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Price v. Philip Morris12/15/2005
the rules nor the staff interpretation of the Federal Reserve Board expressly stated that lenders need not disclose the effect of the Rule of 78s; rather, the regulatory body dictated the content of the required disclosure, implying that no additional disclosure was necessary and, thus, specifically authorizing lenders not to disclose the information.
Although there is extensive Illinois case law dealing with applicability of section 10b(1) in the context of financial transactions where the alleged fraud is related to the issue of disclosure, this case involves alleged fraud in the advertising and promotion of a consumer product. It also requires us to delve deeply into the functions and actions of a federal agency. For these purposes, we turn to other authorities.
4. Other Authorities
We look to the FTC's own published materials and cases from the United States Supreme Court and the federal courts for additional authority in our effort to determine what constitutes "specific authorization" and whether PMUSA used the terms "lights" and "lowered tar and nicotine" under such authority.
PMUSA argues that, over the years, the FTC used a number of mechanisms to regulate and to authorize the making of claims regarding the tar and nicotine content of cigarettes. These include formal agency rulemaking, the issuance of advisory opinions, the use of voluntary agreements with cigarette manufacturers to obviate the need for rulemaking, and the initiation of enforcement proceedings against an individual manufacturer. Such enforcement proceedings might result in a judgment against the particular manufacturer or in the entry of a consent order. Although the consent order may be enforced only against the party who agreed to the terms of the order, PMUSA asserts that an enforcement action against one industry actor is an "especially effective method of regulation" that the FTC employs "to announce to an entire industry what behavior is and is not authorized."
Thus, PMUSA argues, American Brands was specifically authorized by the 1971 consent order to use the terms "low," "lower," "reduced," or "like qualifying terms" in its advertising and packaging to describe the level of tar and nicotine in its cigarettes, so long as it also provided the actual measurement of the level in milligrams. American Brands, 79 F.T.C. 255. Similarly, the 1995 consent order prohibited American Tobacco Company from representing the tar and nicotine levels of Carlton cigarettes by using "a numerical multiple, fraction or ratio" of the tar or nicotine levels of other brands or by depicting more than one pack of Carltons versus one pack of any other brand. The agreed order provided, further, that "presentation of the tar and/or nicotine ratings of any of respondent's brands of cigarettes and the tar and/or nicotine ratings of any other brand (with or without an express or implied representation that respondent's brand is `low,' `lower,' or `lowest' in tar and/or nicotine) shall not be deemed" to violate the ban on numerical comparisons. American Tobacco, 119 F.T.C. at 11. Both consent orders, PMUSA argues, specifically authorized other members of the tobacco industry to act in accordance with their terms.
This assertion is supported by the FTC's own statements and actions. In 1964, the FTC announced the promulgation of a trade regulation rule requiring the disclosure on all cigarette packaging of the fact that "cigarette smoking is dangerous to health and may cause death from cancer and other diseases." Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. at 8325. This rule was rendered unnecessary the following year wit
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