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Price v. Philip Morris12/15/2005
rnative, PMUSA argues that even if compliance with applicable law is not sufficient to bar Consumer Fraud Act liability (see Jackson, 197 Ill. 2d at 58-60 (Kilbride, J., specially concurring, joined by Harrison, C.J.) (rejecting view that mere compliance with the applicable regulatory scheme, by itself, is sufficient to trigger the operation of section 10b(1))), the FTC has specifically authorized the use of the disputed descriptors in cigarette labeling and advertising. PMUSA asserts that regulatory agencies, including the FTC, "use a wide array of tools other than formal regulations to control industry conduct."
Throughout the history of FTC regulation of cigarette marketing, PMUSA claims, the agency has used advisory opinions, voluntary cooperation obtained in response to threatened regulation, investigations of individual industry actors, reports to Congress, and other methods of influencing the behavior of industry actors. Specifically, PMUSA argues, the FTC "has found that one especially effective method of regulation is to bring an enforcement action against one company to announce to an entire industry what behavior is and is not authorized." By resolving such actions with a consent decree, as the FTC did in the 1971 and 1995 cases, the FTC communicated to all industry actors the circumstances under which they may use "low tar" descriptors. For this assertion, PMUSA relies, in part, upon National Labor Relations Board v. Bell Aerospace Co., 416 U.S. 267, 294, 40 L.Ed. 2d 134, 153- 54, 94 S.Ct. 1757, 1771, (1974) (" ` djudicated cases may and do ... serve as vehicles for the formulation of agency policies, which are applied and announced therein' "), quoting National Labor Relations Board v. Wyman-Gordon Co., 394 U.S. 759, 765, 22 L.Ed. 2d 709, 714-15, 89 S.Ct. 1426, 1429 (1969) . Further, PMUSA insists, the FTC itself considers such conduct to be regulatory activity, as evinced by the testimony of Dr. Peterman and the many FTC documents admitted into evidence at trial.
In addition, PMUSA notes that the circuit court found in paragraph 148 of its judgment order that its practices "offend public policy, are immoral, unethical, oppressive and unscrupulous and that this course of conduct caused a substantial injury to the Class members," in violation of both the Consumer Fraud Act and the Deceptive Practices Act. Because an action under the Deceptive Practices Act is barred if the defendant's conduct is "in compliance with" FTC rules, PMUSA argues that it cannot be held liable under the Deceptive Practices Act in the absence of proof a violation of a governing rule or statute.
C. Plaintiffs' Response
Plaintiffs argue that the FTC has never "specifically authorized the fraudulent use of any descriptor, and it would lack the legal authority to do so in any event." They further argue that, whatever is meant by the term "specifically authorized," it clearly requires something more than mere compliance with federal law.
Plaintiffs point to Dr. Peterman's testimony on cross-examination in which he acknowledged that the FTC generally does not adopt trade regulation rules that approve conduct that a regulated entity may or may not choose to engage in. Rather, the FTC adopts regulations that require certain conduct or forbid other conduct. They note that no FTC document or official statement has ever announced that a tobacco company has "substantiated" its use of such descriptors. Further, they point to the FTC's "disavowal" of any "official" definition of these terms. See Cigarette Testing, Request for Public Comment, 62 Fed. Reg. 48,158, 48,163 (September 12, 1997) (noting that the FTC itself does not define terms such as "low tar," "light," "medium," "extra l
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