The Regulation of Cigarette Advertising in the United States: Some Alternatives

ABSTRACT - Currently, U.S. Policy makers are considering proposals that could ban all advertising for cigarettes in the United States. A ban is the most severe regulatory action that can be taken with regards to a product's advertising. Before it can be imposed there should be no question that it is the most viable option available. To add clarity to the debate, this paper will examine the role of cigarette advertising (or more precisely, the conflicting roles described by the industry's critics and defenders) in today's marketplace. Next, the need for affirmative disclosure in cigarette advertising will be addressed as well as the effect of those informational remedies already in place. The paper will then propose a set of regulatory objectives to address the public policy concerns regarding cigarette marketing. Finally, a range of alternative solutions will be proposed in terms of those objectives.

Citation:

Edward T. Popper (1990) ,"The Regulation of Cigarette Advertising in the United States: Some Alternatives", in NA - Advances in Consumer Research Volume 17, eds. Marvin E. Goldberg, Gerald Gorn, and Richard W. Pollay, Provo, UT : Association for Consumer Research, Pages: 482-487.

Advances in Consumer Research Volume 17, 1990      Pages 482-487

THE REGULATION OF CIGARETTE ADVERTISING IN THE UNITED STATES: SOME ALTERNATIVES

Edward T. Popper, Bryant College

ABSTRACT -

Currently, U.S. Policy makers are considering proposals that could ban all advertising for cigarettes in the United States. A ban is the most severe regulatory action that can be taken with regards to a product's advertising. Before it can be imposed there should be no question that it is the most viable option available. To add clarity to the debate, this paper will examine the role of cigarette advertising (or more precisely, the conflicting roles described by the industry's critics and defenders) in today's marketplace. Next, the need for affirmative disclosure in cigarette advertising will be addressed as well as the effect of those informational remedies already in place. The paper will then propose a set of regulatory objectives to address the public policy concerns regarding cigarette marketing. Finally, a range of alternative solutions will be proposed in terms of those objectives.

INTRODUCTION

There can be little argument that the regulation of cigarette advertising and promotion is one of the most controversial issues currently facing marketers and public policy makers. Defenders of cigarette marketing vigorously assert that there are no harmful consequences to that product's advertising and marketing and that these programs have no effect on the aggregate demand for cigarettes (e.g. Ward, 1989). The critics of the industry's marketing practices point to the nearly $3 Billion U.S. cigarette manufacturers spend on cigarette advertising and promotion and argue that it is naive and unrealistic to believe that these massive expenditures have absolutely no effect on total cigarette sales (e.g. Warner,1986).

The debate over proposals to ban or restrict cigarette advertising and/or promotion provides a focus for this controversy. A ban is the most severe regulatory action that can be taken with regards to a product's advertising. Before it can be imposed there should be no question that it is the most viable option available. To add clarity to the debate this paper will, first, examine the role of cigarette advertising (or more precisely, the conflicting roles described by the industry's critics and defenders) in today's marketplace. Next, the need for affirmative disclosure in cigarette advertising will be addressed as well as the effect of those informational remedies already in place. The paper will then propose a set of regulatory objectives to address the public policy concerns regarding cigarette marketing. Finally, a range of alternative solutions will be proposed in terms of those objectives.

THE ROLE OF CIGARETTE ADVERTISING & PROMOTION

At the heart of the current controversy is the role that cigarette advertising plays in the marketplace. Representatives of the tobacco industry have argued that there is no evidence to support the. contention that advertising of cigarettes has any effect on the total size of the U.S. market for cigarettes. The support for this argument ranges from econometric studies that show little effect or no effect of advertising on aggregate cigarette demand (e.g. Schmalensee, 1972) to behavioral studies that suggest children's smoking behavior is a function of peers' and parents' smoking attitudes and behavior (e.g. Ward, 1986; Blackwell, 1986). The most extreme advocates of cigarette advertising even argue that the current decline in cigarette consumption among children and teenagers "confirms...that advertising is not [emphasis in original] a significant influence on the decision of children to start smoking (Boddewynn, 1989).

Critics of cigarette advertising reject these arguments vigorously. In the words of a founder of FCB Advertising:

"[T]he cigarette industry has been artfully maintaining that cigarette advertising has nothing to do with total sales...[T]his is complete and utter nonsense. The industry knows it's nonsense...I am always amused by the suggestion that advertising, a function that has been shown to increase consumption of virtually every other product, somehow miraculously fails to work for tobacco products (Foote, 1981)".

Others argue that it makes no financial sense for cigarette manufacturers to advertise only for brand share shifts (Tye, Warner & Glantz, 1987) citing industry data that indicates brand shifting is only 10% annually (Marketing and Media Decisions, 1985). At the extreme, the critics of cigarette advertising argue, for example, that "Most cigarette advertisements are deceptive, and many violate the tobacco industry's own code of ethics (Tobacco and Youth Reporter, 1989)."

The actual role of cigarette advertising and promotion falls somewhere in the middle of these extremes. A review of the econometric studies examining the effect of tobacco advertising on aggregate demand for tobacco (Toxic Substances Board, 1989) reveals that many of the studies do show advertising for cigarettes increases aggregate demand. This same conclusion was also suggested by the U.S. Surgeon General who reported "...evidence makes it more likely than not that advertising and promotional activities do stimulate cigarette consumption (U.S. Department of Health and Human Services, 1989)." Further, all of these studies are likely to underestimate advertising effects since they ignore promotional expenditures and the effect of "quitters" leaving the cigarette market.

The funding of promotional programs has grown to over half of all cigarette marketing communications expenditures in the 1980's (FTC, 1986) while advertising expenditures have remained relatively flat (in constant dollars). Thus, econometric studies that examine only advertising are omitting what has become the predominant form of marketing communications used in this industry and underestimating spending for marketing communications. The task confronting those marketing communications is also underestimated in these studies since they examine aggregate demand without accounting for the effect of substantial numbers of smokers leaving the market. For example, if aggregate demand was level over a period of years but a substantial number of smokers had left the market, the only way demand could have been level would have been for either average consumption level (among the retained smokers) to increase or for new consumers to enter the market (In fact, government data indicate that new smokers are entering the market every year, albeit, at a declining rate. U.S. Department of Health and Human Services, 1989). Those econometric studies that are based on aggregate demand ignore this market replenishment which, absent the high quitting levels, would actually result in increased aggregate consumption.

Aside from increasing aggregate demand, advertising that results in brand switching may be targeting (either explicitly or implicitly) youth. The 1989 Surgeon General's Report (U.S. Department of Health and Human Services, 1989) indicates that most current smokers, started using cigarettes while they were teenagers. The cigarette industry's own data indicate that new smokers switch between brands for the first year they smoke before crystallizing on a chosen brand (MARPLAN, 1957). Given the low rate of brand switching referenced above (10% per year) it is clear that a substantial portion of that switching occurs among teens. Thus, if the function of cigarette advertising is, as the companies insist, to promote brand switching a target of that advertising must be those teens who are new smokers.

A final role for cigarette advertising is a defensive one. Some cigarette advertising presents alternatives for smokers who are considering leaving the market. That advertising presents brands that claim lower levels of tar and nicotine. While such claims could be considered simply to be statements of product construction (as some researchers have claimed), the only relevance the claims could have is if consumers inferred (perhaps incorrectly) that the products were safer and healthier because of the lower tar and nicotine. Aside from claims of low tar and nicotine content, for consumers who are not actively considering quitting smoking, brand image advertising also plays a defensive role reenforcing the product images that are the bases for some smoker's brand loyalty.

In summary, cigarette advertising increases the market for cigarettes, promotes brand switching among both adults and youths, and provides both reasons and alternative products to keep smokers in the cigarette market.

AFFIRMATIVE DISCLOSURE

While there is near unanimous belief in the medical community that cigarettes are remarkably toxic and addictive (U.S. Department of Health and Human Services, 1989) consumers are less unanimous in their awareness of the product's risk . While the majority of consumers are aware of some of the health risks of smoking, a significant portion are unaware. This portion is even higher for smokers (ibid). Thus, many current and potential cigarette smokers are approaching this product category uninformed.

There can be little doubt that information about the health risks of using a toxic product is important and material to a consumer. Using this logic the FTC, in 1981, recommended that more effective cigarette warnings (both on packages and in advertisements) be adopted (Myers, et al., 1981). While, as is the case for most disclosure programs (Wilkie, 1985), there were no objectives formally set for the new disclosures, some objectives can be inferred.

As stated above, the rationale for proposing new disclosures (in format, content, and number) was the relatively low consumer awareness of the risks of smoking. Thus, at the very least, the disclosures were intended to increase consumer information about the risks. If that was the objective, the current cigarette disclosures are unsuccessful.

The 1989 Surgeon General's Report (U.S. Department of Health and Human Services, 1989) indicates that significant numbers of adults continue to underestimate the health risks of cigarette smoking. Further, there is rising evidence that even the current in-ad cigarette warnings are ineffective (Fischer, et al., 1989; Davis and Kendrick, 1989). These studies suggest that the non-warning content of cigarette advertising is the attention focus of the advertising targets. Conversely, there is no research that demonstrates that smokers note the warnings (either on pack- or in-ad) or recall them. This would indicate that for the inferred informational objectives discussed above to be achieved either the warnings or the advertising itself must be changed.

How the warnings could be changed to increase their communications effectiveness is unclear. Obviously, increasing the size of the warnings would, at some point, result in increased attention. However, if the size of in-ad warnings is increased by as much as 50%, they still will not increase the warning's communications level (Popper & Murray, 1989). That same research indicated that moderate changes in the warning format are also unlikely to increase communication. Thus, while the warning could be changed to increase communication, the magnitude of change necessary might be so substantial that the warning dominates the ad.

TABLE 1

PROPOSED REGULATORY OBJECTIVES

An additional issue is the potential for interaction between the warning disclosure and the advertiser's selling message. If the warning is attended to and believed it presents a health problem to a smoker (current or potential). An implied health claim in the advertiser's selling message (such as a statement about low tar and nicotine) presents what could be perceived (inappropriately) as a solution to that problem. Thus, even an effective disclosure could have harmful consequences for the smoker.

Disclosure has been a component of cigarette communication for the past twenty five years. The very presence of the disclosures provides an indication of the policy makers' belief that disclosure is required. That the disclosures are ineffective or have unintended consequences suggests that the underlying policy must be reconsidered. The following section will propose a set of regulatory objectives to be considered when evaluating policy alternatives.

PROPOSED REGULATORY OBJECTIVES

It is a stated public health objective of the United States to achieve a totally smoke free (i.e. no cigarettes used) country by the year 2000 (U.S. Department of Health and Human Services, 1989). Any regulatory objectives should be consistent with that goal. At the same time, no one is realistically proposing a ban (or prohibition) on the sale of cigarettes. Thus, the regulatory objectives effecting advertising must be consistent with the joint goals of eliminating smoking and not prohibiting cigarette sales. This results in the following set of objectives (Table 1):

Eliminate Advertising and Promotion that Leads to the Expansion of the Cigarette Market

Obviously expansion of the cigarette market is inconsistent with the policy objective of eliminating smoking. Thus, any marketing program or activity that expands the market for cigarettes is contrary to the stated national public health policy and must be eliminated. Since cigarette manufacturers argue that none of their advertising and promotion leads to market expansion they should accept this regulatory objective without reservation. Further, given that market expansion would be a violation of public policy, the burden of proof should be on the cigarette marketers themselves to demonstrate (perhaps from the research they already conduct on all of their marketing programs) that their programs (taken separately or as a campaign) have no market expansion effects.

Eliminate Advertising and Promotion that Would Inhibit Smokers from Quitting

Given the public health goal to eliminate smoking, for a company to employ marketing practices that keep people smoking is contrary to that objective. Thus, to be consistent with that public health goal, the regulatory objective must be the elimination of marketing programs that either encourage smokers to keep smoking or inhibit them from quitting. As above it should be the responsibility of the marketers themselves to demonstrate that their advertising and promotion programs neither have the intent nor effect of keeping people in the cigarette market.

Communicate the Health Risks of Smoking at a Level at Least Equal to the Communication of the " Benefits" of Smoking

A basic problem facing disclosures is defining a standard of adequacy. Common sense should dictate that a disclosure designed to modify a claim or a marketer's message have equal "visibility" to the message it modifies (Popper, 1988). This is particularly appropriate when the disclosure deals with a substantial, indeed, mortal health risk. Thus, it naturally follows that information (in cigarette marketing communications) that presents the health risks of smoking (i.e., mandated health disclosures) have the same level of communication as the attribute/benefit information in the ad. Once again, it should be the cigarette marketer's responsibility to demonstrate that parity of communication as a natural outgrowth of their ongoing advertising, communications, and marketing research.

TABLE 2

CIGARETTE ADVERTISING & MARKETING REGULATORY ALTERNATIVES

Prohibit Advertising Targeted to Youth

The cigarette manufacturer's own Advertising Code prohibits advertising to youth. This objective would simply give their self regulatory standard the regulatory force. To the extent that the self regulatory standard is adhered to, the industry could have no objection to this objective.

Prohibit Deceptive Advertising

This final objective simply reenforces existing regulatory authority. It puts cigarette manufacturers on notice that policy makers expect them to be non-deceptive in their advertising. If a deceptive ad is one that misleads a consumer, acting reasonably, to his or her detriment, than any cigarette advertisement that claims health or benefits (either implicitly or explicitly) without evidence to substantiate the health claim would be deceptive. Given the FTC's guidelines on advertising substantiation (the presence of a claim in an ad requires the advertiser to have proof of the accuracy of that claim before it can be included in an advertisement), cigarette manufacturers would be required to have proof (in this case, medical proof), prior to advertising (either explicitly or implicitly) relative health benefits of a cigarette.

This set of potential objectives results in a number of regulatory alternatives.

ALTERNATIVE SOLUTIONS

A wide range of policy alternatives are available to achieve the objectives discussed above. Given that any of the alternatives will represent a constraint on commercial speech, they should only be implemented if there is no less restrictive method to achieve the same policy objective. The following are a range of policy alternatives in reverse order of severity to achieve those policy objectives (Table 2):

Increased Mandatory In-Ad Disclosure

Obviously this is closest to current practice. It would entail increasing the number, explicitness, size or colors of the disclosures required to appear in cigarette advertisements. One alternative for developing these warnings would be to have them written by regulators or legislators (as is the case for all disclosures currently required mandated for any product). Another approach would be to require in-ad disclosures that would be attention demanding (as determined by consumer research rather than regulatory fiat) as well as including the health risk information determined, designed by public health experts, in order to fully inform smokers.

In many ways this alternative is similar to what was actually proposed by the FTC in 1981 (Myers, et al., 1981) but not enacted by the U.S. Congress. It is unclear, however, if such communications-effective disclosures were introduced whether cigarette manufacturers would continue to advertise. Much as they withdrew from television in the face of the fairness doctrine advertisements in the late 1960s (Warner, 1986), faced with powerful and required in-ad anti-smoking disclosures the cigarette manufactures might withdraw their advertising voluntarily.

Increased Mandatory In-Ad Disclosure With Performance Standard

This proposal is similar to the previous one except it acknowledges the historical inability of regulators to craft effective disclosures. Instead, it places the responsibility for disclosure design in the hands of the cigarette companies themselves (whose success in crafting effective communications is unquestionable) .

Under this alternative regulators would only define the medical/health risk information that needs to be communicated. They would not define the manner or even specific wording for communicating this information. The cigarette manufacturers would then be required to demonstrate that the health risk information (disclosures) are communicated as effectively (using predetermined criteria and measures) as are the selling or image messages of the advertisement (i.e. a performance standard). It is likely, for the same reasons described above, that such a requirement would also result in the manufacturers voluntarily withdrawing their advertising.

Counter Advertising Funded By Additional Cigarette Tax

As Warner (1986) demonstrates, the counter advertisements run under the fairness doctrine ruling in the late 1960s, were particularly effective in communicating the health risks of smoking and reducing per capita cigarette consumption in the U.S. This proposed alternative would fund a similar series of anti-smoking messages. Run in paid media (as opposed to PSA placement, as are most current counter advertisements) in high viewership/readership slots and developed according to rigorous (DAGMAR) standards, including copy testing), these messages could be expected to have impacts similar to those that achieved by the fairness doctrine mandated anti-smoking commercials of the 191 Os.

Funding anti-smoking commercials with additional cigarette taxes serves two goals. First, the messages are both self-funding and self adjusting. The funding is a function of the level of sales. As the market declines, the need for the messages declines, and the funding declines according. Further, since cigarette consumption has been demonstrated to be price elastic (Toxic Substances Board, 1989), a "Counter Advertising Tax" (a type of user fee) would have the added benefit of reducing consumption in furtherance of the nation's Public Health Goal.

Tombstone Advertising Requirement (Image Ad Ban)

This alternative would limit advertisers to including only product attributes in their cigarette advertisements. It is based on the premises that "image" advertising plays a role in youths' determining which brand to adopt at the end of their introductory "trial" period (MARPLAN, 1957) and that image maintenance is among the reasons why smokers resist quitting.

Given the objectives described above, if the attributes included in these tombstone advertisements represented health claims (either explicit or implicit) the cigarette advertisers would be required to provide prior data supporting the medical validity of their health claim(s).

Total Advertising Ban

This proposal would extend the current ban on broadcast cigarette advertising to all media. While the broadcast advertising ban had an initial impact on cigarette sales, the cigarette manufacturers quickly increased their expenditures in other media. After just a few years, the level of advertising expenditures (in constant dollars) reached its prebroadcast ban level. When the broadcast ban was enacted, broadcast advertising represented the overwhelming share of cigarette advertising. The expected effect would, presumably, have been to dramatically reduce cigarette advertising. In turn, this would suggest that the implied regulatory objective of the broadcast ad ban was to dramatically reduce cigarette advertising. This proposal simply extends the current ban to accomplish the ends sought by the broadcast ban.

The experience with the broadcast ban further suggests that if the regulatory objective is to reduce the overall level of marketing communications for cigarettes it is insufficient to merely ban the currently dominant form(s) of marketing communications. Instead, the regulation or legislation has to be crafted to cover potential marketing communications media (perhaps including media that do not yet exist).

-The obvious concern over this advertising ban (or the bans proposed below) is that it might not be permissible under the first amendment to the U.S. Constitution. Obviously, this is a precise question of law appropriately left to the courts. However, there is an indication that the U.S. Supreme Court Decision in Posadas de Puerto Rico v. Tourism Company of Puerto Rico provides specific support for a ban on cigarette advertising (Devore, 1988).

Total Promotion Ban

An alternative to banning cigarette advertising is to ban consumer promotion (to include sampling, couponing, event sponsorship, premiums, etc.). Currently cigarette manufacturers' promotional expenditures exceed their advertising expenditures (FTC). This reflects a general trend in marketing towards promotion, away from advertising, due to the action-inducing benefits of promotion. Further, cigarette advertising is so intensive that the marginal return for incremental advertising expenditures is declining.

By banning promotion those devices which are most likely to result in youthful trial of cigarettes (such as free sample distribution, concert sponsorship, and sports sponsorship) would be removed. Further, the elimination of sports sponsorship would eliminate the linkage of cigarettes to sports performance (e.g. the Virginia Slims Tennis series), which is, itself, a violation of the industry's own advertising code. This would also remove the opportunity cigarette company's currently have to circumvent the broadcast ad ban through their own sponsorship of events, performers and competitors.

Total Advertising & Promotion Ban

Obviously, the most draconian of steps, this proposal should only be taken if the actions of the cigarette companies violate the objectives presented above and all other alternatives are either rejected or ineffective.

RESEARCH OPPORTUNITIES

This paper has only presented some of the alternatives available to regulators and suggested some of the relevant issues. It presents no evidence regarding the potential effect of these programs if implemented in the U.S. market. That is because no such evidence is available. While the gravity of the health risks presented by cigarettes is such that the U.S. government may well decide to take action, all parties would clearly benefit from research that evaluates the potential impact of any and all of these programs.

Some of the alternatives available to regulators are dramatically more restrictive than others. To impose a more restrictive policy when a lesser one would accomplish the public policy objectives violates both the spirit and the letter of the Central Hudson guidelines for constraints on commercial speech. Thus there is an opportunity --indeed, an urgent need --- for researchers to test the effects of these alternatives.

REFERENCES

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