Bootleggers & Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics (16 page)

The health interest groups were numerous and apparently effective at the state level, at least initially, but unable to mount a focused national movement when smoking first became a federal issue. The tobacco interests, in contrast, were consolidated early on by James Duke, who in 1890 formed and led a tobacco trust that accounted for 90 percent of the industry output. Keep in mind, however, that the principal product was plug tobacco meant for chewing.

Cigarettes rose in popularity during World War I. By 1927, all state bans on sales to minors had been repealed, with an important quid pro quo. As bans declined, state tobacco taxes were imposed, beginning in 1921 in Iowa and spreading to “nearly all” states by 1960 (Chaloupka, Wakefield, and Czart 2001, 42; Robert 1967, 256, 276). After an antitrust breakup of the tobacco trust in 1911, six firms dominated the U.S. market. By 2004, there were seven tobacco firms, but just two, Philip Morris and R.J. Reynolds, had a combined market share of over 80 percent. With just two to tango, tobacco industry political action was not very hard to coordinate.

In this early period of tobacco dominance, state legislatures joined hands with the tobacco producers and overwhelmed the fractured anti-smoking leagues. The anti-smoking groups relied primarily on impassioned moral appeals. Scientific discoveries linking smoking to a variety of health problems, which would later galvanize public interest in tobacco regulation, had yet to arrive. This early history shows how tobacco’s fortunes have long been intertwined with government, with the state acting as a sort of cartel manager for the industry.

In the struggles that ensued, both tobacco interests and their opponents engaged in a continuing political battle over market practices and the appropriateness of individual tobacco use. The government-protected tobacco cartel won repeatedly. Winning, after all, meant higher profits for the industry, larger campaign contributions to accommodating politicians, and a reliable source of tax revenues to state governments.

Eventually, health interest groups grew more influential as they became national in scope, smaller in number, and ultimately armed with scientific evidence that linked smoking to adverse health effects. Still, direct regulation of tobacco did not immediately follow. Consider the FDA, which would seem to be the most logical place to find federal regulation of tobacco. Until 2009, Congress consistently denied the FDA explicit authority over tobacco. The statute creating the FDA, the Pure Food and Drug Act of 1906, granted the agency jurisdiction over drugs but defined them as only: “(1) medicines and preparations recognized in the United States Pharmacopoeia or National Formulary . . . and (2) any substance or mixture of substances intended to be used for the cure, mitigation, or prevention of disease.”
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Although tobacco had been listed in the 1890
United States Pharmacopoeia
, the substance was conveniently removed from the
Pharmacopoeia
just before the passage of the 1906 statute. Some suggest removal was a price paid by pro-FDA forces to gain support for the FDA statute from tobacco states, but others disagree (Fritschler 1969, 32; Pringle 1998, 102). Later, the tobacco companies’ avoidance of substantive health claims in their marketing enabled the industry to escape FDA’s authority by way of the statute’s second condition. Until the 1990s, the FDA did not play an active role in tobacco regulation, although industry fear of FDA oversight lurked in the background and perhaps raised the price industry was willing to pay for political protection.

The Industry and the First Wave of Regulation

Tobacco’s success was at least partly due to the power of seniority in the Senate, where long-serving senators from tobacco-producing states were able to block efforts by health interest groups to extend FDA jurisdiction to tobacco. Also, prior to the 1950s anti-tobacco groups were not politically savvy, consisting largely of “moralizing tub-thumpers who repeated, to no enduring effect, that tobacco was inherently dirty and ungodly and encouraged crime” (Pringle 1998, 122). For a time, cigarette manufacturers even advertised the purported weight control benefits of their brands with such catchphrases as “Reach for a Lucky instead of a sweet” (Parker-Pope 2001, 82–86).

In the 1950s, emerging scientific information on the health effects of smoking transformed the debate. The
New York Times
ran a lengthy series of articles on smoking and health during 1953–54 (Pringle 1998, 125). This inspired the FTC to target tobacco advertising claims, particularly those concerning tar (Kozlowski and O’Connor 2004, 39–41). But instead of seeking the moral high ground as a promoter of health, the FTC focused on another moral dimension: truth—and its enemy, deceptive advertising. Whether working to improve human health or truth in advertising, the FTC apparently served the interests of citizen Baptist groups.

Tobacco’s political power remained a force to be reckoned with, however. The first serious proposal in Congress to regulate tobacco was a 1957 attempt to give the FTC powerful injunctive powers for deceptive tobacco advertising, including tar and nicotine content claims. The effort failed miserably. The House member who sponsored the legislation lost his subcommittee chair, and his subcommittee was abolished by the House leadership (Kluger 1996, 189).

But the failed attempt to regulate the industry brought out more Bootleggers and health care Baptists. With growing medical evidence on the Baptist side of the issue, and with the industry happy to cooperate, the FTC negotiated a ban on tar and nicotine advertising in 1960. The agency effort to eliminate low-tar and nicotine claims was based on the position that they lacked a scientific basis. Indeed, when the advertising was banned, the FTC chair called the ban “a landmark example of industry-government cooperation in solving a pressing problem” (Kluger 1996, 190). But what looked like industry-government cooperation to placate Baptist interests was really a Bootlegger success. The elimination of competitive health-related claims limited market entry, slowed the costly search for lower-tar cigarettes, and led to a market-share increase for unfiltered products. Polluters’ profits soon followed. The briar patch beckoned one more time.

The ban also made it illegal to advertise which substances filters removed, though an advertisement could extol the virtues of the filter itself. In an effort to maintain taste while promoting filters, some of the brands introduced stronger tobacco, which in effect nullified the filter’s original purpose (Kluger 1996, 188). When all was said and done, the tobacco cartel appeared to have won again, with the FTC now in control. Meanwhile, however, the Baptists were becoming better organized.

The Surgeon General’s Report: The FTC Swings Again

In June 1961, several national organizations concerned with the health effects of smoking—the American Cancer Society, the American Heart Association, and the National Tuberculosis and Respiratory Disease Association—requested the appointment of a commission to examine tobacco’s health hazards and propose solutions. Shortly afterward, Surgeon General Dr. Luther Terry announced that he was establishing an “expert committee to undertake a comprehensive review of all data on smoking and health” (Fritschler 1969, 37–38).

The resulting Surgeon General’s report dramatically changed the political debate over tobacco. The 1964 report, which concluded that “cigarette smoking contributes substantially to mortality” from a wide range of diseases, including lung cancer, chronic bronchitis, and coronary disease, called for prompt regulatory action on smoking (U.S. Department of Health, Education, and Welfare 1964, 8–9, 31–32).

The report was just what the FTC needed. Four days after the report was published, the agency announced it would issue rules requiring health warnings on all cigarette packages and in all cigarette advertisements. The agency asserted that failure to warn consumers that smoking was dangerous was an unfair and deceptive trade practice and thus a violation of the FTC statute (Fritschler 1969, 83–84).

On July 2, 1964, the FTC issued the final version of its Trade Regulation Rule on Cigarette Labeling and Advertising, requiring all cigarette ads as of January 1, 1965, and all cigarette packages as of July 1, 1965, to carry a stern warning: “Cigarette Smoking Is Dangerous to Health and May Cause Death from Cancer and Other Diseases” (FTC 1964, 8324). Note that subsequently it took 46 years for death to reenter the picture with the FDA’s 2011 abortive advertising rule.

The cigarette industry immediately mobilized, created a voluntary advertising code, and lobbied Congress for protection (Kluger 1996, 280). Following a pattern that would regularly characterize tobacco regulatory activities, Congress assessed the politics and intervened. On August 19, 1965, at the request of then chair of the House Committee on Interstate and Foreign Commerce Rep. Oren Harris (D-AR), the FTC delayed the effective dates of the Trade Regulation Rule to allow Congress to develop a regulatory package acceptable to the industry (Kluger 1996, 272, 286–87). The Senate acceded, and Congress passed the Federal Cigarette Labeling and Advertising Act.
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The statute gave the FTC specific authority to regulate cigarette advertising related to health claims and nicotine content, but it provided the tobacco industry much more and was called “a victory for cigarettes” (Fritschler 1969, 112–16). The “death” warning the FTC had proposed was watered down to read “Caution: Cigarette Smoking May Be Hazardous to Your Health” (FTC 1964). Even more important, the statute prohibited any further mandated warnings by the FTC or state or local governments on cigarette packages and prohibited any warning requirement in cigarette advertising until 1969.

The Fairness Doctrine: Enter the Federal Communications Commission

In June 1967, another agency joined the FTC in its lonely battle over cigarette advertising. The Federal Communications Commission (FCC), a second regulator working on behalf of the Baptists, ruled that the “fairness doctrine” applied to cigarette commercials. Under this regulatory doctrine, the FCC required broadcasters to provide airtime for opposing viewpoints whenever they broadcast controversial opinions. As a result, health groups and the government Public Health Service were able to air announcements on the dangers of tobacco use on television and radio. In 1968 alone, the three major networks aired 1,300 anti-smoking messages (Kluger 1996, 309). The ads appear to have been effective: per capita cigarette sales dropped 5.7 percent between 1967 and 1970 (R. Jones 1997, 13).

When courts upheld the fairness doctrine’s application to cigarettes, both the FCC and the FTC put forward additional proposals designed to restrict cigarette advertising and consumption. In February 1969, the FCC issued a notice of proposed rulemaking to completely prohibit cigarette advertising on television and radio. In May 1969, the FTC issued a proposal to require all cigarette advertising (both broadcast and print) to contain a more direct warning: “Cigarette Smoking Is Dangerous to Health and May Cause Death from Cancer, Coronary Heart Disease, Chronic Bronchitis, Pulmonary Emphysema, and Other Diseases.” (FTC 1969, 7917). Once again, death was in the message. And once again, the industry mobilized.

Hearing the call of their Bootlegger buddies, Congress again intervened. In April 1969, representatives of tobacco-producing states introduced a series of bills in the House to prevent the stronger warning label and make permanent the temporary ban on state and federal regulation of cigarette advertising. But the political climate had changed, and some members now saw “that legislation backing consumer interests was becoming good politics,” as Ralph Nader’s consumer movement demonstrated (Kluger 1996, 331).

Following extensive negotiations, a compromise bill emerged that banned all cigarette advertising on electronic media beginning January 1, 1971, and mildly strengthened the package warning, requiring that all cigarette packages include the statement “Warning: The Surgeon General Has Determined That Cigarette Smoking Is Dangerous to Your Health.”
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Once again, “death” was deleted from the message.

Some may have seen this as a slam-dunk victory for anti-smoking groups, but the tobacco industry had even more to celebrate. First, banning TV ads eliminated the fairness doctrine–mandated public service announcements. Second, eliminating television ads saved the companies the more than $200 million they were spending annually on television in 1969—a necessary expenditure for each company as long as their competitors were buying TV ads, but not if all could be barred from the airwaves at once (R. Jones 1997, 13). Third, the TV ad ban enabled producers of existing brands to maintain market share and created substantial barriers to the entry of new firms by denying them an effective means of establishing a brand.

Sales figures support the interpretation that the bill helped tobacco: cigarette sales
increased
following the legislation. Total U.S. cigarette consumption rose steadily from 536.4 billion units in 1970 to 621.5 billion in 1979 (USDA 2005, table 1). Consumption per capita for the above-18 population rose from 3,985 in 1970 to 4,122 in 1975 and then began to decline somewhat (J. Nelson 2004, table 2). To put it mildly, the major tobacco firms, now ensconced in a cozy regulatory cartel, benefited from this lively Bootlegger/Baptist interaction.

The 1998 Master Settlement Agreement: The Ultimate
and Final Cartel

With passage of legislation specifying marketing practices and the end of the FCC’s oversight, the tobacco industry entered a somewhat stable relationship with Congress and regulators. What the cigarette companies could not avoid was a renewed assault by private lawyers. A wave of tobacco litigation began in 1983. Armed with new evidence on smoking’s health effects, entrepreneurial plaintiffs’ attorneys pooled their resources in an effort to win their suits. Tobacco companies continued their all-out defense and won every case. The labeling regulation had bolstered their “assumption of risk” defense: not only were the dangerous health effects of smoking well established and publicly known, tobacco lawyers argued, but the tobacco companies even placed a warning label on their product to that effect.