Federal Judges Approve Corrective Statement Settlement Agreement

Cigarette Smoking

The following article was contributed by the National Association of Tobacco Outlets (NATO)

On Dec. 6, 2022, Federal Judge Paul Friedman signed an order approving a settlement agreement entered into by the U.S. Department of Justice, Altria Group Inc., Philip Morris USA Inc., R.J. Reynolds Tobacco Company, and ITG Brands LLC regarding certain corrective statement signage to be displayed in retail stores that have manufacturer cigarette programs in place. A copy of this signed Consent Order/Settlement Agreement accompanies this bulletin.

Background: In 1999, the United States Government sued the major cigarette companies asserting claims under various federal laws. In 2006, a federal judge entered judgment in favor of the Government on certain claims and, among other things, ordered Altria Group Inc., Philip Morris USA Inc., and R.J. Reynolds Tobacco Company to make “corrective statements” on certain cigarette health-related topics. ITG Brands LLC became a party to the litigation for purposes of the court-ordered remedies when it purchased four cigarette brands from R.J. Reynolds Tobacco Company in 2015.

Earlier this summer, these manufacturers reached a settlement agreement with the Federal Government, as represented by the U.S. Department of Justice, and several public health organizations that intervened in the lawsuit regarding how the court-ordered “corrective statement” signage will be displayed in retail stores. Both the National Association of Tobacco Outlets (NATO), and the National Association of Convenience Stores (NACS), participated in the settlement negotiations. As part of the settlement agreement, these manufacturers will be required to amend their cigarette program agreements with retailers to require the placement of a corrective-statement sign or signs in retail stores.

Amendments to Cigarette Retail Program Agreements: The settlement agreement states that the cigarette retail program agreements between retailers and the manufacturers will be amended to include the settlement agreement provisions. The settlement agreement provides that a retail store with a cigarette retail program agreement will need, depending on various circumstances, to display one, two or three corrective statement signs for a 21-month period. A store that does not have a retail promotional contract with any of these three manufacturers is not required to display corrective statement signage.

Importantly, the Government had previously proposed that 25 percent of the cigarette display space and 25 percent of the area of all advertisements displayed in a store devoted to the manufacturers’ cigarette brands (except those advertisements on the main cigarette display) be covered with corrective-statement signs for a 24-month period. The settlement agreement replaced the Government’s 25 percent proposal with the one, two, or three corrective-statement signs alternative, and ensures that no signs will cover any portion of the main cigarette display.

Corrective-Statement Signs: The following corrective-statement sign requirements are a part of the settlement agreement and apply to all retail stores which have cigarette retail program agreements with any of the three manufacturers:

  • For regular stores that are not a kiosk-style store, one 348 square inch corrective statement sign will be displayed. The sign will be either square (18.655” x 18.655”) or rectangular (32” x 10.875”). The sign will need to be displayed in one of four locations based on the following order: (1) above the main cigarette display, (2) adjacent to the main cigarette display, (3) within 48” of the main store entrance, or (4) within 48” of the cash register.
  • For retail stores that are not a kiosk-style store and have more than 9’ of horizontal linear visible display space devoted to the manufacturers’ cigarette brands, a second 348 square inch corrective-statement sign will be displayed and placed in one of the same four locations as the first sign.
  • For retail stores that are not a kiosk-style store and that have cigarette promotional signage displayed elsewhere in the store other than on the main cigarette display (and excluding signage that only identifies the brand, price, or has a picture of a pack of cigarettes), an additional 144 square inch corrective statement sign will be displayed within 48” of the main store entrance. The sign will be either square (12” x 12”) or rectangular (20” x 7.2”).
  • For kiosk-style stores, which are those stores that either (1) do not allow customers to enter and that have a selling window between the customer and store personnel, or (2) that are no more than 325 square feet in area, not including restrooms, regardless of whether customers are allowed to enter the store, one 144 square inch sign will need to be displayed near the transaction window or near the cash register. The sign can be either square (12” x 12”) or rectangular (20” x 7.2”).

The manufacturers will print the corrective-statement signs with 17 different court-ordered messages, with one message to be printed on each sign. The signs will be randomly distributed by the manufacturers to stores across the country.

Time Periods to Implement Settlement Agreement: With the signing of the order approving the settlement agreement, there are three different time periods under the settlement agreement. Those time periods are as follows:

  • Implementation Period: This period begins on Jan. 1, 2023 and runs through June 30, 2023 and allows the cigarette manufacturers six months to print and develop a plan to distribute the corrective statement signage to retailers nationwide.
  • Ramp Up Period: This period will begin on July 1, 2023 and run through September 30, 2023 and provides three months for the cigarette manufacturers to physically hang the corrective statement signage in stores.
  • Display Period: This period will begin on Oct. 1, 2023 and run through June 30, 2025 and requires that the corrective statement signs be continuously displayed in stores during this 21-month period.

During the 10th, 11th and 12th months of the 21-month Display Period, the manufacturers will rotate the signs in stores by replacing existing signs with signs that have a different court-ordered corrective statement message. Photos of the signs placed in all stores will be uploaded to a database to confirm a store’s compliance with the settlement agreement. Once the three time periods are complied with, the terms of the settlement agreement will have been fulfilled and the corrective statement signage will be removed from retail stores.