This is Chapter 13 of my new book, working title “The Industry Playbook: Corporate Cartels, Corruption and Crimes Against Humanity” that is being published online chapter by chapter.
Tobacco is an interesting case as it became a monopoly power before any of our big regulatory agencies were even created.
“As food and drug regulation was created in 1906 and stiffened in 1938, tobacco products were viewed within the Food and Drug Administration as neither food nor drug and, thus, outside the agency’s mandate,” writes Brandt. “The industry successfully avoided any requirements for reporting ingredients or evaluating the safety of the product. There was virtually no governmental oversight of the manufacturing process.”
This is in stark contrast to other industries where a revolving door of regulators moving to and from industry is critically important in benefiting the industry as will be described in other chapters. For Big Tobacco it was a matter of staying free from regulation and they were able to do that for a long time. Defying any kind of regulation is just one form of controlling it.
The Tobacco Institute could take credit for this. As legislation occurred, the industry aimed to make sure that state or local level regulations could not pass. They did so by pre-empting such regulations with federally approved legislation. A Congressional act would require labels to be put on cigarette packages and ads but wouldn’t allow states to pass any other regulation.
“The Federal Cigarette Labeling and Advertising Act of 1865 (FCLAA) is a classic demonstration of how efforts to regulate can be turned 180 degrees—given enormous clout in Congress and a successful strategy, implemented with great tactical skill and military precision,” writes Brandt.
Journalist Elizabeth Drow wrote about the FCLAA that “It is an unabashed act to protect private industry from government regulation.”
In 1992, the EPA declared that tobacco smoke is a Class A human carcinogen. This action did not carry any policy change though.
In August of 1996, FDA Commissioner David Kessler announced they’d regulate nicotine-containing tobacco products as medical devices and restrict youth access and advertising. They asserted that tobacco did fall under its jurisdiction. “Whatever the challenges, the industry cannot be left to peacefully reap billions of dollars in profits, totally unrepentant, and without thought to the pain caused in the process. For that remains its intent,” said Kessler.
However, the industry immediately sued to stop this. And they did. The courts taking a long time through motions and appeals, it was not until March of 2000, that the Supreme Court ruled 5-4 that the FDA did not have jurisdiction to regulate tobacco.
But that wasn’t the end of the fight either. Ultimately, the FDA was successful, with the passage of the Family Smoking Prevention and Tobacco Control Act by Congress in 2009. This granted the FDA regulatory power over tobacco.
Big Tobacco now pays for a significant portion of the FDA’s budget for this regulation. In 2019, tobacco user fees, paid by manufacturers and importers, made up $666 million of the $3.15 billion total budget. That means that Big Tobacco pays roughly a quarter of the FDA’s budget.
Key Takeaways on Controlling Regulation
- Tobacco products were around before any regulatory agency that should oversee them was. With this they were sort of grandfathered in to not being regulated.
- Big Tobacco was able to stop regulation at a state or local level by pre-empting any such regulation with passage of a federal act that did nothing more than label cigarettes.
- The FDA sought to regulate tobacco in 1996. Due to Big Tobacco fighting it, it didn’t come to pass until 2009, thirteen years later. Big Tobacco pays approximately one quarter of the FDA’s total budget.
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