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No smoke screen RJR accused of violating tobacco settlement
By Mike Fish, CNNSI.com Brace yourself, race fans. The sugar-daddy of Winston Cup racing, R. J. Reynolds Tobacco Co., stands accused of violating the 1998 multi-billion dollar tobacco settlement with state governments by advertising year-round at race tracks. If the signage is struck down, it could cause RJR to re-evaluate its financial support of racing, which industry sources believe approaches $40 million a year. R. J. Reynolds, through its Winston brand, has long been a major supporter of both the NASCAR stock car racing and NHRA drag racing series. The Winston Cup has been the championship trophy of NASCAR's premier series since 1971, with the company's support of the point fund, alone, growing from $100,000 the first year to more than $13 million this season. Clearly, the relationship is fruitful to the parties. Studies reveal that Winston is far-and-away the No. 1-sponsor, in terms of on-air mentions, during televised NASCAR racing. That exposure alone would cost Reynolds countless millions, if it were still allowed to buy the airtime. So, even though this might appear a minor legal flap, you have to wonder about the Winston name in NASCAR if it can't get full exposure. Simply put, the tobacco giant stands accused here of trying to pull a fast one. And the courts are being asked to enforce the tobacco settlement, as it pertains to outdoor signage, as well as awarding any relief deemed appropriate.
In response Tuesday to separate suits brought by attorneys general in California, Arizona, New York and Washington, the Reynolds legal team acknowledged existence of the signage at various tracks but denied that its violates the 1998 agreement. The issue really isn't that complex. Attorneys for the states argue that R. J. Reynolds has matter-of-factly violated a clause in the National Tobacco Settlement, which dictates that tobacco companies can post outdoor advertising 90 days before and 10 days after a sponsored motor-sports event. An event, in their eyes, is a single Winston Cup race. Officials for the tobacco giant contend their sponsorship is of the entire NASCAR Winston Cup and NHRA Winston Drag Racing series, which start in February and run through November. So their signage, to the chagrin of states, is a permanent fixture at major racing facilities from coast to coast -- some of which is seen by passing motorists and TV audiences. Alabama has not filed suit, but permanent Winston Cup Series signage was visible from the main road leading to last weekend's Talladega 500. "I think they're just trying to keep those signs up as long as they can," said Tim Nelson, Arizona assistant attorney general. "The bottom line is if you describe the event as the entire series, then there is no reason to even have a 100-day window because it'd be a year-round deal. That’s not the agreement. "The issue is how hard they're pushing the envelope in terms of what they agreed to do. And we think they're pushing too hard." Anti-smoking advocates believe the tobacco giant is attempting to circumvent rules against TV advertising through its costly sponsorship of motor sports. R.J. Reynolds says it's just a difference in interpretation of a key provision in the settlement, suggesting that the lawsuits are an attempt to renegotiate the agreement through the courts by imposing new restrictions. Reynolds' chairman, Andrew J. Schindler, said in a written statement that the agreement "established the marketing rules under which cigarette manufacturers could compete for adult smokers' business, while minimizing youth exposure to advertising. Imposing new restrictions that accrue to the benefit of one company over another undermines the free-enterprise system. ... When competition is reduced, the market leader, in this instance Philip Morris and its Marlboro brand, is the likely beneficiary."
Who's No. 1 doesn't interest law enforcement bosses. Instead, the attorneys general in the four states have documented with photos that the advertisements violate the 100-day window, and suggest that in some cases the signage has never come down since the agreement was signed in 1998. At Phoenix International Raceway, which host one Winston Cup race a season, large signage advertising the NASCAR Winston Cup Series is displayed on the track's turns and above the grandstand. Similar signage exists at the city's drag racing facility, along with a permanent structure called the Winston Pavilion. "The race tracks host numerous other events outside the 100-day [advertising] window and thousands are exposed to the Winston ads," Nelson said. "Kids 12-and-under are admitted for free to some of the events, and they're all getting exposed to the advertising. "We had an Indy car event at PIR [this spring] that was televised by FOX. And they got hit-after-hit every time they showed the Winston signs." California officials trumpet a like complaint, alleging cigarette signage is visible to millions of television viewers during non-Winston events at Sears Point Raceway in Sonoma and Pomona Raceway in Los Angeles county. Dennis Eckhart, a California senior assistant attorney general, said potential violations were identified in at least 10 states. The belief is that a victory by the suing states would force Reynolds to make changes nationwide. "It's strictly a question of legal interpretation and there is really not a dispute about where the signs are and which ones we're talking about," Eckhart said. Along with attempts by individual states to resolve their differences with Reynolds, Pennsylvania attorney general Mike Fisher wrote the company last December in his role as chairperson of the National Association of Attorney Generals. Fisher cited 15 violations at race venues and suggested that RJR's position on outdoor advertising is "completely at odds with the letter and intent of the [settlement agreement] and borders on bad faith." As part of the tobacco industry's 1998 settlement with 46 states, it paid $206 billion and agreed to, among other things, restrictions on outdoor advertising and brand-name sponsorships. Florida was one of the state's signing its own earlier deal, and is not party to the master agreement. It puts Florida in a unique position of being home to NASCAR and its signature track, Daytona International Speedway, where state officials have no jurisdiction over tobacco signage or the track's popular Winston Tower. "It is an extraordinary circumstance here in Florida for that tower to be there," said Jim Peters, Florida assistant attorney general. "It can’t be an issue with us. If it was some other state -- hell, yes. "You could not replicate in California, for instance, what we may be observing at Daytona Beach at the International Speedway." But if the suing states prevail, Peters suspects repercussions will filter down to NASCAR's hometown.
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