Discount Tobacco City Takes on the FDA

When a number of major tobacco companies, including R.J. Reynolds Tobacco Co., Conwood Co. LLC, Commonwealth Brands Inc., Lorillard Inc. and National Tobacco Co., decided to take on the federal government’s ban on tobacco advertising, they were looking for one retailer to step up and join the fight.

They got their wish when Frank Hinton, president and owner of Discount Tobacco City & Lottery Inc., decided to join the tobacco companies’ lawsuit in a federal district court in Bowling Green, Ky., suing the Food and Drug Administration (FDA) for the right to advertise the sale legal tobacco products.

“I saw something that just wasn’t right, so to try to correct something you have to step forward and do something on your own,” Hinton said of why he decided to join the lawsuit. “I wanted the right to advertise products inside of my store without it having to be tombstone advertisement, and I didn’t want to have to be afraid if we’re recommending a product to a customer.”

Building a Business
Discount Tobacco City operates four stores in Western Kentucky, all of which have been built from the ground up.

Hinton founded the company in 1995. He got into the business after he faced hard times working in the wholesale tobacco and candy business and decided that joining the retail world might be a profitable next step.

“At the time, I had a gentleman right across the street from my office who decided to open his own convenience stores, and was very successful,” Hinton said. “In the early 90s, I was servicing a bunch of mom and pop stores in Western Kentucky and the stores were all closing. I looked across the road and I said, ‘This is stupid.  He opened up his own gas station and convenience store. I need to do the same thing.’”

And he did.  Roughly 15 years and four stores later, Discount Tobacco City does a strong business and sells all types of tobacco from roll-your-own to snuff, and from value-pack cigarettes to premium cigars. “We’re 100% tobacco stores,” Hinton said.

But in 2009, the government sent a curve ball flying his way, when President Barack Obama signed the Family Smoking Prevention and Tobacco Control Act, giving the FDA oversight of  tobacco regulation. The rule that went into effect on June 22, also handed the FDA the ability to restrict cigarette and smokeless tobacco advertising and to require new cigarette package warning labels. Many retailers felt this was a breach of their constitutional right under the First Amendment, which protects freedom of speech.

Taking Action
Hinton joined forces with a number of tobacco companies and challenged the constitutionality of the FDA’s plan to restrict advertising.  The September lawsuit aimed to have the following rules declared unconstitutional:

• Prohibit color lettering, trademarks, brand logos and images on all point-of-sale (POS) advertising and direct mail advertising.
• Restrict tobacco product advertising in retail stores to the use of black letters on white background to list brand name, product size and price, referred to as tombstone advertising.
• Prohibit any color images on the cigarette packs and smokeless tobacco products while also requiring that the top 50% of the front and back of the cigarette packages contain shocking graphic images and government mandated warning information.
• Prohibit tobacco manufacturers from making any statements about tobacco products in scientific, public policy or political debates.

Hinton noted that he sells legal tobacco products to adults over the age 18 at his four stores, and therefore the federal government shouldn’t dictate how he advertises his legal products to adults inside his stores.

In January 2010 the lawsuit resulted in a partial win. U.S. district court judge Joseph McKinley agreed with Hinton and the tobacco companies that the FDA could not ban color and graphics on labels, but he did approve FDA bans on the sponsorship of athletic, cultural and social events and the use of tobacco imagery on items like hats and T-shirts. He also approved of a requirement that warning labels cover half of the front and back of the packaging of tobacco products.

But the fight is anything but over. “We’re on appeal right now. We just filed a brief in late October, so we’re appealing the decisions the judge ruled in their favor and they’re appealing what was ruled in our favor,” said Hinton, who noted the lawsuit is scheduled for review sometime in spring 2011.

The right to advertise, he noted, is important to business. “I’d like to be able to advertise to adult smokers at events like fishing tournaments and golf games,” Hinton said, adding that even big box retailers like widely-known Wal-Mart find the need to advertise products necessary to business.

Courage Under Fire
For his initiative in stepping forward and challenging the government for the industry, Hinton was honored at the National Association of Tobacco Outlets’ (NATO) award dinner in Las Vegas last spring.

“It was quite a surprise.  They called to see if I was going to be able to be there the night of the awards, so I knew something was up,” Hinton said. “At the dinner, they got on stage and they were talking about a retailer that stepped forward and did all these things to help the industry, and the fellow to the right of me said, ‘Boy that is a smart fellow right there.’ All of a sudden they called out my name and I said ‘whoa’—it was very surprising and humbling to me.”

Mostly, Hinton has been approached with positive feedback on his attempt to challenge a law he thinks isn’t right.  “Some people said, ‘I wish I had the nerve you did to do this,’ and others said, ‘Keep at it,’” he said. “I’ve had more support than I have had negative reactions.”

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