UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION

In the Matter of

R.J. REYNOLDS TOBACCO COMPANY, a corporation.

FILE NO. 992-3025

AGREEMENT CONTAINING CONSENT ORDER

The Federal Trade Commission has conducted an investigation of certain acts and practices of R.J. Reynolds Tobacco Company, a corporation ("proposed respondent"). Proposed respondent, having been represented by counsel, is willing to enter into an agreement containing a consent order resolving the allegations contained in the attached draft complaint. Therefore,

IT IS HEREBY AGREED by and between R.J. Reynolds Tobacco Company, by its duly authorized officer, and counsel for the Federal Trade Commission that:

1. Proposed respondent R.J. Reynolds Tobacco Company is a New Jersey corporation with its principal office or place of business at 401 North Main Street, P.O.B. 2959, Winston-Salem, North Carolina 27102.

2. Proposed respondent admits all the jurisdictional facts set forth in the draft complaint. This agreement is for settlement purposes only and does not constitute an admission by proposed respondent that the law has been violated as alleged in the draft complaint, or that the facts as alleged in the draft complaint, other than the jurisdictional facts, are true.

3. Proposed respondent waives:

a. Any further procedural steps;

b. The requirement that the Commission's decision contain a statement of findings of fact and conclusions of law; and

c. All rights to seek judicial review or otherwise to challenge or contest the validity of the order entered pursuant to this agreement.

4. This agreement shall not become part of the public record of the proceeding unless and until it is accepted by the Commission. If this agreement is accepted by the Commission, it, together with the draft complaint, will be placed on the public record for a period of sixty (60) days and information about it publicly released. The Commission thereafter may either withdraw its acceptance of this agreement and so notify proposed respondent, in which event it will take such action as it may consider appropriate, or issue and serve its complaint (in such form as the circumstances may require) and decision in disposition of the proceeding.

5. This agreement contemplates that, if it is accepted by the Commission, and if such acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of Section 2.34 of the Commission's Rules, the Commission may, without further notice to proposed respondent, (1) issue its complaint corresponding in form and substance with the attached draft complaint and its decision containing the following order in disposition of the proceeding, and (2) make information about it public. When so entered, the order shall have the same force and effect and may be altered, modified, or set aside in the same manner and within the same time provided by statute for other orders. The order shall become final upon service. Delivery of the complaint and decision and order to proposed respondent's address as stated in the agreement by any means specified in Section 4.4 of the Commission's Rules shall constitute service. Proposed respondent waives any right it may have to any other manner of service. The complaint may be used in construing the terms of the order. No agreement, understanding, representation, or interpretation not contained in the order or in the agreement may be used to vary or contradict the terms of the order.

6. Proposed respondent has read the draft complaint and consent order. It understands that it may be liable for civil penalties in the amount provided by law and other appropriate relief for each violation of the order after it becomes final.

ORDER

DEFINITIONS

For purposes of this order, the following definitions shall apply:

1. "Competent and reliable scientific evidence" shall mean tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that has been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.

2. Unless otherwise specified, "respondent" shall mean R.J. Reynolds Tobacco Company, a corporation, its successors and assigns and its officers, agents, representatives and employees.

3. "Commerce" shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C.  44.

4. "Advertisement" shall mean any written or verbal statement, illustration, or depiction that is designed to effect a sale or create interest in the purchasing of any tobacco product, including but not limited to a statement, illustration or depiction in or on a brochure, newspaper, magazine, free standing insert, pamphlet, leaflet, circular, mailer, book insert, letter, coupon, catalog, poster, chart, billboard, transit advertisement, point of purchase display, specialty or utilitarian item, sponsorship material, package insert, film, slide, or the Internet or other computer network or system.

5. "Tobacco product" shall mean cigarettes, cigars, cigarillos, little cigars, smokeless tobacco, cigarette tobacco, pipe tobacco, and any other product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product.

6. "Winston cigarettes" shall mean all varieties and styles of the Winston brand of cigarettes, including but not limited to all lengths, strengths, hard pack or soft pack, menthol or not.

I.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, promotion, offering for sale, sale, or distribution of Winston cigarettes or any other tobacco product in or affecting commerce, shall display in advertisements as specified below, clearly and prominently, the following disclosures (including the line breaks, punctuation and capitalization illustrated):

In cigarette advertisements:

No additives in our tobacco

does NOT mean a safer cigarette.

In advertisements for any other tobacco product:

No additives in our tobacco

does NOT mean safer.

These disclosures shall be displayed:

A. Beginning no later than July 15, 1999, and continuing for a period of one year thereafter, in all advertisements for Winston cigarettes that contain no additives.

B. Except as provided for in Part II.A of this order, beginning no later than thirty (30) days after the date of issuance of this order, in any advertisement that, through the use of such phrases as "no additives," "100% tobacco," "additive-free," "pure tobacco," "does not contain additives," or substantially similar terms, represents that a tobacco product has no additives.

Provided, that the above disclosures shall not be required in any advertisement that is not required to bear a health warning pursuant to 15 U.S.C.  1333.

Provided further, that the above disclosures shall not be required in any advertisement for a bona fide event, entrant, team or series presented or sponsored by any Winston tobacco product where (i) the advertisement contains the word Winston only as part of the name of the event, entrant, team or series and/or as part of the phrase "brought to you by Winston King," "presented by Winston King," "sponsored by Winston King," or the equivalent ("the Phrase"); (ii) the Phrase is displayed in a type size, manner and color contrast no greater than reasonably necessary so that it may be read; (iii) the advertisement does not, through the use of such phrases as "no additives," "100% tobacco," "additive-free," "pure tobacco," "does not contain additives," or substantially similar terms, represent that the tobacco product has no additives; and (iv) there is no other selling message describing a feature or attribute of Winston tobacco products.

Provided further, that the above disclosures shall not be required if respondent possesses and relies upon competent and reliable scientific evidence demonstrating that such cigarettes or other tobacco product pose materially lower health risks than other cigarettes or other products of the same type.

For purposes of this Part, "clearly and prominently" shall mean, as exemplified by Exhibits 1 and 2, attached to this order:

1. In black type and black rule on a solid white background, or in white type and white rule on a solid red background, or in any other color combination that would provide an equivalent or greater degree of print contrast as objectively determined by densitometer or comparable measurements of the type and rule color and the background color; and

2. Centered, both horizontally and vertically, in a ruled rectangle. The area enclosed by the rectangle shall be no less than 40% of the size of the area enclosed by the ruled rectangle surrounding the health warnings mandated by 15 U.S.C. 1333. The width of the rule forming the rectangle shall be no less than 50% of the width of the rule required for the health warnings mandated by 15 U.S.C. 1333.

Provided that, if, at any time after this order becomes final, 15 U.S.C.  1333 is amended, modified, or superseded by any other law, the area enclosed by the ruled rectangle shall be no less than 40% of the area required for health warnings by such amended, modified, or superseding law, and the width of the rule forming the rectangle shall be no less than 50% of the width of any surrounding rule required by such amended, modified, or superseding law; and

3. In the same type style and type size as that required for health warnings pursuant to 15 U.S.C. 1333. The word "NOT" shall be in bold typeface.

Provided that, if, at any time after this order becomes final, 15 U.S.C. 1333 is amended, modified, or superseded by any other law, the type style and type size of the disclosure shall be the same as the type style and type size required for warnings by such amended, modified, or superseding law; and

4. In a clear and prominent location but not immediately next to other written or textual matter or any rectangular designs, elements, or similar geometric forms, including but not limited to any warning statement required under the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1331 et seq., or the Comprehensive Smokeless Tobacco Health Education Act, 15 U.S.C.  4401 et seq. In addition, the disclosure shall not be positioned in the margin of a print advertisement. A disclosure shall be deemed "not immediately next to" other geometric or textual matter if the distance between the disclosure and the other matter is as great as the distance between the outside left edge of the rule of the rectangle enclosing the health warning required by 15 U. S. C. 1333 and the top left point of the letter "S" in the word "SURGEON" in that health warning; and

5. For audiovisual or audio advertisements, including but not limited to advertisements on videotapes, cassettes, discs, or the Internet; promotional films or filmstrips; and promotional audiotapes or other types of sound recordings, the disclosure shall appear on the screen at the end of the advertisement in the format described above for a length of time and in such a manner that it is easily legible and shall be announced simultaneously at the end of the advertisement in a manner that is clearly audible.

Provided, however, that in any advertisement that does not contain a visual component, the disclosure need not appear in visual format, and in any advertisement that does not contain an audio component, the disclosure need not be announced in audial format.

Nothing contrary to, inconsistent with, or in mitigation of any disclosure provided for in this part shall be used in any advertisement. Provided, however, that this provision shall not prohibit respondent from truthfully representing, through the use of such phrases "no additives," "100% tobacco," "additive-free," "pure tobacco," "does not contain additives," or substantially similar terms, that a tobacco product has no additives, where such representation is accompanied by the disclosure mandated by this order.

II.

IT IS FURTHER ORDERED that respondent shall:

A. Instruct each R.J. Reynolds Tobacco Company sales representative to remove or sticker with the disclosure specified in Part I of this order any advertisement for Winston cigarettes displayed in a retail establishment where such advertisement, through the use of such phrases as "no additives," "100% tobacco," "additive-free," "pure tobacco," "does not contain additives," or substantially similar terms, represents that Winston cigarettes have no additives and does not include the disclosure specified in Part I of this order. The sales representative may remove or sticker such advertisements in the ordinary course of performing his or her duties, but in any event, shall remove or sticker all such advertisements in each of the retail establishments for which the representative is responsible no later than July 15, 1999.

B. For five (5) years after the date of issuance of this order, maintain and upon request make available to the Federal Trade Commission for inspection and copying 1) a copy of each different version of the letter instructing R.J. Reynolds Tobacco Company sales representatives to remove or sticker advertising pursuant to subparagraph A of this Part; and 2) a list of the name and address of each R.J. Reynolds Tobacco Company sales representative to whom such a letter was sent.

III.

IT IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company, and its successors and assigns, shall, for five (5) years after the last date of dissemination of any representation covered by this order, maintain and upon request make available to the Federal Trade Commission for inspection and copying:

A. All advertisements containing the representation;

B. For any representation covered by this order that is not accompanied by a disclosure set forth in Part I of this order:

1. All materials that were relied upon in disseminating the representation; and

2. All tests, reports, studies, surveys, demonstrations, or other evidence in their possession or control that contradict, qualify, or call into question the representation, or the basis relied upon for the representation, including complaints and other communications with consumers or with governmental or consumer protection organizations.

IV.

IT IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company, and its successors and assigns, shall deliver a copy of this order, in either paper or electronic form, to all current and future principals, officers, and directors, and to all current and future managers, employees, agents, and representatives having responsibilities with respect to the subject matter of this order. Respondent shall secure from each such person either 1) a signed and dated statement acknowledging receipt of the order; or 2) a dated, electronic acknowledgment indicating that the person has read, downloaded or printed the order. Respondent shall deliver this order to current personnel within thirty (30) days after the date of service of this order, and to future personnel within thirty (30) days after the person assumes such position or responsibilities. Respondent shall maintain and upon request make available to the Federal Trade Commission for inspection and copying a copy of each signed statement acknowledging receipt of the order or a record, in either electronic or paper form, of each electronic acknowledgement of receipt of the order.

V.

IT IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company and its successors and assigns shall notify the Commission at least thirty (30) days prior to the sale of any Winston cigarettes for which the composition or formula has been changed in such a manner as may affect compliance obligations arising under this order, including but not limited to the addition of any additives to any variety of Winston cigarettes. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

VI.

IT IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company and its successors and assigns shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including but not limited to a dissolution of a subsidiary, parent or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

VII.

IT IS FURTHER ORDERED that respondent R.J. Reynolds Tobacco Company, and its successors and assigns shall, within sixty (60) days after the date of service of this order, and at such other times as the Federal Trade Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.

VIII.

This order will terminate twenty (20) years from the date of its issuance, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that the filing of such a complaint will not effect the duration of:

A. Any Part in this order that terminates in less than twenty (20) years;

B. This order's application to any respondent that is not named as a defendant in such complaint; and

C. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided further, that if such complaint is dismissed or a federal court rules that the respondent did not violate any provision of the order, and the dismissal or ruling is either not appealed or upheld on appeal, then the order will terminate according to this Part as though the complaint had never been filed, except that the order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal.

Signed this _________ day of ________________, 1999

R.J. REYNOLDS TOBACCO COMPANY

By: _______________________
GUY M. BLYNN
Vice-President, Deputy General Counsel
and Secretary

________________________
JUDITH L. OLDHAM
Collier, Shannon, Rill & Scott, PLLC
Attorney for Respondent

_______________________
BETH GROSSMAN
Counsel for the
Federal Trade Commission

APPROVED:

____________________
C. LEE PEELER
Associate Director
Division of Advertising Practices

___________________
JOAN Z. BERNSTEIN
Director
Bureau of Consumer Protection