FDA to ITC: Reynolds Has No Right to Request 337 Investigation

On October 13, Reynolds Tobacco filed an investigation application (337 investigation) with the US International Trade Commission (ITC), accusing 26 Chinese and American e-cigarette manufacturers and distributors of engaging in unfair import practices.

Recently, the US Food and Drug Administration (FDA) sent a letter to the International Trade Commission (ITC), emphasizing that Reynolds Tobacco has no authority to request an investigation into 26 e-cigarette companies. Will this letter have an impact on the progress of the case? To answer this question, we consulted Chinese e-cigarette legal expert, Counsellor Tang Shunliang. According to Counsellor Tang, it is advantageous for the e-cigarette companies under investigation that the FDA took the initiative to cite legal basis in their letter to the ITC.

Views of Counsellor Tang:

The FDA promptly contacted the ITC, which was unexpected beforehand. From the content of the FDA letter, it is clear that it states that the ITC does not have jurisdiction over the case and does not explicitly indicate any enforcement actions taken against the companies involved. However, it does point out that Reynolds Tobacco, being a privately-owned enterprise, cannot be the applicant to file the investigation under Section 337, which is more akin to administrative enforcement power of government departments at the Federal Food, Drug, and Cosmetic Act (FDCA) level. The law has already granted the FDA the authority to enforce and litigate against non-compliant behavior, eliminating the need for companies to file lawsuits through "self-help" methods.

However, the FDA did not directly state in the letter that it completely lacks jurisdiction over ITC. According to evidence provided by Reynolds, the defendant companies have issues such as "customs codes" for imported goods, which do not fall within the purview of FDA management. However, these reasons may be deemed too minor for ITC as grounds for sanctions.

The correspondence provided more details on the FDA's regulatory measures and enforcement actions concerning e-cigarette products. The FDA confirmed that it has taken and will continue to take consultative and enforcement actions against tobacco products that are being sold without FDA authorization. For instance, as of October 20, 2023, the FDA has issued over 630 warning letters to companies that have manufactured, sold, and/or distributed new tobacco products without FDA approval.

Additionally, the FDA has filed civil penalty complaints against 35 e-cigarette manufacturers and 22 retailers, as well as permanent injunction complaints against six companies selling illegal e-cigarettes. Furthermore, the FDA has issued multiple import alerts specifically targeting these products. These actions can be seen as a defense of their perceived insufficient enforcement efforts.

In reality, the FDA faces a significant workload in reviewing e-cigarettes. The issue of enforcing, strictly enforcing, and determining when to enforce regulations remains vague, according to companies. Some businesses have applied for review and obtained a registration number, allowing them to continue selling without issue.

In the letter, the FDA extensively cited regulations and precedents to bolster the point that the provisions of the FDCA and the responsibilities of the FDA are legally justified in the areas of food, drugs, cosmetics, tobacco, and e-cigarettes. According to the FDA, it has the authority to enforce against non-compliance in these domains based on the regulations provided and this power has been bestowed upon the FDA by Congress.

The FDA further expressed that private companies do not have the authority to demand the government enforce the FDCA. The letter stated that because the FDA is the sole expert agency responsible for determining whether products comply with the FDCA, Congress has granted the FDA the use of various enforcement tools to address the distribution of non-compliant products.

The FDA may consider filing civil injunction lawsuits against companies distributing such products, but Congress prohibits private individuals from taking action to enforce the FDCA.

Finally, we concluded that Reynolds's move demonstrated its ambition to capitalize on legal regulations as a means to dominate the e-cigarette market in the United States. Therefore, the FDA directly implicated the tobacco brand VUSE itself for similar non-compliance issues in their letter.

The Reynolds 337 investigation case may face obstacles following the recent announcement from the FDA regarding ITC's exclusion of jurisdiction. However, it still has the option to appeal to the court against ITC's decision.

Selected Main Points of the Letter:

1. Based on the Lanham Act, the investigation into deceptive advertising of "disposable e-cigarettes being authorized and/or allowed for sale in the United States" implies acceptance of an illegal private right of action which is excluded by the Federal Food, Drug, and Cosmetic Act (FDCA).
2. As a policy matter, the FDA has decided not to immediately enforce against unauthorized ENDS products that were already on the market prior to the presumed effective date of the regulations.
3. As time goes on, the FDA is attempting to strike a balance between the significant risks that e-cigarettes pose to young people and the potential benefits of helping adult smokers transition away from or significantly reduce their use of combustible cigarettes through revised enforcement policies. These efforts continue in the midst of complex regulatory and legal litigation, which challenge the FDA's actions against certain products and ENDS product groups.
4. The FDA has filed civil penalty complaints against 35 e-cigarette manufacturers and 22 retailers. There have also been 6 permanent injunction complaints against companies selling illegal e-cigarettes. The FDA has issued multiple import alerts regarding such products.
5. Because the FDA is the expert agency responsible for determining whether products comply with the FDCA, Congress has granted the FDA several enforcement tools to address the distribution of non-compliant products. The FDA may initiate civil injunction lawsuits against companies distributing such products. These enforcement mechanisms are outlined in sections 331(a) to (d) and 332 of Title 21 of the United States Code, which include seizure of illegal products, civil fines, and criminal prosecution of individuals and companies. Additional references can be found in sections 331, 333, and 334 of Title 21 of the United States Code, as well as the Heckler v. Chaney case reported in Volume 470 of the United States Reports, pages 821 and 835 (1985). However, while Congress has granted the FDA these and other tools to enforce the FDCA, it prohibits private parties from taking action to enforce the Federal Food, Drug, and Cosmetic Act.
6. The case of POM Wonderful v. The Coca-Cola Company, found in Volume 573 of the United States Reports, pages 102 and 109 (2014), emphasizes the extensive enforcement powers provided by the FDCA and its regulations. It states that private individuals are not permitted to initiate enforcement litigation. As a result, Congress ensures that decisions relating to the regulation or compliance status of tobacco products, as well as which products should be prioritized for enforcement, reflect the perspective of the agency responsible for enforcing the Federal Tobacco Control Act.
7. The complainant (Reynolds) seeks confirmation of a single specific product claim, asserting that the packaging of the investigated illegal disposable e-cigarette serves as indicative proof that the manufacturer authorizes and/or permits its sale in the United States. Each questioned product includes the statement "permitted for sale in the United States." It is noteworthy that this claim is required to be printed exactly as "permitted for sale in the United States" on all labels and packaging of tobacco products intended for sale in the United States.
8. In fact, the complainant's own Vuse Alto product was also sold without FDA authorization, and therefore must carry the same statement "permitted for sale in the United States.
9. If, according to the law, all tobacco products (whether authorized or not) must bear the word "allowed," then according to the complainant's theory, anything that is not "allowed" by the FDA under the Lanham Act is clearly false or misleading. However, as stated above (as admitted by the complainant, Compl. 22), almost every ENDS product currently on the market (including at least one of the complainant's products) lacks FDA authorization and is therefore illegal.
10. The situation where two federal regulations cannot be simultaneously enforced further compels the exclusion of cases that violate the Lanham Act based on compliance with the Federal Consumer Protection Law. The POM case highlights the significance of specificity when the Lanham Act and FDCA cannot be fully implemented together ("greater specificity only makes sense in situations where the Lanham Act and FDCA cannot be simultaneously fully enforced."). Complainant (Reynolds) attempts to avoid this absurd and disallowed outcome by suggesting an alternate definition for "unlawful" products.
11. The FDA is a authoritative agency that applies its expertise to determine appropriate circumstances to enforce laws for the promotion of public health. It is evident that, as stated in the indictment, evidence, and previous discussions, the FDA is indeed deploying consultation and enforcement tools to address its significant concerns over numerous tobacco products, including some controversial ones. However, it is the FDA's authority, not the plaintiff's, and therefore, according to 21 U.S.C.§337, the ITC should decline to initiate an investigation into such claims.