Summary of Corrective Statements Point-of-Sale Settlement Agreement

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    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, R.J. Reynolds Tobacco Company (RJR) and Philip Morris USA (PM USA) to make “corrective statements” on certain 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.

    PM USA, RJR and ITG (the “manufacturers”) have now reached a settlement agreement with the government and several public health organizations that intervened in the case regarding how these court-ordered “corrective statements” will be displayed in retail stores. As part of the settlement agreement, the manufacturers will be required to amend their cigarette retail 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 corrective statement sign, two corrective statement signs or three corrective statement signs for a 21-month period.

    However, it is important to note that the government had previously proposed that 25 percent of the cigarette display space and 25 percent of all offset advertisements devoted to the manufacturers’ cigarette brands in each retail store 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 that have contracts with the manufacturers:

    • For 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”).
    • For retail stores that are not a kiosk-style store and have more than 9 feet of horizontal linear display space devoted to the manufacturers’ cigarette brands, a second 348-square-inch corrective statement sign will be displayed.
    • 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. 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) are no more than 325 square feet in area, not including restrooms, regardless of whether customers are allowed to enter the store, then one 144-square-inch sign will be displayed. The sign can be either square (12” x 12”) or rectangular (20” x 7.2”).

    The manufacturers will print 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.

    Display Period for Corrective Statement Signs: Under the settlement agreement, there is a three-month “posting period” for the manufacturers to actually place the corrective statement signs in stores. Then, after this “posting period,” the corrective statement signs will be displayed in stores for 21 consecutive months. During the 10th, 11th and 12th months of the 21-month period, the manufacturers will rotate the signs in stores by replacing existing signs with signs that have a different court-ordered message. Photos of the signs placed in all stores will be uploaded to a database to confirm compliance with the settlement agreement.

    Retail Compliance and Noncompliance: If a retailer complies with the terms of the settlement agreement by displaying the required sign or signs, the retailer will not incur any noncompliance penalties. If a retailer does not fully comply with the sign display requirements, then a retailer may incur various consequences depending on the kind of noncompliance.