STATEMENT OF HON. PAUL RAND DIXON, CHAIRMAN, FEDERAL TRADE COMMISSION; ACCOMPANIED BY J. V. BUFFINGTON, ADMINISTRATIVE ASSISTANT TO THE CHAIRMAN; JOHN WHEELOCK, EXECUTIVE DIRECTOR; CHARLES SWEENEY, CHIEF OF DIVISION OF FOOD AND DRUG ADVERTISING OF BUREAU OF DECEPTIVE PRACTICES; AND FRED DOWNS, ATTORNEY OF BUREAU OF DECEPTIVE PRACTICES

Mr. DIXON. I have with me members of the staff. To my right is my assistant Mr. J. V. Buffington and to his right is Mr. John N. Wheelock, the Executive Director of the Federal Trade Commission. To my left is Mr. Charles Sweeney the Chief of the Food and Drug Advertising Division, and to his left, a staff attorney, Mr. Fred Downs. Mr. Chairman, I appreciate the opportunity to appear before you on behalf of the Federal Trade Commission and to present the Commission's views on H.R. 4244 and H.R. 3014. My comments on H.R. 3014 will apply equally to H.R. 4007 since these two bills are identical. The Federal Trade Commission as this committee knows, has played a leading role in the initiation of remedial measures dealing with cigarette labeling and advertising in relation to the public health questions raised by cigarette smoking. On September 15, 1955, the Commission promulgated Cigarette Advertising Guides (FTC Ann. Rept. 1960, p. 82). Among other things, they prohibited representations in cigarette advertising or labeling which refer to either the presence or absence of any physical effects from cigarette smoking, or which make unsubstantiated claims respecting nicotine, tars, or other components of cigarette smoke, or which in any other respects contain implications concerning the health consequences of smoking cigarettes or any advertised brand. In 1960, the Commission obtained agreement from the leading cigarette manufacturers to discontinue the confusing and unsubstantiated representations of tar and nicotine content which had characterized the so-called tar derby. (FTC Ann. Rept., 1960, p. 82.) Since the promulgation of the Cigarette Advertising Guides, the Commission has maintained a close and continuous scrutiny of cigarette advertising practices, and has been very much interested in the progress of medical research delving into the health aspects of cigarette smoking. The Commission, through its staff members has monitored all cigarette advertising during this period and today is continuing such monitoring. We have maintained a close contact with officials of the cigarette industry, as well as with public and private bodies which have engaged in scientific research in this field.

With the mounting of emphasis, in recent years, on the grave hazards to life and health involved in cigarette smoking, the Commission's concern with fulfilling its statutory responsibilities in the area of the merchandising of cigarettes has increased. As a manifestation of this concern, the Commission requested technical guidance from the U.S. Public Health Service on the labeling and advertising of tobacco products. One of the reasons you will find in this report of this "blue ribbon scientific committee" for the establishment of such a committee was this request I have just referred to. I wrote the letters myself because we were getting, Mr. Chairman, questions from the Congress and from the public. What is your attitude on the bill? What are

you going to do about this representation? I turned to what I wouldconsider the best scientific source I could in America when I asked the Surgeon General to give us some guidance, and so he cited that as one of his several reasons for establishing this committee which he established.

In fact, the Associate Chief of the Division of Scientific Opinions of the Commission's Bureau of Deceptive Practices, a medical doctor, was one of the observers from interested Federal agencies who participated in the initial deliberations of the expert Advisory Committee established by the Surgeon General in 1962, to undertake a comprehensive review of available data on the relationship between smoking and health. Our doctor merely was in a liaison capacity. He was not a member of the committee that made a report or study, sir.

Thus, the Commission was prepared, when the Advisory Committee's report was released on January 11, 1964, to act upon the Surgeon General's statement-made in announcing the release of the report-that: Out of its long and exhaustive deliberations the Advisory Committee has reached the overall judgment that cigarette smoking is a health hazard of sufficient importance in the United States to warrant remedial action.

On January 18, 1964, the Commission, pursuant to the Federal Trade Commission Act and to procedures set forth in the Administrative Procedure Act and the Commission's procedures and rules of practice, initiated a proceeding for the promulgation of a trade regulation rule or rules for the prevention of unfair or deceptive acts or practices in the sale of cigarettes in relation to the health hazards of smoking, as found by the Advisory Committee to the Surgeon General. After receiving extensive written data, views and argument, and after holding public hearings, the Commission closed the record of the rulemaking proceeding on May 15, 1964. Thereafter, on June 22, 1964, the Commission, on the basis of findings made by it in the rulemaking proceeding and set forth in a comprehensive statement of basis and purpose of trade regulation rule, promulgated a trade regulation rule for the prevention of unfair or deceptive advertising and labeling of cigarettes in relation to the health hazards of smoking.

This rule expresses the Commission's determination, for the purpose of preventing future violations of law, of the requirements of the Federal Trade Commission Act as applied to the marketing of cigarettes in light of the health hazards of smoking. The rule provides that it is an unfair or deceptive act or practice within the meaning of section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to fail to disclose clearly and prominently in cigarette advertising and labeling that cigarette smoking is dangerous to health and may cause death from cancer and other diseases. Both the advertising and labeling requirements of the rule become effective on July 1, 1965. The reasons justifying such a rule, as more fully explained in the statement of basis and purpose, are basically twofold. First, there is consensus of medical and scientific opinion that cigarette smoking is a significant cause of certain grave diseases and contributes substantially to mortality from those diseases and to the overall death rate. These were the findings of the Surgeon General's blue-ribbon Advisory Committee on Smoking and Health. These findings are authoritative and reliable. Mr. Chairman, that group of scientists and doctors who cat on that blue-ribbon committee were picked from a group that were

nominated by the tobacco industry and all that were interested in this subject. The men that were allowed to sit on that committee, the 10 that sit there, sat there with the veto right of every member of the tobacco industry to strike them if they had any reason to strike them, and their report didn't quibble. It was unanimous, sir.

They provide a compelling basis for prompt and effective governmental remedial action. Second, the Commission found that the methods by which cigarettes have been and are being sold to the consuming public by means of labeling, and advertising, which fails to disclose the health hazards of cigarette smoking-are deceptive and unfair to consumers-especially children and teenagers, among whom cigarette smoking is very widespread-under settled legal principles governing truth and fairness in advertising.

The Commission, therefore, strongly believes that effective remedial measures with respect to current cigarette advertising and labeling are necessary in the public interest, and supports legislation consistent with the objectives of its rule.

Insofar as labeling is concerned, H.R. 4244 would require the statement "Warning-Contents May Be Dangerous to Health" on each package of cigarettes and H.R. 3014 would require the statement “Caution: Cigarette Smoking May Be Hazardous to Your Health" on each package of cigarettes. It is our opinion that either of these two cautionary warnings on the label of cigarettes would have a certain remedial effect in warning cigarette smokers of the dangers which may result from smoking cigarettes. We would suggest, however, that the statement in H.R. 3014 be changed by substituting the word "Is" for the words "May Be" because it is our opinion that cigarette smoking is a health hazard.

H.R. 3014, provides that its labeling requirements are to be enforced solely by criminal proceedings and by injunctive action instituted by the Attorney General, while H.R. 4244, provides for its enforcement by the Federal Trade Commission under the rules, regulations, and procedures provided for in the Federal Trade Commission Act. It is our opinion that H.R. 4244, would provide the more appropriate method of enforcement. I say that, Mr. Chairman, because I think Congress was wise in establishing a regulatory agency such as the Federal Trade Commission. It is a pliable agency. Circumstances and remedies that appear necessary can be changed by circumstances of tomorrow, whereas if you pass a law and you say "This shall be the law" and you turn it over to the enforcement of the respective U.S. Attorneys General, the only way you can change that, is to change the law.

With respect to cigarette advertising, the bills take entirely divergent approaches.

H.R. 4244 describes when cigarettes are misbranded. It further provides that the

sale, advertising, or offering for sale in commerce *** of any cigarettes which are misbranded *** is unlawful and shall be an unfair practice, in commerce under the Federal Trade Commission Act.

Beyond this, H.R. 4244 does not deal with cigarette advertising. The Commission would interpret this omission as no preemption of its existing authority under existing statutes to prevent, if necessary through a requirement of affirmative disclosure, unfair and deceptive cigarette advertising. It was, of course, pursuant to its existing gen

eral statutory authority that the Commission promulgated the trade regulation rule. In this connection, however, I might add that if the Congress should adopt the approach as provided in H.R. 4244, the Commission would not, in any event, require in advertising any affirmative disclosure which would be inconsistent in any way with the statement required on the cigarette package.

H.R. 3014 provides that nothing in it

shall be construed to limit or to expand the authority of the Federal Trade Commission with respect to the dissemination in commerce of any false or misleading advertisement of cigarettes *

but with the proviso that the Commission shall not have authority in any proceedings under any statute which it administers

to require the inclusion in any advertisement of any statement concerning any hazard to health involved in smoking cigarettes where the advertised cigarettes have been packaged in conformity with the labeling provisions

of the bill. It also prohibits any Federal agency from requiring any additional cautionary statement on any package labeled in conformity with the provisions of the bill.

As we interpret H.R. 3014 on this point, it would prohibit the Federal Trade Commission from bringing any proceeding to require the inclusion in any advertisement of cigarettes any statement concerning the danger to health from smoking where the advertised cigarettes have been labeled in conformity with the provisions of the bill. The effect of this would be to single out cigarettes and exempt them from any requirement that advertising must disclose the danger attendant to their use. Thus, while under settled principles the Commission in order to avert deception of consumers could in the future require a seller to affirmatively disclose in advertising the country of origin of his imported products, the fact that his fabric depicted to resemble mink is in fact made of a synthetic fiber, or the adverse consequences of the normal use of his drug, device, or cosmetic, it could not require in the advertising of cigarettes a statement of the established danger to health associated with the smoking of them.

This, of course, is a limitation on the Commission's authority which the Congress may, if it wishes, impose. We are fully aware of that, Mr. Chairman. I do feel, however, that it is my duty to point out to this committee one of the factors which led the Commission to the conclusion that cigarette advertisements should contain a warning statement. Our study of the problem convinced us that the principal means of promoting the sale of cigarettes is advertising, not labeling. According to our information the total expenditures in 1963 for cigarette advertising by the six leading cigarette manufacturers exceeded $200 million. Of this, over $125 million was spent on television advertising, including both network and spot commercials. This represented a substantial increase over 1962, and an increase over 1952 expenditures for television advertising of over 250 percent.

We reviewed and studied a lot of this television advertising in our rulemaking proceeding and found it to portray the smoking of virtually every significant brand of cigarette as pleasant, desirable, a social asset, romantic, and associated with manliness and popularity. Portrayal of the desirability of smoking was also accomplished by the association of smoking with ideas and individuals worthy of emulation or likely to be emulated, so as to suggest that smoking is an

important attribute of full personal success and development. All of these themes are, of course, attractive to teenagers, and radio and television programs sponsored by cigarette manufacturers can be seen and heard at any time of day or night. Cigarette companies were found to be the sponsors of numerous television programs having a particularly large audience of children and teenagers, through which they suggested to them over and over again the desirability of smoking, without suggesting in any way that children should not smoke or that smoking might impair one's health. One program, "The Beverly Hillbillies" had an audience of children 2 to 12 years of age equal to 12.6 million, or about 28.8 percent of the children of the United States of that age group. It is sponsored by Winston.

And, Mr. Chairman, this impact of cigarette advertising on young people was a particularly important consideration in our proceeding. Available data on smoking patterns indicate that an ever-increasing proportion of persons in younger age groups are becoming regular smokers. Among males 25 to 34 years of age as of February 1955, 61.4 percent had become regular smokers prior to the age of 21, and among females 25 to 34 years of age, 28.9 percent had become regular smokers prior to the age of 21. By contrast, among males and females 45 to 54 years of age, 51.2 percent and 7.5 percent, respectively, had become regular smokers prior to the age of 21.

We get some overall indication of the effectiveness of advertising by making a comparison of cigarette consumption data and advertising expenditure data. Between 1956 and 1962 there was an increase of 25.8 percent in domestic cigarette consumption and 16.9 percent in domestic cigarette consumption and 16.9 percent increase in per capita cigarette consumption. In this same period of time there was a 47.3 percent increase in cigarette advertising expenditures by the six leading manufacturers.

Another indication of the effects of cigarette advertising on cigarette consumption is found in this quote from the April 20, 1964, issue of Advertising Age.

April sales of P. Lorillard Co. are running ahead of last years, following a "low point" in February-thanks in part to "record levels of advertising," Morton J. Cramer, president, told the company's annual meeting today.

Because of the Surgeon General's report and "competitive considerations” Lorillard's advertising reached record levels during the first quarter, he said. "The decision to spend these record amounts was made in the full knowledge that commitments of this magnitude would significantly affect our already depressed earnings, but it has already been proved sound-by the turnaround in sales," said Mr. Cramer.

Having in mind these and the other considerations set forth in its statement of basis and purpose of its rule, the Commission felt that it would not be in the public interest to leave unregulated the advertising of cigarettes and thereby fail to have the public, especially children, warned of the relationship between cigarette smoking and health. In this connection, however, I would point out that this was on the assumption that past conditions of cigarette advertising would continue unchanged. In its published statement, the Commission expressly recognized that circumstances might change, and that such change could affect the public interest with respect to the need for the required disclosure in cigarette advertising would continue unchanged. In its published statement, the Commission expressly recognized that