John Middleton, Inc.

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION

In the Matter of

JOHN MIDDLETON, INC., a corporation.

FILE NO. 002-3205

AGREEMENT CONTAINING CONSENT ORDER

The Federal Trade Commission has conducted an investigation of certain acts and practices of John Middleton, Inc. ("proposed respondent"). Proposed respondent, having been represented by counsel, is willing to enter into an agreement containing a consent order resolving the allegations contained in the attached draft complaint. Therefore,

IT IS HEREBY AGREED by and between John Middleton, Inc., by its duly authorized officer, and counsel for the Federal Trade Commission that:

1. Proposed respondent John Middleton, Inc., is a Pennsylvania corporation with its principal office or place of business at 418 West Church Road, King of Prussia, PA 19406.

2. Proposed respondent admits all the jurisdictional facts set forth in Paragraphs 1 through 3 of the draft complaint.

3. Proposed respondent waives:

a. Any further procedural steps;

b. The requirement that the Commission's decision contain a statement of findings of fact and conclusions of law; and

c. All rights to seek judicial review or otherwise to challenge or contest the validity of the order entered pursuant to this agreement.

4. The agreement shall not become part of the public record of the proceeding unless and until it is accepted by the Commission. If this agreement is accepted by the Commission, it, together with the draft complaint, will be placed on the public record for a period of thirty (30) days and information about it publicly released. The Commission thereafter may either withdraw its acceptance of the agreement and so notify proposed respondent, in which event it will take such action as it may consider appropriate, or issue and serve its complaint (in such form as the circumstances may require) and decision in disposition of the proceeding.

5. This agreement is for settlement purposes only and does not constitute an admission by proposed respondent that the law has been violated as alleged in the draft complaint, or that the facts as alleged in the draft complaint, other than the jurisdictional facts, are true.

6. This agreement contemplates that, if it is accepted by the Commission, and if such acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of Section 2.34 of the Commission's Rules, the Commission may, without further notice to proposed respondent, (1) issue its complaint corresponding in form and substance with the attached draft complaint and its decision containing the following order in disposition of the proceeding, and (2) make information about it public. When so entered, the order shall have the same force and effect and may be altered, modified, or set aside in the same manner and within the same time provided by statute for other orders. The order shall become final upon service. Delivery of the complaint and the decision and order to proposed respondent's address as stated in this agreement by any means specified in Section 4.4(a) of the Commission's Rules shall constitute service. Proposed respondent waives any right it may have to any other manner of service. The complaint may be used in construing the terms of the order. No agreement, understanding, representation, or interpretation not contained in the order or in the agreement may be used to vary or contradict the terms of the order.

7. Proposed respondent has read the draft complaint and consent order. It understands that it may be liable for civil penalties in the amount provided by law and other appropriate relief for each violation of the order after it becomes final.

ORDER

For purposes of this order, the following definitions shall apply:

1. Unless otherwise specified, "respondent" shall mean John Middleton, Inc., a corporation, its successors and assigns, and its officers, agents, representatives, and employees.

2. "Commerce" shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44.

3. "Cigar" shall mean any roll of tobacco wrapped in leaf tobacco or wrapped in any other substance containing tobacco, other than a cigarette within the meaning of the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1331, et seq.

4. "Little cigar" shall mean any roll of tobacco wrapped in leaf tobacco or any substance containing tobacco (other than any roll of tobacco which is a cigarette within the meaning of the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1331, et seq.) and as to which one thousand units weigh not more than three pounds.

5. "Premium cigar" shall mean a hand-rolled cigar that is wrapped in a natural tobacco leaf wrapper.

6. "Commission" shall mean the Federal Trade Commission.

7. "Brand" shall mean cigars that bear a common identifying name or mark, regardless of whether the cigars are differentiated by type of product, size, shape, packaging, or other characteristic, and, in the case of generic or private label cigars, means all cigars produced or imported by respondent or its affiliates.

8. "Package" shall mean any pack, box, carton, tube, can, jar, container or wrapping in which any cigar is offered for sale, sold or otherwise distributed to consumers, but for purposes of this order, package does not include: (a) any shipping container or wrapping used solely for transporting cigars in bulk or quantity to respondent or packagers, processors, wholesalers or retailers unless the container or wrapping is intended for use as a retail display or (b) any wrapping or container that bears no written, printed or graphic matter. Any package that is also used as a point-of-sale display item shall also constitute "advertising" for purposes of this order.

9. "Label" shall mean any written, printed or graphic matter affixed to or appearing on any package containing a cigar, with the exception of any revenue stamp affixed to a cigar or any cigar band with a total surface area less than three (3) square inches.

10. "Utilitarian item" shall mean any item, other than cigars, that is sold or given or caused to be sold or given by respondent to consumers for their personal use, and that display cigar advertising such as a brand name, logo or selling message. Such items include, but are not limited to, matchbooks, lighters, clothing or sporting goods. The term "logo" includes any brand specific characteristics of a cigar, including but not limited to any recognizable pattern of colors or symbols associated with a particular brand.

11. Unless otherwise exempted by specific provision of this order, "advertisement" (including the terms "advertise" and "advertising") shall include any oral, written, printed, pictorial or graphic representation made by or on behalf of respondent, the purpose or effect of which is to promote the sale or use of any cigar manufactured or distributed by respondent, including but not limited to a statement, illustration or depiction in or on a brochure, newspaper, magazine, free standing insert, pamphlet, leaflet, circular, mailer, book insert, letter, coupon, catalog, poster, chart, billboard, transit advertisement, utilitarian item, sponsorship material, package insert, film, slide, or point of purchase display (including any cigar package that can be used as an open package display or any functional item such as a clock or change mat that includes advertising), any advertising on television, radio, or the Internet, and any other electronic advertisement.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, shall not fail to disclose clearly and conspicuously and in the manner set forth in this order one of the following statements on all cigar labels and, unless otherwise exempt from disclosure by this order, in all cigar advertisements:

SURGEON GENERAL WARNING: Cigar Smoking Can Cause Cancers Of The Mouth And Throat, Even If You Do Not Inhale.

SURGEON GENERAL WARNING: Cigar Smoking Can Cause Lung Cancer And Heart Disease.

SURGEON GENERAL WARNING: Tobacco Use Increases The Risk Of Infertility, Stillbirth And Low Birth Weight.

SURGEON GENERAL WARNING: Cigars Are Not A Safe Alternative To Cigarettes.

SURGEON GENERAL WARNING: Tobacco Smoke Increases The Risk Of Lung Cancer And Heart Disease, Even In Nonsmokers.

Provided, however, that the warning statement requirements shall not apply to company and divisional names, when used as such; to signs on factories, plants, warehouses or other facilities related to the manufacture or storage of cigars; to corporate or financial reports; to communications to security holders and others who customarily receive copies of these communications; or to promotional materials that are distributed to wholesalers, dealers or merchants but not to consumers, and are not for public display or consumer exposure. In addition, these warning statement requirements do not apply to shelf-talkers and similar product locators with a display area of twelve (12) square inches or less.

II.

IT IS FURTHER ORDERED THAT for purposes of this order, "clear and conspicuous" disclosure of any warning statement required by this order means that the warning statement shall be set out as follows:

A. The warning statement shall be capitalized and punctuated as indicated in Part I of this order, with the words "SURGEON GENERAL WARNING" printed in uppercase letters in bold print and the remaining words printed with the initial letter of each word in uppercase print and the remaining letters in lowercase print;

B. The warning statement shall be printed in black against a solid white background. In addition, the warning statement shall appear in two to four lines that are parallel to each other as well to the base of the cigar package or advertisement; and

C. The language of the warning statement shall appear:

(1) For any cigar label, the warning statement shall be set out in the English language. If the label of a cigar contains a required warning in a language other than English, the required warning shall also appear in English.

(2) For any cigar advertisement, the warning statement shall be set out in the English language, except as follows:

(a) In the case of any cigar advertising in a newspaper, magazine, periodical, or other publication that is not in English, the warning statement shall appear in the predominant language of the publication in which the advertisement appears; and

(b) In the case of any other cigar advertising, the warning statement shall appear in the language of the target audience (ordinarily the language principally used in the advertisement).

III.

IT IS FURTHER ORDERED that in the case of any cigar label required by the order to bear a warning statement, the following requirements shall apply:

A. The warning statement shall be in a clear and conspicuous place on the principal display panel of the label. The principal display panel is the part of a label that is likely to be displayed, presented, shown, or examined under normal viewing conditions. In the case of a rectangular or square cigar package, the principal display panel shall mean the front or top panel of the package, whichever is larger. Provided, however, that in the case of a rectangular or square package containing ten or more premium cigars, the warning shall appear on the front or top panel of the package, whichever is the principal display panel. In the case of a cylindrical cigar package, a clear and conspicuous place shall mean along the length of the cylinder and perpendicular to the top and bottom of the cylinder.

Provided, however, that in the case of any cigar package, the warning statement shall not be deemed to be in a clear and conspicuous place if it:

(1) appears or is affixed on the bottom of the package;

(2) is printed or affixed on the tear line;

(3) is printed or affixed on cellophane or any plastic film overwrap (with the exception of any package whose label appears only on cellophane or plastic film overwrap); or

(4) is printed or affixed in any other location that will be obliterated when the package is opened.

B. The warning statement shall appear in a clear and conspicuous and legible type and be separated in every direction from other written or graphic matter on the label by the equivalent of at least twice the height of the "W" in the word "WARNING" in that warning statement.

C. On a rectangular or square cigar package, the warning statement shall appear in the type style Univers 57 Condensed in the following type size in relation to total surface area of the largest panel of the package:

(1) Surface area of less than 5 square inches

Type size: 9 point

(2) Surface area of 5 to less than 10 square inches

Type size: 10 point

(3) Surface area of 10 to less than 15 square inches

Type size: 11 point

(4) Surface area of 15 to less than 25 square inches

Type size: 12 point

(5) Surface area of 25 to less than 40 square inches

Type size: 14 point

(6) Surface area of 40 or more square inches

Type size: 16 point

D. On a cylindrical cigar package, the warning statement shall appear in Univers 57 Condensed type style in the following type size in relation to the lengthwise surface area of the cylinder:

(1) Surface area of less than 5 square inches

Type size: 8 point

(2) Surface area of 5 to less than 15 square inches

Type size: 9 point

(3) Surface area of 15 to less than 25 square inches

Type size: 10 point

(4) Surface area of 25 to less than 30 square inches

Type size: 12 point

(5) Surface area of 30 to less than 40 square inches

Type size: 14 point

(6) Surface area of 40 or more square inches

Type size: 16 point

E. The warning statements required by this order may be affixed to the cigar label by sticker, provided that: the sticker is placed directly on the surface of the package, and not on any cellophane or other plastic film overwrap (with the exception of any package whose label appears only on cellophane or plastic film overwrap); the sticker is permanent (non-removable) and durable; and the warning statement complies with all other requirements of Parts I, II, III and VIII herein.

F. Each cigar label shall meet the requirements of this order upon being prepared for distribution in commerce for retail sale, but before it is distributed to be offered for retail sale. In the case of any cigar that is imported, the warning statements may be affixed in the country of origin or after importation into the United States, but shall be affixed before the cigar is removed from bond for sale or distribution. This section does not apply to any cigar that is manufactured, packaged or imported in the United States for export from the United States, if the cigar is not in fact distributed in commerce for use in the United States.

IV.

IT IS FURTHER ORDERED that in the case of any advertisement required by this order to bear a warning statement, except advertisements covered by Part V of this order, the following requirements shall apply:

A. The warning statement shall appear in a ruled rectangular box with the enclosing rule printed in black, and shall be centered both horizontally and vertically within the rectangular box and separated from any edge of the rule by at least one-half the height of the "W" in the word "WARNING" in the warning statement;

B. The warning statement shall be in a clear and conspicuous place. For purposes of this part, a "clear and conspicuous place"shall mean a location within the advertisement that is separated from any other written or textual matter or any graphic designs, elements or geometric forms by a distance from the outside rule at least twice the height of the "W" in the word "WARNING" in that warning statement. In addition, the disclosure shall not be positioned in the margin of a print advertisement. Provided further, the warning statement shall not be included as an integral part of a specific design or illustration in the advertisement, such as a picture of the package, unless at least 80 percent of the area of the advertisement is taken up by a picture of the package.

C. The size of the warning statement shall be clear and conspicuous and shall be in Univers 57 Condensed type style, with the following outside dimensions and type size in relation to the advertising display area of the advertisement:

(1) Total area of less than 15 square inches

Border: 2" by ¾"

Rule width: 1 point

Type size: 9 point

(2) Total area of 15 to less than 65 square inches

Border: 3" by ¾"

Rule width: 2 point

Type size: 11 point

(3) Total area of 65 to less than 110 square inches

Border: 3½" by "

Rule width: 2 point

Type size: 13 point

(4) Total area of 110 to less than 180 square inches

Border: 4" by 1"

Rule width: 2 point

Type size: 15 point

(5) Total area of 180 to less than 360 square inches

Border: 4" inches by 1"

Rule width: 2 point

Type size: 16 point

(6) Total area of 360 to less than 470 square inches

Border: 5" by 1¼"

Rule width: 2½ point

Type size: 18 point

(7) Total area of 470 to less than 720 square inches

Border: 8¼" by 1¾"

Rule width: 3 point

Type size: 30 point

(8) Total area of 5 to less than 10 square feet

Border: 11" by 3½"

Rule width: 6 point

Type size: 43 point

(9) Total area of 10 to less than 20 square feet

Border: 1' 4" by 3½"

Rule width: 8 point

Type size: 58 point

(10) Total area of 20 to less than 40 square feet

Border: 2' 8" by 1'

Rule width: ¼"

Type size: 1½" (Cap Height)

(11) Total area of 40 to less than 80 square feet

Border: 3' 4" by 1' 2"

Rule width: "

Type size: 2¼" (Cap Height)

(12) Total area of 80 to less than 160 square feet

Border: 5' 8" by 2' 4"

Rule width: ¾"

Letter height: 3½" (Cap Height)

(13) Total area of 160 to less than 350 square feet

Border: 19' 4" by 7' 4"

Rule width: 1¾"

Letter height:11" (Cap Height)

(14) Total area of 350 to 1200 square feet

Border: 20' by 7' 8"

Rule width: 2¼"

Letter height:12" (Cap Height)

(15) Total area of 1200 square feet or more

Border: 27' 4" by 9' 4"

Rule width: 3"

Letter height: 1' 4" (Cap Height)

D. In determining the outside dimensions, type size and placement of the warning statement in any advertisement in a newspaper, magazine or other periodical that appears on more than one page:

(1) A double full page or multiple full page advertisement shall not be required to have more than one warning, but the outside dimensions and type size of the warning statement shall be determined by the aggregate advertising display area of the entire advertisement;

(2) An advertisement that occupies one full page and part of another page shall not be required to have more than one warning, but the outside dimensions and type size of the warning statement shall be determined by the aggregate advertising display area of the entire advertisement and the warning shall appear on the full page on which the advertisement appears; and

(3) An advertisement that occupies parts of two or more pages shall not be required to contain more than one warning, but the outside dimensions and type size of the warning statement shall be determined by the aggregate advertising display area of the entire advertisement and the warning shall appear on the page that contains the greater (or greatest) part of the advertisement.

E. In determining the outside dimensions, type size and placement of the warning statement on any point-of sale advertisement with curved, irregular or multiple surfaces:

(1) In the case of point-of-sale items that are designed to contain products ("merchandisers") such as counter and floor displays, package dispensers, racks and gondolas:

(a) Where the merchandiser itself contains no cigar advertising, the merchandiser shall not require a warning statement;

(b) Where the merchandiser contains cigar advertising, the outside dimensions and type size of the warning statement shall be determined by the aggregate advertising display area of all of the surfaces containing such advertising;

(c) On merchandisers displaying advertising on more than one side, the warning statement shall be placed on the largest side of the item that is visible to the public from its normal viewing position.

(d) For merchandiser formats designed and in use as of May 1, 2000 where the height or width of the display panel on which the warning statement must appear is less than the height or width of the border of the warning statement required by Part IV.C of this order, respondent may submit for approval, and the Commission shall approve upon a showing of practical necessity, a warning statement that has an alternative outside border provided that the warning statement has the same rule width, type size and total area as required by Part IV.C.

(2) In the case of functional items such as clocks, change mats, change trays and welcome signs, the outside dimensions and type size of the warning statement shall be determined by the surface area of that side of the item which contains advertising, unless the advertising is clearly separated from the remainder of the area of that side by clear border lines of a contrasting color and one-quarter inch in width, in which event the size of the warning statement shall be determined by the surface area within the border area containing the advertising.

F. In the case of a cigar package that also can function as a point-of-sale display, such item shall also comply with the advertising provisions of this order. In determining the outside dimensions, type size and placement of the advertising warning statement on such item:

(1) in the case of a package that itself contains two or more packages of cigars, the item shall comply with the requirements of Part IV.E.1 of this order; and

(2) in the case of a package that contains two or more individual cigars, and can function as an open package display:

(a) the warning statement shall be placed on the principal display panel of the interior of the package and shall be positioned so that it is visible to the public from any normal viewing position; and

(b) the outside dimensions, type size and style of the warning statement shall be determined by the area of the panel on which the statement is placed.

G. For any catalogue, leaflet, brochure or other non-point-of-sale promotional advertisement that has more than one page:

(1) An advertisement that occupies up to four pages shall not be required to contain more than one warning, but the outside dimensions and type size of the warning statement shall be determined by the aggregate advertising display area of the entire advertisement and the warning shall appear on the page that contains the greater (or greatest) part of the advertisement; and

(2) An advertisement that occupies more than four pages shall be required to contain multiple warnings on alternating pages, with the outside dimensions and type size of the warning statement determined by the twice the advertising display area of the page containing the warning.

IT IS FURTHER ORDERED that in a television, radio, Internet or other electronic advertisement, or any other audio or video advertisement, including but not limited to videotapes, cassettes, discs, films, filmstrips, audiotapes or other types of sound recordings, "clear and conspicuous" disclosure shall mean as follows:

A. If the advertisement has a visual component, the warning statement shall be superimposed on the screen in black print on a white background enclosed in a black rectangular box format, as specified in Parts IV.A and IV.B above, and its size, duration on the screen and location shall be sufficient for an ordinary consumer to read and comprehend it;

B. If the advertisement has an audio component, the warning statement shall be announced orally and shall be delivered in a volume, cadence, and location sufficient for an ordinary consumer to hear and comprehend it;

Provided, however, in the case of an audio advertisement in a retail store or other place where cigars are offered for sale, no warning shall be required, even if respondent provides an incentive for disseminating the advertisement, so long as the announcement includes only the brand name or product identifier, the price, and the product's location in the store.

C. If the advertisement has both a visual and an audio component, the warning statement shall be superimposed on the screen in a rectangular box format and announced orally in compliance with the requirements set out in Sub-parts A and B of this Part V of the order. In addition to the foregoing, in advertising in an interactive electronic medium such as the Internet or online services, the disclosure shall be presented in an unavoidable manner on every Web page, online service page, or other electronic page, and shall not be accessed or displayed through hyperlinks, pop-ups, interstitials or other similar means.

D. Pursuant to the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1331, et seq, it shall be unlawful for respondent to disseminate any advertisement for little cigars on any medium of electronic communication subject to the jurisdiction of the Federal Communications Commission.

VI.

IT IS FURTHER ORDERED that in the case of advertisements for cigars on utilitarian items:

A. The warning statements required by this order shall be in a clear and conspicuous and legible type and shall appear within the rectangular box format specified in Part IV;

B. The warning statement required by this order must be in a clear and conspicuous location on the object. A clear and conspicuous location on the object is one that is proximate to and on the same surface as the cigar advertising, and is visible when the brand name, logo or selling message is visible.

C. The outside dimensions and type style and size of the warning statement shall conform to the requirements set forth in Part IV.C of this order. For purposes of determining the outside dimensions and type size of the warning statement, the advertising display area for an advertisement on a utilitarian item shall be the visible area on which the advertising appears. For example, the advertising display area for a shirt bearing a brand name, logo or selling message on the front or back is the entire front or back of the shirt, excluding any sleeves. For a shirt bearing a brand name, logo or selling message on the sleeve, the advertising display area is the sleeve.

D. If the cigar advertising appears in more than one location on the utilitarian item, the warning either:

(1) Shall appear proximate to each area with the advertising; or

(2) Shall appear only once on the item, however, in such case, the advertising display area shall be the aggregate of all the surface areas on which any advertising appears.

E. The warning statement required by this order must be printed, embossed, embroidered or otherwise affixed to the utilitarian item with a permanence and durability that is comparable to the permanence and durability of the brand name, logo, or selling message. Provided, however, that if a product brand name or logo is embroidered on a hat, and a legible warning cannot be embroidered in the proper size due to technological limitations, the warning may be affixed to the hat by another method, so long as its permanence and durability is comparable to that of the brand name, logo or selling message.

F. For fabric baseball style hats, the warning statement shall appear in the Number 3 size as set forth in Part IV.C of this order.

G. For those utilitarian items under eight (8) square inches that are viewed predominantly by the user, the warning statement shall be:

(1) Printed on the package of the item, if the item is disseminated in a package to the consumer. The total surface area of the package shall comprise the advertising display area for purposes of determining the outside dimensions and type size of the warning statement; or

(2) Placed in the form of a sticker or decal directly onto the item in the Number 1 warning size as set forth in Part IV.C of this order. The item shall be packaged in such a way to ensure that the sticker cannot be removed before it is received by the consumer.

VII.

IT IS FURTHER ORDERED that all cooperative advertisements paid for, directly or indirectly, in whole or in part, by respondent must bear the required warning. Provided, however, in the case of a print advertisement with a display area of four (4) square inches or less, disseminated by a retailer, no warning is required so long as the advertisement contains only the brand name or other product identifier and a price. In addition, no warning is required in the case of certain in-store audio announcements as described in Part V.B of this order.

VIII.

IT IS FURTHER ORDERED that with regard to the rotation, display, and distribution of warning statements on cigar packages, respondent shall:

A. Display each of the five warning statements required by this order randomly in each twelve (12) month period in as equal a number of times as possible on the labels of each brand of the product and distribute the packages randomly in all parts of the United States in which the cigars are marketed.

Provided, however, that for purposes of this order, the phrase "as equal a number of times as possible'' shall permit deviations of four (4) percent or less in a 12-month period.

Provided further, that the term "random distribution" shall mean that nothing in the production or distribution process of a cigar would prevent the five warning statements on the package from being distributed evenly in all parts of the United States where the product is marketed.

B. No later than ninety (90) days after the effective date of this order, respondent shall submit to the Commission or its designated representative for approval a plan that provides for the display of the five warning statements on packages of cigars as required by this order, and comply with the plan as approved. This plan shall be sufficiently detailed to enable the Commission to determine whether the warning statements appear on the package in a manner consistent with the requirements of this order. The equal display requirements may be satisfied by one of the following three methods:

(1) A plan may satisfy the requirements by providing for the engraving or preparation of cylinders, plates, or equivalent production materials in a manner that results in the simultaneous printing of the five required warnings in as near an equal number of times as possible under the circumstances;

(2) A plan may satisfy the requirements by providing for the preparation of separate cylinders, plates, and equivalent production materials and requiring that they be changed at fixed intervals in a manner that results in the display of the five required warnings in as near an equal number of times as possible under the circumstances during a one-year period; or

(3) A plan may satisfy the requirements by providing that stickers bearing the five required warnings be printed in equal numbers and affixed randomly to packages of the product.

Provided, however, nothing in this part of the order requires the use of more than one warning statement on the label of any brand during any given part of the 12-month period except for a cigar package that also functions as a cigar display (which must also comply with the advertising requirements of this order).

C. A plan for the rotation, display, and distribution of warning statements on cigar packages shall include representative samples of labels with each of the five warning statements required by this order. This provision does not require submission of a label with each of the required warning statements for every brand marketed by respondent, and shall be deemed to be satisfied by submission of labels for different types of cigars, and a range of cigar package sizes for each type of product.

IX.

IT IS FURTHER ORDERED that with regard to the rotation, display, and dissemination of warning statements in cigar advertising:

A. Except as specified in sub-part B. herein, respondent shall rotate each of the five warning statements required by this order every three (3) months in an alternating sequence in the advertisement for each brand of cigar. Provided, however, that any rotational system may take into account practical constraints on the production and distribution of advertising.

B. On merchandisers, utilitarian items, and cigar packages that can function as open package displays, respondent shall display each of the five warning statements required by this order randomly in each twelve (12) month period in as equal a number of times as possible, and distribute such merchandisers, utilitarian items, and cigar packages randomly in all parts of the United States in which they are disseminated.

Provided, however, that for purposes of this sub-part, the phrase "as equal a number of times as possible'' shall permit deviations of four (4) percent or less in a 12-month period.

Provided further, that the term "random distribution" shall mean that nothing in the production or distribution process of a merchandiser or cigar package than can be used as an open package display would prevent the five warning statements on such display items from being distributed evenly in all parts of the United States where they are disseminated.

C. No later than ninety (90) days after the effective date of this order, respondent shall submit a plan to the Commission or its designated representative for approval that ensures that:

(1) On all types of cigar advertising, except those specified in sub-part B herein, the five warning statements are rotated every three months in alternating sequence, and that respondents comply with the plan as approved. This rotational warning requirement may be satisfied by requiring either that all brands display the same warning during each three-month period or that each brand display a different warning during a given three-month period. A plan shall describe the method of rotation and shall include a list of the designated warnings for each three-month period during the first fifteen (15) month period for each brand. The plan also shall describe the method that will be used to ensure proper rotation in different advertising media in sufficient detail to ensure compliance with the order. For advertising in newspapers, magazines, or other periodicals, the method of rotation shall be set either according to the cover date or the closing date of the publication. For posters and placards, the method of rotation shall be set according to either the scheduled or actual appearance of the advertising. The method of rotation for point-of-sale and non-point-of-sale promotional materials such as leaflets, pamphlets, coupons, direct mail circulars, paperback book inserts, or non-print items shall be set according to either the date the materials or objects are ordered or the date on which the objects or materials are scheduled to be disseminated, provided that the production of such materials or objects is carried out in a manner consistent with customary business practices.

(2) On merchandisers, utilitarian items, and cigar packages that can function as open package displays, each of the five warning statements required by this order is displayed randomly in each twelve (12) month period in as equal a number of times as possible.

D. A plan for the rotation, display, and dissemination of warning statements in cigar advertising shall include a representative sample of each of the five warning statements required by this order. This provision does not require the submission of all advertising for each brand marketed by respondent and shall be deemed to be satisfied by submission of actual examples of different types of advertising materials or acetates or other facsimiles indicating the warning statements as they would appear in advertisements of varying sizes.

IT IS FURTHER ORDERED that the Commission intends that this order provide for a uniform, federally mandated system of health warnings on cigar packages and advertisements nationwide. Entry of the order will uniformly provide consumers in all states and territories of the United States with clear, conspicuous and understandable disclosures of the health risks of cigar smoking. The Commission shall consider a state or local requirement for the display of different warnings concerning cigar smoking and health to be in conflict with the requirements of this order, but only to the extent that any such provision requires that the state or local warning appear on any package or advertisement required to display the Federal warnings set forth herein.

XI.

IT IS FURTHER ORDERED that respondent shall be deemed to be in compliance with this order if it has taken reasonable steps to:

A. Provide, by written contract or other clear and prominent instructions, for the rotation of the label statements required by this order;

B. Give clear and prominent instruction and, to the extent possible, furnish materials (such as film negatives, acetates or other facsimiles) for the production of cigar packages and advertising that contain the required warning statements; and

C. Prevent and correct mistakes, errors or omissions that have come to its attention.

Provided, however, that in the event of the distribution of labels or the publication of advertisements that do not conform to this order, the burden of establishing that reasonable steps have been taken to comply with this order (including fulfilling the conditions described in this Part of the order) shall rest solely with respondent.

XII.

IT IS FURTHER ORDERED that the cigar labeling and advertising requirements of Parts III through VI of this order shall become effective one hundred eighty (180) days after issuance of the order. Provided, however, that:

A. The cigar labeling requirements of Part III of this order shall not apply to cigars distributed in commerce for retail sale prior to one hundred eighty (180) days from the date of issuance of the order.

B. The cigar advertising requirements of Parts IV through VII of this order shall take into account practical constraints on respondent with respect to the production and distribution of advertising submitted for publication prior to one hundred eighty (180) days from the date of issuance of the order.

XIII.

IT IS FURTHER ORDERED that in the event the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. 1331, et seq., or the Comprehensive Smokeless Tobacco Health Education Act, 15 U.S.C. 4401, et seq., or the regulations implemented thereunder, 16 C.F.R. 307, et seq., are amended or modified to change the size or format of the warning requirements for the labeling or advertising of cigarettes or smokeless tobacco, respectively, such action shall constitute sufficient changed conditions to reopen this order to determine whether the size or the format of the warning statements contained herein should be altered or modified to conform to the same or similar size or format.

XIV.

IT IS FURTHER ORDERED that respondent and its successors and assigns, for five (5) years after the last date of dissemination of any cigar label or advertisement covered by this order, shall maintain and upon request make available to the Federal Trade Commission business records demonstrating their compliance with the terms and provisions of this order, including, but not limited, to a sample copy of each advertisement and label disseminated during such time.

XV.

IT IS FURTHER ORDERED that respondent and its successors and assigns shall deliver a copy of this order to all current and future principals, officers, directors, and managers, and to all current and future employees, agents, and representatives having responsibilities with respect to the subject matter of this order, and shall secure from each such person a signed and dated statement acknowledging receipt of the order. Respondent shall deliver this order to current personnel within thirty (30) days after the date of service of this order, and to future personnel within thirty (30) days after the person assumes such position or responsibilities.

XVI.

IT IS FURTHER ORDERED that respondent and its successors and assigns shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by the Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580.

XVII.

IT IS FURTHER ORDERED that respondent and its successors and assigns shall, at such times as the Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.

Signed this ___ day of _____, 2000.

JOHN MIDDLETON, INC.

By:

CLINTON O. PRICE, SR.
President and CEO

L. ANDREW ZAUSNER
PETER J. KADZIK
Dickstein Shapiro Morin & Oshinsky
Counsel for Respondent

FEDERAL TRADE COMMISSION

By:

MAMIE KRESSES
ROSEMARY ROSSO
MICHAEL OSTHEIMER
Counsel for the Federal Trade Commission

APPROVED:

C. LEE PEELER
Associate Director
Division of Advertising Practices

JOAN Z. BERNSTEIN
Director
Bureau of Consumer Protection