In 1998, Big Tobacco agreed to cough up more than $206 billion over 25 years to 46 states in exchange for immunity from litigation. The states had sued the industry over the crushing costs of caring for sick smokers. But the lion’s share of the $40 billion they have pulled in so far has been used for pet projects or to plug budget holes in state budgets, while only a trickle has gone to educate the public about the risks of smoking.
Now, $1.2 billion of this year’s tobacco payout–and possibly more in future years–may be in peril. The major tobacco companies, including Altria Group’s Philip Morris USA and Loews’ Lorillard, which were the original signatories to the deal, known as the Master Settlement Agreement (MSA), complain that their collective market share has fallen from 99.6% in 1997 to 92% in 2003.
On Tuesday, an independent arbiter sided with the companies, saying that the marketing restrictions imposed on them from the MSA have been a “significant factor” in causing them to lose market share to upstarts that never signed on to the settlement.