[Congressional Record Volume 144, Number 76 (Friday, June 12, 1998)]
[Senate]
[Pages S6275-S6289]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        NATIONAL TOBACCO POLICY AND YOUTH SMOKING REDUCTION ACT

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
resume consideration of S. 1415, which the clerk will report.
  The legislative clerk read as follows:

       A bill (S. 1415) to reform and restructure the processes by 
     which tobacco products are

[[Page S6276]]

     manufactured, marketed, and distributed, to prevent the use 
     of tobacco products by minors, to redress the adverse health 
     effects of tobacco use, and for other purposes.

  Pending:

       Gregg/Leahy amendment No. 2433 (to amendment No. 2420), to 
     modify the provisions relating to civil liability for tobacco 
     manufacturers.
       Gregg/Leahy amendment No. 2434 (to amendment No. 2433), in 
     the nature of a substitute.
       Gramm motion to recommit the bill to the Committee on 
     Finance with instructions to report back forthwith, with 
     amendment No. 2436, to modify the provisions relating to 
     civil liability for tobacco manufacturers, and to eliminate 
     the marriage penalty reflected in the standard deduction and 
     to ensure the earned income credit takes into account the 
     elimination of such penalty.
       Daschle (for Durbin) amendment No. 2437 (to amendment No. 
     2436), relating to reductions in underage tobacco usage.
       Reed amendment No. 2702 (to amendment No. 2437), to 
     disallow tax deductions for advertising, promotional, and 
     marketing expenses relating to tobacco product use unless 
     certain requirements are met.
  The Senate resumed consideration of the bill.
  Mr. KERRY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KERRY. Mr. President, I know the plan this morning is for us to 
have the Senator from Rhode Island proceed on the amendment that he 
laid down last night. And subsequent to that, the Senator from Texas, 
Senator Gramm, will debate his amendment for a period of time.
  Let me just say, for a couple of minutes before we proceed --I want 
to pick up on what the Senator from Arizona said--this will close the 
third week of effort on this bill. Obviously, next week will be 
critical. We have dealt with three or four of the most contentious 
issues. We visited the issue of attorneys' fees twice now, 
notwithstanding the fact that no attorney has been paid the fees that 
have been thrown around on the floor of the U.S. Senate. In every 
State, those fees are being renegotiated, they are being subject to 
arbitration, subject to court decision, but we revisited that twice.
  We had a spirited and important debate on the subject of liability. 
In fact, the bill, as brought to the floor, was changed by those who 
wanted to have a stronger section, and that is the will of the Senate 
working its way. The look-back provisions were strengthened by the will 
of the Senate. So the bill has, in some respects, been strengthened 
from the bill that was brought to the floor.
  In addition to that, we have had a very long and contentious debate 
on the subject of how the money would be spent. The Senate, again, 
spoke by deciding that a significant component of that fund will go 
back to the American people in the form of tax relief for the marriage 
penalty.
  In addition to that, the Senate spoke on the issue of drugs, and a 
very significant measure was incorporated where, again, a certain 
proportion of the revenues that will come from the increase of the 
price of cigarettes is going to go to help fight the war on drugs. I 
might add, the war on drugs is, in fact, the same as the war on 
tobacco, because tobacco is an addictive substance that kills people. 
In this legislation, we are seeking to have the Food and Drug 
Administration have the capacity to regulate it, and that is in the 
bill.
  That is an important measure for America, that for the first time the 
FDA will be given the capacity to undertake important regulatory 
efforts with respect to the use of tobacco. All of that is now 
contained in this legislation.
  We hear talk that there are a couple of substitutes floating around 
out there. I ask that those who have a substitute to come forward with 
them perhaps on Monday or Tuesday, and we will be able to move forward 
with respect to the substitutes if, in fact, they really do exist.
  In addition to that, we have a major contentious issue left at some 
point in time to deal with, which is how to help the farmers. I am 
certainly particularly sensitive with respect to the Senator from 
Kentucky and the Senator from South Carolina and the Senators from 
Virginia and others who are concerned about what happens to those who 
are impacted by a decision that the U.S. Government may take.
  Traditionally, we have tried to help people who are impacted 
economically negatively as a consequence of decisions that we make that 
suddenly come in and change their lives. I have always thought that is 
appropriate. I fought to do that, whether it was people in the Midwest 
or the South or the West. An example is the fishermen of New England 
who were adversely impacted by Government decisions that were made on 
whether or not they could fish the Georges Bank. When we took the 
Georges Bank away from them for a period of time, we tried to provide 
economic assistance. We provided, for the first time, a buyout program 
for some of the fishing vessels in order to help them deal with that 
issue.

  I might add, we are not the first country to do that. Great Britain, 
Norway and Iceland where they tried to regulate fishing, they also 
provided significant buyout efforts to do that.
  So it is appropriate for us to try to, in the context of the 
legislation, deal with the problems of the tobacco farmers.
  My hope is, Mr. President, that in the next few days, we can do that. 
The real test before the Senate is very, very simple. There are some 
people who seem prepared and satisfied with the notion that we can have 
the status quo be the victor here; that we can leave the tobacco 
companies without any Federal settlement, without any global 
settlement, and that the Senate can somehow walk away from the children 
of America and have done well by the country.
  The only people who will benefit by that will be the tobacco 
companies. Those are the only people who will benefit, and I am not so 
sure, given the jury verdict in Florida 2 days ago, and given the size 
of the settlements that have taken place in Minnesota and elsewhere, 
that they will actually wind up doing that well because, in the end, 
the lawsuits will proliferate. We may well wind up as we were with the 
asbestos companies where all of a sudden there is nothing left, and we 
don't have a tobacco cessation program, we don't have 
counteradvertising, we don't have any of the restraints that the FDA 
can impose, but at the same time nor do we have order within the 
process by which these companies are going to be sued. I think, in the 
end, nobody benefits from that--nobody benefits.
  What is very, very clear is that during that period of time, a lot 
more young children in America will be subjected to the same barrage of 
opportunities to pick up a cigarette and get hooked and ultimately die 
prematurely of it as they are today.
  During the time this debate has taken place, more than 60,000 
children have started smoking, and we all know that 20,000 or so of 
them are going to die prematurely as a result of the habit they now 
have. We know to a certainty that 86 percent of all the people who 
smoke in America began as teenagers, and we know to a certainty if you 
raise the price and simultaneously have concerted efforts to reach 
those children, you will reduce the number of people who smoke.
  If you reduce the number of people who smoke, you will give America a 
tax cut, because every American today is paying a very significant 
amount of their income to cover the health care costs of a nation that 
pays for people who are for a long time hooked up to tubes or require 
oxygen or suffer long-term stays in hospitals as a result of the 
diseases they get, whether it is cancer of the pancreas, cancer of the 
throat, cancer of the larynx, kidney problems, heart problems, 
emphysema--all of these are costly to America. That is the tax on 
America. And if we want a tax cut, the way to get that tax cut is to 
pass tobacco legislation.
  The only benefit of not passing it would be to keep the tobacco 
companies liberated to pursue the policies of predatory practice which 
they have pursued that we now know to a certainty over the last years.
  I hope we are going to vote on this next week. I hope we can have 
cloture on this next week. I hope the majority leader will join us next 
week by offering a cloture motion and bringing the Senate together to 
complete its important task of reducing teenage smoking in this 
country.
  Mr. KERREY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. KERREY. Mr. President, I listened to the statements of the 
distinguished Senator from Rhode Island and

[[Page S6277]]

the Senator from Massachusetts. I am struck, because I think an awful 
lot of people become confused about what this bill is. In part, that 
confusion comes as a result of a substantial amount of expenditures by 
the tobacco companies saying to citizens of this country that this bill 
is a tax increase.
  I heard the last few words the Senator from Massachusetts was saying. 
I believe he was saying this bill is not a tax increase; is that what 
the Senator from Massachusetts was saying? As I understand it, the 
underlying bill, prior to it being amended by the Senator from Texas, 
who has been arguing essentially that it is a tax increase, because he 
is using the same language the tobacco companies are using on 
television--that it is a tax increase; thus, we should have a tax cut 
in here as well.
  As I understand the underlying bill, it is not a tax increase at 
all. It is a $15 billion payment into a tobacco trust fund by the 
tobacco companies that they agreed to last June 20, 1997, and it phases 
up to a $23 billion fee that the tobacco companies would be paying into 
a tobacco trust fund as a result of another settlement which occurred 
in Minnesota where they basically agreed to 50 percent more.

  So this bill is not a tax increase. It is a fee being paid by the 
tobacco companies as a consequence of them now saying that they are 
stipulating in court documents--and the distinguished Senator from 
Massachusetts knows more about prosecutorial law than I do--because, as 
I understand it, they have stipulated now in court documents that 
nicotine is addictive, that they have been targeting our youth, that 
they have been failing to disclose all the dangers and risks that are 
associated with tobacco.
  So if you want to talk about tax cuts, I would love to come to the 
floor and argue about cutting the payroll tax. There are lots of 
inequities in our tax system I would love to debate. The distinguished 
Senator from Texas has converted, very intelligently, this debate from 
one of trying to help Americans who are addicted to stop smoking--they 
are not just smoking; we now know they are addicted. There is a big 
difference between just doing something sort of casually and doing what 
tobacco smokers do.
  Forty-five million Americans--likely a very high percentage of those 
individuals--are addicted. That means they cannot quit, they have a 
physical addiction, and when they stop smoking, they have withdrawal 
symptoms, and they have a very difficult time.
  There are 330,000 Nebraskans who smoke. They spend $250 million a 
year on cigarettes every single year. And I see what the distinguished 
Senator from Massachusetts and the Senator from Arizona are trying to 
do is write a law so that we have resources at the State level to help 
those who are addicted to stop smoking.
  Just take Nebraska, I would say. We have $250 million a year being 
spent by 300,000 or so people who smoke. If we are able to get smoking 
cessation programs and educational efforts, that would mean, let us 
say, $50 million less a year being spent on tobacco as a result of 
helping people break away from this terrible addiction to nicotine. 
They break away from that addiction, and $50 million less, that is $250 
million in their pockets.
  The Senator from Texas is talking about a tax increase. We are trying 
to help decrease expenditures on tobacco. And the more we decrease 
expenditures on tobacco, the more we get a win-win: Money in the 
pockets of our citizens, the people who are addicted, who did not 
realize that tobacco was addicting; and improve health consequences.
  I note with great interest that the Chamber of Commerce--U.S. Chamber 
of Commerce--and the National Restaurant Association are opposed to 
this legislation. They are opposed because they are misinformed, in my 
judgment. I can make the case at home--and intend to make the case at 
home--to my State chamber of commerce and my State restaurant 
association that it is in their interest to reduce the number of 
citizens in our State who are smoking.
  Their health insurance costs are going to be lower; their absentee 
rates are going to be lower; their productivity rates are going to be 
higher. I said yesterday that one of my most conservative business 
friends will not even hire people who smoke as a consequence of 
understanding the costs that are associated with it.
  I see that my friend from Texas has come to the floor. We perhaps can 
engage in a little colloquy about this, because as I understand this 
legislation that the Senator from Arizona and the Senator from 
Massachusetts have brought to the floor, there is a $15 billion fee in 
it phased up to $23 billion that the tobacco industry has agreed to 
pay. They agreed to pay $15 billion. And they have agreed in Minnesota 
to pay 50 percent more. As I see it, the more we are successful in 
helping people stop their smoking, break away from this terrible 
addiction, that is going to make them more prosperous, more healthy, as 
a consequence.
  I have talked, and there are a number of questions in there. I would 
appreciate very much if the Senator from Massachusetts could help me 
understand if that isn't what is in this legislation, if that isn't the 
intent of what is in the law as seen by the Senator from Massachusetts 
and the Senator from Arizona.
  Mr. KERRY. If I can respond, I do not think the Senator needs a lot 
of help. I think the Senator has adequately--more than adequately--
described the virtues of what is being attempted here.
  I just say to the Senator, in my State of Massachusetts we have 
discovered, through research, that our addicted citizens are spending 
$1.3 billion a year to try to get unaddicted--$1.3 billion that is 
diverted from money they could be putting into schools, putting into 
their kids' education, that they are paying for nicotine patches, they 
are paying for the gum, for the hypnosis, for counseling. It is an 
extraordinary amount of money.

  This is happening because almost 90 percent of those citizens got 
hooked when the tobacco companies targeted them specifically as 
teenagers. We have now seen--and it is in the record--the degree to 
which that targeting was a very purposeful replenishment effort for 
business. They said to themselves, ``We've got to replenish the people 
who are dying off, and we've got to get these people hooked when they 
are young.''
  So, R.J. Reynolds, Philip Morris, Brown & Williamson--their own 
documents testify to the degree to which they were targeting teenagers 
in order to get them hooked forever.
  I do not want to abuse the courtesy of the Senator from Rhode Island, 
who is expected to proceed forward here. I think he has some time 
problems, so I do want to allow him to go on with his amendment. And 
then I know the Senator from Texas is going to go.
  But the Senator from Nebraska is absolutely correct. The tax cut in 
this bill comes from the reduction of the cost of health care to all 
Americans, the reduction in the cost of lost productivity. All the 
things the Senator from Nebraska has said are correct.
  I yield the floor.
  Mr. REED addressed the Chair.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. REED. Mr. President, thank you.


                           Amendment No. 2702

  Mr. REED. Mr. President, today I rise to continue my discussion of 
the amendment I offered last evening, an amendment which would deny the 
tax deduction for advertising expenses for those tobacco companies 
which disregard and violate the FDA rule with respect to advertising to 
children.
  This is an amendment that is being cosponsored by my colleagues: 
Senator Boxer, Senator Wyden, Senator Kennedy, Senator Daschle, Senator 
Durbin, Senator Wellstone, Senator Feinstein, Senator Bingaman, and 
Senator Conrad.
  In addition, it has received the widespread support of the public 
health community. In a recent editorial in the Journal of the American 
Medical Association, Dr. C. Everett Koop, David Kessler, and George 
Lundberg wrote about the history of the tobacco industry in the United 
States. In their words:

       For years, the tobacco industry has marketed products that 
     it knew caused serious disease and death. Yet, it 
     intentionally hid this truth from the public, carried out a 
     deceitful campaign designed to undermine the public's 
     appreciation of these risks, and marketed its addictive 
     products to children.

  Numerous, numerous studies have implicated the tobacco industry's 
advertising and promotional activities as

[[Page S6278]]

the cause of a continued increase in youth smoking in the United 
States. Research on smoking demonstrates that increases in youth 
smoking directly coincide with effective tobacco promotional campaigns.
  My amendment addresses this critical issue in this ongoing debate 
about how we can control teenage smoking in America. It targets the 
industry's ceaseless efforts to market to children. It is time for 
Congress to put a stop to the tobacco industry's practice of luring 
children into untimely disease and untimely death.
  This amendment is based on a bill that I introduced earlier this 
year, along with Senators Boxer, Chafee, and Conrad. I would also like 
to recognize the leadership of many of my colleagues in prior 
congresses. Senator Harkin, along with former Senator Bill Bradley, has 
made continuous efforts to try to eliminate in total the tax deduction 
for tobacco advertising.
  While I concur with Senator Harkin that this deduction is of 
questionable value, I would like to emphasize today that my amendment 
does not attempt to eliminate the entire deduction for tobacco 
manufacturers. Indeed, under my amendment, they maintain the deduction 
as long as they do not advertise to children. Eliminating the promotion 
of tobacco products to children is a necessary part of any 
comprehensive effort to prevent tobacco use by minors. My amendment 
offers a constitutionally sound way to enforce strong tobacco 
advertising restrictions.
  Under my amendment, if tobacco manufacturers do not comply with the 
advertising restrictions promulgated by the Food and Drug 
Administration, the manufacturers' ability to deduct the cost of 
advertising and promotional expenses will be disallowed in that 
particular year. The restrictions promulgated by the FDA are 
appropriately tailored to prevent advertising and marketing of tobacco 
products to minors.
  Key components of the FDA regulation include the banning of outdoor 
advertising within 1,000 feet of a school; black and white text-only 
advertisements in youth publications--and those are publications which 
have a readership of more than 15 percent of young people under 18--
banning the sale or giveaway of branded items--caps and trinkets, and 
all sorts of T-shirts--and the prohibition of sponsorship of sporting 
or entertainment events by brand name.
  The FDA has already promulgated these regulations. They are being 
contested as we speak in the fourth circuit.
  Today, my amendment offers an additional enforcement mechanism, an 
enforcement mechanism that I think will put real teeth into the 
restrictions. We will put on notice to the companies that they 
themselves have to carefully watch what they spend on advertising for 
young people. If they fail to adhere to the FDA rules, they will pay, 
and they will pay immediately because they will lose their advertising 
deduction.
  Support for this amendment is broad based in the public health 
community. It is supported by Dr. C. Everett Koop, former Surgeon 
General of the United States. It is supported by the American Lung 
Association, by the Center for Tobacco-Free Kids, and by the ENACT 
Coalition. This is a coalition comprised of leading public health 
groups, including the American Cancer Society, the American Heart 
Association, and many others.
  The importance of this issue is enormous. The facts speak for 
themselves. Today, some 50 million Americans are addicted to tobacco. 
One of every three of these long-term users of tobacco will die 
prematurely from diseases related to their tobacco use. Tobacco is also 
clearly a problem that begins with children. Almost 90 percent of those 
people who smoke today started before they were 18 years old. The 
average youth smoker in the United States starts at 13 and is a regular 
smoker by the age of 14\1/2\.
  This is the greatest pediatric health care problem in the United 
States today. We have not only the opportunity but the obligation to 
stop it. A key component in that campaign to give children a chance to 
avoid smoking is effectively controlling advertising aimed at children. 
Each year, 1 million children become regular smokers and one-third of 
these children will die prematurely of long cancer, emphysema, and 
similar tobacco-caused diseases. Unless current trends are reversed, 5 
million children today under the age of 18 will die prematurely from 
tobacco-related diseases.
  More and more, we are learning that children are being enticed into 
smoking because of industry advertising and promotional efforts. A 
recent study by John Pierce and others found evidence that the tobacco 
industry's advertising and promotional activities actively influenced 
children who have never smoked to start smoking. Among the findings, 
tobacco industry promotional activities in the mid-1990s will influence 
almost 20 percent of those who turn 17 and try smoking. At least 34 
percent of youthful experimentation with cigarettes is attributed to 
advertising and promotional activities.
  This is an industry which has a sordid record when it comes to 
dealing with the children of America. We have to learn from their past 
record to adopt appropriate means of controlling their future conduct. 
They have made money ruthlessly by marketing to children. They have 
shown no concern for the children of America. They have only shown 
concern for the bottom line. And they will continue to target children 
unless it affects their bottom line.
  The culture of big tobacco is one that has yielded incredible revenue 
by capitalizing on the vulnerabilities of our children. The story of 
tobacco and their promotional activities is a story of our century and 
beyond. In the 1920s, the cigarette industry, knowledgeable, of course, 
that their products were not safe, had the temerity to enlist 
physicians--or people dressed up like physicians--to be models in their 
advertising, to suggest that smoking was not only harmless, it was in 
some way beneficial. Lucky Strikes advertised ``20,679 Physicians Say 
Luckies are Less Irritating'' and ``For Digestion's sake, smoke 
Camels,'' another advertising jingle of the 1920s and 1930s. In 1950, 
the Federal Trade Commission found that Camel advertising was 
deceitful, that they were suggesting that their products weren't 
harmful, and they, in fact, took action against them for false and 
deceptive advertising.

  So for more than 50 years--indeed, for as long as you can recall the 
history of the tobacco industry--there has been a constant attempt to 
deceive the American public about what they are selling. That record is 
one that has to be countered by our legislation in this Congress.
  Today, we have Winston ads that are trying to suggest that tobacco 
products are like health foods, proclaiming ``no additives.'' We have a 
new Camel campaign, ``Live Out Loud,'' which is a not-so-subtle stand 
in for the ``cool'' Joe Camel target of so much criticism.
  We know from the documents released by the industry itself they 
consciously, deliberately, and consistently targeted children. In 1973, 
a memorandum written by a Claude Teague of RJR said, ``if our Company 
is to survive and prosper, over the long-term we must get our share of 
the youth market.'' Another memorandum from a vice president of 
marketing at RJR, in 1974, C.A. Tucker, concluded, ``this young adult 
market, the 14-24 age group * * * represent(s) tomorrow's cigarette 
business.'' What responsible group of people would describe 14- and 15-
year-olds as ``young adults''? This is what has been going on for years 
now with respect to the tobacco industry and their conscious, 
deliberate attempts to entice children to smoke.
  In 1982, the then-chairman and chief executive officer of R.J. 
Reynolds Tobacco Co., Edward Horrigan, testified before the Commerce 
Committee and tried to dismiss suggestions that they were going after 
children by simply saying, ``No''--in his words --``[p]eer pressure and 
not our advertising provides the impetus for smoking among young 
people.''
  Yet, just a few years later, in 1986, a R.J. Reynolds' Joe Camel 
advertising memo said this:

       Camel advertising will be directed toward using peer 
     acceptance/influence to provide the motivation [to] target 
     smokers to select Camel. Specifically, advertising will be 
     developed with the objective of convincing target smokers 
     that by selecting Camel as their usual brand they will 
     project an image that will enhance their acceptance among 
     their peers.

  What could be more cynical, what could be more hypocritical, than an 
industry objective trying to dismiss their

[[Page S6279]]

advertising, saying it has no effect at this time--it is peer 
pressure--and internally, in their boardrooms, consciously plotting to 
use that peer pressure tied into their advertising to force children to 
smoke.
  That is the record of this industry. That is why we are here today to 
enact comprehensive tobacco control legislation. I argue that without 
appropriate restrictions on advertising, it will not be successful.
  The documents that we have seen from all of these different 
litigations around the country reveal, time and time again reveal they 
have consciously targeted the young adult smoking market. A 1987 
document discussed the ``Project LF (Camel Wides), and it states: 
``Project LF is a wider circumference non-menthol cigarette targeted at 
younger adult male smokers (primarily 13-24 year old male Marlboro 
smokers.)'' Executives were sitting around in the boardrooms, 
concocting schemes, so that 13-year-olds will begin to smoke. That is 
what the record of the industry is.
  I am deeply skeptical that this tobacco industry is willing, even 
today in the glare of publicity with adverse court rulings, to change 
their behavior unless we act appropriately and with great vigor to 
ensure that they do what is right and not try to addict children in 
this country.
  Every year the industry spends billions and billions of dollars to 
find new ways to hook kids into smoking. Examples of what they do are 
endless. We know from the research and we know from our own experience 
that pivotal in the decision of a young person to smoke is the 
advertising they are seeing constantly. Eighty-six percent of underage 
smokers prefer one of the three most heavily advertised brands--
Marlboro, Newport and Camel. That is not a coincidence. That is the 
effect of a repeated, unending assault on their minds and bodies by 
tobacco advertising, aimed at getting them to smoke.
  One of the advertising campaigns most criticized is the Joe Camel 
campaign by R.J. Reynolds. When they introduced this campaign, their 
market share among underage smokers leaped from 3 percent to 13 percent 
in 3 years--a huge increase. Once you have someone hooked on a brand at 
13 or 14 years old, they will probably be your smokers for life, 
representing to them billions of dollars in profit. They did it 
deliberately. They did it consciously. They were prepared to accept the 
criticism because they knew they were hooking these kids, they were 
hooking them for life, and it was going right into their bottom 
line. And although the Congress banned television advertising in 1970, 
tobacco companies routinely circumvent this restriction through the 
sponsorship of events that give their products television exposure. You 
can see that their advertising expenditures have been exploding over 
the last several years. As this chart indicates, from 1975 until today, 
their advertising expenses have increased tenfold. In 1975, the 
industry was spending about $491 million a year on advertising.

  In 1995 alone, tobacco manufacturers spent $4.9 billion on 
advertising and promotional expenses, and we are subsidizing these 
expenses through the tax deduction. In 1995, American taxpayers 
subsidized $1.6 billion of these expenses that are used in a concerted, 
conscious effort to hook our kids. We are helping to write the check 
for that.
  (Mr. SMITH of New Hampshire assumed the Chair.)
  Mr. REED. In effect, we are subsidizing their advertising costs. In 
1995, the amount of our subsidy, the $1.6 billion, paid for all of 
their efforts to send coupons, to have multipack promotions, to have 
retail value-added items such as key chains, hats, T-shirts--all the 
things the kids really like to wear. I don't see many adults running 
around with them, but I see lots of kids with Joe Camel T-shirts, and 
key chains, and all the cool things they get. In effect, we paid for 
that through this subsidy.
  You can see the record on this chart of their expenditures and our 
support of those expenditures through this deduction. As I said, they 
are spending a huge amount of money trying to get kids to smoke. In 
ironic contrast, we spend a pittance trying to help people who are 
afflicted with the diseases caused by smoking. In 1995, that $4.9 
billion was double the amount of money we spent for the National Cancer 
Institute. It was four times the amount of money we spent for the 
National Heart, Lung and Blood Institute. It represents 40 times what 
was spent at the National Institutes of Health on lung cancer research.
  Those are the proportions. That is the huge amount of advertising 
expenditures that are being bombarded on the American public, but 
particularly on the children of this country. We know the cost to our 
society is significant: $100 billion a year in health costs and lost 
productivity is estimated. In 1993, health care expenditures directly 
caused by smoking totaled about $50 billion; 43 percent of those costs 
were paid for by Medicare and Medicaid.
  We are paying both ways. We are helping them sell their products, and 
then we are taking care of the people who are ill because of their 
products. We have to do much more. We have to go ahead and ensure that 
the advertising ban that has been enacted by the Food and Drug 
Administration is supported with real force and real effect. That is 
the purpose of my amendment.
  Of course, any time you talk about a situation where you are 
attempting to affect the commercial speech of anyone in this country, 
you have to reckon with the first amendment to the Constitution, and I 
do recognize that.
  Let me again remind you that the story of the tobacco industry in 
America is a story inextricably linked to advertising. For decades, the 
tobacco industry ingeniously promoted its products and has done so with 
total disregard for the health of its customers. The industry relied 
upon image rather than information to sell its product. The tobacco 
industry has taken an addiction that prematurely kills and dressed it 
up as a glamorous symbol of success in all manner of endeavor. All of 
this is unsettling, but with the revelation that the industry has 
deliberately and ruthlessly targeted children, it becomes 
unconscionable, and we should not and need not accept it.
  Now, as I said, we do and must and should recognize that any time you 
attempt to suggest restraints on commercial speech, you have to reckon 
with the first amendment. But the amendment I am proposing today 
combines the narrowly drafted and focused restraints of the FDA rule to 
prevent marketing to children with the recognized and broad-based 
authority of Congress over the Tax Code to create a provision that 
conforms to the first amendment.
  First, let's be clear that the Constitution affords a much lesser 
degree of protection to commercial speech than to other 
constitutionally guaranteed expression. In 1975, the leading Supreme 
Court case on the subject of commercial speech essentially said that 
the Constitution imposed no restraint on Government with regard to 
``purely commercial speech.'' Today, commercial speech may be banned in 
advertising an illegal product or service, and, unlike fully protected 
speech, pure speech, it may be banned if it is unfair or deceptive. 
Even when it advertises a legal product and is not unfair or deceptive, 
the Government may regulate commercial speech more than fully protected 
speech.
  The record of the tobacco industry clearly demonstrates that this 
industry, over decades, has deliberately carried out a scheme to 
violate the laws of every State in the Union. All 50 States bar the 
sale of tobacco products to minors. But as I have shown in these 
documents, those laws were carelessly and callously disregarded by the 
industry in their attempt to, as they say, ``get the young adult 
market''--13-, 14-, 15-, 16-, and 17-year-olds.

  Since this advertising campaign consciously sought to illegally 
market their products to children, there should be no protection. The 
first amendment does not give them the right to engage in illegal 
marketing schemes. Thus, the most basic reason that this amendment will 
pass constitutional muster is the fact that it is designed to prevent 
tobacco companies from promoting illegal transactions.
  Even if one were to invoke the constitutional test applied to the 
legal sale of commercial products, this would still pass muster. In the 
Central Hudson case, the Supreme Court established the standards for 
evaluating a purported restraint on commercial speech. As a preliminary 
point, the Court drew a distinction between legal

[[Page S6280]]

activities and unlawful activities or misleading speech.
  As I have already indicated, if the commercial speech in question 
involves unlawful activities or it is misleading, then the Government 
may restrict it. Or, as the Supreme Court indicated in Central Hudson, 
there can be no constitutional objection to the suppression of 
commercial messages that do not accurately inform the public about 
lawful activity.
  Now, assuming for the sake of argument, despite the rapidly 
accumulating evidence to the contrary, that tobacco advertising would 
be treated as routine commercial speech and the Court would ignore the 
inherent illegality of their plans to market to children, the proposed 
restriction still meets the standards of Central Hudson. First, there 
is a substantial governmental interest in restricting advertising aimed 
at minors. Second, the proposed restraints directly advance this 
governmental interest. Finally, the proposed legislation is no more 
extensive than necessary to serve this substantial governmental 
interest.
  Now, what could be of greater interest to the American people than 
the prevention of 3,000 children a day from becoming addicted to 
cigarettes? I daresay that every Member of this Senate would concur 
that this is not only a valid governmental interest, it is a compelling 
one--1 million children a year become addicted to cigarettes, and one-
third of these children will die prematurely as a result. The FDA has 
concluded in extensive rule-making that limits on advertising will 
avert the addiction of anywhere between 25 percent and 50 percent of 
these children at risk. Literally, we have it within our power to save 
250,000 children a year from the ravages of smoking. Prevention of 
childhood smoking is clearly and unequivocally a substantial 
governmental interest.
  The second prong of the Central Hudson test requires a showing that 
the proposed restraints directly advance this substantial public 
interest. Perhaps the most compelling evidence to establish this point 
is the behavior of the tobacco industry itself. They certainly feel 
that advertising and marketing is an important part of their strategy 
to addict children. The industry, overall, spends $5 billion a year on 
advertising; that is $13 million a day.
  We know from the internal documents I have shared with you that much 
of this effort is directed at ensnaring children. I can remind you of 
the numerous documents I have cited. They indicate a deliberate and 
calculated attempt to addict children. Unless we restrain advertising 
directed at children, we will never effectively prevent the use of 
tobacco products by children.
  All of this evidence is substantiated by the research underlying the 
FDA rule. In its rule-making, FDA relied on two major studies 
summarizing the effects of advertising on youthful tobacco use--the 
study of the Institute of Medicine in 1994 and the Surgeon General's 
Report in 1994 concluded that advertising was an important factor in 
young people's tobacco use. Moreover, these reports indicated that 
advertising restrictions must be part of any meaningful approach to 
reduce underage smoking. In promulgating its rule, the FDA declared:

       Collectively, the studies show that children and 
     adolescents are widely exposed to, aware of, respond 
     favorably to, and are influenced by cigarette advertising. 
     One study found that 30 percent of 3-year-olds and 91 percent 
     of 6-year-olds identified Joe Camel as a symbol of smoking. 
     Other studies have shown that young people's exposure to 
     cigarette advertising is positively related to smoking 
     behavior and their intention to smoke.

  All of this shows that the FDA rules and my amendment are directly 
related to achieving the substantial government interest.
  And the final issue that has to be addressed with respect to the 
Central Hudson test is to ensure that the proposed restrictions are no 
more extensive than necessary to accomplish the governmental objective. 
In the realm of commercial speech, the court requires there be a 
``reasonable'' correlation between the proposed restraint and the 
policy outcome sought.
  Now, it is important to note that the proposed restrictions under the 
FDA rule do not absolutely prohibit the advertising of tobacco 
products. They have been carefully tailored to allow continued 
promotion of cigarettes to adults. Their objective is to prevent 
marketing to children. The FDA regulations retain the informational 
value that such advertising has for adults, but affects in a positive 
way access to these images by children.
  It is also important to note that we have, over several decades, 
tried other means short of advertising restrictions to stem the 
epidemic of underage smoking. Warning labels have not worked. They are 
ignored by children in the clutter of the ``live out loud,'' rock-and-
roll imagery, or the Joe Camel character, all of those things.
  In fact, ironically, the only one the warning labels seem to have 
helped at least for a while is the industry itself, because they use 
them in their defense to say that smokers assumed the risk when they 
picked up a pack of cigarettes because of that label. We tried to ban 
advertising on television. That has not worked either.
  As Chairman Robert Pitofsky of the Federal Trade Commission pointed 
out in his testimony before the Senate Commerce Committee:

       After cigarette manufacturers were prohibited from 
     advertising on television and radio in 1969 (a prohibition 
     that was intended, in part, to protect children), they put 
     tens of millions of dollars in print advertising to sell 
     their products. In more recent years, the cigarette 
     manufacturers have shifted an increasing amount of money away 
     from traditional advertising and into sponsorships and so-
     called ``trinkets and trash''--T-shirts, caps, and other 
     logo-adorned merchandise--that some believe are very 
     attractive to young people.

  We simply cannot rely on the good faith of this industry to do what 
is right. Today, as we debate this legislation, they continue to target 
children. Just a few weeks ago I received a letter from a constituent 
in Rhode Island. He wrote me and said:

       As you consider legislation regarding tobacco company 
     advertising aimed at children, I thought you might like to 
     see a mailing piece that my oldest son, Mark, a junior in 
     high school, recently received. Brown & Williamson Tobacco 
     Company evidently got his name because he attended a concert 
     last summer in which the group featured in the advertisement 
     performed. I suspect that the great majority of the audience 
     was under 18 years of age.

  And this is the flier that a high school junior, a 16-year-old child 
received in Providence, RI.
  Here it is: This is the first piece, and this is a very sophisticated 
piece of direct mail. This was individually addressed to the child, not 
to occupant, not to parent. This was individually addressed to him. It 
is his own mail. And we all know, when you are a youngster and you get 
your own mail, that is a big deal to think that you are so special that 
a big company like Brown & Williamson would write to you directly.
  Here is what it said: ``We Know You Like It Loud,'' the rock concert 
motive which they might well have sponsored. Again, as Pitofsky pointed 
out, they have shifted a huge amount of money away from the traditional 
advertising to go into rock concerts and trinkets and direct mail, and 
everything else.
  And this is the bulk of the advertising: ``You like it loud, and 
very, very smooth, Kool Milds, Kool Filters. Kick back today and enjoy 
bold taste, refreshing menthol.''
  And a coupon: ``Relax with Kool and slip into something smooth.''
  ``Slip into something smooth,'' a lifetime addiction to tobacco. That 
is what they want. It is happening today, directly targeted at 
children. That is what we are about in the Chamber. It is not about 
taxes. It is not about lawyer's fees. It is about an industry that 
continues to go after our kids without any letup, ruthlessly, 
relentlessly, and they are doing it today, and they will continue to do 
it today unless we make them understand. And the only way we do it is 
through the bottom line, that they can't keep doing this again and 
again.

  We have been debating on this floor the last few weeks whether we are 
going to increase the price of cigarettes $1.10 or $1.50. What do they 
do in their promotions? They are cutting a buck. Here is one dollar off 
the two-pack package. Any style of Kool you want, young man. You are 
16. You should be smoking. We will give you a break.
  That is what this is about. We want to raise the price per pack 
because we don't want kids to go out there and smoke cigarettes. They 
want to cut

[[Page S6281]]

cigarette prices to addict children. It is happening today, shamelessly 
happening today. We can stop it. We must stop it. We have to go ahead 
and ensure that this type of activity doesn't take place.
  Now, this whole promotion--and I am not the expert on this. This is 
the whole rock-and-roll series of concerts that are directed at kids. 
Sure, there might be some college kids there, but this is what is hot 
in high school. They want to be grown up. They want to go to the rock 
concert. They are sponsoring the concerts. They are tracking the kids 
down afterwards. They are sending them promotional materials. They are 
giving them coupons. Absolutely shameless. We shouldn't accept it. We 
can't accept it.
  Now, the proposed FDA regulations have been carefully tailored to 
prevent this type of activity, to allow them to market to adults, to 
make conscience choices, that we can't stop, that we don't want to 
stop. But we have to, I think, ensure that they are not allowed to 
continue this type of behavior. My amendment will do that.
  Now, moving away from the issue of the constitutionality, and very 
quickly, with respect to the tax law consequences, the Supreme Court 
has held that Congress is not required to subsidize first amendment 
rights through a tax deduction, but a first amendment question would 
arise if Congress were to invidiously discriminate in its subsidies in 
order to suppress ``dangerous ideas.''
  Now, the appropriateness of this denial of a deduction which touches 
upon first amendment issues rests fundamentally on the underlying 
propriety of the proposed restraint. And as I indicated, the proposed 
FDA regulations do not ``invidiously discriminate.'' They have been 
narrowly drafted to conform to the ``commercial speech'' doctrine of 
Central Hudson. They will, in fact, stand the test of a court.
  And in addition, denying of a deduction as I propose would not ban 
any speech. The standing bill itself, my amendment, would not require 
the companies to say anything or refrain from saying anything. But if 
they violate these rules, they will have to do it on ``their own 
nickel.'' It won't be subsidized to the tune of $1.6 billion a year by 
the taxpayers of the United States.
  Let me mention something else which I think is appropriate in this 
context. It is that we have to be realistic and understand that this 
industry has avoided any type of real regulation for as long as we all 
can remember. There are laws on the books of the FTC for misleading in 
advertising. And what happens, the FTC brings a case, it takes 2 years 
to go through the administrative appeals, they might get an adverse 
decision. They will appeal it to the courts, and by that time the 
advertising campaign is gone anyway. They are not going to run a 
campaign for 100 years. It is the game they are playing. This approach, 
my approach will make them each year look at what they have done 
because they have to file their taxes. It will put their auditors and 
their accountants and their tax attorneys on notice that they can't 
claim these deductions if they are violating these rules. No messy FDA 
bureaucracy. No FDA agents running around scouring the countryside 
measuring the distance between schools and billboards. They are going 
to have to do it. They should do it. This enforcement mechanism, I 
think, is another positive aspect of this legislation.
  Now, in another context this Senate has voted to deny tax benefits 
for those groups that engage in speech activities. The most prominent 
one is the fact that we have denied tax-exempt status to nonprofit 
groups if they engage in lobbying activities. Lobbying activities--
political speech has the strictest scrutiny of the Supreme Court. It is 
pure speech, not commercial speech, yet we in our wisdom have said: 
Listen, if you are going to use your tax advantage to go ahead and 
engage in lobbying, you lose that tax advantage. If we do that to not-
for-profit groups, where we do that to groups that are trying to affect 
positively the health of youth in this country, why should we be 
reluctant to go ahead and deny this group tax deductions if they are 
engaged in this type of shameless behavior? I think we should move 
aggressively to do that.

  Let me emphasize my proposal is very narrowly tasked. It is targeted 
very closely along the lines of the FDA regulations to prevent access 
of children to this type of tobacco advertising.
  Let me make another point about the context of the legislation and 
how it fits within the particular McCain bill. I commend the Senator 
from Arizona for his effort toward the goal of this legislation. 
Indeed, his perseverance, his strength, his endurance has carried us 
this far along, along with many other colleagues. But this legislation 
is designed to prevent children from smoking. It is not about taxes. It 
is not about big government. It is about making the companies stop 
soliciting kids to smoke.
  There are two ways in which the bill does it. First, it reaffirms the 
full authority of the FDA to promulgate these rules. In effect, it 
supports the FDA's advertising bans that are being tested now by the 
industry. A second part is a protocol, a contractual relationship 
between the industry and the government, which actually imposes further 
restrictions on what they can do. My amendment affects only the first 
part of the McCain legislation. It would deny tax deductibility if the 
industry violated the FDA rule. Again, it is narrowly tailored, it is 
consistent with the Constitution, and it is something that will 
effectively stop the industry from doing what they are doing.
  We have witnessed, for years and years and years, the industry's 
unrelenting attempts to addict children to nicotine. They are doing it 
today. They are doing it through rock concerts, through promotional 
giveaways, through T-shirts, through every other method of advertising. 
We know that. We can stop this assault on America's children. We can 
stop it by supporting the FDA rules and we can stop it, I think, much 
more decisively and definitively by adopting the amendment I propose, 
by telling the tobacco companies very straightforwardly: If you choose 
to advertise to children, you will lose your tax deduction. You will 
feel it in the bottom line. You will have to pay, as these kids and our 
society pay for their addiction.
  I urge my colleagues to support this amendment.
  Mr. KENNEDY. Mr. President, I commend Senator Reed for his leadership 
on the amendment that is before the Senate at the present time. He has 
proposed a creative and effective enforcement mechanism to deter 
tobacco industry marketing targeted to children. I strongly support his 
amendment to eliminate the tax deduction for tobacco industry 
advertisements that violate FDA advertising restrictions.
  Clearly, the tobacco industry should not be marketing its addictive 
products to children. For years, Big Tobacco has appealed to children 
through its advertising and promotional campaigns. Tobacco advertising 
was banned from television in the 1970s, but cigarette manufacturers 
have found new ways to hook kids on their products through colorful 
magazine advertisements, free t-shirts and caps with brand logos, 
product placements on prime-time television shows and in the movies, 
and sponsorship of sports events and cultural events.
  In fact, studies show that more cigarette ads are placed in stores 
near schools than in other stores. Ads are put next to the candy 
counters more often than elsewhere in stores. Displays are set at eye-
level for children. In stores near schools and in neighborhoods with 
large numbers of children under 17, there are more tobacco ads outside 
the store and in the store windows than in cases where schools are 
nearby.
  Recently in Massachusetts, 3,000 teenagers surveyed stores in their 
communities to identify cigarette advertising aimed at children. Stores 
within a thousand feet of schools in low-income and minority 
neighborhoods had more cigarette advertising than stores in affluent 
communities.
  According to a recent study in the Journal of the American Medical 
Association, children watching the Marlboro Meadowland Auto Race on 
television were exposed to Marlboro ads over 4,700 times in 90 
minutes--4,700 times in 90 minutes. Cigarette ads are theoretically 
prohibited on television--but the tobacco companies have obviously 
found a way to get around that prohibition.

[[Page S6282]]

  These advertising placements do not happen by accident. Tobacco 
companies have consistently targeted children as young as 12--because 
they know that once children are hooked on cigarettes, they are 
customers for life.
  In fact, a 1996 study in the Journal on Marketing found that 
teenagers are three times as responsible as adults to cigarette 
advertising.
  Before the Joe Camel advertising campaign began, less than 0.5 
percent of young smokers chose Camel. After a few years of intensive 
Joe Camel advertising, Camel's share of the youth market rose to 33 
percent--33 percent.
  Some 90 percent of current adult smokers began to smoke before the 
age of 18. If young men and women reach that age without beginning to 
smoke, it is very likely that they will never take up the habit in 
later years. And so the industry has cynically conducted its 
advertising in a way calculated to hook as many children as possible.
  For at least a generation, Big Tobacco has targeted children with 
billions of dollars in advertising and promotional giveaways that 
promise popularity, maturity and success for those who begin this 
deadly habit.
  The Centers for Disease Control and Prevention found that the average 
14-year-old is exposed to $20 billion in tobacco advertising--$20 
billion--beginning at age 6. It is no coincidence that the three most 
heavily advertised brands are preferred by 80 percent of children--
Marlboro, Camel, and Newport.
  A study published in the February 8, 1998 Journal of the American 
Medical Association also reported a strong correlation between 
cigarette advertising and youth smoking.
  It analyzed tobacco advertising in 34 popular U.S. magazines and 
found that as youth readership increased, the likelihood of youth-
targeted cigarette advertising increased as well.
  Two recently disclosed industry documents reveal that Big Tobacco had 
a deliberate strategy to market its products to children. In a 1981 
Philip Morris memo entitled ``Young Smokers--Prevalence, Implications, 
and Related Demographic Trends,'' the author wrote that ``it is 
important to know as much as possible about teenage smoking patterns 
and attitudes. Today's teenager is tomorrow's regular customer, and the 
overwhelming majority of smokers first begin to smoke while still in 
their teens. Because of our high share of the market among the youngest 
smokers, Philip Morris will suffer more than other companies from the 
decline in the number of teenager smokers.''
  A 1976 R.J. Reynolds Tobacco Company memorandum stated that ``young 
people will continue to become smokers at or above the present rates 
during the projection period. The brands which these beginning smokers 
accept and use will become the dominant brands in future years. 
Evidence is now available to indicate that the 14- to 18-year-old group 
is an increasing segment of the smoking population. R.J. Reynolds 
Tobacco must soon establish a successful new brand in this market if 
our position in the industry is to be maintained over the long-term.''
  The conclusion is obvious. Big Tobacco's goal is to hook children 
into a lifetime of nicotine addiction and smoking-related illnesses. 
They've used Joe Camel, the Marlboro Man, and the prominent placement 
of tobacco advertising. Obviously, Big Tobacco knows how to stop 
targeting children. That's why the Reed amendment is so important. If 
tobacco companies continue to target children with their billboard 
advertisements near schools, giveways of branded items, sponsorships of 
sporting events, and magazine promotions, they'll lose their tax 
deduction.
  The health of the nation's children deserves to be protected. The 
Reed amendment is an important enforcement mechanism to ensure that Big 
Tobacco plays by the rules.
  If we continue to permit tobacco companies to deduct the cost of 
advertising targeted to children as an ordinary and necessary business 
expense, we will literally be providing a tax subsidy for this unlawful 
and immoral conduct. Unless we adopt the Reed amendment, the taxpayers 
will be paying approximately 35 cents of every dollar spent by the 
industry on a billboard, on a magazine ad, on a promotional item 
designed to entrap our children into a lifetime of addiction and 
premature death. The Senate should declare in one resounding voice that 
we do not consider addicting children to be ``an ordinary and necessary 
business expense.''
  This amendment speaks to the tobacco industry in the only language it 
understands--money. It will dramatically increase the cost, and 
therefore help to deter, marketing campaigns which seek to convert 
impressionable kids into lifelong smokers. For every advertisement 
which does not appear because of this amendment, there may well be a 
child who does not light up his or her first cigarette.
  The Reed amendment deserves the support of every Senator. I urge my 
colleagues to support it.
  Mr. CONRAD. Mr. President, I rise today to express my support for the 
amendment of the Senator from Rhode Island, Mr. Reed. The amendment of 
the Senator from Rhode Island is an important amendment. Senator Reed 
has been a very important member of the task force that I chaired on 
the Democratic side on the tobacco issue. He has been a superb 
contributor to the work of the task force. In fact, he traveled to 
North Dakota to participate in a hearing on the tobacco issue with me. 
I went to Rhode Island, and we held a very informative hearing at Brown 
University in his State.
  No one has played a more constructive role than the Senator from 
Rhode Island, Mr. Reed. He is absolutely dedicated to the cause of 
trying to craft responsible national tobacco policy. As part of that 
effort, Senator Reed has brought to us an amendment. I believe it is an 
important amendment. It says very simply that the tobacco companies 
will be denied tax deductibility for advertising if, and only if, a 
tobacco manufacturer violates the Food and Drug Administration's 
advertising restrictions.
  I am a cosponsor of this amendment. I believe it is an amendment that 
ought to pass 100 to nothing. There is absolutely no reason why every 
Member of this Chamber should not support the Reed amendment. We all 
know that the tobacco industry has a history of marketing to children. 
After we received through the various trials the documents that were 
previously secret and beyond our observation, we now know beyond 
question that this industry has targeted children, sometimes as young 
as 12 years old. We have seen document after document from the industry 
itself that demonstrate the truth of those statements.
  The advertising restrictions included in the FDA rule are not 
extraordinary. These restrictions are constitutional. They are 
carefully targeted to prevent the tobacco industry from advertising to 
kids. In every State of the Union it is illegal to sell tobacco 
products to children under the age of 18--in every State in this 
Nation. It is illegal to market to kids under the age of 18.
  In every State of the Nation, the tobacco industry should be stopped 
from advertising to children under the age of 18. These advertising 
restrictions are sensible and reasonable, and again, fully 
constitutional. In fact, the tobacco industry found them reasonable 
enough to agree to them in the proposed settlement which they reached 
with the State attorneys general. The tobacco industry actually agreed 
to some restrictions that went beyond those provided for in the FDA 
rules. The FDA determined that in order to reduce youth smoking, the 
following restrictions to advertising should be enforced:
  No. 1, no outdoor advertising within 1,000 feet of a public school or 
playground. We know that outdoor advertising has an impact. Billboards 
placed close to places where kids spend a great deal of time can be 
very influential. The tobacco industry is aware of the power of the 
billboard. According to the industry's own marketing materials:

       Outdoors is right up there, day and night, lurking, waiting 
     for another ambush.

  Those are the tobacco industry's own words. The FDA rules also limit 
advertising in publications with a significant youth readership to a 
black-on-white, text-only format. They also limit advertising in an 
audio format to words with no music or sound effects. They also limit 
advertising in a video format to static, black-on-white text. They also 
prohibit the marketing, licensing, distribution or sale of all 
nontobacco promotional items such as T-shirts and caps. These 
restrictions do

[[Page S6283]]

pass constitutional muster. They were designed to pass constitutional 
muster. These restrictions are aimed at ads that target kids. They do 
not attempt to ban legitimate commercial speech. Mr. President, that is 
why they pass constitutional muster.
  Senator Reed's amendment is intended to penalize the tobacco 
manufacturer if it fails to limit its advertising and marketing to 
those who are legally able to buy the product. We know from the 
thousands and thousands of internal industry documents that the tobacco 
companies purposely and aggressively sought a youth market share. There 
can be no question about it. How many times have we heard on the floor 
the words ``youth replacement smoker''? Because the industry has to 
find someplace to get those to fill the shoes of the 425,000 smokers 
who die every year from tobacco-related illness. Where do they recruit 
them? They recruit them from our youth. Maybe we could put up those 
charts that speak to these questions. These are not my words. These are 
not the words of the public health advocates of this bill. These are 
the words of the industry itself. They have said to us they don't 
market to children.
  But in a 1978 memo from a Lorillard executive, they said, ``The base 
of our business are high school students.''
  ``The base of our business are high school student.'' What could be 
more clear?
  Again, they have said they don't market to children, but if we look 
at their own documents, in this case a 1976 R.J. Reynolds research 
department forecast:

       Evidence is now available to indicate that the 14 to 18 
     year old age group is an increasing segment of the smoking 
     population. RJR must soon establish a successful new brand in 
     this market if our position in the industry is to be 
     maintained over the long term.

  These are not my words. These are the industry's own documents, 
Again, the claim that they don't market to children and another 
document from the industry, a 1975 memo from a Philip Morris 
researcher:

       Marlboro's phenomenal growth rate in the past has been 
     attributable in large part to our high market penetration 
     among young smokers . . . 15 to 19 years old . . . [it goes 
     on to say] my own data . . . shows even higher Marlboro 
     market penetration among 15 to 17 year olds.

  Can there be any question that they targeted kids? Can there be any 
serious question when their own documents reveal that is precisely what 
they have done?
  Finally from a Brown & Williamson document.

       The studies reported on youngsters' motivation for 
     starting, their brand preferences, et cetera, as well as the 
     starting behavior of children as young as 5 years old . . . 
     the studies examined . . . young smokers' attitudes towards 
     addiction, and contained multiple references to how very 
     young smokers at first believe they cannot become addicted, 
     only to later discover, to their regret, that they are.

  These are the industry's documents and they reveal that they have 
targeted kids. This industry has spent more than $5 billion a year on 
advertising and marketing each year. The industry says this effort is 
aimed at getting adult smokers to switch. But their own documents 
reveal that these ads are also aimed at building youth market share. 
They repeatedly talk about the need to build the youth market, and they 
know that smokers are very loyal to the first brand they smoke. Few 
adults switch brands as a result of tobacco advertising. The reality is 
that the toys and the slogans and the marketing and the ads are 
targeted at kids. The campaign by the tobacco industry against our 
youth must stop. This amendment, the amendment of the Senator from 
Rhode Island, Senator Reed, I think, would help. It would be another 
tool in the tool box to help us achieve the goals of protecting public 
health and reducing youth smoking.
  Mr. President, I call on our colleagues to support the Reed amendment 
when we have a chance to vote on it next week.
  I thank the Chair and yield the floor.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll. The assistant 
legislative clerk proceeded to call the roll.
  Mr. HATCH. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Sessions). Without objection, it is so 
ordered.
  Mr. HATCH. Mr. President, I rise once again to address the issue of 
the constitutionality of the Commerce bill, as modified by the floor 
substitute.
  A buzz seems to be in the air that perhaps the pending substitute 
bill might actually pass.
  What seems to be forgotten--or ignored--however, is there are serious 
questions surrounding the bill's constitutionality. In a rush to do 
good, in the haste to pass legislation that limits youth cigarette 
smoking, some have either ignored the constitutional problems or 
deluded themselves that no such problems exist.
  In 1845, Justice Joseph Story complained ``how easily men satisfy 
themselves that the Constitution is exactly what they wish it to be.'' 
Well, the courts will not ignore the Constitution. They will scrutinize 
the legislation according to applicable case law and constitutional 
doctrine and, most assuredly, will strike down as unconstitutional 
pertinent provisions of the bill.
  So what will we have accomplished? Major portions of this bill will 
fail. Teen smoking may not decrease. Or, even worse, from a public 
health standpoint, the bill will be tied up for a decade or more in 
litigation; no national tobacco program could be implemented until the 
litigation is resolved; and more and more teens will start and continue 
smoking. Many of our youth, naturally, will die prematurely--at least 
10 million kids--while this is litigated, assuming it passes in its 
current form, as unconstitutional as it is. There will be at least 10 
years of litigation, and another 10 million kids will become hooked on 
smoking, a high percentage of whom will probably die prematurely as a 
result of that.
  We must, as a body, address the constitutional concerns raised by the 
tobacco legislation, and we should not evade this issue.
  Mr. President, I want to make clear that I am a strong advocate of 
legislation that will reduce youth consumption of tobacco products. I 
also want to make it abundantly clear that I am a vociferous critic of 
the tobacco industry. But should our disdain for tobacco and our desire 
to help young people prevent us from crafting an efficacious bill that 
meets constitutional requisites?
  We must heed Justice Oliver Wendell Holmes, Jr., who in 1904 observed 
that it must always be ``remembered that legislatures are the ultimate 
guardians of the liberties and welfare of the people in quite as great 
degree as the court.'' So we must act as guardians of the Constitution. 
Our oaths of office require it. The American people demand no less of 
us.
  The Commerce bill raises a number of serious constitutional issues 
which involve the following: No. 1, the first amendment; 2, the 
prohibition of bills of attainder contained in article I; 3, the 
takings clause; and 4, the due process clause. Allow me to address each 
of these issues in the order I listed them.
  Let me first turn to the first amendment issue.
  The Commerce bill unconstitutionally restricts tobacco product 
advertising, one, by apparently enacting the August 1996 FDA rule, and, 
two, by imposing additional restrictions that go beyond these 
regulations through a so-called ``voluntary protocol'' modeled after my 
original tobacco plan.

  Section 103 of the floor vehicle deems the FDA rule to be ``lawful 
and to have been lawfully promulgated under the authority of this 
chapter.'' The meaning of this is unclear, but the language will 
probably be interpreted as codifying the rule.
  As to the protocol section of the Commerce bill, one must remember 
that it is intended to be voluntary. It is null and void without the 
participation of the tobacco companies and the other parties to the 
June 20, 1997, settlement.
  Both of these restrictions violate the first amendment and the 
Supreme Court's cases defining commercial speech. Moreover, the 
``counter-advertising'' provisions--the ``coerced speech doctrine''--of 
the bill are subject to first amendment challenges unless consented to 
by the tobacco companies, who have said they will not consent to this 
Commerce Committee bill.
  Let me discuss these concerns in more detail.

[[Page S6284]]

  On August 28, 1996, the U.S. Food and Drug Administration published a 
rule which restricted tobacco advertising. These limitations include: 
No outdoor advertising for cigarettes and smokeless tobacco, including 
billboards, posters, or placards, within 1,000 feet of the perimeter of 
any public playground, elementary school, or secondary school; other 
advertising must be in black text on a white background only, in FDA-
approved publications; labeling and advertising in audio format must be 
in words only, with no music or sound effects, and in video format in 
static black and white text only, on a white background; the sale of 
any item--other than cigarettes or smokeless tobacco--or service, which 
bears the brand name, logo, et cetera, identical or similar to any 
brand of cigarettes or smokeless tobacco is prohibited; offering any 
gift or item--other than cigarettes or smokeless tobacco--to any person 
purchasing cigarettes or smokeless tobacco is prohibited; and 
sponsoring any athletic, musical, or other social or cultural event is 
prohibited.
  In April 1997, the U.S. District Court in Greensboro, NC, while 
upholding the FDA's general jurisdiction over tobacco, held that the 
FDA did not have statutory authority to regulate advertising. The first 
amendment issues, therefore, were not addressed by the court. An appeal 
is pending in the Fourth Circuit Court of Appeals. Oral arguments were 
heard earlier this week.
  These advertising restrictions propose to be codified in a 
freestanding FDA regulation of the tobacco section of the Commerce 
bill. The Commerce bill also broadens these restrictions, and, much 
like the original Hatch bill, it places these broader restrictions in a 
voluntary yet binding contract termed the ``protocol.''
  Pursuant to the protocol, the tobacco companies waive their first 
amendment rights in exchange for the settlement of existing suits and 
the scaled-back civil liability limitations--in the original floor 
vehicle, the ``soft'' cap on annual payments--that is, $6.5 billion per 
year. These modest civil liability limitations may be nullified if the 
Gregg amendment is adopted.
  As the bill currently stands, the proposed incentives for the tobacco 
industry to agree voluntarily are largely illusory, hence the 
explanation for the recent withdrawal by the industry from the June 20 
settlement. So there is no longer any voluntary consent protocol. 
Private parties may waive their constitutional rights. I cite with 
particularity the Snepp v. United States 1980 case. We can only assume 
that without this waiver, parties will tie up the legislation in the 
courts for years. I don't think there is any question about it.

  The Supreme Court has consistently held that constitutional rights 
may be waived provided that such waiver is knowing, voluntary and 
intelligent. [See Fuentes v. Shevin, 407 U.S. 67, 95 (1972); D. H. 
Overmyer Co., Inc. Of Ohio v. Frick Co., 405 U.S. 174, 187 (1972).] Of 
course, the tobacco companies have now withdrawn from the settlement, 
so no waiver can occur unless they rejoin the negotiations.

  So, the tobacco industry will not enter into the protocols and we 
must analyze the bill's constitutionality on this fact. With this bill, 
we are not discussing restrictions which will be agreed to. Hence, the 
constitutionality is the problem.
  Because the advertising restrictions affect only commercial speech, 
they are entitled to less First Amendment protection than, let's say, 
political speech. [E.G., Central Hudson Gas & Elec. Corp. v. Public 
Service Comm'n, 447 U.S. 557 (1980).] Yet, according to the 1980 
Supreme Court decision in Central Hudson v. Public Service Commission, 
the government still bears the burden of justifying a restriction on 
commercial speech. I also cite, Rubin v. Coors Brewing Co. [, 115 S.Ct. 
1585, 1592 (1995).] According to Central Hudson, the Supreme Court has 
enunciated a four-part test governing the validity of commercial speech 
restrictions: 1. Whether the commercial speech at issue is protected by 
the First Amendment, whether it concerns a lawful activity and is not 
misleading; and 2. Whether the asserted governmental interest in 
restricting it is substantial; If both inquiries yield positive 
answers, then; 3. Does the restriction directly advance the 
governmental interest asserted; and 4. Is the restriction not more 
extensive than is necessary to serve that interest?
  In the 1996 case of 44 Liquormart, Inc. v. Rhode Island, [116 S. Ct. 
1495 (1996)], the Supreme Court heightened the protection that the 
Central Hudson test guarantees to commercial speech. It makes clear 
that an effectively total prohibition on ``the dissemination of 
truthful, non-misleading commercial messages for reasons unrelated to 
the preservation of a fair bargaining process'' will be subject to a 
stricter review by the courts than a regulation designed ``to protect 
consumers from misleading, deceptive, or aggressive sales practices.''
  The proposed restrictions would fall with in the scope of the first 
prong of the test because, presumably, the advertising is lawful and 
not misleading. They would also meet the second prong because 
protecting the public health, safety, and welfare (particularly when 
the public group being protected is comprised of children) is a 
substantial interest.
  So, a court in analyzing the constitutionality of the advertising 
restrictions will be left to question seriously whether the third and 
fourth prong of the Central Hudson test has been met. In other words, 
the questions facing the Congress and a future court are whether the 
government could carry its burden of proving the advertising 
restrictions will directly advance the reduction of youth smoking and 
that the restrictions are not more extensive than necessary to 
accomplish this objective.
  Because ``broad prophylactic rules in the area of free speech are 
suspect,'' courts rigorously apply the third and fourth factors of the 
Central Hudson test. The Supreme Court noted in Edenfield v. Farre [507 
U.S. 761, 777 (1993),] that as to the third and fourth factors 
``[p]recision of regulation must be the touchstone in an area so 
closely touching our most precious freedoms''.
  Although Congress may reasonably believe that the severe curtailment 
of tobacco product advertising will impact youth smoking, that fact 
alone will not satisfy the government's burden of providing a direct 
advancement of its interest. As the Second Circuit held recently, to 
satisfy this burden, the government must ``marshall . . . empirical 
evidence'' supporting its ``assumptions,'' and must show that its 
putative interest is advanced ``to a material degree'' by the 
restriction on speech. [Bad Frog Brewery, Inc. v. New York State Liquor 
Authority, 134 F.3d 87, 98, 100 (2d Cir. 1998).]
  This burden is a heavy burden.
  It is unlikely that there is uncontroverted ``empirical evidence'' 
proving, for example, that prohibiting sponsorship of athletic, social, 
or cultural events under the brand name of a tobacco product, or that 
prohibiting advertising without notice to the FDA in any medium not 
pre-approved by the FDA would have a material impact on youth smoking. 
The Senate has held more than 30 hearings on the tobacco settlement, 
but have we been provided any such ``empirical evidence?'' And the 
answer is ``no.''
  But, even if the government could carry its burden of proving direct 
advancement of its interest, it cannot survive the fourth prong of the 
Central Hudson test and prove that the FDA regulations are not more 
extensive than necessary.
  The Supreme Court has found that a restriction on commercial speech 
is not sufficiently narrow, and is, thus, unconstitutional, when there 
are available to the government ``alternatives that would prove less 
intrustive to the First Amendment's protections for commercial 
speech.'' [Rubin v. Coors Brewing Co., 514 U.S. 476, 491 (1995).]

  There are obvious regulatory and legislative alternatives here.
  First, the entire premise of the Commerce bill is that other 
regulations that do not impact First Amendment freedoms will advance 
the government's interest in reducing youth smoking. These include (1) 
enforcement of the current access restrictions, public education and 
counter-advertising projects (2) price increases, and (3) cessation 
programs.
  For example consider the 44 Liquormart case I mentioned earlier, [116 
S. Ct. at 1510], which held that liquor price advertising restrictions 
failed Central Hudson's fourth factor, since the government could have 
accomplished its objective through increased

[[Page S6285]]

taxation, limits on purchases, and educational campaigns.
  Moreover, any assertion by the government that non-speech 
alternatives would be ineffective in reducing youth smoking would not 
be viewed favorably by the courts.
  In publishing final regulations promulgated under the ADAMHA 
Reorganization Act of 1992, that's alcohol, drug abuse, mental health 
administration, an act which conditioned federal grants on state 
enforcement of tobacco access restrictions, Department of Health and 
Human Services--the federal agency with expertise on the matter--
proclaimed that ``aggressive and consistent enforcement of states are 
likely to reduce substantially illegal tobacco sales.'' [61 Fed. Reg. 
1492 (Jan. 19, 1996).]
  Likewise, the Surgeon General stated that the ADAMHA Amendments would 
``provide significant new leverage for increased enforcement of laws to 
reduce sales of tobacco products to youth.'' I might add, this was 
included in ``A Report of the Surgeon General: Preventing Tobacco Use 
Among Young People,'' 254 (1994).
  In addition, other measures directed at youth contained in the Hatch 
bill, but not the Commerce bill--such as imposing criminal penalties on 
purchases or possession of cgiarettes by underage persons, or making 
entitlement to a driver's license dependent on a record without such 
offenses--would clearly advance the government's interest more directly 
than would advertising restrictions.
  Finally, the Commerce bill's Protocol restrictions, if they are 
somehow imposed without consent, would work an even more clear 
violation of the First Amendment.
  The Protocol restrictions are no less broad than the voluntary 
restrictions in the Proposed June 20 settlement. And nearly every First 
Amendment scholar who has testified before Congress has concluded that 
such restrictions would violate the First Amendment if enacted 
unilaterally. I refer my colleagues to the testimony of Laurence H. 
Tribe, who testified before the Senate Judiciary Committee last July 
that any legislation containing the Proposed Resolution's advertising 
restrictions would be ``extremely problematic under the First 
Amendment.''
  I also refer my fellow Senators to the testimony of Floyd Abrams, one 
of the leading legal experts in the first amendment privileges and 
rights, before the Senate Judiciary Committee on February 10, 1998, 
where he asserted that any act containing the proposed resolution's 
advertising restrictions would be ``destined to be held 
unconstitutional'' under Reno v. American Civil Liberties Union, [117 
S. Ct. 2329,2346 (1997)].
  Now, let me next discuss the counteradvertising provisions.
  Another first amendment problem plaguing this bill is that, if 
enacted, the bill would also violate the U.S. Constitution insofar as 
the ``counteradvertising'' provisions would require the tobacco 
industry to fund directly political and commercial speech with which it 
disagrees. This violates the so-called ``coerced speech'' doctrine.

  Section 221 of the Commerce bill would directly require the tobacco 
industry to fund a tobacco-free education program, which would award 
grants to public and nonprofit, private entities to carry out public 
informational and educational activities designed to reduce the use of 
tobacco products.
  Section 1172 would direct the Secretary of Health and Human Services 
to disburse funds appropriated for the tobacco industry to be used ``to 
discourage the use of tobacco products by individuals and to encourage 
those who use such products to quit.''
  Now, I do not question these objectives or the motives of those who 
drafted these restrictions. They certainly had the best interests of 
the public at heart in doing so.
  Nevertheless, the Commerce Committee bill would--in these two 
separate instances--compel the tobacco industry to directly fund 
political and commercial speech to which they may be opposed, in 
derogation of the first amendment rights to be free from compelled 
speech and compelled association. Compare this to a situation where 
speech is subsidized by Government, but the revenues come from the 
General Treasury. In this situation, there would be no constitutional 
violation. But the bill is constitutionally infirm and violates the 
Constitution.
  As the United States Supreme Court has held, the first amendment 
prohibits Government from ``requiring a speaker to associate with 
speech with which it may disagree.'' That is Pacific Gas & Electric Co. 
v. Public Utilities Commission of California [475 U.S. 15 (1986)]. 
Government-compelled funding of objectionable speech infringes upon 
both the right of free speech and the right of free association. [Id. 
at 20-21]
  At issue in the Pacific Gas case was a State order that required the 
Pacific Gas and Electric Company to disseminate the views of one of its 
regulatory opponents. In finding that such an order violated the first 
amendment, the Supreme Court held that ``for corporations, as for 
individuals, the choice to speak includes within it the choice of what 
not to say. . . . Were the Government freely able to compel corporate 
speakers to propound messages with which they disagree, this protection 
of the first amendment would be empty.''
  I refer my colleagues to Abood v. Detroit Board of Education [431 
U.S. 209, 234-35 & n.31], a 1977 case, where the Court held that 
Government-compelled union dues may not be used for ideological 
purposes.
  Various Federal courts of appeals, including the Third, Seventh and 
Ninth Circuit Courts of Appeal, have also held that the freedom of 
speech includes the right not to be compelled to render financial 
support for other speech, especially when the views expressed are 
contrary to one's own. These cases include Cal-Almond, Inc. v. U.S. 
Department of Agriculture [14 F. 3d 429, 434-35 (9th Cir. 1993)], U.S. 
v. Frame [885 F. 2d 1119, 1132-33 (3rd Cir. 1989)], and Central 
Illinois Light Company v. Citizens Utility Board [827 F. 2d 1169 (7th 
Cir. 1987)].
  This right to be free from compelled funding of objectionable speech 
is hardly a new development in the law.
  As early as 200 years ago, Thomas Jefferson declared that ``to compel 
a man to furnish contributions of money for the propagation of opinions 
which he disbelieves is sinful and tyrannical.'' [See Abood, 431 U.S. 
at 235 n.31.]
  Moreover, as recently as last year, the Supreme Court reiterated that 
the protections of the first amendment are called into play whenever 
Government seeks to ``require speakers to repeat an objectionable 
message out of their own mouths, or require them to use their own 
property to convey an antagonistic ideological message. . ..'' That is 
Glickman v. Wileman Brothers & Elliot, Inc. [117 S. Ct. 2130, 2139 
(1977)], a 1997 case decided last year.
  Thus, the Commerce bill--by essentially forcing tobacco manufacturers 
to finance an advertising campaign--could be found to infringe on their 
rights to be free from compelled speech and compelled association. 
Unless heightened legal strictures are first met, the Commerce bill may 
not constitutionally require the industry to fund antitobacco speech.
  Keep in mind, this is a legal industry. As bad as it is, as much harm 
as it does, it is still legal. We are unwilling to ban this industry 
and to force these companies to leave our country because we have 
approximately 50 million smokers in this country who are hooked on 
cigarettes. And it has always been approved as a legal business through 
all of these years. So these constitutional points are important 
points, in spite of the fact that we may despise what these companies 
do.
  In order for the ``counter-advertising'' provisions of the Commerce 
bill to pass constitutional muster, there must be a ``narrowly tailored 
means of serving a compelling State interest.'' [See Pacific Gas, 475 
U.S. at 19]
  Although the Federal Government may have a ``compelling State 
interest'' in reducing the health hazards associated with smoking, the 
Commerce bill addresses that concern with a broadside approach that is 
far from narrowly tailored, and which unnecessarily tramples on 
important first amendment rights. The lack of ``narrow tailoring'' is 
most evident from the fact that Congress has available to it a whole 
host of alternative methods to encourage and finance antitobacco speech 
that would not impinge on any constitutional concerns.

  For example, Congress could provide tax incentives to members of the 
mass

[[Page S6286]]

media in exchange for their cooperation in supporting counter-
advertising. Or Congress could condition the receipt of certain Federal 
funds--that is educational and research grants--on the requirement that 
recipients promote measures to reduce tobacco use. Or Congress could 
even directly subsidize antitobacco advertising through the Department 
of Health and Human Services, provided that all such funding was drawn 
from taxpayers ``generally''--and not exacted from the tobacco industry 
in particular. I refer my colleagues to the Supreme Court's opinion in 
U.S. v. Frame [885 F. 2d 119, 1132-33 (3d Cir.)], a 1989 case, which 
emphasized the distinction between ``money from the general tax fund'' 
and money from ``a fund earmarked for the dissemination of a particular 
message associated with a particular group.'' Should this bill become 
law, a Federal court would have to conclude that instead of choosing 
any one of these constitutionally permissible methods of funding 
counter-advertising, the Congress will have adopted a scheme that 
unnecessarily infringes upon the first amendment rights of the tobacco 
industry.
  Let me discuss bill of attainder, takings, and due process issues 
raised by the Commerce bill.
  The Commerce bill would impose large annual payments on these tobacco 
product manufacturers that enter into a voluntary protocol.
  Keep in mind, they have said they are not going to enter into a 
voluntary protocol if the McCain bill is the bill that passes. But 
let's assume otherwise.
  The first six annual payments are to be made regardless of sales or 
profits. The bill would also provide for a $10 billion up-front 
payment.
  Any attempt to impose the Commerce bill's payment scheme on an 
involuntary basis would be subjected to legal challenge under at least 
three independent constitutional provisions--the Bill of Attainder 
Clause, the Takings Clause, and the Due Process Clause of the 
Constitution.
  The implementation of the ``look-back'' penalties--if the industry is 
without fault--raises the same constitutional concerns.
  The Comprehensive Tobacco Resolution agreed to between the tobacco 
companies and the State attorneys general contains a ``look-back'' 
provision, whereby, if prescribed goals for reducing teen smoking rates 
in future years are not achieved, the tobacco companies would be 
subject to specified monetary liabilities.
  The Commerce bill imposes greater ``look-back'' liabilities upon the 
tobacco companies--amounting to more than $5 billion per year--without 
the consent of the industry. Thus, the bill would impose multibillion 
dollar liabilities upon tobacco companies--over and apart from the 
ongoing payments the companies would be called upon to make as part of 
the resolution.
  Even if the companies fully complied with all measures imposed by the 
resolution to prevent teen smoking, they would be subject to the 
penalties without any showing of illegal or wrongful conduct whatever.
  Let me discuss why certain provisions in this bill violate the 
prohibition of bills of attainder contained in Article I, Section 9, 
Clause 3 of our Constitution. This provision simply reads, ``No Bill of 
Attainder or ex post facto Law shall be passed.''
  What is a bill of attainder? The Bill of Attainder Clause prohibits 
the imposition of a punishment by Congress without a judicial trial. 
That was decided as early as 1866 in the Cummings v. Missouri case [71 
U.S. 277 (1986)]. The clause reflects the framers' belief that ``the 
legislative branch is not so well suited as politically independent 
judges and juries to the task of ruling upon blameworthiness.'' That is 
U.S. v. Brown [381 U.S. 437. 445 (1965)], a 1965 case. Legislation 
violates the Bill of Attainder Clause if it singles out a specific 
group for unique treatment imposing punitive liability upon that group 
without a trial.
  I refer my colleagues to Selective Service System v. Minnesota Public 
Interest Research Group, [468 U.S. 841, 846 (1984)], and also generally 
to Nixon v. Administrator of General Service [433 U.S. 425, 469-475 
(1977).]
  In sum, a general definition of what constitutes a bill of attainder 
demonstrates that a bill of attainder prohibited by the Constitution is 
composed of two elements: first, an element of punishment inflicted by 
some authority other than a judicial authority; and second, an element 
of specificity, that is, a singling out of an individual or 
identifiable group for the infliction of the punishment. In other 
words, a bill of attainder is primarily a legislative act designed to 
punish an individual or discrete class of individuals without a hearing 
or a demonstration of fault.
  It is clear that a court would interpret the floor vehicle's 
penalties as punitive and would thus violate the Bill of Attainder 
prohibition.
  The so-called ``look-back penalties'' in the floor vehicle--in other 
words, in the Commerce bill before this body--which are imposed on the 
tobacco companies if teen smoking does not meet certain goals for 
reduction, are subject to constitutional challenge unless they are 
voluntarily agreed to by the tobacco companies.
  I might add, which, of course, is not the case. The companies have 
said they will not voluntarily agree to what they consider to be the 
exhorbitantly punitive bill that is before the Senate at the present 
time.
  I am talking about even the substitute as brought forward by the 
distinguished Senator from Arizona.
  I might add that the bill now terms the penalties ``surcharges.'' But 
this simply is an attempt to elevate form over substance. No matter how 
they are termed, these payments are the functional equivalent of fines. 
Thus, the Supreme Court in United States v. Lovett, [328 U.S. 303 
(1946)], held that legislative acts--no matter what there form or what 
they are called--that apply either to an individual or a discreet class 
in such a way as to impose punishment without a trial--are bills of 
attainder prohibited by the Constitution.
  Given what we know--or do not know--about how teens react to 
advertising, it is possible that even if the tobacco industry does all 
it can to prevent teen smoking, and teen smoking still will not meet 
the target, then they are being punished unnecessarily, Moreover, 
besides the look-back penalties, the floor vehicle contains an 
additional provision that companies lose their liability cap protection 
if underage smoking exceeds the targets by a set amount. This is also 
done without a showing of fault.
  The Bill of Attainder Clause has been invoked by lower courts to 
invalidate similar punitive economic legislation aimed at particular 
industries, companies, or individuals. Thus, for example, in SBC 
Communications, Inc. v. FCC, the District Court struck down provisions 
of the recently enacted Telecommunications Act, which subjected 
regional telephone companies to burdensome requirements for entry into 
the long distance business. [981 F. Supp. 996, 1004 (N.D. Tex 1997).] 
Because the ``Baby Bells'' were singled out for unique and economically 
punishing regulatory treatment--based on an unproved legislative 
presumption that they were engaged in ongoing anti-competitive 
practices--the Court held that the provisions violated the Bill of 
Attainder Clause.
  As another example, in News America Publishing, Inc. v. FCC, the D.C. 
Circuit invalidated on First Amendment grounds a law that singled out 
Rupert Murdock for unfavorable treatment. [844 F.2d 800, 813 (D.C. Cir. 
1988).]
  Explaining that the ``safeguards of a pluralistic system are often 
absent when the legislative zeros in on a small class of citizens,'' 
the D.C. Circuit found that the challenged provision ``strikes at 
Murdoch with the precision of a laser beam,'' and held the provision 
unconstitutional. ``Congress' exclusive focus on a single party clearly 
implicates values similar to those behind the constitutional 
proscription of Bill of Attainder.''
  The Supreme Court in Nixon v. Administrator of General Services, [433 
U.S. 425, 468-484 (1977)] has indicated that the existence of 
punishment is dependent upon the circumstances of individual cases.
  A three-part test to determine whether a legislative act is a bill of 
attainder was developed. One test is that of historical experience 
under the law of England and our own country the United States. This 
test involves an analysis of punishment in terms of what traditionally 
has been regarded

[[Page S6287]]

as punishment for purposes of bills of attainder--which were used to 
seize or escheat property--and bills of pains and penalties--which were 
used to deprive individuals of their civil rights.

  A second test is a functional one which takes into account the extent 
to which any enactment challenged as a bill of attainder furthers any 
non-punitive purposes underlying it.
  A third test for determining the existence of the punishment element 
is a motivational one, involving an assessment of the purposes or 
motives of the legislative authority.
  There can be little doubt that applying the Supreme Court's three-
part test would result in the conclusion that the look-back penalties 
constitute a bill of attainder. Imposing the floor vehicle's payment 
scheme upon the tobacco industry without its consent would, in effect, 
be a fine for the tobacco industry's past conduct and would therefore 
constitute a bill of attainder, even if a due process hearing were held 
to determine factually whether goals were met or not.
  First, the scheme would single out a discrete group for unique 
treatment, since the payments would be forced only upon the country's 
five major tobacco manufacturers. And, second, payments would be 
imposed by the terms of a congressional decree, not through a trial.
  That these measures are ``punitive'' would be readily apparent to any 
court (1) from the huge payments which historically and functionally 
amount to a deprivation and confiscation of property; and (2) from the 
legislative record, which is replete with expressions of congressional 
condemnation of the tobacco industry and, therefore demonstrate a clear 
motive to punish. Thus, the bill punishes and is directed at a discrete 
group, that is, the tobacco companies.
  Let me make clear that there is no greater critic of the tobacco 
industry than Orrin Hatch.
  I have fought them vigorously for most of my career.
  I believe that the tobacco companies have done great harms 
particularly to the children of this nation.
  They have hidden documents demonstrating the addictive nature of 
nicotine.
  They have concealed evidence that cigarette smoking is a significant 
contributor to such diseases as cancer and emphysema.
  Nevertheless, we must put our faith in the judicial process. If 
wrongs have been committed by the tobacco industry, the courts will 
reveal and punish them. That specter is what has brought the tobacco 
companies to the bargaining table. That threat is what caused the 
tobacco companies to settle with the 40 state attorney generals. That 
risk is what led the tobacco companies to settle the individual state 
suits in Mississippi, Florida, Texas, and Minnesota.
  Our task is to pass moderate legislation that implements the 
settlement and adheres to the Constitution. Passing legislation that 
amounts to a bill of attainder is a very dangerous precedent.


                           the takings clause

  Mr. President, let me now turn to the property rights issues that the 
bill raises.
  The Takings Clause in the Fifth Amendment provides, ``nor shall 
private property be taken for public use without just compensation.'' 
The Takings Clause ``conditions the otherwise unrestrained power of the 
sovereign to expropriate, without compensation, whatever it needs.'' 
United States v. General Motors Corp., [323 U.S. 373, 377 (1945).]
  As the Supreme Court in Dolan v. City of Tigard, [512 U.S. 374, 384 
(1994).] held: ``One of the principal purposes of the Takings Clause is 
`to bar Government from forcing some people alone to bear public 
burdens which, in all fairness and justice, should be borne by the 
public as a whole.' ''
  Where there is, in fact, a permanent physical occupation--no matter 
how small--the Supreme Court has held that there is a per se taking, 
immune from application of the balancing test, which I will discuss 
shortly. [See Loretto v. Teleprompter Manhattan, CATV Corp., 458 U.S. 
419 (1982). I refer my colleagues to the Lucas v. South Carolina 
Coastal Council, [505 U.S. 1003 (1992)] case and its discussion on the 
distinction between per se or categorical takings and regulatory 
takings.
  As the Supreme Court noted in the 1984 case of Ruckelshaus v. 
Monsanto Co., while ``[c]ondemnation of land by the power of eminent 
domain is the commonest example of [a] taking,'' it is well-established 
that the ``taking of personal property'' is likewise protected by the 
Takings Clause. [Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003-04 
(1984).]
  And the Supreme Court has held explicitly that the Takings Clause 
protects not only against government expropriations of intangible 
personal property but also against government expropriations of money. 
[Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 162-63 
(1980).] In Webb's Fabulous Pharmacies v. Beckwith, a state court, 
which had maintained funds owed the plaintiff in a court bank account, 
tried to withhold over $9,000 of interest as a fee for ``receiving 
money into the registry of court.'' The Supreme Court held that because 
``the exaction [amounted to a] forced contribution to general 
governmental revenues, and [was] not reasonably related to the costs of 
using the courts,'' it constituted a taking.
  It seems to me that the Commerce bill's expropriation falls under the 
bright line per se takings rule. Clearly, monies and assets are being 
expropriated, and this is not an example of a regulatory taking, where 
a court must balance certain factors to determine whether a diminution 
of value constitutes a taking. [See generally Ruckelshaus v. Monsanto, 
467 U.S. 986 (1984).]
  Moreover, even if the regulatory takings balancing test were applied, 
the Commerce bill's confiscations probably would be considered 
unconstitutional. In determining whether expropriation of money from 
the tobacco product manufacturers constitutes a taking, a reviewing 
court would focus upon the following factors: the character of the 
government action; the economic impact of the regulation on the 
claimant; and the extent to which the regulation has interfered with 
reasonable investment backed expectations.

  Application of this three factor Penn Central test shows that forcing 
the Commerce bill's payment scheme upon the tobacco industry would 
constitute a taking.
  First, the character of the governmental action is--quite clearly--a 
seizure of money. It does not even purport to function as a ``fee'' or 
a ``tax,'' since the initial $10 billion payment and the first 6 annual 
payments are owned regardless of whether there is any income and 
regardless of whether there are any sales.
  Moreover, there is no effort to make the amount of the payments 
relate in any way to the costs of smoking programs that the bill 
authorizes. And, no industry--not even the tobacco industry--could be 
said to ``expect'' that its capital could be simply expropriated in 
lump sum amounts for the public's benefit. Indeed, the Supreme Court 
found a taking in Webb's Fabulous Pharmacy when the Government merely 
interfered with the right to receive interest on capital.
  In this nation's history, there is no statutory precedent whatsoever 
for forced lump sum payments in anything even approximating the amounts 
contemplated here in this proposed legislation.
  In addition, the floor vehicle's document provision is 
constitutionality suspect. I must point out that the June 20 settlement 
agreement presupposed voluntary participation by the tobacco companies 
in releasing proprietary documents.
  While litigation documents already made public can be released to the 
FDA, as required in the bill, it is problematic that the industry could 
be required to release additional documents, especially work product, 
confidential, or privileged documents without the Court saying so. Such 
documents are property as defined by the Fifth Amendment.
  Thus the district court in Nika Corp. v. City of Kansas City, [582 
F.Supp. 343 (W.D.Mo. 1983),] held that a corporation's documents 
constitute property under the Fifth Amendment. I now refer my 
colleagues to other cases--United States v. Dauphin Deposit Trust Co., 
385 F.2d 129 (3rd Cir. 1967), where the court found that a trust 
company has property interest in documents and business records. I also 
refer

[[Page S6288]]

my colleagues to Webb's Fabulous Pharmacies, Inc. [at 162-63.]
  Pursuant to the same theory, the forced funding by the industry of 
the depository--the leasing of the building, the salaries of the 
personnel, etc., indeed as for any confiscation of cash or any valuable 
assets--would constitute a taking under the Fifth Amendment requiring 
compensation. [See Webb's Fabulous Pharmacies, Inc. at 162-63.]
  Furthermore, the multi-billion-dollar appropriation by the government 
of the tobacco companies' funds through ``look-back'' provisions 
constitutes the very type of government expropriation that the Supreme 
Court has held in the past to be an unconstitutional taking. Thus, 
where the Government does not merely impair an owner's use of private 
property, but actually seizes ownership of private property (such as 
money) for its own use without compensation, there is an 
unconstitutional taking. [See, e.g., Webb's Fabulous Pharmacies, 449 
U.S. at 163; Loretto, 458 U.S. 419 (1982).]


                              due process

  In addition to First Amendment, Bill of Attainder, and Takings 
concerns, forced industry payments would also violate due process. The 
substantive due process guarantee of the Fifth Amendment bars 
``arbitrary . . . government actions `regardless of the fairness of the 
procedures used to implement them.' '' [Zinermon v. Burch, 494 U.S. 
113, 124 (1990).]
  The Commerce bill's payment scheme--if imposed involuntarily--would 
arbitrarily compel settlement of various pending and potential 
litigations for the arbitrary amount. Indeed, the arbitrariness of the 
payments is clear on its face: the Bill expressly provides that the 
payments would be, in part, to settle the state attorneys general 
actions.
  But, at the same time, the Bill gives each state the right to opt out 
and pursue its claims, yet fails to give the tobacco product 
manufacturers any offset if the states choose to exercise this right.
  The possibility remains that, through no fault of the tobacco 
industry--and indeed despite the industry's full cooperation in efforts 
to end tobacco use by minors--teen smoking reduction goals established 
as part of a resolution may not be reached within the planned 
timetable.
  In that event, if look-back obligations were imposed by legislative 
edict without the companies' consent, the companies would incur massive 
and unpredictable monetary liabilities, not because they failed to 
implement the terms of the resolution in good faith or otherwise acted 
improperly, but merely because the nation was unsuccessful in fully 
achieving its goals for reasons unrelated to any conduct of the tobacco 
companies. Such a legislative imposition of ``look-back'' liability--
absent any finding of actual responsibility on the part of the tobacco 
companies--would flout fundamental tenets of due process.
  Due Process contains two components: procedural due process and 
substantive due process. A statutorily imposed, non-consensual look-
back scheme violates each of these components.


                         procedural due process

  As the Supreme Court restated in 1992, the right to procedural due 
process guarantees a ``fair procedure in connection with any 
deprivation of life, liberty or property.'' [Collins v. City of Shaker 
Heights, 503 U.S. 115, 125 (1992).] Among other things, procedural due 
process requires that individuals must receive notice and an 
opportunity to be heard before government deprives them of property, 
[United States v. James Daniel Good Real Property, 510 U.S. 43, 48 
(1993),] and a fair trial in a fair tribunal. [In re Murchison, 349 
U.S. 133, 136 (1955).]
  Here, no such fair procedures exist.
  The proposed legislatively-mandated ``look-back'' schemes essentially 
provide that if teen smoking fails to decline by certain percentages, 
there will be no notice, no opportunity to be heard as to whether that 
event were caused by any tobacco company conduct, and no trial.

  Instead, the tobacco companies are automatically proclaimed liable to 
pay billions of dollars if the Secretary determines that the goals are 
not met. This violates procedural due process.
  The Commerce bill does provide for court review upon imposition of a 
penalty. But this review is simply to determine the factual 
determination of the Secretary of HHS on whether the targets of 
reduction in youth smoking have been met. If not met, the penalties, 
according to the bill's language, must be imposed.


                        Substantive Due Process

  Even apart from its manifest failures as a matter of procedural due 
process, a legislatively imposed ``look-back'' scheme would violate 
substantive due process as well. The substantive due process guarantee 
of the Fifth Amendment bars ``arbitrary . . . government action 
`regardless of the fairness of the procedures used to implement them.' 
'' [Zinermon v. Burch, 494 U.S. 113, 124 (1990).]
  Here, the arbitrariness of the look-back scheme is clear; the look-
back scheme would automatically assign massive liability to tobacco 
companies even if the companies fully complied with all steps to reduce 
teenage smoking.
  Indeed, if one steps back from the current issues surrounding tobacco 
and looks to analogies for other industries, the arbitrariness, and, 
therefore, the unconstitutionality, of the proposed look-back scheme is 
even more obvious. Thus, the proposed legislative mandate would be the 
equivalent--for constitutional purposes--of imposing multi-billion-
dollar liabilities on the automobile industry if--despite car 
companies' full compliance with government safety and design mandates--
death rates from automobile accidents did not decline by certain 
desired percentages;
  It would be the equivalent of imposing liabilities on the beef 
industry if--despite its funding of increased public health advertising 
programs--Americans failed to limit their meat intake and the instance 
of heart disease in America did not decline by certain percentages;
  It would be the equivalent of imposing liabilities on the alcohol 
industry if--despite its best effort to educate the public and promote 
enforcement of state minimum age purchase laws--underage drinking and 
drunk driving fatalities will not decline by certain percentages.
  It would be the equivalent of imposing liabilities on the airline 
industry if its on time performance failed to satisfy government 
targets, without regard to whether such deficiencies resulted from 
failures in the government-run air traffic control system or bad 
weather, rather than industry conduct.
  In each of these cases, such liability would be imposed regardless of 
the reasonableness of the ``targets.''
  There can be no question but that the look-back provisions here would 
be just as arbitrary and irrational as the above hypotheticals.
  Thus, the various proposed look-back schemes irrebuttably presume 
that, if teen smoking does not drop by a certain percentage, it 
definitively is a result of conduct by the tobacco companies. This 
would be irrespective of any showing a tobacco company could make that 
it fully complied with all steps to reduce teen smoking and that the 
failure of the nation to meet its teen smoking goals was based solely 
on external factors.
  Such irrebuttable presumptions have been repeatedly struck down by 
the Supreme Court. [Vlandis v. Kline, 412 U.S. 441, 446 (1973),] The 
Court struck down as an irrebuttable presumption a stricture that 
anyone who had an out-of-state address at the time they applied for 
admission to a university remained a non-state-resident throughout 
their tenure at the university. [See also Tot v. United States, 319 
U.S. 463, 467-68 (1943).]
  Moreover, in only recently striking down a punitive damage judgment, 
the Supreme Court has held that the Due Process Clause precludes the 
imposition of liability that does not bear a justifiable relationship 
with actual conduct. [BMW v. Gore, 116 S. Ct. 1589, 1599 (1996).
  Here, the proposed ``look-back'' scheme would impose multi-billion-
dollar liability without any showing of any improper conduct 
whatsoever. The Due Process Clause simply does not permit such a 
``deprivation [of property], through the application, not of law and 
legal processes, but of arbitrary coercion.'' [Id. at 1605 (Breyer, J., 
concurring).] [I refer my colleagues to Calero-Toledo v. Pearson Yacht 
Leasing Co., 416 U.S. 663, 689 n.27 (1974), where the Supreme Court 
noted that liability must be imposed ``with a due

[[Page S6289]]

regard to the rights of property and the moral innocence of the party 
incurring the'' liability.]
  Mr. President, we can be sure--as sure as anything--that the tobacco 
industry will challenge the constitutionality of this bill on these, 
and perhaps even other issues.
  I am confident that every argument that I have made is legitimate. 
The tobacco companies need only prevail on one of these theories and 
this opportunity we have had will have been squandered.
  Mr. President, in 1878, William E. Gladstone, the famous future Prime 
Minister of Great Britain, remarked that the ``American Constitution is 
. . . the most wonderful work ever struck off at a given time by the 
brain and purpose of man.''
  Indeed, the Constitution by limiting the scope of government has 
fostered individual autonomy, which in turn has unleashed the creative 
energies of the American people.
  The Constitution, for over two centuries now, has been the source of 
our prosperity, as well as our liberty. Let us abide by its strictures. 
Let us pass legislation that both helps our kids and is also 
constitutional.


                          explanation of vote

  Mrs. BOXER. Mr. President, I wish to inform the Senate of the reason 
I voted ``present'' on the Faircloth-Sessions amendment relating to a 
cap on attorneys' fees in tobacco cases.
  I abstained on this vote because my husband's law firm is co-counsel 
in several lawsuits against tobacco companies filed in California state 
court by health and welfare trust funds.
  This Ethics Committee has advised me that voting on an amendment such 
as this ``would not pose an actual conflict of interest'' under the 
Senate Code of Conduct.
  However, I decided that voting on this amendment could create the 
appearance of a conflict of interest and therefore I abstained by 
voting ``present.''
  The PRESIDING OFFICER (Mr. Gorton). The Senator from Mississippi.

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