Posted on 03/26/2006 3:07:35 AM PST by SheLion
For the past eight years, major cigarette makers and 46 state governments have enjoyed a beautiful partnership: The cigarette companies paid billions into state coffers in return for the states abandoning legal claims against the industry.
On Monday comes a decision that could fray the relationship.
That's when an arbiter is to issue a decision that could allow cigarette companies to reduce a multibillion-dollar payment due this spring by $1.2 billion -- and potentially similar amounts in future years. A decision in favor of the industry would be a significant blow to the states, which have come to rely on the annual payments to prop up their budgets. That the issue is even being discussed highlights a new bravado exhibited by the major cigarette companies after a string of legal victories.
The money in question is part of Big Tobacco's obligation to 46 states under a landmark 1998 legal settlement that ended a raft of state-government lawsuits against the industry. The agreement requires Altria Group Inc.'s Philip Morris USA, maker of Marlboro, and other major cigarette companies such as Reynolds American Inc.'s RJR and Loews Corp.'s Lorillard to reimburse the states for their costs to care for sick smokers, in yearly installments. So far the companies have paid $41.6 billion and about $6.5 billion more is due April 17.
When the deal was struck, the tobacco industry was under siege, facing lawsuits from state governments as well as numerous smokers sick with tobacco-related illnesses. But in recent years, a string of victories in major smoker lawsuits, along with soaring stock prices, has given the tobacco industry a new swagger.
The companies argue that the settlement has hurt their market share in favor of a crop of upstart companies that have sprung up since 1998 offering low-priced generic cigarettes. They contend that their market share declined to 92% in 2003 from 99.6% in 1997 as a result.
The settlement has a provision that lets companies reduce their payments upon a market-share decline of this magnitude. But it's not automatic: The arbiter has to decide whether the market-share decline is a result of the settlement or other factors.
After a hearing in January, the arbiter -- Daniel McFadden, a professor of economics at the University of California at Berkeley -- issued a preliminary decision March 1 in favor of the companies. If the arbiter sticks to his original decision, a new legal battle could erupt in state courts around the country. States warn that, if necessary, they will sue the companies to get the full payment.
If the tobacco companies win, No. 2 player Reynolds, which markets Camel and Salem, stands to gain the most -- roughly $567 million -- because it suffered the steepest loss in market share. Philip Morris, No. 1, would be entitled to about $386 million, and No. 3 Lorillard would be able to keep about $109 million, according to estimates by the settlement's designated auditor.
No wonder all frantic anti activity lately! The states are going to lose their funding! This puts the push for the constitutional amendment to set aside 15% of the settlement money for tobacco control, in Florida, and the fight in Mississippi into a different light! The arbitrator already decided in March in favor of BT unofficially! What chance is there that he will change that opinion! Oh this is good!
Huge Settlement Could Get Smaller
"The cigarette companies paid billions into state coffers in return for the states abandoning legal claims against the industry."
That statement is wrong. The consumer is paying the billions. Even the consumer who doesn't smoke cigarettes.
"The cigarette companiues" just handle the money.
One thing I've noticed at work is that people are smoking "Little Cigars". They cost something like $1.50 a pack.
So much for a pack of Cigs at $5.00!!
I don't know which tobacco products are exempt from the taxes and which aren't.
A fellow at work rolls a batch of his own before he leaves home.
This is great. The states have been extorting money from cigarette companies, milions rolling in and at the same time attacking cigarette smokers by passing stupid anti-smoking laws and jacking up cigarette taxes. How long did they think this goose would continue to lay those golden eggs while they were slowly hacking its head off.
Although I pay taxes and in the end will have to take up the slack , I wish the courts would say the states would get nothing.
The whole case has been legal theft.
You are half right. It is the smokers that pay taxes on cigarettes that are paying this money! This is wonderful news indeed!!!
They should "roll their own." Save hundreds of dollars and still enjoy a good cigarette!
Well, I take after my Grandfather and smoke a pipe, stuck my mouth right now. Cost is less that cigs and smells better.
During work, just go to my car, listen to what ever talk radio I can get, mostly Air Amerkica. When I come back, most people are finishing those little cigars.
They smell like crap, but they do get their fix in.
Well the ones that people smoke at work do smell like crap. Have to see if I can get them to try yours.
This is great. The states have been extorting money from cigarette companies, milions rolling in and at the same time attacking cigarette smokers by passing stupid anti-smoking laws and jacking up cigarette taxes. How long did they think this goose would continue to lay those golden eggs while they were slowly hacking its head off.
Although I pay taxes and in the end will have to take up the slack , I wish the courts would say the states would get nothing.
The whole case has been legal theft.
The problem is: the taxes smokers pay on cigarettes has been paying for all of this. States can't even balance their budgets without raising cigarette taxes!
We are even paying the salaries for the "Partnership for a Tobacco Free Everything," and the rest of their ilk.
Smokers are therefore, paying for all the control, abuse and restrictions put upon them. I, for one, am thankful to see that the money might not be there.
But let me tell you, it's going to put many states into a tailspin!
Most tobacco companies are conglomerates. I just wonder if their non-tobacco products aren't higher priced than they would be if there wasn't the Tobacco Agreement?
Non-Tobacco???!!! What do you mean?
Aren't most of the tobacco companies into other products - food, for instance?
Oh lord yes. Thank you. I had forgotten that. Like Phillip Morris and their cheeeeeeeeese. hehe
It's been nine years since I quite everything (everything tobacco). Prior to that I tried a pipe until I caught myself starting to inhale some of that raw smoke. You better not be doing that, ya hear?
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