Of Tobacco and Mushrooms

The U.S. Supreme Court handed down two marketing-related rulings in June, one in favor of tobacco companies, the other on behalf of mushroom farmers.

In the tobacco case, the court ruled that states cannot impose ad restrictions harsher than the federal laws set in 1998 as part of the Master Settlement Agreement. Four cigarette companies had appealed to the high court after Massachusetts last year banned billboards within 1,000 feet of schools or playgrounds and restricted merchandising and in-store signage (so as not to be visible to children in or outside stores).

The court ruled that the 1969 Federal Cigarette Labeling and Advertising Act (FCLAA) pre-empts state restrictions on outdoor and point-of-sale advertising. It also said state restrictions would infringe on tobacco marketers’ free speech. The court did, however, allow Massachusetts to keep its ban on self-serve displays. (The June 28 decision reversed an earlier U.S. Appeals Court ruling.)

Massachusetts attorney general Thomas Reilly argued that FCLAA laws deal with content and leave room for the state to restrict the location (though not the message) of billboards. The court rejected that argument, and also struck down the state’s ban on in-store signage hung lower than five feet. “Not all children are less than five feet tall, and those who are certainly have the ability to look up and take in their surroundings,” the court wrote.

The appeal was filed by Lorillard Tobacco Co., Brown & Williamson Tobacco Corp., R.J. Reynolds Tobacco Co., Philip Morris, Inc., U.S. Smokeless Tobacco Co., and several cigar manufacturers and retailers. It’s no surprise that they were pleased with the ruling.

“Our opposition to [Massachusetts’] regulations had nothing to do with youth smoking prevention and everything to do with our ability to communicate truthful information to adult smokers at the location in which they choose to purchase cigarettes,” said Philip Morris vp-general counsel William Ohlemeyer in a statement.

In a separate case, a federal judge ruled that New York state’s ban on Internet, mail order, and phone sales of cigarettes was unconstitutional interference with interstate commerce. Passed in August 2000, the statute prohibited tobacco companies from shipping products to New York residents (March PROMO). The two main issues were age verification and lost tax revenue. Brown & Williamson subsidiary BWT Direct, Louisville, KY, challenged the law.

Mushroom Doom

On June 25, the Supreme Court ruled that mandatory assessments to fund a generic ad campaign for mushrooms violates the First Amendment rights of mushroom producer United Foods, Inc., Bells, TN. Since 1997, the privately held company has refused to pay a U.S. Department of Agriculture marketing fee, saying generic ads benefit smaller competitors. The Justice Department, speaking on behalf of the USDA, argued that generic ads benefit all producers.

The ruling could have implications for co-op marketing programs that assess a fee from growers or producers to fund general, non-branded ads and promotions for a product. High-profile campaigns include the California Milk Processors Board’s “Got Milk?” (which is licensed for national use by Dairy Management, Inc.) and the National Pork Producers Council’s “The Other White Meat.”

While the ruling seems to put such co-op marketing programs at risk, the Supreme Court makes a crucial distinction between the 11-year-old Mushroom Council and comprehensive joint programs that “restrict marketing autonomy” by binding competitors closely in a generic program. The mushroom program spends most of its money on generic advertising and has nothing to prevent growers from acting independently. “Mushroom growers are not forced to associate as a group that makes cooperative decisions,” the court wrote.

In February, the USDA agreed to restructure its $51.4 million Pork Checkoff Program as part of a settlement with the National Pork Producers Council and the Michigan Pork Producers Association (March PROMO). The reorganization separates the National Pork Board from the NPPC and gives the board two years to prove the value of its marketing programs before a June 2003 survey of producers on whether to continue assessing marketing fees.

DÉJÀ VU

Publishers Clearing House settled deceptive advertising claims with 26 states in June.

The direct marketer will pay $34 million and will stop omitting facts about a sweepstakes, implying individualized attention from company executives, using simulated checks, promising a visit from the Prize Patrol, implying that purchase improves odds of winning, or implying that employees have personal feelings for mail recipients.

PCH made a similar $18 million settlement with 23 other states and the District of Columbia last year (October 2000 PROMO).