Retailers should take note that Philip Morris USA Inc., Altria Group, Inc, R.J. Reynolds Tobacco Company have reached an agreement with the United States Department of Justice on warnings to be placed in retail stores carrying the manufacturers’ cigarettes to warn consumers about the health effects of tobacco. These are referred to as “corrective-statement signs” because they are meant as “corrections” to the manufacturers’ alleged deliberate misleading of consumers as to the dangers of smoking from the 1950s until the early 2000s. The manufacturers have disputed these allegations and the matter has been in litigation since September 1999.  Although the exact language and other details of the agreement have not yet been released, a Joint Motion for Status Conference filed by the parties in the United States District Court for the District of Columbia reveals that the proposed settlement will cover nine main components:

  1. the placement and number of corrective-statement signs adjacent to the main cigarette merchandising display at participating retail locations;
  2. the placement of corrective-statement signs near the main entrance of the participating retail location;
  3. the design of the signs;
  4. the length of time for which the signs must be posted;
  5. the rotation of the signs within the participating retail locations;
  6. the display of corrective-statement signs in Spanish at certain locations;
  7. third party-auditing of compliance with the settlement;
  8. consequences for noncompliance with the settlement; and
  9. the establishment of a working group to address implementation and compliance issues.

The genesis of these negotiations dates back to 2006, when, in USA v. Philip Morris USA et. al., the District Court ordered that “corrective statements” be displayed by the cigarette manufacturers on packaging, in print and television media, on their websites, and in retail stores as countertop displays and header displays. On appeal, the Circuit court vacated the remedy with respect to retail stores because the District Court had not adequately considered the remedy’s impact on retailers, especially as to the requirement that retailers sacrifice countertop space for the displays. The issue has gone back and forth between the Circuit and lower court, which was briefed on the issue in 2014 and again in 2018, but no resolution on the statements had been reached until this week. This development is just ahead of a scheduled evidentiary hearing on the matter which was to be held in June of this year.

The parties’ joint motion indicates that they will be seeking the District Court’s input on whether affected retailers should be provided notice of the settlement and an opportunity to be heard, and on a trial schedule in the case that the settlement cannot be finalized. The National Association of Convenience Stores and the National Association of Tobacco Outlets participated in the negotiations between the manufacturers and the federal government and will participate in the status conference that has been requested to be set at the court’s “soonest convenience.”

Tobacco retailers should watch closely for further developments and for potential opportunities to weigh in on the settlement and/or guidance as to display of the corrective-statement signs.