Society

U.S. Appeals Court Says Cigarette Makers are 'Racketeers'

| by Reason Foundation

Today the U.S. Court of Appeals for the D.C. Circuit upheld the main thrust of a 2006 ruling in which U.S. District Judge Gladys Kessler found the leading American tobacco companies guilty of a conspiracy to mislead the public about the hazards of cigarettes. The case, brought by the Justice Department during the Clinton administration, accuses the cigarette manufacturers of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act through a pattern of mail and wire fraud, consisting of public statements aimed at minimizing the risks involved in smoking.

A three-judge panel of the D.C. Circuit upheld most of the remedies ordered by Kessler, including a prohibition on future false statements, a ban on descriptors (such as "low-tar" and "light") that imply reduced health risk, and "corrective statements" on cigarette labels and in TV and print ads regarding the health hazards of smoking, the failure of "low-yield" cigarettes to substantaily reduce those hazards, the addictiveness of nicotine, and the dangers of secondhand smoke.

Although there is strong evidence that the tobacco companies lied, or at least omitted material facts, on those first three topics, Kessler erred in portraying the debate about secondhand smoke as a fake controversy invented by cigarette manufacturers. Because nonsmoking bystanders are exposed to much lower doses of toxins and carcinogens than smokers are, measuring the hazards of secondhand smoke pushes the limits of epidemiology.

There is a substantial, irreducible amount of uncertainty about the meaning of studies that find an association between secondhand smoke and lung cancer or heart disease. Many people (including me) have expressed honest doubts about whether these associations, which are weak and usually not statistically significant, signify causal relationships. Tobacco company officials say they too have criticized the case against secondhand smoke in good faith, and the evidence to the contrary cited by the appeals court is pretty weak:

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This judge looked an inmate square in the eyes and did something that left the entire courtroom in tears:

In 1980 a Philip Morris scientist reviewed a paper concluding that secondhand smoke caused "significant damage to airway function" in exposed nonsmokers, and found "little to criticize," deeming the paper "an excellent piece of work which could be very damaging" to the industry....In 1982, a Philip Morris-sponsored research facility concluded that the "side stream" smoke composing the bulk of secondhand smoke is "more irritating and/or toxic" than the "main stream" smoke inhaled by smokers....And several TI [Tobacco Institute] advertisements and press releases claimed that an independent 1981 study showing "a significant correlation between lung cancer and secondhand smoke" suffered from a statistical flaw, yet the district court found that industry consultants told TI, Reynolds, and Brown & Williamson that TI knew at the time not only that the statistical error did not exist, but also that the study was in fact correct.

None of this shows that tobacco company executives privately conceded secondhand smoke causes lung cancer or heart disease. Forcing people to remedy an unproven fraud by saying something they do not believe raises clear First Amendment problems, no matter how many times the D.C. Circuit inserts the word commercial before speech.

A mandatory "corrective statement" regarding secondhand smoke is akin to forcing an oil or car company that raises questions about the impact of global warming to announce that Al Gore is right, or telling a chemical company that suggests you shouldn't worry too much about pesticide residues in fruits and vegetables that it has to start running ads promoting organic produce. If advertising and public relations become racketeering once a judge declares that a scientific controversy has ended, any company that comments on alleged risks associated with its product could be violating RICO without realizing it.

Despite the compelled speech provisions, Kessler's injunctions fall far short of the $289 billion in disgorged profits the DOJ originally sought (nixed by a D.C. Circuit ruling that said civil RICO remedies have to be forward-looking and corrective, not backward-looking and punitive) or even the scaled-back demand for $14 billion toward a "counter-marketing campaign, national smoking cessation program, youth smoking reduction plan, and monitoring scheme." It's also significant that none of Kessler's racketeering findings required a showing that anyone actually was injured by relying on false or misleading statements by tobacco companies—something that is tough to prove, given all the countervailing information about the hazards of smoking and the difficulty of quitting that was available to consumers from the government, the media, private health organizations, and medical professionals.

As I've said before, it is impossible to conceal matters of common knowledge, which is why smokers and their relatives historically had a hard time recovering damages from tobacco companies. Lately they've had more success, but it's not because they've been able to demonstrate that Big Tobacco fooled them into believing smoking was safe. I think it's mainly because the industry has acquired such a reputation for bald-faced dishonesty (precisely because of its long history of contradicting common knowledge) that jurors have started to overlook the fact that smokers voluntarily assume the risks associated with their habit.

The entire D.C. Circuit ruling is here (PDF). Previous coverage of the DOJ case here, here, and here.