Cigarette companies and federal government agree on warnings in retail stores

Retailers should note that Philip Morris USA Inc., Altria Group, Inc, RJ Reynolds Tobacco Company have entered into an agreement with the United States Department of Justice for health warnings to be posted in retail stores that stock manufacturers’ cigarettes to inform consumers to warn against the health effects of tobacco. These are called “Correction Notices” because they are meant to be “corrections” to manufacturers’ alleged intentional misleading of consumers about the dangers of smoking from the 1950s through the early 2000s. The manufacturers have denied these claims and the matter has been in litigation since September 1999. Although the exact wording and other details of the agreement have not yet been released, the parties filed a joint status conference motion in the United States District Court. The District of Columbia announces that the proposed settlement will have nine major components:

  1. the placement and number of corrective notice signs adjacent to the main display for cigarette sales at participating retail locations;
  2. the placement of signage near the main entrance of the Participating Retail Store;
  3. the design of the signs;
  4. the duration for which the signs must be up;
  5. rotation of signs within participating retail locations;
  6. the display of proofreading marks in Spanish in certain locations;
  7. third-party compliance testing;
  8. Consequences of not complying with the settlement; and
  9. the establishment of a working group to deal with implementation and compliance issues.

The genesis of these negotiations dates back to 2006, when in USA vs Philip Morris USA et. Al.the district court ordered that “corrective information” be placed by cigarette manufacturers on packaging, in print and television media, on their websites and in retail outlets as counter displays and head displays. On appeal, the district court vacated the appeal with respect to retail stores because the district court failed to adequately consider the impact of the appeal on retailers, particularly with regard to the requirement that retailers sacrifice countertop space for displays. The matter went back and forth between the Circuit and the lower court, which was briefed on the matter in 2014 and again in 2018, but no resolution on the statements had been reached as of this week. This development comes close to a scheduled hearing on the matter, which was due to take place in June this year.

The parties’ joint motion indicates that they will seek guidance from the district court as to whether affected retailers should be notified of the settlement and given an opportunity to be heard, and a plan of action if the settlement is not completed can. The National Association of Convenience Stores and the National Association of Tobacco Outlets participated in the negotiations between the manufacturers and the federal government and will attend the status conference, which the court is scheduled to call “as soon as possible”.

Tobacco retailers should closely monitor further developments and possible opportunities to participate in the settlement and/or guidance on the display of corrective information placards.

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