TOPIC

PROVISION

Marketing and Advertising Restrictions

• Calls for the development of national and state protocols, the industry would agree to, that would:
• Prohibit outdoor advertising and advertising on the internet;
• Prohibit the use of human images, animal figures, or cartoon characters;
• Limit print advertising to black and white text only (except in adult periodicals and venues); and
• Limits color ads to the back face of adult magazines.
• Limits advertising to Food and Drug Administration (FDA)/Federal Trade Commission (FTC) specified media.
• Restricts glamorization of tobacco.
• Any advertising that violates the statute or protocol is considered "false and misleading" under FTC’s Section 5 authorities.
• Eliminates liability limits if tobacco companies challenge or are no longer bound by advertising restrictions.
• Places size, color, number, and placement restrictions on point-of-sale advertising and displays.
• Prohibits additional point-of-sale advertising for companies with higher market share.
• Provides for federal and state regulatory authority over tobacco product advertising.

Federal Regulation of Tobacco Products and Nicotine

• Gives FDA broad authority over tobacco, including advertising, youth access, and new products.
• Establishes separate chapter of the Food, Drug and Cosmetics Act authorizing FDA regulatory authority over tobacco.
• Provides that any ban on nicotine, retail sales, or other category of tobacco products would require presidential notification to Congress and include a two-year waiting period for Congress to act. If Congress fails to act during the two-year waiting period, the ban would go into effect.
• Establishes that the FDA has no authority over farmers.
• Requires FDA rules to take into account the impact of actions on demand for unregulated contraband products.

Warnings, Labeling & Packaging

• Requires new, explicit warning labels in bold type.
• Requires alternating black on white; white on black warning labels.
• Allows FDA to update warnings at any time based on science.

Smoking Restrictions In Public Facilities

• Restricts smoking in public facilities to enclosed areas.
• Specifies that employees may not be required to enter smoking areas.
• Exempts restaurants (other than fast food), bars, private clubs, hotel guestrooms, casinos, bingo parlors, tobacco outlets, and prisons.
• Allows states two years to opt out.
• Authorizes an incentive grant program for states.

Youth Access Restrictions

• Establishes federal prohibition on sales to minors under age 18.
• Requires photo identification for individuals under age 27 who want to purchase tobacco products.
• Requires face-to-face transactions.
• Bans vending machine and self-service sales, except in adult-only facilities.
• Permits mail-order sales, subject to FDA review.
• Requires FDA to administer restrictions.

State Enforcement of Youth Access Laws

• Sets compliance goals for state and tribal governments.
• Provides funding from the settlement for enforcement efforts.

Licensing of Retailers

• Requires state, tribal and federal licensing program to be funded from settlement payments.
• Requires the FDA to draft a model state law in consultation with state and local officials.
• Creates a block grant program for states that enact laws requiring licensing of retailers, including enforcement and penalty provisions. States that choose not to participate may still receive enforcement funding to carry out a federal program.

Preemption

• Allows state and local governments to impose any additional tobacco product control measures that are not inconsistent with the provisions of this Act.

Cessation & Prevention

• Authorizes the following programs:
• National Community Action Program;
• National Cessation Research Program;
• National Tobacco Free Public Education Program; and
• National Smoking Cessation Program.
• Creates a Tobacco Use and Cessation Board.

Native Americans

• Provides that the requirements of the Act relating to the manufacture, distribution, and sale of tobacco products apply on tribal lands.
• Provides that the federal government would collect state taxes on cigarettes sold on tribal lands and pass the taxes through to state governments.
• Considers tribes as states for the purposes of eligibility for public health funding.

Underage Tobacco Use Targets

• Sets reduction targets of underage use:
• Cigarettes:
• 3 years – 15%
• 5 years – 30%
• 7 years – 50%
• 10 years – 60%
• Smokeless Tobacco:
• 3 years – 12.5%
• 5 years – 25%
• 7 years – 35%
• 10 years – 45%

(Assumes base of 4.5 million youth smokers)

Industry Penalties

• Requires industry to pay tiered monetary penalties (non-tax deductible) for falling short of youth reduction targets:
• 1-5 percentage points short - $80 million per point
• 6-10 percentage points short - $160 million per point
• 10 or more percentage points short - $240 million per point
• Establishes an annual cap of $3.5 billion on penalty payments (not tax deductible).
• Provides for joint, several & strict liability for penalties (payments based on market share).
• Manufacturers may bring claims against each other for financial liability.
• Provides that if any company misses its share of the target by more than 20 points, the company’s liability cap is waived for 2 years or until goal is met, whichever is later, with due process.
• Liability cap is waived for criminal convictions of violations under this Act.
• Creates a Tobacco Agreement Accountability Panel comprised of representatives from the FDA, Centers for Disease Control and Prevention (CDC), and U.S. Department of Health and Human Services (HHS), to oversee a company’s compliance plan with requirements of the Act.
• Authorizes the panel to submit information to a court in cases of serious non-compliance allowing the court to lift liability protections.

Corporate Culture and Compliance, Lobbyists and Whistle-Blowers

• Requires the development of national and state protocols requiring an industry plan to comply with all new laws on the manufacture and distribution of tobacco.
• Protects industry whistleblowers.
• Requires lobbyists to comply with the act and agree not to support or oppose any federal or state legislation without the consent of manufacturers.
• Disbands the Tobacco Institute and the Council for Tobacco Research.
• Requires the industry plan to include a specific assessment mechanism and enforcement standards in the protocols.

Establishment of Tobacco Trust Funds and Annual Industry Payments

• Establishes a National Tobacco Settlement Trust Fund.
• Requires the industry to pay $10 billion up front.
• Establishes a per pack licensing fee according to the following schedule:
• 1999 - 65 cents per pack
• 2000 - 70 cents per pack
• 2001 - 80 cents per pack
• 2002 - $1 per pack
• 2003 - $1.10 per pack
• (Meets Administration budget request for real $1.10 increase in 5 years)
• Yearly payments required of the industry:
• 1999 - $14.4 billion
• 2000 - $15.4 billion
• 2001 - $17.6 billion
• 2002 - $21.2 billion
• 2003 - $23.6 billion
• 2004-2006 – yearly $23.6 billion in dollars beginning in 2004 (real) and adjusted to inflation.
• Payments are volume adjusted, increased if consumption volume increases and decreased if volume decreases from 2004 levels.
• Total industry payment exposure over 25 years (minus look back penalties) - $506 billion (real), not volume adjusted or $89 billion (real) if volume reductions are achieved.
• These payments are tax deductible.

Consent Decrees and National Protocol

• Provides for manufacturers and states to enter into consent decrees that include many of the provisions of the Act, and a waiver of Constitutional claims.
• Requires each manufacturer to enter into a legally binding and enforceable contract (The National Tobacco Control Protocol) on both the state and federal levels, within 6 months of enactment.
• Provides that the federal protocol be executed with the U.S. Attorney General in consultation with the Secretary of HHS and that the state protocol be executed with the State Attorney General in consultation with the governor.

Mandated Pass-Through Payments

• Establishes a limited anti-trust exemption to permit industry to comply with the requirement that they pass-through payments to cigarette prices and to adopt an industry plan to comply with law and protocol.

Non-Participating Manufacturers

• Denies non-participating manufacturers liability protection and imposes user fees on them; and
• Requires annual payments into a reserve fund to settle liability claims.

Attorney’s Fees

• Provides that all attorney’s fees and costs paid by industry are outside the payments made under this Act.
• Authorizes the establishment of a three-member arbitration panel to negotiate fees (a plaintiff representative and a defendant representative pick a third member).

Civil Liability Restrictions

• Caps liability at $6.5 billion a year.
• Settles attorney general lawsuits and current major class-action cases.
• Sets no limit on class action lawsuits or punitive damages.

Industry Document Disclosure

• Creates the National Tobacco Document Depository.
• Expands availability of documents in the public depository for use by plaintiffs in actions against the industry and provides for efficient use of the documents.
• Requires manufacturers to deposit:
• All deposition of corporate representatives;
• Depositions of all expert and fact witnesses;
• Answers to interrogatories in all cases;
• Court orders on substantive issues;
• All documents provided in recent specified lawsuits;
• All health research documents; and
• Document indexes maintained by the industry.
• Allows manufacturers to determine and withhold documents protected by attorney-client privilege.
• Requires manufacturers to deposit a detailed, itemized log of privileged documents.
• Establishes a three-judge federal arbitration panel to settle disputes over making privileged documents public.

Federal Recoupment of State Settlement Funds Attributable To Medicaid

• Prohibits federal recoupment of any state tobacco settlement funds attributable to Medicaid, both prospectively and retrospectively. (Note: NCSL has not been able to confirm that the bill addresses current state settlement funds. If the provision does not address existing state tobacco settlement agreements, it is possible HHS will recoup funds from as many as 40 states.)

Trust Fund Expenditures

• Specific funding levels will be established during the Senate floor debate.

Funding Priorities

• Includes a "Sense of the Senate" Resolution that states that the funds raised by this Act should be used to support the following priorities:
• Tobacco use prevention and cessation;
• Tobacco-related health research;
• Assistance to tobacco farmers and to tobacco dependent communities;
• Reimburse public health care financing programs for tobacco-related costs, including Medicare;
• Settle with and reimburse states for tobacco-related health care costs and damages, including Medicaid;
• Establishment of a Tobacco Asbestos Trust Fund to assist asbestos workers;
• Funding for the black lung program;
• Funds to compensate veterans for service-related smoking claims; and
• Assistance for vending machine companies affected by lost sales resulting from the vending machine ban (see "Marketing and Advertising").

Agricultural and Rural Community Assistance

• Includes the Leaf Act, which continues the federally-administered quota and price support system.
• Creates the Tobacco Community Revitalization Trust Fund from payments by industry.
• The fund pays for lost tobacco quotas, tobacco community Economic Development Grants, Farmer Opportunity Grant Program, and the Tobacco Worker Transition Program.
• Offers farmers the opportunity to stop producing tobacco by selling their quotas.
• Provides tobacco farmers with educational and economic assistance to convert to other crops or shift to a new vocation.
• Provides general immunity for tobacco producers and warehouse owners.

International Tobacco Control

• Creates a non-profit corporation and provides funds for international tobacco control programs.
• Prohibits use of federal funds to promote U.S. tobacco exports or to seek to remove nondiscriminatory restrictions on tobacco products by foreign countries.
• Prohibits U.S. employees of tobacco companies from marketing to children overseas.
• Requires tobacco product exports to carry warning labels.