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Price v. Philip Morris12/15/2005
ation of cigarette advertising, the district court noted that Philip Morris was not required to advertise its cigarettes as "light" or "low tar." Nevertheless, the court acknowledged:
"[Philip Morris] is permitted by the FTC to so advertise its cigarettes if they meet the FTC's standard. Philip Morris is required to adhere to the FTC's regulation of `lights' advertising. The FTC requires disclosure of Cambridge Filter Method tar and nicotine ratings in cigarette advertisements, and has stated that a cigarette may be advertised as light if its rating using the FTC Method is less than 15mg using the FTC Method. Therefore, any contention that Philip Morris' advertising of these two cigarette brands as `Lights' is misleading squarely confronts the FTC's mandate that cigarette companies disclose FTC Method results in their advertising and use the Method to determine whether a particular cigarette may be classified as `Light.' " Watson, No. 4:03-CV-519 GTE.
The district court also observed that a "formal rule is not required in order for a federal agency to direct the actions of a private company." The FTC "often regulates the industries it governs by compelling voluntary agreements and consent orders rather than promulgating formal rules." In reaching this conclusion, the district court relied upon a documentary record similar to the record in the present case. In addition, the district court cited the 1987 testimony before Congress of then-chairman of the FTC Daniel Oliver, in which he described the FTC's preference for informal regulation via the use of enforcement actions and consent orders rather than formal rulemaking. Oliver stated that it is "more efficient" to bring a single case against one industry actor than to use scarce resources to engage in rulemaking and that in "the case of the cigarette industry," it was "entirely reasonable to suppose that one action against cigarette company would have an effect on all of them, and that you would not have to make a rule." Quoting Statement of Daniel Oliver, Chairman of the Federal Trade Commission, Hearing before the Subcommittee on Transportation, Tourism, and Hazardous Materials of the House Comm. on Energy and Commerce, 100th Cong. 17-19 (1987).
The Watson court noted that the FTC coerced Philip Morris and other cigarette manufacturers into "voluntary" cooperation with its cigarette labeling and advertising policies "in such a way that a formal rule" was not required to create federal jurisdiction. Finally, although formal rulemaking "may be one of the principal ways federal agencies regulate," "it is clearly not the only way. In the FTC's case, it is not even the preferred way to regulate the cigarette industry."
The issue addressed by the Watson court-whether removal to federal court was proper-has no bearing on the present case. However, the federal district court's detailed analysis does support our conclusion that specific authorization for the use of the disputed descriptors may be found in consent orders rather than in formally promulgated trade regulation rules of the FTC.
5. Summary
Based on these other authorities, read in conjunction with Illinois law, we conclude that the FTC could, and did, specifically authorize all United States tobacco companies to utilize the words "low," "lower," "reduced" or like qualifying terms, such as "light," so long as the descriptive terms are accompanied by a clear and conspicuous disclosure of the "tar" and nicotine content in milligrams of the smoke produced by the advertised cigarette. See American Brands, 79 F.T.C. 255. Further, the FTC reiterated this authorization in the 1995 consent order, which forbade the representation of tar ratings as
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