pharmacological effects, the agency has

concluded that all cigarette and

smokeless tobacco manufacturers

‘‘intend’’ their products to affect the

structure or function of the body, and

that these products are, therefore,

nicotine delivery devices under the act.

In addition, the agency collected

evidence of the tobacco industry’s

statements, actions, and research

demonstrating awareness of the

addictive and other pharmacological

effects of these products, the industry’s

knowledge that consumers use these

products for these effects, and the

industry’s deliberate manipulation of

levels of nicotine in these products to

ensure that adequate amounts of

nicotine are delivered to consumers.

These internal documents are further

evidence in support of the conclusion

that cigarette and smokeless tobacco

manufacturers intend their products to

be drug delivery devices, but they are

not necessary for that conclusion. The

agency, therefore, has not inferred the

intent of one company based

exclusively on the internal documents

of another. Moreover, assuming that

copyrights and trademarks are property

protected by the Fifth Amendment’s

Due Process Clause, due process does

not require that FDA provide tobacco

manufacturers with a hearing beyond

the opportunity for notice and comment

that it has already provided. The

Supreme Court has stated that the APA

established ‘‘the maximum procedural

requirements’’ that the courts can

impose upon agencies in conducting

rulemaking procedures and that the

circumstances in which courts may

require additional procedures, ‘‘if they

exist, are extremely rare’’ (Vermont

Yankee Nuclear Power Corp. v. Natural

Resources Defense Council, 435 U.S.

519, 524 (1978)). The Court further

stated that due process may ‘‘in some

circumstances’’ require ‘‘additional

procedures’’ beyond those required by

the APA ‘‘when an agency is making a

‘quasi-judicial’ determination by which

a very small number of persons are

‘exceptionally affected, in each case

upon individual grounds’’’ (Id. at 542

(quoting United States v. Florida East

Coast Ry., 410 U.S. 224, 242–245

(1973))).

By this test, due process does not

require that the agency provide tobacco

manufacturers with a hearing. Simply

put, the agency is not making ‘‘a quasijudicial determination by which a very

small number of persons are

exceptionally affected, in each case

upon individual grounds’’ (Vermont

Yankee, 435 U.S. at 542 (quotations

omitted)). The final rule at issue here

prospectively limits the sale and

promotion of cigarettes and smokeless

tobacco to individuals under the age of

18; it imposes conditions on all

manufacturers, distributors, and

retailers of tobacco products and will

affect the access to tobacco products of

millions of individuals under the age of

18. The final rule is therefore ‘‘an

agency statement of general * * *

applicability and future effect designed

to implement, interpret, or prescribe law

or policy’’ (5 U.S.C. 551(4)); in other

words, it is a rule under the APA, and

the agency followed APA rulemaking in

formulating it (5 U.S.C. 551(5)). Like the

nuclear fuel cycle rulemaking in

Vermont Yankee, 435 U.S. at 528–530,

and the rulemaking about ambient air

quality standards for lead in Lead Indus.

Ass’n v. Environmental Protection

Agency, 647 F.2d 1130, 1136–1144 (D.C.

Cir.), cert. denied, 449 U.S. 1042 (1980),

this process is ‘‘a rulemaking

proceeding in its purest form,’’ and not

a ‘‘quasi-judicial determination’’ to

which due process requirements beyond

the requirements of the APA might

apply. (See Vermont Yankee, 435 U.S. at

542 n.16; Lead Indus. Ass’n, 647 F.2d at

1171 n.119.)

In any case, manufacturers have had

ample opportunity during the comment

period for this rulemaking to submit

evidence—including other internal

tobacco industry documents or

affidavits from their employees—that

contradicts any evidence, including

internal tobacco industry documents,

that the agency has placed in the

administrative record. And they have

submitted voluminous comments with

supporting documentation to the

agency. The manufacturers have

therefore been ‘‘afforded a meaningful

opportunity to be heard and to

controvert the evidence. Fairness

demands no more’’ (Lead Indus. Ass’n,

647 F.2d at 1170 (quotations omitted)).

In summary, due process does not

require that FDA provide manufacturers

with an adjudicative hearing. The notice

and opportunity for comment provided

in this rulemaking are all that fairness

and due process require here. And, as

discussed in greater detail in section

XII. of this document, this rulemaking

meets all the requirements of the APA

for informal rulemaking.

XII. Procedural Issues

A. Introduction

The Food and Drug Administration

(FDA) went to great lengths to involve

the public in this proceeding. On

February 25, 1994, David A. Kessler,

Commissioner of Food and Drugs (the

Commissioner) wrote to Scott Ballin,

chairman of the Coalition on Smoking

OR Health, regarding the possibility of

FDA regulation of cigarettes in response

to certain petitions that had been filed

with the agency. The Commissioner

explained:

[T]he agency has examined the current

data and information on the effects of

nicotine in cigarettes * * *. Evidence

brought to our attention is accumulating that

suggests that cigarette manufacturers may

intend that their products contain nicotine to

satisfy an addiction on the part of some of

their customers * * *. This evidence * * *

suggests that cigarette vendors intend the

obvious—that many people buy cigarettes to

satisfy their nicotine addiction. Should the

agency make this finding based on an

appropriate record or be able to prove these

facts in court, it would have a legal basis on

which to regulate these products * * *.

In the months that followed, the

Commissioner testified twice before

Congress regarding the accumulating

evidence relating to the intended use of

cigarettes. 255 That testimony was

extensive and detailed.

In July and August of that year, FDA

Associate Commissioner for Regulatory

Affairs, Ronald G. Chesemore wrote to

the major cigarette and smokeless

tobacco companies requesting all

documents relating to ‘‘all research on

nicotine * * *, including their

pharmacological effects, and all

documents relevant to the nicotine’’ in

their products. On August 1, 1994, FDA

held a Drug Abuse Advisory Committee

meeting that was fully open to the

public on the subject of the abuse

potential of nicotine.

On August 11, 1995, FDA provided

the public with an extensive Federal

Register document setting forth its
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44557

256Because the APA in this context provides the

public at least as much protection as the Due

Process Clause of the Constitution, the agency will

address these procedural objections solely under

the APA. See Forester v. Consumer Prod. Safety

Comm’n, 559 F.2d 774, 787 (D.C. Cir. 1977); Ass’n

of Nat’l Advertisers, Inc., v. Federal Trade Comm’n,

627 F.2d 1151, 1166 (D.C. Cir. 1979), cert. denied,

447 U.S. 921 (1980).

rationale for proposing to restrict the

sale of cigarettes and smokeless tobacco

in a 60 page discussion supported by

442 endnotes (the 1995 proposed rule)

(60 FR 41314 to 41375). The agency

carefully documented each of the

essential propositions offered in support

of its reasoning. Indeed, most of the 442

endnotes in the 1995 proposed rule

contain multiple authorities for the

agency’s position and, in all cases, the

agency provided the reader with

specific page references to the numerous

studies, reports, and industry

documents on which it relied.

In the same issue of the Federal

Register in a document entitled

‘‘Analysis Regarding The Food and Drug

Administration’s Jurisdiction Over

Nicotine-Containing Cigarettes and

Smokeless Tobacco Products,’’ FDA also

provided an analysis of the agency’s

authority to assert jurisdiction over

cigarettes and smokeless tobacco based

on the evidence before the agency at

that time (the 1995 Jurisdictional

Analysis) (60 FR 41453 to 41787). In the

text of the 1995 Jurisdictional Analysis,

the agency supported its reasoning with

appropriate citations to case law,

statutes, and regulations. In addition,

the 1995 Jurisdictional Analysis was

supported by over 600 footnotes, each of

which provided the factual context for

the agency’s legal position.

On August 16, 1995, the agency

placed on public display some 20,000

pages of materials that it cited in the

1995 proposed rule and in the 1995

Jurisdictional Analysis. With the

exception of three documents, which

the agency referenced only in the 1995

Jurisdictional Analysis, the agency

made available to the public all of the

materials on which it was relying on as

of that time for support.

On September 29, 1995, the agency

supplemented the administrative record

by putting on public display

approximately 13,000 documents

comprising some 190,000 pages of

factual and analytical materials the

agency considered in the course of

issuing the 1995 proposed rule and the

1995 Jurisdictional Analysis. Although

it was under no legal obligation to do so,

the agency made these additional

materials available because of the

importance of this proceeding.

The agency also made two other

significant additions to the public

record. On December 1, 1995, the

agency announced the findings of focus

group studies concerning possible brief

statements to be included on all

cigarette advertising (60 FR 61670), and

added to the record for the rulemaking

proceeding a report of these findings

and approximately 1,500 pages of

supporting documentation. Second, in

the Federal Register of March 20, 1996

(61 FR 11349), the agency published

notice of an additional 30 day comment

period limited to specific documents the

agency added to the proposed

rulemaking docket, and to the docket in

support of the agency’s analysis of its

jurisdiction (61 FR 11419). These

materials consisted of two declarations

and a report from three former tobacco

industry employees, as well as FDA

memoranda to the record regarding

adult publications and billboards.

In addition, the agency has added to

the final record of this proceeding a

comparatively small number of

documents that expand upon or confirm

information made available in the 1995

proposed rule or the 1995 Jurisdictional

Analysis, or that address alleged

deficiencies in the agency’s initial

record.

The administrative record now also

includes the comments received from

the public. The agency received over

700,000 comments, some directed to the

1995 Jurisdictional Analysis, some

directed to the 1995 proposed rule, and

many with overlapping discussions.

Though many comments consisted of

form letters, the agency received over

95,000 distinct or unique sets of

comments. Five major cigarette

manufacturers jointly submitted 2,000

pages of comments and 45,000 pages of

exhibits. The major smokeless tobacco

manufacturers jointly submitted 474

pages of comments and 3,372 pages of

exhibits. The initial comment period

remained open for 144 days.

(1) Despite the agency’s extraordinary

efforts to involve the public in this

proceeding, FDA received several

comments regarding the procedures the

agency followed in providing notice of

the 1995 proposed rule and in

publishing the 1995 Jurisdictional

Analysis. Some of these comments

complained that the agency designated

certain documents in the administrative

record as ‘‘confidential,’’ and that the

shielding of these documents denied the

public a meaningful opportunity to

participate in the rulemaking process.

One of these comments also contended

that FDA refused to disclose certain

nonconfidential information on which

the agency had relied. Some comments

also argued that FDA failed to set forth

a balanced view of the issues presented

by the 1995 proposed rule, thereby

rendering the notice inadequate and

‘‘misleading’’ under the Administrative

Procedure Act (the APA). In their view,

FDA concealed certain issues in order to

deny the public the right to participate

in the rulemaking process. Finally, at

least one interested person maintained

that the comment period for the 1995

proposed rule was so short as to be

arbitrary and capricious.

As the discussion that follows in this

section of the document demonstrates,

the agency’s notice, the public

availability of the information the

agency relied upon at the notice stage of

this proceeding, and the opportunity for

comment, went well beyond the

requirements of the APA, well beyond

what is required by case law construing

the APA, and well beyond the agency’s

own procedural requirements for

informal rulemaking.

B. Adequacy of the Record

(2) Several industry comments

complained about the adequacy of the

record in support of the 1995 proposed

rule. They contended that the agency

violated the APA, 5 U.S.C. 553(b) and

(c), and the Due Process Clause of the

Fifth Amendment to the Constitution,

by failing to disclose all of the

information the agency ‘‘considered or

relied upon in the proceeding.’’ 256 In

particular, these comments complained

that the public was deprived of the

opportunity to comment meaningfully

because, according to these comments,

the agency relied on confidential

documents and on substantial amounts

of undisclosed data. One comment went

so far as to claim that ‘‘a substantial

portion’’ of the material FDA relied

upon was not made available for public

scrutiny.

The record in support of the 1995

proposed rule provided the public not

only with a ‘‘reasonable opportunity’’

for comment, but with an extraordinary

opportunity to examine the agency’s

position. The claim that the agency

withheld ‘‘a substantial portion’’ of the

materials on which it relied is simply

unfounded.

1. The Administrative Record

In an informal rulemaking

proceeding, the APA itself requires only

that the ‘‘notice of proposed rule

making’’ include a statement of the

time, place, and nature of the

proceeding, ‘‘reference to the legal
44558 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

257The two confidential documents the agency

directly referenced are the 1991 Handbook on Leaf

Blending and Product Development (Confidential

Document 75) and the unredacted summary of

notes of FDA trip visits (Confidential Document 74).

The summary was compiled from notes and

handouts that are also designated as confidential

(Confidential Documents 69, 70, 71, 72, and 73).

The agency views the summary as a stand-alone

document to the extent it distills a large volume of

disparate handwritten notes and handouts. Also,

the agency cited only to the summary itself.

Nevertheless, even if the summary were counted as

five documents rather than one, the agency at most

relied on six confidential documents. The agency’s

basis for relying on these documents in the 1995

Jurisdictional Analysis is discussed in detail in the

1996 Jurisdictional Determination, annexed hereto.

258On page 255 of the 1995 Jurisdictional

Analysis (60 FR 41453, 41716), the agency redacted

several lines of text along with a footnote that

identified the sources for the redacted text. The

footnote consisted of references to two sources, both

of which appeared on the agency’s public docket for

the 1995 Jurisdictional Analysis: J. E. Kiefer,

‘‘Cigarette Filters for Altering the Nicotine Content

of Smoke’’ (Report No. 71 5003 7), Tennesee

Eastman Co., pp. 1–2; August 18, 1971, and J. G.

Curran, Jr., and E. G. Miller, ‘‘Factors Influencing

the Elution of High Boiling Components of Cigarette

Smoke from Filters,’’ Beitr. Tabakforsch, pp. 5 and

67, 1969. The Kiefer document appeared on the

public docket with certain trade secret information

redacted from the document. The Curran document

was made available to the public in full.

authority under which the rule is

proposed,’’ and ‘‘either the terms or

substance of the proposed rule or a

description of the subjects and issues

involved’’ (5 U.S.C. 553(b)). The APA,

thus, does not expressly require

disclosure of the information on which

the agency relies in proposing a

regulation.

Nevertheless, courts have implied

under the APA a requirement that an

agency give notice of the information on

which it actually relies to support a

proposed rule, and make that

information available to the extent it is

not readily accessible to the public. (See

Davis, K. and R. Pierce, Jr.,

Administrative Law Treatise, vol. 3,

section 7.3 at 305–09 (3d ed. 1994)

(discussing one of the seminal cases on

disclosure of data relied on to support

a rulemaking proceeding, Portland

Cement Ass’n v. Ruckelshaus, 486 F.2d

375 (D.C. Cir. 1973), cert. denied, 417

U.S. 921 (1974)).) No court, however,

has required the degree of public

disclosure at the notice stage of a

rulemaking proceeding that FDA

undertook here.

Indeed, the primary cases cited by the

comments, namely, Portland Cement

Ass’n, supra, United States v. Nova

Scotia Food Products Corp., 568 F.2d

240 (2d Cir. 1977), and United States

Lines, Inc. v. Federal Maritime Comm’n,

584 F.2d 519 (D.C. Cir. 1978), address

agency conduct that bears little

resemblance to FDA’s efforts in this

proceeding. While FDA has provided a

remarkable degree of factual support

and procedural openness, these cases

involved instances in which agencies

provided the public with no information

whatsoever or otherwise excluded a

study that was critical to the

administrative proceeding. In Portland

Cement, the Environmental Protection

Agency altogether failed to provide the

public an opportunity to comment on

the test results and procedures on which

the agency relied as the critical’’ basis

for the emission control level adopted

by the agency. That is, the agency set

very specific pollution control limits,

but failed to make public until after the

close of the comment period the details

of crucial tests relied upon to determine

these limits (486 F.2d at 392).

In Nova Scotia Food Prods., ‘‘all the

scientific research was collected by the

agency, and none of it was disclosed to

interested parties as the material upon

which the proposed rule would be

fashioned’’ (568 F.2d at 251) (emphasis

added). And in United States Lines,

where a common carrier challenged an

order of the Federal Maritime

Commission amending a contract

between two competitors, the court

found that the Commission had made

‘‘critical findings’’ on the basis of data

which was neither identified in its

decision nor included in the

administrative record. Rather, the

Commission based its decision on

‘‘reliable data reposing in the files of the

Commission’’ (584 F.2d at 533). The

reviewing court simply had no idea of

the factors or data on which the

Commission had relied (Id.).

Thus, at best, the case law requires

agencies to disclose studies and data

actually relied upon by the agency. Even

then, the cases that have struck down

agency rulemaking are generally

confined to instances in which the

agency provided woefully inadequate

information to the public or failed to

disclose a critical piece of information.

(See, e.g., Kennecott Corp. v.

Environmental Protection Agency, 684

F.2d 1007, 1018–19 (D.C. Cir. 1982)

(agency acted arbitrarily and

capriciously when it failed to include in

the public docket during the comment

period any documents supporting a

particular proposed regulation);

compare Personal Watercraft Indus.

Ass’n v. Department of Commerce, 48

F.3d 540, 544–45 (D.C. Cir. 1995) (while

agency must disclose information

critical to its decision to regulate a

particular activity, absent prejudice an

agency may rely on studies developed

after close of comment period that are

not critical to the underlying proposal).)

Finally, FDA’s own procedural

regulations require that the agency

include with the notice of proposed

rulemaking, among other things,

‘‘references to all information on which

the Commissioner relies for the proposal

* * *’’ (§ 10.40(b)(vii) (21 CFR

10.40(b)(vii)) (emphasis added); see 21

CFR 10.3 (defining the term

‘‘administrative record’’ to mean the

materials on which the agency ‘‘relies to

support the action’’). Thus, even under

the agency’s own procedural

regulations, FDA is required—when it

initiates informal rulemaking—to

supply the public only with the

materials the agency is relying upon to

support the proposed action.

Here, the materials the agency relied

on are the materials the agency cited in

the 1995 proposed rule and the 1995

Jurisdictional Analysis. Not only did the

agency provide these materials to the

public, but it also provided the roughly

190,000 pages of factual and analytical

materials the agency considered but did

not rely upon in either the 1995

proposed rule or the 1995 Jurisdictional

Analysis. Moreover, the agency

provided over 1,000 endnotes and

footnotes directing readers to each and

every document, including every study,

Government report, journal article,

industry document, and agency record

on which FDA relied to support the

1995 proposed rule and the 1995

Jurisdictional Analysis.

Out of all this material, the only

nonpublic materials on which the

agency relied were two confidential

documents 257 and two lines of text the

agency redacted from a document the

agency placed on the public record. 258

The agency relied on this material only

in the context of the agency’s 1995

Jurisdictional Analysis. None of these

documents is pivotal to the analysis of

jurisdiction in that none provides the

sole or principal basis for the agency’s

conclusion that cigarettes and smokeless

tobacco are drug delivery devices under

the Federal Food, Drug, and Cosmetic

Act (the act). Further, as discussed in

the 1996 Jurisdictional Determination

annexed hereto, the decision to keep

these materials confidential did not in

any way undermine the quality of the

public participation in this proceeding.

In sum, the procedures the agency

followed in assembling a public record

in this proceeding simply are not in line

with the facts described in cases like

Portland Cement, Nova Scotia Food

Products, and United States Lines.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44559

259The agency did not acknowledge ownership of

the handbook in the 1995 Jurisdictional Analysis,

or in the September 29, 1995, index to the

administrative record. However, in a set of

comments filed by Brown & Williamson, the

company itself acknowledged publicly its

ownership of the handbook. (See Brown &

Williamson Tobacco Corp., Comment (Jan. 2, 1996),

pp. 37–38).

260 Kiefer, J. E., ‘‘Cigarette Filters for Altering the

Nicotine Content of Smoke,’’ Tennessee Eastman

Co., Report No.71 5003 7, pp. 1–2, August 18, 1971.

261One comment noted that the agency relied in

the 1995 proposed rule on undisclosed information

gathered from former industry sales representatives

and managers. (See 60 FR 41314 at 41323.) The

reference in the rule to interviews with former sales

representatives and managers appears in the

discussion of proposed § 897.12 Additional

Responsibilities of Manufacturers. The agency used

the information gathered from these individuals to

support the proposition that manufacturers direct

their sales representatives to police retailers’

cigarette and smokeless tobacco displays.

Accordingly, the agency proposed to require sales

representatives to be responsible for removing

violative visual displays and advertising used in

retail outlets. In light of comments received, the

agency has decided to revise § 897.12 to eliminate

this requirement. Because manufacturer sales

representatives will no longer be held responsible

for maintaining retailers’ fixtures, the agency’s

reliance on the interviews in the 1995 proposed

rule, and the issue of whether the agency should

have made more information on this matter

available to the public, is moot. Davis, K. C., and

R. J. Pierce, Jr., Administrative Law Treatise, vol. 1,

section 7.3 at p. 307 (3d ed. 1994) (‘‘If an agency

does not attempt to support its final rule by

reference to an undisclosed study, it seems

apparent that the agency was not required to make

the study available to potential commentators’’).

Finally, as the agency explained in its December 27,

1995, Federal Register notice, the agency has not

made such information available to the public

because of the need to protect the identity of

individuals who came forward during the agency’s

investigation and who might not otherwise have

come forward (see 60 FR 66981, 66982). As

discussed in section VI. of the 1996 Jurisdictional

Determination, FDA believes there are

circumstances in which an agency may rely on

confidential information in a rulemaking

proceeding, and that there are ways in which an

agency may present such information in order to

preserve the public’s right to a reasonable

opportunity to participate in the proceeding (60 FR

66981). The agency, however, has not relied on any

such material in this final rulemaking.

2. The Agency’s Use of Confidential

Documents

a. Confidential documents on which

the agency did not rely. The agency

placed in a confidential docket 75

documents from the approximately

210,000 pages of materials the agency

made available at the opening of this

proceeding. The agency identified each

of these 75 documents for the public in

an index filed on September 29, 1995,

on the public docket. (See 60 FR 66981

at 66982, December 27, 1995.) Of these

75 documents, 73 were not even relied

upon by the agency to support either the

1995 proposed rule or the 1995

Jurisdictional Analysis.

Sixty-one of these 73 confidential

documents consisted either of

commercial information and trade

secrets that the industry urged FDA to

keep confidential (Confidential

Documents 1–12, 16–21, and 62–73), or

unpublished manuscripts for which the

agency lacked the authors’ permission,

as of September 29, 1995, to make them

available for widespread dissemination

(Confidential Documents 22–52). The

remaining 12 documents were either

proprietary reports and other

copyrighted information—such as

financial reports generated by Dun and

Bradstreet—which the agency lacked

permission to reprint (Confidential

Documents 13–15, and 53–58), or

confidential documents that supported a

pending new drug application

(Confidential Documents 59–61).

Again, the agency did not rely on any

of these 73 documents as support for the

1995 proposed rule. Therefore, the

agency was not even required to include

these documents in the administrative

record of the notice of proposed

rulemaking. (See 21 CFR 10.40(b)(vii).)

It likewise follows that because the

agency did not rely upon these

documents, the decision to protect them

cannot be said to have unfairly

interfered with the public’s ability to

question the agency’s rationale for the

rule. (See Mid-Tex Electric Coop., Inc. v.

Federal Energy Regulatory Comm’n, 773

F.2d 327, 344 (D.C. Cir. 1985) (agency’s

failure to disclose two studies was

‘‘manifestly harmless’’ because the

agency did not rely on the studies to

support any finding or conclusion);

Conference of State Bank Supervisors v.

Office of Thrift Supervision, 792 F.

Supp. 837, 843 (D.D.C. 1992) (there is

no violation of the APA’s notice

requirements where the agency has

declined to disclose materials on which

it did not rely in proposing the rule);

B.F. Goodrich Co. v. Department of

Transp., 541 F.2d 1178, 1184 (6th Cir.

1976) (only the basic data ‘‘upon which

the agency relied in formulating the

regulation’’ must be published for

public comment), cert. denied, 430 U.S.

930 (1977); K. Davis, Administrative

Law Treatise, section 7.3 at 307 (3d ed.

1994) (‘‘If an agency does not attempt to

support its final rule by reference to an

undisclosed study, it seems apparent

that the agency was not required to

make the study available to potential

commentators.’’).) The agency went well

beyond existing requirements to make

publicly available thousands of

additional documents for public

review—in recognition of the

uniqueness and public importance of

this proceeding. This effort by the

agency should not be used now as a

basis for suggesting that the agency was

required to publish all information that

it had on hand.

Finally, at the close of this rulemaking

proceeding and with the publication of

the annexed 1996 Jurisdictional

Determination, the agency will

supplement the public docket with

copies of those confidential items for

which the agency previously lacked

permission to publish, but for which

permission has now been granted. Most

of the unpublished manuscripts in the

confidential docket—none of which

were relied upon by the agency to

support the rule—will be available

through this addition to the public

record.

b. Confidential documents on which

the agency relied. In support of the 1995

Jurisdictional Analysis, FDA relied on

only 2 of the 75 documents designated

as confidential: A summary of notes

taken by FDA investigators during site

visits to manufacturing plants run by

Brown and Williamson, Philip Morris,

and R. J. Reynolds (Confidential

Document 74); and a 1991 Brown and

Williamson handbook on leaf blending

and product development (Confidential

Document 75). 259 In addition, the

agency relied in its 1995 Jurisdictional

Analysis on two lines of text that were

redacted from a document that appeared

on the public docket. 260 The 1995

proposed rule itself did not rely on any

of these documents. 261 A thorough

discussion of these three documents,

and the agency’s basis for relying on

them to support its analysis of

jurisdiction, is provided in section VI. of

the 1996 Jurisdictional Determination,

annexed hereto.

3. The Claim that FDA Relied on

‘‘Unknown’’ Undisclosed Data

(3) An association representing the

tobacco industry also claimed that the

agency withheld certain data and

calculations used to construct a series of

charts showing that nicotine and tar

levels in smoke have risen steadily from

1982 to 1991. (See 60 FR 41453 at 41728

to 41731.) These charts appeared only in

the context of the agency’s 1995

Jurisdictional Analysis. A thorough

discussion of how the agency

constructed these charts, and on what

data the agency relied, is provided in

sections II. and VI. of the 1996

Jurisdictional Determination, annexed

hereto.
44560 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

262See, e.g., Personal Watercraft v. Department of

Commerce, 48 F.3d 540, 544 (D.C. Cir. 1995)

(‘‘Agencies may develop additional information in

response to public comments and rely on that

information without starting anew unless prejudice

is shown.’’); Solite Corp. v. Environmental

Protection Agency, 952 F.2d 473, 484 (D.C. Cir.

1991) (‘‘[C]onsistent with the APA, an agency may

use ‘supplementary’ data, unavailable during the

notice and comment period, that expands on and

confirms information contained in the proposed

rulemaking and addresses alleged deficiencies in

the preexisting data, so long as no prejudice is

shown.’’); Community Nutrition Inst. v. Block, 749

F.2d 50, 57–58 (D.C. Cir. 1984) (agency may rely on

information that ‘‘expanded on and confirmed’’

information in the 1995 proposed rule and

addressed alleged deficiencies in the record); see

also Davis, K. C. and R. J. Pierce, Jr., Administrative

Law Treatise, section 7.3 (3d ed. 1994).

4. The Claim that FDA Failed to Include

in the Record New Drug Application

(NDA) Data on Which it Relied

(4) One comment claimed that the

agency relied on studies in seven NDA’s

for the proposition that a high

proportion of smokers are addicted to

nicotine, but failed to make adequate

disclosure of these NDA’s. In particular,

this comment stated that the agency

failed to include any information in the

public docket for NDA 18–612

(Nicorette gum, 2 milligrams (mg)) and

NDA 20–385 (Nicotine nasal spray), and

included only summaries for five other

NDA’s the agency cited. To the extent

the agency relied on any of these NDA’s,

it did so only in the context of the 1995

Jurisdictional Analysis. A

comprehensive discussion of the

agency’s reliance on this material is

provided in section VI. of the 1996

Jurisdictional Determination, annexed

hereto.

5. The Agency’s Reliance in the Final

Rulemaking on New Materials

In an FDA informal rulemaking

proceeding, the final administrative

record must contain the proposed rule,

including all information that the

Commissioner identifies or files with

the proposal, all comments received on

the proposal, including all information

submitted as part of the comments, and

the notice issuing the final regulation,

including all information that the

Commissioner identifies or files with

the final regulation (§ 10.40(g)). An

agency may rely on information and

data that were not included at the

proposal stage that expands on or

confirms information in the proposal or

addresses alleged deficiencies in the

preexisting data, provided that no

prejudice is shown. 262 Otherwise,

‘‘[r]ulemaking proceedings would never

end if an agency’s response to

comments must always be made the

subject of additional comments’’

(Community Nutrition Inst. v. Block,

749 F.2d 50, at 58). Accordingly, the

agency has cited in this preamble and in

the 1996 Jurisdictional Determination

annexed hereto, a small amount of

information that is needed to respond

fully to the comments or that otherwise

supplements the information contained

in or filed with the 1995 proposed rule.

These documents include published

scientific articles, reference texts, letters

to tobacco industry counsel, an abstract

that the tobacco industry asked to

include in the record, three publicly

released tobacco company documents,

Congressional hearing transcripts, and

newspaper articles. The agency has

placed this cited information in the

administrative record.

C. Adequacy of the Notice

(5) Two industry comments argued

that the public’s participation in the

rulemaking process has been frustrated

because the agency presented a ‘‘onesided’’ view in its 1995 notice of

proposed rulemaking. They claimed that

FDA failed to satisfy the APA’s notice

requirement for informal rulemaking

because the agency neither disclosed

nor discussed the supposedly ‘‘large

body’’ of information that is

‘‘inconsistent with, or otherwise not

supportive of, the proposed rule.’’

Further, the agency did not, in their

view, provide a ‘‘reasoned explanation’’

for departing from past precedent on the

issue of whether FDA should regulate

all cigarettes and smokeless tobacco.

These comments provided no legal

authority to support the proposition

that, at the notice stage of a proceeding,

the agency is required to anticipate all

challenges to its reasoning, and must

attempt to answer those challenges.

Rather, at the notice stage of a

rulemaking proceeding, the agency’s

obligation is to include sufficient detail

on the content of the rule, and on the

basis in law and fact for the rule, to

allow for meaningful and informed

comment. (See American Medical Ass’n

v. Reno, 57 F.3d 1129, 1132 (D.C. Cir.

1995); Home Box Office, Inc. v. Federal

Communications Comm’n, 567 F.2d 9,

35–36 (D.C. Cir.), cert. denied, 434 U.S.

829 (1977).)

More specifically, in an informal

rulemaking proceeding, the APA

requires public notice of an agency’s

intention to issue a regulation (5 U.S.C.

553(b)). The notice must include

‘‘reference to the legal authority under

which the rule is proposed,’’ and ‘‘either

the terms or substance of the proposed

rule or a description of the subjects and

issues involved’’ (5 U.S.C. 553(b)(2) and

(b)(3)). FDA’s own regulations require

that a notice of proposed rulemaking

include ‘‘a preamble that summarizes

the proposal and the facts and policy

underlying it, * * * all information on

which the Commissioner relies for the

proposal, * * * and cites the authority

under which the regulation is

proposed’’ (21 CFR 10.40(b)(vii)).

Under case law construing section

553 of the APA, notice of informal

rulemaking must be ‘‘sufficiently

descriptive of the ’subjects and issues

involved’ so that interested parties may

offer informed criticism and comments’’

(Ethyl Corp. v. Environmental Protection

Agency, 541 F.2d 1, 48 (D.C. Cir.) (en

banc), cert. denied 426 U.S. 941 (1976)).

Notice is sufficient under the APA ‘‘if it

affords interested parties a reasonable

opportunity to participate in the

rulemaking process’’ (Forester, 559 F.2d

at 787; accord State of South Carolina

ex rel. Tindal v. Block, 717 F.2d 874,

885 (4th Cir. 1983), cert. denied, 465 U.

S. 1080 (1984)). And, insofar as the 1995

proposed rule relied on a technical

study or specific data essential to an

understanding of the rule, the notice

should have disclosed this information

to the extent needed to allow for

‘‘meaningful commentary’’ (Connecticut

Light and Power Co. v. Nuclear

Regulatory Comm’n, 673 F.2d 525, 530–

31 (D.C. Cir.), cert. denied, 459 U. S. 835

(1982)).

In this instance, the 1995 proposed

rule met both the APA’s notice

requirements (as interpreted by

prevailing case law), as well as FDA’s

own procedural requirements. The

agency by any standard ‘‘fulfilled its

obligation to make its views known to

the public in a concrete and focused

form so as to make criticism or

formulation of alternatives possible’’

(Air Transport Ass’n of America v. Civil

Aeronautics Board, 732 F.2d 219, 225

(D.C. Cir. 1984) (quoting Home Box

Office, Inc., 567 F.2d at 36)).

1. The Agency Provided Adequate

Notice of the Key Legal and Factual

Issues

Although the APA’s notice

requirements could have been met by a

far briefer presentation, the agency

chose to supply the public with a notice

that explored in full the wide range of

factual and legal issues presented. In

doing so, the agency discussed the most

significant issues that the two industry

comments claimed were missing from

the notice.

(6) The comments contended that the

agency failed to discuss past instances
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44561

263Letter from D. Kennedy (FDA) to J. Banzhaf

(ASH) of Dec. 5, 1977, (denial of 1977 petition);

Letter from J. E. Goyan (FDA) to J. Banzhaf (ASH)

of Nov. 25, 1980; Public Health Cigarette

Amendments of 1971, Hearings Before the

Consumer Subcommittee of the Committee on

Commerce, U.S. Senate, 92d Cong., 2d sess., pp.

239–246.

264As discussed in section IV. of the 1996

Jurisdictional Determination, the agency’s decision

not to include a prolonged discussion of past

agency decisions is based on the fact that the

agency is now operating under a different set of

facts. The agency did not commit a procedural error

by failing to chronicle exhaustively decisions it

made in a factually distinguishable context.

Moreover, one of the comments faulted the agency

for failing to give notice of the ‘‘several’’ citizen

petitions filed since 1977 that requested that the

agency regulate cigarettes. In fact, the agency

incorporated by reference into the opening docket

for the 1995 Jurisdictional Analysis all significant

dockets opened since the conclusion of the ASH

litigation that relate to the agency’s jurisdiction over

cigarettes and other nicotine delivery systems. The

index the agency provided to the public on

September 29, 1995, in conjunction with the public

display of the administrative record (as of that

date), included a description of nine dockets the

agency incorporated by reference into the record

supporting the 1995 Jurisdictional Analysis.

in which it declined to exercise

jurisdiction over cigarettes and

smokeless tobacco, including FDA’s

response to a 1977 citizen petition. One

comment in particular insisted that such

a discussion would have alerted the

public to the idea that Congress enacted

preemptive legislation in reliance on

FDA’s past pronouncements, legislation

which the comments argue bars FDA

from regulating these products.

The agency acknowledged in the 1995

Jurisdictional Analysis, published in

conjunction with the 1995 proposed

rule, that it has in the past refrained

from exercising jurisdiction generally

over all cigarettes and smokeless

tobacco (unless claims were made for

the product) (60 FR 41453 at 41482 n.

5). Among other things, the agency

referred readers to the published

decision in Action on Smoking and

Health [ASH] v. Harris, 655 F.2d 236

(D.C. Cir. 1980). That decision

discussed, and indeed arose from, the

1977 citizen petition which, as one

comment claimed, the agency

‘‘conscientiously avoid[ed]’’ in order to

‘‘mislead[]’’ the public. Not only does

the ASH opinion discuss the petition

and the agency’s position at that time

with respect to exercising jurisdiction

generally over cigarettes, it also recounts

for the reader the agency’s historical

position on the issue (Id. at 237–241).

Moreover, the agency placed in the

administrative record copies of

documents in which FDA declined to

exercise jurisdiction, including FDA’s

response to ASH’s 1977 citizen

petition. 263

In addition, the agency attached as

part of an appendix to its 1995

Jurisdictional Analysis copies of the

Commissioner’s testimony before the

House Subcommittee on Health and the

Environment of the Committee on

Energy and Commerce on March 25,

1994 (Appendix 7). At the outset, the

Commissioner stated:

Although FDA has long recognized that the

nicotine in tobacco products produces druglike effects, we never stepped in to regulate

most tobacco products as drugs. One of the

obstacles has been a legal one. A product is

subject to regulation as a drug based

primarily on its intended use. * * * With

certain exceptions, we have not had

sufficient evidence of such intent with regard

to nicotine in tobacco products. * * *

Mr. Chairman, we now have cause to

reconsider this historical view. * * * This

question arises today because of an

accumulation of information in recent

months and years. In my testimony today, I

will describe some of that information.

(Appendix 7 at 1–2 (footnote omitted))

This testimony, like the reference to the

ASH decision, adequately put the public

on notice of FDA’s past position. 264

Nor does FDA agree with the

comment’s argument that Congress, in

reliance on past FDA pronouncements,

enacted legislation precluding FDA

from regulating tobacco products under

the act. As discussed in detail in

sections IV. and V. of the annexed 1996

Jurisdictional Determination, the agency

has never categorically disclaimed

jurisdiction over tobacco products and

Congress has never expressly forbidden

FDA from asserting jurisdiction over

these products. The agency has no

affirmative obligation to posit in its

notice of proposed rulemaking

arguments it believes are legally infirm.

(Cf. Florida Power and Light Co. v.

United States, 846 F.2d 765, 771 (D.C.

Cir. 1988), cert. denied, 490 U.S. 1045

(1989).)

Two tobacco industry comments also

claimed that the agency unfairly

underplayed the complexity of issues

such as ‘‘intended use,’’ product

categorization, regulatory authority over

combination products, and the

applicability of the medical device

provisions of the act to cigarettes and

smokeless tobacco. Instead, one of these

comments asserted that all the agency

had done was publish ‘‘a tendentious

anti-tobacco, pro-FDA-regulation

manifesto’’ and, as such, the agency’s

notice was ‘‘fraudulent.’’ The agency

disagrees with this characterization.

More to the point, the agency disagrees

with the argument that the agency

somehow deprived the public of fair

notice.

Again, to satisfy the APA’s notice

requirement, the agency must specify

with particularity the legal authority on

which its proposal is based (K. C. Davis

& R. J. Pierce, Jr., Administrative Law

Treatise (vol. 1, 3d ed. 1994) section 7.3

at 299). Notice must be ‘‘informative’’

and must ‘‘fairly apprise’’ interested

persons (Id. at 299 and 300). The agency

need not, however, unravel for the

public each and every theoretical step in

the analysis. (See Chemical Waste

Management, Inc. v. Environmental

Protection Agency, 869 F.2d 1526, 1535

(D.C. Cir. 1989) (even where agency

statement in notice of rulemaking

assumes rather than invites comments

on an issue, notice is sufficient if it

provides interested parties ‘‘with a clear

indication of the agency’s intended

course of action * * *.’’); Center for

Auto Safety v. Peck, 751 F.2d 1336,

1361 (D.C. Cir. 1985) (‘‘It is simply not

the case, however, that all of the

essential postulates for an agency rule

must be contained in the record.’’)).

Nevertheless, the agency provided the

public a detailed explanation of why it

regards cigarettes and smokeless tobacco

as drug/device combination products,

and why it believes the device

provisions of the act may, and should,

be used to regulate these products. The

agency set forth its rationale for

regulating these products as devices in

both the August 11, 1995, proposed rule

(see 60 FR 41314 at 41348 to 41350) and

again in the August 11, 1995

Jurisdictional Analysis (see 60 FR 41453

at 41521 to 41525). Further, the agency

identified the precise statutory

provisions under which it proposed to

regulate these products (see 60 FR

41314 at 41346 to 41352, and 41372).

The agency also put the public on

notice, by referencing the Intercenter

Agreement between the Center for Drug

Evaluation and Research and the Center

for Devices and Radiological Health,

that preloaded drug delivery systems are

often regulated using the drug

authorities under the act. The agency

adequately explained—for notice

purposes—why in this instance it

proposed a different approach (60 FR

41314 at 41348 to 41350).

With respect to the application of the

concept of ‘‘intended use,’’ the lengthy

discussion in Part II of the 1995

Jurisdictional Analysis provided the

public with full disclosure of the

agency’s rationale for regulating

cigarettes and smokeless tobacco based

on the ‘‘intended use’’ of these products.

The core facts and precedents on which
44562 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

265See, e.g., Joint Comments of the Smokeless

Tobacco Manufacturers, Comment (January 2,

1996), at 43 to 73 (discussing the agency’s historical

position on agency jurisdiction over tobacco

products), at 99–258 (discussing the agency’s

application of the concept of intended use to

tobacco products), and at 259–307 (analyzing the

agency’s position that cigarettes and smokeless

tobacco are combination products that may be

regulated as restricted devices); Joint Comments of

Cigarette Manufacturers at, among other places, Vol.

I (discussing FDA’s historical position on

jurisdiction), Vol. II (discussing the concept of

intended use), and Vol. V (discussing the regulation

of cigarettes as medical devices).

266See, e.g., Public Citizen Litigation Group,

comment (January 2, 1996); American Heart

Association, comment (December 26, 1995).

267The agency also received a comment

criticizing the agency for failing to discuss the June

1994 Federal Trade Commission’s (FTC) decision

regarding the ‘‘Joe Camel’’ advertising campaign. In

section VI. of this document, the agency discusses

the FTC’s decision, showing that the FTC’s decision

in 1994 with respect to the ‘‘Joe Camel’’ campaign

was neither relevant to, nor contradicted, FDA’s

discussion of the campaign in the 1995 proposed

rule.

the agency relied were displayed in a

manner the agency believes invited

maximum public scrutiny. The agency

even provided the public with 11

different examples (9 from the 1980’s

and 1990’s) of the application of the

intended use concept to the

determination of whether a product,

absent express claims, may be regulated

as a drug or a device (60 FR 41453 at

41527 to 41531). This level of

explanation more than satisfied the

notice requirements of the APA as

interpreted by the relevant case law.

Finally, the quantity and quality of

comments the agency received on the

1995 proposed rule and the 1995

Jurisdictional Analysis suggest that, in

fact, the public was adequately notified

of the relevant issues. The agency

received more comments in this

proceeding than it has ever received on

any other subject, with over 700,000

comments (including form letters) and

over 95,000 distinct or unique sets of

comments. More important, the agency

received hundreds of pages of

comments on the very issues the agency

is said to have hidden from the public.

Indeed, the two industry comments who

complained most vigorously about the

supposed deficiencies in the agency’s

notice of proposed rulemaking

themselves filed volumes of comments

on the issues they claim the agency

concealed. 265 Even the comments of

interested nonindustry persons

evidenced fair notice of the agency’s

reasoning for applying the device

provisions of the act to cigarettes and

smokeless tobacco. 266

In Chemical Waste Management, the

plaintiff complained that the

Environmental Protection Agency’s

(EPA) notice of proposed rulemaking

treated a certain controversial issue ‘‘as

an accomplished fact’’ (869 F.2d at

1535). Like two of the comments here,

the plaintiff in Chemical Waste

Management argued that the APA

required the agency to highlight the fact

that its position was subject to debate

and to solicit comments on the issue.

The United States Court of Appeals for

the District of Columbia rejected this

argument because EPA had provided

notice of its intended course and

because the agency in fact received

numerous comments on the issue (869

F.2d at 1535). (See also Shell Oil Co. v.

EPA, 950 F.2d 741, 757 (D.C. Cir. 1991)

(recognition of a certain issue in

comments may be used to infer that

adequate notice of the issue was given);

Haralson v. Federal Home Loan Bank

Board, 678 F. Supp. 925, 926 (D.D.C.

1987) (same).)

As in cases such as Chemical Waste

Management, the comments FDA

received demonstrate that there is no

serious claim to be made that the agency

has concealed issues from the public.

Interested persons representing both

sides in this controversial proceeding

commented on the very issues the

agency supposedly underplayed in its

notice of proposed rulemaking. 267

The comments that challenge the

adequacy of the agency’s notice confuse

the merits of the issue with procedure.

The supposed deficiencies in FDA’s

legal reasoning, and the supposed

failure to discuss contrary authorities,

raise substantive issues to be resolved

during the comment and response-tocomment phase of the proceeding. The

possibility that some of the agency’s

legal conclusions may be subject to

debate does not render the notice

inadequate. (See Chemical Waste

Management, Inc., 869 F.2d at 1535;

Natural Resources Defense Council, Inc.

v. Hodel, 618 F. Supp. 848, 864–65 (E.D.

Cal. 1985).)

2. The Agency Provided a ‘‘Reasoned

Explanation’’ for its Current Position

Several tobacco industry comments

also claimed that the agency violated

the APA’s notice provisions by failing to

include a ‘‘reasoned explanation’’ for

departing from past precedent on the

issue of whether to regulate all

cigarettes and smokeless tobacco. In

their view, the 1995 proposed rule and

the 1995 Jurisdictional Analysis were

procedurally infirm because the agency

did not adequately explain its basis for

past decisions not to regulate these

products, and did not distinguish those

decisions from its present position. One

of these comments likewise asserted

that the agency was required to include

in the administrative record each and

every document ‘‘that formed the basis

for, or was an expression or reflection

of, FDA’s consistent position over more

than 80 years that it does not have

jurisdiction to regulate cigarettes.’’ The

absence of this material, according to

the comment, demonstrates that the

agency failed to consider ‘‘obviously

relevant’’ contrary information in

proposing to regulate these products.

The authorities cited in the comments

at best require that, by the close of an

administrative proceeding, the agency

must provide a ‘‘reasoned explanation’’

to the extent the agency has departed

from a prior formal position. (See, e.g.,

RKO Gen., Inc. v. FCC, 670 F.2d 215

(D.C. Cir. 1980) cert. denied, 456 U.S.

927 (1982) (challenge to final order of

Federal Communications Commission

denying renewal of television license);

Baltimore and Annapolis R. R. v.

Washington Metro. Area Transit

Comm’n, 642 F.2d 1365 (D.C. Cir. 1980)

(challenge to final order of transit

commission); Greyhound Corp. v. ICC,

551 F.2d 414 (D.C. Cir. 1977) (challenge

to final decision of the labor board);

International Union, United Auto

Workers v. NLRB, 459 F.2d 1329 (D.C.

Cir. 1972) (challenge to final decision of

labor board); see also Motor Vehicle

Mfrs. Assoc. v. State Farm Mutual Auto

Ins., 463 U.S. 29, 43 (1983) (challenge to

final rule rescinding passive restraint

seatbelt requirement contained in a

Department of Transportation

standard).) None of these cases, which

involved challenges to final agency

orders and final rules, holds that at the

notice stage of a proceeding, when an

agency is proposing to depart from a

prior position, the agency must provide

a comprehensive ‘‘reasoned

explanation.’’

The agency nevertheless agrees that

the rulemaking proceeding, taken as a

whole, should clearly and rationally

justify changes in existing policies.

Thus, FDA included in its notice of

proposed rulemaking and 1995

Jurisdictional Analysis ample reference

to its prior policy and a more than

ample discussion of the agency’s

rationale for changing its policy. Indeed,

the very intent of the 1995 Jurisdictional

Analysis, and the 622 footnotes

supporting the analysis, was to provide

the public with a full view of the

evidence that supports the need for the

agency to take a different approach to

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

1995 Jurisdictional Analysis, its

decision to propose to regulate these

products, when in the past it chose not

to (except where claims were made), is

based on the fact that ‘‘[t]he quality,

quantity, and scope of the evidence

available to FDA today is far greater

than any other time when FDA has

considered regulation of cigarettes and

smokeless products.’’ (60 FR 41453 at

41464, n. 1.) Footnote 5 of the 1995

Jurisdictional Analysis, in particular,

made clear that: (1) The agency in the

past had declined to exercise

jurisdiction generally over these

products; and (2) the reason for taking

a different position today is that the

evidence before the agency regarding

the intended use of these products ‘‘has

changed dramatically.’’ (60 FR 41453 at

41482, n. 5). In addition, the agency

repeatedly stated that its analysis was

based on ‘‘evidence now available to the

agency’’ (60 FR 41453 at 41464),

‘‘current evidence’’ (60 FR 41466),

evidence accumulated since 1980 (60

FR 41482, n. 5), and evidence that has

emerged since 1980 or was not widely

known until recently (60 FR 41453 at

41483 to 41484, and 41539).

Neither the APA nor the case law

cited in the comments requires an

agency to provide a thorough ‘‘reasoned

explanation’’ for departing from

precedent at the notice stage of a

proceeding. Rather, the APA at best

requires that the agency give notice of

its proposal to take a different position

or view, and give enough information to

allow the public a reasonable

opportunity to comment. Not until the

close of the proceeding, after public

comment has been received, must the

agency ensure that it has provided a

‘‘reasoned explanation.’’ The agency

believes in this instance that its

discussion at the notice stage met the

standard that courts ordinarily do not

impose until the close of an

administrative proceeding. Nonetheless,

the agency has provided a detailed

discussion of the legal and factual bases

for taking its current position in section

IV. of the 1996 Jurisdictional

Determination, annexed hereto.

Finally, the agency does not agree that

it was required to include in the record,

at the notice stage of the proceeding,

each and every prior agency ‘‘decision,

statement, and finding.’’ Rather, the

agency appropriately included in the

record enough documentation to give

the public notice of the agency’s prior

position, and notice of the agency’s

prior reasoning for declining to exercise

jurisdiction generally over these

products (absent express claims). For

example, the agency incorporated by

reference into the administrative record

supporting the 1995 Jurisdictional

Analysis all significant dockets opened

since the conclusion of the 1977 ASH

litigation that relate to the agency’s

jurisdiction over these products. In

addition, the agency included in the

record in support of its 1995

Jurisdictional Analysis its response to

the original ASH citizen petition. The

response to the ASH petition outlines in

detail the ‘‘contrary’’ view the agency

allegedly concealed, including full

discussions of the agency’s enforcement

history with respect to tobacco products

and the agency’s significant past

pronouncements on the subject. In any

case, the tobacco industry itself, through

its comments, has introduced many of

the agency’s earlier statements into the

administrative record for this

proceeding. Thus, unlike the facts

presented in cases such as Public

Citizen v. Heckler, 653 F. Supp. 1229

(D.D.C. 1986) or Walter O. Boswell

Memorial Hospital v. Heckler, 749 F.2d

788 (D.C. Cir. 1984), as referenced in the

comment, the administrative record for

this proceeding already contains the

‘‘adverse’’ information claimed to be

lacking, by virtue of the agency’s

inclusion of documents in the record

and the comments received by the

agency.

D. Adequacy of the Comment Period

FDA received at least one comment

urging that the comment period was

unreasonably short in light of the

complexity of the proposed rule, the

number of materials the agency put on

public display, and the possible impact

of the rule on the tobacco industry. This

comment argued that the agency acted

arbitrarily and capriciously in deciding

to ‘‘limit’’ the comment period to 144

days from the publication of the August

11, 1995, proposal and 95 days from the

public release of the documents FDA

considered but did not rely upon.

Far from having ‘‘limited’’ the

comment period, FDA provided more

than twice as much time for comment

as the agency’s regulations require. (See

60 FR 53560, October 16, 1995

(extending comment period for the

proposed rule); 60 FR 53620, October

16, 1995 (extending comment period on

Jurisdictional Analysis).)

The APA requires only that an agency

‘‘give interested persons an opportunity

to participate in the rule making

through submission of written data,

views, or arguments * * *.’’ (5 U.S.C.

553(c).) This is all the APA requires;

there is no statutory requirement

concerning how many days an agency

must allow, nor is there a requirement

that an agency must extend the period

at the request of an interested person.

(See Phillips Petroleum Co. v. EPA, 803

F.2d 545, 559 (10th Cir. 1986).)

FDA’s own regulations generally

afford the public 60 days to comment on

a proposed rule, unless the

Commissioner shortens or lengthens the

period for good cause (21 CFR

10.40(b)(2)). Executive Order 12889

implementing the North American Free

Trade Agreement prescribes a minimum

comment period of 75 days on certain

proposed rules, except when good cause

is shown for a shorter comment period.

(See 58 FR 69681, December 30, 1993.)

Here, the agency provided the public

with 144 days from the publication of

the notice, 139 days from the release of

the documents the agency cited in

support of the rule and the 1995

Jurisdictional Analysis (on August 16,

1995), and 95 days from the release of

the materials the agency considered but

did not directly rely upon (on

September 29, 1995). Thus, even when

counting from the date the agency

released additional documents of no

direct relevance to the 1995 proposed

rule, the agency provided much more

time for comment on the notice of

proposed rulemaking than its

regulations, or the Executive Order,

require.

Further, on March 20, 1996, the

Federal Register published a notice

providing an additional 30-day

comment period limited to specific

documents the agency added to the

proposed rulemaking docket (see 61 FR

11349, March 20, 1996) and to the

docket in support of the agency’s

analysis of its jurisdiction (see 61 FR

11419, March 20, 1996). Although the

agency expressly limited the scope of

the matters on which interested persons

could comment, the March 20, 1996,

action did provide the public with yet

another 30 days on which to comment

on issues related to such core subjects

as the manipulation of the nicotine

content of cigarettes and smokeless

tobacco. The March 20, 1996, action

also reopened the comment period with

respect to the record in support of the

agency’s proposal to regulate the

advertising of these products in ‘‘adult

publications’’ and billboard advertising.

The agency is not persuaded that any

interested person has been unfairly

prejudiced by the length of the comment

period. First, FDA considers requests to

extend the comment period on a caseby-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

Institute together with five major

tobacco companies) presented in their

request for additional time no

compelling reasons to extend the period

(such as a new, material study). On the

other hand, FDA is faced with a matter

raising serious public health concerns.

For those reasons, the agency denied the

request to extend the period for as long

as had been requested (see 60 FR

53560).

Second, each of the five tobacco

companies who submitted this joint

comment complaining about the length

of the comment period also filed suit

against FDA 1 day before the Federal

Register published FDA’s notice of

proposed rulemaking. The timing

appears to indicate that these firms had

been preparing to respond to an FDA

proposal to regulate cigarettes and

smokeless tobacco for some time. In any

case, they were able, jointly, to submit

2,000 pages of comments and 45,000

pages of exhibits within the time

allotted for commenting on the

Jurisdictional Analysis and the

proposed rule. Their submissions far

outweigh any others. The agency,

therefore, is not persuaded that these

interested persons suffered prejudice as

a result of FDA’s allowing twice as

much time as the agency’s regulations

require. (See Conference of State Bank

Supervisors v. Office of Thrift

Supervision, 792 F. Supp. 837, 844

(D.D.C. 1992) (in light of the comments

received, court declined to find that 30-

day comment period was insufficient to

allow opportunity for meaningful public

participation); Phillips Petroleum Co.,

803 F.2d at 559 (citing cases in which

courts have upheld notice periods of 45

days or less).)

In sum, the agency believes it

provided ample additional time for

comments—nearly 90 days more than is

provided for in the agency’s own

procedural regulation. Given that it

received over 95,000 distinct sets of

comments, the agency is not persuaded

that the length of the comment period

unfairly hampered the quality of the

public debate on this matter.

E. Conclusion

Because of the importance of the

issues involved in this proceeding, the

agency compiled the most extensive

administrative record in support of a

proposed rulemaking in its history. FDA

employed procedures that exceeded all

legal requirements in giving the public

a reasonable opportunity to participate

in this matter.

XIII. Executive Orders

A. Executive Order 12606: The Family

Executive Order 12606 (E.O. 12606)

directs Federal agencies to determine

whether policies and regulations may

have a significant impact on family

formation, maintenance, and general

well-being. The preamble to the 1995

proposed rule stated that the rule would

have ‘‘no potential negative impact on

family formation, maintenance, and

general well-being.’’ Specifically, the

Food and Drug Administration (FDA)

said that the rule would not affect

family stability or marital commitments,

would not have a significant impact on

family earnings, and would not impede

parental authority and rights in the

education, nurture, or supervision of

children. To the contrary, the preamble

to the 1995 proposed rule said that the

rule would ‘‘help the significant

majority of American families that seek

to discourage their children from using

cigarettes and smokeless tobacco’’

because ‘‘[t]he pervasive promotion and

easy availability of these products * * *

severely hinder the individual family

from carrying out this function by itself’’

(60 FR 41314 at 41356).

In the Federal Register of August 11,

1995, the preamble to the proposed rule

(60 FR 41314) (the 1995 proposed rule)

also stated that, under section 1(g) of the

Executive Order (which instructs

agencies to ask about a rule’s ‘‘message’’

to young people concerning their

behavior, their personal responsibility,

and societal norms), the rule would

‘‘help reduce the conflict between the

anti-smoking messages issued by

Federal and State authorities and the

pro-tobacco messages seen in

advertising’’ that are attractive to

children. This would enable young

people ‘‘to understand how prevalent

tobacco use is in society and also

appreciate how their decisions

regarding cigarette and smokeless

tobacco use can affect their health’’ (60

FR 41314 at 41356).

In the 1995 proposed rule, FDA

invited comments and suggestions on

the rule’s effect on the family.

FDA received several comments that

disagreed with FDA’s analysis.

(1) One comment said that the rule

would have a significant economic

effect on family earnings through

increased costs (in order to comply with

the rule) or the possible loss of jobs.

Another comment said that the rule

would destroy some family businesses,

especially those dependent on vending

machines selling cigarettes or on

sponsorships by cigarette or smokeless

tobacco manufacturers.

The agency disagrees with the

comments. FDA reiterates that the rule

does not affect sales to adults. It is

narrowly drawn to reduce young

people’s access to cigarettes and

smokeless tobacco and to reduce the

appeal of those products to young

people. In short, the rule is intended to

prevent illegal sales to young people,

and the agency has no evidence to

suggest that a significant number of

families depend on such sales.

FDA also notes that the final rule, as

amended, permits vending machines in

facilities that are inaccessible to young

people and also permits sponsorships

under certain restrictions. These

changes to the rule should reduce the

potential economic impact on families

dependent on vending machine

earnings or sponsorships or enable them

to adjust their affairs to maintain family

earnings.

(2) Several comments said that the

rule interferes with parents’ ability to

raise their children, but did not

elaborate on how the rule supposedly

interfered in child-rearing.

The agency disagrees with the

comments. The rule does not direct

parents to educate or raise their children

in any particular manner and, insofar as

adults are concerned, does not regulate

the use of cigarettes or smokeless

tobacco by adults. It does reduce both

their access and appeal to young people

and, as a result, should help those

parents who are trying to prevent their

children from becoming regular users of

these products. Thus, the rule does not

interfere with parental authority or the

manner in which parents educate,

nurture, or supervise their children.

FDA, therefore, reiterates that the rule

does not have a negative impact on

family formation, maintenance, and

general well-being and is consistent

with Executive Order 12606.

B. Executive Order 12612: Federalism

Executive Order 12612 (E.O. 12612)

requires Federal agencies to carefully

examine regulatory actions to determine

if they have a significant impact on the

States, on the relationship between the

States and the Federal government, and

on the distribution of power and

responsibilities among the various

levels of government. E.O. 12612 directs

Federal agencies that are formulating

and implementing policies to be guided

by certain federalism principles, such as

encouraging a ‘‘healthy diversity in the

public policies adopted by the people of

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

2 of E.O. 12612).

Although § 897.42 of the 1995

proposed rule would have excluded

from preemption under section 521 of

the act more stringent State and local

requirements that do not conflict with

requirements imposed under FDA’s

final rule, FDA has deleted § 897.42

from the final rule because of significant

concerns with regard to the validity of

that section’s proposed preemption

exclusion. See discussion in section X.

of this document. Thus, under the

express provisions of section 521(a) of

the act, FDA regulation of cigarettes and

smokeless tobacco as nicotine-delivery

devices will result in preemption of

State and local requirements governing

the sale and distribution of cigarettes

and smokeless tobacco when such

requirements are different from, or in

addition to, the requirements under

FDA’s final rule.

FDA received many comments on the

1995 proposed rule regarding its

possible impact on State and local

governments. Most comments came

from individual State legislators in over

15 States (often using the same text or

paragraphs). FDA also received

comments from United States Senators

and Representatives, four State

governors, three lieutenant governors, as

well as a number of State and local

health departments, substance abuse

programs, and law enforcement

agencies. In addition, FDA received

comments from industry trade

associations and individual retailers.

After careful consideration of these

comments, FDA has assessed the rule’s

impact on the States, on the relationship

between the States and the Federal

government, and on the distribution of

power and responsibilities among the

various levels of government. As

discussed below in this section, the

agency concludes that the preemptive

effects of the final rule are consistent

with E.O. 12612.

(3) Many comments, including several

from legislators, expressed opposition to

the 1995 proposed rule on the grounds

that the rule adversely affected State

sovereignty by infringing on States’

rights to regulate tobacco products, to

protect their citizens, and to regulate

businesses within the State. Some

comments from State legislators

criticized the rule, interpreting it as a

statement that the State are ‘‘unable to

care for [their] own children,’’ while

other comments said that legislators, not

FDA, should address issues affecting

private citizens because legislators are

elected officials who can be held

politically accountable by their

constituents.

Some comments asserted that the

1995 proposed rule would prevent

States from experimenting with or

trying different local approaches to

reduce the accessibility and appeal of

cigarettes and smokeless tobacco

products. Some of these comments

argued that their State laws were either

adequate or superior to the 1995

proposed rule, citing, for example, State

vending machine restrictions, State laws

prohibiting distribution of tobacco

products to minors, and State proof-ofage requirements. Moreover, some

comments argued that FDA has failed to

show that youth access to, and use of,

tobacco products is a national (rather

than State) concern warranting Federal

action.

In contrast, several comments from

State departments of health and State

attorneys general noted that tobacco

regulation is not solely a State issue.

Moreover, some of the comments

supported the rule for its potential

impact on public health and on illegal

sales of tobacco products to young

people.

FDA recognizes the pioneering and

continuing role in the area of regulation

of youth access to tobacco products that

States have played, particularly certain

active tobacco-control States. Federal

cooperation with, and continued

reliance upon, innovative and

aggressive State and local enforcement

efforts is essential.

As explicitly recognized in E.O.

12612, however, Federal action limiting

the discretion of State and local

governments is appropriate ‘‘where

constitutional authority for the action is

clear and certain and the national

activity is necessitated by the presence

of a problem of national scope’’ (section

3(b) of E.O. 12612). The final rule meets

both of these conditions. First, the

constitutional authority for the final rule

is clearly rooted in the act which was

enacted by Congress under the authority

of the Commerce Clause of the

Constitution, art. I, section 8, cl. 3.

Second, youth access to cigarettes and

smokeless tobacco is a problem of

national scope that necessitates the

provisions established by the final rule.

As discussed in the preamble to the

1995 proposed rule, approximately 3

million children under the age of 18 are

daily smokers (60 FR 41314 at 41317).

Moreover, every day, approximately

another 3,000 young people become

regular smokers (Id.). Children annually

consume hundreds of millions of

cigarettes, with the estimates ranging

from 516 million to 947 million

packages (Id.). Although most segments

of the American adult population have

decreased their use of cigarettes,

smoking among young people has

recently begun to rise (60 FR 41314 at

41315). With regard to smokeless

tobacco, similar statistics demonstrate

the extent of the problem in this area—

an estimated 1 million adolescent males

use smokeless tobacco (60 FR 41314).

These figures clearly demonstrate a

serious problem which exists at a

national level. The health effects

associated with cigarettes and smokeless

tobacco are well established and have

national social and health implications

that warrant Federal attention.

As discussed in section X. of this

document, FDA believes the

requirements it is establishing in this

final rule set an appropriate floor for

regulation of youth access to tobacco

products but do not, as a policy matter,

reflect a judgement that more stringent

State or local requirements are

inappropriate. Indeed, State and local

governments may apply for exemption

from preemption under section 521(b) of

the act with regard to State and local

requirements governing the sale and

distribution of cigarettes and smokeless

tobacco. A State or local requirement

will be exempted from preemption

under section 521(b) of the act if the

State or local requirement: meets the

exemption requirements established

under that section, and is consistent

with the goals in the final rule. The

availability of exemptions from

preemption established under section

521(b) of the act enables State and local

governments to preserve or enact more

stringent requirements governing the

sale and distribution of cigarettes and

smokeless tobacco.

(4) Several comments asserted that

States should be free to decide how to

allocate their resources, including

decisions as to whether any resources

should be spent on tobacco control.

Other comments expressed concern as

to the rule’s possible impact on State

resources, explaining that States lacked

resources to enforce the rule or

predicting that FDA would lack

sufficient resources to enforce the rule

and, as a result, would have States

handle enforcement matters.

FDA believes that these concerns are

unfounded. First, because FDA is

responsible for enforcing this rule, the

rule should not require the expenditure

of State resources for its enforcement.

Second, with regard to State tobacco

control, State and local governments

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

in this area through the availability of

exemptions from preemption under

section 521(b) of the act.

(5) Several comments also expressed

strong concern regarding the rule’s

possible impact on the State economies,

particularly with respect to farmers,

manufacturers, distributors, and

retailers. A detailed analysis of the

rule’s economic impact can be found in

section XV. of this document.

Section 3(d)(3) of E.O. 12612 directs

Federal departments and agencies to

consult with appropriate officials and

organizations representing the States in

developing those standards. Similarly,

section 4(d) of E.O. 12612 instructs

Federal departments and agencies to

consult, to the extent practicable, with

State officials and organizations when

the Federal department or agency

‘‘foresees the possibility of a conflict

between State law and federally

protected interests within its area of

regulatory responsibility.’’ Moreover,

section 4(e) of E.O. 12612 requires

Federal departments and agencies to

‘‘provide all affected States notice and

an opportunity for appropriate

participation in the proceedings’’ when

the Federal department or agency

proposes to act through rulemaking to

preempt State law.

The proposed rule published in the

Federal Register of August 11, 1995,

notified States and local governments of

the Federal interest in regulating the

sale and distribution of cigarettes and

smokeless tobacco in order to protect

children and adolescents. FDA, through

the comment period on the proposed

rule, gave State and local governments

notice and an opportunity to participate

in the rulemaking process, as required

by E.O. 12612. This final rule, as well

as the exemption document, which

appears elsewhere in this issue of the

Federal Register, provide additional

notice to State and local governments.

Further opportunity for participation is

provided by the availability of

exemptions from preemption set forth in

section 521(b) of the act.

In conclusion, FDA has determined

that the preemptive effects of the final

rule are consistent with E.O. 12612.

C. Executive Order 12630:

Governmental Actions and Interference

with Constitutionally Protected Property

Rights

Executive Order 12630 (E. O. 12630)

directs Federal agencies to ‘‘be sensitive

to, anticipate, and account for, the

obligations imposed by the Just

Compensation Clause of the Fifth

Amendment in planning and carrying

out governmental actions so they do not

result in the imposition of unanticipated

or undue additional burdens on the

public fisc’’ (Section 3(a)). Section 3(c)

of the order states that actions taken to

protect the public health and safety

‘‘should be undertaken only in response

to real and substantial threats to public

health and safety, be designed to

advance significantly the health and

safety purpose, and be no greater than

is necessary to achieve the health and

safety purpose.’’ Additionally, section

4(d) of E.O. 12630 requires, as a

prerequisite to any proposed action

regulating private property use for the

protection of public health and safety,

each agency to: (1) Clearly identify the

public health or safety risk created by

the private property use that is the

subject of the proposed action; (2)

establish that the proposed action

substantially advances the purpose of

protecting the public health and safety

against the identified risk; (3) establish,

to the extent possible, that the

restrictions imposed on private property

are not disproportionate to the extent to

which the use contributes to the overall

risk; and (4) estimate, to the extent

possible, the potential cost to the

Government should a court later

determine that the action constitutes a

taking.

The agency, in the preamble to the

1995 proposed rule, considered whether

the rule would result in a ‘‘taking’’ of

private property and concluded that,

while some requirements might affect

private property, the rule did not result

in a ‘‘taking’’ of that property. (See 60

FR 41314 at 41357 through 41359.) In

brief, the preamble to the 1995 proposed

rule noted that the proposal would

prohibit the use of a nontobacco product

trade name on a tobacco product,

eliminate vending machines and selfservice displays, restrict outdoor

advertising from being placed within

1,000 feet of any elementary or

secondary school or playground,

prohibit all brand identifiable

nontobacco items (such as hats and teeshirts), and require established names

and a brief statement on labels, labeling,

and/or advertising. Sponsorship, under

the 1995 proposed rule, would be

limited to the corporate name. The

preamble to the 1995 proposed rule

explained that the rule did not result in

a ‘‘taking’’ because the rule would not

require the Government to physically

invade or occupy private property and

would not deny all economically viable

uses of property. For example, the

preamble to the 1995 proposed rule also

stated that some items, such as vending

machines, self-service displays, and

nontobacco items, could be adapted to

other uses. The preamble to the 1995

proposed rule also found that the rule

substantially advanced the purpose of

protecting the public health and that the

restrictions were not disproportionate to

the extent to which the use of the

private property contributed to the

public health risk (60 FR 41314 at 41357

through 41359). FDA also invited

interested persons to submit

information to enable the agency to

determine the potential cost to the

Government if a court found that the

actions described in the 1995 proposed

rule constituted a taking.

The final rule, as amended, prohibits

the use of a trade name of a nontobacco

item for any tobacco product, restricts

the placement of vending machines and

self-service displays, restricts outdoor

advertising from being placed within

1,000 feet of any elementary or

secondary school or playground,

prohibits all brand identifiable

nontobacco items, such as hats and teeshirts and requires established names on

labels, labeling, and/or advertising, and

places certain restrictions on

sponsorship. Thus, the final rule, in

many respects, is more lenient than the

1995 proposed rule. For example, the

1995 proposed rule would have

eliminated the use of vending machines;

the final rule permits vending machine

sales to occur in locations that are

inaccessible to young people. The 1995

proposed rule would have eliminated

mail-order sales; the final rule permits

such sales to continue. So, given that

the 1995 proposed rule did not result in

a ‘‘taking,’’ the final rule, being more

lenient than the 1995 proposed rule,

also should not result in a ‘‘taking.’’

Nevertheless, FDA received several

comments asserting that the rule would

effect a ‘‘taking’’ of private property.

Most comments did not assign a specific

monetary value to the private property

which they felt would be ‘‘taken’’ or,

instead, gave values or figures

applicable to the entire industry rather

than values or figures that would apply

to the market (which, in this case,

would be sales to people under age 18)

affected by the rule.

(6) Several comments, particularly

from retailers, claimed that the 1995

proposed rule’s restrictions on selfservice displays constituted a ‘‘taking.’’

A few comments explained that, for selfservice displays, requiring the displays

to be moved behind the counter would

be analogous to a Government requiring

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

Amendment. FDA also received a small

number of comments from firms that

manufacture displays; these firms

argued that the rule would essentially

force them out of business and represent

a ‘‘taking’’ of the business.

FDA disagrees with the comments.

The final rule, as amended, permits selfservice displays (merchandisers only) in

facilities that are totally inaccessible to

young people. Thus, in those facilities

where merchandisers will be permitted,

the rule will not require the

merchandisers to be removed, and firms

that manufacture merchandisers will

continue to have a market for their

merchandisers.

Retailers might be able to avoid or

reduce the rule’s impact on some

merchandisers if those merchandisers

could be adapted to other uses. For

example, a merchandiser that consisted

of bare shelves could be used to display

products other than cigarettes and

smokeless tobacco. Other merchandisers

could be moved and, as a result, would

retain their utility; for example, a

counter display that stands near a cash

register could be moved behind the

counter and still be used for cigarettes

and smokeless tobacco.

Additionally, as explained in greater

detail in section XI. of this document,

reductions in personal property’s value,

even prohibitions on all economically

viable uses, and financial expenditures

to comply with a regulatory requirement

do not necessarily establish a taking.

(7) Several comments asserted that the

rule would eliminate the use of vending

machines. In the preamble to the 1995

proposed rule, FDA cited an article from

a vending machine publication to

suggest that vending machines could be

converted to sell other products and so,

while the 1995 proposed rule would

prohibit the use of vending machines for

cigarettes and smokeless tobacco, the

ability to convert a vending machine to

other uses reduced the likelihood of a

‘‘taking’’ (60 FR 41314 at 41358).

However, FDA received several

comments explaining that some

cigarette vending machines, particularly

older models, cannot be adapted to

other uses so that the 1995 proposed

rule would destroy the value of those

older vending machines.

As discussed earlier in this document,

the final rule permits vending machines

in facilities that are totally inaccessible

to young people. While this may limit

the number of places where vending

machines may be used, may exclude

vending machines from places where

they were used most profitably, or, for

those vending machines that cannot be

moved, may compel the vending

machine owner to convert the machine

to other uses, if possible, the final rule’s

restrictions do not constitute a taking.

Reductions in personal property’s value,

even prohibitions on all economically

viable uses, and financial expenditures

to comply with a regulatory requirement

do not necessarily establish a taking.

(8) Several comments asserted that the

rule would reduce sales or tax revenues,

prompt companies to terminate

employees, or suspend sponsorship of

events, thereby depriving States of

revenues associated with those

sponsored events or eliminating the

event itself. For example, one State

legislator claimed that the rule would

adversely affect automobile racing

events in the State, leading to a loss of

8 million dollars in revenue and

adversely affecting the State’s tourism

department. Another State legislator

asserted that the rule’s sponsorship

restrictions would end rodeo events in

the State.

FDA disagrees with the comments.

While the rule’s economic impacts may

be significant, those impacts do not

necessarily result in a taking. For

example, the final rule does not require

firms to terminate employees or to stop

sponsoring events. In fact, the final rule

expressly permits sponsorships in the

corporate name. The concerns expressed

by the comments are also speculative

and, to the extent that they do occur,

would result from decisions made by

third parties rather than by FDA. The

Fifth Amendment requires just

compensation for a governmental taking

of private property; it does not require

compensation for the consequential

damages resulting from the exercise of

a lawful Government regulation on that

property.

Indeed, as noted in the preamble to

the 1995 proposed rule, courts have

generally required either a physical

invasion of the property or a denial of

all economically beneficial or

productive use of the property and

examined the degree to which the

governmental action serves the public

good, the economic impact of that

action, and whether the action has

interfered with ‘‘reasonable investmentbacked expectations’’ (60 FR 41314 at

41357 through 41358). The preamble to

the 1995 proposed rule noted that

deprivation of the most beneficial use of

property does not constitute a taking

and that Government regulation often

involves adjustment of rights for the

public good. If every Government

regulation resulted in a taking, then the

Government would be effectively

required to ‘‘regulate by purchase’’ (60

FR 41314 at 41358 (citing Andrus v.

Allard, 444 U.S. 51, 65 (1979)). Here, the

agency is not directing retailers to

terminate staff, taking revenue

belonging to retailers, or ending

sponsored events. It is only issuing

regulations to reduce illegal cigarette

and smokeless tobacco to young people

and the appeal of such products to

young people. Retailers would still

receive revenues from legal sales to

adults; sponsorships in the corporate

name could occur.

Other cases support the notion that

lawful regulatory action does not

constitute a taking merely because the

Government action diminishes the value

of private property, reduces profits, or

prevents the most beneficial use of

property (see Carlin Communications,

Inc. v. Federal Communications

Comm’n, 837 F.2d 546, 557–558 n. 5 (2d

Cir.), cert. denied, 488 U.S. 924 (1988)

(FCC regulation of ‘‘dial-a-porn’’

services to protect minors did not

constitute a taking); Galloway Farms,

Inc. v. United States, 834 F.2d 998 (Fed.

Cir. 1987) (trade embargo, while closing

off certain markets, did not eliminate all

economic value so no taking occurred);

Minnesota Ass’n of Health Care

Facilities, Inc. v. Minnesota Dep’t of

Public Welfare, 742 F.2d 442, 446 (8th

Cir. 1984), cert. denied, 469 U.S. 1215

(1985) (nursing home’s decision to

participate in Medicaid program was

voluntary and so a statute pertaining to

Medicaid rates did not constitute a

taking); Carruth v. United States, 627

F.2d 1068, 1081 (Ct. Cl. 1980)

(regulation affecting contaminated

peanuts, while reducing their value, did

not constitute a taking); Warner-Lambert

Co. v. Federal Trade Comm’n, 562 F.2d

749, 759 n. 45 (D.C. Cir. 1977), cert.

denied, 435 U.S. 950 (1978) (FTC order

requiring corrective advertising did not

constitute a taking)).

Furthermore, courts have generally

declined to require compensation for

the loss of contracts that could not be

completed following the enactment of a

new statute or regulation or action by

the Government and have not required

compensation for the loss of future or

anticipated profits. In Omnia

Commercial Co. v. United States, 261

U.S. 502 (1923), the Supreme Court had

to decide whether the Government’s

acquisition of a steel company’s entire

production of steel plate constituted a

taking of a firm’s contract for a large

quantity of steel plate from the same

steel company. The Court wrote that,

‘‘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

value of or destroy property—for

example, restrictions upon the height or

character of buildings, destruction of

diseased cattle, trees, etc., to prevent

contagion—but for which no remedy is

afforded. Contracts in this respect do

not differ from other kinds of property’’

(Id. at pp. 508 through 509). The Court

reviewed earlier decisions and stated

that:

The conclusion to be drawn * * * is, that

for consequential loss or injury resulting

from lawful governmental action, the law

affords no remedy. The character of the

power exercised is not material. * * * If,

under any power, a contract or other property

is taken for public use, the Government is

liable; but, if injured or destroyed by lawful

action, without a taking, the Government is

not liable.

(Id. at p. 510)

The Court held that while the

Government took the steel, it did not

take the contract itself and that

‘‘[f]rustration and appropriation are

essentially different things’’ (Id. at p.

513). (See also Louisville & Nashville

R.R. Co. v. Mottley, 219 U.S. 467, 484

(1911); NL Industries, Inc. v. United

States, 839 F.2d 1578, 1579 (Fed. Cir.),

cert. denied, 488 U.S. 820 (1988)

(‘‘frustration of a business by loss of a

customer was not a taking’’); Carruth,

627 F.2d at 1081 (‘‘[I]n cases where

there has been no direct appropriation

of property by governmental agencies,

consequential damages resulting from

the exercise of lawful regulations are not

compensable takings within the

purview of the Fifth Amendment’’).)

Thus, FDA disagrees with the

comments suggesting that the rule will

result in a taking of jobs or future

revenues associated with sponsored

events.

(9) Several comments said that the

1995 proposed rule’s restrictions on the

use of trade names constitute a taking of

trade names or the goodwill associated

with a tradename or asserted that one

has a ‘‘right’’ to use a brand name in any

manner.

As discussed in section XI. of this

document, the agency disagrees that any

provision in this rule effects a taking of

trademarks and goodwill.

XIV. Environmental Impact

In the Federal Register of August 11,

1995 (60 FR 41314), the preamble to the

proposed rule stated that FDA had

determined under § 25.24(a)(8), (a)(11),

and (e)(6) that the proposed action was

of a type that does not individually or

cumulatively have a significant impact

on the human environment. No new

information or comments have been

received that would affect the agency’s

previous determination that this action

has no significant impact on the human

environment, and that neither an

environmental assessment nor an

environmental impact statement is

required.

XV. Analysis of Impacts

A. Introduction and Summary

The Food and Drug Administration

(FDA) has examined the impacts of the

final rule under Executive Order 12866,

under the Regulatory Flexibility Act (5

U.S.C. 601–612), and under the

Unfunded Mandates Reform Act of 1995

(Pub. L. 104–4). Executive Order 12866

directs agencies to assess all costs and

benefits of available regulatory

alternatives and, when regulation is

necessary, to select regulatory

approaches that maximize net benefits

(including potential economic,

environmental, public health and safety,

and other advantages; and distributive

impacts and equity). If a rule has a

significant economic impact on a

substantial number of small entities, the

Regulatory Flexibility Act requires

agencies to analyze regulatory options

that would minimize any significant

impact of such rule on small entities.

Section 202 of the Unfunded Mandates

Reform Act requires that agencies

prepare an assessment of anticipated

costs and benefits before proposing any

rule that may result in an expenditure

by State, local and tribal governments,

in the aggregate, or by the private sector,

of $100,000,000 (adjusted annually for

inflation) in any year. Section 205 of the

Unfunded Mandates Reform Act also

requires that the agency identify and

consider a reasonable number of

regulatory alternatives and from those

alternatives select the least costly, most

cost-effective, or least burdensome

alternative that achieves the objective of

the rule. The following analysis, in

conjunction with the remainder of this

preamble, demonstrates that this rule is

consistent with the principles set forth

in the Executive Order and in these two

statutes.

FDA published its preliminary

economic analysis in the preamble to its

1995 proposed regulation. In response,

the agency received thousands of

comments raising economic issues or

concerns. Representatives of affected

industry sectors emphasized burdens in

excess of those estimated in the

preliminary economic analysis. Other

comments stressed the considerable

economic value of the expected public

health benefits. Although few comments

provided quantifiable data on projected

economic impacts, whether benefits or

burdens, a report prepared by the

Barents Group and presented as Volume

11 of the Tobacco Institute submission

provided a comprehensive critique of

the methodology, assumptions, and cost

estimates presented in FDA’s

preliminary economic analysis and

developed alternative estimates of

regulatory costs. Other comments

addressed selected economic issues.

FDA carefully examined and evaluated

the reasoning and data presented in

these comments, accepted those that

were persuasive, and presents this

revised analysis of the final rule.

In its preliminary analysis, FDA based

the benefits of the 1995 proposed rule

on a finding that compliance could help

to achieve the Department’s ‘‘Healthy

People 2000’’ goal of reducing underage

tobacco use by one-half. Comments

received in response to the proposal

have reinforced the agency’s conviction

that this goal can be realized, although

it will require the active support and

participation of State and local

governments and civic and community

organizations, as well as manufacturers

and retail dispensers of tobacco

products. In the Federal Register of

January 19, 1996 (61 FR 1492), the

Substance Abuse and Mental Health

Services Administration (SAMHSA)

issued a regulation governing a program

of State-operated enforcement activities

to restrict the sale or distribution of

tobacco products to individuals under

the age of 18. SAMHSA predicted that

its rule would cut the rate of underage

tobacco consumption by between onetenth and one-third. FDA can not

separately quantify the incremental

benefits of the respective agency

programs, due to the substantial

interdependencies and uncertainties

regarding future compliance with these

rules; but finds that its final rule and the

SAMHSA regulation are fully

complementary and, working together,

will produce results that would more

than equal the sum of their independent

efforts.

Each year, an estimated 1 million

adolescents under the age of 18 begin to

smoke cigarettes. The Centers for

Disease Control and Prevention (CDC)

estimate that approximately one in three

of these adolescents will die of smokingrelated diseases, and FDA has

concluded that this projection provides

the best estimate of the excess fatality

rate. FDA finds that even overly

conservative projections indicate that

achieving the ‘‘Healthy People 2000’’

goal of reducing underage tobacco use

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

900,000 future life-years for each year’s

cohort of teenagers who would

otherwise begin to smoke. The monetary

value of these health benefits (at a 3

percent discount rate) is estimated to

total $28 to $43 billion per year and

includes $2.6 billion in medical cost

savings, $900 million in productivity

gains from reduced morbidity, and

$24.6 to $39.7 billion per year in

willingness-to-pay values for averting

premature fatalities. (Because of the

long periods involved, a 7 percent

discount rate reduces the total benefits

to about $9.2 to $10.4 billion per year).

If the agency’s goal were exceeded,

these benefits would be even larger.

Moreover, if even a fraction of the goal

were achieved, the benefits would

substantially outweigh the costs of the

rule. As shown in Table 1c, halting the

onset of smoking for only 1/20 of the 1

million adolescents who become new

smokers each year would provide

annual benefits valued at from $2.8 to

$4.3 billion a year. In addition, although

FDA has not quantified the benefits of

reducing the number of serious illnesses

attributable to the use of smokeless

tobacco by youngsters under the age of

18, the agency is convinced that these

benefits also will be substantial.

TABLE 1c.—ANNUAL ILLNESS-RELATED BENEFITS OF ALTERNATIVE EFFECTIVENESS RATES

(UNDISCOUNTED LIVES AND LIFE-YEARS; 3% DISCOUNT RATE FOR MONETARY VALUES)1

Fraction of Teenage

Cohort Deterred

Fewer Teenagers who

will Smoke

as Adults3

(No.)

Smoking Related Deaths

Averted (No.)

Life-Years

Saved (No.)

Medical

Savings

($bils.)

Morbidity-Related Productivity Savings

($bils.)

Mortality-Related Willingness-to-PayTotal Benefits

Life-Yrs.

Saved

($bils.)

Deaths

Averted

($bils.)

Low

($bils.)

High

($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

1Totals may not add due to rounding.

2Estimate used in analysis.

3Assumes 50% of adolescents who are deterred from smoking continue to refrain as adults.

In its evaluation of the economic

impact on industry, FDA also includes

those costs that might be attributable to

the SAMHSA program, as the rules of

both agencies work collectively to

reduce youth access to tobacco

products. As a result, the overall

estimated compliance costs of the rules

range from $174 million to $187 million

in one-time costs and from $149 million

to $185 million in annual operating

costs (see Table 2). Manufacturers of

tobacco products will incur one-time

costs ranging from $78 million to $91

million, primarily for removing

prohibited point-of-sale promotional

items and self-service displays, and for

changing package labels. As the

responsibility for removing the

prohibited point-of-sale promotional

and display items resides with the

owner, manufacturers and retailers may

ultimately share the costs of removal

and replacement. FDA’s cost estimates

assume that manufacturers will pay for

most removal and installation activities

and retailers will pay for most

replacement items. (If, in fact, retailers

assume most removal responsibilities,

the estimated manufacturer costs fall by

about $47 million).
44570 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

TABLE 2.—COSTS 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

1Assumes 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 shortterm resource dislocation and educational programs.

Retail establishments will incur an

estimated $96 million in one-time costs.

About $57 million of these costs are due

to the self-service restriction, primarily

for replacing display cases and other

functional promotional items. (If

retailers rather than manufacturers

remove the prohibited point-of-sale

advertising and display items, the

estimated retailer costs rise by about $17

million). The retail sector will also incur

about $78 million in annual costs. In

addition to new labor costs attributable

to the self-service restrictions, both the

FDA and SAMHSA rules impose costs

for training employees to verify

customer ages, for routinely checking

I.D.’s of young purchasers, and for

foregoing profits due to reduced

vending machine sales. Consumers will

bear costs of up to $50 million annually

for incurring some delay in checkout

lines. Finally, enforcement of these

rules may cost the FDA from $3 million

to $5 million per year and State

governments from $25 million to $50

million per year for administering

various SAMHSA enforcement

programs.

FDA could not, however, quantify

every regulatory cost. For example, the

agency may require certain tobacco

manufacturers to broadcast educational

messages under the agency’s

notification process. Cost estimates for

these activities will be developed in

parallel with the program elements. In

addition, a number of commercial

sectors will experience costs for shortterm dislocations of current business

activities. Neither FDA nor any of the

industry comments on the agency’s

proposal projected the magnitude of

these costs, but they would be mitigated

for those businesses that anticipate the

adjustments in long-term business

plans.

In addition to the costs described

previously, the rule will create

significant distributional and

transitional effects. Some industry

comments asserted that FDA had

neglected the cost of lost sales revenues

in its preliminary economic analysis

and one industry study estimated these

‘‘Illustrative Costs’’ at from $1.3 billion

to $3.3 billion per year. In fact, FDA had

considered these sector-specific revenue

reductions, but described the impacts as

distributional effects, rather than as net

societal costs. For example, any lost

sales experienced by suppliers of

advertising were considered

distributional impacts, because dollars

not spent on advertising will not be lost

to the U.S. economy, but will be spent

on other goods and services. As

acknowledged by the authors of one of

the economic impact analyses

commissioned by the tobacco

manufacturing industry:

* * * when tobacco product

manufacturers decrease their advertising

expenditures, the money not spent translates

into increased profits for the industry. The

increased profits ultimately end up in the

hands of the companies’ owners

(shareholders) either as direct payouts or as

investments on their behalf in other lines of

business. In general, these profits are

ultimately recycled into increased

consumption and investment by the owners

of the companies.

Similarly, the anticipated slow but

persistent decline in tobacco product

sales revenues are not societal costs,

because the dollars not spent on

tobacco-related items will be spent on

other goods or services.

Nevertheless, FDA is aware that many

tobacco-related industry sectors will be

adversely affected by this rule. Tobacco

manufacturers and suppliers will face

increasingly smaller sales, because

reduced tobacco consumption by youth

will lead, over time, to reduced tobacco

consumption by adults. The impact of

this trend on industry revenues,

however, will be extremely gradual,

requiring over a decade to reach an

annual decrease of even 4 percent. Also,

if State and Federal excise tax rates on

tobacco products remain at current

levels, tax revenues would decrease

slowly over time, falling by about $231

million and $196 million, respectively,

by the 10th year following compliance

with the regulation.

Tobacco manufacturers spent $6.2

billion on advertising, promotional, and

marketing programs in 1993, and about

30 percent may be substantially altered

to reflect the various ‘‘text only’’
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44571

268Statement of Clyde Behney and Maria Hewitt

on Smoking-Related Deaths and Financial Costs:

Office of Technology Assessment Estimates for 1990

Before the Senate Finance Committee, pp. 1–2,

April 28, 1994.

269Littlechild, S. C., ‘‘Smoking and Market

Failure,’’ in ‘‘Smoking and Society: Toward a More

Balanced Assessment,’’ edited by R. D. Tollison,

Lexington Books, p. 271, 1986.

270Beales III, J. Howard, ‘‘Advertising and the

Determinants of Teenage Smoking Behavior,’’ p. 44,

1993.

271 Viscusi, W. K., ‘‘Smoking: Making the Risky

Decision,’’ Oxford University Press, New York, p.

149, 1992.

272 Goodin, R. E., ‘‘No Smoking: The Ethical

Issues,’’ University of Chicago Press, pp. 30–32,

1989.

273Fuchs, V. R., ‘‘How We Live,’’ Harvard

University Press, Cambridge, MA, pp. 228–229,

1983.+

274Becker, G. S., and K. M. Murphy, ‘‘A Theory

of Rational Addiction,’’ Journal of Political

Economy, vol. 96, No. 4, pp. 675–700, 1988.

restrictions or other prohibitions. If

tobacco companies choose to reduce

advertising and promotional activities

due to the FDA restrictions, the sectors

affected would include advertising

agencies and communications media,

owners of retail and outdoor advertising

space, and recipients of corporate

brand-name sponsorships (especially

auto racing). These businesses would

need to attract new revenues to

maintain current levels of profitability.

Similarly, vending machine operators

will need to find substitute products to

replace up to 3 percent of their sales

revenues.

In summary, FDA finds that

compliance with this rule will bring

significant health benefits to the U.S.

population. The rule will also exact

long-term revenue losses on the tobacco

industry and short-term costs on various

affiliated industry sectors. With regard

to small businesses, many near-term

impacts will be small or transitory, but

some business will be adversely

affected. For a small retail convenience

store not currently complying with this

rule, the additional first year costs could

average $400. For those convenience

stores that already check customer

identification, these costs average $137,

largely to relocate tobacco product

displays. Moreover, the rule will not

produce significant economic problems

at the national level, as the long-term

displacement within tobacco-related

sectors will be offset by increased

output in other areas. Thus, under the

Unfunded Mandates Act, FDA

concludes that the substantial benefits

of this regulation will greatly exceed the

compliance costs that it imposes on the

U.S. economy. In addition, the agency

has considered other alternatives and

determined that the current rule is the

least burdensome and most costeffective alternative that would meet the

objectives of this rule.

B. Statement of Need for Action

The need for action stems from the

agency’s determination to ameliorate the

enormous toll on the public health that

is directly attributable to the

consumption by adolescents of

cigarettes and smokeless tobacco.

According to the nation’s most

knowledgeable health experts, tobacco

use is the most important preventable

cause of morbidity and premature

mortality in the United States,

accounting each year for over 400,000

deaths (approximately 20 percent of all

deaths). Moreover, these morbidity and

mortality burdens do not spare middle

aged adults—with the average smokingrelated death responsible for the loss of

up to 15 life-years. 268

In its guidelines for the preparation of

Economic Impact Analyses, OMB asks

that Federal regulatory agencies

determine whether a market failure

exists and if so, whether that market

failure could be resolved by measures

other than Federal regulation. The basis

for this request derives from standard

economic welfare theory, which by

assuming that each individual is the

best judge of his/her own welfare,

concludes that perfectly competitive

private markets provide the most

efficient use of societal resources.

Accordingly, the lack of perfectly

competitive private markets (market

failure) is frequently used to justify the

need for Government intervention.

Common causes of such market failures

include monopoly power, inadequate

information, and market externalities or

spillover effects.

While FDA agrees that various

elements of market failure are relevant

to the problem of teenage use and

tobacco addiction, the agency also

believes that this regulatory action

would be justified even in the absence

of a traditional market failure. As noted

previously, the implications of the

market failure logic are rooted in a basic

premise of the standard economic

welfare model—that each individual is

the best judge of his/her own welfare.

FDA, however, is convinced that this

principle does not apply to children and

adolescents. Even steadfast defenders of

individual choice acknowledge the

difficulty of applying the ‘‘market

failure’’ criterion to non adults.

Littlechild, for example, adds a footnote

to the title of his chapter on ‘‘Smoking

and Market Failure’’ 269 to note that

‘‘[t]he economic analysis of market

failure deals with choice by adults.’’

Although both Beales 270 and Viscusi

find that young persons balance risks

and rewards in making decisions on

whether or not to smoke, Viscusi

explains that:

[n]evertheless, there are some classes of

choices that have major consequences, and

for that reason society may wish to reserve

the privilege of making these choices until a

particular age is reached. These limits

should, however, be set according to the age

at which individuals are believed to be

capable of making reasonable long-term

decisions regarding their welfare, rather than

some arbitrary date independent of the

choice context. The emerging consensus of

smoking restriction policies has focused age

18 as the minimum age for the purchase of

cigarettes. 271

FDA concludes, therefore, that even if

some children do make rational choices,

the agency’s regulatory determinations

must reflect the societal conviction that

children under the age of legal consent

cannot be assumed to act in their own

best interest. 272

In particular, FDA finds that the

pervasiveness and imagery used in

industry advertising and promotional

programs often obscure adolescent

perceptions of the significance of the

associated health risks and the strength

of the addictive power of tobacco

products. Section VI. of this document

describes numerous studies on the

shortcomings of the risk perceptions

held by children. Health economist

Victor R. Fuchs describes the typical

sequence:

There is considerable evidence that the

[time discount] rate falls as children mature.

Infants and young children tend to live very

much for the present; the prospect of

something only a week in the future usually

has little influence over their behavior. As

children get older their time horizons

lengthen, but once adult status is reached

there seems to be little correlation between

time discount and age. 273

Thus, although most youngsters

acknowledge the existence of tobaccorelated health risks, the agency finds

that the abridged time horizons of youth

make them exceptionally vulnerable to

the powerful imagery advanced through

targeted industry advertising and

promotional campaigns. In effect, these

conditions constitute an implicit market

failure not adequately remedied by

existing government action.

Moreover, the agency does not view

these results as inconsistent with the

growing economic literature based on

the Becker and Murphy models of

‘‘rational addiction.’’ 274 Although

several empirical studies have
44572 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

275Becker, G. S., M. Grossman, and K. M.

Murphy, ‘‘An Empirical Analysis of Cigarette

Addiction,’’ The American Economic Review, vol.

84, No. 3, pp. 396–418, June 1994; Chaloupka, F.,

‘‘Rational Addictive Behavior and Cigarette

Smoking,’’ Journal of Political Economy, vol. 99,

No. 4, pp. 722–742, 1991; Keeler, T. E., T. W. Hu,

P. G. Barnett, and W. G. Manning, ‘‘Taxation,

Regulation, and Addiction: A Demand Function for

Cigarettes Based on Time-Series Evidence,’’ Journal

of Health Economics, vol. 12, pp. 1–18, 1993.

276Chaloupka, F., ‘‘Rational Addictive Behavior

and Cigarette Smoking,’’ Journal of Political

Economy, vol. 99, No. 4, p. 740, 1991.

277Manning, W. G., E. B. Keeler, J. P. Newhouse,

E. M. Sloss, and J. Wasserman, ‘‘The Costs of Poor

Health Habits, A RAND Study,’’ Harvard University

Press, Cambridge, MA, 1991.

278 Gravelle, J. G., and D. Zimmerman, ‘‘CRS

Report for Congress: Cigarette Taxes to Fund Health

Care Reform: An Economic Analysis,’’

Congressional Research Service, p. 1, March 8,

1994.

279See ‘‘Smoking and Health in the Americas: A

1992 Report of the Surgeon General in collaboration

with the Pan American Health Organization,’’

Department of Health and Human Services (DHHS),

Public Health Service (PHS), CDC, National Center

for Chronic Disease Prevention and Health

Promotion (NCCDPHP), Office on Smoking and

Health (OSH), pp. 105–112, 1992, (hereinafter

referred to as ‘‘1992 SGR’’) for a full summary of

these methodologies and findings.

280Statement of Clyde Behney and Maria Hewitt

on Smoking-Related Deaths and Financial Costs:

Office of Technology Assessment Estimates for 1990

Before the Senate Finance Committee, p. 2, April

28, 1994.

281 ‘‘Medical-Care Expenditures Attributable to

Cigarette Smoking—United States, 1993,’’ in

Morbidity and Mortality Weekly Reports (MMWR),

CDC, DHHS, vol. 43, No. 26, pp. 469–472, July 8,

1994.

282 1992 SGR, p. 111.

demonstrated that, for the general

population, cigarette consumption is

‘‘rationally addictive’’ in the sense that

current consumption is affected by both

past and future consumption, 275

Chaloupka notes that this ‘‘rationality’’

does not hold for younger or less

educated persons, for whom past but

not future consumption maintains a

significant effect on current

consumption. He concludes, ‘‘[t]he

strong effects of past consumption and

weak effects of future consumption

among younger or less educated

individuals support the a priori

expectation that these groups behave

myopically.’’ 276

FDA’s justification of this regulation

relies on the total costs associated with

childhood addiction to tobacco, rather

than on the external or spillover costs to

nonusers. Nevertheless, a further market

failure would exist if the use of tobacco

imposed such costs on nonusers. Many

studies have attempted to calculate the

societal costs of smoking, but few have

addressed these externalities. The most

detailed research on the issue of

whether smokers pay their own way is

the 1991 study by Manning, et al., 277

which develops estimates of the present

value of the lifetime external costs

attributable to smoking. This study

examines differences in costs of

collectively financed programs for

smokers and nonsmokers, while

simultaneously controlling for other

personal characteristics that could affect

these costs (e.g., age, sex, income,

education, and other health habits, etc.).

The authors found that nonsmokers

subsidize smokers’ medical care, but

smokers (who die at earlier ages)

subsidize nonsmokers’ pensions. On

balance, they calculated that, before

accounting for excise taxes, smoking

creates net external costs of about $0.15

per pack of cigarettes in 1986 dollars

($0.33 per pack adjusted to 1995 dollars

by the medical services price index).

While acknowledging that these

estimates ignored external costs

associated with lives lost due to passive

smoking, perinatal deaths due to

smoking during pregnancy, and deaths

and injuries caused by smoking-related

fires, the authors concluded that there is

no net externality, because the sum of

all smoking-related externalities is

probably less than the added payments

imposed on smokers through current

Federal and State cigarette excise taxes.

A Congressional Research Service

Report to Congress concurred with the

study’s conclusion, 278 although many

uncertainties remain regarding the

potential magnitude of the omitted cost

elements.

C. Regulatory Benefits

1. Prevalence-Based Studies

The benefits of the regulation include

the costs that would be avoided by

reducing the adverse health effects

associated with the consumption of

tobacco products. Most research on the

costs of smoking-related illness has

concentrated on the medical costs and

productivity losses associated with the

prevalence of death and illness in a

given year. These prevalence-based

studies typically measure three

components: (1) The contribution of

smoking to annual levels of illness and

death, (2) the direct costs of providing

extra medical care, and (3) the indirect

costs, or earnings foregone due to

smoking-related illness or death. 279

In a recent statement, the former U.S.

Office of Technology Assessment (OTA)

declared that ‘‘the greatest ’costs’ of

smoking are immeasurable insofar as

they are related to dying prematurely

and living with debilitating smokingrelated chronic illness with attendant

poor quality of life.’’ Nonetheless, OTA

calculated that in 1990 the national cost

of smoking-related illness and death

amounted to $68 billion and included

$20.8 billion in direct health care costs,

$6.9 billion in indirect morbidity costs,

and $40.3 billion in lost future earnings

from premature death. 280 More recently,

the CDC estimated the 1993 smokingattributable costs for medical care,

alone, at $50 billion. 281 Unfortunately,

these prevalence-based studies do not

answer many of the most important

questions related to changes in

regulatory policy, because they present

the aggregate cost of smoking-related

illness in a single year, rather than the

lifetime cost of illness for an individual

smoker. As noted in the 1992 Report of

the Surgeon General, most prevalencebased studies fail to consider issues

concerning ‘‘the economic impact of

decreased prevalence of cigarette

smoking, the length of time before

economic effects are realized, the

economic benefits of not smoking, and

a comparison of the lifetime illness

costs of smokers with those of

nonsmokers.’’ 282 In effect, although

these studies are designed to measure

the smoking-related draw on societal

resources, they are not well-suited for

analyzing the consequences of

regulation-induced changes in smoking

behavior.

2. FDA’s Methodology

An alternative methodology, termed

incidence-based research, compares the

lifetime survival probabilities and

expenditure patterns for smokers and

nonsmokers. As this approach models

the individual life-cycle consequences

of tobacco consumption, FDA relied on

these incidence-based studies for its

original analysis of the proposed rule to

value the beneficial effects of the rule

over the lifetime of each new cohort of

potential smokers. The methodology

incorporates the following steps:

• A projection of the extent to which the

rule will reduce the incidence, or the

annual number, of new adolescent users

of tobacco products;

• A projection of the extent to which the

reduced rates of adolescent tobacco

consumption will translate to reduced

rates of lifetime tobacco consumption;

• A projection of the extent to which the

reduced rates of lifetime tobacco

consumption will decrease the number

of premature deaths and lost life-years;

and

• An exploration of various means of

estimating the monetary value of the

expected health improvements.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44573

283 Jason, L. A., P. Y. Ji, M. D. Anes, and S. H.

Birkhead, ‘‘Active Enforcement of Cigarette Control

Laws in the Prevention of Cigarette Sales to

Minors,’’ The Journal of the Amercian Medical

Association (JAMA), vol. 266, No. 22, p. 3159,

December 11, 1991.

284 DHHS, ‘‘Reducing the Health Consequences of

Smoking: 25 Years of Progress,’’ A Report of the

Surgeon General, U.S. Department of Health and

Human Services, Public Health Service, Centers for

Disease Control, National Center for Chronic

Disease Prevention and Health Promotion, Office on

Smoking and Health, DHHS publication No. (CDC)

89–8411, p. 517, 1989 (the 1989 SGR).

285Leaney, K., ‘‘Effect of Tobacco Advertising on

Tobacco Consumption: A Discussion Document

Reviewing the Evidence,’’ Economics and

Operational Research Division, Department of

Health, London, p. 22, October 1992.

286 Kropp, R., ‘‘A Position Paper on Reducing

Tobacco Sales to Minors by Prohibiting the Sale of

Tobacco Products by Means of Self-Service

Merchandising and Requiring only Vendor-Assisted

Tobacco Sales,’’ North Bay Health Resources

Center, Stop Tobacco Access to Minors Program

(STAMP), Petaluma, CA, p. 4, November 3, 1994. 287 61 FR 1502, January 19, 1996.

The annual benefits of the 1995

proposed rule were measured as the

present value of the lifetime benefits

gained by those youngsters, who in the

absence of the proposed regulation,

would have become new smokers. Upon

review of the public comments, FDA

found none that would persuade the

agency to revise its projections. In

general, the relevant comments

expressed no objection to the basic

methodology or model, but some

disputed the accuracy of the specific

data estimates. The following

paragraphs describe the FDA

assumptions that underlie these benefit

estimates and present the agency’s

response to the applicable public

comments.

3. Reduced Incidence of New Young

Smokers

FDA’s preliminary analysis assumed

that 1 million youngsters become new

smokers each year. One trade

association comment questioned this

figure, asserting that the relevant studies

included individuals over the age of 18.

However, the 1985 National Health

Interview Survey reported 1.08 million

20-year old smokers, and the Combined

National Health Interview Surveys for

1987–1988 found that 92 percent of 20-

year old smokers had started smoking

by age 18. Taking 92 percent of 1.08

million yields 993,600 new underage

smokers per year. This figure is

supported by parallel estimates of the

SAMHSA. Based on data from the 1994

National Household Survey on Drug

Abuse, SAMHSA estimated that 1.29

million persons under age 20 became

daily smokers in 1993, and that 1.1

million of these persons were under the

age of 18. As a result, FDA retains

confidence in its original estimate of 1

million new smokers per year.

The regulation targets youngsters by

restricting youth access to tobacco

products and by limiting advertising

activities that affect adolescents. Several

communities have demonstrated that

access restrictions are extremely

effective when vigorously applied at the

local level. Woodridge, IL, for example,

achieved a compliance rate of over 95

percent. Moreover, 2 years after that law

was enacted, a survey of 12- to 14-yearold students indicated that overall

smoking rates were down by over 50

percent (over 2/3 for regular

smokers). 283

Advertising and promotional

restrictions will augment these efforts to

limit the attractiveness of tobacco

products to underage consumers. As

discussed in detail in section VI. of this

document, no one study has definitively

quantified the precise impact of

advertising or of advertising restrictions.

Nevertheless, much of the relevant

research indicates that advertising

restrictions will reduce consumer

demand. For example, according to the

1989 report of the Surgeon General,

‘‘The most comprehensive review of

both the direct and indirect mechanisms

concluded that the collective empirical,

experiential, and logical evidence makes

it more likely than not that advertising

and promotional activities do stimulate

cigarette consumption.’’ 284 Similarly,

after a careful examination of available

studies, Clive Smee, Chief Economic

Adviser to the United Kingdom

Department of Health determined that,

‘‘the balance of evidence thus supports

the conclusion that advertising does

have a positive effect on

consumption.’’ 285 A detailed evaluation

of the effects of advertising on youth

consumption of tobacco products is

provided in section VI. of this

document.

In Northern California, 24 cities and

unincorporated areas in 5 counties

adopted local youth tobacco access

ordinances that prohibit self-service

merchandising and point-of-sale tobacco

promotional products in retail stores.

Survey measures of the impact of these

ordinances by the Stop Tobacco Access

for Minor Project (STAMP) found that,

on average, tobacco sales to minors

dropped by 40 to 80 percent. 286

In its analysis of the 1995 proposed

rule, FDA argued that, while

quantitative estimates of the

effectiveness of its regulation cannot be

made with certainty, comprehensive

programs designed to discourage

youthful tobacco consumption could

reasonably achieve the ‘‘Healthy People

2000’’ goal of halting the onset of

smoking for at least half, or 500,000, of

the 1,000,000 youngsters who presently

start to smoke each year. In the Federal

Register of January 19, 1996 (61 FR

1492) SAMHSA published a regulation

governing a program of State-operated

enforcement activities that would

restrict the sale or distribution of

tobacco products to individuals under

18 years of age. SAMHSA had originally

estimated that its program would reduce

tobacco consumption by youth and

children by from one-third to twothirds, but subsequently determined

that reductions of between one-tenth

and one-third would be ‘‘more realistic

given the uncertainties implicit in

varying levels of State enforcement and

the absence of meaningful controls on

tobacco advertising and promotion.’’ 287

While strongly supporting the objectives

of the SAMHSA program, FDA finds

that achieving the ‘‘Healthy People

2000’’ goal will demand a full arsenal of

controls to complement and fortify the

new State inspectional programs,

including restrictions on industry

advertising and promotions and quite

possibly educational messages to

counter the influence of ongoing

marketing activities.

Numerous public comments to the

1995 proposal addressed the issue of the

effectiveness of the regulation. Many

argued that tobacco advertising does not

increase tobacco use, or that the

enforcement of existing or forthcoming

State laws, alone, could accomplish

reasonable goals. In contrast, many

others supported a comprehensive

regulation, contending that only

vigorous enforcement of new

restrictions would bring significant

results. As outlined earlier in the

preamble in this document, FDA has

determined, based on a full examination

of the evidence, that the combined effect

of the regulations (restricting advertising

and promotion, prohibiting self-service

sales, providing new labeling

information, and imposing age

verification obligations) and educational

programs will significantly diminish the

allure as well as the access to tobacco

products by youth. The agency

acknowledges the imposing size of the

required effort, but is confident that its

goals are reasonable and presents

regulatory benefits based on the

presumption that the ‘‘Healthy People

2000’’ goals will be met.
44574 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

288 1994 SGR, pp. 5 and 65.

289Peto, R., A. D. Lopez, J. Boreham, M. Thun,

and C. Heath, Jr., ‘‘Mortality from Smoking in

Developing Countries, 1950–2000,’’ Oxford

University Press, p. A10, 1994. Indirect estimates

from national vital statistics.

290Memorandum from Michael P. Eriksen (CDC)

to Catherine Lorraine (FDA) August 7, 1995 and

CDC Fact Sheet; citing Pierce, J. P., M. C. Fiore, T.

E. Novotny, E. J. Hatziandreu, and R. M. Davis,

‘‘Trends in Cigarette Smoking in the United States:

Projections to the Year 2000,’’ JAMA, vol. 261, pp.

61–65, 1989; Unpublished data from the 1986

National Mortality Followback Survey, CDC, OSH;

Peto, R., A. D. Lopez, J. Boreham, M. Thun, and C.

Heath, ‘‘Mortality from Smoking in Developed

Countries, 1950–2000: Indirect Estimates from

national Vital Statistics,’’ Oxford University Press,

Oxford, 1994.

FDA agrees, however, that these

projections are uncertain and therefore

also presents estimates of benefits at

effectiveness levels that are

considerably smaller. The agency

conducted this exercise not because its

estimates are excessively speculative or

arbitrary, as suggested by one comment,

but because sensitivity analyses are part

of generally accepted ‘‘best practice’’ for

the conduct of cost-benefit analysis and

are recommended by OMB guidance.

These results demonstrate that even if

the rule were only modestly effective in

reducing tobacco use, it yields

justifiable benefits.

One comment urged the agency to

demonstrate the effectiveness of tobacco

marketing restrictions over and above

those for access restrictions or public

information campaigns. FDA is unable

to forecast the independent results of

each regulatory provision, due to the

high degree of interdependence among

the various requirements, but notes that

SAMHSA concluded that its access

restrictions, alone, would reduce

underage tobacco consumption by onetenth to one-third. If so, accomplishing

the ‘‘Healthy People 2000’’ goal implies

that the FDA rule would generate

incremental tobacco use reductions of

between 17 and 40 percent for

youngsters under 18 years of age.

4. Reduced Number of Adult Smokers

The major beneficiaries of the rule are

those individuals who would otherwise

begin using tobacco early in life and

who, accordingly, are unlikely to start

using tobacco products as an adult.

Evidence suggests that this percentage

will be high, as over half of adult

smokers had become daily cigarette

smokers before the age of 18. Moreover,

the 1994 Surgeon General’s Report

indicates that 82 percent of persons

(aged 30 to 39) who ever smoked daily

began to smoke before the age of 18.

That report concludes that ‘‘if

adolescents can be kept tobacco-free,

most will never start using tobacco.’’ 288

Although some comments disagreed

with that conclusion, FDA believes that

the Surgeon General’s Report is correct.

Nonetheless, to account for the

possibility that some would-be smokers

who are prevented from smoking until

they are age 18 may eventually start

smoking as adults, FDA uses the more

conservative assumption that these rules

will lead to a tobacco free adult life for

only one-half of the estimated 500,000

youngsters who will be deterred from

starting to smoke each year.

Accordingly, FDA calculates the annual

benefits from the lifetime health gains

associated with preventing 250,000

adolescents from ever smoking as an

adult. Further, in response to comments

that challenge this estimate, FDA

presents sensitivity analysis showing

results using a wide range of alternative

rates.

5. Lives Saved

Based largely on data from Peto, et al.,

who found that about half of all

adolescents who continue to smoke

regularly throughout their lives will

eventually die from a smoking-related

disease, 289 CDC estimates that about

one in three adolescent smokers will die

prematurely. 290 Although the CDC

projection provides the best estimate of

this excess fatality rate, it does not

provide a distribution of the smokingrelated fatalities over time.

Consequently, FDA derived this

distribution by comparing age-specific

differences in the probability of survival

for smokers and nonsmokers. The

probability of survival data for the

agency’s estimate are derived from the

American Cancer Society’s Cancer

Prevention Study II, as shown in Table

3.

TABLE 3.—PROBABILITY OF SURVIVAL BY AGE, SEX, AND SMOKING STATUS

(Probabilities of a 17-year-old surviving to age shown)

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

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

in the probabilities of death for smokers

versus nonsmokers within each 10-year

period by the number of smokers

remaining at the start of each 10-year

period. Assuming an equal number of

males and females, the excess deaths

among smokers in all age groups totaled

almost 28 percent of the 250,000 cohort.

FDA recognizes that this methodology

probably understates the current risk of

smoking, because it arbitrarily assumes

that the smoking-related risks for

females will continue to be smaller than

for males, even though female smoking

patterns are presently comparable to

those of males. Nevertheless, FDA used

this model to support its proposed

regulation and maintains the calculation

to demonstrate the robustness of the

results. Moreover, because some

comments suggested that these data may

not account for all potentially

confounding variables, such as alcohol

consumption or other lifestyle

differences, FDA further adjusted the

mortality estimate to 24 percent to

reflect findings by Manning et al., that

such nontobacco versus tobacco lifestyle

factors may account for 13 percent of

excess medical care expenditures. Thus,

the benefits projections presented below

conservatively rely on the probabilities
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44575

291 Gold, M. R., J. E. Siegel, L. B. Russell, and M.

C. Weinstein, ‘‘Cost-effectiveness in Health and

Medicine,’’ Oxford University Press, p. 232, 1996.

292For each 10-year age interval, the number of

life-years is calculated as the number of people in

each cohort (250,000) times the probability of

surviving until the end of that age interval times 10

years of life, plus the number expected to die in that

interval times an assumed 5 years of life.

293The calculation procedure probably

understates total life-years saved, because it misses

smoking related-fatalities that occur within the

same 10-year age interval. However, because more

of these misses involve fatalities that, if avoided,

would add few life-years, the resulting 15-year

average life-years saved may be high. FDA’s benefit

estimates, however, remain understated because

they are based on total life-years saved, not average

life-years saved.

294Hodgson, T. A., ‘‘Cigarette Smoking and

Lifetime Medical Expenditures,’’ The Milbank

Quarterly, vol. 70, No. 1, p. 97, 1992. (Based on data

from the American Cancer Society’s Cancer

Prevention Study II).

295 Id. (Using the average of the male and female

totals).

296Hodgson, T. A., ‘‘Annual Costs of Illness

Versus Lifetime Costs of Illness and Implications of

Structural Change,’’ Drug Information Journal, vol.

22, No. 3, p. 329, 1988.

297Rice, D. P., et al., ‘‘The Economic Costs of the

Health Effects of Smoking, 1984,’’ The Milbank

Quarterly, vol. 64, No. 4, p. 526, 1986.

shown in Table 3, corrected by the 13

percent lifestyle influence adjustment.

In sum, they indicate that achieving the

‘‘Healthy People 2000’’ performance

goal will prevent about 60,200 smokingrelated fatalities among each year’s

cohort of potential new smokers.

The economic assessment of healthrelated variables requires discounting

the value of future events to make them

commensurate with the value of present

events. For this analysis, a 3 percent

discount rate is used to calculate the

present value of the projections. (This

rate was recommended by the Panel on

Cost-Effectiveness in Health and

Medicine, a nonfederal

multidisciplinary group of experts in

cost-effectiveness analysis, convened by

the Office of the Assistant Secretary for

Health in 1993. 291 Since the Office of

Management and Budget (OMB)

Circular A–94 recommends the use of 7

percent as a base case, FDA presents

summary estimates below for discount

rates of both 3 percent and 7 percent.)

On the assumption that it would be

roughly 20 years for each year’s cohort

of new adults to reach the midpoint of

the 35 to 45 age bracket and 60 years to

reach the 75 to 85 age bracket, these

calculations indicate that the present

value of these benefits equate to 15,863

lives per year.

6. Life-Years Saved

The number of life-years that will be

saved by preventing each year’s cohort

of 250,000 adolescents from acquiring a

smoking addiction was calculated from

the same age-specific survival

differences between smokers and

nonsmokers. In each 10-year life span,

the number of years lived for each

cohort of persons who would have been

smokers but who were deterred was

compared to the number of years that

would have been lived by that same

cohort if they had been smokers. The

difference between these two measures

is the life-years saved for that 10-year

period. 292 Deducting the 13-percent

lifestyle adjustment indicates that, over

the full lifetime of each cohort, the

regulations will gain an estimated

905,000 life-years, which translates to

almost 4 years per smoker and 15 years

per life saved. 293 The present value of

these additional life-years equates to

211,391 life-years annually.

7. Monetized Benefits of Reduced

Tobacco Use

There is no fully appropriate means of

assigning a dollar figure to represent the

attendant benefits of averting thousands

of tobacco-induced illnesses and

fatalities. However, to quantify

important components of the expected

economic gains, FDA developed

estimates of the value of the reduced

medical costs and the increased worker

productivity that will result from fewer

tobacco-related illnesses. In addition,

since productivity measures do not

adequately address the avoidance of

premature death, FDA adopted a

willingness-to-pay approach to value

the benefits of reduced tobacco-related

fatalities.

8. Reduced Medical Costs

On average, at any given age, smokers

incur higher medical costs than

nonsmokers. However, nonsmokers live

longer and therefore continue to incur

medical costs over more years. Several

analysts have reported conflicting

estimates of the net outcome of these

factors, but the most recent research is

the incidence-based study by

Hodgson, 294 who found that lifetime

medical costs for male smokers were 32

percent higher than for male

neversmokers and lifetime medical costs

for female smokers were 24 percent

higher than for female neversmokers.

Hodgson determined that the present

value of the lifetime excess costs were

about $9,400 in 1990 dollars (future

costs discounted at 3 percent). 295 As

noted earlier, the incidence-based study

by Manning, et al., implies that about 13

percent of the excess medical costs were

attributable to factors other than

smoking. Accounting for this reduction

and adjusting by the consumer price

index for medical care raises the present

value of Hodgson’s excess medical cost

per new smoker to $10,590 in 1994

dollars. Thus, those 1,000,000 young

people under the age of 18, who

currently become new smokers each

year, are responsible for excess lifetime

medical costs measured at a present

value of $10.6 billion (1,000,000 x

$10,590). Because FDA projects that

achieving the ‘‘Healthy People 2000’’

goals will prevent 250,000 of these

individuals from smoking as adults, the

medical cost savings are estimated at

$2.6 billion per year.

9. Reduced Morbidity Costs

An important cost of tobacco-related

illness is the value of the economic

output that is lost while individuals are

unable to work. Thus, any future

reduction in such lost work days

contributes to the economic benefits of

the regulation. Several studies have

calculated prevalence-based estimates of

U.S. productivity losses due to smokingrelated morbidity, but FDA knows of no

incidence-based estimates. Hodgson,

however, has shown that, in certain

situations, incidence measures can be

derived from available prevalence

measures. For example, he demonstrates

that in a steady-state model the only

difference between prevalence and

incidence-based costs is due to

discounting. 296 Accordingly, FDA has

adopted Hodgson’s method to develop a

rough approximation of incidence-based

costs from an available prevalencebased estimate of morbidity costs.

Rice, et al., 297 found that lost wages

due to tobacco-related work absences in

the United States amounted to $9.3

billion in 1984. This equates to $12.3

billion in 1994 dollars when adjusted by

the percentage change in average

employee earnings since 1984. Although

FDA does not have a precise estimate of

the life-cycle timing of these morbidity

effects, the relevant latency periods

would certainly be shorter than for

mortality effects. Thus, to account for

the deferred manifestation of smokingrelated morbidity effects, FDA assumed

that they would occur over a time

horizon equal to 80 percent of that

previously measured for mortality

effects. Although one comment

mistakenly assumed that FDA had made

no adjustment for lifestyle differentials

between smokers and nonsmokers, in

fact, these estimates were further
44576 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

298Schelling, T. C., ‘‘Economics and Cigarettes,’’

Preventive Medicine, vol. 15, pp. 549–560, 1986.

299Fisher, A., L. G. Chestnut, and D. M. Violette,

‘‘The Value of Reducing Risks of Death: A Note on

New Evidence,’’ Journal of Policy Analysis and

Management, vol. 8, No. 1, pp. 88–100, 1989.

300 Viscusi, W. K., ‘‘Fatal Tradeoffs: Public and

Private Responsibilities for Risk,’’ Oxford

University Press, p. 24, 1992.

301Harris, M., ‘‘The Loss That is Forever The

Lifelong Impact of the Early Death of a Mother or

Father,’’ Penguin Books, 1995.

302Miller, A. L., ‘‘The U.S. Smoking-Material Fire

Problem Through 1992: The Role of Lighted

Tobacco Products in Fire,’’ National Fire Protection

Association, p. 2, 1994.

303 1994 SGR, p.39.

304 Id.

305 Goolsby, M. J., ‘‘Smokeless Tobacco: The

Health Consequences of Snuff and Chewing

Tobacco’’, Nurse Practitioner, vol. 17, No. 1, p. 31,

January 1992.

306 Id.

reduced by 13 percent to reflect the

Manning, et al., findings. Finally,

because the long-term decline in

smoking prevalence has exceeded the

growth in population, FDA reduced the

incidence-based costs by another 20

percent. At a 3 percent discount rate,

this methodology implies that the

incidence-based cost of smoking-related

morbidity, or the present value of the

future costs to 1 year’s cohort of

1,000,000 new smokers, is about $3.5

billion. Thus, the estimated annual

morbidity-related savings associated

with preventing 250,000 new youths per

year from smoking as adults is estimated

at about $879 million.

10. Benefits of Reduced Mortality Rates

From a societal welfare perspective,

OMB guidance advises that the best

means of valuing benefits of reduced

fatalities is to measure the affected

group’s willingness-to-pay to avoid fatal

risks. Unfortunately, the specific

willingness-to-pay of smokers is

unknown, because institutional

arrangements in the markets for medical

care obscure direct measurement

techniques. 298 Nevertheless, many

studies have examined the public’s

willingness-to-pay to avoid other kinds

of life-threatening risks, especially

workplace and transportation hazards.

An EPA-supported study 299 found that

most empirical results support a range

of $1.6 to $8.5 million (in 1986 dollars)

per statistical life saved, which

translates to $2.2 to $11.6 million in

1994 dollars. However, the uncertainty

surrounding such estimates is

substantial. Moreover, Viscusi has

shown that smokers, on average, may be

willing to accept greater risks than

nonsmokers. For example, smokers may

accept about one-half the average

compensation paid to face on-the-jobinjury risks. 300 FDA therefore has

conservatively used $2.5 million per

statistical life, which is towards the low

end of the research findings, to estimate

society’s willingness-to-pay to avert a

fatal smoking-related illness. Thus, the

annual benefits of avoiding the

discounted number of 15,863 premature

fatalities would be $39.7 billion.

An alternative method of measuring

willingness-to-pay is to calculate a value

for each life-year saved. This approach

is intuitively appealing because it places

a greater value on the avoidance of

death at a younger than at an older age

and is the traditional means of assessing

the cost-effectiveness of medical

interventions. Nevertheless, there have

been few attempts to determine the

appropriate value of a life-year saved.

OMB suggests several methodologies,

including annualizing with an

appropriate discount rate the estimated

value of a statistical life over the average

expected life-years remaining. For

example, at a 3-percent discount rate, a

$2.5 million value per statistical life for

an individual with 35 years of

remaining life-expectancy converts to

about $116,500 per life year. Since

achieving the agency’s goals were

estimated to save 211,391 discounted

life-years annually, this calculation

yields annual benefits of $24.6 billion.

FDA notes that even these values

understate the full value of the health

impact, because they fail to quantify any

reduction in either the adverse effects

attributable to passive smoking or the

infant and child fatalities caused by

mothers’ smoking. Moreover, these

totals may not capture the heavy toll of

psychic loss to surviving family

members, or the corresponding

economic losses among family members

for the mental health care of griefrelated depression and other conditions

that often follow the premature death of

middle aged adults. 301

11. Reduced Fire Costs

Every year lighted tobacco products

are responsible for starting fires which

cause millions of dollars in property

damage and thousands of casualties. In

1992, fires started by lighted tobacco

products caused 1,075 deaths and $318

million in direct property damage. 302 A

reduction in the number of smokers,

and the corresponding number of

cigarettes smoked, will result in a drop

in the number of future fires. In the

1995 proposal, FDA estimated that if the

number of fires falls by the same

percentage as the expected reduction in

cigarette sales, this implies present

value savings of $203 million for the

value of lives saved and $24 million for

the value of averted property damage,

totaling $227 million annually over a

40-year period.

One comment denied the existence of

any association between fires and

cigarette consumption. FDA

acknowledges that the relationship may

be nonlinear, but finds the asserted lack

of a positive correlation implausible.

This comment further stated that

residential fires caused by smoking and

deaths from residential fires caused by

smoking decreased from 1983 to 1992

by 39 percent and 40 percent,

respectively, or about 5.5 percent

annually. Accounting for this trend

would lower FDA’s fire cost estimate to

a present value savings of $145 million

for the value of lives saved and $17

million for the value of averted property

damage, totaling $162 million annually

over a 40-year period. Even these

estimated savings significantly

underestimate the potential benefits,

however, because they exclude both

nonfatal injuries and the need for

temporary housing.

12. Smokeless Tobacco

The Smokeless Tobacco Council, Inc.,

remarked that FDA had not attempted to

measure the benefits that would result

from the decreased use of smokeless

tobacco products by underage youths.

The introduction to the 1995 proposed

regulation, however, explained that the

use of smokeless tobacco causes severe

health effects. While data are not

available on age-specific differences in

the probability of survival for smokeless

tobacco users as compared to nonusers,

the 1994 Surgeon General Report

indicates that the ‘‘primary health

consequences during adolescence

include leukoplakia, gum recession,

nicotine addiction, and increased risk of

becoming a cigarette smoker.

Leukoplakia and/or gum recession occur

in 40 to 60 percent of smokeless tobacco

users.’’ 303 Oral leukoplakias have a 5-

percent chance of becoming

malignancies in 5 years. 304 Cancers of

the nasal cavity, pharynx, larynx,

esophagus, stomach, urinary tract and

pancreas have also been linked to

smokeless tobacco use. 305 Other effects

include discoloration of teeth,

periodontal disease and excessive tooth

wear and decay. 306 One study of female

snuff users showed that it increased

one’s risk of developing oral and
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44577

307Winn, D. M., W. J. Blot, C. M. Shy, L. W.

Pickle, A. Toledo, and J. F. Fraumeni, ‘‘Snuff

Dipping and Oral Cancer Among Women in the

Southern United States,’’ The New England Journal

of Medicine, vol. 304, No. 13, pp. 745–749, Table

2, March 26, 1981.

308Estimates of youth smokeless usage vary. This

projection relies on a conservative estimate of total

youth (ages 12–17) usage calculated from data in

the Statistical Abstract of the U.S. 1995, 115th

edition, Tables 16 and 218.

309 1994 SGR, p.39.

310Economic Analysis of Federal Regulations

Under Executive Order 12866, January 11, 1996.

Prepared by interagency group convened by OMB

and co-chaired by a Member of the Council of

Economic Advisers.

311This analysis evaluates the regulation

following the Kaldor-Hicks criteria for societal

welfare maximization.

pharyngeal cancer between 1.5 to 4.2

times. 307

If the provisions pertaining to

smokeless tobacco are as effective as

those pertaining to cigarettes, the rule

will prevent about 36,500 youths from

becoming adult users of smokeless

tobacco. This projection assumes that

the number of underage users will

decrease by 50 percent and one-half of

those youths will remain nonusers after

reaching 18 years of age. The estimate

also assumes that the ratio of new

underage users to total underage users

parallels that of cigarette users (i.e.,

approximately one-third) and that about

440,000 youths under the age of 18 are

current users of smokeless tobacco

products. 308

Leukoplakia and/or gum recession are

estimated to occur in 40 to 60 percent

of smokeless users. 309 If even 50

percent of these cases were caused by

smokeless tobacco use, the previous

assumptions imply that these

regulations will prevent from 7,300 to

11,000 cases of leukoplakia and/or gum

recessions per year. Although FDA can

not estimate the number of oral or other

cancers prevented, the realized number

will be substantial.

13. Summary of Benefits

The discussion above demonstrates

the formidable magnitude of the

economic benefits available from

smoking reduction efforts. As described,

FDA forecasts annual net medical cost

savings of $2.6 billion and annual

morbidity-related productivity savings

of $900 million. From a willingness-topay perspective, the annual benefits of

reduced smoking-related disease

mortality range from $24.6 to $39.7

billion. As a result, the value of the

annual disease-related benefits of

achieving the ‘‘Healthy People 2000’’

goal is projected to range from $28.1 to

$43.2 billion. (Following Hodgson, this

analysis uses a 3-percent discount rate.

A 7-percent rate reduces these benefits

to a range of $9.2 to $10.4 billion).

These totals do not include the benefits

expected from fewer fires (over $160

million annually), reduced passive

smoking, or infant death and morbidity

associated with mothers’ smoking.

Moreover, while FDA believes these

effectiveness projections are plausible,

much lower rates still yield impressive

results. Table 1c of this section

summarizes the disease-related health

benefits and illustrates that youth

deterrence rates as small as 1/20, which

would prevent the adult addiction of at

least 25,000 of each year’s cohort of

1,000,000 new adolescent smokers,

would provide annual benefit values

measured in the billions of dollars.

Moreover, the higher risk estimates

suggested by Peto, et al., could

significantly increase these values. In

addition, while FDA could not quantify

the benefits that will result from the

projected decline in the use of

smokeless tobacco, they would be

considerable.

D. Regulatory Costs

A recently issued guideline for

conducting economic analysis of

Federal regulations, prepared under the

auspices of OMB, states that:

[T]he preferred measure of cost is the

‘‘opportunity cost’’ of the resources used or

the benefits foregone as a result of the

regulatory action. Opportunity costs include,

but are not limited to, private-sector

compliance costs and government

administrative costs. Opportunity costs also

include losses in consumers’ or producers’

surpluses, discomfort or inconvenience, and

loss of time * * *. An important, but

sometimes difficult, problem in cost

estimation is to distinguish between real

costs and transfer payments. Transfer

payments are not social costs but rather are

payments that reflect a redistribution of

wealth. While transfers should not be

included in the [Economic Analyses’]

estimates of the benefits and costs of a

regulation, they may be important for

describing the distributional effects of a

regulation. 310

Accordingly, FDA finds that the final

rule will impose new cost burdens on

manufacturers, retailers, consumers, and

Government regulators of tobacco

products. In addition, certain industry

sectors will experience lost sales and

employment, but these revenue losses

will be at least partly offset by gains to

other sectors, as discussed in the

‘‘Distributional Effects’’ section of this

document. 311 While a number of

industry comments argued that the

agency’s preliminary analysis was

deficient for not including these lost

revenues in its cost-benefit assessment,

FDA finds that the revenue losses

suggested by these comments do not

meet the previous definition of

‘‘opportunity cost;’’ because they fail to

provide the changes in net costs that are

necessary to estimate producer surplus,

conventionally defined as sales minus

variable costs. This rule will affect

producer surplus in several industries

and only net changes in these surplus’

are social costs. Calculating such

changes would require a multi-market

model of economic changes over many

years. Such general equilibrium models

have not been used by Federal agencies

for regulatory analyses, are not

specifically recommended by the OMB

guidance, and would be impractical to

use, especially where major markets are

dominated by few firms.

The most comprehensive critique of

FDA’s preliminary economic analysis

was prepared by the Barents Group,

economic consultants to the Tobacco

Institute. While the Barents Group

developed independent estimates of

economic costs, in many instances its

methodology was consistent with FDA’s

analysis of its 1995 proposal. Often,

however, the Barents Group had access

to more recent data, or to additional

data provided by the affected industries.

FDA’s revised cost estimates rely

extensively on these new data, but as

described below, the agency’s final cost

estimates are far smaller than those

presented by the Barents Group.

1. Number of Affected Retail

Establishments

A critical variable underlying the

agency’s cost estimates is the number of

retail outlets currently selling over-thecounter (OTC) tobacco products. A

major confounding factor is that the U.S.

Census publishes product line data only

for establishments with payroll. For its

original estimate of the number of retail

establishments selling tobacco products,

FDA relied on 1987 Census data to

count the number of affected payroll

establishments and very conservatively

included every nonpayroll

establishment in those categories that

traditionally sell tobacco products

(general merchandise stores, grocery

stores, service stations, eating and

drinking places, drug stores, and liquor

stores). FDA estimated that the number

of establishments selling tobacco

products OTC included 275,000 payroll

establishments and 215,000 nonpayroll

establishments, for a total of 490,000

retail establishments. To account for all

other business categories that might sell
44578 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

312 Kropp, R., ‘‘A Position Paper on Reducing

Tobacco Sales to Minors by Prohibiting the Sale of

Tobacco Products by Means of Self-Service

Merchandising and Requiring only Vendor-Assisted

Tobacco Sales,’’ North Bay Health Resources

Center, Stop Tobacco Access for Minors Project

(STAMP), Petaluma, CA, p. 5, November 3, 1994.

OTC tobacco products, FDA estimated a

total upper bound range of 600,000

establishments. FDA did not know how

many locations currently served by

cigarette vending machines would

convert to OTC operations following

implementation of the regulation, but

estimated the number at 100,000, raising

the upper bound total to 700,000 future

establishments.

FDA still has no definitive estimate of

the number of retail outlets selling

tobacco products. For their economic

analysis, the Barents Group used 1992

U.S. Census estimates for the number of

affected retail establishments with

payroll, but adopted an alternative

methodology to estimate the number of

affected establishments without payroll.

The Barents Group subdivided retail

businesses into 10 categories: General

merchandise stores, supermarket/

grocery stores, convenience stores

without gas, convenience stores with

gas, gasoline service stations, eating

places, drinking places, drug and

proprietary stores, specialty tobacco

stores, and miscellaneous retail stores.

Within each category, the Barents Group

assumed that the percentage of

nonpayroll establishments selling

tobacco products would be the same as

the percentage of payroll establishments

selling tobacco products. As a result,

they concluded that the number of retail

payroll establishments selling tobacco

products OTC is approximately 283,000,

and the number of retail nonpayroll

establishments selling tobacco products

OTC is about 107,000, for a total of

390,000 retail outlets. The Barents

Group’s subsequent calculations are less

clear and not documented in their

appendix on methodology. Noting that

FDA had estimated an upper bound of

600,000 establishments selling OTC

tobacco products, they assumed the

existence of an additional 100,000 to

200,000 nonretail establishments, such

as operations within manufacturing or

service businesses, that sell OTC

tobacco products. Finally, the Barents

Group accepted FDA’s estimate that

about 100,000 current vending machine

locations would convert to OTC sales

for tobacco products and proposed total

lower and upper bound estimates of

from 500,000 to 700,000 establishments.

For this final economic analysis, FDA

adopts the apparent mid-point of the

Barents Group’s forecast of the number

of establishments that will sell tobacco

products, or about 500,000 current

establishments and a total of 600,000

future establishments. FDA estimates by

business category are displayed in Table

4 and follow closely the methodology

presented by the Barents Group, except

for slight adjustments to eliminate

nonstore outlets. Because Census data

on the number of establishments

without payroll were not reported

separately for convenience stores,

convenience stores with gas, or

specialty tobacco stores, these outlets

are counted with the higher level outlet

categories.

2. Removing Self-Service and Other

Prohibited Retail Displays

The 1995 proposed regulation

restricted all point of purchase

advertising to ‘‘text only’’ and banned

the use of all self-service displays by

requiring vendors to physically provide

the regulated tobacco product to

purchasers. In its original analysis, FDA

explained that the proposed ban on selfservice displays would affect many

retail stores selling tobacco products,

although shoplifting concerns had

already caused a large number of these

stores to place tobacco products in areas

not directly accessible to customers.

Those retailers that discontinued selfservice displays typically modified their

stores by either: (1) Placing tobacco

products behind or above store cashiers

or in locked cases located within close

reach of store cashiers, (2) placing

tobacco products behind only one or

two checkout lines, similar to the ‘‘cash

only’’ or ‘‘less than 10 items’’ lines

commonly found in supermarkets, (3)

dispensing tobacco products from a

controlled area of the store, where store

employees also conduct other

administrative or customer-service

tasks, or (4) installing a signaling

system, whereby assigned store clerks

bring requested tobacco products to

individual checkout stations. Each

store’s physical configuration dictates

the most cost-effective approach, but at

least one regional survey found that

retail outlets readily complied with

comparable local ordinances without

architectural remodeling or substantial

refitting of checkout counters or store

aisles. 312
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44579

TABLE 4.—ESTIMATED NUMBER OF ESTABLISHMENTS CURRENTLY SELLING TOBACCO PRODUCTS OVER-THE-COUNTER

Kind of Business

Number of Retail

Establishments with

Payroll

Percentage of Retail

Establishments with

Payroll Selling Tobacco

Products

Number of Retail

Establishments with

Payroll Selling Tobacco

Products

Total Number of Retail

Establishments without

Payroll

Estimated Number of

Retail Establishments

without Payroll Selling

Tobacco Products(j)

Estimated Total of

Establishments Selling

Tobacco Products Overthe-Counter(k)

(1) (2) (3) (4) (5) (6)

Retail Establishments:

General Merchandise 34,606 35.01% 12,117 28,010 (f) 9,807 21,924Supermarket/Grocery 126,785(a) 56.19% 71,240 97,061(g) 54,538 125,778Convenience Stores 30,748 95.62% 29,400 – (h) – 29,400Convenience Stores

with Gas 57,033(b) 91.02% 51,913 – (h) – 51,913

Service Stations 71,336(c) 53.21% 37,958 14,248 7,581 45,539Eating Places 377,760(d) 3.17% 11,992 96,538 3,065 15,057Drinking Places 55,848 19.24% 10,745 27,733 5,336 16,081Drug Stores 48,142 60.33% 29,046 3,031 1,829 30,875Tobacco Stores 1,477 100.00% 1,477 – (h) – 1,477Miscellaneous Retail

Stores 273,256(e) 9.15% 24,995 490,633(i) 44,879 69,874

Other Establishments – – – – – 100,000Total 1,076,991 280,883 757,254 127,035 507,918

(a) Category contains food stores (SIC 54) with payroll, excluding convenience food stores (SIC 541 pt) and convenience food/gasoline stores (SIC 541 pt).(b) Category contains convenience food/gasoline stores (SIC 541 pt) and gasoline/convenience food stores (SIC 554 pt).(c) Category excludes gasoline/convenience food stores (SIC 554 pt).(d) Category contains eating and drinking places (SIC 58), excluding drinking places (SIC 5813).(e) Category contains miscellaneous retail stores (SIC 59 ex. 591), excluding nonstore retailers (SIC 596) and tobacco stores and stands (SIC 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 (SIC 596).(j) Column (2) times Column (4).(k) Column (3) plus Column (5).Source: Columns (1)–(4) from U.S. Census of Retail Trade Merchandise Line Sales and Nonemployer Statistics Series; Columns (5) and (6) projections according to Barents Group LLC

Appendix I methodology.
44580 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

313 Id. 314Buck, E., ‘‘Site Visit Report,’’ April 24, 1996.

Because prevailing business practice

is for tobacco manufacturers to assist

and even pay for most product display

equipment, 313 FDA had assumed that

manufacturers would share with

retailers any expense of relocating

displays and that the majority of the

costs would be to relocate self-service

displays for cartons. FDA estimated onetime costs of $22 million to be shared

by manufacturers and retailers and

additional annual operating costs of $14

million to be incurred by retailers (all in

1994 dollars). In stark contrast, the

Barents Group projected one-time costs

of from $558 to $780 million in 1996

dollars ($520 to $728 million in current

dollars), with 62 percent attributed to

the replacement of display items by

retailers and the remaining 38 percent to

manufacturers due to ‘‘time costs

involved in removing banned display

and promotional items, whether the

work would be performed directly by a

manufacturer’s employee or

subcontracted out to a display

distributor.’’ As explained below, FDA

finds that many aspects of the Barents

Group’s estimates are seriously flawed.

Nevertheless, the agency has adopted

the basic framework of that analysis and

its revised estimates reflect the Barents

Group’s methodology and data, unless

specifically modified as discussed

below.

a. The Barents Group’s methodology.

The Barents Group’s cost projections

were based on estimates of an average

outlet cost for each of seven outlet

categories. Each average outlet cost was

multiplied by the total number of

outlets of that category in the United

States to produce national cost

estimates. The actual outlet cost data

were collected by A. T. Kearney, Inc.,

still another business consulting firm.

The Barents Group explained that:

[O]ur estimates are based on a compliance

audit study conducted especially for this

purpose by A. T. Kearney, Inc. A. T. Kearney

performed an in-depth study of the actions

and efforts that would be required of tobacco

manufacturers’ representatives, of point-ofsale display item distributors, and of tobacco

retailers in order to bring stores into

compliance with the proposed regulations.

Detailed surveys were conducted of seven

categories of retail outlets in five U.S.

metropolitan areas, for a total of 88 retail

outlets. Surveyors performed a detailed

inventory of the many types of tobacco

product displays and promotional materials

which are currently found in stores. The

surveyors noted which items would need to

be modified or replaced.

A. T. Kearney reportedly completed a

comprehensive on site compliance

protocol checklist at 88 establishments

randomly selected in 5 general regions

of the United States. The individual

display items were grouped into 41

discrete item categories and a lengthy

discussion of the methodology and

results are presented as a Technical

Appendix to the Barents Group’s

comments.

b. The Barents Groups’s

miscalculations. To evaluate these

results, FDA carefully reviewed the A.

T. Kearney survey data and the Barents

Group’s extrapolation procedures and

attempted to replicate the aggregate

estimates. In doing so, numerous

computational discrepancies were

identified. For example, in calculating

retailer time costs, the Barents Group

intended to use an estimated retail

employee wage of $9.51, but in fact used

the estimated wage for a manufacturer’s

sales representative of $25.70. (See

Appendix Table ‘‘Initial Compliance

Effort Costs per Retail Store.’’) Also, the

Barents Group’s calculations relied on

incorrectly transposed data for the

average number of disposable displays

per store and miscalculated compliance

effort costs for five of the seven types of

business. Further, A. T. Kearney

reported that only one-third of the

lighted signs and clocks would need to

be replaced by retailers, but the Barents

Group’s calculations assumed that all

would be replaced. Finally, A. T.

Kearney reported that retailers would

not replace most promotional posters,

signs and displays, but the Barents

Group’s calculations assigned each $85

in replacement costs. Correcting these

errors reduces the Barents Group’s low

and high cost estimates by $77 and $108

million, respectively.

Even more important, in aggregating

the unit costs for ‘‘Compliance Activity

No. 19—Remove and replace interior

newsstands and shopping basket racks

and baskets and shopping carts,’’ A. T.

Kearney committed a major error that

dominates the aggregated cost totals. In

discussing the costs for this item, A. T.

Kearney focused on the need to replace

shopping basket racks, which ‘‘* * *

are free-standing units and contain

about 20 shopping baskets, that also

contain the name or logo of the cigarette

manufacturer.’’ Although it seems

probable that the logos or brand names

affixed to these items could be either

removed or obscured, the survey data

indicate that six supermarket/grocery

stores, three convenience stores, two

tobacco stores and one convenience

store with gas would replace shopping

basket racks. The detailed survey data

for supermarket/grocery stores,

however, reveal that one store

supposedly possessed 71 racks, two

stores 50 racks, and the remaining three

stores 41, 32, and 10 racks, respectively.

Even a casual review of these data

suggests that individual hand-held

shopping baskets rather than basket

racks were counted. Indeed, an FDA

contractor visited the five Washington,

DC area outlets in which A. T. Kearney

observed the largest number of racks

and found scores of plastic hand-held

baskets adorned with simple advertising

stickers, but only a few basket racks. 314

Although the advertising on these

plastic baskets could easily be removed

or covered, or new plastic baskets

purchased quite inexpensively, the

Barents Group’s calculations

inadvertently assumed that a

distribution services contractor would

be hired to remove each plastic handheld shopping basket at a fee of $45

apiece and that a retailer would spend

30 minutes plus an additional $89

replacement fee for each plastic handheld shopping basket in its possession.

Thus, the estimated cost attributed to

each hand-held basket was $138 and the

cost for just the one outlet reporting 71

shopping baskets totaled $9,850.

Extrapolating to each outlet category,

the A. T. Kearney results implied that

removing and replacing plastic handheld baskets would cost, on average,

over $1,300 for each supermarket/

grocery store and $300 for each

convenience store in the United States.

Its projected costs for removing and

replacing the hand-held shopping

baskets in all supermarket/grocery

stores in the United States ranged from

$163 million to $229 million. For all

outlet types, costs for these hand-held

baskets were estimated at $194 to $271

million, or 43 percent of the national

point-of-sale costs estimated by the

Barents Group.

Based on site visits, FDA modified

Kearney’s field data for the correct

number of shopping basket racks in the

Washington, DC area establishments.

Furthermore, FDA contractors

determined that the hand-held shopping

baskets could easily be modified by a

marketing representative, who would

take, at most, 5 minutes to affix new

stickers on each basket or rack. For a

rack of 20 baskets, this task was

estimated to take a total of 105 minutes,

plus about $42 for stickers. These

adjustments reduce the Barents Group’s

estimated one-time costs by $180 to

$252 million.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44581

c. The Barents Group’s extrapolation

procedure. The Barents Group

contributed still another bias by their

method of extrapolating these survey

results to the assumed range of 500,000

to 700,000 retail establishments. A. T.

Kearney surveyed stores in only seven

business categories: General

Merchandise, Supermarket/Grocery,

Tobacco Specialty, Convenience Store

without Gas, Convenience Store with

Gas, Service Station, and Drug Store. To

represent all affected outlets, the

Barents Group apportioned the full

upper and lower bounds for their

estimated number of establishments

(500,000 and 700,000) among 10

business categories ‘‘based on the

fractions they represent in the Census

sample of with-payroll retail stores

selling tobacco products.’’ (Eating

Places, Drinking Places, and

Miscellaneous Retailers were added for

this outlet allocation, but were assigned

no costs because they are not ‘‘* * * the

types of retail outlets where the vast

majority (more than 90 percent) of

tobacco product sales occur and where

promotional items are most prevalent.’’

That is, the Barents Group used a

proportional adjustment to raise each

establishment category count so that the

lower and upper bound totals sum to

500,000 and 700,000, respectively. The

estimated number of establishments in

each category was then multiplied by

the average cost for each business

category using data from the A. T.

Kearney site visits.

The implications of these

inappropriate establishment number

extrapolations are considerable. For

example, A. T. Kearney surveyed a

sample of 10 outlets from its first

business category—General

Merchandise Stores. These 10 outlets,

which include three K-Mart and two

Wal-Mart stores, averaged over 84,000

square feet of space, with the smallest

store measuring 40,000 square feet. The

U.S. Census reports only 12,117 such

establishments with payroll. The

Barents Group’s proportional

adjustment automatically expanded this

outlet type count to between 21,299 and

29,818. (See Barents Group’s Appendix

Table.) Thus, to generate a national

estimate of costs, the Barents Group

applied the cost per establishment for

its sample of very large general

merchandise stores to roughly double

the number reported in the U.S. Census

for such establishments with payroll.

This methodology inappropriately bases

the per outlet cost for thousands of

small nonpayroll and nonretail outlets

on the per outlet cost reported for very

large general merchandise stores.

The identical problem holds for the

Barents Group’s projection of the A. T.

Kearney survey sample of 27

Supermarket/Grocery stores. Although

this sample includes a few moderately

sized establishments (1 less than 1,000

square feet and 4 less than 5,000 square

feet), 21 of the establishments exceed

10,000 square feet and the average sized

facility is almost 35,000 square feet.

Nevertheless, the Barents Group’s

apportionment procedure inflates the

number of establishments in this

category from the U.S. Census estimate

of 71,240 with payroll to 125,222 and

175,311, on the dubious assumption

that thousands of small nonpayroll or

other nonretail establishments are best

represented by the A. T. Kearney sample

of mostly large supermarkets/grocery

stores.

FDA’s fundamental concern is not

with the Barents Group’s estimate of

500,000 to 700,000 affected

establishments (although the upper

bound of this estimate should be

600,000, because there would be no

display relocation costs for the

additional 100,000 outlets assumed to

be established at existing vending

machine locations), but with the

allocation of the small establishments

among the largest business categories

surveyed by A. T. Kearney. To offset

this bias, FDA reallocated the number of

establishments in the business

categories used to extrapolate the outlet

cost estimates. As shown, in Table 5,

FDA takes the number of establishments

in the first two business categories—

General Merchandise and Supermarket/

Grocery stores—directly from the U.S.

Census number of establishments with

payroll, because there would be very

few nonpayroll or nonretail

establishments equivalent to those

surveyed. For outlet extrapolation

purposes, FDA assigns its estimated

number of nonpayroll establishments in

these two business categories to the

Convenience Store category, on the

assumption that this category is most

representative of the small

establishments excluded from the

Census product line data. Although the

Barents Group omitted all costs for

Eating Places, Drinking Places, and

Miscellaneous Retail Stores, FDA

groups these outlets under Other

Establishments and assumes certain

minimal costs, as explained below. This

redistribution of the establishment

category groupings reduces the Barents

Group’s low cost estimate by $65

million and its high cost estimate by

$170 million.

TABLE 5.—ESTIMATED NUMBER OF ESTABLISHMENTS REMOVING SELF-SERVICE AND OTHER

PROHIBITED RETAIL DISPLAYS

Kind of Business

Number of Retail Establishments with Payroll

Selling Tobacco Products Over-the-Counter

Estimated Number of

Retail Establishments

without Payroll Selling

Tobacco Products Overthe-Counter

Estimated Total Number

of Establishments Selling Tobacco Products

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

315 Kropp, R., ‘‘A Position Paper on Reducing

Tobacco Sales to Minors by Prohibiting the Sale of

Tobacco Products by Means of Self-Service

Merchandising and Requiring only Vendor-Assisted

Tobacco Sales,’’ North Bay Health Resources

Center, Stop Tobacco Access for Minors Project

(STAMP), Petaluma, CA, p. 5, November 3, 1994.

316 ‘‘ERG’s Review of Docket Materials

Concerning FDA’s Proposed Regulations Covering

Tobacco Products: Final Site Visit Report,’’ Eastern

Research Group, April 22, 1996.

(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

Group faulted FDA for not including

costs for the removal of banned display

items or for the replacement of banned

point-of-sale promotional materials.

Their estimates assumed that

manufacturers alone would bear these

costs, since the proposed regulation

required that manufacturers remove all

prohibited advertising displays. The

final regulation, however, places this

responsibility on the owners of the

displays, which may frequently be the

retail establishments. FDA cannot

forecast the ultimate distribution of

display ownership, but in view of

current business practices, assumes that

the manufacturer representatives will at

least participate in the removal process.

Nevertheless, this change in regulatory

responsibility is likely to shift a greater

share of the cost burden to retailers.

On the other hand, the Barents Group

assumed that retailers alone would

replace those promotional items having

a utilitarian function, including display

cases, signs, shopping carts or baskets,

newspaper racks, ash trays, and clocks.

FDA believes that this assumption is

unfounded, because many retailers will

modify rather than replace these items

and many manufacturers will share the

replacement burden with retailers. For

example, one report describing the

results of a local self-service ban

indicated that, ‘‘tobacco distributors and

tobacco company sales representatives

furnished behind-the-counter shelving

and locking cases for tobacco products

to retailers at no charge in order to assist

retailers comply with self-service/

vendor-assisted regulations.’’ 315 Again,

however, the future allocation of these

costs among manufacturers and retailers

is unknown. For its initial estimates,

except as explained below, FDA

maintains the Barents Group’s

assumptions that removal costs are

primarily borne by the manufacturer

and replacement costs by the retailer. In

fact, both cost categories will be shared

and the implications of these

assumptions are illustrated below

through sensitivity analysis.

In February 1996, economic

consultants to FDA attempted to

replicate the A. T. Kearney field audit

in Boston (the Eastern Research Group,

Inc. (ERG),) 316 and in Washington, DC

(an independent contractor). While most

observations of the number of affected

display cases were reasonably

consistent with the A. T. Kearney

findings, the observed number of

exterior and interior promotional

materials deviated significantly from the

A. T. Kearney audit data. One

explanation may be that the seasonal

items available at the end of November

had been removed by the following

February. As a result, FDA has not

adjusted its calculations to account for

these discrepancies (except for the cost

of basket racks in the Washington, DC

stores), but used certain insights from

these visits to revise the Barents Group’s

unit cost assumptions, as follows:

(i) The agency rejects the Barents

Group’s assumption that retailers rather

than manufacturers will bear the costs

of replacing promotional unattached

counter displays. Because many of these

items will be moved to visible locations

behind counters, it is far more likely

that manufacturers, not retailers, would

pay for replacements. For its revised

estimate, therefore, FDA assumes that

manufacturers will pay replacement

costs for unattached counter displays.

Although total costs are unchanged, this

assumption increases the costs for

manufacturers by $17 million and

decreases the costs for retailers by an

equal amount.

(ii) A. T. Kearney and the Barents

Group contradict themselves on the cost

of removing disposable display cases. A.

T. Kearney describes these units as

temporary displays ‘‘frequently found in

association with promotional offerings,

sales, or seasonal themes,’’ but assumes

that retailers will replace them with

permanent self-standing retail pack

cases at $250 each. In contrast, the

Barents Group calculations imply that a

distribution services company will

remove each display for a fee of $150

and retailers will replace each item for

$50. FDA agrees with the Barents Group

that retailers will not replace temporary

units with permanent retail pack cases.

Moreover, if a marketing representative

can throw away free-standing ash trays

filled with sand, as noted by A. T.

Kearney, then a marketing

representative can also dismantle and

throw away disposable displays made of

cardboard and plastic. FDA estimates,

therefore, that instead of hiring a

distribution services company, the

manufacturer’s representative will take

no more than 15 minutes to remove

each disposable unit, install a new

unattached counter display and restock

any excess inventory in a nonselfservice area. This assumption decreases

the estimated one-time costs by $7

million.

(iii) The A. T. Kearney cost-estimating

methodology for the self-service ban

implies that store modifications take

place in a sequential pattern, with no

allowances for economies of scale. For

example, the outlet cost for hiring a

distribution services contractor to

relocate or replace display cases was

calculated as a fixed multiple of the

number of cases to be removed, even

though many establishments must

remove several display cases. This

approach overstates costs by ignoring

the significant scale economies

achievable by performing all

compliance activities at one time. Thus,

FDA modified A. T. Kearney’s

distribution services costs for the

removal, relocation and installation of

small attached, retail pack, and carton

self-service display cases by assuming

that the first display unit in an outlet

would be removed at a unit charge of

$90, $150, or $185, respectively, but that

each additional unit would be removed

at one-half of these costs. For those

stores with different sizes of display

cases, the first unit was assumed to be

the most expensive to remove (e.g., a

carton display would be considered the

first item when there is also a retail pack

display or a small attached display).

Adjusting for these scale economies

reduces the estimated total costs by $15

million.

(iv) A. T. Kearney assumed that many

promotional items, such as signs and

clocks, would be removed by a

distribution services company hired by

the manufacturer. FDA’s consultants,

however, found that almost all of the

promotional material observed could be

easily removed or modified by retail

personnel or marketing representatives.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44583

317 Derived from assumption that 10 percent of

carton transactions are for multiple (2) cartons, and

that cartons constitute 85 percent of tobacco sales

at supermarket/grocery stores, general merchandise

stores, drug stores, and tobacco stores, and 10

percent of tobacco sales at other outlets. Tobacco

sales data from 1992 Census of Retail Trade, pp. 3–

31. Kearney site visits found that 80 percent of

general merchandise stores, 33 percent of

supermarket/grocery stores, 25 percent of

convenience stores, 17 percent of service stations,

30 percent of drug stores, 42 percent of tobacco

stores had self-service carton display cases.

For example, rather than needing a

contractor to remove the lighted sign in

one of the sampled outlets, ERG found

that the front panel was easily

removable and could be quickly

replaced by an acceptable panel.

Although a few signs may require

substantial time to dismantle, most of

these items will take just a few minutes

to remove. To account for this range,

FDA assumes that a manufacturer’s

representative will take 15 minutes to

remove and dispose of the various

exterior signs, banners, clocks and news

stand displays, as well as the interior

lighted signs and clocks, lowering total

costs by $27 million.

(v) A. T. Kearney assumed that many

display cases located in nonself-service

areas would be removed and replaced,

because of improper advertising. They

assumed that the manufacturer would

pay for the removal of the old case and

the installation of the new case, but that

the retailer would purchase the new

display case. Contrary to this finding,

FDA consultants found no sites in the

Boston or Washington, DC regions

where it was necessary to replace

nonself-service displays. Because in

each instance, all visible advertising

could be altered or obscured, retailers

would almost always opt to cover

impermissible advertising rather than to

purchase new display cases costing up

to $300. Accordingly, FDA estimated

that it would take 15 minutes and $5

worth of stickers to cover each small

attached display; 25 minutes and $10

worth of stickers to cover each retail

pack display; and 35 minutes and $15

worth of stickers to cover each carton

display. This modification decreases

total costs by $20 million.

(vi) Even though the A. T. Kearney

audit identified a number of self-service

display cases that did not fit in the

nonself-service area but could be

retrofitted with locks, the Barents Group

did not include cost estimates for these

items. FDA estimates that it would take

30 minutes of retailer time and cost

about $10 for materials to add a lock to

these display cases, increasing the total

one-time costs by $1.5 million.

(vii) In its analysis of the 1995

proposed regulation, FDA

acknowledged that the required

reconfiguration of tobacco displays may

also impose added labor costs for some

purchase transactions, especially for

those stores that move inventory to

areas located away from employee work

stations. On the assumption that the ban

on self-service tobacco displays would

require 10 seconds of additional labor

time for 75 percent of all retail

transactions involving cartons, FDA had

estimated costs of about $14 million per

year. Although a few comments

indicated that the self-service ban

would increase labor costs, the Barents

Group did not include such costs in its

assessment. Nevertheless, FDA believes

that some establishments, particularly

those selling a substantial number of

cigarette cartons that could not be stored

within easy reach of a checkout station,

could experience increased annual labor

costs. Thus, FDA recalculated its

estimate based on the updated retail

employee compensation rate of $9.51

suggested by the Barents Group and the

new site visit data from the A. T.

Kearney study, which imply that only

about 40 percent of cigarette cartons are

purchased at establishments that sell

cigarette cartons from self-service areas.

These adjustments project additional

annual labor costs of about $10.9

million per year. 317

Except for those adjustments, FDA

used the information found in the A. T.

Kearney field audit to develop its

revised estimate. For comparison, the

original Barents Group estimates of the

number of establishments and one-time

point-of-sale costs (corrected for

miscalculations as described above) are

shown in Table 6 and FDA estimates of

one-time costs in Table 7. Detailed

summaries of the FDA one-time cost

estimates are presented in Table 8 and

Table 9 and indicate that costs related

to self-service display cases comprise 73

percent of the total, followed by 18

percent for promotional materials and 9

percent for nonself-service display

cases. As explained above, these

estimates assume that manufacturers

will bear the cost of removing all

promotional items and retailers will

bear the cost of replacing most

functional items. Because the regulation

places the removal responsibility on

owners of the materials, FDA does not

know how these obligations will be

divided. However, if retail outlets,

rather than manufacturers, must remove

these items, the overall cost to

manufacturers falls by about $47 million

and the cost to retailers increases by

about $17 million. (Retail compensation

rates are about one-third of

manufacturer rates, according to the

Barents Group data). The following

discussion describes specific

compliance costs for each outlet

category.

BILLING CODE 4160–01–F
44584 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations TABLE 6.—BARENTS GROUP LLC ESTIMATE OF ONE-TIME POINT-OF-SALE REGULATORY COSTS 1 Kind of Business Estimated Number of Establishments Average Cost per Facility ($) Estimated Point-of-Sale Costs (Lower) Estimated Point-of-Sale Costs (Upper) Lower Upper Retail Costs ($) Manufacturer Costs ($) Total Costs ($) Retail Costs ($) Manufacturer Costs ($) Total Costs ($) General Merchandise 21,299 29,818 1,067 13,268,172 9,449,404 22,717,576 18,575,066 13,228,900 31,803,966 Supermarket/Grocery 125,222 175,311 2,356 182,028,407 112,960,223 294,988,630 254,840,061 158,144,493 412,984,554 Convenience Stores 51,678 72,349 925 24,408,368 23,382,610 47,790,978 34,171,621 32,735,564 66,907,185 Convenience Stores with Gas 91,250 127,750 515 21,656,668 25,294,382 46,951,050 30,319,336 35,412,134 65,731,470 Service Stations 66,721 93,409 217 4,894,902 9,616,053 14,510,955 6,852,833 13,462,416 20,315,250 Drug Stores 51,056 71,478 167 4,472,540 4,054,323 8,526,863 6,261,520 5,676,020 11,937,541 Tobacco Stores 2,596 3,635 2,940 4,486,055 3,147,456 7,633,511 6,281,514 4,407,166 10,688,680 Total 409,822 573,750 255,215,112 187,904,451 443,119,563 357,301,952 263,066,694 620,368,645

1Totals may not add due to rounding.

TABLE 7.—FDA ESTIMATE OF ONE-TIME POINT-OF-SALE REGULATORY COSTS

Kind of Business Estimated Number of Establishments1 Average Cost Per Facility ($) Estimated Point-of-Sale Costs2 Retail Costs ($) Manufacturer Costs ($) Total Costs ($)

General Merchandise 12,117 919 7,874,058 3,263,894 11,137,952Supermarket/Grocery 71,240 810 32,655,560 25,067,316 57,722,876Convenience Stores 93,745 364 12,271,061 21,879,370 34,150,431Convenience Stores with Gas 51,913 213 1,397,066 9,644,359 11,041,425Service Stations 45,539 122 2,560,164 2,974,000 5,534,164Drug Stores 30,875 160 2,978,007 1,966,563 4,944,570Tobacco Stores 1,477 2,175 2,165,591 1,046,163 3,211,753Other Establishments 210,012 19 522,765 3,384,741 3,907,506Total 507,918 62,424,273 69,226,404 131,650,677

1 Number of establishments from Table 5.2Totals may not add due to rounding.
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

318 Kropp, R., ‘‘A Position Paper on Reducing

Tobacco Sales to Minors by Prohibiting the Sale of

Tobacco Products by Means of Self-Service

Merchandising and Requiring Only VendorAssisted Tobacco Sales,’’ North Bay Health

Resources Center, Stop Tobacco Access for Minors

Project (STAMP), Petaluma, CA, p. 5, November 3,

1994.

e. General merchandise stores. None

of the general merchandise stores in the

A. T. Kearney sample had exterior

promotional materials and only a few

had interior promotional materials.

Eighty percent of the stores had only

self-service displays, with carton

displays more numerous than pack

displays at these locations. The average

per facility one-time costs estimated by

FDA were $919. Overall, 97 percent of

the outlet costs related to the

replacement of self-service display

cases, although in some general

merchandise stores, tobacco products

were stocked on shelves rather than in

special display cases, which suggests

that the costs for this business category

may be overstated.

f. Supermarket/grocery. Unlike

general merchandise stores,

supermarkets had significant

promotional materials. While both

packs and cartons were sold at most

locations, over 75 percent of the stores

already had nonself-service display

areas. FDA estimates per facility costs at

$810. Self-service display case removal

and replacement amount to 85 percent

of the total cost, whereas promotional

materials account for 14 percent.

Commenting on the feasibility of the

proposed FDA self-service ban, the Food

Marketing Institute argued that most

retail food stores do not have adequate

space at checkout lines for tobacco

products and rejected the practicability

of alternative procedures. They

suggested that the only option available

to many food retailers would be to

remodel and set-up a controlled area for

the sale of tobacco products, costing up

to $50,000 per store. The A. T. Kearney

audit, however, found that a majority of

supermarket/grocery stores have already

installed nonself-service areas for

tobacco products and would not need to

reconfigure their stores. While some

establishments will incur costs above

the average, the A. T. Kearney site visit

data suggest that most stores could

comply by either moving inventory to

nonself-service areas or by purchasing

new displays that are compatible with

existing store configurations.

g. Convenience stores. Stores in this

category exhibited numerous interior

and exterior promotional items. All of

the convenience stores surveyed had

nonself-service display cases and 50

percent had carton displays. FDA

estimates per facility costs of $364.

Costs for removing and replacing selfservice display cases made up 59

percent of the total, while costs for

promotional materials and nonselfservice display cases were 28 percent

and 14 percent, respectively.

The National Association of

Convenience Stores (NACS) faulted

FDA on its assumption that the main

cost of the self-service ban would be to

relocate tobacco product inventory,

contending that their members would

incur thousands of dollars in

reconfiguration costs. According to

NACS:

[i]t is largely irrelevant that retailers

already keep packs behind the counter. Many

NACS members keep large quantities of

packs and cartons in self-service displays and

would have to reconfigure their stores to

comply with the ban on self-service sales.

Based on an estimate from one member

with a high volume of self-service

cigarette sales, NACS suggested it could

cost $4,320 and $10,120, respectively, to

reconfigure a newer and older

convenience store.

Based on other evidence, however,

FDA does not believe that a large

number of stores will be forced to

undergo extensive modifications and

finds that most convenience stores can

adequately adapt space either behind or

above checkout counters. As noted

earlier, one regional survey reported

that retail outlets readily complied with

local self-service restrictions without

architectural remodeling or substantial

refitting of checkout counters or store

aisles. 318 Space above counters is

typically available for display cases

either by suspending a case from the

ceiling or by supporting a case on beams

from the counter. In its survey, A. T.

Kearney found at least some tobacco

products sold from nonself-service

space in every convenience store.

Although it is possible that stores might

incur added inventory handling costs if

this space were smaller than optimal,

FDA concludes that major

reconfiguration would rarely be

required and relies on the A. T. Kearney

survey data, as adjusted, to project

average costs for this sector.

h. Convenience stores with gas. Like

convenience stores without gas, these

establishments had numerous interior

and exterior promotional materials.

About 89 percent of the stores surveyed

had nonself-service display cases. FDA

estimates per facility costs of $213.

Consistent with the findings of the

Barents Group, the average outlet cost

for this sector is about one-half that of

convenience stores without gas.

In comments to the 1995 proposed

rule, the Society of Independent

Gasoline Marketers of America (SIGMA)

did not present specific data on the cost

to their members, but indicated that

many members would be required to

reconfigure their stores. They stated

that:

[m]any SIGMA members keep large

quantities of packs and cartons in self-service

displays and would have to reconfigure their

stores to comply with the ban on self-service

sales. At a minimum, these members would

have to install new cabinets to accommodate

tobacco products behind the counter. Many

members would have to enlarge the counter

area to make room for the new cabinets.

In contrast, the A. T. Kearney field audit

found few convenience stores with gas

that have self-service displays, other

than unattached promotional counter

displays. Costs to remove or replace

promotional counter displays will be

borne primarily by manufacturers, not

retailers. In sum, the costs for selfservice display cases amount to about

31 percent of the total, promotional

material 30 percent, and nonself-service

display cases 39 percent.

i. Service stations. These

establishments had both interior and

exterior promotional material. Seventyfive percent of the locations surveyed

had only nonself-service display cases

and one-fourth had carton displays.

FDA estimates the per facility cost at

$122.

j. Drug stores. Drug store outlets had

few exterior and interior promotional

materials. As in general merchandise

stores, tobacco products were stocked

on shelves in some locations. Ninety

percent of the stores surveyed by A. T.

Kearney already had nonself-service

displays and approximately 70 percent

had carton displays. FDA estimated

$160 cost per facility for this category of

business. About 93 percent of the total

one-time costs are for replacement of

self-service display cases.

k. Tobacco stores. These stores had

substantial promotional materials and

multiple display cases. FDA estimates

per facility costs of $2,175. About 94

percent of the costs are for self-service

display cases, with promotional

materials and nonself-service display

cases dividing the remaining 6 percent.

While not reflected in the cost totals,

these establishments may choose to

operate as ‘‘adult only’’ restricted areas

to avoid replacing self-service display

cases.

l. Other establishments. This category

includes eating/drinking establishments

and miscellaneous retail stores, which
44590 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

319 ‘‘Tar, Nicotine, and Carbon Monoxide of the

Smoke of 933 Varieties of Domestic Cigarettes,’’

Federal Trade Commission, 1994.

320French, M. T., D. M. Neighbors, L. K. Carswell,

K. B. Heller, and G. L. McDougal, ‘‘Compliance

Costs of Food Labeling Regulations,’’ Final Report,

RTI Project Number 233U–3972–02 DFR, January

1991.

321 Department of National Health and Welfare,

‘‘Tobacco Products Control Regulations,

amendment,’’ Canada Gazette, Part II, vol. 127, No.

16, pp. 3277–3294, August 11, 1993.

322 Kaiserman, M., Department of National Health

and Welfare, Canadian Government, personal

communication, February 1, 1995.

323Bauman, K. E., J. D. Brown, E. S. Bryan, L. A.

Fisher, C. A. Padgett, and J. M. Sweeney, ‘‘Three

Mass Media Campaigns to Prevent Adolescent

Cigarette Smoking,’’ Preventive Medicine, vol. 17,

pp. 510–530, 1988.

were excluded from the A. T. Kearney

audit, plus the estimated 100,000

nonretail establishments that sell

tobacco products OTC, such as hotels,

factories and sporting facilities. Due to

the low volume of tobacco product sales

at these establishments, FDA assumed

that only a small quantity of packs and

no cartons would be sold. Lacking

detailed data, FDA assigned costs of $19

per outlet, based on the costs of

removing promotional materials and

relocating and replacing small attached

display cases, as reported for drug

stores.

3. Label Changes

The final regulation requires that the

tobacco product package contain the

established name of the tobacco product

in a specified size. FDA estimated the

compliance costs for printing new labels

in its earlier analysis of the proposed

regulation and has received no

comments that improve those original

estimates.

Approximately 933 varieties of

cigarettes are currently produced in the

United States. 319 FDA does not have

information on the number of smokeless

tobacco varieties, but assumes that the

total number of cigarette and smokeless

tobacco varieties is roughly 1,000.

Because most varieties of cigarettes are

packaged in both single packs and

cartons, the total number of labels is

assumed to number about 2,000.

FDA used two approaches to estimate

the cost to industry of changing these

labels. The first approach relied on

information compiled by The Research

Triangle Institute (RTI) for its report to

FDA on the cost of changing food

labels. 320 RTI reported a cost of about

$700 for a 1-color change in a

lithographic printing process. FDA

multiplied this figure by 4 to account for

a 2-color change on the actual warning

labels and an additional 2 colors for

modifications to the existing label to

make room for the warning label. This

calculation yielded incremental printing

costs of about $2,800 per label, or $5.6

million for all 2,000 varieties of affected

tobacco products. Adjusting this figure

downward by RTI’s methodology to

account for the current frequency of

label redesign predicts that the total

one-time cost of completing these label

changes within a 1-year compliance

period would be approximately $4

million.

The second approach was to use cost

information provided in the regulatory

impact analysis of a roughly comparable

Canadian regulation. 321 The Canadian

Government estimated a cost of $30

million to change labels for about 300

cigarette varieties. Most Canadian

cigarettes are likewise sold in two sizes,

but about 20 percent are also sold in flip

top packages. 322 Canadian labels,

however, are typically printed using a

gravure method; which, according to

RTI, is about 3.5 times as expensive as

the lithography process used in the

United States. Adjusting the Canadian

estimate upward, to account for the

larger number of cigarette and

smokeless tobacco varieties in the

United States; and downward, for the

smaller number of packages per variety

and the smaller cost of the lithography

printing process, provides a $17 million

estimate for the total cost of these label

changes.

4. Educational Program

FDA may issue notification orders

under section 518(a) of the Federal

Food, Drug, and Cosmetic Act (the act)

(21 U.S.C.360h(a)) to require

manufacturers of cigarettes and

smokeless tobacco products to fund

consumer educational programs. While

the precise details of these orders are

still under development, these orders

may involve the achievement of specific

performance objectives by directing

manufacturers to initiate informational

programs designed to transmit messages

that will reach the majority of young

people. The 1995 proposed regulation

directed manufacturers to spend at least

$150 million annually on this program.

While industry comments were critical,

many other comments suggested that

this figure was too low. One comment

noted that $150 million is equivalent to

about one week of pro-tobacco

expenditures and another that the

industry gained $221 million in profits

from underage sales. Still another

pointed out that the current dollar value

of the informational advertising that was

conducted under the Fairness Doctrine

would amount to about $300 million per

year. One study appears to indicate that

75 percent of adolescents aged 12 to 17

could have been reached in 1985 to

1986 with multiple messages at a cost of

about $17 million a year. 323 FDA is still

evaluating various types of

informational programs, with respect to

both effectiveness and practicality.

Before a final decision is reached, the

agency will determine the costs of

selected alternatives.

5. Restricted Advertising and

Promotional Activities

a. Tobacco industry. The

determination of the societal costs

attributable to the restrictions on

tobacco product advertising and

promotion is complex. While there is no

doubt that individual manufacturers

realize enhanced goodwill asset values

from advertising programs, the industry

has long held that advertising prompts

brand-switching, but does not increase

aggregate sales. Of course, if this were

true, advertising would be unprofitable

from the standpoint of the industry as

a whole and reduced levels would

increase rather than decrease aggregate

industry profits. In addition, if the

primary motivation for tobacco

advertising is to promote brandswitching, then, as long as all firms are

equally restricted from advertising, the

above mentioned loss in goodwill value

will be substantially reduced.

In its comments, the tobacco industry

claimed that tobacco advertising and

promotion have virtually no effect on

youth consumption. Although FDA does

not accept this claim, the agency does

not consider the expected voluntary

reduction in the consumption of tobacco

products to be a societal cost. Although

industry sales will fall, they will reflect

new consumer preferences and

consumer dollars no longer used on

tobacco products will be redirected to

other more highly valued areas. Thus,

for the most part, the resulting reduction

in industry sales are not net costs and

the potential magnitude of this revenue

transfer is discussed below under the

heading of Distributional Effects.

Moreover, as shown in that discussion,

any short-term frictional or relocation

impacts will be significantly moderated

by the gradual phase-in of the economic

effects.

b. Advertising industries. In its

original analysis, FDA argued that

advertising and promotional restrictions

will impose no long term net costs on

society. The Barents Group’s study

found that the various suppliers of
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44591

324Recommendations of the Staff of the Federal

Trade Commission, ‘‘Omnibus Petition for

Regulation of Unfair and Deceptive Alcoholic

Beverage Advertising and Marketing Practices,’’

Appendix A, pp. 3–4, March 1985.

325Sutton, J., ‘‘Sunk Costs and Market Structure,’’

The MIT Press, Cambridge, Massachusetts, pp. 229–

247, 1991.

industry advertising will incur

substantial regulatory costs. It estimated

that illustrative annual costs for this

sector could reach $722 million to $2.17

billion, or up to one-half of its estimate

of the total costs of the FDA proposal.

Upon review, FDA remains firmly

convinced that its original position was

correct. That is, from the standpoint of

assessing societal costs and benefits,

reduced revenues from tobacco

advertising and promotional activities

are not net costs and are appropriately

considered a distributional impact.

Indeed, FDA believes that a strong

argument can be made that, even

irrespective of health benefits, these

advertising restrictions will decrease net

societal costs by freeing productive

resources for alternative uses. This does

not imply that no individual business

entities will be negatively impacted.

Many of the companies that currently

benefit from tobacco promotions (e.g.,

advertising agencies, publishers,

sporting event promoters) will suffer

lost revenues and those firms that

specialize in those activities may lose a

substantial part of their business.

Nevertheless, from a societal

perspective, these losses will be

counterbalanced by an increase in

demand for other consumption and

investment goods, so that nontobaccorelated entities will gain sales. Although

overlooked in most industry comments,

this result is acknowledged within the

comments submitted for the Tobacco

Institute by the Barents Group:

A key assumption in the simulations is

that, when tobacco product manufacturers

decrease their advertising expenditures, the

money not spent translates into increased

profits for the industry. The increased profits

ultimately end up in the hands of the

companies’ owners (shareholders) either as

direct payouts or as investments on their

behalf in other lines of business. In general,

these profits are ultimately recycled into

increased consumption and investment by

the owners of the companies.

That report also reveals the underlying

distributional nature of the impacts by

explaining that its modeling

incorporates the assumption that:

* * * in the long run economic losses in

one sector of the economy will be

redistributed to other sectors of the economy,

i.e., winners and losers will generally balance

out for the economy as a whole.

Further discussion of the impact of

these revenue transfers is included

below under the section on

‘‘Distributional Effects.’’

c. Retail sector. In addition to the

previously estimated direct costs

associated with the removal of

prohibited point-of-purchase

advertising, promotional restrictions

will impact the retail sector because

they will lead to a long-term decline in

tobacco products sales and a potential

fall in promotional allowances (slotting

fees) from manufacturers. Once again,

these impacts are not net societal costs,

since reduced tobacco product sales will

be counterbalanced by increased sales

for other products or services; and

smaller promotional allowances, if they

occur, are gains to tobacco

manufacturers that would be used for

other purchases. Consequently, these

impacts also are examined below under

‘‘Distributional Effects.’’

d. Consumers. Advertising restrictions

may impose costs on society if they

disrupt the dissemination of relevant

information to consumers. Firms engage

in advertising to inform potential

customers about their product

(informative advertising) or to persuade

customers that a product is desirable

(persuasive advertising). According to

the FTC’s Bureau of Economics, the

benefits of advertising derive from:

* * * its role in increasing the flow and

reducing the cost of information to

consumers * * * First, advertising provides

information about product characteristics

that enables consumers to make better

choices among available goods * * *

Second, theoretical arguments and empirical

studies indicate that advertising increases

new entry and price competition and hence

reduces market power and prices in at least

some industries * * *. Third, advertising

facilitates the development of brand

reputations. A reputation, in turn, gives a

firm an incentive to provide products that are

of consistently high quality, that live up to

claims that are made for them, and that

satisfy consumers. 324

FDA has considered each of these

issues. First, while agreeing that many

forms of advertising offer substantial

benefits to consumers, the agency

nevertheless believes that consumers

will lose little utility from these

particular advertising restrictions. The

regulation does not prohibit factual,

written advertising. Thus, the rule will

not impede the dissemination of

important information to most

consumers. In its preliminary analysis,

the agency concluded that, ‘‘[w]hile

imagery and promotional activities may

be important determinants of consumer

perceptions and sales, they typically

provide little meaningful information on

essential distinctions among competing

tobacco products’’ (60 FR 41314 at

41368).

One industry comment strongly

opposed this position, arguing that

advertising is important for product

improvement and that past restrictions

on the advertising of ‘‘low tar’’ products

retarded product innovation. The crux

of the argument is that color and/or

imagery are prerequisites for

disseminating relevant quality

information and that, in its absence,

consumers could not be adequately

informed about the merits of new

products. FDA, however, is not

persuaded that manufacturers will be

unable to convey vital information. The

agency finds that true product

improvements in this industry are rare,

but where they exist, manufacturers

could rely on traditional ads in adultoriented publications and on ‘‘text

only’’ advertising elsewhere. Moreover,

FDA and other public health agencies

would likely coordinate with companies

in disseminating truly important

consumer safety information.

The implications of FTC’s second

point, which addresses the effect of

advertising restrictions on market power

and prices, are less certain, as various

empirical studies have reached

conflicting conclusions. One industry

comment insisted that FDA’s regulation

will deprive consumers of the benefits

of competition, stating that,

‘‘[u]ndoubtedly the clearest measure of

consumer benefit is the effect of

advertising on price.’’ To support this

view, the comment references several

studies that demonstrate the ability of

advertising to reduce product prices.

The comment also contended that the

‘‘[e]limination of advertising will

predictably consolidate the market as

marginal brands are abandoned and

fewer brands are introduced’’ and that,

‘‘[o]ver time this can also reduce the

number of players, as companies with

dominant brands drive out others.’’

FDA agrees that advertising can often

lead to decreased product prices, but

notes that the other industries

referenced (e.g., eyeglasses and

pharmaceuticals) are much more

competitive than tobacco products.

Moreover, economists have found that

advertising can also serve as a barrier to

entry in oligopolistic industries. One

author, for example, determined that

ready-to-eat breakfast foods companies

used advertising programs to support

brand proliferation strategies in order to

dominate retail shelf space. 325 These

programs helped to keep new firms out

and prices high without necessarily
44592 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

326Scherer, F. M., Industrial Market Structure

and Economic Performance, 2nd edition, Rand

McNally College Publishing Co., Chicago, IL, p. 380,

1980.

327Becker, G. S., and K. M. Murphy, ‘‘A Simple

Theory of Advertising as a Good or Bad,’’ Quarterly

Journal of Economics, vol. 108, p. 941, November

1993.

328Federal Trade Commission Report to Congress

for 1993: Pursuant to the Federal Cigarette Labeling

and Advertising Act, issued 1995.

embodying improved quality. Thus, in

certain circumstances, oligopolistic

firms can use extensive advertising to

create barriers for suppressing

innovation and competition. FDA

cannot determine whether tobacco

advertising restrictions would

ultimately increase or decrease product

prices.

Finally, FTC’s third point, which

emphasizes the positive aspects of

advertising in supporting brand

reputations, is more relevant for longlived items, such as consumer durables,

where purchases are infrequent or

personal experience is inadequate.

Advertising is less likely to play a key

role in assuring high quality levels for

tobacco products, where consumer

search costs are low and a brand’s

reputation for quality is tested by

consumers every day. For these

products, high quality will remain a

prerequisite of commercial success

irrespective of advertising strategies.

Other analysts suggest still other

potential attributes of product

advertising. For example, according to

F. M. Scherer, author of a widely read

text on industrial organization:

Advertising is art, and some of it is good

art, with cultural or entertainment value in

its own right. In addition, it can be argued

that consumers derive pleasure from the

image advertising imparts to products, above

and beyond the satisfaction flowing in some

organic sense from the physical attributes of

the products. There is no simple case in logic

for distinguishing between the utility people

obtain from what they think they are getting

and what they actually receive. As Galbraith

observed, ‘‘The New York housewife who

was forced to do without Macy’s advertising

would have a sense of loss second only to

that from doing without Macy’s.’’ 326

Similarly, Becker and Murphy have

argued that advertisements should be

considered ‘‘goods’’ if people are willing

to pay for them and as ‘‘bads’’ if people

must be paid to accept them. 327 They

explain that, in general, the more easily

the advertisements can be ignored, the

more likely it is that the ads themselves

provide utility to consumers.

Newspaper and magazine

advertisements, for example, must

provide positive consumer utility or

they would be ignored by readers. This

final rule allows such advertisements to

continue, some in their current form,

others in a text-only format. (In fact,

industry outlays for newspaper and

magazine advertisements have dropped

sharply in recent years and currently

constitute less than 5 percent of the

industry’s total advertising and

promotion budget). 328 Conversely, the

extraordinary growth in industry

advertising and promotion has occurred

in areas that are typically bundled with

other products, or placed in prominent

public settings that are difficult to

ignore. Thus, there is considerable

question about the contribution of these

programs to consumer utility.

6. Training

a. Retailers. The final regulation does

not explicitly require retail employees

who sell tobacco products to be trained

in checking customer I.D.’s. FDA

understands, however, that some

training is essential to effective

performance. In its analysis of the

proposed regulation, FDA estimated

total annual costs of $10 million for

employee training at retail outlets. This

estimate assumed that an average of 12

employees per store at 467,000 retail

stores (assuming 1/3 of 700,000 stores

already conducted training) would

receive 15 minutes of training at a

compensation rate of $7.41/hour. The

Barents Group commented that FDA’s

analysis did not account for many

individual cost elements, resulting in a

significant underestimate of total

training costs. It estimated one-time

training costs of $184 to $257 million

and recurring annual training costs of

$48 to $67 million.

Specifically, the Barents Group stated

that FDA relied on outdated

compensation data. FDA had obtained

these data from a 1992 report prepared

by Price Waterhouse for the Tobacco

Institute, but agrees that more recent

data are available and employs the

suggested compensation rate of $9.51 for

its revised estimate. The Barents Group

also claimed that FDA failed to consider

recurring training costs due to annual

employee turnover and annual

updating, focusing instead on one-time

training costs only. This criticism is not

valid. Table 2 of the original analysis

(60 FR 41314 at 41360) clearly lists

training costs for retail establishments

as an annual operating cost and the text

(60 FR 41314 at 41367) refers to a ‘‘per

year’’ cost. Because employees would be

trained when first hired, this estimate

implied a 100 percent employee

turnover rate.

To refine its analysis, however, FDA

has disaggregated the cost elements.

Although the Barents Group accepted

FDA’s preliminary estimate of 12

employees per retail store, FDA now

believes that this figure is accurate only

for retail stores with payroll. Stores

without payroll constitute a significant

percentage of the stores selling tobacco

products and, on average, are much

smaller. As explained above, FDA

estimates that about 600,000

establishments will sell over-thecounter tobacco products, including the

100,000 that replace those vending

machines that are removed. Table 10

presents the data that underlie FDA’s

revised estimates of the number of

employees who will be trained. For

existing retail establishments with

payroll, FDA assumes that training will

be needed for all employees in the

affected outlets, except in General

Merchandise and Supermarket/Grocery

stores, where one-third of the employees

will be trained. For establishments

without payroll, nonretail

establishments, and new establishments

replacing vending machines, Census

data on the number of employees is not

available, but FDA assumes that an

average of six employees will be trained.

As shown in Table 10, these

calculations indicate that training will

be required for a total of 4.2 million

workers.

The Barents Group further faulted

FDA for underestimating the training

time that would be required to educate

retail sales clerks about recognizing

proper forms of identification and

handling related customer service

problems. It assumed that 2 hours of

training would be necessary. FDA,

however, reviewed the time needed to

present the training materials from

several corporate entities and finds that

they need not exceed one hour. For

example, one large convenience store

corporation uses a 45 minute training

videotape that covers the sale of tobacco

products, but also covers the sale of

alcohol and possible inhalants,

including means for recognizing

inebriated or drugged individuals.

Moreover, many establishments,

especially small stores, will provide no

formal training, but will provide

instruction during the work day with

minimal lost time. Thus, FDA believes

that average costs are reasonably based

on a 1-hour training program.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44593

329Cummings, K. M., T. Pechacek, and D.

Shopland, ‘‘The Illegal Sale of Cigarettes to U.S.

Minors: Estimates by State,’’ American Journal of

Public Health, vol. 84, No. 2, p. 301, February 1994,

(derived by subtracting sales to 18-years-olds from

the reported 516 million packs consumed).

TABLE 10.—NUMBER OF EMPLOYEES TO BE TRAINED

Kind of Business

Payroll Establishments Nonpayroll Establishments

Total

Employees

Trained

Establishments

Selling Tobacco

Products

Employees

Per Store

Percent

Trained

No. of

Employees

Trained

Establishments Selling Tobacco

Products

No. of

Employees

Trained1

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

about one-third of all affected

establishments already provide

employee training (also assumed by the

Barents Group), implies one-time

employee training costs of $26.6 million

(4.2 million employees x 2/3 x $9.51).

The Barents Group suggested, however,

that even employees who currently

receive training would need 5 extra

minutes on the new regulations, which

adds about $1.0 million to the cost

estimate. Next, the Barents Group

included costs for time spent by

trainers, assuming that the training

would be provided by an outside

source. FDA believes that a more typical

approach would have a store supervisor

provide the training. Using $13.64 as the

compensation rate for a retail manager,

as suggested by the Barents Group, and

adjusting for the assumed one-third

current compliance rate in existing

establishments, yields a one-time cost

for trainer time of $6 million. Thus,

FDA projects total one-time training

costs of about $33.5 million.

In addition, FDA estimates that

employee turnover, using the Barents

Group suggested rate of 42 percent, will

add annually recurring training costs of

about $11.2 million. Also, new

employees will receive I.D. check

training as part of their initial

orientation activities. Since stores may

provide this to several new employees

at once, using either written or video

training materials, FDA estimates that

retail managers, on average, would

spend about 1 additional hour per year

providing this training. This adds $6.0

million to the annual training costs. The

Barents Group also recommended

annual reinforcement training. An

annual 10-minute reinforcement

training period for employees of those

establishments that do not already have

a training program will cost about $2.9

million. In sum, these annual recurring

training costs total about $20 million.

The Barents Group also assumed that

retail managers would need extensive

training to understand the new

regulations. FDA estimated in its 1995

proposal that manufacturers’

representatives would need about 8

hours of training on their new

responsibilities and the Barents Group

assumed that retail managers would

need a similar duration of training. FDA

rejects this estimate, however, as the

final provisions affecting retailers are

straight-forward and will be routinely

communicated through traditional

industry channels.

b. Manufacturers representatives. In

its preliminary economic analysis, FDA

estimated that 7,300 manufacturer

representatives would be trained for 8

hours at a cost of $25.00 per hour. After

noting FDA’s ‘‘undocumented’’ cost

estimate, the Barents Group proceeded

to apply the identical number of

training hours to their ‘‘documented’’

cost estimate of $25.70 per hour. They

also suggested a 15 percent labor

turnover premium, giving a total cost of

$1.5 million. As the final rule eliminates

the monitoring burden for these

employees, this training cost should be

correspondingly smaller. Nevertheless,

these manufacturer employees will still

need to determine the types of displays

that remain permissible. FDA therefore

accepts the $1.5 million cost estimate.

7. Access Restrictions

a. Manufacturers. Although voluntary

decreases in the sale of consumer

products do not impose long-term net

societal costs, mandatory restraints on

the access of consumers to desired

products may imply economic costs.

Economists typically measure producerrelated inefficiencies attributable to

product bans by calculating lost

‘‘producers’ surplus,’’ which is a

technical term for describing the

difference between the amount a

producer is paid for each unit of a good

and the minimum amount the producer

would accept to supply each unit, or the

area between the price and supply

curve. Data derived from Cummings, et

al., indicate that youngsters under the

age of 18 consume 316 million packs of

cigarettes per year, leading to industry

profits of $118 million. 329 On the

assumption that the regulation would

reduce teenage smoking by one-half,

these profits would fall by about $59
44594 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

330 1994 SGR, p. 85.

331U.S. Department of Commerce, Statistical

Abstract of the United States 1993, 113th edition,

p. 137, 1993; DHHS, Office of Inspector General,

Spit Tobacco and Youth; Additional Analysis, June

1993.

332 ‘‘No Sale: Youth Tobacco and Responsible

Retailing,’’ Findings and Recommendations of

Working Group of State Attorneys General, p. 28,

December 1994.

333 1994 Population data for 18 to 26 year-olds

from 1995 Statistical Abstract, Table 16. Cigarettes:

Number of smokers for age group calculated from

Table 217 (1993 data). Average packs/yr. and total

packs/yr. for smokers aged 18 to 26 calculated from

data in Table 20, 1994 SGR, p. 85. (Those smoking

1 to 5 cigarettes/day assumed to smoke 3, those

smoking 20+ cigarettes/day assumed to smoke 25).

The resulting number of packs smoked by 18 to 26

yr.-olds totals about 2.5 billion. If even 1 percent

of these transactions were for cartons, this number

falls to about 2.3 billion. Smokeless: Total units of

smokeless products sold calculated from data in

Spit Tobacco and Youth: Additional Analysis, Dept.

of Health and Human Services, June 1993, Excise

Tax calculations, Option 4; Units consumed by

youths from the Institute of Medicine Report (the

IOM Report) ‘‘Growing Up Tobacco Free:

Preventing Nicotine Addiction in Children and

Youths’’, p. 8. 1994, Usage data and total units (cans

or pouches) consumed for age group for those aged

18 to 26 from ‘‘Use of Smokeless Tobacco Among

Adults-U.S., 1991’’ in ‘‘MMWR’’, CDC, DHHS,

volume 42, No. 14, p. 264, 1993. The number of

containers sold for 18 to 26 yr. old age group totals

about 0.2 billion.

334 IOM Report, p. 202.

million. However, because most of this

profit stems from illegal sales to youths,

FDA has not counted this figure as a

societal cost.

b. Consumers. Consumer surplus is a

concept that represents the amount by

which the utility or enjoyment

associated with a product exceeds the

price charged for the product. Because

it reflects the difference between the

price the consumer is willing to pay and

the actual market price, it is used by

economists to measure consumer

welfare losses imposed by product bans.

However, FDA’s rule imposes no access

restrictions on adults, who will be free

to consume tobacco products if they so

desire. Thus, FDA has not included any

value for lost consumer surplus in its

estimate of the societal costs of these

access restrictions.

8. I.D. Checks

a. Retailers. For the 1995 proposed

regulation, FDA estimated that retail

establishments would bear annual

compliance costs of $28 million for

consumer identification checks. This

figure was derived by multiplying the

estimated retail employee compensation

rate by the extra time that might be

needed to complete purchase

transactions. The estimate measured the

cost to retailers for either increasing the

number of working hours of existing

staff or for hiring new staff to handle the

added workload. The Barents Group

commented on numerous aspects of this

compliance cost estimation, accepting

several key FDA assumptions, but

rejecting others in deriving its estimate

of $142 million per year.

In its preliminary analysis, FDA

estimated the number of tobacco

product transactions for the 18 to 26

year-old age group based on data that

reflected the tobacco consumption of

cigarette smokers 5 to 6 years after high

school 330 and the annual per capita

consumption of smokeless tobacco. 331

The Barents Group faulted FDA for

limiting these transactions to 18 to 26

year-olds, asserting that the standard

practice for alcohol sales is to request

identification for anyone who appears to

be 30 years old or younger. The Barents

Group calculations actually estimated

compliance costs on the assumption

that customers up to age 34 would be

asked for identification, because some

older consumers would appear to be

only 30 years old.

FDA has not accepted this Barents

Group assumption for several reasons.

First, the legal age of purchase for

alcohol in all 50 States is 21 years,

whereas the rule for cigarettes and

smokeless tobacco sets 18 as the legal

age of purchase. This 3-year difference

implies that comparable cigarette and

smokeless identification checks would

be expected only up through age 27.

Also, the current policy and practice of

many retail stores is to request

identification from tobacco consumers

only up to age 26. Requiring proof of age

for anyone who appears younger than

26 years of age was also recommended

by a working group of 26 State

Attorneys General. 332 Finally, the

Barents Group’s use of age 34 to provide

a margin of safety for identifying those

under the age of 30 is illogical, since the

FDA rule requires retail stores to

identify consumers who are under the

age of 26, not 30.

The Barents Group accepted the FDA

assumption that an I.D. check would

take an average of 10 seconds, but

referenced a study by A. T. Kearney that

found that the actual time needed to

verify a photo I.D. for a tobacco product

sale averaged 8.3 seconds. Because FDA

has no better data, the agency adopts 8.3

seconds as the average time needed to

conduct an I.D. check. The Barents

Group further commented that FDA

used outdated employee compensation

data in its calculations. FDA’s revised

totals use the Barents Group’s employee

compensation estimate of $9.51/hour

(1994 dollars) as the time value for retail

sales employees.

FDA originally assumed that only 75

percent of all retail transactions for the

18 to 26 year-old age group would be

extended due to I.D. checks. The

Barents Group argued that the correct

percentage should be 100 percent, as the

rule would apply to all sales to the

relevant age group. FDA continues to

believe that this assumption leads to an

over-estimate of the probable costs.

First, not every moment of a clerk’s time

is effectively utilized and a few seconds

more per transaction will not always

result in lost labor productivity. Second,

many smokers patronize the same retail

store almost daily and are well-known

to clerks. I.D. checks for these customers

will take little extra time. Finally, many

customers will take less time to produce

an I.D., once they realize that

identification checks have become

routine. Nevertheless, FDA adopts the

Barents Group’s 100-percent assumption

to assure a full accounting of the

relevant costs.

One comment claimed that FDA

failed to include the cost of hiring

additional sales clerks. As noted above,

the FDA calculation does reflect the cost

of the additional labor time that might

be needed. The Barents Group also

inexplicably asserts that FDA failed to

consider I.D. checking costs as annual

costs, instead listing them as a one-time

cost. Table 2 of the original analysis (60

FR 41314 at 41360), clearly lists the $28

million identification check cost as an

annual operating cost and the

accompanying text (60 FR 41314 at

41367) refers to the figure as a ‘‘per

year’’ cost. The Barents Group further

faulted FDA for not taking into account

the cost of checking I.D.’s for those

youths under age 18, who will still

attempt to buy cigarettes. While a small

percentage of underage smokers may opt

for this course of action, few would

return to complying outlets. Thus, FDA

believes that any plausible estimate of

the associated costs would be less than

$1 million annually.

FDA originally estimated the number

of tobacco product transactions for the

18 to 26 year-old age group at 2.2

billion, but has updated its estimate to

2.5 billion. 333 Also, the 80-percent

current noncompliance rate that had

been assumed for the 1995 proposal

may be too high, as the Surgeon General

estimated that minors are unable to

make an OTC purchase of tobacco

products about one-third of the time. 334

Nevertheless, FDA retains this

assumption to calculate a cost to
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44595

335 Data from the 1995 Statistical Abstract of the

United States, Table 677 lists weekly earnings for

full time wage and salary workers for the group ‘‘16

to 24 year-olds’’ in 1994. Table 682 lists median

hourly earnings for workers paid hourly rates for

the same group in 1994. Assuming a 40 percent

increase for benefits, the compensation rates for

these two tables for 16 to 24 year-olds are $9.98/

hour and $7.87/hour, respectively.

Using these figures will result in a low estimate

for the 18 to 26 year-old group because 25 and 26

year-olds earn more than 16 and 17 year-olds.

Conversely, using a benefits/wage ratio of 40

percent for 18 to 26 year-olds will overstate the

costs because lower paid workers (hourly and parttime workers, college students) are more likely to

have less generous benefits packages (little or none

of the following: paid vacation, sick leave,

employer-paid health insurance). FDA increased

the estimated compensation rates to $9 to $11/hour

to assure it does not underestimate the true

compensation rate.

336Tobacco industry spending on magazine

advertising was calculated using tobacco

advertising share data from Barents and advertising

revenues from Advertising Age. Advertising

revenue was unavailable for five small publications

that accounted for less than one percent of tobacco

magazine advertising spending in 1994. To estimate

tobacco advertising expenditures in these five

publications, FDA assumed total advertising

revenues for each publication equal to $14,388,

which is the lowest total revenue reported in

Advertising Age for 1994.

retailers for I.D. checks of $43 million

per year (2.5 billion transactions x 8.3

seconds/transaction x $9.51/hour ÷ 3600

seconds/hour x 80 percent

noncompliance rate). This revised

estimate exceeds FDA’s original $28

million figure, but remains far below the

$142 million estimate of the Barents

Group.

b. Consumers. The Barents Group also

criticized FDA for not quantifying the

costs to consumers for the extra time

needed to undergo I.D. verifications.

They estimated this cost at $282 million

a year. FDA agrees that consumers

would incur time costs and, for its

revised estimates, adopts the analytical

framework suggested by the Barents

Group, which counts only the time lost

by young customers. (The Barents

Group suggests that older consumers

also would experience delays, but

FDA’s estimates already account for the

cost of additional clerk time that would

offset longer checkout lines. Younger

customers, however, must wait while

their age is verified, even when

additional checkout clerks are

available.) To estimate the time cost,

FDA applies the same methodology that

was used to estimate the time cost for

retail employees. That is, 2.5 billion

transactions taking an extra 8.3 seconds

each for the 18 to 26 year-old age group,

adjusted for a 20 percent current

compliance rate. The Barents Group

used an average hourly private sector

compensation rate ($15.13/hour) as the

basis of its consumer time cost estimate,

but FDA finds this average rate too high

for young consumers and estimates a

range of $9 to $11 per hour. 335 As a

result, FDA’s estimate of the cost to

consumers for lost time cost amounts to

between $41 and $50 million per year.

9. Vending Machines

In its comments on the costs of FDA’s

proposed vending machine ban, the

Barents Group reports that automatic

vending machine operators will lose

$403 million in annual revenues. They

then subtract an estimated $281 million

offset for future over-the-counter sales

(calculated by assuming an equal

number of future packs sold and an $.80

price premium for vending machine

packs) to project a net $122 million of

regulatory costs to the retail sector.

Although not acknowledged, this

methodology implicitly assumes that a

redistribution of revenues (from vending

machine owners to over-the-counter

sellers) does not generate added societal

costs. Elsewhere, the Barents Group

includes distributional impacts in cost

totals. Nevertheless, even this $122

million estimate is far too high.

The fundamental problem is that

changes in revenue, as discussed above,

do not measure economic costs. The

relevant economic measure of regulatory

costs to an industry is the change in

producer surplus that a firm makes from

selling a good or service. Because

producer surplus’ are difficult to

measure, accounting profits are

sometimes used as a proxy. By

examining only lost revenues, the

Barents Group ignores the difference in

the operating costs of the alternative

sales channel, despite its recognition

that ‘‘[i]n general terms, the extra

margin at vending machines reflects the

costs to vending machine owners of

operating these machines, in addition to

a return on their labor effort and capital

investments.’’ In other words, the reason

that cigarettes purchased from a vending

machine are more expensive is that it

costs more to sell a pack of cigarettes by

vending machine. Consequently, if

cigarette sales shift from more

expensive-to-operate vending machines

to OTC, the loss of industry profits is

much smaller than the loss of industry

revenues.

An approximate assessment of the net

impact on retail profits requires a

comparison of the pretax profit margins

for vending machine operations as

compared to OTC sales. The Barents

Group cited survey results from the

National Automatic Merchandising

Association (NAMA) showing an

average pretax profit margin of 3.8

percent in 1993 and 2.0 percent in 1992,

for an average 2.9 percent for vending

machine operations. Because cigarette

vending machine sales have decreased

in recent years, current profit margins

might be even smaller. Coincidentally,

the Barents Group reports that the

estimated average industry profit margin

for convenience stores is also 2.9

percent. If this rate applies to cigarette

sales at convenience stores and if all lost

vending machine cigarette sales were

transferred to convenience stores, the

net pretax cost to the industry would be

$3.5 million, not $122 million ($403

million to $281 million) x 2.9 percent).

Moreover, NAMA reports that over 50

percent of all vending machines are

located in bars and taverns and many

others in business establishments

frequented only by adults. The final rule

permits vending machines in those

places where the owner can ensure that

no young people under age 18 are

present at any time. FDA does not know

how many vending machines will be

moved to restricted areas in compliance

with this rule, but the number will

further reduce this annual cost.

10. Readership Surveys

The Barents Group reported that 101

leading national magazines had

advertisements for tobacco products in

1994. In addition, Barents obtained

youth and adult readership data for

1994 from MediaMark Research, Inc.

(MediaMark), for 41 of these 101

magazines. Applying the regulatory

threshold of 2 million readers or 15

percent of total readership below the age

of 18, Barents projected that

advertisements in 32 of the 41

magazines (78 percent) would be

restricted to ‘‘text only’’ by the proposed

regulation. In comparison, FDA

examined copyrighted youth and adult

readership data from the Simmons

Marketing Bureau, Inc. (Simmons),

another major marketing research firm,

and found that only 13 of the 27

magazines with tobacco ads (48 percent)

had youth readership over the

threshold. A comparison of youth

readership levels from MediaMark and

Simmons for magazines that had

tobacco advertisements in 1992 is

shown in Table 11. 336
44596 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

TABLE 11.—AVAILABLE YOUTH READERSHIP DATA FOR PUBLICATIONS

WITH TOBACCO ADVERTISEMENTS IN 1994

Publications with Youth and Adult Readership Data

Estimated Percentage of 1994

Tobacco Industry

Spending on Magazine Advertisements

MediaMark Research Inc. (1994 readership data)Simmons Market Research Bureau,

Inc. (1994 readership data)

Number of Readers Under 18

(000)

Percent of Readers Under 18 (%)

Number of Readers Under 18

(000)

Percent of Readers 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

specific youth and adult readership data

be available for any magazine that

displays a tobacco advertisement with

color or imagery. Simmons currently

conducts interviews with adults in

approximately 20,000 households

annually and subsequently returns to

about 3,000 of these households to

interview their youth members. In

general, however, marketing research

firms collect data on youth readership

only for those magazines commonly

read by this age group. Thus, although

78 percent and 48 percent of the

magazines in the two youth readership

samples described above exceeded the

regulatory readership threshold, these

sample results likely overestimate the

percentage of magazines with current

tobacco ads that exceed the threshold.

Simmons now collects adult

readership data for about 230 magazines

and youth readership for about 65

magazines. Because tobacco

manufacturers currently advertise in

about 100 magazines, the industry could

often add magazines that are currently

part of an ongoing adult readership

survey to a youth survey, saving

approximately 60 percent of the cost of

collecting both adult and youth data.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44597

337U.S. Congress, Office of Technology

Assessment, ‘‘Pharmaceutical R&D: Costs, Risks and

Rewards,’’ OTA-H-522 Washington, DC: U.S.

Government Printing Office, pp. 303–304, February

1993.

338 1992 U.S. Census of Manufactures, Industry

Series, Tobacco Products, Table 1a. A few U.S.

agents designated to represent foreign

manufacturers would also need to file forms, but

these costs should be minimal.

339Special Census Tabulation prepared by U.S.

Bureau of Census for U.S. Small Business

Administration, Table 3—United States

(unpublished data).

Because FDA does not know how

tobacco manufacturers will adapt their

marketing strategies to the new

regulatory thresholds, it is difficult to

predict the number of new readership

surveys that may be initiated. It seems

likely, however, that tobacco companies

will both increase the frequency of

advertising in ‘‘adult’’ magazines that

already carry tobacco advertisements

and find suitable ‘‘adult’’ magazines to

replace many of the other magazines.

One plausible scenario is that

approximately one-half, or 50, of the

magazines with current tobacco ads

would not qualify as ‘‘adult’’

publications, because they exceed the

youth readership threshold; and that the

tobacco industry would choose to

advertise in 50 other ‘‘adult’’

publications that do not currently carry

tobacco ads. To identify these 50

additional ‘‘adult’’ magazines, the

industry might need to collect new

youth readership data for up to 100

magazines. In addition, as noted above,

of the original 100 magazines with

current tobacco advertising, youth

readership data is now available for at

least 40. Thus, the tobacco industry may

initially need to obtain new youth

readership data for the remaining 60

magazines. In total, therefore, the

tobacco industry might opt to obtain

youth readership data for an additional

160 publications in the first year that

the rule becomes effective. In

subsequent years, this number might fall

to about 100 surveys, as the industry

would concentrate its survey efforts on

publications very likely to qualify.

If a marketing research firm collects

youth readership data, the cost may

depend on the particular characteristics

of the magazines being surveyed. The

tobacco industry could choose,

however, to hire a survey firm to

develop and administer a questionnaire

solely to gather readership data for

magazines with tobacco advertising.

While FDA is uncertain about which

approach the industry would take, the

agency estimates that such new surveys

might cost approximately $2 million in

one-time costs and $1 million in annual

costs, based on an average cost of about

$650 and $350 per sample household.

11. Records and Reports

Manufacturers will need to comply

with device regulations governing

submissions of representative labels and

advertising, medical device reporting

(MDR’s), establishment registration and

product listing, and current good

manufacturing practices (CGMP’s).

a. Labels and advertising. The rule

requires that each manufacturer

annually submit to FDA copies of

representative samples of labels and

advertising. While the agency expects

about 1,000 product labels, FDA has no

direct evidence on the number of

advertisements that will be submitted.

An approximate estimate, however, can

be derived from the number of

advertising samples submitted by the

pharmaceutical industry. First, FDA

calculated that of the $6.1 billion in

advertising and promotional outlays

reported to the FTC by the tobacco

industry, only about $1.2 billion is

spent on printed advertisements.

(Derived by subtracting categories for

‘‘Coupons/Value Added,’’ ‘‘Promotional

Allowances,’’ ‘‘Specialties Items,’’ and

‘‘Free Samples’’ from the total $6.1

billion).

The pharmaceutical industry spends

an estimated 22.5 percent of sales on

marketing, of which about one-quarter

may be allocated to advertising ethical

pharmaceuticals. 337 The approximately

$50 million in annual sales of

pharmaceutical manufacturers,

therefore, implies a $2.5 billion annual

advertising budget. FDA estimates that

it currently receives about 25,000 pieces

of pharmaceutical advertising per year.

As the pharmaceutical budget is roughly

twice the size of the $1.2 billion tobacco

industry figure derived above, the

agency might receive half as many

documents. Alternatively, reduced

promotional activities may prompt an

increase in the number of printed

advertisements prepared by tobacco

companies, although the Barents Group

assumed this number would decline.

Therefore, FDA projects that it will

receive the same number of

advertisements for tobacco products as

it currently receives for pharmaceutical

products, or about 25,000 per year, plus

about 1,000 labels.

Estimates of the time burden of these

paperwork submissions ranged from 20

minutes (The Barents Group) to 1 hour

and estimates of the hourly cost ranged

from $25.00 (Tobacco Institute) to

$45.26 (the Barents Group). Using the

high end of both ranges provides an

upper bound cost estimate of $1.2

million. This figure is significantly

lower than either the original FDA

estimate, or the Barents Group estimate

of $55 to $57 million, largely because

the final rule imposes no specific

paperwork requirements on retail

establishments.

b. MDR’s. The final rule will require

MDR’s for serious unexpected incidents.

FDA assumes that 31 manufacturing

companies 338 and 1,365 distributors 339

will bear total one-time costs of $21,000

and $231,000, respectively, for

establishing and documenting

procedures for MDR reporting. These

costs include 32 hours of effort per

manufacturing firm and 8 hours per

distributor. Based on estimates

previously developed for the Medical

Device User Facility and Manufacturer

Reporting Final Rule, these activities

were distributed over wage rates

averaging $21.17. Annual costs for MDR

reporting requirements are more

difficult to predict, because they depend

on the number of adverse event reports

that will be submitted. FDA projects,

however, that followup investigation

and reporting of a single event takes

about 8 hours of labor and costs about

$218. Thus, if 50 adverse event reports

were filed annually, the annual cost

would be about $11,000. In addition, if

each manufacturing company submits a

single baseline report and annual

updates, these costs would be about

$2,100 annually, based on unit costs of

$54 and $14 per report, respectively.

Annual certification is necessary, but is

typically a formality in terms of data

collection and reporting and is

estimated to cost about $800 for all

manufacturers and $35,000 for all

distributors assuming 1 hour of

professional and clerical time at $25.80

per hour.

c. Registration and listing.

Registration and listing duties are

estimated to take 41 manufacturing

establishments 2 hours each to prepare

at a unit cost of $42, totaling about

$1,700 per year for the industry.

d. CGMP’s. The Tobacco Institute

asserted that cigarette manufacturers

would need substantial time to comply

with CGMP’s as the industry ‘‘would

need to adopt major new systems * * *

[and] make major changes to their

procedures just to accommodate the

recordkeeping required.’’ Conversely,

the economics study prepared by the

Barents Group for the Tobacco Institute

showed no additional costs for this

requirement. FDA agrees that these costs
44598 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

340Costs include 100 percent of SAMHSA’s state

enforcement costs, plus 40 percent of retail training

costs, vending machine costs, and retail and

consumer I.D. check costs.

should be minimal for facilities with

good quality assurance programs. Its

CGMP’s do not specify a specific format,

but encompass a wide variety of broad

requirements for documenting operating

procedures. Contrary to the Tobacco

Institute’s claim that ‘‘even a well-run

cigarette manufacturing facility would

need to adopt major new systems,’’

CGMP’s are, in fact, based on the

activities of well-run operations.

Moreover, device CGMP’s are currently

under revision to bring them even closer

to ISO 9001, the generally recognized

international standard for quality

assurance systems. Thus, while FDA has

little experience with day-to-day

tobacco manufacturing procedures, the

agency does not anticipate the need for

substantial quality system redesign.

Wholesalers and distributors also

submitted comments contending that

the CGMP’s would create added

paperwork burdens, but the agency has

exempted these sectors from the CGMP

requirements.

12. Government Enforcement

FDA estimates of internal costs for

administering and enforcing this

regulation are extremely uncertain, as

they will depend on the working

relationships to be established with

State tobacco control programs. As a

best estimate, however, FDA projects

that between 30 to 50 full-time

employees (FTE’s) will be needed to

implement the rule. Fully loaded

employee costs vary with the type of

employee (e.g., field inspectors versus

administrative), but an average of

$100,000 per FTE places the dollar cost

at between $3 and $5 million per year.

SAMHSA has estimated that State

programs will need between $25 and

$50 million annually to administer and

enforce appropriate State operations.

13. Comparison of Benefits to Costs

FDA expects the net societal benefits

of the rule to far exceed the regulatory

costs. Based on the analysis presented

above, the estimated one-time costs of

the combined FDA and SAMHSA rules

are $174 to $187 million and the

estimated annual costs are $149 to $185

million. Taking the midpoint of the

ranges and annualizing the one-time

costs at 3 and 7 percent, respectively,

yields total annualized costs of $172

million and $180 million. In contrast,

the agency’s best estimate of the

monetized regulatory benefits that

would follow a 50 percent reduction in

underage tobacco use ranges from $28.1

to $43.2 billion at a 3 percent discount

rate and from $9.2 to $10.4 billion at a

7 percent discount rate. Thus, as shown

in Table 12, the net benefits (benefits

minus costs) of a total effectiveness rate

of 25 percent range from $27.9 to $43

billion at a 3 percent discount rate and

from $9.0 to $10.2 billion at a 7 percent

rate. Table 13 indicates that those

figures imply a cost per life-year saved

of from $800 to $4,700 and a cost per

death avoided of from $11,000 to

$52,000. As noted earlier, these benefits

are exclusive of the substantial health

improvements expected to result from

the reduced consumption of smokeless

tobacco.

The substantial differential between

these estimated costs and benefits

withstands rigorous sensitivity analysis

(see Table 12). For example, SAMHSA

estimated that its rule would reduce

underage tobacco use by from one-third

to one-tenth. The approximate midpoint

of that estimate (20 percent) constitutes

about 40 percent of the regulatory

benefit of reducing underage tobacco

use by one-half. If, for illustrative

purposes, these results, as well as a

proportional fraction of the relevant

costs, 340 are attributed to SAMHSA, the

incremental net benefits of the FDA rule

still range from $16.8 to $25.8 billion at

a 3 percent discount rate, and from $5.4

to $6.2 billion at a 7 percent discount

rate.

Moreover, FDA assumed that reaching

the ‘‘Healthy People 2000’’ goal would

deter about one-quarter of the 1 million

youth under age 18 who currently begin

to smoke each year from ever smoking

as an adult. Thus, this goal implies a 25

percent overall effectiveness rate. If,

however, these rules prevent smoking as

an adult for even 5 percent of the

teenagers who would otherwise become

adult smokers, they would produce

estimated annual net benefits of from

$5.4 billion to $8.5 billion at a 3 percent

discount rate and from $1.7 billion to

$1.9 billion at a 7 percent discount rate.

Even if this latter scenario attributed 40

percent of the benefits and relevant

costs to SAMHSA, the annual net

benefits of the FDA rule would still

range from $3.3 billion to $5.1 billion at

a 3 percent discount rate and from $1.0

billion to $1.2 billion at a 7-percent

discount rate. This last example implies

a cost per life-year saved of $3,500 to

$21,100 and a cost per death avoided of

$47,000 to $234,246. These figures are

well within the range of values for

health interventions typically

considered cost-effective.

TABLE 12.—NET BENEFITS

($ Billions)

Discount

Rate

Effectiveness Rates

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

1Attributes 40% of benefits and associated costs to SAMHSA
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44599

341 ‘‘Tobacco Situation and Outlook Report,’’

U.S.D.A., Economic Research Service, p. 4, April

1995.

342 ‘‘1994 Annual Survey of Manufactures: Value

of Product Shipments,’’ U.S. Department of

Commerce , Bureau of the Census, Table 1, p. 210.

ASM does not report data below the 5-digit SIC

Code Level. FDA assumed chewing tobacco

represented the same percentage of SIC Code 2131

(Chewing and Smoking Tobacco) in 1994 as it did

in 1992 when it was classified at a 6-digit SIC code

in the Census of Manufacturers.

343 ‘‘The Economic Impact of the Tobacco

Industry on the United States in 1990,’’ Price

Waterhouse, p. ES–3, October 1992.

344 Knapp, J. L., ‘‘Tobacco in Virginia,’’ Weldon

Cooper Center for Public Service, University of

Virginia, p. 5, December 1995.

345 Gale, F., ‘‘What Tobacco Farming Means to

Local Economies,’’ U.S. Department of Agriculture,

Economic Research Service, Agriculture Economic

Report Number 694, p. 5, September 1994.

346Warner, K. E., G. A. Fulton, P. Nicolas, and D.

R. Grimes, ‘‘Employment Implications of Declining

Tobacco Product Sales for the Regional Economies

of the United States,’’ JAMA, pp. 1241–1246, April

24, 1996.

TABLE 13.—COST EFFECTIVENESS

Discount

Rate

Effectiveness Rates

25% 15% 10% 5% 2.5%

Cost/LifeYear

Saved ($)

Cost/Death

Avoided

($)

Cost/LifeYear

Saved ($)

Cost/Death

Avoided

($)

Cost/LifeYear

Saved ($)

Cost/Death

Avoided

($)

Cost/LifeYear

Saved ($)

Cost/Death

Avoided

($)

Cost/LifeYear

Saved ($)

Cost/Death

Avoided

($)

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

1Attributes 40% of benefits and associated costs to SAMHSA

E. Distributional Effects

These regulations will impose a

variety of sector-specific distributional

effects. Those sectors affiliated with

tobacco and tobacco products will lose

sales revenues and these losses will

grow over time. Businesses engaged in

the provision of tobacco product

advertising may also face reduced

revenues. Simultaneously, nontobaccorelated industries will gain sales,

because dollars not spent for tobacco

products will be spent on other

commodities.

1. Tobacco Manufacturers and

Distributors

For its calculation of regulatory

benefits, FDA estimates that

implementation of the regulations may

reduce the cigarette consumption of

underage smokers by one-half within 7

years. As discussed earlier in this

section, based on data presented in

Cummings, et al., FDA finds that

teenage smokers under the age of 18

consumed about 316 million packs of

cigarettes in 1994. A 50-percent cut in

sales would drop the number of packs

sold by 158 million. Moreover, FDA has

assumed that at least one-half of those

500,000 teenagers who would be

deterred from starting to smoke each

year would refrain from smoking as

adults, decreasing the number of adult

smokers by 250,000 per year. Because

each adult smoker consumes about 500

packs per year, about 124 million fewer

packs would be sold per year.

Thus, achieving the agency’s goal

would reduce cigarette consumption by

158 million packs in the first year

(while only teenagers are affected), 158

million plus 124 million packs in the

second year, 158 million plus 2 times

124 million packs in the third year, and

so on. Since 1994 cigarette shipments

totaled 36.3 billion packs, 341 cigarette

consumption would fall by about 0.4

percent in the first year, 1.8 percent in

the fifth year, and 3.5 percent in the

tenth year following implementation.

(In fact, these reductions may take even

longer, because it may be several years

before the 50-percent effectiveness level

is achieved, and because young adults

smoke fewer packs than older adults).

Hence, annual tobacco revenues will

decline slowly over time. The U.S.

Bureau of the Census estimates 1994

revenues for cigarette and smokeless

tobacco manufacturers at about $25.9

billion. 342 Assuming comparable

reductions in smokeless tobacco, these

calculations imply that tobacco

manufacturer revenues will fall by $128

million in the first year (0.5 percent),

$501 million in the fifth year (1.9

percent), and $966 million in the tenth

year (3.7 percent). While these

reductions are significant, the gradual

phasing of the impacts will significantly

dissipate any associated economic

disruption.

In a 1992 report prepared for the

Tobacco Institute, Price Waterhouse

estimated that the tobacco

manufacturing, warehousing and

wholesale trade sectors employed about

107,000 full-time workers. 343 Thus, a

constant production-to-employment

ratio projects that a 3.7-percent

reduction in sales over a 10-year period

would result in the displacement of

about 4,000 jobs, or 400 jobs annually

among manufacturers, warehousers, and

wholesalers. Alternatively, a University

of Virginia study concluded that ‘‘the

Price Waterhouse study for the Tobacco

Institute provides estimates of tobacco’s

impact that are high compared to other

measures.’’ 344 That study referenced a

recent U.S. Department of Agriculture

analysis by Gale that found that

manufacturing and wholesale trade

activities employ only 83,000 full-time

equivalent workers. 345 If true, this

finding reduces these job loss estimates

to about 3,000 jobs, or 300 annually.

The smaller job loss estimate is

generally confirmed by a recent study

by Warner, et al., who applied a

computer simulation model to forecast

the regional impact of reductions in

tobacco use. 346 The authors used ‘‘a

state-of-the-art macroeconomic model to

simulate what would happen if

consumers reduced their tobacco

expenditures, with the same level of

spending redistributed to other goods

and services * * *.’’ One scenario

assumed that tobacco control activities

would reduce the expected rate of

tobacco purchases by 2.06 percent per

year, or roughly 5 times the estimated

effect of the FDA rule. While this

scenario does not present direct impacts

to the tobacco industry alone, it

forecasts job losses after 8 years of 6,401

for all U.S. wholesalers and 5,957 for

Southeast Tobacco Region
44600 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

347 Gale, F., ‘‘What Tobacco Farming Means to

Local Economics,’’ USDA, Economic Research

Service, Agriculture Economic Report Number 64,

p. 5, September 1994.

348Warner, K. E., G. A. Fulton, and D. R. Grimes,

‘‘Employment Implications of Declining Tobacco

Product Sales for the Regional Economies of the

United States,’’ JAMA, pp. 1241–1246, April 24,

1996.

349 Gale, F., ‘‘What Tobacco Farming Means to

Local Economies,’’ USDA, Economic Research

Service, Agriculture Economic Report Number 64,

p. 1, September 1994.

350 Id., p. iii.

manufacturers. Accounting for the

multiple of 5, comparable job losses

attributable to the FDA rule would total

about 2,600 after 8 years, or about 325

annually.

The Barents Group did not address

the long-term gradual decline in tobacco

use projected by FDA. Nevertheless, it

claimed that the agency underestimated

the economic impact on industry by

failing to account for the lost sales to

adults that would result from the

proposed ban on vending machines and

self-service displays and the required

checking of customer I.D.’s. The Barents

Group argued that the added consumer

inconvenience imposed by these

provisions was tantamount to an

increase in the effective price of tobacco

products, which would rapidly decrease

the consumption of tobacco by adults.

Relying on ‘‘hypothetical scenarios’’

that assume demand declines of 5 and

10 percent, the Barents Group forecast

that the tobacco manufacturing industry

would lose from 1,800 to 3,700 jobs due

to this increased consumer

inconvenience.

FDA believes these Barents

projections are substantially overstated.

Impacts associated with cigarette

consumption declines of 5 to 10 percent

cannot possibly be attributed to the loss

of vending machines, because vending

machine purchases make up less than 1

percent of all cigarette purchases.

Further, according to NAMA, there are

only 141,000 cigarette vending

machines currently in use (and that

number is falling rapidly), and the cost

analysis prepared by the Barents Group

predicted that 100,000 of these

machines would be replaced by new

OTC establishments. Thus, the Barents

Group’s own analysis eliminates any

added consumer inconvenience from

three-quarters of the existing inventory

of machines. Moreover, the near-term

impact on adult tobacco consumption

will be further moderated both because

the final rule allows vending machines

in ‘‘adult’’ facilities, and because the

added inconvenience cost will be

partially offset by the lower price of the

OTC product. These factors together

make it extremely unlikely that fewer

vending machines will lead to a

substantial near-term fall in tobacco

industry sales revenues.

The likelihood that tobacco sales will

decline significantly due to

inconvenience imposed on adult

customers by the self-service restriction

is similarly remote. While some

purchasers would need more time to

complete a transaction, other purchasers

would save time by no longer having to

search and retrieve a desired product. In

the absence of empirical evidence, the

result is indeterminate; but FDA has

seen no convincing evidence or

arguments to demonstrate that any

delays caused by the self-service

restriction will significantly curtail

adult tobacco use.

Finally, although FDA calculated

above that increased delays due to I.D.

checking could cost young adult

consumers under the age of 26 up to $50

million per year, even this cost would

not lead to significant consumption

declines. As described, the increased

checkout waiting time for young

purchasers was estimated to average

about 8.3 seconds, which translates to a

cost of about 2.3 cents per transaction,

or 1.35 percent of the cost of a pack of

cigarettes. According to the Barents

Group, representative estimates of

demand elasticities for cigarettes range

from -0.6 to -1.0. Young adults under

the age of 26, however, purchase only

about 10 percent of all tobacco products.

Thus, the fall in total tobacco sales

would be, at most, 0.1 percent, not the

5 to 10 percent assumed by the Barents

Group. Moreover, even the 0.1 percent

figure is an overestimate, because those

consumers irritated by the delay will

increase the volume of tobacco products

purchased per transaction. As a result,

the number of cartons sold will rise, but

the decline in tobacco product sales

revenues attributable to the

inconvenience effects of I.D. checks will

be negligible.

2. Tobacco Growers

As explained above, total cigarette

and chewing tobacco consumption is

expected to decrease by 0.5 percent in

the first year, 1.9 percent by the fifth

year, and 3.7 percent by the tenth year,

following compliance with the

regulation. Price Waterhouse estimated

that, on a full-time equivalent basis,

about 153,000 farmers grew tobacco in

1990. Based on these figures, constant

production-to-employment ratios imply

employment losses among tobacco

growers of about 5,700 after 10 years, or

about 570 annually. Alternatively, the

Gale study for the U.S. Department of

Agriculture (USDA) 347 estimated the

number of full-time equivalent tobacco

farmers to be only 65,400, which would

reduce the job loss estimate to about

2,500 by the tenth year, or 250 annually.

This latter figure also closely fits the

findings of Warner, et al., who, as

described above, used a ‘‘state-of-theart’’ macroeconomic simulation model

to project the employment effects of

declining tobacco consumption. 348

Assuming domestic tobacco

consumption decreases of 2.06 percent

per year, Warner, et al. predicted about

7,500 job losses within an 8-year period

for ‘‘Southeast Tobacco Region’’

farmers. As this fall in tobacco use is

roughly five times that projected by

FDA, the analogous job loss estimate

would be about 1,500 over the 8-year

period, or about 190 per year.

According to the USDA study by Gale,

‘‘[f]or most farms, tobacco growing is a

part-time, seasonal enterprise, and

production per farm is usually small.

About two-thirds of tobacco farmers

work off-farm.’’ 349 Citing 1987 Census

of Agriculture data, Gale notes that only

65 percent of the farms growing tobacco

in the United States reported earning

more than half of their receipts from

tobacco, and of those farms,

approximately 80 percent had total farm

sales under $20,000. He explains that

the availability of alternative land uses

will dictate the economic results:

The key factor in adjustment to a smaller

tobacco industry is the alternative uses

available for land, labor, and capital used in

tobacco production * * * For the most part,

concern is focused on rural areas where

tobacco is grown because this stage of

production has the most specialized

resources with fewer attractive alternative

uses. In many areas, small farms that are

unviable without tobacco profits would cease

production and their land would be absorbed

into larger neighboring farms or converted to

other uses * * * In marginal farming areas

* * * much of the land devoted to tobacco

would be converted to residential,

commercial, industrial, or forestry uses, in

which case it would still generate income for

the local economy * * * This land is already

being converted to nonfarm uses in rapidly

growing areas like southern Maryland and

Raleigh-Durham, North Carolina. 350

FDA notes that the economic

consequences of these trends will be

substantially mitigated by the very

moderate pace of the projected changes.

3. Vending Machine Operators

The final regulation prohibits all

vending machine sales of regulated

tobacco products except for those

machines located in a facility where
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44601

351U.S. Department of Commerce, ‘‘Merchandise

Line Sales,’’ 1992 Census of Retail Trade, RC92–S–

3RV, pp. 3–27, 3–31.

352 Vending Times, Census of the Industry Issue,

p. 36–D, 1995.

353National Automatic Merchandising

Association, Cigarette Vending Machine Location

Study, conducted August 31, 1995.

persons under the age of 18 are not

present at any time. In recent years,

cigarette vending sales have dropped

precipitously, due to numerous

restrictive State and local ordinances.

According to the NAMA:

[t]he 1986 cigarette location survey

mirrored an industry with about 700,000

cigarette vending machines on location. In

1994, the vending industry was estimated to

have between 141,000 and 400,000 cigarette

machines. This represents a decline in the

number of cigarette vending machines on

location of between 43 percent and 80

percent.

The U.S. Department of Commerce 351

reports that 1992 sales of tobacco

products by automatic merchandising

machine operators were about $452

million, or 7.1 percent of that sector’s

total sales, but a NAMA fact sheet

shows this rate continuing to fall,

dropping from 8.5 percent in 1990 to 2.7

percent in 1994. One trade magazine

explains that, ‘‘[c]igarette vending, once

an industry mainstay, is now a niche

business increasingly conducted by

specialized enterprises.’’ 352

Referring to 1992 Census data, NAMA

declared that over 3,000 vending

machine operators supply cigarettes, not

including the bars, restaurants, hotels,

and bowling alleys that own their own

machines. On average, these mostly

small firms receive 10 percent of their

revenues from cigarette sales, although

some firms are even more dependent.

While some vending machines can be

converted to sell other products, one

large cigarette machine manufacturer

maintained that more than 85 percent of

the existing machines can be converted

only for new products with packaging

similar in dimension and form to

cigarette packages.

While vending operators will need to

develop new markets to replace the

already dwindling sales revenues from

cigarette vending machines, the overall

economic impact will be mitigated

somewhat by FDA’s decision to exempt

‘‘adult only’’ locations from the ban.

According to a 1995 NAMA survey, 58

percent of cigarette vending machines

are located in bars and cocktail lounges,

11 percent in factory/plant locations,

and 3 percent in business offices. 353

Those locations that do not permit the

entry of youngsters under the age of 18

will be exempted from the cigarette

vending machine restriction.

4. Advertising Sector

In annual reports to FTC,

manufacturers of cigarettes and

smokeless tobacco reported 1993

advertising and promotional/marketing

expenditures of $6.0 billion and $119

million, respectively (see Table 14).

About $2.6 billion (43 percent) of these

outlays went to consumers as financial

incentives to induce further sales (e.g.,

coupons, cents-off, buy-one-get one free,

free samples), and $1.6 billion (26

percent) to retailers to enhance the sale

of their product. The remaining $1.9

billion (31 percent) were related to

consumer advertising activities that will

be significantly modified by the ‘‘text

only’’ restrictions.

TABLE 14.—TOBACCO 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

1Totals may not add due to rounding.

Source: U.S. Federal Trade Commission

FDA cannot project the ultimate

industry response to these advertising

restrictions. On the one hand, the

effectiveness of many advertisements

will fall. On the other hand, many

alternative marketing promotional

activities will be prohibited or

constrained even more stringently,

raising the relative desirability of the

remaining advertising options.

Moreover, as described above, FDA may

require new informational programs that

would generate a substantial increase in

advertising industry revenues.

Nevertheless, if tobacco outlays fall,

there will be short-term dislocations as

industry resources are redirected to

other uses. One firm that depends

heavily on tobacco advertising warned

of severe economic burdens, pointing to

income and job losses for many of its

employees and suppliers. Most

advertising suppliers, however, are not

overly specialized with respect to

particular consumer products and

would redirect resources to other

advertising purchasers, albeit at some

revenue loss. While FDA is aware that

such demand shifts cause short-term

disruption, the U.S. economy creates

and discards thousands of products

each day. For most advertising media,

the ability to respond rapidly to
44602 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

354Statistical Abstract of the United States, p.

750, 1995.

355Beales, J. H., ‘‘Advertising and the

Determinants of Teenage Smoking Behavior,’’ vol.

44, p. 13, 1993.

356Endicott, R. C., ‘‘Top Advertisers Rebound,

Spending to $36 Billion,’’ Advertising Age, vol. 64,

No. 41, p. 1, September 29, 1993.

changing markets is a mainstay of

economic survival.

a. Print media. The final regulation

requires that advertising of cigarettes or

smokeless tobacco be restricted to black

text on a white background in those

publications where youthful readers

constitute more than 15 percent of total

readership or number more than 2

million. FDA cannot reasonably forecast

the future marketing strategies of

tobacco manufacturers, but foresees a

possible fall in the $242 million worth

of magazine advertising and the $37

million worth of newspaper advertising

that tobacco manufacturers reported to

the FTC in 1993. These advertising

revenues comprised about 1.1 percent

and 0.1 percent of the 1992 value of

shipments for periodicals and

newspapers, respectively. 354 The

Barents Group identified 32 leading

magazines with tobacco advertising in

1994 that have youth readership levels

exceeding the regulatory threshold and

found that these publications received,

on average, 7.3 percent of their total

advertising revenues from tobacco in

1994. They also predicted, based on the

sharp downward trend of these

advertising outlays, a 21-percent drop in

magazine advertising and a 45-percent

drop in newspaper advertising for

tobacco products by 1996, irrespective

of the FDA regulation.

The impact of these restrictions on the

various advertising media and agencies

is difficult to determine. The Barents

Group contended that FDA had argued

in its original analysis that ‘‘regulations

for print media will have little or no

adverse impact.’’ In fact, FDA made no

such projection, although the agency

did present several historical examples

of advertising bans (e.g., the broadcast

ban on tobacco products) where

advertising revenues rebounded in spite

of new legal restrictions. The Barents

Group also faulted FDA for not

comparing actual revenues after the

broadcast ban to revenues ‘‘that would

have been expected in the absence of

the ban.’’ FDA, however, does not

believe that this ‘‘counter factual’’ logic

for estimating costs precludes the

agency from suggesting that income and

employment would not necessarily fall

in the wake of new advertising

restrictions.

Several comments declared that

advertising outlays would fall sharply

and subscription prices rise. According

to the Barents Group, imagery is a

prerequisite for effective promotion and,

in its absence, magazine and newspaper

advertising revenues would fall by 25 to

75 percent. It also predicted that the

reduced revenues would, in turn, force

publication subscription prices to rise.

FDA agrees that there will be adverse

impacts on certain publications, but

notes that the tobacco industry is

currently shifting its advertising budget

away from print media and that only 6

of the 32 affected magazines identified

by the Barents Group received over 10

percent of their revenues from tobacco

products. Moreover, as noted earlier,

while FDA cannot project the tobacco

industry’s marketing strategies, the

agency suggests that restricted

promotion alternatives could reestablish

print advertising as a relatively

attractive option for conveying product

information to adult readers; thereby

slowing or even reversing the recent

slide in this type of tobacco advertising.

The Barents Group also asserted that

the commercial printing industry, as

well as other industry sectors, would be

harmed by restrictions on coupons and

‘‘retail value added’’ promotions. These

expenditures, which account for $2.6

billion, or 42 percent of the total tobacco

advertising and promotional outlays

reported to FTC in 1993, include outlays

associated with cents-off coupons and

multiple pack promotions, such as ‘‘buy

one, get one free’’ or ‘‘buy two, get one

free;’’ as well as other give-away

promotions, such as ‘‘buy cigarettes and

get a free promotional item.’’ The former

activity will be permitted but the latter

prohibited under the final regulation.

Although a comment submitted by the

Tobacco Institute noted that,

‘‘[a]nalytically, such spending is more

akin to a price cut than to

advertising,’’ 355 the Barents Group,

nonetheless, concluded that, ‘‘[a]

considerable part of this spending

would likely be eliminated by the

proposed regulations.’’ FDA, however,

does not agree that the printing industry

will be significantly affected by changes

in ‘‘coupons and value added’’ outlays.

Cents-off coupons and multiple pack

promotions are the principal

components of these promotions and

will continue to be available under the

final rule.

b. Advertising agencies and other

suppliers. Advertising agency revenues

are directly tied to the level of

advertising expenditures by product

manufacturers. If tobacco manufacturers

reduce advertising outlays, these

agencies will lose income. The Barents

Group found that, in 1993, tobacco

companies routed almost $1 billion

through ad agencies (less than 1 percent

of the reported $131.3 billion spent on

U.S. media advertising in 1992). 356

Assuming agency fees of 10 percent

(while overlooking the proposed $150

million educational campaign), it

suggested that advertising declines of 25

to 75 percent would decrease agency

annual revenues by $25 million to $77

million. Assuming a 50 percent drop

($140 million) in magazine and

newspaper advertising, the Barents

Group next applied a simulation model

to predict that supplier firms among

advertising agencies, government,

business and professional services, and

commercial printers businesses would

lose revenues of from $12 to $23

million. While acknowledging that,

‘‘* * * there will be eventual offsetting

revenue gains in other industries not

shown * * *,’’ these other sectors were

not identified and the offsetting

revenues not explicitly quantified. The

Barents Group correctly noted that the

adjustments will involve short-term

costs to the affected sectors, but did not

estimate the expected magnitude of

these adjustment costs.

c. Outdoor advertising industry and

public transit authorities. The final rule

restricts tobacco billboards and public

transit advertising to black text on a

white background and bans all

stationary outdoor tobacco ads within a

1,000-foot radius of any school or public

playground. The Barents Group

predicted that almost all urban areas

would be covered by the ban and

expected almost no new outdoor

tobacco advertising ‘‘even in permitted

areas due to the relative ineffectiveness

of black-and-white text as an advertising

medium.’’ Further, explaining that the

$232 million spent on outdoor

advertising in 1993 accounts for about

14 percent of all outdoor advertising in

the United States, the Barents Group

found it unlikely that the industry could

find new means of maintaining its

current revenues.

In fact, the billboard industry and

public transit districts will have to find

replacements irrespective of this

regulation. According to the Barents

Group projections, spending on outdoor

advertising by tobacco companies will

fall by almost 40 percent between 1988

and 1996 (Appendix Table). One

billboard trade source notes that,

‘‘almost 60 percent of the industry’s

1979 revenues were derived from
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44603

357Burns, K., ‘‘Driving Into the Future with New

Technology,’’ Outdoor Advertising Magazine, p. 5,

January/February 1995.

358Wolfson, A., ‘‘Canada’s Ad Ban Puts Cigarettes

Out of Sight,’’ The Courier-Journal, pp. A1, A4,

August 1, 1994.

359 56 FR 11661 (March 20, 1991).

360Federal Trade Commission Report to Congress

for 1993: Pursuant to the Federal Cigarette Labeling

and Advertising Act, p. 18, 1995; Federal Trade

Commission Report to Congress: Pursuant to the

Comprehensive Smokeless Tobacco Health

Education Act of 1986, p. 24, 1995.

361EPM Communications, Inc. ‘‘Entertainment

Marketing Letter,’’ February 1, 1996. Based on IEG

Sponsorship Report.

362 1995 IEG Intelligence Report lists $26.7

million in tobacco sponsorships of NASCAR. Two

tobacco-sponsored events did not list the

sponsorship fees, which FDA estimates at about $1

million apiece.

363 Koenig, B., ‘‘NASCAR takes Lead in Race for

Sponsors: Stock-car Racing Gains Corporate Funds

as CART and IRL Lag in Money and Ratings’’, The

Indianapolis Star, March 8, 1996, Business p. F01.;

MacCrae, M., ‘‘Ricky Craven Collectibles Boost

Intensive Fan Interest in Driver’’, Bangor Daily

News, May 2, 1996.

364Oliver, S., ‘‘A Fan-Friendly Sport,’’ Forbes, p.

70, July 3, 1995; Horovitz, B., ’’Fine-Tuning an

Image-New Sponsors Race to NASCAR,’’ USA

Today, Final Edition, p. 1B, April 5, 1996.

365MacCrae, M., ‘‘Ricky Craven Collectibles Boost

Intensive Fan Interest in Driver,’’ Bangor Daily

News, May 2, 1996.

366 IEG’s Complete Guide to Sponsorship, p. 3,

1995.

tobacco and alcohol advertisers. Today

that number is down to 13 percent,

replaced by retail, business and

consumer services, entertainment, and

travel advertisers.’’ 357 Similarly, FDA’s

preliminary economic analysis had

recognized that Canada’s billboard

industry had rapidly adjusted to a

recently imposed advertising ban and

‘‘quickly replaced $20 million in lost

cigarette revenues with ads for food,

soap, toothpaste and beer.’’ 358

In 1993, tobacco industry spending on

public transit ads ($39.1 million)

contributed less than 1 percent to total

public transit revenues, having declined

by 35 percent from 1990 to 1993.

Acknowledging that these expenditures

would continue to fall, irrespective of

this rule, the Barents Group argued that

since relatively few transit authorities

accept tobacco ads, the impact of the

regulation would be significant for those

few.

d. Specialty item suppliers. The

prohibition of nontobacco specialty

items bearing the name or logo of

tobacco products will affect a

substantial number of specialty

manufacturers. In earlier comments to

FTC, 359 the Specialty Advertising

Association International noted that it

‘‘represents 4,400 firms that

manufacture or sell utilitarian objects

imprinted with advertising * * *

predominantly small businesses.’’ It is

likely that some of these firms would, at

least initially, lose part of this $760

million market and would experience

short-term costs while exploring other

business options.

The Barents Group projected that

manufacturer outlays for these

promotional items, in the absence of the

FDA rule, would triple between 1993

and 1996, rising from $760 million to

$2.2 billion, assumed that the rule

would cause revenue decreases of 25 to

75 percent, and modeled the impacts

among other affected industry sectors

(e.g., miscellaneous manufacturers

producing matches and matchbooks,

cigarette lighters, pens and pencils,

sporting goods, etc.). The revenue and

employment losses, therefore, were

measured from a baseline that assumed

a tripling of future industry revenues.

While these growth projections may be

optimistic, they demonstrate the rapid

swings that typify the market for many

of these industries. Indeed, the Barents

Group’s forecasts imply that even if the

FDA rule were to reduce the 1996 level

of tobacco industry advertising on

specialty items by 50 percent, these

outlays would still exceed the 1995

level.

In any case, FDA believes that the

Barents Group’s forecasted impacts may

be overestimated, as they primarily

reflect static outcomes, whereas firms

supplying such products are constantly

adjusting production in response to

rapidly shifting patterns of demand.

While these regulatory changes will

impose short-term dislocation costs,

these costs will be significantly

mitigated in view of the extensive lead

time provided. Again, the Barents Group

noted that FDA had not quantified these

transitory costs, but it also provided no

estimate.

e. Sponsorship recipients. According

to reports submitted to FTC, U.S.

tobacco companies spent $107 million

on public entertainment, primarily

sporting events, in 1993. 360 In

comparison, total spending on corporate

sponsorships for sports, arts, and other

entertainment by all North American

companies is estimated to reach $5.4

billion in 1996. 361 FDA received

numerous public comments asserting

that the loss of sponsorship revenues for

sporting events would increase ticket

prices and, in turn, reduce spectator

attendance. In particular, comments

pointed to the potential loss of jobs,

employee benefits, and business

revenues associated with race track

events.

The Barents Group contended that a

substantial part of the payments made

by tobacco manufacturers would be

eliminated by a ban on tobacco brand

sponsorships, because few sponsors

would agree to continue sponsorships

under corporate names. Acknowledging

the lack of reliable information on

economic impacts; it, nonetheless,

referenced several studies showing that

lost sponsorship dollars decrease

revenues and temporary jobs for local

economies. The Barents Group

predicted that, as tobacco companies

eliminate payments, other advertisers

would replace the major sponsorships,

but leave reduced or no funding for the

less popular events. On this basis, it

projected a 25 to 75 percent reduction

in sponsorship dollars, calculated to

result in revenue losses of $27 to $80

million.

Among the affected U.S. sporting

events, the auto racing industry receives

the greatest amount of tobacco

sponsorship revenues. The Barents

Group relied on various editions of the

IEG Intelligence Reports (IEG) to list

these sponsorships. In reviewing the

IEG data and other sources, FDA found

that about $29 million worth of 1995

tobacco sponsorship revenues were

designated for the National Association

for Stock Car Auto Racing

(NASCAR); 362 which amounted to

about 8.3 percent of estimated NASCAR

sponsorship revenues 363 and about 1.4

percent of estimated NASCAR total

revenues. 364 The IEG data listed Indy

Car tobacco sponsorships totaling only

about $13 million, although these data

did not cover all events.

As the majority of the NASCAR

tobacco sponsorship revenues were

directed to the Winston Cup or other

lead series, FDA agrees that a major

effect of the ban will be to decrease the

price of sponsorships, permitting

smaller sponsors to ‘‘trade up’’ to the

more prestigious sponsorships left

vacant by tobacco companies. Although

new company sponsors will be attracted

by the lower overall sponsorship costs,

this ‘‘ripple effect’’ will impose

shortfalls for some smaller or lower

profile events. This economic impact

will be somewhat mitigated, however,

by the rapid growth in nontobacco

sponsorships. According to IEG

estimates, over the past year, motorsport

sponsorship spending rose by about 17

percent 365 and total North American

corporate sponsorship spending by

about 15 percent. 366
44604 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

367 Kropp, R., ‘‘A Position Paper on Reducing

Tobacco Sales to Minors by Prohibiting the Sale of

Tobacco Products by Means of Self-Service

Merchandising and Requiring Only VendorAssisted Tobacco Sales,’’ North Bay Health

Resources Center, Stop Tobacco Access for Minors

Program (STAMP), Petaluma, CA, pp. 2–3,

November 3, 1994.

368 ‘‘When Packages Can’t Speak: Possible

impacts of plain and generic packaging of tobacco

products,’’ Expert Panel Report, Prepared at the

request of Health Canada, p. 140, March 1995.

369 ‘‘P-O-P Scores with Marketers,’’ Advertising

Age, p. 2, September 26, 1994.

370 Kropp, R., ‘‘A Position Paper on Reducing

Tobacco Sales to Minors by Prohibiting the Sale of

Tobacco Products by Means of Self-Service

Merchandising and Requiring Only VendorAssisted Tobacco Sales,’’ North Bay Health

Resources Center, Stop Tobacco Access for Minors

Project (STAMP), Petaluma, CA, pp. 2–3, November

3, 1994.

371 ‘‘The Economic Impact of the Tobacco

Industry on the United States in 1990,’’ Price

Waterhouse, October 1992.

5. Retail Sector

In addition to incurring the economic

costs described earlier, certain segments

of the retail industry will experience

adverse distributional impacts to the

extent that they receive smaller

promotional allowances (slotting fees)

from manufacturers. In 1993, industry

promotional allowances totaled $1.6

billion dollars. According to FTC:

Promotional allowances are designed to

encourage wholesalers and retailers to stock

and promote a company’s products,

including such things as trade allowances

and slotting allowances. Trade allowances

provide deals to cigarette wholesalers,

dealers and merchants in the form of free

goods or price reductions in return for the

purchase of specific quantities of goods.

Slotting allowances include fees that the

cigarette manufacturers pay retailers to

encourage them to carry a new product or to

allocate premium shelf space to a product.

Trade contests and incentives, training

programs, and trade shows may also be

counted as promotional allowances.

One major convenience store

association, estimating that its members

currently receive about $5,000 per store,

remarked that convenience stores would

‘‘bear a disproportionate burden should

such allowances be eliminated as a

result of the ban on self-service

displays.’’ Other retailers expressed

similar concerns over the prohibition of

self-service displays and promotional

advertising, fearing it would lead to the

elimination of these revenues.

The Barents Group argued that there

were strong reasons to believe that

promotional allowances would fall

sharply as ‘‘tobacco products are

withdrawn to inaccessible areas of the

store, [and] the products taking their

place will offer lower allowances.’’

While acknowledging that, ‘‘[t]he

possibility of promotional payments

continuing may depend on whether the

proposed regulations would allow the

tobacco packages and cartons to be

displayed from behind the check-out

counter or from some other secured

location in the stores,’’ they nonetheless

presented ‘‘illustrative’’ revenue

reductions of from 25 to 50 percent and

projected total revenue losses to the

retail sector of $556 to $1,112 million.

Using the higher percentage, their

analysis implies that pretax profit

margins would fall 12.4 percent for the

average sized convenience store and

even more for smaller stores. Moreover,

they predicted that about 2 percent of

currently profitable convenience stores

would thereafter incur losses.

FDA suspects that many of these

concerns are unwarranted as tobacco

manufacturers will continue to place

significant value on having their

products situated in highly visible

locations. Although desirable locations

behind counters or in locked display

cases will be more limited, there is little

reason to believe that manufacturers

would stop competing for the best

display space available. One comment

indicated that following a self-service

ban in a local area of Northern

California, some retailers:

* * * reported losses of tobacco industrypaid slotting fees * * * because of the

removal of self-service promotional tobacco

displays, racks and kiosks; * * * other

retailers reported they did not loose [sic]

tobacco industry-paid slotting fees if tobacco

displays, racks or kiosks are relocated behind

the counter or if they are replaced by locking

cases * * * [There were] no reported losses

of other tobacco industry-paid advertising

fees, promotional allowances or other

financial incentives paid to retailers for

advertising, promoting and marketing

tobacco products in their stores. 367

Because of the regional aspects of this

ban, it was a ‘‘worst case’’ situation for

retail stores. If self-service displays were

a prerequisite for promotional

allowances, tobacco manufacturers

would have quickly transferred them to

other near-by localities, where selfservice was permitted. The fact that this

did not generally occur demonstrates

that factors other than self-service

displays can support manufacturer

promotional payments to retailers.

Another comment noted that, ‘‘[i]n at

least some areas, cigarette companies

have continued payments to retailers for

favored display space. For instance,

Philip Morris has provided clear, plastic

cases for the display of cigarette packs

and cartons in some stores. These cases

are placed on a checkout counter but

only accessed from the clerk’s side. This

arrangement permits prominent display

of cigarette packs to customers who are

thereby offered cigarettes at close range

while being unable to pick up packs or

cartons themselves.’’ In discussing the

effects of the Canadian advertising ban,

a Canadian study 368 suggested that,

‘‘[i]n the absence of advertising and

promotion outlets * * * the cigarette

industry may be expected to provide

greater incentives to retailers to provide

more and better shelf space for their

brands in order to provide availability to

the buyer in the store.’’ Moreover,

because FDA has not banned all pointof-purchase tobacco advertising, ‘‘text

only’’ advertising at retail stores will be

extremely important to tobacco product

marketers.

In addition, alternative opportunities

for point of purchase (POP) advertising

have climbed briskly, as POP experts

‘‘cite in-store advertising as the fastest

growing segment of the media

industry.’’ 369 That same Northern

California study expressly noted the

‘‘[r]eplacement of self-service tobacco

displays, racks and kiosks with * * *

non-tobacco products such as candy,

gum and soft drinks for which the

retailer receives slotting fees from the

manufacturers of these products.’’ 370

In sum, FDA cannot predict with

certainty the direction of future

payments by product manufacturers to

retailers. The agency points out,

however, that this rule would affect

neither the trade allowances that are

commonly paid to both wholesalers and

retailers, nor the slotting allowances

paid to retailers to encourage them to

carry a new product or to assure the

availability of a particular brand in a

retail outlet. Further, while many

current promotional activities will be

prohibited, a substantial number will

remain available. As the competitive

pressures that drive promotional

allowances are unlikely to abate,

manufacturers will continue to compete

vigorously through programs involving

both ‘‘text only’’ promotions and select

product placements.

6. Other Private Sectors

FDA is aware of several recent studies

that address the contribution of tobacco

to the U.S. economy; or alternatively,

the losses to the U.S. economy that

would follow a decline in tobaccorelated expenditures. The Tobacco

Institute’s Price Waterhouse report 371

purports to measure the induced effect

on the national economy of spending by

the tobacco core and supplier sector

employees and their families. That
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44605

372 ‘‘A Review of the Price Waterhouse Economic

Impact Report and Tobacco Institute Estimates of

‘Economic Losses from Increasing the Federal

Excise Tax’,’’ Arthur Andersen Economic

Consulting, p. 93, October 6, 1993.

373 Gray, H. P., and I. Walter, ‘‘The Economic

Contribution of the Tobacco Industry,’’ in Smoking

and Society: Toward a More Balanced Assessment,

edited by R. D. Tollison, Lexington Books, p. 248,

1986.

374Warner, K. E., G. A. Fulton, P. Nicolas, and D.

R. Grimes, ‘‘Employment Implications of Declining

Tobacco Product Sales for the Regional Economies

of the United States,’’ JAMA, April 24, 1996.

375The Tobacco Institute, ‘‘The Tax Burden on

Tobacco,’’ vol. 28, p. 4, 1993.

report concluded that the induced or

multiplier effects support 2.4 jobs for

every 1 job in the core and supplier

sectors combined, and over $3 in

compensation for every $1 in the other

two sectors. However, a review of that

report, by Arthur Andersen Economic

Consulting, explained that such

multipliers lead to ‘‘massive and

unrealistic estimates.’’ 372 That review

further emphasized that ‘‘money now

being spent on tobacco would not

disappear if demand for tobacco were to

fall,’’ though the Price Waterhouse

report implicitly made that assumption.

The Arthur Andersen review concluded

that these multipliers ‘‘provide no basis

by themselves for predicting how many

jobs would be lost by a reduction in

tobacco spending.’’ FDA strongly

supports this latter view.

The American Economics Group

(AEG), in a new study submitted by the

Tobacco Institute, employed a national

input-output model to project broad

sectoral and regional estimates of ‘‘the

induced impact of the FDA proposed

regulations nationwide.’’ Applying the

low and high illustrative costs estimated

by the Barents Group, AEG predicted

job losses of between 32,000 and 92,500.

In addition to the printing and

publishing industries, significant

employment cutbacks were found for

food, apparel and textiles, paper, metals,

motor vehicles, and other miscellaneous

manufacturers.

FDA is skeptical of the results of this

AEG study. First, the input-output

methodology employs an inherently

static approach for estimating economic

impacts. Indeed, the Barents Group, in

its second report for the Tobacco

Institute, explained that input-output

models will not capture changing

economic conditions, because they fail

to account for changing market prices.

Thus, ‘‘the input-output approach fails

to measure the effects of reallocating

displaced workers and resources to

other parts of the economy.’’

Furthermore, the AEG study suffers

from the same fundamental problem as

the earlier Price Waterhouse analysis: It

assumes that all reduced industry

revenues are lost to the economy. This

methodology is simply inappropriate.

Finally, the AEG study is based upon

the illustrative cost estimates of the

Barents Group. As described in detail

above, these cost estimates are

unreasonably high. Although some

tobacco advertising may decrease, a

significant portion will be redirected

towards the remaining permissible

promotional activities.

In a second report, the Barents Group

presented the results of using its own

cost estimates in a general equilibrium

model to simulate the impacts of the

estimated reductions in advertising and

promotional spending on revenue and

employment for 56 sectors of the U.S.

economy. This model predicted 21,000

to 44,000 U.S. job losses, largely among

wholesale and retail businesses, but also

within advertising, printing, apparel

and miscellaneous manufacturing

industries. FDA finds, however, that

this study also is subject to several

serious deficiencies. In particular, the

Barents Group relies on its own

illustrative cost estimates as model

inputs. As noted above, FDA believes

these estimates are far too high. Next,

the study focuses solely on those

industry sectors predicted to lose jobs,

while ignoring those sectors expected to

gain jobs. In fact, the study explicitly

acknowledges that the underlying

model assumes that:

the aggregate level of employment is not

changed in the long run as a result of

implementing the new regulations. In other

words, though particular jobs in particular

industries are expected to disappear

permanently, the number of man-hours

worked per year in the economy as a whole

is assumed not to change in the long run

* * *

The Barents Group selectively shows

changes in revenue and employment for

the losers only.

Other analysts concluded that such

models should not be used to assess

longer term national economic impacts,

because resources diverted from one use

would be reallocated to the production

of other goods and services. As one

economist explained ‘‘[i]f the focus is

longer term, involving a period of, say,

more than 2 years, then the induced

effect should not be included in the

measure because money not spent in

one industry would find another outlet

with equal (undistinguishable) induced

effects.’’ 373

Some comments addressed regional

issues, pointing to the importance of

tobacco products to the economies of

several states. Comments noted, for

example, that about 177,000 North

Carolinians were employed by tobacco

and that Price Waterhouse estimated

that the economic activity of these

workers supported total State

employment of 260,000. FDA is aware

that tobacco growing states will

experience some adverse economic

effects. Nevertheless, as discussed

above, the agency finds that the income

and employment impacts associated

with reduced tobacco consumption will

be extremely gradual. Moreover,

reduced tobacco consumption will

minimally affect or even boost the

economies of nontobacco states. For

example, a recent economic simulation

of the regional impacts of spending on

tobacco products by Warner, et al.,

found that after 8 years, a 2 percent per

year fall in tobacco consumption (which

substantially exceeds the FDA forecast

for this regulation) would cause the loss

of 36,600 jobs for the Southeast Tobacco

region of the United States (0.2 percent

of regional employment); whereas the

nontobacco regions of the United States

would gain 56,300 jobs. 374 That study

concluded that ‘‘[t]he primary concern

about tobacco should be the enormity of

its toll on health and not its impact on

employment.’’

7. Excise Tax Revenues

The rule will decrease State and

Federal tobacco tax revenues as fewer

youths will become addicted to tobacco

products. These excise tax losses will

increase as more youths become

nonsmoking adults. According to the

Tobacco Institute, State cigarette excise

taxes totaled $6.2 billion for the year

ending June 30, 1993. 375 As State excise

taxes on other tobacco products

(including smokeless tobacco) are

reported at $226 million, FDA assumes

that the value of all State excise taxes

affected by this regulation is about $6.4

billion annually. Federal excise taxes on

cigarettes totaled $5.5 billion for the

year ending June 30, 1993. Federal

excise taxes on smokeless tobacco are

expected to be about $27 million,

according to the Smokeless Tobacco

Council. As described above, FDA

estimates that compliance will reduce

tobacco product sales by a gradually

increasing rate over time; tobacco sales

will fall by 0.5 percent in the 1st year,

1.9 percent in the 5th year, and 3.7

percent in the 10th year. Thus, the rule

will decrease State excise taxes on

affected tobacco products by from $30

million in the 1st year to $231 million

in the 10th year and Federal tobacco
44606 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

376U.S. Department of Commerce, Statistical

Abstract of the United States 1994, 114th edition,

No. 464, p. 298, 1994.

377Special Census Tabulation prepared by U.S.

Bureau of Census for U.S. Small Business

Administration, Table 3—United States p. 68.

378U.S. Small Business Administration, ‘‘Table of

Size Standards,’’ March 1, 1996.

379Federal Trade Commission, ‘‘Cigarette

Importers and Small Manufacturers Plans Filed,

May 26, 1993–October 14, 1994.’’

380Special Census Tabulation prepared by U.S.

Bureau of Census for U.S. Small Business

Administration, Table 3—United States p. 69.

381 1992 Census of Agriculture, U.S., vol. 1,

excerpts from pp. 109–110, 125–126.

382Special Census Tabulation prepared by U. S.

Bureau of Census for U.S. Small Business

Administration, Table 3—United States.

taxes by from $25 million in the 1st year

to $196 million in the 10th year.

Since tobacco taxes represented less

than 1 percent of total revenues on both

the State and Federal level in 1992, 376

even the estimated tenth year impact

measures only 0.03 percent of all State

tax revenues and less than 0.02 percent

of all Federal revenues. Nonetheless, if

necessary, governments could raise

tobacco product excise rates to offset

these revenue losses. A full evaluation

of the fiscal consequences, however,

would involve a variety of public health

ramifications. For example, State

Medicaid programs will benefit from

reduced tobacco-related medical care

expenditures, but will need to finance

additional nursing home expenditures

associated with increased life

expectancy.

F. Small Business Impacts

The Regulatory Flexibility Act

requires agencies to prepare a final

regulatory flexibility analysis if a rule

will have a significant economic impact

on a substantial number of small

entities. Analyses in this section, as well

as in other sections of this preamble,

constitute the agency’s compliance with

this requirement. According to the

Regulatory Flexibility Act, the final

regulatory flexibility analysis must

contain ‘‘a succinct statement of the

need for, and objectives of, the rule.’’

Section XV.B. of this document explains

that the need for action stems from the

enormous toll on the public health that

is directly attributable to the

consumption of tobacco by children and

adolescents under the age of 18. As

described, the primary objective of the

regulation is to achieve the ‘‘Healthy

People 2000’’ goal of reducing by onehalf the number of youngsters who use

tobacco.

The final regulatory flexibility

analysis must also provide ‘‘a summary

of the significant issues raised by the

public comments in response to the

initial regulatory flexibility analysis, a

summary of the assessment of the

agency of such issues, and a statement

of any changes made in the proposed

rule as a result of such comments.’’ The

analyses presented previously in this

section addressed the first two of these

elements.

With respect to the changes made in

the proposed rule as a result of public

comments, the agency has reconsidered

several of its earlier decisions, at least

partly due to their projected effect on

small businesses. The preamble above

describes these changes and presents

the agency’s rationale for each

modification. For example, the

proposed regulation banned all vending

machine sales of tobacco products. In

response to public comment, the final

regulation exempts from the ban those

vending machines in ‘‘adult only’’

locations. FDA does not know how

many small businesses will be able to

take advantage of this exemption, but it

will maintain at least one line of sales

for small vending machine operators

without jeopardizing the protection of

young people.

In addition, the proposed regulation

prohibited direct mail-order sales of

tobacco products. The public comments,

however, indicated that many adults,

especially those who are elderly or who

have limited mobility, would be

substantially inconvenienced and

several small businesses would be

adversely affected by this ban. Even

more importantly, studies suggest that

teenagers purchase cigarettes from

vending machines or retail merchants

rather than from nonretail channels.

FDA took these considerations into

account and the final regulation does

not prohibit mail-order sales of

cigarettes.

The final regulatory flexibility

analysis must also include ‘‘a

description of and an estimate of the

number of small entities to which the

rule will apply or an explanation of why

no such estimate is available.’’ U.S.

Census data for 1993 indicate that most

cigarette manufacturers are large

businesses, with only 4 employing

fewer than 500 employees. 377 The small

business size standard established by

the U.S. Small Business Administration

(SBA) for this industry is 1,000

employees. 378 The Federal Trade

Commission (FTC) provided a list of 52

cigarette importers and small cigarette

manufacturers filing plans with that

agency, but could not distinguish

manufacturers from importers. 379 The

1993 Census data show that 14 of the 20

firms manufacturing chewing and

smoking tobacco employ fewer than 500

employees, the SBA size standard for

this sector. 380 Also, most of the nation’s

124,000 tobacco farms are small; almost

99 percent of the farms growing tobacco

in 1992 had total farm sales under the

SBA small business size standard of

$500,000, and almost 91 percent had

total farm sales under $50,000. 381

Further, 1993 Census data show that

1,332 of 1,365 tobacco wholesale trade

firms (98 percent) employ fewer than

the 100-employee threshold that

constitutes a small business according

to the SBA. 382 As noted above, the

effect of the regulation on tobacco

manufacturing, growing, and wholesale

trade operations will be very gradual,

taking over 10 years to reach a 4 percent

reduction.

The regulation will affect numerous

retail establishments, including food

stores, small general merchandise

stores, small tobacco stores and small

gasoline stations. Table 15 displays the

relative share of the tobacco market for

the major types of tobacco-dispensing

outlets with payroll in 1992. As shown,

food stores and service stations received

about 75 percent of all tobacco sales

revenue and tobacco products

comprised 5 to 7 percent of the total

sales of many of these establishments.

Table 16 indicates that the great

majority of all retail outlets in these

sectors are small businesses.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44607

TABLE 15.—SALES OF TOBACCO PRODUCTS AS A PERCENTAGE OF TOTAL SALES—1992

(Establishments with Payroll Only)

Establishment Type

Tobacco Sales % of Total Sales

($ Mils) (%)

Establishments

Handling

Tobacco

All Establishments

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 TABLE 16.—NUMBER OF SMALL RETAIL BUSINESSES Establishment Type Firms With Payroll Establishments Without Payroll Total Small1 All 588,505 473,668 275,432 Food Stores 127,575 104,5412 97,061 Service Stations 62,585 53,2883 14,248 Drug and Proprietary 28,606 25,396 3,031 General Merchandise 10,264 8,176 28,010 Liquor Stores 26,565 22,859 8,811 Eating and Drinking 331,703 258,381 124,271 Tobacco Stores & Stands 1,207 1,027 n.a.

1Assumes Small Business Administration size standard of $20 million in annual sales for food stores, $6.5 million for service stations and $5 million for all others.2 Due to data limitations, includes firms with annual sales up to $25 million.3 Due to data limitations, includes firms with annual sales up to $10 million.

Source: 1992 Census of Retail Trade, Establishment and Firm Size, 1992 Census of Retail Trade, Summary.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44609

383Based on data form the 1994 SGR, p. 85, and

the ‘‘Tobacco Situation and Outlook Report’’ April,

1995, p. 4, FDA estimates that smokers aged 18 to

26 account for about 10 percent of all cigarettes

smoked. Alternatively, data from the Statistical

Abstract, tables 16 and 218, show that smokers aged

18 to 26 comprise 18 percent of all smokers. FDA

used the midpoint of the 10 to 18 percent range to

avoid underestimating the cost to small retailers. In

addition, data from the 1996 Census of Retail Trade,

Subject Series-Merchandise Line Sales, pp. 3–9 on

the number of convenience stores with payroll and

their total tobacco sales, and the average price per

pack, were used to estimate the average number of

packs sold daily at convenience stores to smokers

aged 18 to 26.

384 1992 Census of Retail Trade, ‘‘Establishment

and Firm Size,’’ Table 4 p. 1–99.

385 ‘‘1993: Industry Posts Best Growth in Four

Years,’’ Automatic Merchandiser, p. A2, August

1994.

386 1992 Census of Service Industries, pp. 1-145

and 1-195.

387Collins, G., ‘‘Major Advertising Company to

Bar Billboard Ads for Tobacco,’’ New York Times,

A15, May 3, 1996.

388 1996 Directory of Corporate Affiliations U.S.

Private Companies, New Providence, NJ; Reed

Elsevier, Inc.; ‘‘Company Profiles’’ database,

Information Access Co., Foster City, CA.

To illustrate the effects of this

proposal on a typical small retail store,

FDA separately utilized Census data to

estimate that the average-sized

convenience store sells 177 packages of

tobacco products daily, of which about

25 might be purchased by young adults

aged 18 to 26. 383 Based on the cost

assumptions described previously, the

outlet’s first year costs would total about

$400, with the largest single cost, $199,

the labor cost for checking

identification. For those stores that

already verify the age of young

customers of tobacco products, the

additional costs fall to $137.

This estimate does not account for the

possible reduction in promotional

allowances, as FDA believes that

competitive pressures will continue to

lead manufacturers to rely on

promotional allowances to compete for

the best shelf space available for their

products. Because FDA rejected the idea

of prohibiting any visible display of

tobacco products, retailers can retain

slotting fees by choosing to display

tobacco products either behind counters

or in transparent locked display cases.

Nevertheless, some small

establishments might experience

reduced promotional payments

following a ban on self-service

marketing.

Census data for 1992 indicate that

almost 4,000 of 4,800 merchandising

machine operator businesses (83

percent) reported annual receipts below

the SBA size standard of $5 million. 384

One trade association noted that almost

three quarters of all vending machine

operators had annual sales of less than

$1 million. 385 As explained earlier,

prohibiting all cigarette vending

machines would initially reduce the

revenues of vending machine operators

by an average of 2.8 percent. Because

only about one-half of the

merchandising machine establishments

sell cigarettes, some businesses

specializing in cigarette sales would

experience greater revenue declines;

although this effect will be moderated to

the extent that cigarette vending

machines are placed in areas restricted

to adults, which would not be

prohibited by the final rule.

The rule would also affect the

distribution of specialty items showing

a tobacco product logo or name.

Industry comments do not provide

precise data on the size distribution of

these firms, but as noted above, the

Specialty Advertising Association

International indicates that 80 percent

of the manufacturers and 95 percent of

the distributors in this industry have

annual sales below $2 million. While

the marketplace in which these firms

traditionally compete demands a quick

response to shifting consumer trends,

this rule would have at least short-term

impact on some small firms.

FDA has received no data that would

allow it to estimate the number of small

firms that are currently involved with

some aspect of tobacco advertising or

the fraction of these firms that will be

affected. In 1992, 861 of 904 year-round

outdoor advertising firms (95 percent)

reported sales revenues of less than the

SBA size standard of $5 million. 386 The

impact of this rule, however, is difficult

to assess without knowing how the

tobacco industry will alter its

advertising strategies. Indeed, one of the

largest outdoor advertising firms

recently decided to reject all tobacco

business, potentially increasing sales to

the smaller firms. 387

The regulation restricts tobacco

advertising to ‘‘text only’’ in magazines

with youth readership above the

regulatory threshold. Of the identified

101 magazines with tobacco ads in

1994, 79 were published by large firms

(over 500 employees). Less than 3

percent of the total revenue of the

remaining 22 publications (which

include, Inc., Rolling Stone and

Penthouse) was derived from tobacco

ads. 388 It is likely, moreover, that many

of these magazines could avoid the ‘‘text

only’’ restriction for tobacco advertising

by demonstrating a low youth

readership.

The regulation will also affect a

substantial number of small race tracks,

although FDA does not know how many

small tracks currently receive significant

revenues from tobacco sponsors. As

discussed previously, some small

operations will likely lose promotional

revenues from tobacco companies, but

the sport is growing rapidly and other

product manufacturers should make up

a substantial part of the shortfall.

The final regulatory flexibility

analysis must include ‘‘a description of

the projected reporting, recordkeeping

and other compliance requirements of

the rule, including an estimate of the

classes of small entities which will be

subject to the requirement and the type

of professional skills necessary for

preparation of the report or record.’’ A

full description of the requirements and

classes of affected small entities has

been provided earlier in this section and

a quantitative review of the paperwork

burdens imposed by the rule is provided

in section XVI. of this document. No

special professional skills will be

required to prepare the reports or

records required by the regulation.

The final regulatory flexibility

analysis must also include ‘‘a

description of the steps the agency has

taken to minimize the significant

economic impact on small entities

consistent with the stated objectives of

applicable statutes, including a

statement of the factual, policy, and

legal reasons for selecting the alternative

adopted in the final rule and why each

one of the other significant alternatives

to the rule considered by the agency

which affect the impact on small

entities was rejected.’’

The earlier sections of this document

provide a full explanation of the

agency’s basis for selecting each

provision of the final rule. In each

instance, FDA evaluated the

implications of each reasonable

regulatory alternative and selected only

those requirements that were absolutely

necessary to satisfy the agency’s

statutory goals. As described, FDA

found that its objectives for reducing the

use of tobacco by young people could

not be achieved with a partial or onedimensional approach, but required a

comprehensive set of regulatory

restrictions. Thus, the final set of

selected provisions reflect a careful

examination of the relevant facts

presented to the rulemaking record, the

agency’s objective of curtailing the use

of tobacco by youngsters without

creating unnecessary economic burdens,

and a full assessment of the agency’s

legal authorities. Because the rejected

alternatives would either provide less

protection of public health, or achieve
44610 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

only minimal improvements at

unwarranted cost, the agency found that

the approach selected for the final rule

best fit its statutory mandate.

As noted, earlier sections of the

preamble fully describe the agency’s

rationale for selecting each provision of

the final rule and for rejecting each

alternative approach. Although many

alternatives were considered, specific

exemptions based solely on business

size were not adopted, because FDA

believes that children would too

frequently exploit such opportunities.

Unlike certain other regulations where

restrictions on large firms alone might

be acceptable, tobacco products are

purchased easily from small, as well as

large firms. An exemption for small

retailers, for instance, would shift

underage sales to those locations,

lessening or eliminating the benefits of

the remaining access restrictions. The

following discussion summarizes the

agency’s consideration of several other

regulatory alternatives.

G. Other Alternatives

One regulatory alternative would have

banned all tobacco advertising; or

alternatively, all tobacco advertising in

selected media, such as all written

publications, or all outdoor billboards.

FDA rejected this approach in order to

focus on those media and aspects of

advertising that children are routinely

exposed to and that have the greatest

effect on youngsters. For example, the

final rule permits black and white ‘‘text

only’’ tobacco advertising in all written

publications and color and imagery in

magazines with fewer than 2 million

youthful readers if youth constitute less

than 15 percent of the publication’s

readership. Billboards are permitted to

show black and white ‘‘text only’’ ads if

located at least 1,000 feet from schools

or public playgrounds. Thus, the rule

leaves the informational aspects of

advertising largely untouched.

Another suggested alternative was to

combat underage tobacco use by relying

on either voluntary compliance or on

better enforcement of laws prohibiting

sales to minors. As discussed earlier in

this document, the tobacco industry’s

voluntary advertising code has failed to

stop illegal sales to underage buyers.

FDA agrees that these approaches can be

partially effective, but finds that they

inadequately counter the appeal of

tobacco products for young people that

is created by advertising and

promotions. Thus, the agency concludes

that there is no less burdensome

alternative for achieving its goals that

would exclude appropriately tailored

restrictions on tobacco advertising.

One alternative considered by the

agency was a far more prescriptive

monitoring requirement for tobacco

manufacturers. Under this rule, each

manufacturer of tobacco products would

have been required to adopt a system for

monitoring the sales and distributions of

retail establishments. These monitoring

systems were to: (1) Include signed

written agreements with each retailer,

(2) contain adequate organizational

structure and personnel to monitor the

labeling, advertising, and sale of tobacco

products at each retail distribution

point, and (3) establish, implement, and

maintain procedures for receiving and

investigating reports regarding any

improper labeling, advertising, or

distribution. The additional costs for

this monitoring were estimated at about

$85 million per year. FDA rejected this

alternative, because it decided that the

industry might employ its resources

more efficiently if permitted to choose

among alternative compliance modes.

Another suggested alternative would

have required package inserts

containing educational information in

cigarette and smokeless tobacco. FDA

had incomplete data to estimate the

additional cost of this requirement, but

based on comments submitted by

industry in response to a Canadian

proposal, tentatively projected one-time

costs of about $490 million and annual

operating costs of about $54 million.

This alternative was not selected

because the agency was not certain that

the benefits of this provision would

justify the compliance costs.

FDA also considered setting the

permissible age for purchase at 19 rather

than 18, because many 18-year-old

adolescents are still in high school and

can easily purchase tobacco products for

younger classmates. This alternative

would have added costs of about $34

million annually, mostly due to lost

producer profits. The final regulation

restricts access to regulated tobacco

products for persons under the age of

18, because most adult smokers have

already become smokers by the age of

18, and because that age limit is already

consistent with most State and local

laws.

H. Unfunded Mandates Reform Act of

1995

On the basis of the preceding

discussion, under the Unfunded

Mandates Act, FDA concludes that the

substantial benefits of this regulation

will greatly exceed the compliance costs

that it imposes on the U.S. economy. In

addition, the agency has considered

other alternatives as discussed in

section XV.G. of this document and

determined that the current rule is the

least burdensome and the most cost

effective alternative that would meet the

objectives of this rule.

XVI. Paperwork Reduction Act of 1995

The 1995 proposed rule would have

collected information from

manufacturers, distributors, and

retailers of cigarettes and smokeless

tobacco. Proposed § 897.24 would have

required such persons to use established

names for cigarettes and smokeless

tobacco. Proposed § 897.29 would have

required manufacturers to establish and

maintain educational programs.

Proposed § 897.32 would have required

manufacturers, distributors, and

retailers to observe certain format and

content requirements for labeling and

advertising. Proposed § 897.40 would

have required manufacturers to submit

labels, labeling, and advertising to FDA.

The preamble to the 1995 proposed

rule, in discussing the Paperwork

Reduction Act, also invited comments

on four questions: (1) The necessity and

utility of the proposed information

collection for the proper performance of

the agency’s functions; (2) the accuracy

of the estimated burden; (3) ways to

enhance the quality, utility, and clarity

of the information to be collected; and

(4) the use of automated collection

techniques or other forms of information

technology to minimize the information

collection burden (60 FR 41314 at

41356).

A. Comments on the Paperwork

Reduction Act Statement

A small number of comments,

primarily from a trade association

representing cigarette manufacturers

and from distributors, addressed FDA’s

Paperwork Reduction Act statement. In

general, these comments asserted that

FDA’s figures were incorrect or that the

rule would duplicate existing reporting

requirements. Few comments provided

any figures or evidence to justify using

different estimates.

(1) One comment, submitted by a

trade association representing major

cigarette manufacturers, said FDA’s

Paperwork Reduction Act statement

underestimated the paperwork burden

due to the exclusion of burden on

retailers. The comment asserted that

FDA did not explain how it calculated

the number of respondents and burden

hours for these sections and that the

absence of an explanation made it

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

agency’s Paperwork Reduction Act

estimate said there would be 200,000

respondents for proposed § 897.40, but

that the agency’s analysis of impacts

estimated that 700,000 retail stores sell

tobacco products. The comment also

asserted that the average burden per

response, under proposed §§ 897.32 and

897.40, should be 1 hour instead of 20

minutes. Thus, the comment concluded

that if all 700,000 outlets spend only 60

minutes annually to comply with all

recordkeeping requirements, at a cost of

$10 per hour, retailers, alone, would

spend 700,000 hours and $7 million to

comply with the recordkeeping

requirements in §§ 897.32 and 897.40.

The agency believes that the comment

misinterprets the figures in the

proposed rule’s Paperwork Reduction

Act statement. To begin with, the

comment mistakenly equates the

Paperwork Reduction Act statement’s

reference to ‘‘annual number of

responses’’ with the annual numbers of

people or firms that might be affected.

The annual number of responses simply

refers to the annual number of things,

whether those things are pieces of

labeling, labels, advertisements, or other

items, that the agency might receive

under that particular regulatory

requirement. So, for example, if the

agency expected to receive only 500

labels, the ‘‘annual number of

responses’’ would be 500, regardless of

whether the number of firms who might

be affected by the rule was greater or

less than 500.

Focusing on §§ 897.32 and 897.40 (the

provisions cited by the comment),

proposed § 897.32 would have

established specific format and content

requirements for labeling and

advertising. For example, proposed

§ 897.32(a) would have required

labeling and advertising to use only

black text on a white background; the

only exception would be advertising

appearing in ‘‘adult’’ periodicals.

Proposed § 897.32(b) would have

required advertising to carry the

product’s established name and a

statement of intended use, and specified

those names and the statement of

intended use. Proposed § 897.32(c)

would have required advertising to

carry a specific brief statement. The

agency believed that these proposed

requirements and specific statements

were so precise that manufacturers,

distributors, or retailers could determine

their regulatory obligations quickly. For

example, it should be quite simple to

determine whether an advertisement

uses black text on a white background.

Proposed § 897.40(a) would have

required manufacturers to provide

copies of labels, labeling, and a

representative sampling of advertising

to FDA. This, too, would not appear to

be an extremely time-consuming task,

particularly when the rule permits

manufacturers to provide a

representative sampling of advertising.

To estimate the time required to

comply with proposed §§ 897.32 and

897.40, the agency tried to examine

other large-scale labeling and reporting

programs. FDA found that one Federal

department conducts a large-scale

labeling program that receives

approximately 200,000 labels annually

and that each label requires a maximum

of 20 minutes to review. Consequently,

the 1995 proposed rule adopted the

200,000 figure as the estimated number

of responses. In the absence of better

data, the proposed rule assigned the

maximum review time (20 minutes) to

its estimates for average burden per

response.

FDA, however, has revised the

200,000 figure and now estimates that

approximately 25,000 pieces of labeling

or advertising will be affected by

§ 897.32. (The agency has deleted

§ 897.40 from the rule in favor of other,

preexisting regulations.) As described in

greater detail elsewhere in this

document, the agency derived these

figures by using advertising

expenditures by the cigarette and

smokeless tobacco industries and by the

pharmaceutical industry, applying the

ratio of such expenditures against the

25,000 pieces of advertising that the

agency receives from the

pharmaceutical industry, and projecting

that printed advertisements may

increase due to the rule’s effect on

promotional activities. Consequently,

FDA now estimates that 25,000 pieces of

labeling and advertising will be affected.

Thus, the agency does not agree that

the estimated number of responses

should be 700,000 or more because the

response rate is not determined by the

number of retailers. However, because

the comment estimated that firms would

require 1 hour to comply, the agency

will use the 1 hour figure and has

adjusted its paperwork estimates

accordingly.

(2) The same comment also asserted

that FDA’s recordkeeping estimate was

incorrect for manufacturers. The

comment stated that FDA did not

explain how it calculated the burden

hour response for manufacturers under

proposed § 897.40 and asserted that

manufacturers would need 40 hours to

document compliance with the

educational program requirements in

proposed § 897.29 alone. The comment

estimated that the recordkeeping costs

for the manufacturers’ educational

programs would be $25 per hour, for a

total cost between $55 and 57 million

annually. The comment explained that

the costs may be even higher because

highly skilled persons would be needed

to comply with the rule.

The comment misinterprets the

agency’s Paperwork Reduction Act

burden estimate. For § 897.29, FDA

estimated that 1,000 hours would be

needed to comply with the educational

program requirements; this estimate

included all functions related to the

development of an educational program,

including recordkeeping. Section

897.40(b), would have required

manufacturers, distributors, and

retailers to make records (including

records on a manufacturer’s educational

program efforts) available to FDA on

inspection. Because the estimate for

proposed § 897.29 included time spent

on recordkeeping associated with the

educational program, the agency’s

estimates for proposed § 897.40 properly

excluded time spent on maintaining

educational program records.

Otherwise, this time would have been

counted twice. In any event, the

comment is moot because FDA has

deleted § 897.29 and § 897.40 from the

final rule.

(3) FDA received several comments

from distributors, claiming that the 1995

proposed rule would result in

substantial paperwork and provide

duplicative information. The comments

stated that the device listing provisions

of part 807 require each medical device

wholesaler to prepare and file reports of

all regulated products. If each brand and

package style of cigarettes and

smokeless tobacco are considered a

separate device, this would

substantially increase paperwork and

duplicative reporting.

The comment correctly notes that part

807, as currently written, requires

distributors to register and list devices

(21 CFR 807.20). However, FDA has

amended part 807 to exempt

distributors of cigarettes and smokeless

tobacco. Thus, distributors do not have

to comply with part 807, nor do they

have to comply with § 897.40 because

FDA has deleted § 897.40 from the final

rule.

(4) Several comments, primarily from

small businesses and convenience

stores, said that the 1995 proposed rule

would have no impact and that adding

paperwork would not curb underage

smoking.
44612 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

The agency disagrees with the

comments. The final rule restricts young

people’s access to cigarettes and

smokeless tobacco and reduces their

appeal to young people. FDA believes

that the final rule, in conjunction with

State and local government efforts, will

prevent large numbers of young people

from using or experimenting with these

products. Yet, insofar as any

information collection burden is

concerned, FDA points out that the

rule’s paperwork requirements are a

function of the act and are being

imposed to further the purposes of the

act and of this final rule, not in any

attempt to curb underage smoking by

simply adding paperwork for

paperwork’s sake.

(5) One comment said that FDA could

reduce the information collection

burden in proposed § 897.29 (the

educational program) by requiring

manufacturers to contribute to an

educational fund that an independent

agency, such as FDA, CDC, or NIH,

could use. The comment said that this

would create a positive incentive for

companies to change their marketing

practices and would reduce the need for

extensive recordkeeping and regulatory

oversight of manufacturers.

The agency has deleted the

educational program provision from the

final rule. Consequently, the

information collection burden

associated with proposed § 897.29 no

longer exists.

(6) In response to comments, FDA has

amended the final rule to include a

medical device reporting requirement

for manufacturers and distributors at

§§ 803.19 and 804.25. For

manufacturers, these reports are limited

to adverse events (resulting from

product contamination, a change in

ingredient or in any manufacturing

process, or serious adverse events that

are not well-known or well-documented

by the scientific community. For

distributors, these reports are limited to

adverse events related to contamination.

FDA estimates that it will receive 50

reports and each report will require 8

hours to prepare. The agency has

amended the information collection

burden to reflect these changes to the

rule.

(7) FDA has also revised the

information collection figures for

§ 897.24 which requires an established

name on labels. The revision changes

the number of respondents from 1,000

to 2,000 to reflect the agency’s position

that there are 1,000 varieties of

cigarettes and smokeless tobacco

products and that each variety has 2

labels, thus resulting in 2,000 affected

labels.

(8) FDA has also revised the

information collection figures for

§ 897.32 to account for the survey

evidence that is needed to establish that

a magazine, newspaper, or other

periodical is an ‘‘adult’’ publication that

is exempt from the requirement of black

text on a white background. The agency

estimates that such surveys will result

in a capital cost of $2 million, with

annual costs of $1 million. FDA

estimates that 31 recordkeepers would

be affected at a total burden hour figure

of 100,000 hours.

B. Information Collection Provisions in

the Final Rule

This final rule contains information

collection provisions that are subject to

review by the Office of Management and

Budget (OMB) under the Paperwork

Reduction Act of 1995 (44 U.S.C. 3501–

3520). The title, description, and

respondent description of the

information collection requirements are

shown below with the estimate of the

annual reporting and recordkeeping

burden. Included in the estimate is the

time for reviewing instructions,

searching existing data sources,

gathering and maintaining the data

needed, and completing and reviewing

the collection of information.

Title: Regulations Restricting the Sale

and Distribution of Cigarettes and

Smokeless Tobacco Products to Protect

Children and Adolescents.

Description: The final rule requires

the collection of information regarding

cigarettes and smokeless tobacco. The

final rule requires manufacturers,

importers, and distributors to report

certain adverse events to FDA and

requires manufacturers to use

established names for cigarettes and

smokeless tobacco. The final rule also

requires manufacturers, distributors,

and retailers to observe certain format

and content requirements for labeling

and advertising, and requires

manufacturers, distributors, and

retailers to notify FDA if they intend to

use an advertising medium that is not

listed in the regulations.

Description of Respondents:

Businesses.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44613

Table 17.—Estimated Annual Reporting and Disclosure Burden

21 CFR Section No. of Respondents

Annual

Frequency

per

Response

Total Annual

Responses

Hours per

Response Total Hours Total Capital Costs Total Operating & Maintenance Costs

803.19 49 1 49 8 392 21,000 13,680804.25 1 1 1 8 8 231,000 35,220897.24 2,000 1 2,000 40 80,000 17,000,000 0897.30 1 1 1 1 1 0 0897.32 25,000 1 25,000 1 25,000 0 0Total Burden 105,401 17,250,000 48,900
44614 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

TABLE 18.—ESTIMATED

ANNUAL

RECORDKEEPING

BURDEN

21 CFR Section No. of Recordkeepers

Annual

Frequency

per Recordkeeping

Total Annual

Records

Hours per

Recordkeeper Total Hours Total Capital Costs Total Operating & Maintenance Costs

897.32 31 1 31 3,226 100,000 2,000,000 1,000,000Total Burden 100,000 2,000,000 1,000,000
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44615

The 1995 proposed rule provided a

90-day comment period (extended to

144 days in the Federal Register of

October 16, 1995, 60 FR 53560). As

discussed previously, the revised

burden hour estimates in the final rule

are based partially on comments

received.

The information collection provisions

in the proposed rule were approved

under OMB no. 0910–0312. Because of

changes made since the proposed rule,

FDA has submitted the information

collection provisions of the final rule to

OMB for review. Prior to the effective

date of this final rule, FDA will publish

a notice in the Federal Register of

OMB’s decision to approve, modify, or

disapprove the information collection

provisions in the final rule.

XVII. Congressional Review

This final rule has been determined to

be a major rule for purposes of 5 U.S.C.

801 et seq., Subtitle E of the Small

Business Regulatory Enforcement

Fairness Act of 1996 (Pub. L. 104–121).

FDA is submitting the information and

reports as required by that statute.

List of Subjects

21 CFR Part 801

Labeling, Medical devices, Reporting

and recordkeeping requirements.

21 CFR Part 803

Imports, Medical devices, Reporting

and recordkeeping requirements.

21 CFR Part 804

Imports, Medical devices, Reporting

and recordkeeping requirements.

21 CFR Part 807

Confidential business information,

Imports, Medical devices, Reporting and

recordkeeping requirements.

21 CFR Part 820

Medical devices, Reporting and

recordkeeping requirements.

21 CFR Part 897

Advertising, Cigarettes, Labeling, Sale

and distribution, Smokeless tobacco.

Therefore, under the Federal Food,

Drug, and Cosmetic Act and under

authority delegated to the Commissioner

of Food and Drugs, 21 CFR parts 801,

803, 804, 807, and 820 are amended and

a new part 897 is added as follows:

PART 801—LABELING

1. The authority citation for 21 CFR

part 801 continues to read as follows:

Authority: Secs. 201, 301, 501, 502, 507,

519, 520, 701, 704 of the Federal Food, Drug,

and Cosmetic Act (21 U.S.C. 321, 331, 351,

352, 357, 360i, 360j, 371, 374).

2. Section 801.126 is added to subpart

D to read as follows:

§ 801.126 Exemptions for cigarettes and

smokeless tobacco.

Cigarettes and smokeless tobacco as

defined in part 897 of this chapter are

exempt from section 502(f)(1) of the

Federal Food, Drug, and Cosmetic Act.

PART 803—MEDICAL DEVICE

REPORTING

3. The authority citation for 21 CFR

part 803 continues to read as follows:

Authority: Secs. 502, 510, 519, 520, 701,

704 of the Federal Food, Drug, and Cosmetic

Act (21 U.S.C. 352, 360, 360i, 360j, 371, 374).

4. Section 803.19 is amended by

adding new paragraphs (f) and (g) to

read as follows:

§ 803.19 Exemptions, variances, and

alternative reporting requirements.

* * * * *

(f) Manufacturers as defined in part

897 of this chapter shall submit medical

device reports concerning cigarettes and

smokeless tobacco under this part only

for serious adverse events that are not

well-known or well-documented by the

scientific community, including events

related to contamination, or a change in

any ingredient or any manufacturing

process.

(g) User facilities are exempt from

submitting medical device reports

concerning cigarettes and smokeless

tobacco under this part.

PART 804—MEDICAL DEVICE

DISTRIBUTOR REPORTING

5. The authority citation for 21 CFR

part 804 continues to read as follows:

Authority: Secs. 502, 510, 519, 520, 701,

704 of the Federal Food, Drug, and Cosmetic

Act (21 U.S.C. 352, 360, 360i, 360j, 371, 374).

6. Section 804.25 is amended by

adding a new paragraph (c) to read as

follows:

§ 804.25 Reports by distributors.

* * * * *

(c) Distributors as defined in part 897

of this chapter shall submit medical

device reports concerning cigarettes and

smokeless tobacco under this part only

for adverse events related to

contamination.

PART 807—ESTABLISHMENT

REGISTRATION AND DEVICE LISTING

FOR MANUFACTURERS AND

DISTRIBUTORS OF DEVICES

7. The authority citation for 21 CFR

part 807 continues to read as follows:

Authority: Secs. 301, 501, 502, 510, 513,

515, 519, 520, 701, 704 of the Federal Food,

Drug, and Cosmetic Act (21 U.S.C. 331, 351,

352, 360, 360c, 360e, 360i, 360j, 371, 374).

8. Section 807.65 is amended by

adding a new paragraph (j) to read as

follows:

§ 807.65 Exemptions for device

establishments.

* * * * *

(j) Distributors of cigarettes or

smokeless tobacco as defined in part

897 of this chapter.

PART 820—GOOD MANUFACTURING

PRACTICE FOR MEDICAL DEVICES:

GENERAL

9. The authority citation for 21 CFR

part 820 continues to read as follows:

Authority: Secs. 501, 502, 515, 518, 519,

520, 701, 704 of the Federal Food, Drug, and

Cosmetic Act (21 U.S.C. 351, 352, 360e, 360h,

360i, 360j, 371, 374).

10. Section 820.1 is amended by

adding and reserving new paragraph (e)

and adding new paragraph (f) to read as

follows:

§ 820.1 Scope.

* * * * *

(e) [Reserved]

(f) This part does not apply to

distributors of cigarettes or smokeless

tobacco as defined in part 897 of this

chapter.

11. New part 897 is added to read as

follows:

PART 897—CIGARETTES AND

SMOKELESS TOBACCO

Subpart A—General Provisions

Sec.

897.1 Scope.

897.2 Purpose.

897.3 Definitions.

Subpart B—Prohibition of Sale and

Distribution to Persons Younger Than 18

Years of Age

897.10 General responsibilities of

manufacturers, distributors, and

retailers.

897.12 Additional responsibilities of

manufacturers.

897.14 Additional responsibilities of

retailers.

897.16 Conditions of manufacture, sale, and

distribution.
44616 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

Subpart C—Labels

897.24 Established names for cigarettes and

smokeless tobacco.

897.25 Statement of intended use and age

restriction.

Subpart D—Labeling and Advertising

897.30 Scope of permissible forms of

labeling and advertising.

897.32 Format and content requirements for

labeling and advertising.

897.34 Sale and distribution of nontobacco

items and services, gifts, and

sponsorship of events.

Authority: Secs. 502, 510, 518, 519, 520,

701, 704, 903 of the Federal Food, Drug, and

Cosmetic Act (21 U.S.C. 352, 360, 360h, 360i,

360j, 371, 374, 393).

Subpart A—General Provisions

§ 897.1 Scope.

(a) This part sets out the restrictions

under the Federal Food, Drug, and

Cosmetic Act (the act) on the sale,

distribution, and use of cigarettes and

smokeless tobacco that contain nicotine.

(b) The failure to comply with any

applicable provision in this part in the

sale, distribution, and use of cigarettes

and smokeless tobacco renders the

product misbranded under the act.

(c) References in this part to

regulatory sections of the Code of

Federal Regulations are to chapter I of

Title 21, unless otherwise noted.

§ 897.2 Purpose.

The purpose of this part is to establish

restrictions on the sale, distribution, and

use of cigarettes and smokeless tobacco

in order to reduce the number of

children and adolescents who use these

products, and to reduce the lifethreatening consequences associated

with tobacco use.

§ 897.3 Definitions.

(a) Cigarette means any product

which contains nicotine, is intended to

be burned under ordinary conditions of

use, and consists of:

(1) Any roll of tobacco wrapped in

paper or in any substance not

containing tobacco; or

(2) Any roll of tobacco wrapped in

any substance containing tobacco

which, because of its appearance, the

type of tobacco used in the filler, or its

packaging and labeling, is likely to be

offered to, or purchased by, consumers

as a cigarette described in paragraph

(a)(1) of this section.

(b) Cigarette tobacco means any

product that consists of loose tobacco

that contains or delivers nicotine and is

intended for use by consumers in a

cigarette. Unless otherwise stated, the

requirements pertaining to cigarettes

shall also apply to cigarette tobacco.

(c) Distributor means any person who

furthers the distribution of cigarettes or

smokeless tobacco, whether domestic or

imported, at any point from the original

place of manufacture to the person who

sells or distributes the product to

individuals for personal consumption.

Common carriers are not considered

distributors for the purposes of this part.

(d) Manufacturer means any person,

including any repacker and/or relabeler,

who manufactures, fabricates,

assembles, processes, or labels a

finished cigarette or smokeless tobacco

product.

(e) Nicotine means the chemical

substance named 3-(1-Methyl-2-

pyrrolidinyl)pyridine or C10H14N2,

including any salt or complex of

nicotine.

(f) Package means a pack, box, carton,

or container of any kind in which

cigarettes or smokeless tobacco are

offered for sale, sold, or otherwise

distributed to consumers.

(g) Point of sale means any location at

which a consumer can purchase or

otherwise obtain cigarettes or smokeless

tobacco for personal consumption.

(h) Retailer means any person who

sells cigarettes or smokeless tobacco to

individuals for personal consumption,

or who operates a facility where

vending machines or self-service

displays are permitted under this part.

(i) Smokeless tobacco means any

product that consists of cut, ground,

powdered, or leaf tobacco that contains

nicotine and that is intended to be

placed in the oral cavity.

Subpart B—Prohibition of Sale and

Distribution to Persons Younger Than

18 Years of Age

§ 897.10 General responsibilities of

manufacturers, distributors, and retailers.

Each manufacturer, distributor, and

retailer is responsible for ensuring that

the cigarettes or smokeless tobacco it

manufactures, labels, advertises,

packages, distributes, sells, or otherwise

holds for sale comply with all

applicable requirements under this part.

§ 897.12 Additional responsibilities of

manufacturers.

In addition to the other

responsibilities under this part, each

manufacturer shall remove from each

point of sale all self-service displays,

advertising, labeling, and other items

that the manufacturer owns that do not

comply with the requirements under

this part.

§ 897.14 Additional responsibilities of

retailers.

In addition to the other requirements

under this part, each retailer is

responsible for ensuring that all sales of

cigarettes or smokeless tobacco to any

person comply with the following

requirements:

(a) No retailer may sell cigarettes or

smokeless tobacco to any person

younger than 18 years of age;

(b)(1) Except as otherwise provided in

§ 897.16(c)(2)(i) and in paragraph (b)(2)

of this section, each retailer shall verify

by means of photographic identification

containing the bearer’s date of birth that

no person purchasing the product is

younger than 18 years of age;

(2) No such verification is required for

any person over the age of 26;

(c) Except as otherwise provided in

§ 897.16(c)(2)(ii), a retailer may sell

cigarettes or smokeless tobacco only in

a direct, face-to-face exchange without

the assistance of any electronic or

mechanical device (such as a vending

machine);

(d) No retailer may break or otherwise

open any cigarette or smokeless tobacco

package to sell or distribute individual

cigarettes or a number of unpackaged

cigarettes that is smaller than the

quantity in the minimum cigarette

package size defined in § 897.16(b), or

any quantity of cigarette tobacco or

smokeless tobacco that is smaller than

the smallest package distributed by the

manufacturer for individual consumer

use; and

(e) Each retailer shall ensure that all

self-service displays, advertising,

labeling, and other items, that are

located in the retailer’s establishment

and that do not comply with the

requirements of this part, are removed

or are brought into compliance with the

requirements under this part.

§ 897.16 Conditions of manufacture, sale,

and distribution.

(a) Restriction on product names. A

manufacturer shall not use a trade or

brand name of a nontobacco product as

the trade or brand name for a cigarette

or smokeless tobacco product, except for

a tobacco product whose trade or brand

name was on both a tobacco product

and a nontobacco product that were

sold in the United States on January 1,

1995.

(b) Minimum cigarette package size.

Except as otherwise provided under this

section, no manufacturer, distributor, or

retailer may sell or cause to be sold, or

distribute or cause to be distributed, any

cigarette package that contains fewer

than 20 cigarettes.
Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations 44617

(c) Vending machines, self-service

displays, mail-order sales, and other

‘‘impersonal’’ modes of sale. (1) Except

as otherwise provided under this

section, a retailer may sell cigarettes and

smokeless tobacco only in a direct, faceto-face exchange between the retailer

and the consumer. Examples of methods

of sale that are not permitted include

vending machines and self-service

displays.

(2) Exceptions. The following

methods of sale are permitted:

(i) Mail-order sales, excluding mailorder redemption of coupons and

distribution of free samples through the

mail; and

(ii) Vending machines (including

vending machines that sell packaged,

single cigarettes) and self-service

displays that are located in facilities

where the retailer ensures that no

person younger than 18 years of age is

present, or permitted to enter, at any

time.

(d) Free samples. No manufacturer,

distributor, or retailer may distribute or

cause to be distributed any free samples

of cigarettes or smokeless tobacco.

(e) Restrictions on labels, labeling,

and advertising. No manufacturer,

distributor, or retailer may sell or

distribute, or cause to be sold or

distributed, cigarettes or smokeless

tobacco with labels, labeling, or

advertising not in compliance with

subparts C and D of this part, and other

applicable requirements.

Subpart C—Labels

§ 897.24 Established names for cigarettes

and smokeless tobacco.

Each cigarette or smokeless tobacco

package shall bear, as provided in

section 502 of the act, the following

established name: ‘‘Cigarettes’’,

‘‘Cigarette Tobacco’’, ‘‘Loose Leaf

Chewing Tobacco’’, ‘‘Plug Chewing

Tobacco’’, ‘‘Twist Chewing Tobacco’’,

‘‘Moist Snuff’’, or ‘‘Dry Snuff’’,

whichever name is appropriate.

§ 897.25 Statement of intended use and

age restriction.

Each cigarette or smokeless tobacco

package, that is offered for sale, sold, or

otherwise distributed shall bear the

following statement: ‘‘Nicotine-Delivery

Device for Persons 18 or Older’’.

Subpart D—Labeling and Advertising

§ 897.30 Scope of permissible forms of

labeling and advertising.

(a)(1) A manufacturer, distributor, or

retailer may, in accordance with this

subpart D, disseminate or cause to be

disseminated advertising or labeling

which bears a cigarette or smokeless

tobacco brand name (alone or in

conjunction with any other word) or any

other indicia of tobacco product

identification, in newspapers; in

magazines; in periodicals or other

publications (whether periodic or

limited distribution); on billboards,

posters, and placards; in nonpoint-ofsale promotional material (including

direct mail); in point-of-sale

promotional material; and in audio or

video formats delivered at a point-ofsale.

(2) A manufacturer, distributor, or

retailer intending to disseminate, or to

cause to be disseminated, advertising or

labeling for cigarettes or smokeless

tobacco in a medium that is not listed

in paragraph (a)(1) of this section, shall

notify the agency 30 days prior to the

use of such medium. The notice shall

describe the medium and discuss the

extent to which the advertising or

labeling may be seen by persons

younger than 18 years of age. The

manufacturer, distributor, or retailer

shall send this notice to the Division of

Drug Marketing, Advertising, and

Communications, 5600 Fishers Lane

(HFD–40), rm. 17B–20, Rockville, MD

20857.

(b) No outdoor advertising for

cigarettes or smokeless tobacco,

including billboards, posters, or

placards, may be placed within 1,000

feet of the perimeter of any public

playground or playground area in a

public park (e.g., a public park with

equipment such as swings and seesaws,

baseball diamonds, or basketball courts),

elementary school, or secondary school.

(c) This subpart D does not apply to

cigarette or smokeless tobacco package

labels.

§ 897.32 Format and content requirements

for labeling and advertising.

(a) Except as provided in paragraph

(b) of this section, each manufacturer,

distributor, and retailer advertising or

causing to be advertised, disseminating

or causing to be disseminated, any

labeling or advertising for cigarettes or

smokeless tobacco shall use only black

text on a white background. This section

does not apply to advertising:

(1) In any facility where vending

machines and self- service displays are

permitted under this part, provided that

the advertising is not visible from

outside the facility and that it is affixed

to a wall or fixture in the facility; or

(2) Appearing in any publication

(whether periodic or limited

distribution) that the manufacturer,

distributor, or retailer demonstrates is

an adult publication. For the purposes

of this section, an adult publication is

a newspaper, magazine, periodical, or

other publication:

(i) Whose readers younger than 18

years of age constitute 15 percent or less

of the total readership as measured by

competent and reliable survey evidence;

and

(ii) That is read by fewer than 2

million persons younger than 18 years

of age as measured by competent and

reliable survey evidence.

(b) Labeling and advertising in an

audio or video format shall be limited

as follows:

(1) Audio format shall be limited to

words only with no music or sound

effects.

(2) Video formats shall be limited to

static black text only on a white

background. Any audio with the video

shall be limited to words only with no

music or sound effects.

(c) Each manufacturer, distributor,

and retailer advertising or causing to be

advertised, disseminating or causing to

be disseminated, advertising permitted

under this subpart D, shall include, as

provided in section 502 of the act, the

product’s established name and a

statement of its intended use as follows:

‘‘Cigarettes—A Nicotine-Delivery Device

for Persons 18 or Older’’, ‘‘Cigarette

Tobacco—A Nicotine-Delivery Device

for Persons 18 or Older’’, or ‘‘Loose Leaf

Chewing Tobacco’’, ‘‘Plug Chewing

Tobacco’’, ‘‘Twist Chewing Tobacco’’,

‘‘Moist Snuff’’ or ‘‘Dry Snuff’’,

whichever is appropriate for the

product, followed by the words ‘‘A

Nicotine-Delivery Device for Persons 18

or Older’’.

§ 897.34 Sale and distribution of

nontobacco items and services, gifts, and

sponsorship of events.

(a) No manufacturer and no

distributor of imported cigarettes or

smokeless tobacco may market, license,

distribute, sell, or cause to be marketed,

licensed, distributed, or sold any item

(other than cigarettes or smokeless

tobacco) or service, which bears the

brand name (alone or in conjunction

with any other word), logo, symbol,

motto, selling message, recognizable

color or pattern of colors, or any other

indicia of product identification

identical or similar to, or identifiable

with, those used for any brand of

cigarettes or smokeless tobacco.

(b) No manufacturer, distributor, or

retailer may offer or cause to be offered

any gift or item (other then cigarettes or

smokeless tobacco) to any person
44618 Federal Register / Vol. 61, No. 168 / Wednesday, August 28, 1996 / Rules and Regulations

purchasing cigarettes or smokeless

tobacco in consideration of the purchase

thereof, or to any person in

consideration of furnishing evidence,

such as credits, proofs-of-purchase, or

coupons, of such a purchase.

(c) No manufacturer, distributor, or

retailer may sponsor or cause to be

sponsored any athletic, musical, artistic,

or other social or cultural event, or any

entry or team in any event, in the brand

name (alone or in conjunction with any

other word), logo, symbol, motto, selling

message, recognizable color or pattern of

colors, or any other indicia of product

identification identical or similar to, or

identifiable with, those used for any

brand of cigarettes or smokeless tobacco.

Nothing in this paragraph prevents a

manufacturer, distributor, or retailer

from sponsoring or causing to be

sponsored any athletic, musical, artistic,

or other social or cultural event, or team

or entry, in the name of the corporation

which manufactures the tobacco

product, provided that both the

corporate name and the corporation

were registered and in use in the United

States prior to January 1, 1995, and that

the corporate name does not include

any brand name (alone or in

conjunction with any other word), logo,

symbol, motto, selling message,

recognizable color or pattern of colors,

or any other indicia of product

identification identical or similar to, or

identifiable with, those used for any

brand of cigarettes or smokeless tobacco.

Dated: August 22, 1996.

William B. Schultz,

Deputy Commissioner for Policy.

David A. Kessler,

Commissioner of Food and Drugs.

Donna E. Shalala,

Secretary of Health and Human Services.

NOTE: The following Annex will not

appear in the Code of Federal Regulations.

BILLING CODE 4160–01–F