Philip Morris Inc. v. Loew's Theatres, Inc., 511 F. Supp. 855 (S.D.N.Y. 1980)

Conboy, Hewitt, O'Brien & Boardman, New York City, for plaintiff; Myron D. Cohen, Anthony L. Fletcher, David Rees Davies, New York City, of counsel.

Weil, Gotshal & Manges, New York City, for defendant; Robert G. Sugarman, Helen D. Jaffe, Jerome C. Pontillo, Surie Rudoff, New York City, of counsel.

SWEET, District Judge.

Plaintiff Philip Morris Incorporated ("Philip Morris") filed an action in this court alleging a violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), as well as various common law and state law torts committed by defendant Loew's Theatres, Inc., doing business as Lorillard ("Lorillard"). The acts of Lorillard which are the subject of the complaint consist of the publication in various media of comparative advertising alleged to be false. A motion for temporary restraint was made by Philip Morris on July 18 and adjourned upon certain *856 representations to July 21, at which time the motion of Philip Morris for preliminary injunction was heard and continued at Lorillard's request to July 23. Affidavits were submitted and testimony was heard. Philip Morris' motion will be granted in part and a preliminary injunction will issue to enjoin use by Lorillard of the phrase "National Taste Test Winner" with respect to the MERIT and MARLBORO LIGHTS brands of Philip Morris, as well as the statement that a majority of smokers surveyed said, "Triumph tastes as good or better than Merit," or "* * * Marlboro Lights." The motion will be denied with respect to the use of the sentence "In rating overall product preference, more smokers independently chose Triumph over Merit," or "* * * over Marlboro Lights." This opinion will constitute the court's findings of fact and conclusions of law.

Philip Morris and Lorillard have been engaged for many decades in the manufacture, distribution, sale and marketing of cigarettes throughout the United States. Both parties manufacture and sell cigarettes under several different brand names and offer "low tar" (15 mg. tar or less) and "full flavor" (16 mg. tar or more) cigarettes.

In 1972, Philip Morris successfully introduced MARLBORO LIGHTS which currently has a market share in excess of 2.7%. During 1975, Philip Morris embarked upon an intensive advertising campaign to introduce a new cigarette, MERIT, and subsequently stressed the claimed delivery of good taste in a "low tar" cigarette as established by taste-testing research. MERIT contains 8 mg. of tar. MERIT currently enjoys a market share of 4.2% and is the largest selling "low tar" cigarette in the United States, such cigarettes amounting to between 38% and 41% of the entire market in 1979.

In June, 1979, after test marketing, Lorillard introduced TRIUMPH cigarettes, which contain 3 mg. of tar. To date TRIUMPH has a .5% share of the total market.

Competition in the low tar cigarette market as well as competition between low tar and so-called "full flavor" cigarettes has centered largely on the element of taste. Both Philip Morris and Lorillard have conducted research to improve the taste of their products as well as research concerning product acceptability.

In April, 1980, SE Surveys, Inc., commissioned by Lorillard, conducted what was labeled "A National Taste Test: Triumph Menthol vs. Winston Lights, Marlboro Lights, Vantage and Merit Non-Menthols" ("the Test").^[1] On June 16, 1980 Advertising Age magazine described a new Lorillard advertising campaign and described the ads which were shortly thereafter published. The ads and the Test are made appendices to this opinion.

Substantial moneys have been committed by Lorillard to this ad campaign (six and one-half times the prior expenditures), and publication of the ads in question is scheduled in Time, Newsweek, the New York Times, other newspapers and on billboards. While Lorillard has not revealed the dollar amount of this campaign or the cost of the space to be purchased for the ads, almost three quarters of a million dollars has been spent in merely creating the materials. The industry practices are revealed to some extent by the facts that industry sales of cigarettes exceed 609 billion dollars and that while MERIT accounts for 350 million dollars of revenue for Philip Morris, over 200 million is spent in its advertising for this brand over a three year period. Advertising is one of the principal means of competition between Philip Morris and Lorillard.

What is apparent from the Test is that when questioned solely about taste, 36% of those surveyed preferred TRIUMPH over MERIT, 24% considered the two about the same, and 40% preferred MERIT. The legend "National Taste Test Winner" is therefore false in that it contains the word *857 "Taste" while the percentages reveal that TRIUMPH did not establish numerical superiority on that portion of the Test.

The text of the ad states "an amazing 60% said 3 mg. Triumph tastes as good or better than 8 mg. Merit" without indicating that on the same basis 64% stated MERIT tastes as good or better than TRIUMPH. This sentence in the context appears misleading. The reasoning behind Lorillard's claim best was expounded by its last witness, the distinguished and obviously experienced president of Foote, Cone & Belding, a preeminent advertising agency which has prepared ads for Lorillard other than those in question. To those familiar with advertising in this field, since it is expected that lower tar will result in lesser taste, even a close loss in a taste test constitutes a victory for a lower tar cigarette.^[2] The inclusion of this subjective assumption, known to the advertising fraternity, does not validate the misleading aspect of the ad.

The same methodology and phraseology is used with respect to the TRIUMPH/MARLBORO LIGHTS comparison except that MERIT was preferred by 43% over 39% who chose MARLBORO LIGHTS, eliminating those who drew no distinction between the two. However, the Test states as to this difference: "the difference is not statistically significant." The "National Taste Test Winner" legend is therefore false. The "amazing 61% said * * *" language is misleading.

Further, both ads contain similar language: "Triumph preferred over Merit. In rating overall product preference more smokers independently chose Triumph over Merit." The smokers were advised of the tar content of the cigarettes before making this choice, and affidavit evidence has been submitted to the effect that this fact so prejudices the smoker that the choice is meaningless in terms of taste. Contrary expert opinion has been offered by Lorillard and the evidence of Philip Morris is not preponderant on this contested issue at this point in the litigation.

Philip Morris has submitted evidence that the ads of Lorillard are viewed by the public as stating that tests have established that TRIUMPH is a better tasting cigarette than MERIT. This survey, undertaken over the weekend after filing of the motion for preliminary injunction, is countered by an expert offered by Lorillard who has testified by affidavit as to consumer psychology, and by an expert who has questioned the methodology of the survey. Notwithstanding their testimony, the survey establishes by a preponderance of the evidence that 37% of those interviewed, the largest block of those answering the open-ended question, believe that the ad establishes that TRIUMPH tastes better than MERIT.

*858 To counter Philip Morris' motion, Lorillard has alleged that the MERIT market share has been achieved by identical advertising practices in the past. Yet the lead in the MERIT ads state in bold type "Merit Wins `Choice' Test" or another general claim of superiority without reference to taste. The ads indicate further that the "smokers chose the MERIT low tar/good taste combination over high tar leaders when tar levels were revealed." The tastes "as good as or better than " phrase is also employed, as well as one headline claiming better taste. No evidence was introduced to show that these claims presents survey results in a misleading fashion.

These facts require the application of the precepts set forth in American Home Products Corp. v. Johnson & Johnson, 577 F.2d 160 (2d Cir. 1978). The falsity of the "National Taste Test Winner" slogan is apparent on its face in view of the Test percentages and relief can be granted without reference to buyers' reaction to that portion of the ad. Id. at 165; American Brands v. R. J. Reynolds Co., 413 F. Supp. 1352, 1356-57 (S.D.N.Y.1976). The misleading implication resulting from the use of the percentages favoring TRIUMPH and the omission of the similar percentage for MERIT is demonstrated by the results of the survey of consumer reaction to the Lorillard ad submitted by plaintiff. Though the statement is statistically accurate, the omission of the percentages established by the Test with their clear implication with respect to taste has caused the ads to be deceptive to the general public as established by Philip Morris's weekend survey, despite its acceptability to those experienced in advertising.

The same result obtains from the use of the "tastes as good or better than" comparison with respect to MARLBORO LIGHTS, in view of the similar omission and the statistical insignificance of the percentages as stated in the test. Although the public opinion evidence has not been submitted, the clear inference which can be drawn from the MERIT survey is sufficient to support the same findings with respect to the public's reaction to the ad concerning the taste of MARLBORO LIGHTS.

Although the weekend survey establishes that the ads create the impression that TRIUMPH beats MERIT, Philip Morris has not submitted preponderant evidence at this stage of the proceeding that the order of questions or the inclusion of a reference to the tar content so infected the general preference questions in the Test as to make this phrase in the ads misleading.

Under the familiar test for the issuance of preliminary relief, Jackson Dairy, Inc. v. H. P. Hood & Sons, Inc., 596 F.2d 70 (2d Cir. 1979), Philip Morris is entitled to an injunction. Based on the facts stated, Philip Morris will probably succeed on the merits with respect to the phrase "National Taste Test Winner", and "* * * Triumph tastes as good or better than Merit" ("* * * Marlboro Lights"), and the damage is irreparable. No measure of the competition for the mind of the consumer has yet been devised other than market share, and no evidence has been, or probably could ever be submitted, that would establish that a particular market share shift was a direct result of a false advertisement so that money damages could be determined. Brand loyalty would be affected and by its very nature would remain incalculable. Further, there is convincing evidence that consumers are being deceived by TRIUMPH's false claim of taste superiority, and the reputation of MERIT, a direct competitor, among consumers will thereby suffer injury. See American Home Products Corp. v. Johnson & Johnson, 436 F. Supp. 785, 803 (1977); aff'd, 577 F.2d 160 (2d Cir. 1978); Ideal Toy Corp. v. Fab-lu Ltd., 266 F. Supp. 755, 757, aff'd, 360 F.2d 1021 (1966). Finally, and most significantly, it is the public interest as well as the competitor which is to be protected from deceptive advertising, and only injunctive relief can prevent that irreparable injury.

A balance of hardships between two substantial, well financed corporations in the cigarette business is difficult to strike, but the public interest in truthful advertising is manifest.

IT IS SO ORDERED.

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[1] For its present purposes Philip Morris accepts the numerical results of the Test in all respects.

[2] The testimony of John O'Toole on cross-examination on this subject is as follows:

Q. Are you familiar then with the fact that in the study conducted by the defendant Lorillard 40 percent of those who expressed a preference, 40 percent of those who judged the taste of the respective cigarettes judged that of Merit superior, whereas only 36 percent judge that of Triumph superior?

A. Yes. But you are talking about those who judged it as superior. There was another category, which I think is quite important, as I said before, those who think it is just as good, and to me a lower tar cigarette does not represent the one that the individual has made his brand commitment to that is judged as just as good is winning.

Q. You are referring to the claim which is in the small print let me get close so I can read it 60 percent said 3 milligram Triumph tastes as good or better than 8 milligram Merit?

A. Right.

Q. Do you know that Lorillard's research demonstrates that 64 percent felt that Merit tastes as good or better than Triumph? Were you aware of that?

A. 64 percent

Q. 64 percent in Lorillard's research found Merit as good or better than Triumph.

A. Well, I am not surprised because a large proportion of that I can't read the print from here either a large proportion of that number must be people who judged them to be relatively equal or just as good.

Q. That's right, because Lorillard added those to 36 to come up to 60, and if you add them to 40 you come up with 64.

A. Yes, but that is not surprising, that a person would say this higher tar cigarette is just as good as the lower tar cigar.

What is news and what establishes the win, I believe, is that the lower tar cigarette could be judged to be just as good in taste as one that has more than twice as much tar.