Does Advertising Increase Smoking? Economics, Free Speech, And Advertising Bans

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By Prof. Sydney Houston High

(London: Institute of Economic Affairs, 1999. 'Occasional Paper 107,118 pages. 12.
2 Lord North Street, London, SW1P 3 LB; e-mail: FAX: 44-171-799-3745.) 

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This monograph is a critical survey of the major economic, and marketing, studies, throughout the world, regarding the relationship, if any, between advertising of tobacco products and tobacco consumption. There is no attempt to assess the medical, or health, issues involved regarding tobacco consumption; and there is but a relatively modest inquiry into the legality of the legislation regarding the banning of tobacco products. Moreover, this is a survey of the literature; there is no pretense of new findings -- rather, this work is an attempt to ensure that the major findings of research regarding the advertising-tobacco nexus, if any, is critically evaluated so that the reader might judge whether the works reviewed are worthy of serious consideration and/or have implications for public policy, or whether they are so flawed as to render their findings and conclusions unworthy of serious consideration.
The review has four major parts: (a) a review of the relevant law, regarding commercial advertising, in North America and the European Community; (b) a survey of cross-section, world-wide studies of the alleged tobacco-consumption relationship; (c) a survey of studies which are confined to the alleged relationship within a nation-state; and (d) studies regarding advertising and consumption by children.

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The first substantive chapter in this work surveys the state of the law regarding freedom of commercial advertising in North America, and the European Community. The conclusions for North America are: case law extends 'freedom of speech/press' to commercial advertising, in both Canada and the United States; moreover, commercial advertising can only be restricted when the state demonstrates clearly and unambiguously that it can carry three very heavy legal burdens: (i) the burden of demonstrating that the proposed law or regulation furthers an otherwise legitimate state interest; (ii) that the means the state would employ to further that interest are reasonable and necessary; and (iii) that the means which the state would employ are minimally intrusive. 
While it is granted that the state has a legitimate interest in the health and safety of the citizenry, a principal finding of this monograph is that the connection, if any, between tobacco advertising and total tobacco consumption is at best weak, and, as is demonstrated in this monograph, the greater weight of the evidence suggests it is non-existent. Obviously, if the state cannot demonstrate a clear connection between advertising and total tobacco consumption, it cannot lawfully employ measures designed to limit or curtail tobacco advertising. And, this is a burden which falls on the state -- not the regulated. Moreover, the state has the additional burden of demonstrating, before curbing or curtailing such an important right as that of free speech/press, that less restrictive measures are not available and/or not effective. Since our review of the evidence suggests, by a clear preponderance of the evidence, that advertising has little or no effect on total tobacco consumption, other measures, such as more rigorous enforcement of point-of-sale regulations on the sale of tobacco products to minors, are clearly available to the state -- which, of course, must demonstrate that it has investigated alternative measures and which, further, must demonstrate that such measures are not as effective as the rather draconian one of restricting commercial free speech.
CLICK ON THE IMAGE TO ORDER THE BOOKThe review of the law regarding the European Community demonstrates, clearly, that (a) the EU is bound, under the Treaties of Rome and Maastricht, to state the treaty articles which, it alleges, would support its recently issued Directive on Tobacco advertising; (b) the articles listed by the EU Council and Parliament in support of its Directive -- articles 100, and 57 and 66 -- are insufficient to support the directive. It is noted that this is not only the conclusion of the present study, but of research undertakings by the EU's own Research Directorate, and its Legal Affairs Committee, as well as a number of notable EU legal scholars. 
Chapter III is devoted to some general observations about the 'economics of advertising'. It is noted that the suggestion that advertising might affect total consumption of tobacco products is a very recent one, largely beginning in the late 'Eighties. This chapter points out that the distinction as between 'new product markets' and 'mature product markets' is an important one: that in 'new product markets', vendors advertise in no small part so as to insure that potential customers have information about the product category being advertised, but in mature product categories, potential buyers, by definition, already have information about the nature of the product advertised; thus sellers endeavor to induce potential buyers not to purchase the product category, but to purchase the particular product being advertised. That is, in mature product categories, the goal of the advertiser is to induce customers to purchase the product of the advertiser in preference to the product of rival sellers. This is an important point when coupled with the review of the many advertising - consumption studies which demonstrate that, in fact, is what occurs: that advertising does not serve to increase total consumption of tobacco products, but serves to increase market share of the product advertised at the expense of rivals.
In this chapter, it is also noted that in industries which are experiencing a secular decline in sales, advertising by the firm is an important vehicle to prevent, or minimize, sales decreases. That is, when there is a secular decline in total market share, firms in the industry experiencing such declines find that advertising is an important vehicle for preventing economic disaster for that firm. Put differently, each firm finds it important to try to maintain market share by 'stealing' away the customers of rivals; and that is, indeed, what the empirical literature suggests happens.

Finally in this chapter, it is noted that advertising serves as an important vehicle for informing the consumer as to the particular products which are available, and, thereby, serves as an important vehicle for product innovation and introduction. Thus, for example, advertising was the vehicle whereby firms could inform customers as to the availability of lower tar, lower nicotine cigarettes, and was the means whereby firms could afford to introduce such innovations since, without advertising, potential consumers would have had few means of learning of such brands, and therefore the firms would not have been able to reap economies of scale which would permit their introduction. It is noted, inter alia, that advertising bans would tend to give local and/or national brands quasi-monopolistic power in a given market, and would thereby prevent consumers enjoying the benefits of increased competition. It is specifically noted that, in the case of the EU where there is a tendency for nationally produced brands to be consumed by consumers within a member nation, advertising bans would serve to impede, rather than increase, the internal market of the European Community.
Chapter IV is a review of the major international studies of the advertising-consumption relationship. There is a discussion of the highly statistically flawed New Zealand Toxic Board study, and its successor, which were so roundly condemned by the courts of Canada as being 'of no probative value.' The much-heralded 'Smee' Report by the U.K. Department of Health is also discussed in this chapter. It is noted that, while the 'Smee Report' is highly flawed, both methodologically and statistically; moreover, its presentation of its findings is, to put it charitably, misleading, as is demonstrated by a simple re-arrangement of 'Smee's' tables. Further, it is exceptionally uncritical regarding the econometric and statistical qualities of the studies which it reviewed, as Hagan and Stewart have both well demonstrated. That said, it is interesting to note the seldom reported conclusion of 'Smee', which is that, in fact, people, including the young, do not smoke as a result of advertising. This is confirmed by an earlier WHO report of 1983-84, as well as other studies reviewed in this chapter.

It is noted that there is a small number of studies which purport to demonstrate a connection between advertising and total tobacco consumption. However, with only one exception, these are immensely flawed (and the one study which is not totally unsound leaves much to be desired).

The subsequent chapter turns to studies of the alleged advertising - tobacco consumption relationship in a number of countries: Spain, Germany, Greece, the United Kingdom, South Africa, South Korea, and America, to mention but a few. It is noted that the conclusion of these studies is that there is no statistically significant relationship between expenditures on tobacco advertising and tobacco consumption. Indeed, the precise opposite is often observed to occur. For mere example, it is noted that, in OECD countries with advertising bans, the average adult is observed to consume approximately 3.3 % more than in those countries without bans. Moreover, in a number of countries with advertising bans, smoking levels -- particularly for women -- have been observed to absolutely increase, while in countries with no, or only partial, bans, consumption has fallen. Given the empirical results noted in Chapter IV, it is clear that governments cannot carry the burden of demonstrating that the bans serve an otherwise permissible state interest, since they are of little or no effect. 
Chapter V is devoted to a review of the studies which allege that children are induced to smoke as a result of advertising. It is noted that some of the alleged 'studies' are not 'studies' at all, but mere assertions. Moreover, it is noted that, while often children recognize tobacco advertisements, and even like such advertisements, they also and equally dislike smoking and smokers. Study after study of children serves as poignant reminders that recognition is not consumption: that children recognize adverts, but do not consume tobacco as a result thereof. Rather we review those studies which have inquired of the causes of smoking up-take by children, and observe that there is over-whelming evidence that the reason children smoke is as a result of the influence of family and friends, not advertising.
The study concludes with an examination of the recently passed EU Tobacco Advertising Directive, which strives to, effectively, ban the advertising of tobacco products throughout the European Union. High notes that, under the Treaties of Rome and of Maastricht, 'public health' issues are reserved to the several member nations and not to the Community's center. It follows, then, that the Directive is an unconstitutional infringement on the rights of the member nations. Additionally, High, citing relevant case law, notes that the Directive will violate the Constitutions of many of the member nations. This, then, will give rise to a constitutional crisis since the courts of the several member nations are forbidden, by their constitutions, to enforce this abortive Directive. Additionally, High notes that if the Directive is, somehow, allowed to withstand constitutional attack, it will serve as the vehicle whereby the federal character of the EU will be destroyed, and the center will, increasingly, be able to control the actions of the several member states so that, in but a short time, the federal union will be turned into a largely unitary state, not unlike the results in the United States which, as a result of the intrusive effects of the Commerce clause, has been reduced from a largely federal state into a largely unitary one. 
The conclusion of this monograph is that there is impressively little evidence that people generally, and children in particular, consume tobacco products as a result of advertising; and the great weight of the evidence suggests that the over-whelming effect of tobacco advertising is to affect market share of an existing (albeit secularly declining) market. Governments, then, can hardly sustain the burdens they are required to carry of showing that (a) proposed advertising bans serve to diminish tobacco consumption; and (b) that they could not use means less intrusive of the right of free speech, and a free press, to attain their desired goals. Advertising bans are draconian assaults on freedom of communication which should not be tolerated in free societies.

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