Monday, 15 October 2012

Day 69: RBH enters the spotlight

Musical chairs have again been played on the benches of the defendant lawyers at the trial of Quebec's class action suits against tobacco companies. Over the next three weeks, the trial will focus on fact witnesses from Rothmans, Benson & Hedges (RBH) - now their lawyer, Simon Potter, will have his turn in the first row. Beside him today was his McCarthy-Tetrault colleague, Kristian Brabander. At the back of the room six newly-arrived members of Philip Morris' legal team watched closely.

Mr. Broen's tobacco career

The first witness from RBH is John Broen, a man who worked in the cigarette trade for 33 years. Originally trained as a civil engineer in his native Alberta, he joined Philip Morris's Canadian operation (Benson and Hedges) in 1967. Within 7 years he had become executive vice president of the company, and after a short sojourn for Philip Morris in Australia, he came back as president of the firm in 1976.

Mr. Broen was dismissed from that position in 1978 and went to work with the then-competitive firm, Rothmans of Pall Mall. When these two companies merged in 1986, he was appointed to head their marketing operations for a few years before being moved to the position of vice-president of corporate affairs. He held that position until his retirement in 2000.

Mr. Broen projected energy and determination throughout the day even though Mr. Potter had suggested that additional breaks might be required. At 73, he appeared to be in good health - if not in good humour.

His body language (crossed arms, shaking head and arched back) suggested his discomfort, as did his barbed editorial asides about the questions put to him. Together with the many chippy exchanges between lawyers Bruce Johnston (for the plaintiffs) and Simon Potter (for RBH), this combined to create a generally disagreeable mood throughout the day.  So much for the peace and serenity so deliberately introduced by the JTI team only last month!

Much to be defensive about

It didn't take long before lawyer and witness were engaged in a verbal tug of war that would last over the day.

Mr. Johnston moved quickly from the usual introductory questions and asked Mr. Broen whether he received training or had any dealings with the Tobacco Institute in the United States. Mr. Broen said there had been no formalized training, and that became aware of "tobacco issues" only in the course of his normal employment. He acknowledged that he had participated in a couple of annual meetings at the Tobacco Institute, but scoffed at them. "To be candid, I thought they were a bit of a waste of time," he said.  Several more questions about the Tobacco Institute received similarly unforthcoming replies.

Soon it became clear why so many chances were being given for Mr. Broen to speak about his experience of the Tobacco Institute -  his name appeared on roster of students who attended a 1978 training session. (Exhibit 759R - available on Legacy). Mr. Broen denied any memory of the event, and testified that he had not attended.

The witness' credibility took a second quick blow when the Court was shown a report that he had prepared on an unsuccessful test-market of a light version of Craven A. In this 1987 memo (Exhibit 757), Mr. Broen had reflected that the company should have lied about the tar levels on its packages.
In retrospect, the change should have taken place in three phases as follows:
l) Increase the 'tar' content of the product with no mention on packaging.
2) Adopt the new packaging
3) Print the new higher tar numbers on the packages several months after introduction.
(Today, Mr. Broen gave a long and confusing explanation of  the events that led to the memo, and why it should not be viewed as a suggestion to mislead consumers.)

Not a good day for Mr. Potter

Mr. Potter looked increasingly disgruntled over he day. His witness was frequently veering off course, providing head scratching answers to simple questions and looking less and less credible as either a witness or a senior executive.

Tobacco CEOs 1994: "I believe that nicotine is not addictive"Mr. Broen has no memory of this event
 (Mr. Broen had no memory, for example, of the 1994 testimony before Congress by seven tobacco CEO's even though he was responsible for public and government issues at the time this received enormous media coverage.)

The documents that Mr. Johnston introduced only made things look worse for RBH.

The Legacy of Mr. Patrick O'Neil.

Rothmans had been established in Canada for over two decades when Mr. Broen started working there in 1978. Although he had never met the first Canadian president, Mr. Patrick O'Neil-Dunn, Mr. Broen was familiar with his practice of providing new employees with introductory lectures on the cigarette business. The two that were were introduced into evidence today show a candid view of how the company approached the task of marketing to market the "evil" cigarette.  (Exhibit 758-9758-11)

Study, for instance, the Coca Cola advertisements, look at the picture of a group on a hot day, with a Coca Cola bottle dripping with dew, look at pictures in other advertisements of delicious looking steaks, glasses of beer beautifully illustrated, and you will realize how very important is our advertising agency. They must know how and use all the tricks of the advertising world to create the desire for the product we sell. If we can get our advertisements to make people want to light one of our cigarettes, we have done something.

From the desk of Robert Parker

Robert Parker was president of the CTMC during the 1994 House of Commons review of plain packaging. In a memo to Mr. Broen and other company public relations strategists, he recommended that the industry respond to its low credibility and the public perception that the "industry's real interest lies in increasing the level of smoking" by "establishing activities and support for smoking cessation."  

Mr. Broen confirmed that no such initiatives had ever been approved. Just as the industry had rejected the government's request that they provided additional health information on packages (Mr. Broen said it would "muddy the waters"), they rejected their own advisor's recommendation to support cessation efforts. Another fork in the road not taken.

Marketing insights.

Three documents presented towards the end of the day today showed the creative minds at RBH at work, and the way the company identified and followed through on marketing innovations.

These minutes of business development meetings (Exhibit 761-0794761-0197761-0894), trace consideration of ways to hide health warnings, to test the limits of legal restrictions, to reach out to ethnic groups, to get smoking back on airplanes, and to develop dozens of new products.

Exhibit 762 -
a good read!
The last document introduced today was a "picture-within-a-picture."
The "strategic review" prepared by RBH's market researcher, Connie Ellis, looked at documents produced at the first Canadian tobacco trial (the Tobacco Products Control Act Trial, in the early 1990s). With additional information from former employees from other companies, Ms. Ellis analyzed the marketing strategies of each company.

She noted the investments made by Imperial Tobacco and RJR-Macdonald  in reaching young smokers...
Imperial recognized early the importance of the "youth" market. As far back as 1971 Matinee's Marketing Plan indicated that "young smokers represent the major opportunity group for the cigarette industry. We should, therefore, determine their attitudes to smoking and health and how this might change over time". They have  since conducted in-depth studies (minimum 1, 000 consumers) every five years up to 1987.

RJR generated many studies and advertising campaigns focusing on starters i. e. 12-16 years old. Their objective was to optimize product and user imagery of  Export "A" against young starter smokers through an offensive strategy aimed at young, male, starter smokers.

By contrast, RBH had little marketing success to boast of - having fallen from a 43% market share in 1975 to less than 22% in 1994. She attributed some of the company's decline to its agreement to a voluntary codes "to stave off government intervention and regulations. When the code was finished it seemed to rein-in Rothmans' areas of strength: promotional activities, advertising and sampling." Ms. Ellis' cast a harsh eye on RBH's management decisions and lack of focused goals.

This 49 page document provides a clearly written history and analysis of the tobacco companies and the factors that contributed to their success and failure -- as seen through the eyes of an insider.

A retirement

This very acrimonious day ended on a pleasant note. The court secretary, Madame Blain, had announced her retirement some weeks past, and this was the moment when the plaintiff and defendant teams came  together to present her with flowers and a farewell gift.

When a court case spans over decades, there are many milestone moments to celebrate. This one was a pleasure to witness.

Tomorrow is Mr. Broen's second and possibly last day testifying. Mr. Norman Cohen, a former scientist with Rothmans, Benson & Hedges, is currently scheduled to testify on Wednesday and Thursday