High, S. Hugh (Depts. of Business Science & Economics, UCT)
Monday, October 19, 1998

(I) lntroduction:
My name is S. Hugh High. I am an economist, and lawyer (although not licensed to practice in the Republic.) I teach Business Science Law, and Economics at U.C.T.

Unlike many this Committee will hear, both opposing and supporting this Bill, I have no financial interest in the outcome of the Bill. Rather, I am here merely as a concerned citizen of the Republic, and as one who values highly fundamental civil liberties, and who has completed a soon to be published rather extensive review of the Advertising- Tobacco Consumption literature.

By way of full disclosure, I should point out that this review grew out of some work I did, approximately 1 1/2 - 2 years ago for the Tobacco Institute of S.A., which approached me and asked me to review the literature. They paid me for this review (the payment was less than 5% of my income.) Since that time I have received no money from anyone connected with the tobacco industry. That work heightened my interest in this issue, in no small part because I have been appalled at the often low standard of research in the area, and by the all-too-frequent willingness of some researchers to leap to policy conclusions which are not at all supported by the underlying research.

By way of further disclosure, I have no hesitancy in telling this Committee that I value fundamental civil liberties, including free speech, extraordinarily highly.

That said: While issues such as this raise tempers, provoke political rhetoric, and often lead to 'playing to the crowd', I would suggest that the issues raised by this Bill are vastly too important for such posturing. I would suggest that a dispassionate inquiry into the facts, and the law, are the only things which should guide this Committee, and Parliament. After all, Members' oaths to the Constitution are rather more important than to political parties. I am not so naive as to think that politics will not influence Committee members ; I am, however hopeful they place commitment to civil liberties above commitment to party.

(II) The Proposed Bill is Unconstitutional
There are a number of reasons this Bill should not be passed. The Committee has, and will, have heard a number of them, including its likely violation of international treaties regarding trademarks and trade, the questionable manner of its presentation to this Parliament, among others.

But, over and above those reasons, this Bill is clearly unconstitutional for the following reason

(1) With this Bill, the State proposes restricting a very fundamental civil liberty - free speech. Now, in discussing free speech, it is important to note that courts worldwide have held that free speech rights run not merely to the 'speaker' , but also to the listener.

(2) Moreover free speech rights in virtually all jurisdictions include the right of free commercial speech ; that is, free speech is not confined to the political, or similar arenas, but incorporates the commercial arena (and, indeed, the division between them is often not clear : by mere way of example, freedom of religion clearly includes the right to espouse those views to others. It is hollow to say one has the right to freedom of religion without the right to espouse those views to others. Is this 'commercial' speech ? Likewise, is the right to political views 'commercial' speech? ) Courts worldwide have, quite rightly, chosen not to limit free speech, including the right to hear/read, to narrowly defined 'political' or 'religious' speech, but have recognized that the right of consumers, and potential consumers, to hear a variety of different views is an important way they can organize their expenditures so as to improve their lives.

In short, commercial free speech is Constitutionally protected speech.
(3) However; commercial free speech, like political speech, is not totally free from limitations by the State. For example, in all jurisdictions, speech which would likely and proximately lead to the destruction of the state through overt rebellion is prohibited. I acknowledge that States worldwide can delimit free speech rights, including the right of commercial free speech.

(4) That said, it is a commonplace in the law of Human Rights that, where the State would restrict the right of free speech, it has an extraordinarily heavy burden of demonstrating, with clear and convincing evidence that the restriction on speech not merely will have a tendency to achieve an otherwise permissible state goal, such as promoting health, but will clearly lead to the attainment of that goal.

Notice, this is a burden which is on the State - it is not on the speaker, or the advertiser. The State, in this instance in the form of the Minister of Health, must show by clear and compelling evidence, and not merely suggestion, that the proposed restrictions on this fundamental human liberty will lead to the desired goal. It is not sufficient that the State, when tampering with fundamental liberties, show that the intrusion/interference MAY have a desirable effect; it must show clearly and unambiguously that the intrusion WILL have the permissible, and desirable effect. [I note that the Minister has altered the Preamble to the Bill, so that now it reads that advertising 'may' have an influence on youth smoking uptake, and no longer reads as 'will' have an influence. This will not save the Bill for it is insufficient that it may have an influence; the Minister must show it unambiguously will have this effect.]

This is a heavy burden on the State, and on the Minister. It is a burden which, I can safely say, having reviewed over 200 studies of the alleged tobacco consumption/advertising nexus, she simply cannot carry. AT MOST, she can point to a handful of studies which suggests - not demonstrates but merely suggests - that tobacco advertising induces people, including children, to smoke. And, of those studies to which she can point, virtually every one of them are (a) flawed in terms of the underlying data, or the methodology, or both ; (b) are merely suggestive of some relationship. Moreover, for every such study, there are a large number which come to the opposite conclusion - that there is no real relationship between advertising and the total consumption of tobacco.

To re-iterate, then, neither the Minister nor anyone else can demonstrate a clear and convincing relationship between tobacco advertising and total tobacco consumption.

(Ill) The Advertising-Tobacco Consumption Literature
(1) It is an old saw in the advertising community that "Half of all money spent on advertising is wasted - the trick is to know which half". And that is very true.

Despite the belief by conspiracy theorists that advertisers can manipulate consumers, willy-nilly, to spend money on products advertised, there is no evidence in support of this belief. Indeed, this is one of the major problems faced by advertising firms - to demonstrate to their would-be customers that the customer/company places an advert through their firm, sales will go up. There is no real way to demonstrate that. At most, the advertising firm can say to a company when we placed this advert, shortly thereafter, sales of your product went up. BUT, sales could have risen for a number of reasons, including but not limited to the following:

(a) advertising by rivals fell;
(b) there was a general increase in the demand for the good advertised (this is particularly true in the case of tobacco - we have witnessed, world-wide, a falling demand for tobacco products, for reasons quite unrelated to tobacco advertising. If
tobacco advertising could induce people to smoke, this secular decline in tobacco sales in a huge number of countries, including those without advertising bans of any sort, would not have occurred ) ; or
(c) there was a general increase in incomes of consumers which enabled them to purchase the good advertised - or
(d) there was a decrease in incomes of consumers which induced them to substitute, in their expenditure patterns, the goods which were advertised for goods which they were previously purchasing.

I mention all this merely to point out that it is difficult, indeed, to establish anything like an even reasonably clear relationship between advertising and consumption.

(2) There is a reason this relationship is far from clear. The effect of advertising on the purchases of goods depends on a number of factors, including the nature of the good being advertised.

Some goods fall into what are called, in the marketing literature, mature product markets." Broadly speaking, these markets are those where the underlying good has been around for a long time, and customers are well aware of the nature of the good, and what it can do for them. An excellent example of such a good is soap. We all know soap can lead to clean clothes, clean bodies, can kill germs, etc. Few of us take more baths as a result of soap adverts, nor do we wash our clothes more frequently as a result of such adverts. Yet, soap manufacturers, however, advertise extensively. Why ? Are they foolish? Don't they know that more advertising will not lead to more purchases of soap ? The answer is simple : soap advertisers wish to either (a) increase their market share by inducing consumers to purchase their brands, rather than those of their rivals ; or; (b) wish to protect their market share.

[Parenthetically, I would ask members to ask themselves if they are induced to bath/shower more often as a result of soap adverts ? I rather doubt it. Nor; equally, are non-smokers induced to smoke as a result of such adverts. The brand of soap you buy, or the brand of cigarette you buy if you already smoke, may be affected by an advert - but bathing, like smoking, is hardly a result of advertising !]

This is well demonstrated by two interesting observations about the tobacco market in S.A. (and applies, with modest modification, to other markets as well)

(a) In the 1960's, Rembrandt Tobacco had only about 10-15 0A of the total market in tobacco sales; it now has approximately 85% of the total market . Why ? The answer is simple : it engaged in aggressive marketing campaigns which induced people to switch to Rembrandt brands - and it continued its marketing campaigns so as to keep customers loyal to its brands. This is not unlike Coca-Cola in S.A., which enjoys approximately 90 0/o of the soft drink market - which it obtained, and retains, as a result of advertising.

(2) A couple of years ago, a Japanese cigarette manufacturer attempted to enter the S.A. market, selling "Wings" cigarettes. Regrettably for the company, its sales flopped. This for a simple reason: it did not mount nor sustain, an aggressive marketing campaign. The result was that it did not induce smokers away from those companies, such as Rembrant, BAT, and R.J. Reynolds, which were rather better established. Only via aggressive marketing, including advertising, could it have hoped to induce smokers to smoke "Wings."

[Incidentally, if this Bill is passed, simple economic theory tells us that one of the effects will be to entrench Rembrant, BAT, and Reynolds. Passage of this Bill by Parliament is a clearly anti-competitive act. I was of the impression that, in passing the Competitions Act, Parliament was committed to fostering competition. This Bill will have the opposite effect.]

(3) All that said, the Advertising-Tobacco Consumption literature can hardly be summarized in a short 15 minute session. Suffice it, however; to say the following:

It can basically be divided into 3 major parts : (1) cross-national studies; (2) national studies, and (3) studies involving children.

It is instructive to note, at the outset, the words of the U.S. Surgeon General who said, in 1989, that " there is no scientifically rigorous study available [ on the subject of the alleged advertising-tobacco consumption relationship] and " given the complexity of the issue, none is likely to be forthcoming...." And, similarly, in 1994, the U.S. Surgeon General acknowledged the lack of a definitive review of the subject. This remains the case.

(A) As to the Cross-National Studies

(1) a 1983-84 Study by the World Health Organisation conducted a 4-nation survey of smoking behaviour of young people and found that when young people start smoking the most important predictor is the smoking behavior and smoking -related activities of 'significant others' Specifically, it found that the "strongest statistical relationships are found with the smoking habits of best friend", while smoking by school children is " strongly related to the number of smokers in the family." Equally, the influence of advertising was clearly unimportant as indicated by the WHO conclusion that there were " no systematic differences" between the smoking behaviour of young people in countries where advertising was completely banned, and in countries where it was not.".

This study was updated in 1986-87 and the results reported to the 7th World Conference on Tobacco and Health. This update revealed that, in general, those countries with the highest incidence of youth smoking were those in which tobacco advertising was banned, while those countries which permitted tobacco advertising had the lowest incidence. For mere example, the research revealed that, in Finland where tobacco advertising had been banned for fully a decade prior to the Survey, fully 29% of the 15-16 year old boys, and 20% of girls the same age, were daily smokers ; likewise, in Norway, where tobacco advertising had been banned for at least 10 years, 16% of the 15-16 year old boys, and 17% of girls of the same age, were daily smokers in 1986-87.

In contrast, in both Austria and Switzerland where tobacco advertising was permitted, the incidence of youth smoking was lower: in Austria only 12% of boys , and 13% of girls, aged 15-16 were daily smokers, while in Switzerland only 10 % of boys, and 12 % of girls aged 15-16 were daily smokers.

(2) Another cross-national study which received a lot of attention was that of the New Zealand Toxic Substances Board, which was followed by a study by the authors of that study. These studies, which were hailed by those who would restrict advertising of tobacco products have been thoroughly discredited, in no small part by various studies by Michael Stewart, which appeared in the International journal of Advertising. The New Zealand study was so awful that a judge in the Canadian case, in which the Canadian advertising ban law was struck down as unconstitutional, was led to say:

With respect to the T.S.B. [Toxic Substances Board] Report, the Court can only note that it contains serious methodological errors and a lack of scientific rigor which renders it for all intents and purposes devoid of any probative value. It is a report with an obvious point of view and its conclusions reflect that point of view.

Clearly, the New Zealand studies are unworthy of consideration.

(3) The U.K. 'Smee' Report
A more recent study which has received an inordinate amount of attention is that of the U.K. Dept. of Health, called the 'Smee' Report, which was published in 1992. This report was undertaken because the U.K. Dept. of Health recognized the inferior nature of much of the work on advertising-tobacco consumption. This report is divided into 2 major sections : (1) a review of the extant literature and (2) Smee's own studies of 3 countries ( New Zealand, Canada, and Norway ) as well as some reliance on a published study concerning Finland's experience with a ban. Much of this Report is to be found in the Appendices, which deal with the statistical and econometric issues of the studies. The Smee Report devotes a great deal of space to conjectures as to how advertising might increase consumption, especially among young people. However; these conjectures and theories, ignore a vast literature and are a major defect of the Report. This literature overwhelmingly suggests that people start smoking because of family and friends - not advertising. For Smee to have ignored this literature is regrettable and one can only speculate as to why he chose to ignore it.

Among other things, after reviewing the literature, the Smee Report comes to the totally unamazing conclusion that young people are aware of tobacco adverts, and of cigarette brands, and especially eye-catching ones like Joe Camel. However; in making these observations, Smee overlooks the fact that, as study after study has demonstrated, awareness is not consumption ; that young people are aware of adverts, but this has little or no effect on their pre-disposition to smoke. Rather; whether they smoke or not is determined, more than anything else, by family and friends . In fact, as a 1995 study by Mizerski in the J. of Marketing , children who recognized Joe Camel were more disposed to dislike cigarettes than were children who did not recognize him. Moreover; while older children were more likely to recognize Joe Camel, they were actually less likely to like cigarettes. Indeed, at every age, children who recognized Joe Camel were more likely to dislike cigarettes than were children who did not recognize him. On reflection, none of this is surprising : Joe Camel was seen as an 'anti-establishment' creature - and that has some very real appeal to children and particularly to adolescents.

In summary on the U.K. Dept. of Health ( Smee ) study, it is useful and instructive to see exactly what it did conclude:

There is a great deal of evidence to show that young people recognize tobacco advertisements .... But awareness of advertising is at most a necessary condition for coming under its influence. It is not reliable evidence that advertising increases consumption.
Surveys of reasons for children starting to smoke suggest that there is some association with awareness and approval of tobacco advertising. However; other factors such as the smoking behaviour of parents and siblings are more important, and it is also possible that those children who react most positively to advertising are already disposed to smoke.

In short, while time doesn't permit a full blown discussion of the Smee
Report, it is sufficient to note what Henley Marketing Dynamics, a
division of the well-known Henley Centre for Forecasting said about the
Smee Report:

Our review concludes that the analysis undertaken in the Department of Health (Smee) Report does not justify its findings. The evidence presented is limited, its analytical approach is flawed, and the conclusions advanced are invalid. The Department of Health has not satisfactorily demonstrated that tobacco advertising has an effect on consumption, or that advertising restrictions and bans have reduced consumption where they have been applied.

(B) National Studies of the Alleged Consumption-Advertising

There are a large number of studies, from various countries, which attempt to determine the relationship, if any, between advertising and consumption. It is impossible to review them all in a short period of time. The quality of them is varied - some are quite statistically and econometrically sophisticated - some are not; some employ very good and reliable data - some do not. I cannot, in a brief period of time, go through them all. I would, however; suggest to this Committee that, if interested, it read my monograph when it is published later this year; since it is probably the most extensive critical review of these studies or, in the alternative, that it read an exceptionally good article written in 1996 by Martin Duffy, of the Univ. of Manchester; who has reviewed much of this literature, and particularly that literature which is more statistically and/or econometrically sophisticated. Duffy reviews, discusses, and evaluates, approximately 14 studies from the U.S. , 7 from the U.K. as well as 1 study from each of the following countries : New Zealand, Australia, Germany, South Korea, Spain, and Greece, as well as studies involving advertising restrictions and bans. His summary of his review of these studies is as follows

(a) For the U.S. , " it may be said that the USA studies fall into two groups:

(i) There are those studies which report results and conclusions which clearly contradict the view that aggregate advertising stimulates consumption. This group comprises Schmalensee, Hamiliton, Grabowski, Schneider, Baltagi and Levin, McAuliffe, Tegen for the period 1953-96, Wilcox and Vacker; and Franke.

(ii) In the second group we place those studies which suggest that advertising may have a weak effect upon total consumption of cigarettes:
Fujii, Bishop and Yoo, Seldon and Boyd, and Seldon and Doroodian.

The balance of evidence suggests that aggregate cigarette advertising has had little or no influence upon total cigarette consumption in the United States. "

(b) Duffy's conclusions as to his review of the U.K. studies is as follows

"McGuiness and Cowling (1975 ), Radfar (1985 ), and Wiff and Pass (1981 ) report very small advertising effects. However; such findings must be viewed with caution because these early studies are relatively unsophisticated in their theoretical analysis and econometric estimation of demand. ... Recent studies have analysed the data with more searching models an estimation techniques, and they have not found any evidence of cigarette advertising affecting total cigarette consumption.... [Indeed ] Duffy (1994) reports negative effects of advertising on cigarette consumption. ... Modern analysis finds no expansionary effect of advertising on total cigarette sales in the United Kingdom."

(c) Duffy's review/conclusions as to advertising in other countries is "that review leads once more to the conclusion that cigarette advertising in these various countries has had little or no effect upon cigarette consumption over recent decades."

(d) As to his review of the effect of cross-country econometric studies of advertising restrictions and bans, Duffy concludes that " the weight of the evidence in these studies does not give much support, if any, to those who believe that advertising bans are an effective means of reducing consumption." This is also his conclusion after reviewing the literature on broadcast bans. Specifically he concludes that a broadcast advertising ban is an ineffective instrument of policy is entirely consistent with our judgment, based on all the evidence discussed elsewhere in this article, that total cigarette advertising does not appear to have the effect of increasing aggregate cigarette consumption."

(C) South African Studies

There are only 3 studies of which I'm aware which even touch on the tobacco-advertising relationship in South Africa; and of these, none are specifically designed to measure this relationship, if any. Rather this is merely an adjunct of other matters in which the authors are interested. Moreover; it should be carefully noted that there are NO studies regarding children, advertising, and tobacco consumption.

(I) The former Dean of Commerce at Wits University, Duncan Reekie, wrote a 1992 paper in which he initially hypothesized that per capita consumption of tobacco in S.A. was a function of price, per capita disposable income and advertising. However; as he acknowledged, his advertising data went back only to 1978 and this meant he had insufficient observations to properly estimate the effect of advertising, as he recognized. This, coupled with earlier work by him which suggested that "advertising was found to be statistically insignificant as a determinant of total market demand" led him to drop the advertising term from his final work.

(ii) In a 1996 work , van Walbeek tried to estimate the demand for cigarettes so as to measure the extent to which the S.A. government might tax it. He hypothesized that the demand for tobacco was a function of the quantity of tobacco consumed in the previous period, the price of substitutes and complements, disposable income, population, tastes, and advertising.

There are two major points of interest in this paper

(1) when he presents his results, he does not present any results for his advertising variable, nor does he mention it in his discussion of his results; moreover;

(2) he says that " the most important explanatory variables of the demand for tobacco ... are consumers' income, price of tobacco, past consumption, and population size. "

We can conclude, then, that he doesn't find advertising a significant variable affecting tobacco consumption.

(c) Abedian/the Tobacco Control Project

An interesting, and more recent, contribution to the literature is by my colleague at U.C.T. , Prof. lraj Abedian, from whom you will doubtless hear later today. One of the avowed purposes of Abedian's work is to quantify "the extent to which tobacco advertising encourages cigarette consumption". This work has evoked much publicity, as many will know. For this reason alone it is worthy of more consideration.

The study has a number of flaws, including but not limited to the data which underlie his estimates of the demand for tobacco . Among other things, Abedian employed data which is highly flawed. As a mere example, he suggest that tobacco consumption increased from 37.89 sticks in 1989 to 54.01 million in 1994, an increase of fully 42.5 percent. Yet, data which is readily available from the Dept. of Customs and Excises shows that tobacco consumption peaked in 1991, when it consisted of 40.18 million sticks, and declined to 37.45 sticks by 1994. That is, Abedian's data serves to importantly bias upward his estimates.

Similarly, Abedian asserts that prior to 1990, reliable data [ on advertising ] was only available for 1980, 1986, and 1989" and, accordingly, he estimated the data for the remaining years by multiplying total spending for the years for which data was not available by 0.05 since " tobacco advertising for these years ( prior to 1990) was a consistent 5 percent of total advertising expenditures." There is , of course, no authority or citation given for this assertion, so it is impossible to know where, or how, Abedian arrived at this figure. Thus, what, in fact, Abedian has is data for only 3 years prior to 1990. For fully 1 7 years of the 25 years between 1970 - 1994 he "estimated" the very advertising data on which he then relied. It is difficult to place much reliance on conclusions based on non-existent data.

There are a number of data, and econometric, difficulties with this work which cannot be adequately discussed here.

When he continues his work with his "Project Update # 3" , he begins with the correct and surprisingly candid admission that , in Project Update # 2, "advertising was not found to be statistically significant ".

So, since he has found no significant effect of advertising on consumption over the period 1970-1994, he determines in Project Update # 3 to re-estimate his equations, now for the period 1970-1990. Here he finds advertising has a minimally significant effect on consumption. Then, he estimates the effect over the period 1 970-1 993 and concludes that

[l]n this case, advertising is insignificantly different from zero. However; if the same equation is estimated over the 1 970-1 990 period advertising is significant.

It is difficult to know precisely what to say about results which vary dramatically as to the choice of data, and time period, used. When Abedian considers the entire period 1970-1994, he gets results which show advertising is not a significant variable affecting consumption; when he looks at the period 1 970-1 993, which contains a large body of data he has 'estimated', but some published data, his equations yield results which indicate that advertising is not significant. It is only when he uses a time period (1970-1990 ) which contains rather more data which he has 'estimated' that he gets results which suggest advertising might have a significant effect on tobacco consumption.

In summary, given the difficulties, and confusion, which abounds, it is difficult to disagree with Abedian's statement that based on the results, there is some ambiguity as to the effect of cigarette advertising on the demand for cigarettes.

That seems like a vast understatement!

This very brief and abbreviated review of the tobacco-advertising literature is just the tip of the proverbial iceberg. The literature is vast, often difficult and sophisticated.

The great weight of this literature suggests there is no relationship between advertising of tobacco products and tobacco consumption. It suggests that the major function of tobacco advertising is to induce smokers to switch brands - something obviously important to tobacco manufacturers and vendors.

It further suggests that children, while aware of tobacco adverts, are not induced to smoke as a result of these adverts. Rather; smoking uptake in both children and adults, is as a result of the influence of family and friends.

Before this Committee, and Parliament, intrudes into Freedom of Speech, it is obliged to have clear, convincing, and compelling evidence that this restriction on a very fundamental human liberty - the right to speak and the right to hear - is likely to attain an otherwise permissible goal of the State. The evidence simply will not support this intrusion!