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Controlling the Retail Sales Environment: Access, Advertising, and Promotional Activities

Robert L. Rabin

Stanford University

School Law

RESTRICTIONS ON YOUTH ACCESS

Introduction

In the 1990s, the attention of the public health community came to focus, among other concerns, on youth access to tobacco products. In part, this attentiveness reflected the persisting high number of underage smokers and the continuing indications in the trend data that no significant inroads were being made in reducing the initiation and prevalence of youth smoking (Johnston et al. 2004b). But the emerging public health concern for supply-side strategies also indicated a sense of disenchantment with the efficacy of information-based, demand-side smoking reduction strategies, such as in-school programs. In addition, at that time, counter-advertising strategies aimed at reformulating youth attitudes towards tobacco use—once again, a demand-side set of initiatives—had yet to provide any indication of success. To the contrary, taking into account the broader vantage point of advertising and promotion engaged in by the tobacco industry to encourage youth smoking, it appeared quite clear that the industry had the upper hand (DiFranza et al. 1991).

The case for the legitimacy of the state’s engaging in youth access protection activity was firmly grounded: The rationale of a state’s undertaking child protection activity rests on long-standing tradition. Reflecting this tradition, tobacco sales to minors were illegal in every state (in most cases, with an age limitation of 18 years). Hence, proactive enforcement of youth access restrictions simply reflected implementation of sanctions on illegal conduct. As a policy choice, however, in contrast to a question of legal authority, the case is not quite so clear-cut. Glantz (1996), among others, has argued that vigorous enforcement of youth access restrictions is a highly problematic public health strategy on the grounds that it is likely to make smoking—as a “forbidden fruit” and one proscribed by “authority”—more attractive to youth, rather than less so (Glantz 1996). Whatever the merits of this argument, clearly the dominant strand in 1990s thinking was that supply-side restriction, in the form of more effective youth access limitations, was a strategy worth pursuing.

Youth Access: 1990–2001

In 1992, Congress enacted the Synar Amendment, aimed at addressing the continuing illegal sales of tobacco to minors (Section 1926, Public Health Service Act [42 USC 300x-26] 2004). This legislation required that all states enact and enforce youth access laws, with the sanction of



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Ending the Tobacco Problem: A Blueprint for the Nation L Controlling the Retail Sales Environment: Access, Advertising, and Promotional Activities Robert L. Rabin Stanford University School Law RESTRICTIONS ON YOUTH ACCESS Introduction In the 1990s, the attention of the public health community came to focus, among other concerns, on youth access to tobacco products. In part, this attentiveness reflected the persisting high number of underage smokers and the continuing indications in the trend data that no significant inroads were being made in reducing the initiation and prevalence of youth smoking (Johnston et al. 2004b). But the emerging public health concern for supply-side strategies also indicated a sense of disenchantment with the efficacy of information-based, demand-side smoking reduction strategies, such as in-school programs. In addition, at that time, counter-advertising strategies aimed at reformulating youth attitudes towards tobacco use—once again, a demand-side set of initiatives—had yet to provide any indication of success. To the contrary, taking into account the broader vantage point of advertising and promotion engaged in by the tobacco industry to encourage youth smoking, it appeared quite clear that the industry had the upper hand (DiFranza et al. 1991). The case for the legitimacy of the state’s engaging in youth access protection activity was firmly grounded: The rationale of a state’s undertaking child protection activity rests on long-standing tradition. Reflecting this tradition, tobacco sales to minors were illegal in every state (in most cases, with an age limitation of 18 years). Hence, proactive enforcement of youth access restrictions simply reflected implementation of sanctions on illegal conduct. As a policy choice, however, in contrast to a question of legal authority, the case is not quite so clear-cut. Glantz (1996), among others, has argued that vigorous enforcement of youth access restrictions is a highly problematic public health strategy on the grounds that it is likely to make smoking—as a “forbidden fruit” and one proscribed by “authority”—more attractive to youth, rather than less so (Glantz 1996). Whatever the merits of this argument, clearly the dominant strand in 1990s thinking was that supply-side restriction, in the form of more effective youth access limitations, was a strategy worth pursuing. Youth Access: 1990–2001 In 1992, Congress enacted the Synar Amendment, aimed at addressing the continuing illegal sales of tobacco to minors (Section 1926, Public Health Service Act [42 USC 300x-26] 2004). This legislation required that all states enact and enforce youth access laws, with the sanction of

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Ending the Tobacco Problem: A Blueprint for the Nation loss of federal block grant substance abuse and treatment funding for noncomplying states. Under subsequently adopted Department of Health and Human Services (DHHS) regulations, states were required to reduce the rate of retailer violations of youth access laws to 20 percent or less by 2003 (DHHS 1996). In a complementary mode, the Federal Drug Administration (FDA) adopted a comprehensive set of youth regulations in 1996 that included a major compliance check program under the auspices of the agency. The regulations had a short shelf-life, however: The FDA program was invalidated by the U.S. Supreme Court in 2000 on the grounds that tobacco regulation was outside the scope of the agency’s authority (FDA v. Brown & Williamson, 2000). As mentioned above, every state has baseline legislation prohibiting sales to minors. Both the Synar Amendment and the failed FDA effort reflect the fact that in the 1990s, when attention came to focus on youth access, there was a widespread perception that states and localities were simply not enforcing these provisions with any vigor. Rigotti (2001) documents a considerable number of studies, beginning in 1987 and extending well into the 1990s, revealing widespread merchant indifference to the laws and a like indifference on the part of enforcement authorities (Rigotti 2001). Indifference is, of course, quite a different matter from disagreement in principle, and Rigotti (2001) asserts that in fact there is widespread agreement among tobacco control activists and public health experts on the provisions that would be incorporated in a model access restriction law. In summary, the principal guideposts Rigotti (2001) mentions are: (1) establish a minimum age of at least 18, (2) require that retailers establish proof of age through checking identification, (3) create a tobacco sales licensing scheme, (4) require periodic tests of retailers’ compliance, (5) establish administrative or civil law penalties for illegal sales, and (6) prohibit self-service displays of tobacco products (IOM 1994). The existing state and local laws on the books, as might be expected, incorporate many of these provisions. However, there were almost no data on ongoing enforcement levels, so it was impossible to conclude with any confidence whether enforcement practices had changed in any meaningful way from the rather dismal record of the period immediately before the Synar Amendment was enacted. Moreover, in a considerable number of instances, local ordinances that appeared strong, at least as written, were diluted by weaker state laws preempting inconsistent local provisions. In 1996, once the Synar Amendment came into effect, the logical inquiry was whether it would exert an independent positive influence on state and local enforcement practices. In the early years, this appears not to have been the case. In an analysis of 1997 substance abuse block grant applications from all states, DiFranza (1999) concluded that “states and DHHS are violating the statutory requirements of the Synar Amendment rendering it ineffective” (DiFranza 1999). In a subsequent study of state Synar compliance through 2000, however, DiFranza and Dussault (2005) find a more positive state of affairs (DiFranza and Dussault 2005). Despite some leniency in holding states to established targets, as DHHS pressured some states to move from educational to compliance-testing strategies, states made considerable progress in achieving maximum 20 percent noncompliance goals. In the late 1990s, a number of studies were conducted of communities that engaged in proactive enforcement, aimed at assessing the efficacy of these efforts. Initially, these studies generally took reduction in access as an outcome measure (i.e., merchant compliance rates, as measured by failed efforts by minors to successfully purchase tobacco products), rather than reduction in smoking initiation or prevalence. These earlier studies were generally uncontrolled, rather than

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Ending the Tobacco Problem: A Blueprint for the Nation matched with non-proactive communities sharing like demographic characteristics. Later studies made an effort to measure effects on smoking activity through self-reports from sample youth populations in the communities and also were designed as controlled studies. Rigotti (2001) analyzes the studies in detail through 2001 and concludes that the results, in terms of efficacy, are mixed at best. The first wave of studies to examine the impact of tobacco sales laws assessed intermediate endpoints (merchant compliance laws) and clearly demonstrated that enforcing the laws changed retailer behavior. Enforcement must continue to be done regularly to remain effective. The relative effectiveness of different penalties as deterrents to selling tobacco to minors has not been systematically studied (Stead and Lancaster 2000). The second wave of studies uses youth access to tobacco and tobacco use as outcomes. These studies have yet to provide conclusive evidence that interventions using retailer education or law enforcement alone can change the ease with which young people obtain tobacco products. Because interventions have not been able to interrupt the supply of tobacco to minors, it is not surprising that they have not been clearly shown to reduce youth tobacco use (DiFranzia 2000; Rigotti 1999; Stead and Lancaster 2000). Existing studies have not been able to provide a rigorous test of the supply reduction hypothesis because it has proved difficult to mount interventions that substantially reduce the supply of tobacco to minors (Rigotti 2001). Another variable that warrants further exploration—both in future efficacy studies and as a more general policy matter—is the nature of the sanctions attached to violation of youth access laws. Existing laws have ordinarily relied on fines and penalties assessed against errant merchants; a stronger sanction obviously would be the threat of loss of license to sell tobacco products (Fichtenberg and Glantz 2002).1 But penalizing merchants does not exhaust the field. Another approach, either complementary or independently, would be to criminalize either purchase or possession. In other words, relying from a deterrence perspective on the threat of criminal sanction against the purchasing minor (demand side) as well as the vendor of the product. In tandem, these sanctions might prove more efficacious than relying exclusively on punishing the seller. However, these alternative sanctioning approaches nonetheless fail to address, in themselves, two critical dimensions of the problem in reducing tobacco use by minors. At the threshold, there is the temporal concern—that is, the very real prospect that a short-term commitment to vigorous enforcement will yield only short-term effects—that staying power has yet to be demonstrated. The still more complicated factor is the presence of noncommercial sources of tobacco—friends and family—as alternative sources, which appear to play a more significant role when commercial sources are perceived to be less available. Recent Analyses: Post-2001 Once again, it is critical to keep in mind three distinct possible outcome measures: (1) changes in merchant compliance (ordinarily measured by “stings,” i.e., test purchasing), (2) changes in ease of access (ordinarily measured by studies of youth perceptions of availability), and (3) changes in youth smoking behavior (ordinarily measured by trends in smoking initiation or prevalence). In a recent study of perceived ease of access, based on Monitoring the Future data, 1997– 2002, Johnston and colleagues (2004a) find that perceived ease of access is linked to smoking 1 It should be noted, however, that a majority of states already have licensing statutes on the books, and this datum has had no discernable deterrent effect in restricting youth access.

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Ending the Tobacco Problem: A Blueprint for the Nation consumption: current regular smokers are significantly more likely to report easy access than never-smokers or past smokers (Johnston et al. 2004a). Moreover, a strikingly high percentage of current smokers (65 percent) report obtaining cigarettes from noncommercial sources (friends, relatives) within the past 30 days. Gilpin and colleagues (2004) provide confirmatory findings, based on analysis of population data from the California Tobacco Surveys, in a study of two cohorts of adolescent smokers in California, 1993–1996 and 1996–1999 (Gilpin et al. 2004). In the earlier cohort, without significant change throughout the period in level of enforcement activity, there was no noticeable difference in transitioning into the current smokers category between those who perceived cigarettes as difficult to obtain and those who perceived this as an easy matter. In the later period, when there was considerably higher enforcement activity, there was a significantly higher transition to current smoking among those who perceived access as easy at the beginning of the period compared to those who perceived it as difficult. After controlling for changes in other regulatory control variables, the authors conclude that higher levels of enforcement had a protective effect, reinforcing the propensity of never-smokers to avoid initiation. The Johnston and colleagues (2004b) study also confirms the finding across numerous studies that social sources of cigarettes undercut the benefits achieved from reducing availability from commercial sources. At the same time, however, Johnston and colleagues (2004b), along with the confirmatory findings in Gilpin and colleagues (2004), suggest a more subtle corollary: even if confirmed smokers do find alternative sources of tobacco—“friendly” commercial establishments or social sources and if commercial access generally is constrained, never-smokers or past-smokers may well be dissuaded from commencing or recommencing smoking by perceptions of difficulty in obtaining tobacco products. But there is conflicting evidence on virtually every dimension of the youth access problem. Dent and Biglan (2004) draw on Oregon Healthy Teens data to survey 8th and 11th grade students from 75 communities in the state regarding the relationship between illegal sales activities and prevalence of tobacco use (Dent and Biglan 2004). Although the findings do indicate a weak relationship between illegal sales rates and smoking prevalence among 11th graders, the dominant finding in the study is the extent to which adolescents adjust their tobacco sources to the available outlets—in particular, the pronounced effect of youths’ shifting to social sources when commercial sources become more problematic. Fichtenberg and Glantz (2002) stake out an even stronger position in a review essay on the eight studies they were able to identify, conducted between 1985 and 2001, in which an effort was made to conduct cohort studies of the association between youth access merchant compliance programs (featuring sting operations) and smoking prevalence (Fichtenberg and Glantz 2002). The authors concluded that no positive association has been established between these youth access interventions and prevalence of youth smoking. Once again, they speculate that the lack of association is largely determined by the availability of noncommercial sources. Finally, on the independent issue of youth perceptions of availability, as distinguished from smoking behavior, Thomson and colleagues (2004) examine a database of all town-level access ordinances in Massachusetts, and in a cross-sectional analysis finds no significant association between communities with high-level restrictions and adolescent perceptions of availability, apart from those communities that had banned free-standing displays of tobacco products (where a positive association was present) (Thomson et al. 2004).

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Ending the Tobacco Problem: A Blueprint for the Nation Summary While the efficacy of proactive enforcement has yet to be firmly established, it can be argued that continued efforts at supply-side access restrictions are warranted, not as the endpoint of an effective tobacco control policy, but as a complementary component of a comprehensive package of control initiatives, if for no other reason than the symbolic value of demonstrating that the public commitment to reducing tobacco use in the critical early years of smoking initiation is not simply a matter of lip-service. In their recent analysis of state compliance with the Synar Amendment, 1992–2000, DiFranzia and Dussault (2005) cautiously suggest: It is certainly plausible that Synar has contributed to this salubrious trend [a 30 percent decrease in youth smoking rates since Synar went into effect] as one component of a multifaceted public health effort that has included price hikes, education, anti-smoking media campaigns, limited restrictions on tobacco marketing, and restrictions on public smoking. It would therefore seem wise to maintain this policy while its impact is carefully evaluated (DiFranzia 2005, supra note 11 at 98). Beyond this, on the basis of presently available data, it cannot be predicted with any degree of confidence that positive outcome determinations in smoking prevalence will result from investing resources in proactive merchant compliance activities. POINT-OF-PURCHASE PROMOTIONS AND ADVERTISING Introduction With the adoption of the Master Settlement Agreement (MSA) in 1998, billboard advertising was prohibited, brand item advertising was limited, and the public entertainment forum advertising was sharply restricted. As a consequence, there was a dramatic shift in the tobacco industry’s advertising and promotion budgets. Pierce and Gilpin (2004) report that by 2001, more than 80 percent of the total advertising and promotion expenditures by the industry were targeted at incentives to merchants and retail value-added offers; in short, retail marketing became the dominant strategy (Pierce and Gilpin 2004). The main venues of such advertising are convenience stores, small grocery stores (often in tandem with the sale of gas), liquor stores, chain supermarkets, and chain pharmacies, with youth access especially concentrated at the first two of these sources. Concomitantly, it appears that a notably disproportionate share of the industry’s advertising and promotion budget, as detailed below, is channeled to those outlets where underage youths tend to hang out or make purchases, raising serious questions as to the efficacy of the MSA advertising limitations in addressing the problem of underage smoking. Indeed, contractual arrangements regarding placement and promotional initiatives are highly site-specific. In the case of independent stores, manufacturers’ representatives generally make site visits to discuss these matters while arrangements with chains are more commonly conducted through dealings with the central retailing office. What are the principal strategies used in the retail environment? For analytical purposes, it is possible to identify a set of promotional policies and a set of pricing strategies. The former would include product placement initiatives, such as self-service displays. As indicated in the preceding section on youth access, self-service readily lends itself to shoplifting, as well as providing a particularly prominent enticement to an on-the-spot purchase attempt. Apparently, however, self-service is on the decline as a voluntary matter: Retailers don’t like it, precisely because

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Ending the Tobacco Problem: A Blueprint for the Nation of the pilferage problem, and at least one of the tobacco manufacturers—Philip Morris, in fact— has come down against the practice, most likely as part of its effort to present a better image. Closely related to self-service as a strategy is a broader set of height and visibility display considerations, which are in fact the subject of detailed specification in the manufacturer–retailer contract, indicating the importance of these marketing considerations to the tobacco companies. Related to these specifications are the so-called slotting fees, which are industry fees paid to retailers in the form of discounts linked to advantageous placement and promotion vis-à-vis competing brands. In addition to product placement itself, these merchandising strategies address an array of product accessories: signage (e.g., discount deals), logos, banners, display racks, and window posters. The second set of strategies involves pricing policies. So-called “buy-downs” feature inventory clearance deals, which are time-constrained discounts. Then, there is the most basic of pricing strategies: straight volume discounts. Finally, there are an array of other stratagems, ranging from “buy one, get one free” to coupon-related inducements. In tandem with the promotional strategies, these initiatives constitute the industry’s current effort to shift directions, post-MSA, from the traditional mass medium advertising to a frame of reference that is much closer to the potential buyer’s immediate impulse for gratification. Retail Environment: Magnitude of the Concern In 2000, tobacco manufacturers spent $4.26 billion on point-of-sale advertising and promotional programs and $3.52 billion on retail value-added items (e.g., free gifts, multipack discounts). Such expenditures totaled 81.2 percent of cigarette manufacturers’ marketing budgets for the year. In the same year, a study by Wakefield and colleagues (2000) found that 80 percent of retail outlets surveyed had interior tobacco advertising displays, 60 percent had exterior advertising, and 70 percent used tobacco product-endorsed functional items (e.g., floormats, clocks) within the store (Wakefield et al. 2000). A study of California retail outlets found that 94 percent of stores displayed tobacco advertisements (Feighery et al. 2001). A 42-state survey conducted in 1999 found that 92 percent of stores contained point-of-purchase advertising for tobacco products (Feighery et al. 2003). The prime advertising space within most stores is the radius around the checkout counter. A study conducted in California found close to 90 percent of tobacco marketing materials within 4 feet of store checkout counters. A similar study found that nearly 50 percent of surveyed California retailers posted tobacco product advertisements at 3 feet or lower in height, easy eyelevel for young children. Additionally, 23 percent of stores had cigarette product displays in close proximity to candy, another high value to volume item that is attractive to youth (Feighery et al. 2001). Store advertising may vary with the store size, store type, and demographics of the neighborhood in which the shop is located. A study of neighborhoods in Boston revealed that the number of stores in an area selling tobacco products was related to the neighborhood’s economic status. In a region with a recorded per capita income in 1989 of $7,620, 19.4 percent of stores sold tobacco products. By contrast, in an affluent neighborhood with a $46,490 per capita income, only 3.7 percent of stores sold tobacco. The study also found that lower-income and minority neighborhood stores were more likely than their affluent counterparts to advertise mentholated cigarettes and to post a greater number of tobacco advertisements on the exterior of the store (Laws et al. 2002).

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Ending the Tobacco Problem: A Blueprint for the Nation Retail Environment: Marketing Strategies Point-of-purchase marketing efforts by tobacco manufacturers take several main forms. Feighery and colleagues (2003) conducted in-depth interviews with 29 tobacco retailers in the United States to determine the type and extent of relationships between tobacco manufacturers and retailers (Feighery et al. 2003). In addition to the production and distribution of marketing materials (i.e., posters, packaging), tobacco manufacturers cultivate direct relationships with retailers in order to achieve the desired placement of their products and materials within stores. Along with slotting fees—direct payments to retailers for prime product placements— manufacturers also offer trade promotions and special offers to retailers as provisions in the retail sales agreement. In the Feighery and colleagues (2003) study, most of the retailers surveyed reported having contracts with tobacco companies at some point. Contract provisions include volume discount offers for stores fulfilling minimum sales volume levels. Such promotional offers, however, tend to be accompanied by requirements that the retailer conform to specifications about product placement within the store. Buy-downs are another prominent promotional incentive offered by manufacturers to retailers. Buy-downs are used to place a store’s existing inventory on sale. Manufacturers will approve a certain reduction in the sale price of their products. The retailer sells its inventory at that reduced price and collects a reimbursement from the manufacturer at a later date. To participate in the buy-down, a retailer must agree to erect special product displays and other promotional signs. One retailer interviewed in the Feighery and colleagues (2003) study reported that manufacturers have reduced their use of “give-aways,” such as T-shirts, cameras, hats, and other promotional products that would be offered free with purchase of tobacco products in the wake of the increased tobacco lawsuits. Instead, the companies have increased their use of techniques such as buy-downs. As noted, a proviso of the manufacturer’s promotional offers is that participating retailers comply with product placement specifications. Placement requirements may differ between firms in the industry and among the specific contracts that each company maintains. However, some trends are worthy of note. Tobacco manufacturers vie for the space closest to the cashier area and for eye-level placement within that space. One retailer told Feighery that manufacturers now want to keep their cigarette products behind the service counter and not in self-service displays because of legislative compliance concerns. Placement of signage is also largely controlled by manufacturers. Companies produce diagrams to show where their advertisements and posters should be placed within the store. Again, line of vision and proximity to the checkout area are the prime considerations. Relationships with tobacco manufacturers can prove exceptionally lucrative for tobacco retailers. Convenience store owners reported annual benefits worth up to $20,000 for fully complying with the marketing programs of tobacco companies (Bloom 2001). PUBLIC POLICY OPTIONS As suggested above, there seems to be a consensus among researchers in attributing the rise in slotting fee and trade promotion expenditures—indeed, in the entire array of retail marketing incentives—to the tobacco industry’s attempt to offset the impact of the ban on billboard advertising and related measures in the MSA. Along parallel lines, Slater and colleagues (2001) found that Philip Morris was significantly more likely to offer a gift-with-purchase promotion for Marlboros in states with comprehensive tobacco control programs than in states without such controls

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Ending the Tobacco Problem: A Blueprint for the Nation (Slater et al. 2001). Regulations aimed at retail outlet advertising and/or promotion may be deemed necessary to close this major loophole in the MSA. Bloom (2001), in his survey of slotting fees and product promotions, discusses an array of options that policy makers might consider by way of limiting the recent shift in industry strategy (Bloom 2001). First, Bloom (2001) suggests that government entities could impose a full ban on slotting fees and trade promotions by tobacco companies. He cites similar action taken by the Bureau of Alcohol, Tobacco and Firearms in 1995 in an attempt to protect small wineries and breweries from being ousted from retail shelves due to high product placement fees paid to large retailers by the major alcohol producers. An outright ban could serve to alleviate the economic pressure felt by retailers to court the big tobacco manufacturers and thereby become their political allies on issues related to teen smoking. Bloom (2001) notes, however, that such a ban could have unwanted effects. As noted above, tobacco companies spend exorbitant amounts of money every year on such promotional fees, money that would remain in the pockets of the industry if such payments were banned. Bloom (2001) suggests that tobacco companies might use these savings to facilitate reductions in product price, an effect that might actually increase youth access to tobacco products. Another option might be to regulate retail prices as a means of preventing retailers from passing on manufacturer-created price breaks to customers. Bloom (2001) refers to a New York regulatory scheme that prohibits retailers from selling tobacco products below cost (plus a statutorily required markup). He contends that by limiting the degree to which manufacturers’ special offers can actually affect the market price, states can diminish the stimulation of demand through trade promotions. On this score, however, in a comparative study of states with and without retail minimum price controls—half of the states fall into each category—Feighery and colleagues (2005) found no conclusive evidence that states with controls had lower prices or lower retailer participation rates in these promotional programs (note, however, that these programs, with the exception of New York’s, do not exclude promotional programs from their minimum price formulas) (Feighery et al. 2005). Still other regulatory options, such as elimination of self-service displays and restrictions on signage—or requirements for antismoking warning signage—would take direct aim at the retailing environment. The likely efficacy of these measures varies. One can question whether more prominent warning signage at the point of sale would add much, if anything, as a deterrent to consumption decisions by minors intent on making illegal purchases. Self-service display bans, by contrast, may very well have a salutary effect, as discussed above. But this practice appears to be on the way out in any event. When one turns to more restrictive controls on advertising and promotion in the retail setting, constitutional considerations, discussed briefly in the following section, become a matter of considerable salience. It would be possible to address controls on the retail sales environment from a distinctly different perspective—namely, placing limits on the number of retail outlets in a particular community. As discussed in Holder (2004), this strategy has been employed, at times, in the context of retail sales of alcoholic beverages (Holder 2004). Licensing schemes and public monopoly systems are two methods states have used to limit alcohol retailers in their jurisdictions. Under a licensing scheme, the state requires retailers to obtain a license in order to sell alcohol products. Licenses are issued for a limited period and require reapplication for renewal. Retailer density can be controlled directly by the licensing body either by limiting the total number of licenses distributed or by limiting the density of licenses within geographic areas. Imposing prohibitive application fees can also serve as an indirect limit on the number of retailers in an area. A public

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Ending the Tobacco Problem: A Blueprint for the Nation monopoly system prohibits the sale of a certain product by private retailers and establishes the state (or local government) as the sole distributor of the good. The rationale for these measures is that reducing the number and density of outlets makes access to the product less convenient and increases the opportunity cost of using the product (i.e., the time and resources expended on search costs) (Shipman 1940). While either of these approaches may succeed in limiting the supply and availability of tobacco products, it should be noted that neither approach is targeted directly at youth access. Rather, the strategies would impact all consumers of tobacco. It would probably be hard to justify outlet restriction as a primary strategy for reducing youth access to tobacco—it would be regarded as overkill because of spillover effects to adults if this were the principal justification. In the Holder (2004) study just cited, reduction in youth access is regarded as a salutary secondary consequence of policy reasons for reducing the number of outlets for the purchase of liquor across the board. Then the question becomes whether the “inconvenience effects” (search costs) of outlet restriction can serve as a direct justification, or strategy, for reducing tobacco consumption across the board (i.e., not just for youth). Interestingly, the present array of strategies that impose inconvenience effects do so as a secondary consequence of achieving other goals. In particular, second-hand smoke zoning-type restrictions on smoking in public accommodations, which are justified on the grounds of either health effects or public nuisance effects on nonsmokers (with inconvenience to smokers and consequent reduction in smoking serving as a collateral benefit). These considerations, along with the obvious opposition of current tobacco sales outlets, suggest the formidable political barriers that would confront an outlet restriction strategy. CAVEAT: THE LORILLARD CASE AND THE FIRST AMENDMENT In Lorillard Tobacco Company v. Reilly (533 U.S. 525 [2001]), the U.S. Supreme Court invalidated Massachusetts regulations and adopted as a more stringent supplement to the restrictions on advertising in the MSA that prohibited outdoor advertising within 1,000 feet of schools (including, in particular, billboard advertising) and proscribed certain retail sales practices, such as displaying tobacco product advertising lower than 5 feet from the floor of the establishment. The Supreme Court left only the narrowest of the regulations in place—a ban on self-service displays—on the tailored rationale that the self-service proscription was not aimed at advertising but at product placement per se (with ease of underage access the immediate basis for the prohibition). The case has been read by many antitobacco activists as sounding a virtual death knell for regulation of advertising at point of purchase, and not without some basis in fact. Lorillard v. Reilly stands on a two-pronged foundation: First, the commercial speech doctrine as enunciated in Central Hudson Gas & Elec. Corp. v. Public Service Commission of New York (447 U.S. 557 [1980]), and broadly applied in Liquormart, Inc. v. Rhode Island (517 U.S. 484 [1996]), and second, the statutory preemption provision in the Federal Cigarette Labeling and Advertising Act of 1966 which, as interpreted in Cipollone v. Liggett Group, Inc. (505 U.S. 504 [1992]) establishes immunity from tort suits based on claims of failure to adequately warn to tobacco advertisements complying with the labeling requirements of the statute. The broad reach of the latter provision is evident in the Supreme Court’s assertion that “a distinction between state regulation of the location as opposed to the content of cigarette advertising has no foundation in the text of the pre-emption provision.” Most of the constraints on product placement and advertising content in the retail setting are put in jeopardy by one or the other

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Ending the Tobacco Problem: A Blueprint for the Nation prong of Lorillard v. Reilly, just as the 5-feet-or-lower proviso is explicitly struck down. At the same time, however, Lorillard v. Reilly would seem to have no bearing on measures aimed at outlet limitations or other price-related discount restrictions.

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