Last week, Judge Amit P Mehta ruled in favor of the premium cigar industry in its battle against the U.S. Food and Drug Administration and ordered that the Deeming Rule, which would regulate premium cigars, be vacated. A year earlier Judge Mehta ruled the FDA’s decision not to exempt premium cigars from regulation on the Final Deeming Rule was arbitrary and capricious. Mehta asked the cigar industry and FDA to prepare briefings before deciding on a remedy. It took over a year for Mehta to issue his decision that the FDA’s briefing was not strong enough and ordered the Deeming Rule to be vacated. The premium cigar industry has felt relief; many even celebrated the win.
Over the past week, I’ve had a chance to digest this decision. I’ve been asked what I think will be next after this decision. One thing I’ve been very clear about as I write articles about the cigar industry’s battle with the FDA is I am not a legal journalist. In many cases, I’ve been drafted to give my thoughts on such a big case. However, by no means I am I an expert in this area, and certainly far from a legal expert. What I can do is provide some observations on what I have seen from my vantage point. In a nutshell, I have come down to three themes. In some ways, these themes are all somewhat intertwined.
- The Cigar Industry is more divided now than it was when the lawsuit was initiated.
- The FDA will try a different approach to go after Premium Cigars.
- The Cigar Industry, and in particular the Premium Cigar Association (PCA), will push for self-regulation.
The Industry Is More Divided Than It Was When the Lawsuit Was Initiated
The cigar industry does not want to see this in print here. Three plaintiffs were listed in the lawsuit: the Cigar Association of America (CAA), the Cigar Rights of America (CRA), and the Premium Cigar Association (PCA). On the surface, one might see a show of unity in our trade associations, but this is not the case. In fact, if I compare things to when the lawsuit was initiated in 2016, the cigar industry is actually more divided than ever.
If you need evidence, look at these three press releases from each of the trade organizations following the court decision:
Unfortunately, coming out of this lawsuit, there is serious infighting going on as to who drove the victory and, more importantly, who paid for the victory. I won’t even attempt to analyze who is right and who is wrong. But what I can say is that infighting exists. While it’s a fair argument to say the end result was that the cigar industry still won the lawsuit against the FDA, I still contend this is not good for the cigar industry.
It’s fair to say the trade organizations are pretty divided, and it might be many more years before we see some healing. I guarantee if it’s noticeable to me, it’s noticeable to the FDA. In the end, this is simply not a good thing.
The FDA Will Try a Different Approach to Go After Premium Cigars
I firmly believe the FDA will not abandon what it perceives as part of its mission to regulate premium cigars. However, instead of going down the premarket approval route, it may attempt to strangle the cigar industry in other ways.
My feeling is there are four areas the FDA will focus on:
- Ban On Flavored Cigars
- Regulating Nicotine Levels
- Regulating Tobacco Manufacturing Facilities
- Marketing and Social Media Regulations
Three of these four have already seen the rule-making process begin. The fourth one, Marketing and Social Media Regulations, has gone as far as the other three, but the FDA is doing studies on it. This was noted significantly in the recent NASEM and Society for Research on Nicotine and Tobacco (SRNT) studies. I think the marketing and social media areas are where the cigar industry has serious exposure. Ultimately, marketing and social media represent low-hanging fruit for anti-tobacco to target the cigar industry when it comes to marketing to youth. I believe this looming cloud of marketing and social media regulations could represent a considerable threat to the cigar industry.
Many of these items will not help heal the division that exists in the cigar industry. Things such as flavored cigars are already a dividing topic. I expect there will also be reasons for disagreements in the other three areas – especially the tobacco manufacturing and marketing areas. I don’t think that the companies are on the same page here.
One question I’ve been asked is whether or not the FDA will appeal Judge Mehta’s decision. There is a 60-day window from the August 9, 2023, ruling to do so. While many experts on this case are saying no, I am not ruling anything out here. It is worth noting that the Department of Justice (DOJ) would make the appeal and not the FDA directly. Given the judge’s decision revolved more around the FDA overextended its reach in this case, I wonder if the DOJ may still opt to fight this case at the appellate level.
A Segment of the Cigar Industry Will Push for Self Regulation
Over the past 18 months, the PCA has issued positions around two topics: Responsible Marketing (ensuring marketing is not aimed at youth) and Unauthorized Use of Trademarks and Trade Dress. While the PCA has taken a position in both cases, it has not implemented any standards for enforcing these positions. Since those positions were announced, the PCA has said it wanted to wait for Judge Mehta’s decision before moving forward in these areas. Now that the decision is made, I expect the PCA to move on these items.
This waiting was primarily due to the fact that the PCA needed to see if the rule would be vacated or not. With the rule vacated, the PCA is now in a position to be proactive and begin to get their house in order.
Putting standards in place around Responsible Marketing is something I have supported. While I don’t feel anyone in the cigar industry intentionally markets to children, anti-tobacco groups look at this quite differently – and they look for any reason to pull on a string that could go after the cigar industry. If something can be construed as marketing to children, look out because it could create a firestorm.
Trademark and Trade Dress standards can’t hurt the industry. Not only does it prevent our industry from looking like the Wild West, but it protects companies when branding products. As we saw last year, crossing the line to parody a trademark or trade dress worked against a company in the spirits industry.
I have often heard the excuse that the cigar industry wants to have fun. I’ve also said many times that when the cigar industry leans back on this position, they get into trouble time and time again. The more we can keep the cigar industry’s house in order, the stronger we will be against threats from the FDA.
I have also said in the past that implementing self-regulation will be an enormous battle. This is a classic case of easier said than done. I’ve covered the cigar industry for 13 years, and one thing I can unequivocally tell you is that does not like to be told what to do by an outside force like the FDA or within the industry itself. There will need to be a well-thought-out plan that will involve getting manufacturers and retailers on board.
Finally, while PCA is expected to lead the charge, I’m curious to see how the CRA and CAA publicly respond to this call to action for self-regulation.
As a lawyer who has been following this as closely as I can, and as someone with some passionate opinions on these issues, and as a William Cooper super fan, I cannot help but comment.
1. The CRA should get the lion’s share of the credit, adulation, and praise that we should all be exuding because of the legal effort that Cigar Rights of America pushed for and funded. THEIR argument/briefing won this historic win. I do believe that the PCA submitted the public comment that the FDA disregarded, however. Big credit on that to the PCA.
2. The entire industry needs to get on its knees and thank the members of the CRA. STG, Drew Estate, Altadis- all companies – should grant three wishes to Rocky Patel, Carlito Fuente, the Newmans, all CRA board companies, and be their butlers/indentured servants for one year, minimum.
3. Always submit public comments, industry members and concerned consumers. Always. This is crucial to providing the attorneys bullets later on.
4. The user fees will very likely be refunded. They need to be. The industry needs to think very carefully about how they utilize the refunded user fees. These fees, ultimately, were born by the consumers. I believe that all companies should donate their user fees to the CRA litigation fund. Or they should pass them on to their customers in the form of discounts.