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American cigarette manufacturers have filed a lawsuit against the FDA.
The largest US tobacco companies filed a lawsuit in the US District Court for the District of Columbia against the Federal Office of the Food and Drug Administration (FDA).
read more ...05/04/15
Interesting facts about cigarettes, countries - tobacco leaders.
Every minute in the world are sold about 8-10 million cigarettes and daily 13-15 billion cigarettes.
read more ...04/01/15
Anti-smoking campaigns run to extremes.
It is strange to what can bring the foolishness of anti-smoking crusaders in their attempts to impose all the rules of a healthy lifestyle, even if they lead to a violation of all norms, artistic freedom and civil society.
read more ...03/03/15
Tobacco Settlement Challenge Claims Companies Acting Like Cartel


When describing the 1998 settlement between four major tobacco companies and 46 states who sued them, the word "windfall" comes to some people's minds.

The settlement, known as the Master Settlement Agreement, requires the tobacco industry to pay the states more than $200 billion over the next 25 years. Of that massive sum, New York will get $25 billion, or more than 10 percent. New York City was the first of the state and local governments to cash in on the agreement, which settles claims to recoup state Medicare costs for caring for sick smokers. In November 1999, it issued $709 million in so-called tobacco bonds, to be repaid through payments made pursuant to the settlement. Others quickly followed, including Nassau County (nearly $300 million) and Westchester County (more than $100 million). To date, some $5 billion in tobacco bonds have been issued, with New York counties accounting for about a third of the total. Tobacco bonds are now the fastest growing segment of the tax-exempt bond market. This tide of money flows entirely on the assumption that the settlement agreement, a notoriously complex, 100-page document that even its supporters admit is far from perfect, is legally sound. With such high stakes, the parties to the agreement are not taking any chances. They have earmarked $50 million toward its defense, and thus far have successfully staved off a half dozen or so court challenges. But the tide could soon turn. Ovevr the summer, the 3rd U.S. Circuit Court of Appeals unanimously dismissed an antitrust challenge to the settlement by A.D. Bedell Wholesale Co., a wholesale distributor who contends that the settlement prevents it from distributing discount cigarettes. Yet that seeming defeat may turn into a stunning victory for Bedell and others who seek to have the tobacco agreement invalidated. As described by one of Bedell's lawyers, Leonard Violi, a partner at New York's Windels Marx Lane & Mittendorf, the decision, A.D. Bedell Wholesale Co. v. Philip Morris, 263 F.3d 239 (3d Cir. 2001) leaves "a gaping hole" in the settlement's structure. Last week, Bedell's lawyers filed a certiorari petition with the U.S. Supreme Court to hear the case on appeal. Although statistically the odds that the justices will take the case are slim, Violi expressed confidence that they will bite. CARTEL ALLEGED Bedell contends that the agreement illegally protects the market share of the participating tobacco companies -- who together control 98 percent of the market -- while they pay off the settlement. Specifically, the sections Bedell complains of are the "renegade clause," the settlement's primary mechanism for allocating payment responsibilities based on companies' production levels, and the provision calling for "qualifying statutes," which are state laws passed pursuant to the agreement that require non-participating cigarette manufacturers to pay into escrow accounts moneys for each sale made. Bedell claims that the settlement and the qualifying statutes, which all the participating states have passed, create an output cartel that imposes draconian monetary penalties for increasing cigarette production, and effectively bars new entry into the market. The behavior of the tobacco industry in the three years since the settlement was reached seems to some to point toward the existence of a cartel. Immediately after signing the agreement, Philip Morris and R.J. Reynolds announced the largest price increase in the industry's history -- 45 cents a pack. The companies did not stop there. As Violi pointed out, they hiked prices two more times, all told generating revenues of nearly $14 billion in the year 2000, or over twice as much as they needed to fund the settlement payments for that year. The tobacco companies contend that the cartel -- if indeed it is a cartel, which they dispute -- is inoculated from the antitrust laws under two legal tenets. First, they argue, the Noerr-Pennington doctrine permits them, as private competitors, to petition the states for an antitrust exemption. (The doctrine arises out of two Supreme Court cases, ERR Presidents Conference v. Noerr Motor Freight Inc., 365 U.S. 127 [1961], and United Mine Workers v. Pennington, 381 U.S. 657 [1965].) The tobacco companies also claim immunity under Parker v. Brown, 317 U.S. 341 (1943), which exempts from antitrust violations both states acting in their sovereign capacity and the private industries being acted upon. ANTITRUST DOCTRINES In Bedell, the 3rd Circuit agreed that the tobacco companies are protected under the Noerr-Pennington doctrine, holding that although the High Court has yet to directly address whether settlement negotiations with state governments are covered, it saw no reason not to extend immunity to this type of activity. "Freedom from the threat of antitrust liability should apply to settlement agreements as it does to other more traditional petitioning activities," the appeals court stated. Although it could have stopped there, the 3rd Circuit went on to analyze whether the defendants are also entitled to Parker immunity, and concluded they are not. Although the settlement as a whole was a product of "sovereign state action," the court found, the states do not actively supervise the parts that form the basis for the alleged antitrust injury -- specifically, the tobacco companies' ability to raise prices and restrict output. "These decisions are left entirely to the private actors," the court said. Violi argues that if allowed to stand, the decision would effectively "eviscerate" Parker, and as such needs to be heard by the justices. Antitrust experts agree that the 3rd Circuit decision is problematic. "Noerr-Pennington protects the petitioning process, including the settlement," said Herbert Hovenkamp, a professor at the University of Iowa College of Law who co-authored a treatise on antitrust law that is widely regarded as definitive. "But it does not protect against subsequent decision-making," such as the alleged output cartel complained of here, he added. He said that in his opinion the decision was incorrect: "I found the court's decree dismissing the complaint to be completely inconsistent with the prior analysis." The settlement's defenders brush aside such arguments. Several people, although declining to speak on the record, noted that the Parker analysis is only dictum, and thus not binding. They also point out that the issue of whether the agreement is indeed anti-competitive -- an allegation that the court adopted to decide the motion to dismiss before it -- has not in fact been litigated. Besides, said one lawyer, the court's findings on these issues are immaterial because "Noerr-Pennington provides a complete defense." Some experts contend that the real danger the Third Circuit's decision poses is not to the tobacco companies, but rather to the states. Robert A. Levy, an antitrust scholar with the Cato Institute, a libertarian think tank in Washington, D.C., submits that the decision suggests a new round of antitrust suits against the states rather than the tobacco industry. Noerr-Pennington, he noted, does not apply to the states, since only private parties can petition under it. That leaves Parker immunity, which he said is "a dead letter" under the 3rd Circuit's ruling. He also said such a challenge is an "odds-on bet." "They may be correct in saying that someone will file a suit, but that's a long way from saying they are going to prevail," countered Julie Brill, a Vermont Assistant Attorney General who is the lead tobacco attorney for the state. She said the decision did not trouble her: "The notion that the states are somehow vulnerable because of anything that appears in the opinion is absolutely a misreading of the decision." Brill pointed out that the court found that actions by the tobacco companies, not the states, formed the basis for the alleged antitrust injuries. "The bottom line is that there is nothing in the decision that says the states have done anything wrong." Whatever happens with the 3rd Circuit decision, the story of the Master Settlement Agreement is far from over. No doubt, the legal attacks will continue, and at least one portfolio manager, Josh Gonze, of Thornburg Investment Management in Santa Fe, N.M., has decided the risks the bonds carry are not worth the potential upside. The problem, he said, is that tobacco bonds have only one repayment source -- the settlement agreement. If that agreement is invalidated, he explained, then payments made pursuant to it would cease and the sole repayment source for billions of dollars in bonds would disappear. The settlement's supporters express confidence that in the end they will prevail, and even its critics admit they have an uphill battle. "The combination of forces against a challenge to the agreement is most formidable," said Levy of the Cato Institute. On one side, "you have the states being enriched, the attorneys general seeing their political ambitions realized, trial lawyers becoming instant millionaires and recycling their money back into legislation, and the tobacco industry getting its market protected," he said. "On the other side, you have a few little tobacco companies." And the magnitude of what is at stake could also operate to keep the agreement intact. As one defense lawyer pointed out, "endangering the agreement would wreak horrendous financial havoc for everyone involved." That could be enough to keep the courts from upsetting the apple cart, he said. If the tobacco agreement is invalidated, explained one portfolio manager, then payments made pursuant to it would cease and the sole repayment source for billions of dollars in bonds would disappear.

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