STATE OF MINNESOTA AND BLUE CROSS AND BLUE SHIELD OF MINNESOTA,
PLAINTIFFS,

V.

PHILIP MORRIS, INC., ET. AL.,
DEFENDANTS.

TOPIC: TRIAL TRANSCRIPT
 TRANSCRIPT OF PROCEEDINGS
DOCKET-NUMBER: C1-94-8565
VENUE: Minnesota District Court, Second Judicial District, Ramsey County.
YEAR: March 23, 1998
 A.M. Session

JUDGE: Hon. Judge Kenneth J. Fitzpatrick, Chief Judge

THE CLERK: All rise. Ramsey County District Court is again in session, the Honorable Kenneth J. Fitzpatrick presiding.

 (Jury enters the courtroom.)
 THE CLERK: Please be seated.
 THE COURT: Good morning.
 (Collective "Good morning.")
 THE COURT: Counsel.
 MR. BLEAKLEY: Thank you, Your Honor.
 ADAM B. JAFFE called as a witness, being previously sworn, was examined and testified as follows:
BY MR. BLEAKLEY:
 Q. Good morning, Professor Jaffe.
 A. Good morning, Mr. Bleakley.
 MR. BLEAKLEY: Good morning, ladies and gentlemen.
 (Collective "Good morning.")
 Q. When we broke on Friday, I was asking you some questions about the first prong, as you call it, of -- of the conspiracy that you believe there existed with respect to fundamental competition, and that was the prong dealing with in-house animal research. Do you recall that?
 A. Yes.
 Q. Now is my understanding correct that it is your opinion that this prong of the conspiracy prevented confirmation of the causation hypothesis? Is that one of the -- one of the explanations that you gave?
 A. I don't know if I used the word "prevention." I think what I -- what I said was that it avoided a situation in which there would be confirmation of the causation hypothesis coming out of the laboratories of the companies themselves.
 Q. Okay. And it permitted the defendants to "avoid," I think the term you used was, very large research expenditures and efforts?
 A. Yes.
 Q. Okay. And it is your opinion that this prong of the conspiracy did this despite the fact that the defendants did do animal research through contracts with outside research laboratories; right?
 A. Yes.
 Q. And despite the fact that defendants, at least on some occasions, cheated and actually did in-house animal research.
 A. Yes.
 Q. And I take it your view on this is also held despite the fact that there was animal research being done by organizations other than the defendants throughout this period of time; right?
 A. Yes. As I explained in my testimony, I think that the defendants' own documents made clear that they thought it was important that smokers be reassured and that that would be undermined if confirmation causation came from the laboratories of tobacco companies themselves.
*2 Q. But there was in fact animal research being done throughout this period of time by researchers other than the defendants, too; wasn't there?
 A. That's correct.
 Q. Such as Dr. Wynder, for example.
 A. Yes.
 Q. And the National Cancer Institute.
 A. Yes.
 Q. And other organizations.
 By the way, it's not unusual for American corporations, American business corporations, to have contract done -- or research done by contract with outside research laboratories; is it?
 A. In general American corporations do use contract research; although, as I discussed the other day, when it comes to research that is crucial for product development, it is much more common for it to be done internally. And both the economic and management literature on this subject and the company documents explain why that's the case.
 Q. And in fact, there are many very fine independent research organizations in the United States; aren't there?
 A. There are fine research organizations in the United States. But as we saw, for example, in the American Tobacco document, the scientists at American Tobacco felt very strongly that they were going to get research that was of the kind that they needed with the security that they needed if they did it in house. Then they were very unhappy with the way they had gotten that kind of research both from academic researchers at the Medical College of Virginia, and also from independent consultants that they'd used.
 Q. For example, the Arthur D. Little Company in Boston is a very fine independent research organization; isn't it?
 A. As far as I know, yes.
 Q. And the Battelle Memorial Institute, that's another very fine independent research organization; isn't it?
 A. I don't have any knowledge of that.
 Q. Well you've heard of the Rand Development Corporation; haven't you?
 A. Excuse me?
 Q. Rand Development Corporation.
 A. There is --
 If that's the Rand Corporation in Santa Monica, I've heard of them.
 Q. And that's a very fine independent research organization; isn't it?
 A. The Rand Corporation that I know of in Santa Monica doesn't do biological research. Maybe we're thinking of different organizations.
 Q. Rand Development Corporation.
 A. If it's not the one that I know of in Santa Monica, then I don't know the organization that you're referring to.
 Q. In any event, you do know that there are many fine independent research organizations in the United States.
 MR. GILL: Repetitious, Your Honor.
 THE COURT: It's been asked and answered.
BY MR. BLEAKLEY:
 Q. And you also know, do you not, that many American business corporations often use independent research organizations to help them in product development; don't they?
 MR. GILL: This has been asked and answered as well, Your Honor.
 THE COURT: It's been asked and answered.
 MR. BLEAKLEY: Your Honor, I did not ask about product development before, I asked about general research.
 THE COURT: All right. You can answer it.
 *3 A. Yes, I believe to a certain extent companies do use outside research to assist them in product development.
 Q. And indeed, many good ideas, many new products, many innovations have been produced at least in part through the efforts of independent research organizations; haven't they?
 MR. GILL: Objection, vague, Your Honor.
 THE COURT: You can answer it if you know.
 A. Well in general, as I talked about earlier, companies do not rely on outside researchers exclusively for product development. It is certainly the case that in situations where a company is engaged in product development in its own laboratories, that where there are particular aspects of that research that they feel they can more effectively undertake through a contract with an outside party, they will -- they will do that. But what's relevant for what we're talking about here is a situation in which the fundamental core of the product development research is not going on, and I don't think in general that you would very often observe private companies relying essentially entirely on outside research for product development.
 Q. Not entirely, but to a substantial degree.
 A. Well I don't think I would even necessarily agree with "to a substantial degree." And if the basic core of the research program is something that they cannot undertake in-house so that they don't have even the capability within their own scientists to understand what's going on with the research, to understand its implications and to evaluate it, I don't think most companies in America would feel that that was a good position to be in with respect to product development.
 Q. In fact, one of the promising ideas that was being explored by one of the defendants in this very case was substantially the result of work being done by that company with an outside research laboratory; wasn't it? The XA project at least?
 A. Yes, it's true that the palladium catalyst with the nitrate palladium process was developed largely through the efforts of A. D. Little in Boston, correct.
 Q. Arthur D. Little in Boston, which is a very fine, highly reputable research organization; isn't it?
 MR. GILL: It's been asked and answered, Your Honor.
 THE COURT: You can answer it again.
 A. I -- I already said it was.
 Q. Professor Jaffe, can you honestly say that the fact that the defendants used contract annual research instead of in-house research exclusively was of sufficiently low quality that it prevented confirmation of the causation hypothesis?
 A. I don't think I said that the primary reason --
 First of all, I didn't say it prevented confirmation of the causation hypothesis, and second of all, I didn't say it was because of the low quality. What I said was that the almost exclusive avoidance of in-house animal research avoided a situation or substantially avoided a situation in which confirmation of the causality hypothesis came from the labs of the tobacco companies and that the companies themselves believed that that was important.
 *4 Q. And can you honestly say, Professor Jaffe, that the fact that the defendants used some contract animal research permitted them to avoid very large research costs?
 A. Well the only information I have about the magnitude of the research costs is the information you talked about that came from the interrogatories, and I would certainly say that the amount of money that they spent based on those interrogatories looked at in the context of the problem they faced in the size of the industry, they did avoid very large research costs, yes.
 Q. Is it your testimony that the defendants spent less money because they did animal research through contracts rather than in- house?
 A. I'm not saying that any particular work they did was cheaper because they did it through contracts than in-house, but what I'm saying is that because contract research was inherently far less effective for the reasons we've discussed several times now, they did far less of it than the amount of research that they would have done in their own laboratories, probably in conjunction with additional contract research, if they had been pursuing the competitive objective of creative destruction rather than having it held back by the limitation on in-house research.
 Q. How do you know that?
 A. I know that based on the economic analysis that I've performed and the company documents that we've looked at. And we've -- we've discussed this over the last several days. The incentives were there. We look at the industry, we look at what the people in the industry understood were the incentives, we look at the programs proposed by people like Dr. Wakeham, which he clearly understood to be of tremendous competitive significance, and we look at the economic stakes, and I think it's clear that the industry that we've seen, the four decades of history that we've seen is very different from the four decades of history that would have proceeded if the fundamental forces of competition hadn't been suppressed.
 Q. Let me ask you this, Professor Jaffe: If the defendants want to -- wanted to avoid confirmation of the causation hypothesis and they wanted to avoid very large research costs, why did they choose a conspiracy that was limited to in-house animal research?
 MR. GILL: Your Honor, assumes facts not in evidence. There's no testimony that the conspiracy was limited solely to this.
 THE COURT: Well you may answer that.
 A. Well I think that a collusive agreement is inherently an attempt to suppress behavior that the individual companies would like to undertake. And when firms in an industry are attempting to collude, they -- they draw the boundaries of that agreement in the way that they think, given the circumstances that they face, is most likely to succeed. And they may have felt that an agreement to completely shut down the research process, including contract research, was something that they weren't going to be able to enforce and that it wasn't going to work, and so they did it as best they could.
 *5 But I don't -- I don't think that it's necessary for my analysis to try to figure out exactly why they constructed it the way they did.
 Q. Let's talk about the second prong of the conspiracy that you have expressed the opinion the defendants engaged in, and that is the so-called reassurance suppression conspiracy. If I'm using the wrong terms to describe it, you correct me. That is what you called it; wasn't it?
 A. Yes.
 Q. Now you don't have a document, like those documents that you referred to in connection with the first prong, you don't have that gentlemen's agreement document here; do you?
 A. No, I don't think that's correct. I think the Hill & Knowlton documents, for example, describe the fact that the companies understood that their own competitive practices were contributing to the health problem as perceived by the companies, and it also lays out that they needed to reach agreement as to how all of them were going to respond to unfavorable research reports as they evolved. And so I think that that is basically laying out the agreement, or -- or, among other things, it's describing that component of the agreement.
 Q. Did you find a document that said we agree to suppress research?
 A. Excuse me?
 Q. Did you find a document that said we agree to suppress research?
 A. I don't believe I've seen a document that contains that phrase.
 Q. You basically inferred the existence of such a conspiracy from your review of all of the documents; right?
 A. I don't think that's correct. I certainly saw documents that talked about agreement, I saw documents about suppression, I saw documents about solving the problem that was created when we got into a competitive dog fight. All of those things are talking about agreement, even if they didn't contain the phrase that was in your previous question.
 Q. In any event, you inferred the existence of a conspiracy from these documents; did you not?
 MR. GILL: It's been asked and answered, Your Honor.
 THE COURT: It's been asked and answered.
 Q. All right. One of the elements or components of this, as I understand it, is that The Council for Tobacco Research, originally The Tobacco Institute -- Tobacco Industry Research Committee, was going to engage only in what you described as basic research; right?
 A. I don't think I said that only. I said that one of the ways that the CTR was used was that it was presented as an organization that was going to seek out the truth on smoking and health and was going to communicate that, but that primarily what the organization did, instead, was to engage in basic research. I didn't say they did no research on smoking and health. I think we saw in Dr. Glenn's testimony in the '90s, he said that there were 10 out of some several hundred studies they had focused that related to smoking and health, so they did do some of that research. But I think primarily the research that they did was far removed from the smoking-and-health issue relating to the basic science. And as we saw the other day, when they did fund research that came up with results, for example relating to addiction, they didn't treat this as something significant that should be communicated to the public when they summarized what it was they were doing.
 *6 Q. You mean other than publishing it.
 A. I'm sorry?
 Q. That research was published; wasn't it?
 A. I -- I didn't --
 I said yesterday it was published. The researchers published it and CTR included an abstract in their report, but they didn't choose to highlight it as something significant to bring to the attention of the people reading the report of the scientific director.
 Q. Highlight. But the fact of the matter is that research was published and available to the public and available to researchers in the area to review and take into account; wasn't it?
 A. I have answered that question several times. Yes, the scientists published it.
 Q. Okay. Now let's talk about basic research. Are you saying that basic research is not relevant to smoking and health?
 A. I don't think I'm saying that basic research is not relevant to smoking and health. I think what I'm saying, which is articulated in the documents, is that the basic research by focusing on the disease generally rather than specifically on the connection between smoking and health allowed the CTR to maintain the position that nothing had been proven, that more research was necessary and they were working on it, but for the most part did not focus on the kinds of research that would tend to lead to direct confirmation of the causation hypothesis and thereby really give smokers more information about the health consequences of smoking.
 Q. Your testimony is that the direct research -- I mean the basic research that the CTR did -- I'm not sure I got these words down right so you correct me if I misstate them -- this basic research was not the kind of focus that would tend to lead to confirmation of the causation hypothesis. Is that your testimony?
 A. Well we're talking in generalizations here, and I think there was a variety of things that came under that -- that rubric, but in general I think that the documents clearly show a strategy to research the disease, to understand the fundamental mechanisms of the disease, rather than to look at specifically the link between smoking and health.
 Q. Is it your testimony that research dealing with the fundamental causes of disease cannot lead to a confirmation or denial of the causation hypothesis?
 A. I didn't say cannot. The fact of the matter is the CTR has been doing the research it's been doing for 40 some odd years now, and we still have Dr. Glenn testifying that more research is necessary and that causation has not been proven. I think that if you look at the kind of research that was funded and you look specifically at what the people both in the CTR and in the companies said about why they were doing the kind of research that they were doing, what you find is that for the most part they were focusing their attention on research that was not going to lead to confirmation of the causation hypothesis.
 Q. Well let me ask you this: Do you think the Surgeon General of the United States would agree with you that this basic research that the Council for Tobacco Research funded was not important?
 *7 A. I don't believe I said it wasn't important. What I said was that it was the kind of research which generally was not going to lead to confirmation of the causation hypothesis.
 Q. Do you think the Surgeon General would agree that the basic research that The Council for Tobacco Research funded was not important to smoking and health?
 A. I don't think I said that either.
 Q. Do you think that the American -- the National Cancer Institute would agree that the research that was funded by CTR was important to smoking-and- health issues?
 MR. GILL: Your Honor, this line is beyond the scope of the direct.
 THE COURT: You may answer it.
 A. Well you've just --
 The only thing you've done now is you changed who might agree. But as I said last time, I don't think I said it wasn't important.
 Q. Would you turn to Exhibit 17873, which is one of the plaintiffs' exhibits that you discussed in your direct testimony.
 A. Yes, I have that.
 Q. Would you turn to page 48 of that document.
 A. Okay.
 Q. Page 48 has the two abstracts or summaries of CTR funded research that you talk about in your direct testimony; doesn't it?
 A. That's correct.
 Q. The first of which was "TASTE THRESHOLDS, CIGARETTE SMOKING, AND FOODS DISLIKES," do you remember that?
 A. That's correct.
 Q. And I believe your testimony was this wasn't very relevant; is that right?
 A. Well I think what it says -- what I said was that it does not appear to be the kind of research that is going to lead to confirmation of the causation hypothesis.
 Q. If you look down there at the bottom of that abstract, it says "Other grantor: U.S. Public Health Service?"
 A. That's correct.
 Q. So the U.S. Public Health Service obviously thought it was worthwhile at least to co-sponsor and co-fund this research; right?
 A. The U.S. Public Health Service clearly thought that this research was worthwhile for some purpose.
 Q. Well you're not suggesting they didn't know that The Council for Tobacco Research was the other co-sponsor; are you?
 A. I am certainly not suggesting that.
 Q. And when you said that The Council for Tobacco Research did in fact fund some tobacco research, specific tobacco research, you know that this document is filled with abstracts of such research; isn't it?
 MR. GILL: Assumes facts not in evidence. It's vague, unless counsel wants to be specific.
 THE COURT: Okay. You may answer it if you understand it.
 A. I don't know that I would characterize this document as being filled with that kind of research, as you put it. It has a variety of abstracts, some of which, I think, are closely related to the issue of smoking and health, some of which are not. And I think this is just one year's report. We've seen the documents that describe the overall strategy, and we've heard Dr. Glenn's testimony about where that situation stands in the '90s.
 Q. The other of the two abstracts to which you referred during your direct testimony is one such study; isn't it?
 *8 A. Yes.
 Q. That is, one involving directly tobacco.
 A. Yes. I'm sorry, that's what I said yesterday -- or the other day when I discussed it.
 Q. The one entitled "ADDICTIVE ASPECTS IN HEAVY CIGARETTE SMOKING;" right?
 A. That's correct.
 Q. Which was co-sponsored by the -- co-funded by the American Cancer Society.
 A. That's correct.
 Q. But there are numerous other abstracts summarized in this annual report of research directly related to tobacco; isn't that right?
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: It's been asked and answered.
 Q. Now let me ask you this: Have you reviewed all of the studies that are summarized in Exhibit 17873?
 A. I'm sorry, the studies themselves?
 Q. Yes.
 A. No, I have not.
 Q. Have you reviewed all of the abstracts that are contained in this annual report?
 A. I looked through them. I wouldn't say I read all of them.
 Q. How many studies funded by The Council for Tobacco Research have you read?
 A. The studies themselves?
 Q. Yes.
 A. None.
 Q. How many abstracts of studies co-sponsored by The Council for Tobacco Research have you read other than those contained in this Exhibit No. 11873?
 MR. GILL: Seventeen thousand --
 MR. BLEAKLEY: Sorry, 17873.
 A. Probably a couple of dozen. In my review of the CTR reports, particularly in the early decades, I focused more on the summary and description of significant findings that appeared in the front of the report, which is what I think any lay person would be likely to do rather than reading the abstract.
 Q. So your knowledge of the actual research funded by The Council for Tobacco Research is limited to the review of the summaries or abstracts contained in Exhibit 17873 and a couple of dozen other abstracts.
 A. No, I don't think that's correct. It includes, for example, the memo that we discussed the other day from Mr. Brady, the associate director of CTR, to the scientific director describing what he thought CTR was doing, it includes the meetings of the Executive Committee of the CTR, which describe what the companies that funded and ran the organization thought it was doing, and includes, as I've mentioned, Dr. Glenn's congressional testimony a few years ago.
 Q. My question was your review of the actual research, not comments on research, but the research co-funded by The Council for Tobacco Research is limited to these abstracts in this exhibit and a couple of dozen others that you've read.
 A. Well that was not your previous question. Your previous question was what was my basis for my conclusion. If you want to ask me what have I reviewed that specifically describes the studies that were conducted, I think that I have looked at the summaries that are in the scientific director's own report and the abstracts that you've mentioned.
 Q. Do you know how many studies have been funded by The Council for Tobacco Research over the roughly 40-year period of its existence?
 *9 A. I've seen a reference to that number; I think it's in the thousands. I don't remember the exact number.
 Q. Do you know what institutions have been given grants?
 A. I couldn't identify all of them. I know that they have gone to many of the standard universities and -- and other organizations that engage in biological research, including basic research.
 Q. Including Johns Hopkins University in Baltimore, for example?
 A. Wouldn't surprise me.
 Q. And Yale University?
 A. I would believe that.
 Q. And Stanford University in California?
 A. Sure.
 Q. And Columbia University and Duke and the University of Chicago?
 A. Sure.
 Q. And the University of Minnesota?
 A. Sure.
 Q. Did you know that there are 17 grantees in Minnesota?
 MR. GILL: Counsel is testifying, Your Honor.
 THE COURT: Sustained.
 Q. Do you know how many grantees there are in the state of Minnesota?
 A. No, I don't.
 Q. Do you know how many Nobel Prize winners have been granted --
 A. Yes.
 Q. -- funds for research by The Council for Tobacco Research?
 A. I believe Dr. Glenn testified there were three.
 Q. Do you know whether any grants have been made to people who are now high public officials in the public health community?
 A. Yes, I think Dr. Glenn mentioned Dr. Varmus.
 Q. The current head of NIH, for example, National Institutes of Health?
 A. I know he had or has had a high position. I don't remember his current position.
 Q. Do you know whether or not some of these or any of these research studies funded or co-funded by The Council for Tobacco Research have been published in peer-reviewed journals?
 A. I believe that many of them have.
 Q. Do you know whether any of them, other than the couple that we referred to right here, have been co-funded by the Public Health Service?
 A. I believe that many of them have.
 Q. And the National Cancer Institute?
 A. Yes. Those organizations fund a lot of basic research.
 Q. The American Heart Association?
 A. I don't know one way or the other.
 Q. Do you know whether any studies funded or co-funded by The Council for Tobacco Research have been cited in Surgeon General's reports on smoking-and-health issues?
 A. I believe they have.
 Q. Do you know what percentage of all of the studies cited in the 1964 Surgeon General's report were funded by The Council for Tobacco Research?
 A. No, I don't.
 Q. You didn't look to see that?
 A. It didn't occur to me to look, no.
 Q. Do you know how many CTR-funded studies are cited in the 1995 Food and Drug Administration analysis regarding the Food and Drug Administration's jurisdiction over nicotine-containing cigarettes and smokeless-tobacco products?
 A. I don't know, no.
 Q. You didn't look in there to see what CTR-funded studies might be cited by the Food and Drug Administration?
 A. No, I didn't.
 Q. Did you make any effort to determine whether there were any CTR-funded studies that came up with results that could be characterized as unfavorable to the tobacco industry?
 *10 A. I've seen a number of CTR-funded studies that came up with results that were unfavorable to the tobacco industry.
 Q. Incidentally, let me ask you to take a look, if you would, at Plaintiffs' Exhibit 21804.
 Did you find that, Professor Jaffe?
 A. Yes.
 Q. This is a Brown & Williamson document in which there was a discussion of possibly reorganizing The Council for Tobacco Research. Do you remember that?
 A. Yes.
 Q. Do you know whether or not the recommendations for reorganization -- reorganizing The Council for Tobacco Research were ever carried out?
 A. Well it's difficult to tell from this document exactly what they had in mind in terms of reorganization. If a reorganization did occur, we know, for example, from the notes of the Executive Committee meeting in 1970 and Dr. Wakeham's discussion following that regarding the fact that CTR was for the benefit of the industry, that the basic points that I made about the role that CTR played in the conspiracy would have remained true whatever reorganization may have occurred here.
 Q. Did you take the time to find out whether or not the recommendation to reorganize The Council for Tobacco Research was ever followed up on?
 A. Well I'm not sure what you mean by "take the time." I've looked at all the materials that I have to try to determine from the 1950s through the 1960s through the 1970s and '80s and into the '90s what CTR was in fact doing at each of those time periods. I don't think I have focused on the question of its organization in terms of whether they changed, you know, the number of associate directors they had or anything else. It seems to me what was relevant for my opinion is what they were doing.
 Q. So you didn't take the time.
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: It's been asked and answered.
 Q. Do you remember Exhibit 21127? Would you take a look at that, please.
 A. Yes, I have that.
 Q. You remember this was a document, the appendix to the document, there's a summary of a meeting in which, among other things, there is a discussion of whether Mr. Spears of Lorillard was going to go or should go to a meeting at the National Cancer Institute. Do you remember that?
 A. Yes, that's correct.
 Q. And you talked about that meeting and used it in your direct testimony; didn't you?
 A. The meeting of the Committee of Counsel, yes.
 Q. And the discussion of whether Dr. Spears should go to the National Cancer Institute.
 A. Yes.
 Q. Would you turn to page nine.
 A. I don't have a page nine. What's the Bates number?
 Q. I'm sorry, page seven of the attachment.
 A. Oh, page seven I have.
 Q. You cited the language, the comment attributed to Mr. Jacob, "He will not help us. If Dr. Spears goes, he may stop us from attacking it later." Do you remember that?
 A. Yes.
 Q. You didn't read the statement made by the next gentleman, Stevens, "I am inclined to let them go."
 MR. GILL: Contrary to the record, Your Honor.
 *11 THE COURT: Well you can answer that.
 A. I think we did read that sentence.
 My discussion of this whole section was mainly to make the point that the whole notion that Dr. Spears and his superiors at Lorillard would think that the question of whether Dr. Spears should go to a meeting is something that should be discussed with the attorneys from all the other firms, so it's not material to the relevance of this section that they in fact made the decision to let him go. What was relevant about this was the fact that people at Lorillard felt that this was an issue that should be decided by the industry collectively rather than by individuals at Lorillard.
 Q. Was this decision made by the industry collectively?
 A. Well we have at this meeting attorneys from a number of the different firms, and -- and plus outside attorneys, and it -- this document shows that Mr. Stevens from Lorillard raised the issue for discussion at this meeting to get their at least advice if not concurrence as to whether or not Spears should go to the meeting.
 Q. Was the decision made that he shouldn't go?
 A. I'm sorry, should or shouldn't?
 Q. Was the decision made that he shouldn't go?
 A. No. As you indicated and as I indicated, the decision was made to let him go.
 Q. And who is Mr. Stevens?
 A. Mr. Stevens is an attorney from Lorillard.
 Q. So you cited this for the proposition that the industry was discussing whether Mr. Stevens should go -- whether Mr. Spears should go to this meeting, but you acknowledge the fact that the general counsel of Lorillard made the decision that he should; right?
 A. Well he says, "I am inclined to let them go," after his discussion with the other attorneys, the gist of which was that they would collectively be better off if he goes than if he doesn't.
 Q. Is that what Mr. Stevens says?
 MR. GILL: Asked and answered, Your Honor, previously.
 THE COURT: You may answer.
 A. Is what was Mr. Stevens said?
 Q. That they decided collectively that he should be permitted to go?
 A. I didn't say that. I said he discussed it with them and they all collectively expressed various opinions. And then it says, as we've read several times now, Stevens says that he's inclined to let him go.
 Q. He made the independent decision to let him go.
 A. I would not characterize it as an independent decision.
 Q. I see.
 A. I would agree with you he says that he is inclined to let him go, but he clearly made that decision in the context of discussing this issue, which really had nothing to do with the other companies, with the attorneys from the other firms.
 Q. You also cited the Auerbach smoking dog study as evidence that supports your view that the industry was attempting to suppress research; correct?
 A. I think what I cited was the fact that there was -- there was a series of meetings at CTR involving people from CTR and people from the industry and attorneys, the gist of which was to organize criticisms of Auerbach and then also to organize a campaign to prevent the National Cancer Institute from further funding of Auerbach, and I don't see how those activities are consistent with the publicly stated purpose of the CTR, regardless of whether people at CTR did or didn't think that the Auerbach studies were good or not good scientific research.
 *12 Q. Now the fact of the matter is, the Auerbach research and the Auerbach study was not suppressed; was it?
 A. Well it was not a fund -- it was not --
 If we're talking about the first round, the study with the beagles that found they had cancer, that was not a study that was funded by CTR. They were not in a position to suppress it.
 Q. My question was: Was it suppressed?
 A. It was not suppressed. I never said it was.
 Q. And in fact it was published; wasn't it?
 A. That's correct.
 Q. It not only was published, it was widely publicized in the press; wasn't it?
 A. I don't think I know one way or the other how widely publicized it was in the press.
 Q. You didn't think it was important to know whether or not this Auerbach study was widely publicized?
 A. It was not relevant. I haven't ever testified that people other than CTR were unable to engage in research and unable to publish that research regarding the connection between smoking and health, so I can't for the life of me see why the publication and the dissemination of the Auerbach results has anything to do with the opinion that I offered.
 Q. Now do you know whether the National Cancer Institute did or did not fund additional work by Dr. Auerbach?
 A. I don't know, no.
 Q. You didn't think that important to find out whether or not the NCI --
 A. Again --
 Again, the issue is not was -- was Dr. Auerbach able to do his -- his work, the issue was what was CTR trying to do, what was the function of CTR as perceived by people at CTR and the companies, and it's very clear that at that moment they saw their function as trying to prevent Dr. Auerbach from doing further research. And I think in terms of what that says about my opinions in terms of the function of CTR, it's immaterial whether in fact they succeeded in that effort to stop the NCI from funding him.
 Q. Would it be immaterial even if the NCI concluded on its own that further funding of Dr. Auerbach's work wasn't a good idea, made no sense?
 MR. GILL: Assumes facts not in evidence.
 MR. BLEAKLEY: Doesn't assume facts. It's a question, Your Honor.
 THE COURT: You'll have to rephrase it.
BY MR. BLEAKLEY:
 Q. Well let me ask you this: Do you know what the ultimate medical and scientific judgment was on the Auerbach study?
 A. I think as I explained in my previous answer, even if NCI and everybody else ultimately concluded that the Auerbach work was not good work, which I haven't seen evidence to support, but even if that were true, it doesn't change the fact that what we saw the CTR doing was organizing its efforts to tell another funding organization how to spend its money, and I don't see, if -- if -- particularly, given the documents from the companies which indicated that although there were problems with the Auerbach work and clearly it raised issues that needed to be resolved, I would think if CTR was in the business that it said it was in, which was to find out the truth, they would have said, gee, we think there are big problems with what Dr. Auerbach has done, so what we need to do is replicate these experiments, we need to encourage him to pursue this work so that it can be -- those problems can be clarified and we can find out what the answer is, and that's not what I saw CTR doing.
 *13 Q. Are you testifying that the tobacco industry could tell the National Cancer Institute what studies to fund and what studies not to fund?
 A. What I'm saying is what the document said, which was that Dr. Gori had agreed that he was going to have a meeting with them - - Dr. Gori from the National Cancer Institute -- and what the people from the industry were going to do is going to organize all the information they could to present to Dr. Gori to try to convince him not to fund that research. That's what the document says they were going to do. I think it's a separate question whether Dr. Gori ultimately paid attention to them or not.
 Q. Okay. In any event, your opinion is that the fact that The Council for Tobacco Research was attempting to persuade the National Cancer Institute that this was not the kind of research they should be funding is evidence of conspiracy.
 A. Well I think what it is, which is what I characterized it as, is evidence that CTR was not what it was presented as being. And I think when you take that, then, in the context of all the other evidence that we have, is part of the basis for my opinion that CTR was a component of the conspiracy.
 Q. Well let's turn to the third prong of the conspiracy that you say existed to suppress fundamental competition, and that is the conspiracy not to warn unless compelled to do so.
 You discussed only one document in connection with that, and that was Exhibit 13416. Would you turn to that, please.
 A. Yes, I have it.
 Q. And this is a letter from the assistant Secretary for Health of the Department of Health and Human Services to the chairman of The Tobacco Institute; right?
 A. That's correct.
 Q. And it refers to negotiations that the Department of Health and Human Services was having with the industry about the precise warnings that were going to be -- might be adopted; right?
 A. That's correct.
 Q. Do you know the circumstances under which these negotiations were taking place?
 A. I'm not sure what you mean by "the circumstances."
 Q. Why were they --
 Why were they negotiating?
 A. Well I --
 Why were they negotiating? You mean --
 Q. Yes.
 A. -- why was the Assistant Secretary of Health -- why did he need agreement of The Tobacco Institute as to what the warning was going to be?
 Q. That was going to be my next question, but you can answer that one.
 A. Well I don't know the answer to that. I wondered about that myself. I would have thought that the Assistant Secretary for Health would just recommend whatever agreement he or she thought was the appropriate agreement from a public health point of view, but it's clear from this letter that he felt that this was an issue that had to be discussed with the industry.
 Q. You made no effort to find out why the Assistant Secretary for Health was negotiating with the industry over warnings?
 A. Well again I don't know why that's relevant to my opinion. All I was using this document for was to characterize the industry position, which clearly is, based on this document, a collective position that warnings should meet the criteria in numbers one, two, three, four, five and six there, which includes the insistance that it retain reference to the Surgeon General.
 *14 Q. So it made no difference to you why these negotiations were taking place.
 A. Well if you --
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: It's been asked and answered.
 Q. Let's go on to the fourth prong of the conspiracy that you believe existed, and that is one dealing with the development of safe or safer cigarettes. Okay?
 A. Okay.
 Q. Is it your testimony that the defendants -- strike that.
 It isn't your testimony or your opinion that the defendants conspired to refrain from attempting to develop a safer cigarette; right?
 A. I'm not saying that they agreed to undertake no efforts with respect to a safer cigarette, that's correct.
 Q. Because we know that in fact they did make efforts to develop so-called safer cigarettes; right?
 A. Several of them did, yes.
 Q. On more than one occasion.
 A. Yes, I think that's true.
 Q. Your testimony is that the conspiracy was to refrain from -- and again, correct me if I don't use the right words
 A. Uh-huh.
 Q. -- to refrain from communicating to the public the health benefits that might exist with respect to these products, and change it to make it your words.
 A. Sure. I mean what I said was that the agreement was not to competitively exploit a safer product in a way that would rely on health concerns. But as I talked about the other day, the fact of that agreement, because it made the potential competitive gains from such a product so much smaller, in my opinion significantly reduced the incentives to engage in research on safer cigarettes and thereby reduce the efforts that were made in that direction, although I have not testified that it eliminated them entirely.
 Q. Well, it's more than not limiting entirely. The defendants did research on the development of filter cigarettes since at least the 1960s; right?
 A. Well I don't believe that that's directly relevant, because they did research on filters, but they never -- (clearing throat) excuse me -- made an attempt, other than the ones we've talked about, with specific products to figure out whether those products with improved filtration were in fact safer. They didn't do the kinds of, for example, studies that were done with respect to XA and Premier to try to show that filter cigarettes were in fact safer products. So although that effort was, I believe, motivated by an attempt to respond to consumers' demand for safer products, I wouldn't characterize filter cigarettes as an attempt to develop a safer cigarette that really was the kind of thing that in terms of creative destruction would have been expected.
 Q. Is it your testimony that the defendants did not attempt to develop proof that filter cigarettes were safer than non-filter cigarettes? Is that your testimony?
 A. I haven't seen any evidence that they -- that they did that.
 Q. Is it your testimony that the defendants never attempted to establish proof that low delivery cigarettes were safer than non-low delivery cigarettes? Is that your testimony?
 *15 A. Well again, I haven't seen any evidence of it. And that's what Mr. Schindler said when he testified.
 Q. I thought Mr. Schindler testified that they didn't have any such proof. Am I wrong about that?
 MR. GILL: Your Honor, if counsel could show him the transcript, perhaps it would be clearer.
 THE COURT: He can answer that.
 A. I don't recall the distinction between what you just said and what he said, so I don't know which it was.
 If they didn't have any proof, it either means they didn't look for it, or they looked for it and couldn't find it, which means that -- that they found evidence that they weren't safer, which would seem to me to suggest that that would have been something that they should have communicated.
 Q. Well let's talk about that for a second.
 Your testimony is that if they didn't find proof, that means they weren't safer; is that your testimony as an antitrust economist?
 A. Well I guess what I'm saying is if they had done studies -- which again I haven't seen the evidence that they did -- but if they did a study to try to determine whether filter cigarettes, for example, were safer, you know, logically there are three possible outcomes: They could have found they were safer, they could have found conclusive evidence that they were not safer, or they could have found that they couldn't determine one way or the other whether they were safer or not.
 It seems to me if their intent in this process was to respond to the consumer demand for a safer cigarette and they were marketing a product that, even if the result was that, gee, we tried, but we couldn't find -- we couldn't verify that these things were safer one way or the other, I would think that that would be information that they would want to share with their customers.
 Q. Isn't there a fourth possibility, Professor Jaffe, and that fourth possibility is that the Federal Trade Commission would not allow them to make claims that the products were safer? Isn't that right?
 MR. GILL: Assumes facts not -- assumes facts not in evidence, Your Honor.
 MR. BLEAKLEY: It assumes nothing. It's a question.
 I'm sorry, Your Honor, I withdraw my --
 THE COURT: May I rule --
 MR. BLEAKLEY: I withdraw --
 THE COURT: -- or are you going to rule?
 MR. BLEAKLEY: No, Your Honor. I take it back.
 THE COURT: Why don't you rephrase it.
BY MR. BLEAKLEY:
 Q. You know, do you not, that the Federal Trade Commission has had the responsibility and authority for regulating advertising of products sold in the United States since well before the 1960s; isn't that right?
 A. That is correct.
 Q. And you also know that the Federal Trade Commission has been active with respect to cigarette advertising; don't you?
 A. I think that's fair.
 Q. And that the Federal Trade Commission has frequently intervened with regard to cigarette advertising; hasn't it?
 A. It's done so on several occasions, yes.
 Q. And you know that in order for the defendant tobacco companies to promote any product as safe or safer or may be safer, it as a practical matter would be necessary to have the Federal Trade Commission let them do it; isn't that right?
 *16 A. I think for them to present any information to consumers, they would have to do that in a way that the Federal Trade Commission would not deem to be false or misleading. And what I was saying in my testimony a minute ago was that any scientific experiments that the companies had done which generated information that was of relevance to consumers in their decisions regarding the purchase of products is information which, if they were intent on competitively exploiting the opportunity that consumers' demands offered, they would have at least tried to find a way to present that information, factual, scientific, valid information, to the public in a way that the Federal Trade Commission would not deem to be false or misleading.
 Q. Now, going back to the question I started with a few moments ago, it is not your contention that the defendants conspired to refrain entirely from developing safer products; right?
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: You can answer it again.
 A. That's correct.
 Q. And we know that in fact the defendant tobacco companies have spent time developing filter and low delivery products; right?
 A. That's correct.
 Q. And we know that the defendant tobacco companies have spent many years developing methods for ventilating tobacco; right?
 A. That's correct.
 Q. And for the use of expanded tobacco.
 A. That's correct.
 Q. And for treated tobacco.
 A. That's correct.
 Q. And for tobacco substitutes.
 A. They have done some work on tobacco substitutes, yes.
 Q. And charcoal filters.
 A. That's correct.
 Q. And cigarettes with no nicotine in them or virtually no nicotine.
 A. Yes, that's correct.
 Q. So we know --
 And cigarettes that have virtually all of the particulate or tar removed from them, we know that, too; don't we?
 A. That's correct. But you've mixed together in that list a variety of different things, some of which I think, based on valid data, could be shown to be responses and efforts to make the product safer, but many of which I think it's very questionable whether either the intent in doing it or the result when it was done was to make the product safer.
 Q. But you're not an expert on whether the products were or were not safer; are you?
 A. No.
 What I've looked at are the documents that the companies have themselves about what they think they had accomplished, what they were trying to accomplish, and how far they got.
 Q. Based on the selected review of the documents that were provided to you by plaintiffs' counsel.
 A. Well there's nothing selective about it. And I've looked at as many documents as we could find, and if you have documents that are from the rest of the 30 million that you think show something else, I would be happy to see them.
 Q. There was nothing selected by it -- about them?
 A. Well when you say "selective," you're implying that there was some choice made to reach a particular result, and all I'm saying is we looked at everything that -- or we attempted to look at everything that we could find that was relevant to my opinion, and I've always assumed that if we missed something important that would change the opinion, that I would see it now.
*17 Q. Well I meant to say "selected." Maybe it wasn't clear.
 A. Okay.
 Q. My question is: And this opinion is based on your review of the documents that plaintiffs' counsel selected for you to review; isn't that right?
 MR. GILL: Your Honor, that assumes facts not in evidence based upon his direct testimony.
 THE COURT: You may answer it.
 A. Well we've been over this several times. What I did would indicate topic areas that I wanted to see documents related to and asked the attorneys to provide them, and I believe that they had every incentive to provide me with all of the documents that related to those topics because if there were documents that were troublesome, it was better for me to see them early rather than later.
 Q. And you don't deny that the defendants have spent hundreds of millions of dollars, if not billions, in the effort to develop these products; do you?
 MR. GILL: Assumes facts not in evidence, Your Honor.
 THE COURT: You'll have to rephrase that, counsel.
BY MR. BLEAKLEY:
 Q. Did you not testify the other day that you don't -- that you know the defendants spent substantial sums of money on the efforts to develop these products?
 A. My understanding from the evidence that was tabulated that we saw was that, based on interrogatories, they spent something like three billion dollars over a period of four decades. And for the reasons that I've talked about the other day -- though any time you talk about a billion dollars, I guess that sounds like a lot of money -- given the resources they had and stakes that they faced and the amount of money they spent on short-term competition, 47 billion dollars on advertising and other forms of promotions, that even though three billion dollars may seem like a lot of money, that in fact it is a relatively meager sum of money given the stakes that they faced.
 Q. And there should have been more.
 A. I think if these firms were competing, there would have been much more.
 Q. Much more.
 A. Much more.
 Q. How much more?
 A. Well I think, for example, if you look at other industries, you look at typical decisions regarding R&D investment, if they had spent, for example, half what they spent on advertising, if they'd spent that on research, that would have been eight or 10 times as much as they actually spent, and that would still be a small fraction of their sales and profits compared to what many other industries invest in the development of new products.
 Q. But you can't put a number on it; can you?
 MR. GILL: It's been asked and answered, Your Honor.
 THE COURT: It's been asked and answered.
BY MR. BLEAKLEY:
 Q. Now let's go back for a moment to the role of the Federal Trade Commission. You're very critical of the involvement of lawyers in scientific matters; aren't you?
 A. As a general matter?
 Q. In this case.
 A. Well we looked at certain specific contexts where what was being discussed was whether research was good research and what kinds of research to do, and we also looked at some contexts where we had decisions that involved a particular company that was being discussed with other companies, and in those contexts I expressed the opinion that that kind of participation seemed to me to be more consistent with a collusive agreement than with competition and in the case of CTR, the stated purpose of CTR.
 *18 Q. Well let's talk about the specific involvement of lawyers in decisions about what product safety claims can be made.
 Anything wrong with lawyers being involved in that?
 A. No.
 Q. Now let's talk about some of the specific product development ideas that you referred to in your direct testimony. One of the ones you discussed was the Saratoga product.
 THE COURT: Counsel, maybe we should take a recess now.
 MR. BLEAKLEY: Fine.
 (Recess taken.)
 THE CLERK: All rise. Court is again in session.
 (Jury enters the courtroom.)
 THE CLERK: Please be seated.
 THE COURT: Counsel.
 MR. BLEAKLEY: Thank you, Your Honor.
BY MR. BLEAKLEY:
 Q. Before the break, Professor Jaffe, we were -- I had started to ask you some questions about the fourth prong of the conspiracy you believe existed that had to do with safe cigarettes, safer cigarettes, and I had just started to ask you a question about Saratoga. I don't actually have much to ask there.
 We discussed Saratoga briefly the other day; right?
 A. Yes.
 Q. And that is potentially a filter -- charcoal filter cigarette that Philip Morris worked on many years ago; right?
 A. In the 1960s.
 Q. In the 1960s.
And you testified, I believe, that you didn't know why that product was never developed and wasn't a successful commercial product; is that right?
 A. Well I think what we talked about was Dr. Wakeham highlighted the decision not to tell people about the evidence they had regarding its physiological superiority as one of the reasons for its failure, and that's the only information that I have.
 Q. You don't know whether it was physiologically superior or not; do you?
 A. That's correct.
 Q. You don't know whether it was or wasn't safer; right?
 A. That's correct.
 Q. And then also briefly talked about a project at BATCo called ARIEL. Do you remember that?
 A. Yes.
 Q. And you know that BATCo had a product that it experimented with back in the 1960s as well which it called Project ARIEL; right?
 A. That's correct.
 Q. And you know that from the evidence that you -- that you saw, the documents that you read, that the cigarette product tasted bad; right?
 A. There was some discussion of that, yes.
 Q. Do you know that whether or not the ARIEL project was ever resurrected?
 A. Well there was a development in the '80s at BATCo which in -- in -- I don't know whether it's precisely a resurrection of the ARIEL, but they did do further work in the '80s on products that had apparently some of the same concepts as were in ARIEL.
 Q. And that was called AIRBUS.
 A. That's correct.
 Q. Or AIRBUS.
 But all you know about that again is what you read in the documents that you reviewed; right?
 A. That's correct.
 Q. You do know that it was, at least to some extent, B.A.T's -- BATCo's effort to respond to Premier from RJR.
 A. Yes, I think some of the documents do indicate that.
 Q. And you also know from the documents you reviewed that they had some fairly serious design problems with AIRBUS.
 *19 A. I do recall that at some point they decided not to pursue it very actively. I don't remember the details.
 Q. One of the problems was that the product, which was like Premier, supposed to be a product that didn't burn, was that it overheated; right?
 MR. GILL: Assumes facts not in evidence, Your Honor.
 THE COURT: You can answer that if you know.
 A. I don't recall.
 Q. You don't recall one way or the other.
 A. That's correct.
 Q. Do you recall whether there was also a problem with a potential conflict with an RJR patent?
 A. I think I did see some reference to that.
 Q. Okay. Then we come to Project XA at Liggett. Do you remember that? You testified to that about -- about that on your direct testimony; right?
 A. Yes.
 Q. And the Project XA involved a cigarette in which Liggett would add a substance called palladium.
 A. That's correct.
 Q. Treat the tobacco with a substance called palladium; right?
 A. That's correct.
 Q. And palladium is a heavy metal; right?
 A. That's correct.
 Q. And you've testified that there came a point in 1979 when the project was referred to a legal project team. Do you remember that?
 A. I think it was '78, but yes.
 Q. Sorry, 1978.
 And that you didn't find any documents about the Liggett palladium product after it was referred to the legal project team; right?
 MR. GILL: Assumes facts not in evidence, Your Honor.
 THE COURT: You may answer that.
 A. No, I think the document that we looked at had it referred to the legal product team in the summer of '78, and then we saw some discussion in January of '79, and then the last document that I saw was a document in the summer of ' 79 that instructed everyone to send all the materials relating to the project to the legal department.
 Q. Okay. I stand corrected.
 Now you do know, do you not, that the Liggett palladium project was public knowledge?
 A. Yes.
 Q. You know that Liggett obtained a number of patents on the palladium project; right?
 A. Excuse me --
 Yes, that's correct.
 Q. And those patents, of course, were all published as they're required to be by law.
 A. When they're granted they're published, yes.
 Q. And you know that the development of the palladium product or project was reported in the popular press; wasn't it?
 A. That's correct.
 Q. And was it --
 Is it not the case that the palladium product was also presented to the public health community?
 A. Yes, I think there were some discussions between some of the people involved and people in the government.
 Q. Do you know whether anyone in the public health community ever endorsed the palladium product as a safer product?
 A. I've seen no evidence that they did.
 Q. Do you know whether they didn't endorse it?
 A. Do I know that they didn't.
 No, I guess I don't know that they didn't. I've seen no evidence one way or the other.
 Q. You have not seen any evidence that public health authorities were concerned about the palladium product?
 *20 A. That's not what I said. What I --
 Q. Did you?
 A. I'm sorry.
 Q. Rather --
 I'm putting too many negatives in my question, professor.
 A. Okay.
 Q. But let's start over again. Did you see any evidence that public health authorities were concerned about the safety of this product?
 A. Yes, I think I've seen some discussion of that. I don't remember the details.
 Q. One of the concerns was that the product, when used, produced a substance called nitrosamines; isn't that right?
 A. Well there was a concern that is discussed in the documents that all cigarettes in fact produce nitrosamines, that the use of additional nitrates in the XA project -- or the XA product, which they found was necessary to maximize the effectiveness of palladium catalyst, there was a concern that the increase in nitrates would increase the level of nitrosamines in the smoke.
 The documents I saw indicated that they thought that, between the filter that they had designed which got the nitrates back down to the level of normal cigarettes and the other testing that they had done to try to see whether there was any evidence of increased activity, that overall there was -- there appeared to be a net reduction in the tumorigenic effects of the condensate.
 Q. Just so we're clear here, nitrosamines are carcinogenic themselves; aren't they?
 A. That is correct.
 Q. And you saw evidence in the files and records that you reviewed that palladium alone was not effective and that you had to have nitrate to make it effective; didn't you?
 A. It was not as effective without the nitrates present, yes.
 Q. And that those nitrates increased the amount of nitrosamines produced.
 A. Well I think at the end of the day it wasn't clear whether the product as marketed, with the higher level of nitrates but with a special filter that was designed to lower the nitrates to the level of normal cigarettes, did or didn't have more nitrosamines than other cigarette products.
 Q. So you don't know one way or another whether the product was in fact safer or less safe; do you?
 A. I think what I testified was that the evidence they had was that the so- called tar, the condensate from the smoke, produced significantly reduced tumor activity on the backs of mice, and that that was biological evidence that was potentially relevant to consumer choices. But I don't think I testified that it was -- that I had a basis to determine that it was a safer product.
 Q. Or even less safe possibly; do you?
 A. Well I think the data are what they are.
 Q. Do you have an opinion of whether or not this product would have been safer or less safe?
 A. I do not.
 Q. Would you turn to tab 24 in your book, please.
 MR. GILL: Exhibit number?
 MR. BLEAKLEY: Yes, it's MD000106.
 Q. This is the 1971 Surgeon General's report.
 A. I have it.
 Q. Would you turn to page 264.
 Got 264 there in front of you?
 A. Well I'm not sure.
 Q. Take your time.
 *21 A. The one in the tab has just a few pages, and I can't read it, so maybe I'll look at the big --
 Q. It is a bad copy. I apologize.
 A. I'll look at the big fat one. Maybe that's easier to read.
 Okay, I think I have 264. If you show me an excerpt, I'll be able to confirm that. I can't quite --
 Q. Down toward the bottom of the page there's a paragraph --
 A. Yes, I have that page.
 Q. -- that reads, "The notrosamine compounds listed are potent carcinogens affecting many organ systems."
 A. That's correct.
 Q. Now if you would turn to tab 12 where there should be a copy of the 1981 Surgeon General's report, hopefully a more legible copy. That is Exhibit number GJ000114.
 A. Yeah, I have it.
 Q. This is the Surgeon General's report entitled "The Health Consequences Of Smoking: THE CHANGING CIGARETTE."
 A. Yes.
 Q. Page 37. There's a little section there entitled "Tobacco-Specific N- Nitrosamines."
 A. Yes, I see that.
 Q. And in the middle of the page there appears the sentence, "These tobacco-specific N-nitrosamines may play a role in the development of several types of human cancer."
 A. That's correct.
 Q. Now various scientists have criticized the possible use of nitrosamines in cigarettes as well; haven't they?
 A. The use of nitrosamines in cigarettes?
 Q. Criticized the existence of nitrosamines in cigarettes.
 A. Yes.
 Q. Including Dr. Dietrich Hoffmann.
 A. I believe that's correct, yes.
 Q. Has any physician or scientist or public health organization called for the production of a cigarette using palladium?
 A. Not that I know of.
 Q. Has any scientist or doctor or physician or public health authority urged Liggett or any other company to place on the market a cigarette containing palladium?
 A. Not that I know of.
 Q. Do you know what happened, what Liggett did with its nitrosamine cigarette when it stopped the effort to develop one in the United States?
 MR. GILL: Your Honor, object to the characterization of XA as a "nitrosamine cigarette."
 MR. BLEAKLEY: Excuse me, I meant palladium. I misspoke.
 Q. The palladium cigarette.
 A. Well --
 Yeah, I guess based on some of the documents that you sent over the weekend, it appears that they made an attempt to license the technology to some of the tobacco companies in Europe.
 Q. Did they have any success?
 A. No, they didn't.
 Q. The next product that you talked about, I'm not sure it was in that order, but another product that you talked about was the Premier product developed by R. J. Reynolds. Do you recall that?
 A. Yes.
 Q. And you know that RJR spent a considerable amount of money on the development of the Premier product; don't you?
 A. Well we --
 I guess "considerable" means different things to different people. I -- from the documents it's clear they spent several hundred million dollars.
 Q. And you know that RJR obtained a number of patents on the processes by which this product would be made; correct?
 *22 A. That's -- that's correct.
 Q. Some 40 patents.
 A. I saw a reference to 20, but 40 wouldn't surprise me.
 Q. And you know that the process of prosecuting and obtaining patents from the United States Patent Office is itself a very extensive and expensive process; isn't it?
 A. Yes. In the literature it's usually estimated $10,000 a patent.
 Q. Now did I understand you -- and if -- if I'm misstating this, please correct me again. Did I understand you to say that RJR never made an approach to the Food and Drug Administration or the Federal Trade Commission about the Premier product?
 A. I believe what I said was in the documents I reviewed I wasn't able to find any evidence that they did.
 Q. So in fact you don't know whether RJR ever made an approach to the FDA or the FTC; do you?
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: You may answer that.
 A. I can only expect that --
 I mean we saw, for example, a presentation made to the board of directors in which the issue of FDA and FTC concerns was raised. I would have thought that if they had gone and actually discussed this issue with the FDA or the FTC, that that would have been mentioned. So I have inferred from the fact that I've seen lots of documents that talk about Premier and I've seen no evidence that they did it, that they didn't.
 Q. You infer that they did not go to the FDA or the FTC.
 A. That's correct.
 Q. But you don't know.
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: You may answer.
 A. Well I can't know for sure because the documents may have surprisingly not talked about the fact that that happened. But it seems to me that that is not likely based on the evidence that I have.
 Q. Do you know whether any public health organizations expressed a view about the Premier product?
 A. When you say "public health organizations," you mean government organizations?
 Q. Private or government.
 A. I do believe that some of the non-profit organizations that are concerned about smoking and health did express concerns about Premier.
 Q. Tried to fight it; didn't they?
 A. Yes, they did.
 Q. Like the American Medical Association, for example.
 A. That may have been one of them.
 Q. In fact the American Medical Association asserted that RJR was making health claims about the product; didn't it?
 MR. GILL: Assumes facts not in evidence, Your Honor.
 THE COURT: Sustained.
BY MR. BLEAKLEY:
 Q. Do you know whether the basis upon which the American Medical Association opposed the Premier product?
 A. Well my recollection is their primary objection was that it was a nicotine-delivery device in their view, and that for that reason the FDA should regulate it. But I don't remember the exact details.
 Q. Do you know whether the American Medical Association argued that the product presents a substantial threat to the public health?
 MR. GILL: Your Honor, that assumes facts not in evidence.
 *23 THE COURT: Sustained.
BY MR. BLEAKLEY:
 Q. Do you know whether any government agencies were opposed to the Premier product?
 A. I haven't seen any evidence that federal government agencies expressed any opposition to the product.
 Q. What about state agencies?
 A. I've seen a reference somewhere along the way that there were -- there was some opposition, but I don't remember what it was.
 Q. What about the Minnesota Department of Health?
 A. That -- that may have been the state agency that I saw reference to.
 Q. In addition to these problems, you also know that the Premier --
 MR. GILL: Object to the characterization as "problems," Your Honor. There's no evidence for that.
 THE COURT: Rephrase the question, counsel.
 MR. BLEAKLEY: Yes, Your Honor.
 Q. You also know that the Premier product smelled bad; don't you?
 A. The documents do discuss the fact that there were taste or odor problems, that smokers perceived it to be very different from a traditional cigarette in that respect.
 Q. Taste and odor problems; weren't they?
 A. I believe that's correct, yes.
 Q. Also had problems keeping the product lit; didn't they?
 A. I have seen -- I'm sorry.
 I've seen references to that, yes.
 Q. And this was a product, one of the purposes of which was to design a product that did not actually burn; right?
 A. Well I believe that Premier does burn, it's just that the tobacco does not burn. It has a carbon element which burns.
 Q. Okay. It was designed so that the tobacco wouldn't burn.
 A. That's correct.
 Q. There would be none of what is called pyrolysis; right?
 A. Combustion or pyrolysis.
 Q. Which is one of the theories about possible adverse health consequences of smoking; right?
 A. That's correct.
 Q. And so Reynolds tried to develop a product in which the tobacco doesn't burn; --
 A. That's correct.
 Q. -- right?
 But one of the problems that R. J. Reynolds had with the Premier product was people had difficulty keeping it lit; right?
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: He's answered it.
 Q. Now, is it your testimony that R. J. Reynolds did not make any advertising claims about the Premier product?
 A. No, that's not my testimony.
 Q. Because you know that R. J. Reynolds did in fact make advertising claims about the product; didn't it -- don't you?
 A. Yes. They tried to test market it and they advertised it in the test market.
 Q. And among the advertising claims that R. J. Reynolds made were those about which the American Medical Association and the Minnesota Department of Health complained; isn't that right?
 MR. GILL: Assumes facts not in evidence, Your Honor.
 THE COURT: You may answer if you know.
 A. I don't know that that's true.
 Q. You do know, however, in the RJR advertising for the Premier product they referred to the reduction of controversial compounds from the product; don't you?
 A. I believe that's correct.
 *24 Q. And that it --
 They claimed that the smoke dissipates instantly; right?
 A. There was something about the lack of sidestream smoke. I don't remember the exact wording.
 Q. And that it results in a change in the composition of cigarette smoke?
 A. I don't recall.
 Q. And some of their advertising referred to Premier as the most significant advance in cigarette history?
 MR. GILL: Assumes facts not in evidence, Your Honor.
 THE COURT: You may answer if you know.
 A. I've seen some of the Premier ads and they had various general claims. I don't remember whether that particular phrase appears or not.
 Q. Did you look at some of the RJR ads for the product?
 A. Yes, I did.
 Q. And is it nevertheless your testimony that RJR had supportable health claims for the Premier product that it did not make?
 A. I don't know that I would characterize them as "health claims." I think what I said was that they had supportable scientific evidence regarding reduced biological activity of the products. Their outside scientists confirmed that the tests that had been done were valid and indicated reduced biological activity in several forms, and that in my opinion a company that had spent the hundreds of millions of dollars that we discussed regarding Premier that wished to exploit this technological development to its maximum potential would have used that information -- would have communicated that information in some form to consumers.
 As we've talked about, the FTC regulated the form in which any kind of claims could be made about cigarettes, and they would have had to have found a way to do it that was consistent with those regulations. But since the underlying goal of the FTC is to prevent claims that are false or misleading and they had extensive scientific information, it's my opinion that they could have at least tried to find a way to present the valid scientific information they had in a way that would not have been deemed false or misleading.
 Q. But because of the conspiracy that you believe existed and despite the fact that they spent hundreds of millions of dollars on this product, the only thing they claimed in their advertising was that it reduced controversial compounds, dissipated smoke instantly, that it was the most significant advance in cigarette history, and that it revolutionized smoking.
 MR. GILL: Assumes facts not in evidence, Your Honor, and it's compound.
 THE COURT: Rephrase the question.
 MR. BLEAKLEY: I'll withdraw it, Your Honor.
BY MR. BLEAKLEY:
 Q. By the way, did you testify that all of the biological studies that were conducted with respect to Premier were conducted by outside laboratories?
 A. I think what I said was that it was a little difficult to tell from the documents, but I saw no evidence that any of them were done in-house, and there was extensive discussion of tests that were done by outside consultants.
 Q. So in fact you don't know whether Reynolds did in-house biological testing of Premier; do you?
 *25 A. I have seen no evidence that they did.
 Q. So you don't know whether they did or didn't; do you?
 MR. GILL: Assumes facts not in evidence, Your Honor, it's argumentative and repetitious.
 THE COURT: I think -- I think he's answered the question.
BY MR. BLEAKLEY:
 Q. Now you also know that R. J. Reynolds has not abandoned the basic product design that was involved in the Premier product; don't you?
 A. I have seen some evidence of their continuing to work on related product designs, yes.
 Q. Using some of the technology developed in the course of the Premier project; right?
 A. Well since -- since I wasn't shown documents after 1994, it's a little hard to tell exactly what technology is being used, but it does appear to be related to technology of the Premier.
 Q. And you know that in fact R. J. Reynolds is currently test marketing such a product; don't you?
 MR. GILL: Objection, Your Honor, beyond the scope of discovery.
 THE COURT: Sustained.
 MR. BLEAKLEY: May we have a side-bar on this, Your Honor?
 THE COURT: Yes.
 MR. BLEAKLEY: Could I have the question read back, please.
 (Record read by the court reporter.)
 A. I do know that R. J. Reynolds is currently test marketing a product called Eclipse. I don't really know what technology it contained in the Eclipse product because I wasn't allowed to see documents. As I understand it, we were not produced documents from the last few years in which Eclipse was marketed.
 MR. BLEAKLEY: Your Honor, I move to strike the last part of that answer as non-responsive.
 THE COURT: Well I think it's sufficiently responsive. It will stand.
BY MR. BLEAKLEY:
 Q. Now you didn't mention a product by -- developed by Philip Morris called Next; did you?
 A. No, I did not.
 Q. But you know about it; don't you?
 A. Yes, I do.
 Q. You know that in fact Philip Morris marketed a product called Next several years ago; don't you?
 A. That's correct.
 Q. And this was a product that contained virtually no nicotine; right?
 A. It was a product that contained very little nicotine, yes.
 Q. And you know that product failed in the marketplace; don't you?
 A. That's my understanding, yes.
 Q. You also know that Philip Morris has another product that it is test marketing now called Accord; don't you?
 MR. GILL: Your Honor, object to questions dealing with test marketing now.
 THE COURT: The objection is sustained.
 MR. BLEAKLEY: Your Honor, could we have a side-bar on this? Promise it won't take any more time than the last one.
 THE COURT: Will there not be any more questions than the last one?
 MR. BLEAKLEY: Couple.
 THE COURT: All right. You better come up.
 MR. BLEAKLEY: Could I have the question read back.
 (Record read by the court reporter.)
 A. I've seen references to that in the newspapers, yes.
 (Document displayed on the screens.)
 MR. GILL: Your Honor, excuse me, I wonder if this could be taken down?
 *26 MR. BLEAKLEY: Sorry. Yeah.
 (Display removed from the screens.)
 MR. BLEAKLEY: Absolutely.
 Q. I'm sorry, you said you've seen references to it in newspapers?
 A. That's right.
 Q. And what do you know about it?
 A. That Philip Morris is test marketing a product called Accord.
 Q. Do you know what its design features are?
 A. I don't recall.
 Q. Do you know whether it is, potentially at least, a safer or medically acceptable product?
 A. I don't know about medically acceptable. I believe the newspaper accounts suggested that part of the motivation was reduced health hazards, but I really haven't focused on that as part of my opinion in this case.
 Q. Okay. Fair enough.
 So we know about Saratoga, we know about ARIEL, we know about its successor AIRBUS, we know about Premier, we know about the Liggett palladium cigarette, we know about Eclipse, the successor to Premier, Next, a little tiny bit about Accord, all products in which the defendants have attempted to develop safer cigarette products; right?
 A. I think it's a fair characterization that the products you just listed all were attempts, to some extent, to develop safer cigarette products, yes.
 Q. And we also know that in addition to that there were efforts made to make tobacco substitutes.
 A. Yes.
 Q. Unsuccessful efforts to make tobacco substitutes.
 A. Generally, yes.
 Q. And finally we know that in fact the defendants have made and sold filter and low tar and nicotine cigarettes over the last 40 years; right?
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: Well you can answer it again.
 A. Yes, defendants have made and sold filter and low tar cigarettes -- low tar/low nicotine cigarettes over the last several decades.
 Q. In fact we know, do we not, that the tar level in the cigarettes has gone from an average of 35 milligrams per cigarette in the mid-1950s to about 12 milligrams per cigarette in the '90s?
 A. I think that average is about correct. And we also know from the company documents and -- and numerous other documents that if there has been any reduction in health consequences associated with that, it is at best significantly less than the proportional reduction in tar that has occurred.
 Q. We know that from the company documents. Is that your testimony?
 A. Yes. I've seen a company document that indicates that.
 Q. And so your testimony is that these products are not any safer based on your review of selected company documents; correct?
 A. I didn't say that. What I said was that if they are any safer, the amount of improvement that they represent is considerably less than proportional to the measured tar reduction, and I have seen company documents that discuss that.
 Q. Okay. So you acknowledge that there are -- that these are safer products; right?
 A. I didn't say that either. I didn't say that either. What I said is they may be safer. There have at points in time been indications they might be safer. On the other hand, the documents as well as public reports make clear that because of smokers' compensation, the delivery to individuals is not reduced as much as the rated delivery, that the low tar products are typically smoked more intensely and drawn -- the smoke is drawn deeper into the lung, which may create different kinds of health hazards or -- or more serious kinds of health hazards, and that in addition their low tar products that contain the many additives that aren't in the other products, that as far as we can tell haven't been tested for safety, and -- and thereby may create new health concerns. So --
 *27 Q. Do you know whether they create new health concerns?
 A. What I know is that there has not been established clearly the net benefit of these new products, and everyone from company scientists to the Surgeon General have expressed that these issues exist.
 Q. This is all based on your review of the company documents selected for you by plaintiffs' counsel.
 MR. GILL: Object to that characterization, Your Honor.
 THE COURT: Objection sustained. Rephrase the question.
BY MR. BLEAKLEY:
 Q. Well have you done any independent research of your own to determine whether or not these products are or are not safer?
 A. I'm not an epidemiologist or biologist, I'm an economist, and what is relevant for me is what was going on in terms of the competitive behavior of the companies. If the companies had perceived these products as their innovative response to the consumer demand, then I would have expected that they would have done the research to determine whether or not they were safer, and if they could show that they were safer, to utilize that information in the marketing of the product, and what I've seen is that they've reduced the tar and nicotine, they have advertised those products as reduced tar and nicotine, but they haven't made systematic efforts to determine whether those products are safer. They clearly understand the compensation phenomenon and rely on the compensation phenomenon to produce products that are lower tar but that smokers will still find satisfying, and the public health evidence as summarized, for example the Surgeon General, is that there is doubt about the significance of any net health benefit that these products may have produced.
 Q. Have you done any independent research of your own to determine whether or not this so-called compensation factor is important?
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: You may answer that.
 A. I have not gone out and done smoking behavioral studies, no.
 Q. Have you read any of the published literature on compensation?
 A. Yes, I've seen some of it.
 Q. Have you read the article by Benowitz and Henningfield?
 A. I don't recall.
 Q. Have you read articles in the published literature suggesting that compensation is not a significant factor?
 A. Yes, I have.
 Q. So you know that there are people out there who don't think compensation is a significant factor; don't you?
 A. I have seen some studies that indicate that, yes.
 Q. Including responsible researchers in the field of nicotine and addiction; right?
 A. As far as I know, that's true. However, again as an economist, what matters to me is how the companies are behaving, and the companies clearly, from their own documents, not only perceived that it occurred, but perceived that it was a phenomenon that they were going to exploit in the development of their products.
 Q. Have you read the Dr. -- the testimony of Dr. Samet in this case?
 A. No, I have not.
 Q. So you don't know what Dr. Samet said about whether low tar and nicotine cigarettes are or are not safer.
 *28 MR. GILL: Your Honor, no foundation based on the last answer.
 THE COURT: Okay. You may answer that though.
 A. It wasn't material to my analysis to know what Dr. Samet said. As I explained, what was material to my analysis was how the companies perceived these products and how they competed with respect to them.
 Q. It was not important to the opinions that you've been expressing here this morning whether the actual scientific evidence is that low tar and nicotine cigarettes are or are not safer? That wasn't important?
 MR. GILL: Argumentative, Your Honor.
 THE COURT: You'll have to rephrase it, counsel.
 Q. Is it your testimony that whether or not low tar and nicotine cigarettes are in fact safer is irrelevant to your opinions?
 A. I don't think I said that. I think that what I said was that I didn't need to read Dr. Samet or any other individual empidemiologist's testimony. For example, I've looked at the Surgeon General's reports which are intended by their nature to summarize the general state of knowledge on these topics, and what the Surgeon General report says is that while there may be some benefits, particularly if smokers don't compensate, that overall there is certainly significant doubt about the magnitude of the net health benefits from these products, and I think for the purposes of my opinion regarding what competition did or didn't occur in this industry, that that's sufficient basis.
 Q. Let me ask you a hypothetical: Let's assume that there was a document in the defendants' files that says low tar and delivery cigarettes are not any safer. Okay? Will you accept that - -
 A. Okay.
 Q. -- hypothetical?
 And in addition, will you except for purposes of this hypothetical that this opinion was expressed by a scientist at one of the tobacco companies?
 A. Okay.
 Q. Okay? And that it was expressed very strongly. Okay?
 A. Okay.
 Q. But the actual scientific evidence is that the product is safer. Would you just ignore that evidence and rely only on the opinion expressed by one employee of a tobacco company?
 MR. GILL: Your Honor, there are no facts in evidence to support the last predicate of that hypothetical.
 THE COURT: Okay. The objection is sustained.
BY MR. BLEAKLEY:
 Q. Is it your testimony that the Surgeon General of the United States, in the Surgeon General's reports that have been published, have not found there to be a reduction in the amount of disease attributable to smoking as the result of low tar and nicotine cigarettes?
 A. Well my understanding is that what the Surgeon General reports indicate, including the 1981 report that the jury saw when Professor Dolan was testifying, is that there is some evidence to suggest that particularly compensation doesn't occur, that there may be reduction in some diseases, but that there are other concerns that potentially offset that, and the magnitude of those concerns to some extent is not known, so that overall it's not possible to make a reliable determination that the net health benefits are significant.
 *29 Q. Would a 20 percent drop in lung cancer rates be significant?
 A. Depending on the context, it might be significant for some purposes.
 Even if there were a 20 percent drop, it would -- it would be very consistent with what I said earlier, which was that if there was any benefit, it seems to be far less than what would be suggested by the aggregate reduction in tar levels that you alluded to, which was far more than 20 percent.
 Q. Is that important?
 A. Is -- is which important?
 Q. Is it important that the reduction in risk is less than the reduction in tar and nicotine numerically? Is that a significant factor?
 A. Well I only mentioned that because you suggested that the reduction from, I believe, 40 to 12 or 35 to 12 was somehow indicative of a significant improvement in cigarettes. I didn't suggest that. But what I was saying was that if someone were to suggest that the reduction in overall tar levels connoted some kind of corresponding, very large reduction in the hazard of cigarettes, then I think it would be very relevant that the actual reduction is apparently far less than proportional to the measured reduction in tar levels.
 Q. But in terms of the impact on health, it doesn't make any difference whether there is a relationship between the percentage reduction in tar and nicotine and the percentage reduction in risk; does it?
 MR. GILL: Your Honor, he just answered that question. This is argumentative as well.
 THE COURT: Okay. I think he answered that.
 MR. BLEAKLEY: Judge, I'm about to move on to a new and a final topic.
 THE COURT: How long is your final topic?
 MR. BLEAKLEY: Probably 45 minutes to an hour.
 THE COURT: Okay. We better recess for lunch then, reconvene at 2:00 o'clock.
 THE CLERK: Court stands in recess, to reconvene at 2:00 o'clock.
 (Recess taken.)
 

*1 TITLE: STATE OF MINNESOTA AND BLUE CROSS AND BLUE SHIELD OF MINNESOTA, PLAINTIFFS, V. PHILIP MORRIS, INC., ET. AL., DEFENDANTS.
TOPIC: TRIAL TRANSCRIPT
 TRANSCRIPT OF PROCEEDINGS
DOCKET-NUMBER: C1-94-8565
VENUE: Minnesota District Court, Second Judicial District, Ramsey County.
YEAR: March 23, 1998
 P.M. Session

JUDGE: Hon. Judge Kenneth J. Fitzpatrick, Chief Judge

AFTERNOON SESSION.

 THE CLERK: All rise. Court is again in session.

 (Jury enters the courtroom.)
 THE CLERK: Please be seated.
 THE COURT: Counsel.
 MR. BLEAKLEY: Thank you, Your Honor.
 Good afternoon, professor.
 THE WITNESS: Good afternoon.
 MR. BLEAKLEY: Good afternoon, ladies and gentlemen.
 (Collective "Good afternoon.")
BY MR. BLEAKLEY:
 Q. Professor Jaffe, is it your testimony that the defendants spent all of this money and all of this effort on attempting to develop safer cigarette products but that they didn't really want them to be successful?
 A. No, that's not my testimony. I think that the companies that spent the money that they did spend on developing safer products did so because they recognized the competitive potential that such products offered and that they did hope that they would be successful, but that they weren't willing in that hope to go the last mile, which involved really exploiting the products in a way that would have taken advantage of their real -- their real superiority from consumers' point of view. So that they -- they in some sense wanted to have it both ways, they wanted to respond to the competitive incentives they saw because they realized that the potential is there, but they were -- they were ham- strung in their ability to really fully exploit it because of the agreement that they had.
 Q. And that last mile, that exploitation of these products, would have been to make safety claims for them; right?
 A. Well I think that what I said earlier with respect to the specific products we talked about is that the last mile would have been to utilize the scientific information that they had to inform the consumers about how these products really were different than the products that were on the market.
 Q. Well what difference would it make to a consumer that the product was different unless it was also safer?
 A. Well I think what they could have said regarding safety would have depended on the data that they had. As we've discussed at some length, with respect to the specific products that -- that were developed, there are some questions about exactly what they could have claimed about those products, and one of the things that I think I've been clear on is that anything that they claimed would have had to have been true. If they had reached the point where they had developed a product that was unquestionably safer or safe and that they had the scientific data to support the claim in whatever form they chose to make it, if they had the data to support it, then I believe that they would have made those claims. The exact nature of the claims they would have made would have depended on the exact nature of the scientific and technological results that they were able to develop.
 *2 Q. And would you agree with me that you don't know whether any of those products were unquestionably safe or unquestionably safer; do you?
 A. The products that were in fact developed, is that what you're referring to?
 Q. Whether or not --
 The products that you say the defendants should have exploited and gone the last mile with respect to the consumers, you don't have any personal knowledge that any of these products were unquestionably safe or unquestionably safer; do you?
 A. I don't have any personal knowledge, and I certainly don't have any basis from the documents to say that any of them were unquestionably safe.
 The documents certainly indicate with respect to Premier, for example, significant scientific evidence that they were less biologically active with respect to a battery of tests that the scientists had -- had -- had undertaken, and I'm not in a position to determine what kinds of statements about safety could have been made based on those tests. But there certainly was a significant amount of data which indicated that, along relevant dimensions, the product, based on those tests, appeared to be safer.
 Q. Now let me turn to the economic impact of what you have described as a conspiracy to suppress fundamental competition.
 You testified -- and again correct me if I don't state this exactly correctly -- that the second element of the analysis -- that is, the first step of the analysis is whether the conspiracy unreasonably restrained competition, the second element of the analysis was the impact on the market, which must be a significant economic impact. Is that right?
 A. I think that's fair, yes.
 Q. So it is necessary for the impact on the market to have been significant; right?
 A. Yes, I believe that's correct.
 Q. A minor and insignificant impact on the market would not have anti- competitive consequences that would be of concern to an antitrust economist; right?
 A. Well I think what I said was to call something an unreasonable restraint of trade, we look for a significant economic impact.
 Q. And you went on to say if this restraint had not been in place --
 And that's the conspiracy that we're talking about here; right?
 A. Yes.
 Q. If this restraint had not been in place, we would have seen a market for cigarettes in the United States today that would have been significantly different from the market that emerged under this competitive restraint; right?
 A. Well you appear to be reading from the transcript. It certainly sounds familiar.
 Q. And that is your opinion.
 A. I -- I agree with that statement, yes.
 Q. Okay. And we would have seen a significantly broader variety of products available to smokers, and they would also have had available to them the information necessary to make informed choices among those different products in purchasing and smoking them; right?
 A. I couldn't have said it better myself.
 Q. And finally, this would have been in a market in which consumers would have had the information necessary to make effective choices among those products. And then you went on to say, "And this was a significant contributing factor to health-care costs in Minnesota."
 *3 A. I did say that.
 Q. Okay. The bottom line of all of this is that health-care costs were higher as the result of this restraint or this conspiracy; right?
 A. That's correct.
 Q. And that if there hadn't been a conspiracy, they wouldn't have been as high.
 A. That's right.
 Q. Okay. In Minnesota.
 A. Well I think as I explained with Mr. Gill, I have not looked specifically at the damages calculations regarding Minnesota. What I have concluded is that because of the significant impact on the cigarette market that you just discussed, and relying on the testimony of others that smoking does cause significant health-care costs, taking those two things together I'm able to conclude that the conspiracy was a significant contributing factor to health-care costs in Minnesota.
 Q. And you also know that the specific health-care costs in Minnesota that are involved in this case are Medicaid, a state medical assistance program called GAMC, and Blue Cross insurance; right?
 A. I do know that, yes.
 Q. Okay. Now let me write up here the four elements of this opinion, and I'll apologize in advance for my writing; I'm not a professor, so I'm not very good at this.
 First was lower health-care costs. Okay?
 A. First --
 Q. First of the elements.
 A. Okay.
 Q. Let me write these down. Then you can tell me whether you agree with them.
 A. Fine.
 Q. Okay?
Two is significantly different market, three was significantly broader variety of products, and finally, more information. At least that's my shorthand. Now perhaps I should have put lower health-care costs down as number four, and that's probably what was confusing you.
 But you said there would be a significantly different market; right?
 A. I did say that.
 Q. And there would be a significantly broader variety of products.
 A. Yeah. In my mind that's part -- three and four are part of two. They're not really distinct from two. But --
 Q. Okay.
 A. -- I don't disagree with having said all those things.
 Q. And more information, relevant information would have been provided to consumers.
 A. Right.
 Q. And the result would be lower health-care costs.
 A. Yes.
 Q. Okay. Now let me ask you this: In order to know whether or not in fact you would have a significantly different market and significantly broader variety of products and more information for consumers and therefore lower health-care costs, we'd need to know a number of things; wouldn't we? We'd need to know what the answers are to a number of questions; wouldn't we?
 MR. GILL: Objection, vague, Your Honor.
 THE COURT: Do you understand the question?
 A. Yes, we would need to know some things, yes.
 Q. Okay. Would you agree with me that one of those things would be whether or not this significantly broader variety of products would be meaningful different products?
 A. Yes, I'd agree.
 Q. Okay. Let me --
 Another pack of cigarettes that's called X instead of Y wouldn't be meaningful.
 *4 A. I agree with that.
 Q. Okay. Meaningfully different products.
 Secondly, we would need to know whether any of these new products were safer; wouldn't we?
 A. Yes.
 Q. We'd also have to know, would we not, how much safer?
 A. No, I don't think so.
 Q. What if they were only a wee tiny bit safer, just an infinitesimal amount safer?
 A. Well I think you'd have to know that within the broader range of products there were products that were significantly safer.
 Q. Okay.
 A. But I don't think you would have to know in a quantifiable sort of measurable terms how much safer.
 Q. Okay. Significantly safer.
 The farther down the board we get, the harder it is to read my writing.
 We'd also need to know who made these products; wouldn't we?
 A. Well we would need to know that these products were offered by the defendants. I don't think we'd need to know which ones specifically.
 Q. That's a D -- I mean a Delta; that's supposed to be for defendants.
 A. Yeah, I got that.
 Q. You understood that. Okay.
 Sorry, I'm standing in front of this and blocking the view of some of the jurors.
 We would also need to know when in time these meaningfully different, safer -- significantly safer products could have been introduced; wouldn't we?
 A. Well again I think that issue is somewhat like the safer issue. We would need to know that they would have been introduced sufficiently early to have had a significant impact on the marketplace, but I don't think we would need to know exactly when.
 Q. Okay.
 A. And just to be clear, would number four -- I think my answer to your question is we would need to know it was the defendants, but we wouldn't need to know which defendants, but what you wrote down is "which defendants," so I'm not quite sure that we had understood each other there.
 Q. How about if I change that to "defendant."
 A. Fine.
 Q. Okay?
 A. Uh-huh.
 Q. So you're with me so far. We're with each other so far.
 A. And again, you just wrote down "when" when what I said was you wouldn't need to know exactly when, you would just need to know if that is sufficiently early on as to have had a significant impact.
 Q. Okay. I'm just trying to shorthand -- do the shorthand --
 A. Okay.
 Q. -- writing as we go down the page here.
 We'd also need to know whether or not any of these meaningfully different, significantly safer products that were introduced in time to have a significant impact could have been produced at a reasonable cost; wouldn't we?
 A. Yes, where "reasonable" takes into account consumers' willingness to pay for a product that was significantly safer.
 Q. I'm going to just put a dollar sign there for that. Is that all right?
 A. Okay.
 Q. Okay. Then we'd need to know whether or not these products would have been or would be acceptable to consumers; right?
 A. We would have to know that they would have been acceptable to a -- to a sufficiently large number of consumers to have had a meaningful impact on the market.
 *5 Q. Now acceptability in this context would include such things as taste; wouldn't it?
 A. Yes.
 Q. And smell?
 A. Yes.
 Q. And whether or not the product would stay lit?
 A. Yes.
 Q. All the things that we've been talking about here this morning, design features that would be acceptable to a sufficient number of consumers so that they would smoke them in significant amounts; right?
 A. I agree with that.
 Q. Okay. And finally we'd need to know what advertising and marketing claims could be made about those products; correct?
 A. I'll answer the question --
 I can't actually see what you wrote, so --
 Q. I wrote "claims."
 A. -- I'll assume that what you wrote is similar to what you said.
 Q. I wrote "claims."
 A. I think we would need to know what kinds of information the companies in general terms could have conveyed about these products.
 Q. And that would take into account, for example, whether or not the Federal Trade Commission or the Food and Drug Administration would allow them to make those claims; right?
 A. Yes, uh-huh.
 Q. And it would also have to take into account, would it not, the extent to which, if at all, other elements of the public health community attacked the product and attacked the claims that were being made.
 A. I'm not sure whether that would be relevant or not. I mean the public health community has certainly done plenty of attacking of the tobacco companies and it doesn't necessarily seem to affect their behavior, so I'm not sure that generic attacks by people other than the regulators who had some legal authority to do something about it would have made much of a difference.
 Q. Well is it your testimony, for example, that if one of the defendants attempted to market one of these products in the state of Minnesota, making whatever health claims that defendants thought were appropriate, and the Minnesota Department of Health took the public position that these claims were not supported, that would affect the ability of the defendants effectively to market this product in Minnesota; wouldn't it?
 MR. GILL: Assumes facts not in evidence, Your Honor, with respect to this hypothetical.
 THE COURT: You can answer that.
 A. I don't know what the state of Minnesota could have done. I'm sorry, I thought you were referring to, you know, the American Medical Association and other non-profit health organizations. But what I would say was that, obviously, any legal requirement that any legal entity, whether it's the federal government or state government, had some authority to enforce obviously would have to be complied with.
 Q. Well, and if a reputable organization such as the American Cancer Society took the position publicly that the claims that the defendants were making for one of these products were untrue, that would affect their ability to sell them; wouldn't it?
 MR. GILL: Assumes facts not in evidence, Your Honor.
 THE COURT: No, you may answer that.
 *6 A. Well I'm a little confused about the relevance to what we're talking about, because the predicate here was that we were going to have scientifically defensible, factual information that the companies were going to present regarding these safer -- these significantly safer products, so I guess if the American Cancer Society took the public position that something that was scientifically demonstrable was nonetheless false, I'm not sure that would have any effect on anything.
 Q. Well you testified that RJR had a scientific basis for making claims about Premier; didn't you?
 A. I testified that they had a scientific basis to make some claims. I didn't testify as to specifically what was the nature of the claims that they could make that would be defensible, and I haven't seen any evidence that anything that the American Cancer Society or other non-profit organizations did with respect to Premier had any consequences.
 Q. Your testimony is that the opposition to Premier by the American Medical Association had no -- played no role in the lack of success of Premier?
 A. Well I've seen company documents that groused about the fact that it was opposed by anti-smoking organizations. I'm not sure I've really seen any evidence that shows that that actually had any effect.
 Q. In any event, you would agree with me that we'd need to know the answers to these questions in order to know whether or not a significantly different market, significantly broader variety of products, more information, would result in lower health costs; isn't that right?
 A. Yes, I think as characterized in my earlier answers with respect to the, you know, the summary points you've put up there.
 Q. Okay. Well let's take them one by one.
 We don't know whether the defendants could have developed meaningfully different products; do we?
 A. In my opinion I think we do know to a reasonable degree of confidence, that given the economic analysis that we've talked about, the huge stakes that were perceived by the companies, the opportunities that they saw, the progress that was made, incomplete as it was, the progress that was made with the meager resources that were invested, I think one can conclude that if the last four decades of this industry had been allowed to play out competitively with the forces that we've seen were operating rather than being suppressed, that the industry would look significantly different, and that there would be meaningfully different products, safer products along a variety of dimensions. They would have been significantly safer.
 We've seen evidence even with the meager resources that were invested that progress was made in that direction. I think a lot more progress would have been made if greater resources had been invested. And I think that it's not -- it's not hard to conclude that if -- if we'd had four decades to progress without the restrictions that we've talked about, that all of those things would have been in place.
 *7 Q. Every one of them.
 A. That's what I just said.
 Q. The defendants would have been able to develop safer products than they have already.
 MR. GILL: Asked and answered, Your Honor.
 THE COURT: Well go ahead, you can go through it again.
 A. Yes.
 Q. Significantly safer product than they have already.
 A. Yes.
 Q. And it would have been one or more of the defendants in this case.
 A. One or more of the defendants, yes.
 Q. And you have no hesitancy whatsoever in opining to a reasonable degree of scientific probability that this could have been done in time to have a significant impact on the market.
 A. Yes.
 Q. And you also have no hesitancy whatsoever to testify to a reasonable degree of scientific probability that this could have been done on a cost- effective basis.
 A. Where "cost-effective" is defined to recognize that consumers quite clearly would have been willing to pay somewhat more for products that were demonstrably safer.
 Q. And you have absolutely no doubt that they could have designed products that would have been acceptable to consumers; right?
 MR. GILL: Your Honor, improper question, certainly not the relevant standard, as counsel knows.
 THE COURT: Sustained.
BY MR. BLEAKLEY:
 Q. And you would testify here today to a reasonable degree of scientific probability that these companies could have developed products that would have been acceptable to a significant number of consumers in time to have a significant impact.
 A. Yes. I mean, for example, we know that the low tar -- the ultra low tar products are viewed by many smokers as not as desirable along various dimensions. I'm not saying that every smoker would have adopted them and I'm not saying that they would have been indistinquishable from traditional products, what I'm saying is we would have had a variety of products available which would have offered sufficient satisfaction to smokers along the various dimensions that they care about that a significant number would have purchased them.
 Q. And you will testify to a reasonable degree of scientific probability that the defendants would have been able successfully to make claims about these products in their advertising and marketing that would have resulted in a significant impact on the market?
 A. Well again, we've already talked about this. The -- the standard --
 The basis of the FTC regulation is that the claims not be false or misleading, and I think if the companies had had valid scientific information that they could have developed, if they'd invested the appropriate resources, that there would have been a way to express that information that was not false or misleading but nonetheless was sufficiently specific and clear that smokers would have understood what was being communicated, and it would have affected their choices.
 Q. There would have been a way.
 MR. GILL: Asked and answered, Your Honor.
 Q. Is that right?
 THE COURT: It's been asked and answered.
 *8 Q. But despite your opinion to a reasonable degree of scientific probability, you can't identify any such product; can you?
 A. I think that that's not the issue. I mean we're talking about an industry that four decades of the history of which has been changed significantly by a conspiracy to suppress the forces of competition and creative destruction, and so I don't think it would be reasonable to expect that someone could say, sitting here today with the four decades having played out the way they did, specifically what those products would look like or specifically which company would have introduced them. It would be like going back to the 1950s and looking from the perspective of the 1950s, trying to anticipate in a modern, dynamic industry what that market would look like in the year 1998. I don't think anyone doing that in 1950s, looking at the cola industry, would have thought that you were going to see sugar-free colas that people -- or most people, including me, couldn't distinguish from regular cola. I don't think they would have anticipated computers the size of a shoe box that would do what the computers the size of a building did then. You can tick off industry after industry where the products that are available today could not possibly have been anticipated in their specific form four decades ago, and yet what we have in this industry is a market that has been arrested in its development relative to that dynamic process that would have occurred. And I think it's -- it's impossible to say what the specific products would have been, but it's not at all hard to say that the range of products would have been significantly different.
 Q. It's not just impossible to say what the specific products would have been, it's impossible to say how much safer they would have been; isn't it?
 A. Well we have some information. We know that with --
 THE COURT: Excuse me, counsel.
 MR. BLEAKLEY: Sorry.
 THE COURT: You're --
 (Mr. Bleakley resumes his position behind
 the podium.)

 THE COURT: Sorry to interrupt you. Go ahead.
 MR. BLEAKLEY: That's okay.
 A. Okay. I'll start over. We do have some information. We know with respect to Premier, for example, that a product was developed that eliminated the products of combustion and pyrolysis and along a number of scientific dimensions clearly had reduced the biological activity. Now as we've discussed, there were problems with Premier, there were issues with its consumer acceptability, but any time you introduce a new product, it takes a while to get the bugs out of it, to get kinks out of it. I think Premier was a significant strive forward.
 Based on the work that we saw that B.A.T did on ARIEL in the 1960s, I think that, you know, we -- we -- we would have gotten to the point that we got to with Premier far earlier if this competition had -- had been unfettered, and I think with that as an indication of what happened, even with limited resources, I don't think it's hard to conclude that we could have come up with products that were significantly safer.
 *9 Q. And what prevented all of this from happening was an agreement between the defendants not to do in-house animal research and not to exploit the benefits of their products.
 MR. GILL: Your Honor, assumes facts not in evidence in that it omits several prongs and it omits reference to the overall conspiracy.
 THE COURT: Well you can answer this question.
 A. Well the different elements of the conspiracy, as I discussed, are interrelated. I think with respect to each of the other elements I noted that one of the things it did was contribute to the suppression of the demand for safer products, so I don't think I testified that you could isolate out the first and the last aspects as the mechanism for preventing the dynamic evolution of the industry that otherwise would have occurred. I think all of the different aspects of the conspiracy were mutually reinforcing and contributed to the result.
 Q. Isn't it a fact, Professor Jaffe, that the opinion that you have expressed about the economic impact of this alleged conspiracy is pure speculation?
 A. No. I don't know why you would conclude that. I think I spent three days here explaining exactly why, based on the economic analysis and based on the evidence that I have looked at, I've come to the conclusion I've come to.
 MR. BLEAKLEY: I have no further questions.
 MR. GILL: Your Honor, I only have 10 or 15 minutes, so I think we can just proceed straight away.
 Mr. Bleakley, could you move this out of the way?
 (Easel moved by Mr. Bleakley.)
 MR. GILL: Good afternoon, ladies and gentlemen.

 (Collective "Good afternoon.")
BY MR. GILL:
 Q. Good afternoon, Professor Jaffe.
 A. Good afternoon, Mr. Gill.
 Q. Professor Jaffe, do you recall some questions this morning from Mr. Bleakley that dealt with the testimony of Dr. Samet?
 A. Yes, I do.
 Q. And do you recall some testimony along the lines suggested to you by Mr. Bleakley that Dr. Samet had testified to a 20 percent reduction in lung cancer as measured in epidemiological studies due, according to Mr. Bleakley, to use of low tar/low nicotine cigarettes?
 A. That was the suggestion of his question, yes.
 Q. And you told Mr. Bleakley that you had not read the testimony of Dr. Samet at the time.
 A. That's correct.
 Q. I'd like to show you some of Dr. Samet's testimony on February 13, 1998, at pages -- at page 3761 in the record, starting at line two.
 MR. BLEAKLEY: Your Honor, I object to this. This is not recross- examination -- or redirect examination, this is just reading the testimony of another witness, which, unless it's all read on the entire subject, would be inappropriate in any event.
 THE COURT: You mean you don't --
 On what subject, the subject that you crossed on?
 MR. BLEAKLEY: The subject that I crossed him about and which he said he had no knowledge.
 THE COURT: Okay. I think he can redirect on a subject that you crossed on.
 MR. GILL: That's all I intend to do, Your Honor.
 *10 THE COURT: All right.
BY MR. GILL:
 Q. You see a question at the top of the page, line two, that says, "Now what has happened to the disease risks of smoking over the past 40 years?"
 A. Yes.
 Q. All right. And Dr. Samet asked -- answers, "Well we've seen, certainly, no drop in the disease risks associated with smoking, and evidence of increasing risks for some diseases."
 Now is that consistent with the understanding that you got from Mr. Bleakley regarding the testimony of Dr. Samet?
 A. Well Mr. Bleakley seemed to be suggesting that Dr. Samet had testified that there was a reduction, and this doesn't seem to indicate that.
 MR. BLEAKLEY: Your Honor, --
 Q. Is it fair --
 MR. BLEAKLEY: -- I object to that. Now the witness is actually testifying on the nature of this prior testimony. If he wants to display the testimony of Dr. Samet, I objected to that, too, but I can understand it, but engaging in this dialogue with Professor Jaffe I submit is inappropriate.
 THE COURT: Well your question characterized Dr. Samet's testimony. I think he is entitled to --
 MR. BLEAKLEY: I characterized it accurately, Your Honor.
 THE COURT: All right. Well --
 MR. BLEAKLEY: Now what he wants to do --
 THE COURT: That's what we're here to find out.
 MR. BLEAKLEY: But he's asking this witness questions about it. He's never seen it until lunch time, apparently.
 THE COURT: All right. You can answer the question.
BY MR. GILL:
 Q. And Professor Jaffe, I think you did answer the last question; did you not?
 A. Yes, I believe I did.
 Q. All right. Let's go on to the question that starts at line seven on that page.
 A. It says --
 Q. Okay. You can go ahead and read it.
 A. It says, "What do we see when we measure the disease risk in specific studies, doctor?"
 And the answer is, "We saw some -- I talked about some information yesterday, for example, of the CPS-I study, that was the 1959-1960 to 1972 study that showed some drop, about a 20 percent drop in risk of dying from lung cancer for those who were smoking the lower tar cigarettes of the time '59 to ' 72, compared to the higher tar cigarettes of the time. So just remember that the higher tar cigarettes in that study had -- were in the range of 25 and higher in terms of the milligrams of tar, the lower tar were about -- under 17.6 milligrams of tar, if I remember correctly, so with that degree of reduction, there was about a 20 percent drop in the lung cancer risk."
 Q. All right. Let me interrupt you right there.
 Now that does refer to a 20 percent reduction in the lung cancer risk; does it not?
 A. Yes, it does.
 Q. And it references a timeframe between what years?
 A. 1959-'60 compared to 1972.
 Q. Now further on on the very next page, 3762, do you see the question that starts at line 19?
 A. Yes.
 Q. Would you read that question and that answer, please.
 A. "But what do we see when we measure the risks of smoking over the past 40 years?
 *11 "Answer: Well there we have some information that I discussed yesterday. We have the two studies of the American Cancer Society, the two studies of one million Americans, the earlier study across the '60s, '59 to ' 72, the later study beginning in the '80s. And what I showed yesterday was that in that study, the disease risk, lung cancer and the other major smoking-caused diseases, had actually gone up comparing the two studies, one looking at the risks in persons who were enrolled towards the left side of that exhibit and the other more towards the right side of that exhibit.
 "And also, in terms of the results of the individual epidemiological studies in the animations as I showed the findings of those studies over time, there was no evidence that risks had begun to drop off in the later studies."
 Q. So what is your interpretation, Professor Jaffe, of the testimony from Dr. Samet with regard to any reduction in the epidemiological risks associated with the smoking of low tar cigarettes after 1972?
 MR. BLEAKLEY: Objection to any interpretation of this testimony by this witness.
 THE COURT: Well I think you should --
 You'll have to rephrase that, counsel.
BY MR. GILL:
 Q. Let me ask the question this way, Professor Jaffe: Is the answer to the last question that you just read to the jury, is that consistent with the understanding that you gained from the nature of the question put to you by Mr. Bleakley this morning regarding Dr. Samet's testimony?
 MR. BLEAKLEY: Same objecti