August 7, 2024 

What Retailers Need to Know About the Rotation of Corrective Statement Signs in Stores

Starting in July 2023, Corrective Statement signs with cigarette health-related topics have been displayed in retail stores that are under a cigarette promotional contract with Altria/Philip Morris, R.J. Reynolds Tobacco Company, and/or ITG Brands.  The display of the signs is a requirement of a lawsuit settlement agreement between the U.S. Department of Justice and these three manufacturers.  While the signage will remain displayed in stores until June 30, 2025, the Settlement Agreement also requires that the signs be rotated during a three-month period that began July 1, 2024 and runs through September 30, 2024 so that signs with different cigarette health-related topics are displayed in each store.

All three manufacturers sent retail trade announcements to their retail accounts in June explaining the sign rotation phase of the Settlement Agreement.  Manufacturer sales representatives along with two third-party vendors under contract with the manufacturers are in the process of rotating the signs in stores.  After the signs are rotated, the manufacturer sales representatives or the third-party vendors take pictures of the rotated signs and upload the photos to a database, which an auditing company accesses to determine whether the signs have been rotated as well as whether the signs are installed compliantly.

If the auditing company is unable to determine from the uploaded photos that the signs for a particular store have been rotated, such as whether pictures of both the original signs and the newly rotated signs, or that the signs are not installed compliantly, the auditor will email a “Notice of Suspected Non-Compliance” to the retailer and the three manufacturers indicating the reason why the retailer may be in suspected non-compliance. There is then a 30-day period to remediate and resubmit the photos to the auditing company to demonstrate compliance. The in-person non-compliance penalties previously communicated do not apply to this rotation period photo audit.

What a “Notice of Suspected Non-Compliance” States:  With the Corrective Statement signs being rotated during July, August and September, some retailers have received a “Notice of Suspected Non-Compliance” from the auditing company.  The Notice of Suspected Non-Compliance will state the following:

• The reason why the auditor determined that the store may be in suspected non-compliance.
  • The retailer does not need to take any action at this time other than to prepare for a revisit of the store by a representative from either a manufacturer or one of the third-party vendors. A revisit is not always required depending on the issue found by the auditing company, such as if before and after photos of the store were submitted.

• During the follow up store visit, the manufacturer representative or the third-party vendor will correct any compliance issues with the signs, take new pictures of the rotated signs and upload the photos to the database.
• The revisit and the uploading of new photos of the signs must be completed within 30 days of the issuance of the Notice of Suspected Non-Compliance.  The notice specifically states the date that this 30-day period ends.
• The auditor will review the new photos and determine if the signs have been properly rotated and are installed compliantly.
• After this review of the new photos, the auditor will send another email to the store and the manufacturers explaining whether the store is either now compliant or remains in suspected non-compliance.
• The auditor only allows for one resubmission of photos to demonstrate compliance.
• If these corrective actions listed above are not taken, the retailer will be added to a pool of suspected non-compliant stores which will increase the likelihood of a future in-person inspection of the store by the auditor.
• Besides an increased chance of a future in-person inspection, there is nopenalty to a store if it is found in suspected non-compliance during the rotation period. A store would be subject to the previously communicated penalties if the store is found in either major or minor non-compliance as a result of an in-person inspection.
• If a retailer has questions or concerns regarding their obligations regarding the Corrective Statement signs, the retailer should contact one of their manufacturer’s representatives.

What Retailers Should Do if a Notice of Suspected Non-Compliance is Received:  As a Notice of Suspected Non-Compliance states, a retailer does not need to take any action upon receiving the notice because either a manufacturer representative or a third-party vendor will revisit the store to ensure compliance and take new photos and/or resubmit photos of the installed signs within 30 days of the date of the notice.

While there is no penalty against a retailer for being added to the pool of suspected non-compliant stores, it is still important for retailers to try and avoid being placed in the pool of suspected non-compliant retail stores.  Why?  Because being added to this pool increases the likelihood that the auditor will conduct future in-person inspections of the store to determine if there are any continuing or new violations relating to the Corrective Statement signs being displayed. 

To reduce the possibility of being added to the pool of suspected non-compliant stores, a retailer that receives a Notice of Suspected Non-Compliance should consider doing the following:

• Calendar the 30-day deadline date that the auditor includes in the Notice of Suspected Non-Compliance.
• During the 30-day period allowed for the manufacturers or their third-party vendors to revisit the store and take and upload new pictures for the auditor, be watchful for the revisit to take place. However, please note that there are certain issues raised by the auditing company related to the photos submitted that the Manufacturers or their vendors may be able to remediate without a revisit to the store.
• If the revisit has not occurred and the 30-day deadline date is approaching, contact one or more of your manufacturer’s representatives and request that the store be revisited before the 30-day deadline date so that pictures can be taken and uploaded before the deadline passes.

Finally, as a Notice of Suspected Non-Compliance states, a retailer which has any other questions or concerns should contact one of their manufacturer’s representatives.