Answer the questions based on the videos you watch the case you read in the attached files.

FDA Labeling: Informative or Infringement?

Case

Author: Pamela E. Queen

Online Pub Date: January 02, 2018 | Original Pub. Date: 2018

Subject: Business & Management, Brand Management & Strategy, Business, Government,

& Society

Level: Intermediate | Type: Experience case | Length: 4187 words

Copyright: © Pamela E. Queen 2018

Organization: Government| Tobacco Industry| Fast Food Industry| Advertising Agency |

Organization size: Medium, Large

Region: United States of America | State:

Industry: Manufacture of food products| Manufacture of tobacco products| Advertising and

market research

Originally Published in:

Publisher: SAGE Publications: SAGE Business Cases Originals

DOI: http://dx.doi.org/10.4135/9781526445483 | Online ISBN: 9781526445483

© Pamela E. Queen 2018

This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes. 2018 SAGE Publications Ltd. All Rights Reserved.

This content may only be distributed for use within CQ PRESS. http://dx.doi.org/10.4135/9781526445483

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Abstract

There is increasing debate about whether government regulations intended to educate and protect the public interfere with corporate rights for free enterprise and consumer choice. This issue is viewed through the eyes of Melody, a rising star at a top advertising firm in the U.S. who is in charge of a major advertising account for a pizza company. The case explores her dilemma after learning of trending negative public opinion about fatty foods and recent calls for graphic warning labels (GWLs) on pizza. Melody discovers that pizza, like tobacco, is viewed as a demonized product. The role of government in balancing its public safety role of protecting consumers with free speech for corporations is explored through discussion of GWLs on tobacco products. As a marketing director, Melody must decide how to develop a marketing campaign for her pizza company client in the face of increasingly divided public attitudes toward government intervention in free enterprise.

Case

Learning Outcomes

Students should have an improved understanding of the following:

The role of government in providing public health information and programs for the good of society. The balance between the role of government and its vast platform in the regulation of certain products and corporate rights for free enterprise and consumer choice. The limits of government authority on forcing private corporations to advertise potential negative effects of its products. The intent of truth in advertising for products, from product ingredients, caloric content, and health warning labels to pictorial warning labels. The importance of using data to drive policy decisions and management actions.

Introduction

Melody is a rising star at her company, which is one of the top advertising firms in the nation. Following several successful print media campaigns she was eager to expand her experience with a major multi-media advertising campaign, and was elated when she was assigned as the marketing director for a multi-million dollar account: a major pizza company.

Excited about this new opportunity, Melody sent a group text to a few close friends about her new promotion and assignment. Without stating the client’s name, she accompanied her text, which read, “ready to put my brand of toppings on pizza,” with a happy face emoji.

Seconds later, she received a response to her text with a link to an online article about junk food and the need to inform consumers about the dangers of the adverse health effects from consumption of fatty foods with little nutritional content. The article, authored by doctors from the Ontario Medial Association, asserts that junk food should have graphic warning labels similar to tobacco. The first few sentences of the article read:

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“Will your pizza come with a picture of a decayed, fatty liver? How about a bottle of pop with a close-up shot of a blood-red diabetic foot ulcer? The Ontario Medical Association says junk food should be treated the same way as tobacco, slapped with higher taxes and packaged with graphic warning labels” (Ha, 2012).

After reading the article, “Oh no!” Melody exclaimed. She responded via text to the sender of the article, “OMG, is pizza the new tobacco?” An array of thoughts raced through Melody’s mind as she pondered her next steps. She initially felt that this had to be a minority opinion. After all, pizza was everyone’s favorite food—a staple at schools, stadiums, and neighborhood and company gatherings, including her own.

“How did we get to a point in which the government can dictate consumer choice?” she pondered. “It is clear that the intent of graphic warning labels is to deter consumers from the purchase and use of certain products. Shouldn’t consumers decide via their purchasing choices whether a certain product is good for them?” she asked herself. She decided to take a closer look at FDA regulations on tobacco and its potential impact to her marketing campaign for her client, a pizza company.

Background on Tobacco and Health Risks

In the United States, tobacco use is the leading cause of preventable disease and death. Cigarette smoking causes more than one in five deaths annually. Tobacco use causes more deaths than disease and health-related illnesses from human immunodeficiency virus (HIV), illegal drug use, alcohol use, motor vehicle injury, and firearm-related incidents combined (Campaign for Tobacco-Free Kids, 2017).

According to the Center for Disease Control (CDC), the number of avoidable premature deaths in the U.S. are attributed to five leading causes of death: (1) heart disease, (2) cancer, (3) chronic lower respiratory diseases, (4) stroke, and (5) unintended injury. Most of these causes are directly influenced by long-term tobacco use. In addition, research shows that tobacco use contributes to the risks for heart disease, lung cancer, and chronic respiratory diseases such as asthma, bronchitis, and emphysema (American Cancer Society, n.d.). As Figure 1 highlights, smoking has an adverse effect on many human organs and body parts.

Figure 1. Risk Impacts from Smoking on All Body Parts.

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Source: Centers for Disease Control and Prevention (CDC), Risks from smoking, https://www.cdc.gov/tobacco/infographics/health-effects/pdfs/he-infographic1.pdf?s_cid=bb- osh-effects-graphic-005.

Preventable deaths are a public health concern and a major social cost for federal, state, and local governments. According to 2016 data, approximately 40 million U.S. adults smoke cigarettes and about 4.7 million youth use at least one tobacco product including e-cigarettes. Each day, more than 3,800 youth under the age of 18 smoke their first cigarette. Deaths from

tobacco use totaled 100 million in the 20th century; projections for the 21st century indicate that tobacco will kill one billion people (Fong, Hammond, & Hitchman, 2009).

The social costs due to illness, disease, and deaths from tobacco use are staggering. In the U.S., smoking-related issues cost $170 billion annually in direct medical care for adults, and over $155 billion in lost productivity due to illness from second-hand smoke and premature deaths. When tobacco users die prematurely, their families are deprived of income, health care costs increase, and economic growth is hindered for both the family and community. Of the five major preventable causes of death in the United States from 2008 to 2010 cited by the Centers for Disease Control and Prevention (CDC), tobacco use is an underlying contributor to the top three causes (see Figure 2: Top Causes of Preventable Deaths in the United States).

Figure 2. Top Causes of Preventable Deaths in the United States.

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Source: Centers for Disease Control and Prevention (CDC), Potentially preventable deaths f r o m t h e f i v e l e a d i n g c a u s e s o f d e a t h ( U n i t e d S t a t e , 2 0 0 8 – 2 0 1 0 ) , https://www.cdc.gov/media/releases/2014/images/p0501-preventable-deathsB.pdf.

At all levels of government, extensive efforts have been implemented to curtail tobacco use, including price increases, education about the harms of tobacco use, smoking cessation programs, patient counseling on how to quit smoking, anti-smoking school curricula, smoke- free policies in public buildings, mass media anti-smoking advertisements, and restrictions on the adolescent purchase of tobacco products.

With more than 1 billion smokers worldwide, tobacco use is considered a pandemic. Negative effects of tobacco use is one the greatest public health threats, killing more than 7 million people a year. Almost 1 million of these are deaths of non-smokers exposed to second-hand smoke. The World Health Organization (WHO) championed the first international public health treaty devoted to inhibiting the tobacco pandemic and better informing the public about the adverse impact of tobacco use. In 2008, the WHO’s Framework Convention on Tobacco Control (FCTC) identified tobacco as a major cause of preventable deaths and advocated moving beyond text health warning labels to inclusion of graphics on tobacco packaging in an effort to illuminate the dire consequences of habitual cigarette smoking.

Proponents of graphic warning labels (GWLs) believe the dangers of tobacco use are not well or widely understood. Many people are not fully aware, do not understand, or underestimate the severity of tobacco use and exposure to tobacco smoke. Health warning labels are a key component of a comprehensive campaign to control tobacco consumption and save lives. Well-planned and -positioned health warning labels and messaging on tobacco product packaging are a cost-effective method of increasing public awareness of the health risk of tobacco use and reducing tobacco consumption.

Because smoking is a leading cause of premature death in Canada, in 2001 the country became a trailblazer by beginning to include GWLs on cigarette packages. From 2001 to 2011, health warnings were required to cover 50% of the front and 50% of the back of all cigarette packages sold in Canada. Data from the Canadian Community Health Survey of the population’s health status, health care utilization, and health determinants indicate that

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declines in smoking rates were observed across all demographics from 2001 to 2011 (see Figure 3: Smoking Rates in Canada (2001–2011)). Many health advocates attribute this decline in tobacco usage to Canada’s adoption of GWLs to better inform consumers about tobacco’s adverse health effects. Studies estimate that 21% of all deaths from 2001 to 2010 were due to smoking; lung cancer caused more deaths than any other cancer (Jones, Gulbis, & Baker, 2010). In response, the size of the warnings were increased in 2012 to cover 75% of the front and 75% of the back of packages. Although significant progress has been made, smoking remains the leading cause of premature death in Canada.

Figure 3. Smoking Rates in Canada (2001–2011)

Source: Statistics Canada, Health at a Glance, Statistics Canada Catalogue, no. 82-624-x by Teresa Janz, Percentage of current and daily smokers by sex, household population 12 and o l d e r , C a n a d a 2 0 0 1 t o 2 0 1 1 , http://www.statcan.gc.ca/pub/82-624- x/2012001/article/chart/11676-01-chart1-eng.html.

The FDA’s Mission to Regulate Tobacco

The mission of the Food and Drug Administration (FDA) is to advance the public health of the nation by ensuring safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, and the nation’s food supply. In addition, the FDA is responsible for regulating the manufacturing, marketing, and distribution of tobacco products to protect the public health and to reduce tobacco use by minors.

Under the Federal Cigarette Labeling and Advertising Act of 1965, the FDA required companies to place health warning labels on cigarette packages; current health warnings consist of text-only messages. The intent of the health warnings is to inform smokers about the health hazards of smoking, encourage smokers to quit, and prevent nonsmokers from starting to smoke. U.S. health professionals and advocates agree that health warnings on cigarette packages are a direct, cost-effective method of communicating information on health risks to smokers in an effort to influence their behavior. Direct warnings on cigarette packs are considered one of the most important sources of health information to consumers. A pack-a- day smoker would be exposed to these health warnings more than 7,000 times per year (Bach, 2016).

Yet, in the decades since health warning labels appeared on cigarettes, cigars, and other tobacco products sold in the United States, the impact on smoker behavior has been minimal; the reductions in new smokers and deaths attributed to tobacco use has been insignificant. Earlier health warning labels in the mid-60s cautioned that smoking might be a health hazard; more grim warnings messages were issued in the 1970s. By 1985, the Surgeon General required tobacco companies to rotate four direct warning messages that explicitly state the health risks of lung cancer, heart disease, and emphysema, as well as the dangers of smoking during pregnancy. These continue to appear on tobacco products sold today.

GWLs on Cigarette Packaging

As highlighted in international studies, few people understand the specific health risks of tobacco use. Research supports the advantage of large pictorial warnings over text-only warnings in informing smokers. Theories in social and health psychology assert, and empirical

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studies have demonstrated, the superiority of using pictures and imagery over text-only messages in health communication. For example, a 2009 survey in China revealed that only 38% of smokers knew that smoking causes heart disease and only 27% knew that it causes stroke (WHO, 2017). Research shows that pictorial warnings are critical in communicating health information to populations with lower literacy rates. This is especially important when you consider that, in many countries, smokers have lower education levels. In low- and middle-income countries, warning labels are the primary source of information about the negative effects of tobacco use (Fong et al., 2009).

Research confirms that large, color graphic warnings illustrating the danger of tobacco use are more effective than textual health warnings in reducing smoking and curtailing new smokers. International studies conducted after the implementation of pictorial package warnings in Brazil, Canada, Singapore, and Thailand consistently showed that pictorial warnings significantly increased people’s awareness of the dangers of tobacco use (Fong et al., 2009).

The WHO has also found that hard-hitting anti-tobacco graphics and advertisements influence the number of smokers quitting and decrease the number of children beginning to smoke. These explicit health warnings are a beneficial source of health information for both smokers and non-smokers, increasing health knowledge, awareness and perceptions of the associated risks. GWLs heighten awareness of negative impacts of second-hand smoke, and can persuade smokers to smoke less inside the home and avoid smoking near children to protect the health of non-smokers. GWLs also reduce cigarette package appeal, discourage the start of smoking, and encourage smoking cessation.

In 2008, Article 11 of the WHO’s Framework Convention on Tobacco Control (FCTC) outlined specific guidance on the packaging and labelling of tobacco products. The guidelines specify the design, size, location, color, and message content of health warning labels for tobacco products. Based on the results of research about the most effective placement, the FCTC gave the following guidance for health warning labels on tobacco product packaging:

The location and layout should comprise 50% or more, but not less than 30% of the display area; The font size should be easily legible and in color to enhance visibility and legibility; There should be multiple targeted text health warning messages addressing different harmful health effects for tobacco users and non-users; In addition to or instead of text, full color rather than black and white pictures and graphics are encouraged to enhance attention-grabbing; Pictorial health warnings and messages may also disrupt the impact of brand imagery on packaging and decrease the overall attractiveness of the package.

As of 2016, 105 countries and territories representing about 58% of the world’s population have completed their GWL requirements for tobacco products. Leading the way, the European Union (EU) countries have adopted requirements for picture warnings covering 65% of cigarette packaging. Several countries have adopted even bolder GWL requirements—Nepal and Vanuatu require GWLs to cover 90% of the cigarette packaging, and India and Thailand require 85% coverage for all tobacco products.

In contrast, U.S. smokers are not alarmed by the health warnings on tobacco products according to the Institutes of Medicine. These warnings seemingly go unnoticed or unread, possibly because of their small size, which is easily overwhelmed by product designs on cigarette packs. U.S. health professionals and proponents of GWLs on tobacco products

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contend that more vivid admonitions are needed.

U.S. Congress Acts to Prevent Tobacco Use

In 2009, The Family Smoking Prevention and Tobacco Control Act was passed by Congress and signed by President Obama. This law mandates the FDA to issue regulations requiring color graphics depicting the negative consequences of smoking (see Figure 4: The FDA’s Proposed Nine Graphic Warning Labels). Consistent with WHO’s FCTC guidance, this legislation mandates that color graphics or pictorial warnings cover the top 50% of the front and rear sides of the cigarette package. The same warnings must be included in cigarette advertising and must comprise at least 20% of the area of the advertisement. The graphics must accompany nine new, targeted health warnings in text form.

Figure 4. The FDA’s Proposed Nine Graphic Warning Labels (GWLs)

Source: Hammond, D., Reid, J. L., Driezen, P., & Boudreau, C. (2012). Pictorial health warnings on cigarette packs in the United States: an experimental evaluation of the proposed FDA warnings. Nicotine & Tobacco Research, 15, 93-102.

Although, these labeling requirements for U.S. tobacco products were originally scheduled to become effective in 2012, implementation has dragged. Supporters of GWLs on tobacco products assert that this delay has social costs including preventable deaths, preterm birth, and low-birth-weight infants. Based on evidence from other countries, a modeling study on the potential effectiveness of GWLs estimates implementation of GWLs in the U.S. could reduce smoking prevalence by 5% within just a few years and may have significant impact on

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efforts to curtail smoking in the long-term (Huang, Chaloupka, & Fong, 2014).

Despite the well-known, fact-based benefits of GWLs in addressing a public health issue, efforts to expand health warnings on cigarettes to include color graphics have met opposition in the United States. Critics question the appropriateness of government intervention in product messaging and advertisement content, as it can be considered infringement on free speech.

Tobacco Industry and Lawsuits

As of 2016, the largest global tobacco industry companies included Philip Morris International, British American Tobacco, Imperial Brands, Japan Tobacco International, and China Tobacco. In 2016, Americans spent more on cigarettes than they did on soda and beer combined (Maloney, 2017). The top tobacco companies continue to earn billions in revenue despite the decline in American smoking (see Figure 5: Revenue of Top Tobacco Companies).

Figure 5. Revenue of Top Tobacco Companies

Source: The Tobacco Atlas. (2012). Tobacco company revenue compared to country GDPs. http://www.tobaccoatlas.org/topic/tobacco-companies/

U.S. lawsuits introduced by states against the tobacco industry in the mid-1990s claimed that tobacco causes significant health risks and contributes to cancer deaths. The lawsuits uncovered that the industry had decades of internal memos confirming that tobacco contains nicotine, which is widely known to be both addictive and carcinogenic. Although the tobacco industry denies that nicotine is addictive, large cash settlements were paid by tobacco companies to the states that sued. Subsequently, class action lawsuits have claimed individual damages; the current lawsuits in progress will probably be followed by many more and will likely continue for many years.

Despite this controversy, the tobacco industry remains one of the most highly profitable businesses that has ever existed. Companies continue to spend millions and even billions of dollars annually to advertise their products. Both private and state-owned tobacco companies

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consistently earn significant profits due to price increases, targeted advertising, and marketing strategies including privatization and mergers and acquisitions that have strengthened the market position of the largest global tobacco companies. As highlighted in The Tobacco Atlas

(2012, 4th edition), in 2010, profits from the six leading tobacco companies equaled those of Microsoft, McDonalds, and The Coca Cola Company combined.

Cigarette companies spend millions in advertising dollars targeting two different age groups: adolescents aged 12–17 and young adults aged 18–25 years. Targeting these markets using promotional gimmicks generates revenues that double or even triple the amount invested in advertising.

While tobacco manufacturers understand the responsibility of government to inform and protect the public on health issues, they contend that attempts to expand health warning labels on cigarettes with graphics is unnecessary and redundant. In addition, they claim that pictorial health warnings frighten and stigmatize smokers rather than inform them. Tobacco companies argue that if the government wants more explicit health warnings as a public health policy, then the government should use billboards or TV commercials, not impose restrictions on product packaging. Opponents of GWLs contend that this mandate forces advertisers to include information and gross pictures that might as well say “don’t buy this product” on its packaging (Morgenstein, 2011), and violates the companies’ First Amendment rights.

In R.J. Reynolds v. FDA, the Court of Appeals for the District of Columbia Circuit Court held in 2012 that the Federal Drug Administration’s nine warning labels (including a simulated cadaver, a cartoon drawing of a baby in a cloud of smoke, and a photo of a blackened lung) go beyond factual warnings and are a form of advocacy imposed by the government. Because the labels involve images that do more than convey dispassionate facts, the Court decided that the labels violate the First Amendment. One major reason the Court ruled against the FDA was that the FDA did not provide adequate evidence that graphic images would reduce the number of Americans using tobacco products (Huang et al., 2014).

First Amendment scholars contend that this legal battle has been years in the making and reveals unintended consequences arising from the government’s interest in promoting public health collides with the U.S. Constitution. The Court ruling states the government’s interest in informing or educating the public about the dangers of smoking might be compelling, but an interest in simply advocating that the public not purchase a legal product is not compelling.

How Should Melody Proceed?

Melody personally did not consume tobacco products and thought it was admirable that her company had never done marketing for the tobacco industry, but she pondered whether she had been too quick to demonize tobacco products, or too eager to view the fast food industry in a different light. Her head was spinning as she vacillated between viewing this as a “truth in advertising” issue or government infringement on a company’s free speech and free market pursuit.

Melody questioned whether the government actions fall within its mission to better inform the public or if mandating companies to advertise potential negative effects of their products infringes on the free speech of private enterprise.

As a marketing director for a major pizza company, Melody must decide how to develop a

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1.

2. 3.

4.

5.

6.

7.

marketing campaign for her client during a time with increasingly heated public attitudes— both pro and con—toward government mandates to provide graphic health warning labels on certain products, including tobacco and unhealthy foods, to deter or minimize their use.

Discussion Questions

Is the mandate from the FDA to place graphic warning labels (GWLs) on cigarette products within its mission and purpose? Explain your answer. Do GWLs on products support better consumer protection? Why or why not? Do GWLs on products contribute to improved consumer education? Explain your answer. Are government mandates requiring GWLs on product packaging a limitation to free market enterprise? Why or why not? Are government mandates requiring GWLs on product packaging a limitation on consumer choice? Explain your answer. Does your viewpoint on the use of GWLs differ for tobacco versus junk food products? Why or why not? What are Melody’s next steps as the new marketing director for the pizza company account?

Further Resources Aguinaga Bialous, S., & Peeters S. (2012). A brief overview of the tobacco industry in the last 20 years. Tobacco Control, 21, 92–94. Change Lab Solution. (2012, August 24). New court ruling on graphic cigarette warning labels. Retrieved from http://www.changelabsolutions.org/news/new-court-ruling-graphic-cigarette- warning-labels Hammond, D.Reid, J. L.Driezen, P., & Boudreau, C. (2012). Pictorial health warnings on cigarette packs in the United States: an experimental evaluation of the proposed FDA warnings. Nicotine & Tobacco Research, 15, 93–102. Pakhale, S.Leone, F., & White, A. C. (2013). The argument in favor of graphic warning labels on cigarette packages. Annals of the American Thoracic Society, 10, 50–52. Sohn, E. (2011, June 22). Graphic cigarette warnings: Do they work? Retrieved from http://www.nbcnews.com/id/43499250/ns/technology_and_science-science/t/graphic- cigarette-warnings-do-they-work/#.Wad0aGyotPY Tobacco Free Center. (2011, February). Warning labels: Countering industry arguments. Retrieved from http://global.tobaccofreekids.org/files/pdfs/en/WL_industry_arguments_en.pdf World Health Organization. (n.d.). Nutrition topics: Controlling the global obesity epidemic. Retrieved from http://www.who.int/nutrition/topics/obesity/en/

References American Cancer Society. (n.d.). Tobacco and cancer: Health risks of smoking tobacco. Retrieved from https://www.cancer.org/cancer/cancer-causes/tobacco-and-cancer/health- risks-of-smoking-tobacco.html Bach, L. (2016, November 3). Tobacco warning labels: Evidence of effectiveness. Retrieved from https://www.tobaccofreekids.org/research/factsheets/pdf/0325.pdf Campaign for Tobacco-Free Kids. (2017, August). The toll of tobacco in the United States. Retrieved from https://www.tobaccofreekids.org/problem/toll-us/ FCTC. (2003). WHO framework convent ion on tobacco control. Retr ieved f rom http://apps.who.int/iris/bitstream/10665/42811/1/9241591013.pdf?ua=1

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Fong, G. T., Hammond, D., & Hitchman, S. C. (2009). The impact of pictures on the effectiveness of tobacco warnings. Bulletin of the World Health Organization, 87, 640–643. Ha, T. T. (2012, October 23). Junk food needs graphic warning labels similar to tobacco, Ontario doctors say. Retr ieved from https://beta.theglobeandmail.com/life/health-and- fitness/health/junk-food-needs-graphic-warning-labels-similar-to-tobacco-ontario-doctors- say/article4631243/?ref=http://www.theglobeandmail.com& Huang, J., Chaloupka, F. J., & Fong, G. T. (2014). Cigarette graphic warning labels and smoking prevalence in Canada: A critical examination and reformulation of the FDA regulatory impact analysis. Tobacco Control, 23(Suppl 1), i7–i12. Jones, A.Gulbis, A., & Baker, E. H. (2010). Differences in tobacco use between Canada and the United States. International Journal of Public Health, 55, 167–175. Maloney, J. (2017, April 23). Against all odds, the U.S. tobacco industry is rolling in money. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/u-s-tobacco-industry- rebounds-from-its-near-death-experience-1492968698 Morgenstein, M. (2011, August 17). Tobacco giants suing FDA over warning labels mandate. Retrieved from http://www.cnn.com/2011/HEALTH/08/17/cigarette.labels.lawsuit/index.html World Health Organization. (2017, May). Media centre: Tobacco. Retr ieved from http://www.who.int/mediacentre/factsheets/fs339/en/ http://dx.doi.org/10.4135/9781526445483

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