Thursday, February 26, 2004
Continuing to Plug Holes in the Tobacco Settlement
Vice Squad has been following some of the issues surrounding the "avoidance" of the 1998 tobacco settlement by manufacturers that were not parties to the agreement. States are trying to ensure that the non-signatories don't gain a competitive advantage, as that would undermine the flow of tobacco payments to the states. The agreement itself and further action at the state levels might even be described as extraordinary efforts at limiting avoidance of the settlement parameters.
Today, Pennsylvania has announced that it has settled a case with a non-participating manufacturer. The firm had been a bit torpid in setting up and maintaining its escrow account, as mandated by state law (following the settlement). As Vice Squad recently noted, the justification for this mandated account is, shall we say, imaginative. The funds are supposed to cover future claims against non-settling firms, though the real purpose is to keep the settlement cash flowing.
In other tobacco settlement news, California has been suing R.J. Reynolds on the grounds that the tobacco firm violated the 1998 agreement by continuing to target underage consumers in advertising. The appeals court upheld a lower court finding against Reynolds, but overturned the $20 million fine, "ruling that the amount was based on the company's national print advertising budget rather than the amount spent in California." The California case is not to be confused with the ongoing suit by the US government against Big Tobacco concerning advertising allegedly aimed at underage consumers.