How Did the Master Settlement Agreement Change Tobacco Industry Expenditures for Cigarette Advertising and Promotions?

Abstract

The 1998 multistate Master Settlement Agreement (MSA) with the tobacco industry restricted cigarette advertising and promotions. The MSA monetary settlement was also associated with an average cigarette price increase of U.S.$1.19/pack between 1998 and 2001 to fund, in part, industry payments to the states. We examined Federal Trade Commission reports on how the tobacco industry spends its cigarette advertising and promotional dollars to see if changes expected as a result of the MSA occurred. Expected changes included reduced total expenditures and reductions for outdoor advertising, specialty promotional items identified with a brand (e.g., caps, t-shirts, lighters), and public entertainment. However, tobacco industry spending for advertising and promotions increased 96% between 1995 and 2001, with large increases in 1998 and 1999, as the MSA took effect. Between 1997 and 2001, outdoor advertising declined 98%, expenditures for specialty promotional items decreased 41%, although public entertainment increased 45%. However, in 2001, these categories represented only a small fraction of the total budget. Expenditures for retailvalue-added increased 344% between 1997 and 2001 (to 42.5% of total), perhaps to mitigate increased cigarette prices. In 2001, the incentives-to-merchants and retail-value-added categories comprised more than 80% of total expenditures. To adequately monitor tobacco industry expenditures as they adapt to the MSA and other tobacco control efforts, more refined reporting categories are essential.