December 13, 2023                    

Update on Corrective Statement Signs in Retail Stores 

As a result of a settlement agreement with the U.S. Department of Justice, Altria Group Inc., Philip Morris USA Inc., R.J. Reynolds Tobacco Company, and ITG Brands LLC have installed one, two, or three Corrective Statement signs in retail stores across the United States that have manufacturer cigarette promotional contract programs in place. A store that does not have a retail promotional contract with any of these three manufacturers is not required to display corrective statement signage. The signage requirements and definitions of “non-compliance” are at the end of this article. 

Display Period: Each retailer that is required to have one, two, or three Corrective Statement signs must keep the sign(s) continuously displayed through June 30, 2025. Upon installation, photos of the signs as placed in all stores were taken and uploaded to a database to confirm a store’s compliance with the settlement agreement. 

Auditor and Working Group: An auditor was retained by the manufacturers to review the photos of signs uploaded to a database and to inspect up to 10,000 retail stores in-person during each of four audit periods to make determinations of retail compliance or non-compliance. Currently, the first audit is underway. A Working Group composed of 10 members, including attorneys appointed to represent each of the three manufacturers, a NATO legal representative, a NACS representative, three Department of Justice attorneys, and two public health group attorneys, was formed to address implementation and compliance questions from retailers. 

Important Information for Retailers Which Receive Non-Compliance Notices: Each retailer that has a cigarette promotion contract with one or more of the three major cigarette manufacturers was presented with an amendment to these cigarette promotion contracts by the cigarette companies. The amendment explained the new requirement to have the corrective statement signage installed and displayed in a retail store. In addition, the amendment stated that the retailer needed to cooperate with the manufacturers so that the companies would be able to comply with the settlement agreement. Also, the amendment stated that the retailer is responsible for displaying the corrective statement signage according to the terms of the settlement agreement. 

Retailers who receive a notice of non-compliance can appeal the notice of minor or major non- compliance to the Working Group via email within 14 days of receiving the non-compliance notice. If a retailer’s appeal on a notice of major non-compliance is not granted by the Working Group, then the retailer can further appeal a notice of major non-compliance to an adjudicator appointed by the court, and then can appeal to the court as well. 

A retailer who receives a non-compliance notice from the auditor can, through an appeal, request that the non-compliance violation be reversed if the retailer: (1) did not receive any corrective statement signs nor were any signs installed, (2) received fewer corrective statement signs than required for installation in the store, or (3) the corrective statement signage that was received and installed did not comply with the settlement agreement terms. 

If a retailer receives a notice from the auditor which states that the retailer is non-compliant because no corrective statement sign was installed in the store, less than the required number of signs were installed, the incorrect size of sign was installed, or an English language or Spanish language sign was incorrectly installed, and the retailer files an appeal demonstrating that one or more of these exceptions applies, then the Working Group is required to issue a decision that finds the retailer has complied with its requirements under the promotional cigarette contract(s) and reverse the auditor’s decision that the retailer is non-compliant. If one or more of these exceptions arise, the settlement agreement also requires that manufacturers must immediately correct the signage issue that caused the auditor to issue a finding of non-compliance to the retailer. 

Signage Requirements and Definitions of “Non-Compliance” 

Corrective-Statement Signs: The following corrective-statement sign requirements are a part of the settlement agreement and apply to all retail stores which have cigarette retail program agreements with any of the three manufacturers: 

For regular stores that are not a kiosk-style store, one 348 square inch corrective statement sign must be displayed. The sign is either square (18.655” x 18.655”) or rectangular (32” x 10.875”). The sign must be displayed in one of four locations based on the following order: (1) attached to or within 6” above the main cigarette display, (2) attached to or within 6” adjacent to the main cigarette display, (3) within 48” of either the main store entrance that can be seen by customers as they enter the store and the bottom of the sign is at least 48” above the ground or floor of the store or within 48” of the cash register that can be seen by customers as they approach or are standing at the cash register and the bottom of the sign is at least 48” above the floor of the store, or (4) either perpendicular to a main cigarette display and at least 48” above the floor or on a wall in front of a recessed main cigarette display but in a plane parallel to the front of the display and at least 48” above the floor. If none of these four display operations are possible, then a retailer could request permission from the Corrective Statement Working Group for permission to use an alternative sign placement location. 

For retail stores that are not a kiosk-style store and have more than 9’ of horizontal linear visible display space devoted to the manufacturers’ cigarette brands, a second 348 square inch corrective-statement sign must be displayed and placed in one of the four locations as the first sign. 

For retail stores that are not a kiosk-style store and that have cigarette promotional signage displayed elsewhere in the store other than on the main cigarette display (and excluding signage that only identifies the brand, price, or has a picture of a pack of cigarettes), an additional 144 square inch corrective statement sign must be displayed within 48” of the main store entrance. The sign is either square (12” x 12”) or rectangular (20” x 7.2”).                    

For kiosk-style stores, which are those stores that either (1) do not allow customers to enter and that have a selling window between the customer and store personnel, or (2) that are no more than 325 square feet in area, not including restrooms, regardless of whether customers are allowed to enter the store, one 144 square inch sign must be displayed near the transaction window or near the cash register. The sign can be either square (12” x 12”) or rectangular (20” x 7.2”). 

The manufacturers were required to print the corrective-statement signs, which include 17 different court-ordered corrective-statement messages. The signs were then randomly distributed by the manufacturers for installation in stores across the country. 

Retail Compliance and Non-Compliance: If a retailer complies with the terms of the settlement agreement by displaying the required sign or signs, the retailer will not incur any non-compliance penalties. If a retailer does not fully comply with the sign-display requirements, then a retailer may incur various consequences depending on the kind of non-compliance. 

•      “Minor Non-compliance” includes obstructing a portion of a sign (other than the smoking/health-related statement) or displaying a sign incorrectly (as long as it remains visible to consumers). Minor Non-compliance would result in counseling by the manufacturers on the proper sign-display requirements and, if not corrected, could lead to a warning letter and the retailer being required to display an additional 144 square inch corrective-statement sign in the non-compliant store for 120 days.                         

•     “Major Non-compliance” includes not posting a sign, obstructing, or displaying a sign so that the message is not visible, damaging or removing a sign, or failing to rotate a sign. The penalties for Major Non-compliance become more severe with each separate violation of the signage display requirements. These penalties begin with counseling by the manufacturers on the proper sign-display requirements, then being required to display an additional 144 square inch sign corrective-statement sign through June 30, 2025, followed by paying to each manufacturer with which the retailer has a retail marketing promotion contract a financial penalty equivalent to the retailer’s price-promotion discounts for a period of 4-weeks or 13-weeks, depending on the number of Major Non-compliance violations. Repeated Major Non-compliance would result in the retailer’s suspension from the retail marketing programs for various periods of up to 17 weeks.                            

  (Publisher’s Note: This article is authored by Thomas Briant, the legal representative for NATO on the Corrective Statements Working Group) 

  Note: The full details of the final court order and settlement agreement are not discussed in this article. To request a final copy of the final settlement agreement, known as a Consent Order, as signed by the federal judge implementing the Corrective Statement Settlement Agreement please reach out to NATO.