By Alan Prendergast
By Michael Roberts
By Michael Roberts
By Amber Taufen
By Patricia Calhoun
By William Breathes
By Michael Roberts
By Melanie Asmar
Colorado attorney general Gale Norton is investigating one of the most controversial charges yet against tobacco companies: that the firms encourage kids to shoplift cigarettes as part of an effort to hook them on smoking. But even as Norton is turning up the heat in her lawsuit against big tobacco, funding for the suit is hanging by a thread at the state legislature.
Norton is a late convert to the idea of state-funded tobacco litigation and has taken campaign money from cigarette makers herself ("The Marlboro Woman," May 1, 1997). But last July she filed suit against the Tobacco Institute and nine major tobacco companies. Now her staff has begun examining claims that tobacco companies know cigarettes are regularly stolen by minors--and that they're paying big money to make sure convenience stores and other retailers don't do anything about it.
"We think those are serious allegations," says Marti Allbright, chief deputy attorney general and the lead lawyer on Colorado's tobacco suit. "We are investigating them as part of our lawsuit." Allbright won't talk about the results of her office's probe, citing a need to keep strategy secret before trial. She does say that the charge would fall under the portion of the state's suit that accuses tobacco companies of a "pattern of racketeering."
The claim is that tobacco companies want children, who can't buy smokes legally, to steal their product so they'll develop a nicotine habit. "The tobacco companies know that 90 percent of all smokers start before the age of eighteen," says Anne Landman, a coordinator for the American Lung Association of Colorado. "So if they can get some cigarettes into the hands of a kid, that kid becomes a walking annuity for the tobacco companies."
According to Landman and others, the companies accomplish that in part by paying retailers to give cigarettes prominent placement near checkout stands. Tobacco companies say these "rack fees" are designed merely to encourage legal impulse purchases. They also note that it's common for companies to pay retailers for product placement. But critics say the fees serve in part to compensate stores for stolen cigarettes--and to dissuade those retailers from putting tobacco products behind counters where customers have to ask for them.
"The tobacco companies are reimbursing the stores for lost product," says Marianne Wildey, who spent six years studying youth access to tobacco at the Center for Behavioral and Community Health Studies at San Diego State University. "And most of that lost product is going to underage consumers."
The question of whether cigarette companies covertly endorse shoplifting has been discussed in academic circles since Wildey's study was released in 1995. It showed that nearly half of ninth- and tenth-grade smokers surveyed admitted to stealing cigarettes. In a separate survey from Pennsylvania, 10 percent of teen smokers admitted that their primary means of getting cigarettes was by stealing them.
According to Wildey's study, "cigarette companies dislike [putting tobacco products behind the counter], as it reduces shoplifting, resulting in less product movement."
"Of course, they are never going to admit that," Wildey says. "But we collected enough evidence from retailers that we were convinced it was true."
In Colorado, however, the most vociferous denials that rack fees compensate for stolen goods come from the retailers themselves. "We take exception to the accusation that we place products so that they will be stolen," says JoAnn Groff, director of the Colorado Retail Council, an organization that represents stores such as 7-Eleven. The Retail Council has close ties to the tobacco industry; $3,000 of the $5,000 distributed last year by its political-action committee was provided by cigarette makers. And the council recently lobbied hard against a proposal by state representative Ken Gordon of Denver that would have forced stores to put tobacco behind the counter. "That would make convenience stores a lot less convenient," Groff notes.
A spokeswoman for 7-Eleven's parent company, Southland Corporation of Dallas, says the charge that rack fees make up for stolen property is "preposterous." Margaret Chabris says the fees are designed to increase legal purchases, not theft. "The tobacco companies want their product to be in front of the customer so that they'll make an impulse purchase," Chabris says.
However, whether adult smokers really make impulse buys is questionable. Brian Haldorson, president of A-B Petroleum, says that when some of his seven convenience marts around the Denver area recently moved cigarettes behind the counter due to space considerations, they didn't lose out on sales. "We haven't seen much of a drop at all," Haldorson says.
Tobacco companies say rack fees are an important merchandising tool that helps keep their products where customers can see them. If people steal the cigarettes, they say, that's not their problem.
"We pay the retailer to merchandise the product--anything else is in the control of the shopkeeper," says Tara Carraro, a Philip Morris spokeswoman from New York City. Carraro says that the fees are not designed to encourage youth smoking because "we don't believe kids should smoke, period."
But that position has been undermined in recent months as internal documents detailing tobacco companies' efforts to market to children have come out in the course of discovery in other suits around the country, especially in Minnesota. In that case, lawyers working for the state are reviewing 33 million pages of internal tobacco-company documents, many of which had been shipped overseas in an effort to keep them secret. Some of the documents from as late as 1988 detail plans to try to get kids to smoke before they turn eighteen.