III. THE ATTORNEYS GENERAL'S INITIATIVE

The participating Attorneys General, as the chief civil law enforcement officers of their respective states, are very concerned about the illegal sale of tobacco products to minors. An environment in which minors can easily buy tobacco increases the likelihood that youth will experiment with, and ultimately become addicted to tobacco. Moreover, young people's respect for the law and public policy is severely damaged in an environment where retailers routinely violate the law and allow youth easy, illegal access to tobacco.

In May 1994, in an effort to address the widespread availability of tobacco products to minors, the Attorneys General of twelve states formed a Working Group to study this problem. Two things became immediately clear to the Working Group. First, the retail community's current efforts to ensure compliance with the laws prohibiting sale of tobacco to minors are inadequate. Second, it is crucial to have tobacco retailers' active voluntary involvement in any overall strategy to reduce the use of tobacco by underage youth in America.

To obtain a better understanding of what measures retailers already have in place to prevent illegal sales, the Working Group, after obtaining written submissions from a number of retailers, held a series of meetings with representatives from a cross-section of tobacco retailers. Participating in these meetings were the principal trade associations representing convenience stores, grocery stores, drugstores and mass retailers, as well as nine of the nation's largest retail chains, including representatives from major convenience stores, gas stations, discount retailers and a supermarket chain. The following is a summary of what we learned.

How The Retail Industry Is Currently Addressing The Problem

A. Gas Station Stores

These small stores, which have become a fixture at most of the nation's filling stations, do a land office tobacco business. For many gas stations, cigarettes are the largest source of income after gasoline. In fact, cigarettes represent as much as 40 to 60% of non-gasoline sales at such stores. Despite this high volume of tobacco business, gas station store operators told us their industry has long given higher priority to preventing underage alcohol sales than to the prevention of illegal tobacco sales. There are two principal reasons for this. First, society has emphasized the problem of teen drinking, because of the tragedies caused by drinking and driving. Second, stores have given greater attention to the sale of alcohol because of the stores' potential liability if an underage person purchases alcohol and is subsequently involved in a car accident.

Gas station stores rely primarily on their employee training programs to achieve compliance with state laws regarding the sale of age restricted products. However, the training programs the Working Group was able to review were minimal in nature. Under these programs only station managers receive extensive training, while new clerks are generally trained on the job. New employees are taught the legal age for the purchase of tobacco and instructed not to sell to people below the legal age, but are given little additional instruction. Typically, new employees are required to sign a form acknowledging they have received this instruction. These forms underscore the importance of the no-sales-to-minors laws, but to some extent also serve to allow the retailer to attempt to shift responsibility for violations to the individual employees and away from the employer corporation.

Many gas station stores post signs warning that it is illegal to sell tobacco to minors, and some post signs that age identification will be required. In some stores, a chart or legal "time clock" is posted near the cash register to help cashiers determine whether a customer's identification is acceptable. In most cases however, these charts and time clocks only address the legal drinking age for alcohol and do not show the date of birth required for the lawful purchase of tobacco products.

Because many gas station stores have only one employee on duty at a time, and because robberies are a serious problem, a majority have surveillance cameras focused on the cash registers. Cigarettes are almost always kept behind the cash register counter, some of which are protected by bulletproof glass. These measures are intended for security purposes. However, they also are likely to have some deterrent effect on minors seeking to make purchases.

Although most of the gas station store operators with whom we met have not made the prevention of illegal tobacco sales to minors a high priority, at least two companies have taken extraordinary measures on their own.  Because of the public controversy surrounding R.J. Reynold's "Joe Camel" advertising campaign -- which many believe has the effect, if not the purpose, of marketing cigarettes to children -- two oil companies have directed their store managers to remove all Joe Camel advertising from their stores. In addition, one of these companies has elected not to sell cigarettes that come packaged with special promotional items like hats, T-shirts, mugs or lighters bearing cigarette company logos. Because the law prohibits the sale of tobacco to minors, these companies decided that it was inappropriate for a retailer to display advertising or to sell promotional items that are particularly attractive to youth and may encourage them to break the law.

The smaller of these two companies, faced with what it saw as a worst case scenario --- a workforce composed mostly of young people between the ages of 17 and 20, and a very young customer base --- has also implemented a comprehensive self- monitoring system to ensure its employees comply with laws prohibiting the sale of tobacco to minors. This company directed all area managers to send young "decoy shoppers" into each of their stores once a month, as a test to see whether employees request age identification before selling tobacco. If an employee complies with the law, he or she is given a reward such as movie tickets, and a letter of commendation. If an employee makes an illegal sale, the area manager sits down with the employee immediately to discuss the problem and issues a written warning. According to the company, these monthly checks coupled with the immediate follow-up of a reward or disciplinary action, have been extremely effective in reducing illegal tobacco sales to minors. In addition, the company's auditing departments which oversee large numbers of store operations by region, have two full-time employees who constantly monitor compliance by conducting random test shoppings. When the company was asked about the expense of this program, the Working Group was told that the cost is not an issue. In the company's view, compliance with the law is simply a necessary cost of doing business. As a result of this two-tiered monitoring system, this company is widely regarded as having an exemplary record for compliance.

B. Convenience Stores

Like gas station stores, convenience stores depend heavily on tobacco sales for revenue. Tobacco products typically account for 20 to 30% of  sales at these stores. Convenience stores also rely on training to ensure that their employees comply with state laws regarding the sale of age-restricted products -- such as lottery tickets, alcohol, tobacco and adult magazines -- which make up much of a convenience store's stock in trade.

Some large convenience store chains have developed extensive training programs that include classroom sessions, videotapes and self-testing systems. They use these programs to train new employees in their corporate-owned stores, and make the training materials available to franchisees for their employee training. Independently-owned convenience stores can obtain a similar training program from their trade association, the National Association of Convenience Stores.

The most sophisticated and comprehensive training programs the Working Group reviewed include videos that teach employees how to determine a customer's age, when and how to check for identification, what types of identification to accept, how to recognize false identification, how to handle a customer who tries to make an illegal underage purchase, how to handle second-party sales (in which a person of legal age is clearly making the purchase for a minor), how to handle an abusive customer, and the consequences of making an illegal sale. To complete these training programs, new employees must pass a written test and acknowledge in writing that the law prohibits underage tobacco sales and they will not sell tobacco to minors. Several stores indicated that an employee who violated this agreement would receive a warning for a first offense and would be terminated for a second.

Historically, these employee training programs emphasized the prevention of illegal alcohol sales to minors. Some chains acknowledged, quite candidly, that they had not focused on tobacco. They said they had not felt it necessary to emphasize tobacco sales laws in their training materials because there had been so little enforcement of these laws, and because society had not taken as dim a view of teen smoking as it had of underage drinking. The companies we met with assured us this is no longer their view. In fact, many had already begun revising their training materials to give illegal tobacco sales the same emphasis and importance as illegal alcohol sales.

Complying with the law is made more difficult for convenience stores, as it is for gas stations and supermarkets, by their extraordinary rate of employee turnover. In one typical chain, for example, the average cashier spends only 88 days in the position. Due to very high turnover rate, convenience stores cannot afford to send new employees to lengthy training sessions at outside facilities. Instead, they rely on in-house training programs, often on videotapes. One company is now developing a pilot, interactive, multi-media program on CD-ROM so that soon, any of its stores with a computer will be able to give each of its new employees quality training.

Convenience stores also employ other measures that may help to reduce the likelihood of underage tobacco sales. Many post signs advising the public that it is illegal to sell tobacco products to minors, and they require proof of age for these purchases. Because of theft problems, most convenience stores keep tobacco products behind the sales counter or in a locked storage area. The fact that minors have to ask for tobacco to make a purchase is also believed to have some deterrent effect on illegal sales.

C. Supermarket Chains

Tobacco sales are only a small part of the business of supermarkets, accounting for less than five percent of their total sales, yet some members of this industry use the most technologically advanced equipment to help ensure that tobacco products are not sold illegally to minors. Almost all supermarkets now use highly sophisticated price scanners at the checkout counter. At least two major national chains have programmed these price scanners so that when a tobacco product is scanned, the register stops scanning, and displays a message prompting the checker to request age identification.

If the customer appears to be unquestionably over the legal age limit (i.e., at least 26 or 30 years old), these grocery chains allow their checkers to use an override code to continue scanning the customer's purchases without requesting identification. However, if there is any question as to whether the customer is of legal age, the checker must ask for a photo identification. Some scanner systems simply require the checker to inspect the identification and then enter a code before continuing to scan the customers other purchases. Other systems specifically require the checker to key the customer's birthdate into the register for automatic approval. If the identification indicates that the customer is under the legal age (or if the identification appears to have been tampered with), the sale is rejected and the checker removes the tobacco product from the counter. This is relatively new technology, but the supermarket chains that are using it indicated it is working without major problems, and it is not expensive to program existing scanners to perform this function.

New supermarket employees also go through training which includes instruction on the sale of tobacco and other age-restricted products. According to the industry representatives with whom we met, an estimated 65 to 75% of workers at their supermarket checkout counters are themselves under the age of 18, and the turnover rate is very high. Retailers said this makes training difficult. Because of the large number of items in the average shopping cart, and the pressure on checkers to serve customers quickly, several supermarket chains have determined that a point-of-sale reminder to check for identification in the scanner itself, is the best means to ensure compliance with laws setting age restrictions on the purchase of tobacco.

D. Drugstores

Although the Working Group did not meet with drugstore owners, we did meet with the National Association of Chain Drug Stores ("NACDS"), a trade association representing 155 chain companies that operate approximately 30,000 retail pharmacies nationwide. Based on the overview they provided, we learned that tobacco sales account for only a small percentage of the drugstore business and that sales have decreased from seven percent of total sales in the mid-1980's to only three and one-half percent of total sales today.

According to NACDS, the typical shopper in a chain drugstore is a 35 to 60 year old woman who comes in about twice a month to fill a prescription or to purchase over-the-counter drugs or cosmetics. Tobacco is generally an incidental purchase, which drugstores sell as a convenience to customers - not to attract them. Accordingly, drugstores do not as a general rule, advertise cigarettes, use aggressive price promotions or use in-store promotional displays provided by tobacco companies.

Most large chain drugstores train new employees by using videotapes with instructions on the legal age to purchase tobacco, handling customers who get upset when age identification is requested, and acceptable forms of identification. Many chain drugstores also display signs warning customers that the legal age to purchase cigarettes is eighteen and that age identification will be required. Tobacco products are generally kept in the front of the store, either near the cash register or behind the counter. Tobacco is almost never sold in the pharmacy section of the store. Although 60% of chain drug stores use cash register scanners, NACDS was not aware of any chains whose scanners are programmed to lock when a tobacco product is scanned.

Tobacco control activists have criticized drugstores for selling tobacco because their primary purpose is to provide health care products. They argue it is hypocritical for a store to sell cigarettes and smokeless tobacco alongside nicotine patches and other medical devices intended to help people overcome nicotine addiction. Despite this criticism, and although in isolated instances some individual drug stores have opted to go tobacco free, the Working Group is unaware of any widespread move by drugstores in this country to stop selling tobacco.

E. Discount Stores

The Working Group also met with representatives of three of the nation's largest discount retail chains and their trade association, the International Mass Retail Association. These discount retailers told us that tobacco accounts for very little of their business, comprising less than one percent of their total sales. They indicated they sell cigarettes primarily as a convenience to their customers, who they told us generally do not come to their stores for the purpose of buying cigarettes, but who might shop elsewhere if cigarettes were not available.

Discount chains told us they do not believe that illegal tobacco sales to minors are a major problem in their sector of retailing, because only a small percentage of their customers are under the age of eighteen, and because almost all of their cigarette sales are by the carton. They believe that minors generally cannot afford to buy cigarettes by the carton, opting instead for single packs. Despite these assertions, compliance checks around the country demonstrate that discount stores are just as likely to sell cigarettes to an underage decoy as are other types of stores.

Although discount store employees at the companies we met with do receive some training in the sale of age-restricted products, these programs place no special emphasis on tobacco. The employees are not required to sign acknowledgments that they understand and will comply with the laws against tobacco sales to minors. Nor do these discount stores post signs advising that it is illegal to sell tobacco to minors, or that they require age identification, unless such signs are required by law. Although most of the major discount stores use electronic scanners, the Working Group is aware of only one chain that is testing the use of scanners programmed to instruct the cashier to request age identification whenever a tobacco product is scanned.

F. Tobacco Industry Voluntary Compliance Programs

In late 1990, the Tobacco Institute introduced the "It's the Law" program, an educational campaign to help curb youth access to cigarettes through the distribution of window decals, in-store signs and educational materials to merchants. Some versions of these materials state "It's the law. You must be over 18 to buy tobacco products." Some critics have expressed concern that this wording seems to suggest that an underage purchaser will have committed a crime (whereas, in most states, the law applies to sellers, and not the buyers), and that this language may discourage parents from reporting unlawful sales. In a study conducted in Massachusetts, to assess compliance with that state's laws, underage shoppers were sent into seven businesses participating in the "It's the Law" program. Six of the merchants (86%) made illegal sales, approximately the same rate of violation as among non-participating merchants.

R.J. Reynolds (RJR) offers a similar program called "Support the Law, It Works." This program includes in-store signs, stickers, brochures and other materials, as well as television public service announcements. In 1994, RJR also became the sponsor of a program offered by the U.S. Junior Chamber of Commerce. This program, called "JAYS," or "Jaycees Against Youth Smoking," is a community service program to encourage retailers to support tobacco sales- to-minors laws. It incorporates many of the materials developed by RJR for the "Support the Law" program. The Working Group has not identified any studies of the effectiveness of these programs. We are concerned about their effectiveness because these programs are missing what many believe is the most essential component of any effort to prevent illegal tobacco sales to minors -- compliance checks.

In general, the Working Group supports programs for voluntary compliance, but believes they must be designed and implemented carefully. Nothing in such a program should be designed or calculated to minimize the seller's responsibility for compliance with the law, or to shift attention or emphasis away from that responsibility and onto the underage customer. Most importantly, the posting of a few signs should never become a substitute for effective oversight of a retailer's workforce. The most meaningful test of the effectiveness of any voluntary compliance program, the Working Group believes, is whether it significantly reduces the rate of illegal sales by that business. Participation in a voluntary compliance program does not by itself, satisfy a business's responsibilities under the law, unless it in fact prevents unlawful sales, and businesses should be careful not to assume that, simply because they participate in one of these programs, they have met their legal obligations.

G. Distribution Subsidies

Although the tobacco industry purports to be concerned about illegal tobacco sales to minors, tobacco companies spend approximately one and a half billion dollars each year in subsidies to retailers to ensure that a wide variety of tobacco products are openly displayed and kept in easy reach of all consumers, including minors. Tobacco companies offer financial rewards to retailers who are willing to stock several different brands of cigarettes, even those with little market demand. In addition, retailers are offered financial incentives to place certain tobacco products in highly visible self-service displays, either at the checkout counter or in free standing displays. Self-service displays make it much easier for minors to purchase or pilfer tobacco. The Working Group believes that, if the tobacco industry is sincere in its desire to keep tobacco products out the hands of minors, it should offer financial incentives to retailers who keep tobacco behind the counter or in other controlled locations, instead of those who make tobacco readily available to youth by keeping it out in open displays.