Thursday, 24 April 2014

Day 230: Round 3 with David Soberman

Even after months at the Montreal tobacco trials, it is often not clear to me how and why lawyers make the call to prolong or to cut short the cross examination of an opponent's witness.  If you can't make your points quickly, at what point does the witness look resilient to your criticism?

Unusually, the plaintiffs continued into a third day with their questions to the man hired by JTI-Macdonald to convince Justice Riordan that the company had not "designed marketing to target adult non-smokers or minors" (Mr. Soberman's report, Exhibit 40560).

Mr. Soberman may have used the overnight break to rethink how he answered their questions. Today, his replies were shorter and less preachy-teachy. He also introduced a new nuance in his replies. His opinion had been about marketing, but his replies today were clarified to be about "advertising" - only one component of the marketing mix.

Plaintiff lawyer Bruce Johnston continued on his game-plan and executed it with an unrelentingly severe tone. As I had been during the cross-examination by Doug Mitchell of the plaintiffs own experts many months ago, I was again struck by the pugilism of cross-examination with some witnesses. If you don't like blood sports (and I don't), the courtroom can be a very uncomfortable theatre.

By the end of this third round -- mid way through the afternoon -- Mr. Soberman and his view of tobacco advertising had received multiple blows. But he showed no sign of altering his belief that advertising did not alter the likelihood of anyone smoking - or that it made smokers' happier by increasing the value they assigned to the cigarettes they bought. He did not relent on his opinion that  -- no matter how many references there were to "young adults", "starters"  and "new smokers" on the records of the company, there had never been a reason for JTI-Macdonald to target such people with their advertsing. His faith in the law firm that shaped the records he reviewed was unshaken. So too, it seemed, was his profound belief that tobacco advertising was a benefit to smokers, not a threat.

Mr. Soberman left the court with a smile, albeit one a little more crooked than when he had arrived a week ago.

The Freshfields Review of Documents

Mr. Johnston continued to focus on the review of JTI-Macdonald documents that had been undertaken on behalf of Mr. Soberman by Freshfields, the UK lawfirm that works for Japan Tobacco, and which has been the first point of contact for expert witnesses for its affiliates in this case.

He again used this 700 page document (Exhibit 1742) to highlight contradictions between Mr. Soberman's view of what the company had done against its own records, to portray Mr. Soberman as irresponsibly naive in his trust of lawyers to prepare an independent report, and to cast suspicion on the representativeness of the documents Mr. Soberman reviewed.

Mr. Johnston drew attention to a few major omissions on the list of documents prepared by the Freshfields lawyers. He pointed out that the document made reference to 1978 marketing plans for minor brands -- like Contessa Slims and More -- but left out that year's plans for Export A, the bread-and-butter brand of the company.

The implausibility that Mr. Soberman could have overlooked the document was emphasized by the fact that references to the same plans had been cited in the report of plaintiff expert Mr. Pollay, a document that would certainly have been thoroughly reviewed.

How was it that Mr. Soberman had neither asked for the document nor sought it out for himself. How was it that his opinion had not been influenced by the references to the company's objective of "convincing first time smokers" and its desire to recruit "new smokers entering the cigarette market"?

Despite Mr. Soberman's general uncertainty about whether he had seen documents or not, he was reasonably sure that he had reviewed this one. Nonetheless, "it is possible that I missed this line". 

Today's reminder did not change his overall opinion. "A first time smoker is someone who is already a smoker" (therefore the company was not targeting non-smokers), and "advertising does not have an effect on being able to get people to smoke" (therefore there was no potential impact).

The exercise was repeated with other documents which described Export A as "the starter's choice" (Exhibit 1742), and which described the importance of young adult smokers to RJR (the owner of JTI-Macdonald at that time). The answers were also repeated: no targeting, no impact.

He stressed that his views were grounded in marketing theory about mature markets, and again cited the  "text book" models of Philip Kotler.

Philip Kotler: the father of modern marketing

Soon, Mr. Johnston taunted Mr. Soberman with a sneering reference to Mr. Kotler - "whoever he is!"  I had barely time to type a note to myself -  "BAIT!" -  before Mr. Soberman hooked himself on the question.

"Sorry, with all due respect, Professor Kotler is actually one of the fathers of marketing!"  After that, it was even harder for the witness to distance himself from the opinions of Mr. Kotler, opinions that Mr. Johnston showed were not at all a validation of Mr. Soberman's views.

Mr. Kotler harshly criticized the behaviour of tobacco companies, and noted that they "win the most by creating young smokers."  ("Ethical Lapses of Marketers", Exhibit 1744). Mr. Soberman replied by saying he was perhaps in a better position to talk about tobacco marketing than Mr. Kotler, as he had "assimilated the wealth of information related to this topic."

Mr. Kotler considered that "buyers have the right to expect the product to be safe" ("What Consumerism Means for Marketers," Exhibit 1745). Mr. Soberman replied by saying he was  "of the view that people should be able to make decisions [about risky products] for themselves but should also be provided with the best information."

Mr. Kotler identified ways in which companies operating in a mature market would try to "convert non-users" (Text-book excerpt, now Exhibit 1746). Mr. Soberman replied that if you could bring new people into the market, then it wasn't a mature market. (There is no rule against circular arguments!)

The opinion that counts

Towards the end of his questions, Mr. Johnston asked about Mr. Soberman's familiarity with the 2007 Supreme Court decision on tobacco advertising.

Did he know that it accepted the trial judge's finding that "much of the industry's advertising is in fact aimed at youth and that persuading teenagers to take up smoking was a calculated and deliberate industry advertising strategy." Or the earlier Court ruling that "lifestyle advertising invariably seeks to increase overall tobacco consumption, not just to inform existing smokers."

"I don't know what trial this is referring to," Mr. Soberman said. Is it possible that marketing professors do not take note of Constitutional Challenges to advertising restrictions! And don't read the papers?

Why had he not asked Mr. Mitchell for background material from this case? "I couldn't have asked for something I didn't know about."

Procedure! Declarations! Timetable?

Among the small number of trial issues discussed this week were:

The Tobacco-related Damages and Health Care Costs Recovery Act.  Justice Mongeon's March 5 decision to uphold the validity of the Quebec law affecting the rights of litigants against tobacco companies is being appealed. In the meantime, Simon Potter was eager to have section 17 of that law  declared of no effect in the two class actions. Even though the plaintiffs made assurance that they did not believe that this section of the law was intended to affect their case and that they had no intention to invoke it, Mr. Potter wanted a ruling from Justice Riordan. It was given "from the bench" yesterday.

The structure of the final arguments. A document much hidden from view is the proposed outline for the final arguments. Mr. Kevin LaRoche (JTI-Macdonald) is coordinating the companies' input to how this should take shape, and there was a brief and cordial discussion on this today. The subject will be considered again when the hearings resume on the first week of May.

The tardiness of the Appeal Court ruling.  The unexpectedly long time without a ruling from the Court of Appeal on Imperial Tobacco's right to call for medical records has put the next stage of this trial in a deep fog. Justice Riordan spoke today of a potential "six-month suspension" of the trial, and yesterday encouraged the parties to try to stimulate a response from the higher court.

Financial records and confidentiality. The president of JTI-Macdonald, Michel Poirier, is scheduled to appear on May 23rd to answer questions about the capacity of his company to pay punitive damages. A decision on whether other witnesses are required will be made by next week. The request by the companies to have their financial records kept confidential will not be discussed until the final arguments. Again, there is a desire not to have more appealable interlocutory decisions than can be avoided!

Counter-proof.  The plaintiffs may not have any witnesses to respond to the companies' defence. Mr. Paul Slovic is the only one tentatively on the calendar, and a final decision on his appearance will be made later today. (Not in open court!)

More documents!  Exhibits from the companies continue to flow onto the court record. It is difficult to know how many such records there are, as the index is not always published in the transcripts, and the numbering system allows for sets of many hundred documents to be filed as part of one number (i.e. Exhibit 123.1, 123.2, 123.3, etc). When the hearing resumes on the first full week of May,more these records - and likely the last - will be discussed and filed.

The trial -- or at least what is left of it at this stage -- will resume on May 5th. 

Wednesday, 23 April 2014

Day 229: A roughing up

The continued cross-examination of JTI-Macdonald's expert witness in marketing was perhaps the most aggressive treatment of a witness in several months.

I don't know why the gloves came off when plaintiff lawyers Philippe Trudel and Bruce Johnston stood to challenge Mr. Soberman's view of tobacco marketing. Perhaps, as the last major witness, he was a foot-ball they could land a last few kicks on before the bell rang. Perhaps it was turn-about for the even more bare-knuckled pummeling given to their own marketing expert last year.

Or perhaps it was because Mr. Soberman's style of answering was like a giant "kick me" sign. During the break, my colleague, Pierre Croteau, said this witness was like a bubble machine - spouting out frothy replies that disguised any real meaning. His body language, with a grimacing smile, big hand gestures and lots of bobbing and weaving, didn't help. (Too much time at the front of a lecture hall? Too much time in France?)

For whatever reason, it was tough going. Tough enough that for the first time since Jacques Lacoursière's testimony at the beginning of the defence case a year ago, a witness asked for time out. The morning break was held ten minutes earlier than normal!

Who was directing the directive summary?

Mr. Trudel used the "directive summary" of 976 documents as the organizing principle for his last several rounds of questions in the morning.

Mr. Soberman had surprised everyone by revealing on his first day of testimony that lawyers from the U.K. firm, Freshfields, had prepared a summary of marketing documents from JTI's Canadian operations. This summary had not been provided to the plaintiffs with the usual disclosure of "reliance" material, but was hastily given to them in the following days.

The 700 page document (Exhibit 1742) was a rich mine for the plaintiffs. It allowed them to contrast what was written in the summaries with what Mr. Soberman had included in his report. It allowed them trace the influence of the lawyers on his supposedly independent report. It allowed them to put their fingers on obvious exclusions and likely redactions.

Mr. Soberman's story was that the lawyers had provided him with research assistance no different than he would have received from non-advocates, and that he had complete confidence in the work that had been done.

He stuck with that story -- and also with his explanation of having supplemented his review with documents he located for himself from public sources. But over the now four days of his appearance, the story seems to have changed. At first I thought it was just my bad note-taking, but by the end of the day I am pretty confident that there were several contradictions about the series of these events. "The record will show" as they say in this business!

The missing documents 

The directed summary talks of 996 documents, but only 620 or so are presented. So what happened to the other 370?

Doug Mitchell (lawyer for JTI-Macdonald) gave his explanation before the question could be put to Mr. Soberman. Documents had been extracted because they were duplicates or because they were irrelevant, as they referred to pipe tobacco, or roll your own tobacco. The fact that there were lots of references to roll-your-own in the remaining list just meant that "they didn't do a very good job," he said. (This seems to me to be remarkably prescient, given that this summary was prepared some three years before Justice Riordan ruled that roll-your-own and pipe tobacco were not relevant to the trial).

The documents reviewed had been screened for their relevance to the arguments Mr. Soberman wanted to present: that the company had not targetted young people, or tried to discourage smokers from quitting, or that it had behaved in ways that companies do when operating in a "mature market".

The disconnect

Mr. Trudel pointed out several ways in which these documents did not support these conclusions. There were very few documents that had been identified as confirming his theories about the mature market - and there were documents where it looked like the company's marketers had a different view. (Exhibit 1742.304 and 1742.103).

Mr. Trudel found other defects in the process. Several relevant marketing documents were missing from the list - documents which, for example, showed JTI-Macdonald trying to recruit starter smokers or discourage quitting.

Mr. Soberman could have (and possibly did) see these documents as part of his review of the trial transcripts and records related to Mr. Pollay's testimony. (Several times Mr. Soberman was unable to say clearly whether he had read a document or not -- they all seemed rather alike after having read so many, he noted. On this point, I truly sympathized)

Mr. Trudel drew a few important admissions. Mr. Soberman had not considered addiction when applying his mature market model to his analysis, or to his understanding of how people moved from experimenting with cigarette to regular use.  He agreed that the lowering of prices that resulted from smuggling would increase the number of smokers.

But for the most part, the witness stood fast. Starter smokers were those who were already smokers. Opinions about safer cigarettes were unaffected by advertisements, as government messaging had already established in smokers' minds that lower tar was safer. The decision to smoke was one that was made with a high level of emotional involvement, and after considerable effort. Advertising could create social acceptability for cigarette brands, but not for the behaviour of smoking.

Not a universal opinion

Mr. Trudel showed examples where marketers from the other companies (Imperial Tobacco, Exhibit 153 and Rothmans, Benson and Hedges, Exhibit 762) had taken the view that advertising generated social acceptability and recruited youth. "So these marketing planners were out of touch with what good marketers would do?" Mr. Soberman demurred, saying that he could not answer fully without reading the whole document. (They were hefty documents -- he knew they were too long to read in the time permitted!).

Later, he was shown a chapter from the 2012 Surgeon General's report which articulated the tobacco industry's position on tobacco marketing. Line by line, Mr. Soberman was asked whether these views were also his. Line by line, he agreed.

Switching up

Despite maintining pressure on Mr. Soberman, it seemed this morning that Mr. Trudel was unable to get the answers he wanted from this witness. Perhaps this is why Bruce Johnston upped the pressure when he took over in the afternoon - feet splayed, arms crossed, rapid-fire delivery. He didn't hesitate to chastize the witness for evasive or non-answers.

Physically, Mr. Soberman responded to the change n tone. He stopped wandering around, and often stood with his arms behind his back as he replied. His answers were shorter, if not always direct.

Mr. Johnston challenged Mr. Soberman's judgement, drilling into his willingness to accept the work of JTI's lawyers as competent and unbiased assistants, and to not even gain direct access to the company records. "The research was done in a fair way," said Mr. Soberman. "And you are asking the court to make the same assessment," Mr. Johnston pointed out.

Exhibit 1272
In the form of documents that had been omitted from the work prepared by the lawyers, Mr. Johnston provided reasons why Mr. Soberman's trust might have been misplaced. Missing from the series of marketing plans on his list were documents for 1979. But the plans for that year were already on teh trial record -- including several statements that contradicted the witness' view that the company had no ambitions for starters. (Exhibit 1272)

Mr. Soberman had to fend off questions that suggested his research methods were sloppy -- that he had not tried to interview current or former employees. That he had not, in effect, done as good a job as a marketer at RBH, who had conducted a review of the marketing strategies of each of the Canadian companies. (Exhibit 762).

Ms. Ellis had interviewed former RJR-Macdonald staff, reviewed transcripts and documents from the constitutional case. She reported "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."

As the afternoon wore on, Mr. Soberman's view of JTI-Macdonald's actions looked increasingly naive. But his enthusiasm at delivering that message did not dim. Tomorrow will be the last morning of this second-to-last defence witness.

Better late than never?

A funny thing happened midway through the afternoon, after Doug Mitchell rose in an attempt to shield his witness from a question. After more than 200 days at trial, Justice Riordan finally read the riot act to the company lawyers -- ordering them, through a lecture to Doug Mitchell, to stop signalling answers with their objections. "There has been a lot of that in this trial – too much, and I want to clamp down."

With only a handful of days of witness testimony remaining, his timing is most peculiar!

Tomorrow is the last day of Mr. Soberman's cross examination. A number of procedural issues will also be discussed. Included in tomorrow's blog will be a report on some procedural discussions today.

Tuesday, 22 April 2014

Day 228: The paper chase

The testimony of marketing professor David Soberman had been interrupted by the four-day Easter holiday. But it only took a few sentences of his resumed testimony this morning before the Montreal tobacco trials were again transformed into a lecture hall for marketing practices.

In advertising, it is said that repetition is the soul of persuasion. Mr. Soberman seems to have taken that to heart. His testimony since last Wednesday contained so many repeated ideas, repeated catch-phrases and repeated examples that my notes on his answers all began to look confusingly alike.

Take that, Rick Pollay!

Mr. Soberman's appearance at this trial is on behalf of JTI-Macdonald. Doug Mitchell, who is counsel for this company, used the first half of the morning session to complete his questions to Mr. Soberman.

Almost all of his questions served to give his witness the opportunity to explain why the plaintiff's marketing expert, Richard Pollay, was wrong in his assessment of the intent or impact of tobacco advertising.

The detailed level of this exercise made me wonder if this might not be a continuation of a grudge match between Mr. Mitchell and Mr. Pollay. For the past quarter century, Mr. Mitchell has been trying to convince judges to reject Richard Pollay's conclusions about the ways that tobacco advertising reassures smokers, provides friendly familiarity, induces people to start smoking and discourages them from quitting.

Both men squared off during the industry's constitutional challenges to federal tobacco ad bans, both of which began in this very same Palais de Justice. In 1995, Mr. Mitchell's team won, in that the Supreme Court was not convinced that a total ban was necessary. Twelve years later the victory went to the government, for whom Mr. Pollay was again key witness.

(If Justice Riordan finds it odd that he is being asked to re-hear the question of whether advertising influences young people to smoke, even after the Supreme Court has ruled that it does, he has not objected. But for a man who manages to look interested even when it must be very difficult to do so, he has allowed himself to look uncharacteristically unreceptive to the testimony about marketing given over the past days by Mr. Soberman and Mr. Heckman. Perhaps, like me, he thinks this is a chose jugée!)

Nothing wrong with marketing of lights

The use of the terms "light" and "mild" are no longer used on cigarettes sold in Canada, at first as a result of a voluntary agreement between the federal government's Competition Bureau and the companies in 2006, and more recently as a result of federal regulation.

Mr. Soberman was asked whether he felt that such terms were intended to or had the effect of offering smokers false reassurance or encouraging those thinking of quitting to keep smoking longer. He said no, and provided a lengthy set of reasons why not.

He said the advertising had no effect, because consumers already had it in their mind that such products were safer, and that the information that led to this belief came at a prior time from governments and health authorities. "Government is perceived to be a credible source of information ... it largely explains the association that people have between lower tar and nicotine and reduced health risks."

Companies marketed lower tar products not because they were trying to influence smokers, but because they were forced by smokers' preferences for these brands to do so. "If they didn’t have low tar products they would lose market share to the other companies." 

He pointed out that low tar brands had existed from the 1960s, but that the use of the descriptor "light" emerged in the 1970s to make it easier for consumers to find a brand they wanted.  "It facilitates consumers of an existing brand finding a product that meets that need [for a lower tar product] while at the same time providing a promise to consumers that the taste and flavour associated with the brand they are smoking will be part of the offer in that new light product."

Nor was any suggestion that JTI may have made to smokers about switching to low tar cigarettes instead of quitting likely to have delayed quitting - not even their "To smoke or not to smoke" ad for Vantage cigarettes.  (Mr. Soberman seemed embarrassed at having inserted an American version of the ad, shown below, in his expert report.)

"The target of the Vantage campaign was a segment was called 'concerned smokers' – people who were concerned about the health risks of smoking. One of the ways that this group of smokers could address the health risks was to find a cigarette with lower tar or nicotine. ... The headline reflects the mental things they might have been thinking about smoking."

Besides, it wasn't a good ad -- "too much copy".

He said that quitters would  not be influenced by such an ad. For one thing, they would not pay attention to it. He thought a conscious and unconscious reasons would push recent quitter into avoiding even looking at cigarette ads: "People who have just quit will want to avoid thinking about the pleasure they miss." 

Even if someone thinking about quitting did read the ad, it would not affect their decision to quit. (Judge Riordan seemed quite skeptical about this assertion. His questions to the witness on this point felt like a credibility-losing exchange).

Nothing wrong with anything else either!

In a similar vein, Mr. Soberman was given an opportunity to explain why there was no harmful effect from marketing cigarettes in lighter coloured packages, or using lifestyle advertisements. He compared such marketing activities to those of products like toothpaste. Nor could cigarette ads change the social acceptability of smoking.

Sponsorship campaigns were "weaker and less effective" than brand advertising, he said, and even more so for tobacco sponsorship where the product not be shown.

"Lots of people will look at the ad and not be aware it is an ad for a cigarette," he said, when shown an example of JTI-Macdonald's "go your own way" sponsorship campaign from the late 1990s. Export A, he said, was not like Coca Cola, where everyone knew the brand name.

 "Those are my questions" concluded Mr. Mitchell mid-morning. For the rest of the day, the questions were put to Mr. Soberman by plaintiff lawyer, Philippe Trudel.

Documents! Documents! Documents!

An underlying theme of Mr. Trudel's questions was the fate of marketing documents at the company which has variously been known as Macdonald Tobacco, RJR-Macdonald and JTI-Macdonald. In particular, he wanted to suss out whether there were documents that Mr. Soberman had reviewed for his client, but which had not been shared with the plaintiffs, as would be required under the normal practices of disclosure.

To begin with, there was the 700 page summary of documents which Mr. Soberman had alluded to during the voir-dire last week, but which had not previously been shared with the plaintiffs. (This summary was provided over the weekend: it is now Exhibit 1742)).

Despite many questions and many answers, some confusion lingered about these many categories of documents that Mr. Soberman had seen or asked for. (I am still confused!). There were also the references to documents about Tempo cigarettes, and conflicting accounts of how many documents related to that youth-friendly brand were ever disclosed. There were the documents he had  used when writing his report, and which were used as the basis of his conclusions about the motivations and intentions of the company, but which he had had not been identified or shared with the plaintiffs.

Summaries of documents
were prepared by lawyers
for their expert witness
In reviewing the company documents, Mr. Soberman was assisted by "two junior lawyers working at Freshfields": - Simon Duncombe and Andrew Austin. It was they who had access to the company database of records, and who provided him with paper copies of the records on demand. Their "directed summary" looked for items on the documents that were identified by Mr.Soberman. "I had no reason to think that there was a set of documents hidden from me."

No market pre-test? Or no documents remaining?

Mr. Trudel hinted at an even more suspicious hole in the record: the absence of any pre or post marketing studies for Export A Extreme Sport Series. How likely was it that a company would engage in such a massive marketing endeavour without having found out how consumers would react?

For a man who spoke at such length about professional marketing standards, Mr. Soberman seemed unconcerned about the absence of any such record. "In hindsight, maybe it is something they should have done, but I didn’t see evidence of it having been done," he said. "I trusted in good faith that had they existed they would have been produced to me by the research assistants."  

If he grasped that Mr. Trudel was hinting that the documents had been destroyed, he did not show it!

Not even when Mr. Trudel showed him a memo from 1978 (Exhibit 656) referring to the "monumental task" of obeying instructions from head office "to purge our files. of references to ages below 18 years" did he seem to clue in that this might have involved more than the "six, seven or eight" documents he had found that had been affected.

"Based on this document there was a search conducted to see f there was any evidence of purging or changing documents – and there was no such evidence," he said. "The idea that they had been purged or were in a safe being withheld from me seems far-fetched."  

Making smokers happier

Mr. Trudel asked Mr. Soberman whether his views that marketing contributed to a happier society also applied to the marketing of cigarettes.

Mr. Soberman prefaced his answer by saying that he acknowledged the health consequences of smoking, and that it "has led to people having health problems they would not have were it not for smoking." But yes, he said, advertising would have made smokers happier.

"In terms of the extent that attractive images make people feel happy or have higher levels of utility, given that they are smoking, for those people it gave positive effects when it was done in the 70s and 80s."

Retail availability increases sales

Mr. Trudel asked Mr. Soberman to draw on his experience in marketing bubble-gum for Nabisco to describe the ways in which retail displays influenced sales. I think the record of Mr. Soberman's answers will be more useful to health regulators than to his client.

He acknowledged that counter displays are "an important part of generating sales, for sure."  

And although he did not think that his media comments about PepsiCo applied to tobacco companies [Exhibit 1640], he did allow that the similar logic of availability to youth could increase use. "If they [cigarettes] were not available in the places near to them, the rate of smoking would have been lower than it was."

So many questions, so little time

Mr. Soberman is a witness in demand: the plaintiffs indicated today that they had a day or more of questions for him.

Justice Riordan strongly discouraged his running overtime, cautioning Mr. Trudel against being inefficient in his questions, and reminding Mr. Soberman that it was not necessary for him to repeat his explanations. "I realize you are being a professor and I respect that - but I am being a judge and I am trying to get through a trial!"

The cross-examination of Mr. Soberman continues tomorrow - perhaps for the last day.

Thursday, 17 April 2014

Day 227: The consumer-driven marketing professor

By the end of a day and a half of listening to the testimony of University of Toronto business professor, David Allan Soberman, I felt I deserved a course credit for Marketing 101. 

His elaboration of marketing principles was mostly delivered to the reading level of first year university students or TED-talk audiences. All of it seemed intended to present the marketing activities of his client, JTI-Macdonald as the appropriate actions of marketing professionals. 

Introducing Mr. Soberman

Before a witness is accepted as an "expert", he is interviewed (by both sides) about his credentials and background. Through the questions put to Mr. Soberman on Wednesday afternoon, we learned much that might explain his view on the world.

To begin with, he spent his formative years at Queens' University in Kingston, where both his parents were professors and where he received his first qualifications (Engineering '81 and MBA '83). I remember well Queens in those years, and Mr. Soberman's contented capitalism is certainly evocative of that time and place. 

Secondly, Mr. Soberman's professional experience as a marketer was at companies whose operations are also of public health concern: Nabisco and Molsons. At the first he sold candy to kids (Bonkers and Bubble Yum), and at the second he sold beer to young adults (Coors). He said nothing to suggest that he thought that these products or the way they were marketed might be problematic.

Thirdly, he has an apparently deep belief that marketing makes the world a happier place as it encourages people to put a higher value on the things they use. ("Trying to create higher levels of satisfaction, the theory being that you make society better."

He illustrated this tenet with a story from his own experience in being asked by his son for a Canada Goose winter jacket. He explained that the makers of this brand are able to sell their goods for several hundred dollars more than other jackets of similar quality. Through the "image they have created, people like it."  The difference in value was real, he said, and you could tell "when you look at the smile on my son's face."  In his analysis, people benefit when they become willing to pay more for goods.  

His fresh-faced enthusiasm for making people want stuff and his boyish voice (he is a very young 54!) made me think more than once of the white-shirted young men who occasionally knock at my door wondering if I have an unmet need for salvation.

The plaintiffs made no objection to Mr. Soberman's credentials. If anything, they seemed pleased to have the industry's perspective validated by such a person. (They sat quietly, responding to questions and comments with small smiles and few objections!)

Mr. Soberman's Report

JTI-Macdonald engaged Mr. Soberman to reply to Richard Pollay, the marketing professor engaged by the plaintiffs. 

Like other experts engaged by JTI-Macdonald, Mr. Soberman was recruited by the UK-based law firm, Freshfields. Like the other defence experts, his assigned task was apparently not communicated in writing. 
He seems to have applied his own market research skills to the development of his work for this trial: he reported several meetings to learn more about his clients needs before eventually honing in the product he would provide to them.

In more than 50 pages of small print, he addresses 3 questions:
(a) did the company try to get minors or non-smokers to start smoking, and, if so, did it work.
(b) is the argument of brand-switching credible.
(c) were "light" cigarettes marketed in misleading ways or to prevent smokers from quitting

He covered a lot of ground before providing the expected answers -- "no", "yes", "no" . He read the proceedings, several trial transcripts, Mr. Pollay's report and all the documents referred to in it. JTI-Macdonald also provided him several hundred additional documents.

Taking a swing at Mr. Pollay

In comparison with the verbal assault by JTI-Macdonald counsel, Doug Mitchell, last year, Mr. Soberman's criticisms of Mr. Pollay are diplomatically put. Nonetheless, his clear message is that the plaintiffs expert is no expert in marketing and should not be given much credence. 

Mr. Pollay apparently does not cite relevant models of consumer psychology, mis-states how advertisements are received by consumers, does not understand what a mature market is, interprets tobacco ads in the wrong temporal or regulatory context, and basis his conclusions on irrelevant examples from the United States.

"[Mr. Pollay's] report tells  a story, but the story that it tells has a number of shortcomings. The definitions or concepts that he argues seem to be contradictory to what I would call generally accepted marketing theory would say about certain things."

The decision to smoke is not formed by advertising

Mr. Soberman does not share the view of the World Health Organization and others that young people are particularly vulnerable to tobacco advertising.

If young people decide to smoke, he says, they do not do so as a result of exposure to tobacco ads. Intead, this is a behaviour that comes through a high level of emotional involvement and after considerable thought. In his report he writes: "The evidence is thus that the process of becoming a regular smoker occurs over many months and is an extended decision, rather than the spontaneous response to a particular piece of marketing."

Because people only "pay attention to ads for material we are interested in," young people who notice cigarette ads are already thinking about smoking.

Consumers don't believe ads

Mr. Soberman expressed no concern about lifestyle advertising for cigarettes. People are skeptical about advertising from a very young age, they take the credibility of the source of the information into consideration, and they have to see a lot of ads before it will have any impact. 

He said that Mr. Pollay's concerns about cigarette ads being associated with vitality and health showed that he improperly understood how people interpret advertisements.

"One of the things that struck me as being the most far fetched when I read his report was the assertion that people process this lifestyle advertising literally – which is that they think that if you see an ad with someone engaging in an activity or looking like they are having a good time then by using the activity the same thing will happen to you. These types of comments permeate the report. They are completely inconsistent with my understanding of how people process advertising. people are used to seeing advertising and processing advertising."

His report cites examples of other products whose ads showed that literal interpretation was inappropriate. These included Tiger Wood's promotions for Titleist golf balls and former sex-kitten Farah Fawcett's promotion for Mercury Cougar cars.

"People know that if they use a Titleist golf ball, they will not hit the ball as far or as straight as Tiger Woods does in the commercials."
  "There is no evidence to believe that viewers actually inferred they would meet and spend time with Ms. Fawcett or a live cougar were they to purchase a Mercury Cougar."

Smoking as risky behaviour 

In contrast to tobacco advertising, the messages that might factor into young people smoking, he said, might come from government when it warned about the dangers of smoking. These messages might backlash "in so far that it communicates the risks of smoking" to young people who are interested in taking risks.

Justice Riordan may have thought that Mr. Soberman was missing the point.

He asked the witness whether tobacco ads might not generate interest in risk-taking by youth, and cited ads which showed skiiers contemplating a dangerous run.

"You are not interpreting the ad in the way that the person who sees the ad would think about it'" Mr. Soberman answered. "Advertising operates at a level where people aren't thinking about it too much."
No impact on consumption

As Mr. Heckman had done earlier this week, Mr. Soberman cited endogeneity as the reason that advertising was sometimes improperly related to an increase in tobacco use. He relied on the same studies as the previous witness to conclude that "advertising doesn’t seem to have an effect on tobacco prevalence."

Brand choice

Mr. Soberman was firm that the only reasons that JTI-Macdonald marketed its brands was to encourage smokers to try their brands, to maintain brand loyalty among existing smokers, and to increase the brand equity. Moreover, they had no choice but to do so: as the smallest tobacco company they had to advertise or die.

He came at this conclusion from several angles: his reading of their marketing reports, his own experience as a marketer, modern theories of marketing, the return on business investment. 

He calculated that each percentage point of the Canadian market, expressed in 2010 dollars, was worth $9 million to JTI-Macdonald or any other company. (He did not use the same method to calculate the costs to Canada of each percentage point of the tobacco market -- $170 million in 2002!)

Advertising "added value" to a brand, encouraging smokers to be willing to pay more for their cigarettes. Just as people are willing to pay more for Coca Cola than a generic soft drink, they are willing to pay more for brand name cigarettes than for generic brands. The "brand equity" produced by advertising lasts over time, but not indefinitely -- the ads must be sustained.

The prisoner's dilemma

He appealed to game theory to explain why tobacco companies were compelled to advertise even though it might not be in their collective interest to do so. The "prisoner's dilemma", explained why they would be prepared to lose money in advertising.

Although his phenomenon has been used to explain why American companies adopted a voluntary ban on television ads in the early 1970s, Mr. Soberman said that companies would still be expected to fight against ad bans even with knowledge of this dilemma. 

"It does not capture the full richness of the market. Image marketing allows them to create brand equity and generate significant profits. In a world where you cannot market at all, the images become very week. This changes dimension from image to pricing, which is generally bad for firms."

Facts? Opinions?

Mr. Mitchell raised a number of allegations that have been made against JTI-Macdonald and asked Mr. Soberman to reply to them. Their adherence to the voluntary code. Their market research on young people. Their marketing of light cigarettes. The impact of spill-over advertisements. Their controversial campaign for Tempo cigarettes.

A good half of Mr. Soberman's testimony was on general marketing practices, and he drew on these to interpret documents from JTI's records to refute each of these suggestions, i.e. "My findings would be that the evidence I reviewed indicates that the marketing of JTI-Macdonald was in all cases directed towards people who were 18 years of age or older."

There was much in these questions and answers that made him sound more like a fact witness for the company than as an expert witness for the court -- a point that plaintiff lawyer, Bruce Johnston, put to Justice Riordan at the end of the day.  

Mr. Soberman's testimony continues on Tuesday and Wednesday next week.

Wednesday, 16 April 2014

Day 226: The patrimonial situation of JTI-Macdonald

Today's session at the Montreal tobacco trials was neatly divided in two.

In the morning, Justice Riordan heard arguments against the head of Canada's third largest tobacco company being called again to testify. In the afternoon, the same company introduced its final expert witness, a man with a clearly deep belief in the social benefits of marketing.

More on Mr. David Soberman tomorrow - today's post is about JTI-Macdonald's motion to quash a subpoena served on Michel Poirier.

Reviewing the patrimonial situation

Almost a year has passed since the plaintiffs declared their proof "closed". The sole caveat to this declaration was that they would still have the right to enter proof regarding the patrimonial situation of the defendant companies. ('Patrimonial situation' is not an attempt to provide a gendered counterpart to matrimony, but is a civil code gallicism used to describe assets or wealth).

This is no small matter -- the 'patrimonial situation' of the defendants and their capacity to pay is a factor that Justice Riordan must take into account when assessing punitive or exemplary damages. (This is established in Article 1621 of the Civil Code, reprinted below). The more they can pay, the greater the punitive damages could be.

Nor, in the case of Japan Tobacco, is it likely to be an easy matter. The company, as we heard a few months ago, earns about $100 million each year from tobacco sales, yet manages to report negative income on its financials. The plaintiffs appear to want to call Mr. Poirier in to explain how this can happen.

"Been there, done that."

Guy Pratte
Counsel to
It was Guy Pratte who outlined the reasons why JTI-Macdonald was unwilling to have Mr. Michel Poirier recalled.

While agreeing that the plaintiffs had the right to proof on the patrimonial situation, he thought they were not already in receipt of all the information necessary. The reason they had subpoenaed Mr. Poirier was because "they did not like what they saw." They would have to live with it, he said -  "it is what it is."

Moreover, the circumstances of JTI-Macdonalds corporate structure had already been reviewed by Justice Mongeon, who had ruled against the plaintiff's request for a safeguard order. The Quebec Court of Appeal had upheld that decision, Mr. Pratte said, and the issue should now be considered closed. He suggested to Justice Riordan that not one but "two courts say that you have to take into account that it has been settled.... The capacity to pay issue has been settled!"

Mr. Pratte described the plaintiffs intention as a "forensic examination" which was beyond their entitlement to do. Even then, he said, the president was the wrong person for them to have identified for this purpose. The right man for the job was the same Mr. McMaster, the company's treasurer, who had provided evidence during the discussion about a safeguard motion.

The financial statements are not enough

André Lespérance
André Lespérance was the first to present the plaintiffs' perspective.

He said that the financial statements were not sufficient for Justice Riordan's needs. "They do not answer the question of whether the company is able to pay."  To know that, he told Justice Riordan, it would also be important to understand the corporate relationships within the company.

And as to the suggestion that the question was settled -- he pointed to the ability of the companies to raise the issue of access to medical records three times during the trial, and yet to argue that the financial statements and the corporate relationships behind them could only be discussed once. "This is another example of the double standard that is being applied at this trial."

The left and right pockets are not independent

Gordon Kugler
Gordon Kugler, who managed this file for the plaintiffs during the safegaurd hearing before Justice Mongeon, reminded Justice Riordan that the issue was still part of the same class action trials, confirming that they had the same trial docket numbers.

And, perhaps for the first time, Justice Riordan heard the background to the case. (It was never made clear to me why the safeguard motion was redirected to Justice Mongeon).

Mr. Kugler explained that 14 years ago, JTI-Macdonald created a wholly-owned subsidiary, JTI-TM,  to which it transferred ownership of its principal assets, its trade-marks, which were valued in billions.

JTI-Macdonald subsequently became indebted to its subsidiary, and "a circle of so-called loans ended up so that it pays an interest payment of $100 million a year, roughly equal to its income."  He described this as the right pocket paying the left pocket. But only one pocket is party to the class action trials -- JTI-TM was not included in the suits.

Mr. Kugler said that the interest rate on the loan that JTI-Macdonald pays to JTI-TM has varied at the direction of JTI-Macdonald management. "In 2009, 2010 and 2011 they amended their contract agreement to reduce their interest rate to 0.1%."  But at the end of 2012, it was increased back to 7% - information that was not shared with the plaintiffs until the fall of 2013. "This demonstrates they have the capacity to pay."

(Mr. Kugler did not mention that 2009-2011 was the period when JTI-Macdonald was making payments to the federal and provincial treasuries as a result of its settlement on contraband charges.)

He disagreed with Mr. Pratte's characterization of the refusal of leave to appeal this interlocutory decision as being the same as the Court of Appeal upholding Justice Mongeon's decision. And he said he did not believe that Mr. McMaster's testimony would be sufficient, given that he had been unable to explain senior management decisions when he was previously under oath.

The judge decides: the subpoena stands

As soon as the hearing resumed after the lunch break, Justice Riordan gave his decision.

He noted that the plaintiffs were of the view that Mr. McMaster "is not a knowledgeable witness" for the types of questions they wished to ask. "I must respect the plaintiffs' choice of witness." On this ground alone, he said, he would reject the motion to quash the subpoena.

He characterized other concerns raised by Mr. Pratte as objections to questions that were anticipated -- but he could not rule in advance on questions that had not been asked. When the moment came, he said, all sides would be able to weigh in on how "all appropriate circumstances"  in Article 1621 should be applied. 

JTI-Macdonald's motion was dismissed with costs.
Quebec Civil Code, Article 1621.
Where the awarding of punitive damages is provided for by law, the amount of such damages may not exceed what is sufficient to fulfil their preventive purpose.
Punitive damages are assessed in the light of all the appropriate circumstances, in particular the gravity of the debtor's fault, his patrimonial situation, the extent of the reparation for which he is already liable to the creditor and, where such is the case, the fact that the payment of the damages is wholly or partly assumed by a third person.
The road ahead

These weeks everyone seems to be on tenterhooks, waiting for the Court of Appeal to decide whether Justice Riordan's decision to block access to the medical records of class members will stand.

In the meantime, the days ahead are being filled with a few left over witnesses and more than a few disputes to settle.

Next week:

Easter Monday is a holiday. On Tuesday and possibly Wednesday morning, David Sobertman will complete his testimony.

On Wednesday afternoon, views will be exchanged on three issues: (a) the companies' response to the draft outline of final arguments circulated by Justice Riordan, (b) discussion of RBH's view regarding the non-application of sections of Quebec's Tobacco-related Damages and Health Care Costs Recovery Act and (c) Justice Riordan's suggestion that "three to five" class members be heard in advance of the Court of Appeal ruling, so as to get a sense of time required.

Thursday will allow for "2870" documents to be filed.

In two weeks: 

On May 5 and 6th, the plaintiffs' rebuttal testimony will begin with the Paul Slovic, who was engaged to respond to the defendants' experts' views on warnings.

On May 7th, two contentious issues: (a) whether the companies' financial records should remain confidential, and whether the plaintiffs should be allowed to file a strategic reflection by a U.S. company lawyer (Exhibit 1702R).

Mary Trudelle has been scheduled for the 8th, but this may be postponed to coincide with the later appearance of Mr. Poirier.

The testimony of David Soberman resumes tomorrow.

Tuesday, 15 April 2014

Day 225: Hidden methods and reluctant answers

The cross-examination of James Heckman at the Montreal tobacco trial was likely more interesting than it felt.

Plaintiff lawyer André Lespérance and Bruce Johnston gave a sustained pounding to the report of this prominent American economist, raising a number of issues that by themselves could be the fodder for a lively debate.

But there was something that seemed rob the day of the dramatic tension it deserved. Was it the irritating way that Mr. Heckman quibbled over the simplest of questions, or refused to give clear answers? Is there a fin-de-siècle ennui as this trial sputters to an uncertain finish line? Was it Justice Riordan's apparent fatigue or disinterest with this witness?

For whatever set of reasons, this might be a rare day in the trial where the transcript is a more enjoyable read than sitting through the hearing. Too bad for the visitors from other plaintiff teams who were in court watching developments!

Filling in the blanks

James Heckman produced two econometric analyses for his clients, Imperial Tobacco and Rothmans, Benson and Hedges. One looked at "whether restrictions on advertising and warning label requirements on packages were followed by decreased youth smoking." (Expert report, part I, Exhibit 21320.1)

The other sought to evaluate whether "tobacco companies’ marketing of lights in Québec led consumers
to erroneously regard lights as a less risky alternative to full-flavored cigarettes, which in turn allegedly resulted in a lower level of quitting among proposed class members than would otherwise have been the case absent this alleged misconduct." (Expert report, part 2, Exhibit 21320.2).

In both cases his answer "no" came in the form of a table that would make sense only if one had some familiarity with regression studies. Explanation of the results, and the methods used to get there, were sparsely provided -- and even more parsimoniously presented during the introduction of this witnesses' opinions yesterday by Imperial Tobacco lawyer, Deborah Glendinning. Perhaps she thought his pedigree meant he didn't have to actually explain his methods
How James Heckman presented his results:
Advertising bans do not affect youth smoking

Fortunately for us observers, there was a lot of economic experience in the room that could help Mr. Heckman fill in these important missing blanks. (Both Justice Riordan and plaintiff lawyer, André Lespérance, completed graduate studies in economics before turning to law as a career. )

And so Ms. Glendinning's somewhat perfunctory reveal of her witnesses' conclusions was complemented by today's more detailed review of what did -- and more importantly, what did not -- go into Mr. Heckman's calculations.

This is not a graduate seminar

Although Mr. Heckman has court experience, he seemed to have difficulty understanding that the choice of topics was not his to make, and that someone else had the right to frame the questions.

Mr. Heckman quibbled with the use of some words. He didn't want to answer hypothetical questions. He wandered into the weeds of unrelated details. On several occasions he was directed by the lawyers - and also by Justice Riordan - to answer the question. Not once did I get the impression that it dawned on this witness that this style was not helpful to his cause.

On a handful of occasions, he was told that the point he wanted to make could be picked up by his lawyer at the end of the day. But when that moment came, Deborah Glendinning too gave it a pass. Again, she acted in ways consistent with wanting to minimize his time on the stand.

Criticisms but no answers

André Lespérance began the day by pointing to the relatively small attention given to tobacco issues in Mr. Heckman's long research career.  He really only published one paper on the topic (Exhibit 21320.5).

Mr. Lespérance pointed out that this paper had criticized the studies of other economists, and had recommended an improved "framework" to address what lead young people to smoke. Yet in the following 8 years, Mr. Heckman has never actually applied that framework to produce his own estimate.

This echoed the testimony last month of Laurentius Marais, Kenneth Mundt, and Bertram Price, who were long on criticism of public health epidemiology, but very short on their own contributions to the research questions that they thought others had improperly answered.

Under the hood

In listening to Mr. Heckman yesterday, and reading his report, I had identified a few flaws in his approach. But my short list was a fraction of the criticisms leveled against the report by Mr. Lespérance.

Over the course of the morning, the lawyer showed the witness many factors that should have been included in Mr. Heckmans study, but were missing. These included:

* not accounting for the addictive nature of cigarettes.
Mr. Heckman acknowledged that cigarettes were addictive, and said that there were many ways to model for addictive behaviour, some of which were controversial. But the only adjustment he had made to his analysis was to "control in a simple way by conditioning on previous smoking". He eventually agreed with Mr. Lespérance that addiction "is a background variable and it may play a role."

* his model discussed the 1989 Tobacco Products Control Act (after which corporate sponsorship advertising was permitted), but did not identify the more comprehensive restrictions of the 1998 Tobacco Act 
Mr. Heckman said the reason he highlighted the earlier law was because he was responding to a paper by an author whose methods he criticized. (Saffer and Chaloupka, Exhibit 21320.13). After a while, he said that he had modeled the later law in his sensitivity analysis - a part of his report that has not been shared with the court. He was asked to provide the court with that sensitivity analysis.

* his model did not reflect the fact that tobacco companies substituted direct advertising with sponsorship advertising in the period he studied.
When asked why he did not consider sponsorship promotion in his model, Mr. Heckman gave the quintessential economist's reply:: if sponsorship advertising had been as effective as direct advertising, the companies would have used it before. Therefore it could not be seen as an effective alternative.

* his model did not address the availability of cheaper contraband products in the period 1989 to 1994, even though his client companies had pleaded guilty to contraband offences in that period.
Mr. Heckman explained that it had been methodologically difficult to assess a "cigarette price index" in the period. He acknowledged that the lowered prices in this period "could be a factor" in prevalence not falling.

* his model did not include actual advertising expenditures, but only a "dummy variable" for whether an ad ban was in effect.
Mr. Lespérance showed him ACNeilsen estimates of advertising expenditure that were available on the same web-site Mr. Heckman's researchers had used to obtain other data. Mr. Heckman said it was not specific levels of advertising expenditures that would make a difference, "but the accummulated stock" of many years exposure to advertising. If he realized that acknowledging such lag effects undermined his own study methods, he did not show it.

ACNielsen estimates of tobacco advertising
expenditures 1987 - 2000
* his model did not look at the impact of advertising on perceptions of risk, or on the reception to health warnings.
Mr. Heckman was asked to consider whether advertising which associated smoking with health, activity and risk taking could influence the environment in which government information about smoking was being presented. He admitted that this too had not been put into his model. 

So what would he tell a health minister?

Mid-morning, Mr. Lespérance presented Mr. Heckman with the scenario where he was asked to advise a Health Minister who was considering responding to his conclusions by allowing cigarette advertising to return to television - including during prime time youth programming.  Would Mr. Heckman tell the minister that this was a safe thing to do, given his view that advertising did not increase smoking?.

The witnesses' discomfort with the question was answer enough. He tried to point out that this was an extremely unlikely scenario, given the tenor of the times, and that even tobacco companies were no longer in the business of advertising in this way.

But under force to answer, he admitted that it would "not be a good public policy initiative ... I think I would not want to run the risk."  He then identified a reason other than the potential impact of advertising to justify his qualms: a policy reversal by government, he said, would be received as "new information" and the subsequent changed perception of the harmfulness of smoking might lead to increased use.

Switching it up

On the plaintiffs' team, it is André Lespérance and Bruce Johnston who often conduct cross-examination. Usually they follow the good cop/bad cop pattern of gentle questions by Mr. Lespérance followed by more forceful attempts at admissions by Mr. Johnston.

Today, they broke this pattern. In the morning, Mr. Lespérance had responded to Mr. Heckman's intransigent answers by speaking unusually sharply (for him) to the witness. Yet in the afternoon, the admissions that Mr. Heckman was volunteering seemed to encourage Mr. Johnston to keep things in a nodding-along tea-party mode.

The Compass Lexecon Team

Although Mr. Heckman has only ever published one paper on tobacco advertising (Exhibit 21320.5),  and  it greatly resembles the opinion he was paid to present to Justice Gladys Kessler,

His co-authors were Fredrick Flyer and Colleen Loughlin, who are senior executives of Compass Lexecon, a company which provided several consultant witnesses for the tobacco industry during the U.S. Department of Justice Trial, including Mr. Heckman. (Exhbit 1740R)

Mr. Johnston seemed to think that it was a little unlikely that Compass Lexecon would have provided the service of reworking their court opinions into a paper for publication without support from their client, but Mr. Heckman repeated that he had not billed for his work on the paper. But he did admit that he "did not know for a fact" whether his co-authors had been paid.

Mr. Flyer and Ms. Loughlin were sitting in the court. Pointing to them, Mr. Heckman said that "they drafted the report" he was presenting to Justice Riordan, before correcting himself to say "they helped draft the report."

Rational economic agents who run tobacco companies

Mr. Johnston seemed to hit a sweet spot when he asked Mr. Heckman to comment on the behaviour of tobacco companies as "economic actors". Mr. Heckman uncrossed his arms and spoke openly about what companies could be expected to want to do to increase their profits.

He agreed that the companies would advertise to recruit new smokers, and would advertise to prevent smokers from quitting as long as the costs of doing so were not greater than the rewards. "If it were shown to be a profitable activity, I an sure they would pursue it."

He cast doubt, however, on whether such advertising activities would bear fruit. "If they did try, it has been a pretty miserable effort because the total marketing is shrinking."

Mr. Johnston elicited his agreement to many of the statements made by Rick Pollay regarding the execution of advertising activities -- that cigarettes were portrayed as part of the "good life", and that it "made economic good sense" to design adds to reassure and retain conflicted smokers.

Mr. Heckman was reminded that there was a time when some were encouraged to deny causality between smoking and disease. Mr. Johnston asked lightly whether he might not be in a similar role, denying causality between advertising and consumption. "I did not deny causality," said the economist. "I just said it hadn’t been proven."

Mr. Johnston pulled him into a personal endorsement of the lingering power of tobacco advertising. He showed an extract of Allan Brandt's book the Cigarette Century. (Exhibit 1544.2)  Mr. Heckman had not read the book, and was not familiar with the work of this Harvard historian. At first, he did not remember the Camel billboard in Times Square that Mr. Brandt discussed... and then the memory popped up.

Oh yes, he remembered -- "The one that blew smoke rings!"

Justice Riordan and light cigarettes

Earlier in the day, Mr. Heckman had been challenged about his choice of 1975 as the first period he used in studying whether light cigarettes had or had not affected quitting rates. Since this was the year in which cigarettes labelled "light" had first been used, his analysis did not allow a comparison with quit rates in pre-lights years.

Justice Riordan returned to this analysis with his short round of questions at the end of the day.

He pointed to the flat line of quit rates that Mr. Heckman had found for the years when the proportion of light cigarettes was growing. He wanted to know whether the quit rates should have been expected to increase in that time, given that there was growing concerns about smoking. "My intuitive reaction is to say that during that time, given those circumstances, the quit rates should have been rising. And yet you make a convincing portrayal that they were not."

Mr. Heckman's illustration of why light cigarettes
did not influence quit rates - Exhibit 21322
Mr. Heckman's answer was a gift to the plaintiffs. It was a logical possibility, he said, but he "didn't have access" to information on growing awareness.

The rules allow for questions which respond directly to the Judge's inquiry - and Bruce Johnston took advantage of the moment to show Mr. Heckman that his clients had indeed tabulated growing awareness of smoking as a health risk -- and that it had climbed steadily during this period. (Exhibit 62).

Deborah Glendinning had no questions for her witness today. Mr. Simon Potter, who represents his Philip Morris International-owned client, was not even in the room.

Well before 5, Mr. Heckman and his associates were trying to figure out whether they could catch a flight back to Chicago this evening. At $2,300 an hour, his two days before Justice Riordan would provided Mr. Heckman with more money than the median annual income of Canadians. It's a heterogenous world indeed!

Tomorrow the last of the industry expert witnesses will testify. Mr. David Soberman is an economist with the University of Toronto. Arguments will also be heard on a motion to block the return of JTI-Macdonald president, Michel Poirier

Monday, 14 April 2014

Day 224: James Heckman: the dismal scientist

By most standards, Mr. James Heckman would have to be considered a star witness for the two defendant tobacco companies who hired him to testify on their behalf at the Montreal tobacco trials.

As economists go, this man is no slouch.

Winner of the Nobel Memorial Prize in Economic Sciences. Distinguished service professor at the University of Chicago. Recipient of a dozen or more honorary doctorates of law or honorary professorships. It's hard for an economist to be more distinguished than that!

And it's a distinction he seems willing to share with asbestos, tobacco and other companies who have found themselves on the defensive in lawsuits.

The 69-year old Mr. Heckman has testified for asbestos companies and has assisted the defence of Philip Morris in a few important large tobacco trials in the United States, (Falise 2000Blue Cross 2001, Department of Justice, 2005). In regulatory issues, also, he has produced opinions to help forestall plain packaging of cigarettes. (United Kingdom, 2012)

And yet, despite this 14-year relationship with tobacco clients (and a billing rate he revealed today to be US$2,300 an hour!) Mr. Heckman says that the industry has never paid for any of his research.

He positively bristled at the suggestion in this year's Surgeon General's Report that he was a "consultant researcher" to the tobacco industry.

(I will leave to others to assess his written direct testimony at the DOJ trial  and the subsequent paper he published on the topic same topic  - Exhibit 21320.5 - against the Surgeon General's conclusion. In making that assesment, one might want to consider that the co-authors of that paper - Mr. Frederick Flyer and Ms. Colleen Loughlin - were also in the courtroom this afternoon. The three are senior mounts in Compass Lexecon's stable of professionals "with testifying experience.")

The Expert Economist and the Straw Man 

Even speaking at a fast clip, and lingering only briefly on his accomplishments, Ms. Glendinning took well over an hour to allow Mr. Heckman to present his background before she asked Justice Riordan to qualify him as an expert in "economics, econometrics and determinants of causality." 

It was then the turn for plaintiff lawyer, Bruce Johnston, to point to reasons why the judge might want to doubt the value of Mr. Heckman's contribution. He immediately honed in on the way that Mr. Heckman's report (Exhibit 21320.1) was aimed at evaluating whether "[plaintiff expert witness on marketing] Dr. Richard Pollay has provided a reliable basis for concluding that a causal relationship exists between tobacco company advertising and aggregate smoking."

The problem, as Mr. Johnston saw it, was that such a topic had not been addressed in Mr. Pollay's report -- a fact that had been confirmed when Mr. Pollay testified last January.

Was this not an example of Mr. Heckman using a Straw Man to misrepresent an argument he was going to rebut?

Justice Riordan looked at the ceiling as the two men tangled over the meaning of straw-man. Mr. Heckman denied that his report was intended to suggest that Mr. Pollay had said there was a causal relationship. "I did not say he did. I said I was asked whether he had provided a reliable basis. I was asked to talk about the issue." 

Not long after, however, Mr. Heckman conceded that Mr. Pollay had never addressed causality. "I completely agree with you." He said his report was not directly linked to Mr. Pollay's except "to the extent that he talks about advertising and I talk about advertising."  

Like a professional wrestling match: a foregone call

Many months ago, another expert witness had been accused of going further in rebuttal than the reports he was challenging. On that occasion, the plaintiffs withdrew much of Robert Proctor's report, in anticipation of having sections struck down by the judge.

For a short while in an otherwise tedious day, we were on the edge of our seats. Would Justice Riordan be asked to apply the same sauce to the gander?  If so, would Mr. Heckman be finished by lunch?

The realpolitik at this stage of the trial demands that there are no more excuses for Appeal Court delays. The result -- no ruling against the defendants -- was thus a foregone conclusion.

So in an I'm-just-going-through-the motions tone, Mr. Johnston objected that that Mr. Heckman's testimony was irrelevant, as it did not respond to any evidence from the plaintiffs. And with a lets-get-this-over-with air, Justice Riordan said that he saw "enough of a connection, and would allow the report to come in."

Once over lightly 

Given Mr. Heckman's stature, one might have expected him to have been given a lengthy exposition, and the opportunity to drill down on some of his findings, as others have. (His main conclusions are appended at the end of this post).

But Ms. Glendinning seemed surprisingly anxious to not let her witness linger too long in front of Justice Riordan. She frequently cut short his answers, or otherwise tried to rush him through her set list of questions. The day adjourned with a full hour left on the clock, during which time her witness would have had a captive audience. So much left unexplained!

The brevity came with a mixture of the overly simple and the overly simplified.

In the morning, Mr. Heckman was asked to explain ideas that by this point in the trial are more than well understood, and which seemed almost insultingly basic. Justice Riordan, who received his own Masters in Economics only four years after James Heckman, certainly does not need to have the Scientific Method nor the role of the OECD explained to him!

James Heckman explains the Scientific Method
to Justice Brian Riordan - Exhibit 21321
In the afternoon, by contrast, the thinking behind Mr. Heckman's conclusions was rapidly skimmed over, where more detailed explanations would have been expected.

A dense table of calculated results was shown, for example, while the witness was merely asked to state his conclusions that there was no real relationship between advertising and smoking prevalence, or between the marketing of "light" cigarettes and the rate at which smokers quit.

I was reminded of the rapid display of the empty magician's sleeve before the dove was produced.


One of Mr. Heckman's drive-home messages was unmeasured phenomena can lead to mistaken conclusions.

He used the colourful if somewhat dated/distasteful analogy of trying to answer the research question "Does reading Playboy lead to reduced homosexuality?"  One had to consider endogeneity, he said -- or the likelihood that those who read Playboy might already have a predisposition towards heterosexuality.

Endogeneity also played a role when society adopts measures like bans on tobacco advertising. This happens when social attitudes towards smoking were unfavourable and is thus also connected with fewer people smoking.

Smoking rates in Canada were already declining when health measures were adopted he said -- likely the results of an unmeasured social attitude, and not the measures themselves.

James Heckman's view of events in tobacco control
in Canada as tied to smoking rates. 
He applied the same concept at the individual level.

Endogeneity is a factor when considering the child who wears a T-shirt printed with Joe Camel, or who collects a tobacco-branded ashtray. This young person likely has a predisposition towards smoking -- one caused by factors other than industry behaviour.

"There is very little evidence that advertising has an effect – but the price of cigarettes, or whether or not parents are smokers, or the environment and peer effects are major determinants - even the education of the child."  Even genetics could predetermine smoking.

As if to underline that it is defects in the individual that leads to smoking, and not the actions of those who sell cigarettes, he several times characterized smokers as people who adopt "risky behaviours. "Those people who smoke marijuana, who drink, who participate in risky behaviours - they are more likely to also smoke." 


As other defence expert witnesses have before him, Mr. Heckman underscored that it was not appropriate to think of smokers as a homogenous class of individuals. 

The differences among people -- heterogeneity -- had to be considered before drawing any conclusions. 
"The 'representative individual' is a fiction. [It] disguises variability in individuals."

Earlier, he had cast smoking in the context of variance of non-cognitive abilities (a major focus of his usual research). It was not measurable brain power that predicted success, he said. Equally or more important were often unmeasured abilities, such as resilience and perseverance. People with these other characteristics did well in a host of ways - including having less chronic disease.

Mr. Heckman seemed to sincerely believe that it was not the way tobacco was provided in the market that led to what he called "the smoking decision". The factors he honed in on were personal strengths, parental background, education and peer values.  

The cross-examination of Mr. Heckman will take place tomorrow. On Wednesday morning, a motion to prevent the plaintiffs from asking for JTI-Macdonald president, Michel Poirier, to testify will be argued. In the afternoon, another industry marketing witness: Mr. David Soberman.


Some of Mr. Heckman's Conclusions

(Extracts from Exhibit 21320.1, 21320.2)

"[M]y main conclusion is that Dr. Pollay does not provide a reliable basis to support a causal inference between tobacco company advertising and aggregate smoking.

"Dr. Pollay’s analysis is based on a review of tobacco company documents, advertising/marketing theory, and his personal judgment on the impact of various marketing campaigns on consumer behavior. His work does not employ the rigorous analytical methodology necessary to establish the existence of a causal link between tobacco company advertising and the level of smoking in Québec above the level that would have existed absent this advertising. Dr. Pollay’s analysis does not provide reliable empirical support for the conclusion that tobacco company advertising was a causal factor in initiation, quitting or intensity of smoking decisions. As a result, his work does not provide reliable evidence addressing the narrower question of whether tobacco company alleged misconduct caused harm to the class.'

"I also conclude that tobacco companies have economic incentives to advertise, even absent any effect of such advertising on individuals’ decisions to smoke. Namely, I understand that plaintiffs have put forth the argument that a key incentive for tobacco companies to advertise is to increase aggregate cigarette consumption. This conclusion is conjecture without a reliable empirical basis, as firms have multiple economic incentives to advertise."

"My analysis of these Canadian data and other academic research efforts do not support Plaintiffs’ claim that the marketing of light cigarettes reduced cessation rates in Québec."

"I also considered the issue of whether any possible effects of Defendant tobacco companies’ alleged misconduct (including, but not limited to allegations of wrongful lights marketing and marketing to youth) would have differed significantly between class members. In my opinion, substantial heterogeneity among class members in important factors affecting smoking behavior provides support for differential impact. For example, the amount and frequency of smoking light cigarettes and other factors, such as exposure to marketing in Québec varied among class members. In addition, even if the exposure to the alleged misconduct were the same across class members (which it was not), the impact of such exposure would not be uniform across the proposed classes, which constitute a heterogeneous group of individuals who undoubtedly varied substantially with regard to time and place of initiation and continuation of smoking, socioeconomic circumstances, peer influence, genetic makeup and societal conditions such as the extent of public smoking restrictions and predominant attitudes regarding acceptability of smoking. Therefore, there is no reliable basis to conclude that impacts of the alleged misconduct on smoking behavior, even if such
impacts existed, would be common among the class members.