Reuters and The Wall Street Journal recently reported that Cincinnati-based U.S. Court of Appeals has passed a ruling saying that the U.S. Food and Drug Administration (FDA) can impose restrictions on the graphic labels of the cigarettes packets sold in the country. The ruling also went on to say that these restrictions were not unconstitutional, as they in no way violated the freedom of speech of the tobacco companies.
In a ruling in June last year, the FDA had asked the tobacco giants of United States to design their cigarette packets, starting October 2011, according to the norms set by the council. Graphic design of a dead body, cancerous lungs and rotten teeth would definitely be a scary intimidation for US tobacco lovers each time they pick up a packet of their favorite brand.
Moreover, the ruling required that the labels must be printed in color and must cover the top 50% of a cigarette pack’s front as well as back panels.
The labels were designed keeping in tune with the “Family Smoking Prevention and Tobacco Control Act” to convey the health hazards of smoking. The act gives FDA the authority to restrict the tobacco industry’s efforts to tap children, ban the introduction of flavored tobacco products, cut out misleading terms such as “light and low,” propagate larger and more effective warning labels and ask for a detailed information about all ingredients as well as additives.
FDA expects to cut the smoking population by 213,000 by 2013 by using labels that would induce fear and disgust among Americans and thereby discourage them from lighting up.
Five tobacco giants across the globe together protested against the forceful use of horrendous labels on the cigarette packets. Reynolds American Inc. (RAI), Lorillard Inc. (LO), Ligget Group, Santa Fe Natural Tobacco, and Commonwealth Brands filed a case against FDA for imposing labels that are more probable of cutting down smokers rather than helping consumers make a free choice.
The companies appealed that the labels not only scare smokers but also incur huge printing expenses. The FDA also issued that the nine warning labels should be rotated so that all the companies have all the labels printed on their packs periodically.
In November 2011, the tobacco companies heaved a sigh of relief as a federal judge blocked the rule that mandated tobacco warning labels on the cigarette packets. The images and texts or the health warnings, FDA, were considered to violate these companies’ right of free speech, and thus the rule was blocked by U.S. District Judge Richard Leon in Washington.
The interpreter noted that the ruling of the FDA, which compelled the tobacco giants of United States to print the latest design set by the council on their cigarette packets containing graphic design of a dead body, cancerous lungs and rotten teeth, may “unconstitutionally compel speech.”
According to Judge Leon, the images were digitally enhanced to provoke an emotional response rather than being “purely factual.” However, the ruling has not been entirely washed out; the judge only postponed the Sept. 22, 2012, deadline for the regulations to take effect until he finishes reviewing the rulings of the FDA.
However, anti smoking groups welcomed the current decision of the US court. In recent years, more than 40 countries or jurisdictions have introduced labels similar to those created by the FDA. After a survey in countries using graphic labels, The World Health Organization revealed that the visibility of the label was much higher and almost 25% had responded by opting to quit.
United States had so far been very soft with its cigarette warnings, unlike other nations like Uruguay, Brazil and Canada. After Canada issued the first-of-its-kind law in 2000 about affixing warnings in cigarette packs, smoking rate fell to 20% from 26%.
Reynolds American holds Zacks #3 Rank, which translates into a short-term Hold rating and Lorillard holds Zacks #2 Rank, which translates into a short-term Buy rating.
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