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  • Supreme Court Is Asked to Strike Down Tobacco Settlement

    Last week the Competitive Enterprise Institute, a Washington-based free-market advocacy group, filed a petition with the U.S. Supreme Court to review the 1998 tobacco Master Settlement Agreement on the grounds it violates federal antitrust laws and is unconstitutional.

    The tobacco MSA is the result of 46 state attorneys general striking a deal with the four major tobacco companies in 1998 to settle Medicaid lawsuits over tobacco-related health care costs. Tobacco companies agreed to fork over $246 billion to the states over 25 years and adhere to restrictions on advertising, marketing and promotion of cigarettes.

    Never mind that smoking already generates huge sums of tax revenues and saves taxpayers’ dollars on entitlement expenses when smokers die before they can draw benefits. The New England Journal of Medicine put it this way:

    “If people stopped smoking, there would be a savings in health care costs, but only in the short term. Eventually, smoking cessation would lead to increased health care costs.”

    In its filing, CEI argues that the Big Tobacco companies saw an opportunity to solidify their respective shares of the market against competition while avoiding future lawsuits  by the government.  By settling, state attorneys general and Big Tobacco now share the goal of keeping major companies profitable, so they can continue funding state budgets.

    “The state AGs imposed a massive national sales tax on cigarettes, without a single elected legislator at any level of government voting for it,” according to CEI general counsel Sam Kazman. “This is a major power grab by state AGs at the expense of citizens.”

    The plaintiffs, a discount tobacco company, a tobacco shop and an individual smoker, are represented by the lead counsel Erik Jaffe in the case. The petition to the Supreme Court is a long time coming after five years of litigation; the legal challenge primarily rests on the Constitution’s Compact Clause which states, “No State shall, without the Consent of Congress … enter into any Agreement or Compact with another State.”

    CEI argues that the multi-state tobacco settlement clearly violates that provision and sets an alarming precedent of government using litigation rather than legislation to impose taxes and regulations. The MSA also puts smaller competitors, who were not part of the state lawsuits or settlements negotiations, in peril by requiring them to make major escrow payments to the states.

    By no means the worst part of this scheme, but also noteworthy, is that funds from the tobacco companies go to an anti-smoking advocacy group, American Legacy Foundation, creators of TheTruth.com commercials. Aimed at young people, the campaign relies on hyperbole and sensational ads to convince Americans not to smoke.

    Camilo Rodriguez is currently a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm

    Posted in Legal [slideshow_deploy]

    3 Responses to Supreme Court Is Asked to Strike Down Tobacco Settlement

    1. Michael says:

      It appears that this racket is about half over. If the high court doesn't rule for the plaintiffs, who will fund state budgets, Medicaid and anti-smoking ads after 2023? If they do rule for the plaintiffs, how will the states make up this budget shortfall now? Raise tobacco taxes or worse yet raise sales and income taxes?

      If smoking really killed people, shouldn't it be completely banned? Not as long as it generates tax revenue. The FDA is threatening to ban fusion drinks because they are "dangerous"; aren't we told tobacco is even worse? If there was a "fusion" tax, I bet they would leave it alone. There has to be a better way to keep gov't from banning "dangerous" products other than letting them tax it.

      No bans and low, non-discriminatory taxes. We're all going to die anyway.

    2. TheCivilRoar.com says:

      The Master Settlement Agreement is an awful example of state collusion and unconstitutional infringement on commerce/liberty – hopefully CEI can take this further!

      Yet in terms of arguing the case, putting the NE Journal of Medicine quote in a positive light raises concerns:

      > “If people stopped smoking, there would be a savings in health care costs, but only in the short term. Eventually, smoking cessation would lead to increased health care costs.”

      Yes, health care costs would increase because more people would be living longer. If we believe in the sanctity and inherent worth of human life, this is a positive outcome. As we champion free market principles, the values of life, liberty and the pursuit of happiness are not in conflict with each other — all are inalienable rights that should be upheld.

      Setting up a scenario where the loss of human life results in economic gain is an incomplete, false story – and there's already enough half-truths in politics.

    3. Earl, QUEENS, NY says:

      Regardless of how one feels about tobacco, why let emotions stand in the way of good judgment?? Can anyone who’s been around the past 4 decades honestly say that he/she never knew smoking could be hazardous to your health?? GET REAL!! Common sense should tell anyone that lawsuits against the tobacco industry are frivolous!! Common sense should also say that the costs of lawsuits will be passed on to the consumer in the form of higher prices (whatever the product may be). My biggest beef about the tobacco industry is the fact that they never should’ve settled, but instead should’ve fought the crooked politicians of Florida and other states which filed such frivolous suits claiming people were duped by the industry. In addition to higher excise taxes, the costs of these settlements have no doubt added to the inflated price of cigarettes. This is another good reason (in addition to the high cost of health care and malpractice insurance) to say we really need tort reform. With the help of rich greedy trial lawyers, there are many drones and moochers turning our legal system into a lottery.

      And while on the subject, I’m tired of all the double talk and baloney we hear from do-gooders, leftists, statist Demon-crats, etc. E.g., their fear-mongering often says that smoking kills 400,000+ Americans each year. Yet I never hear them break down that number into age groups. My guess is that doing so would indicate the majority of deaths are at an age at which the victims will face death panels and get the shaft under Obamacare (which needs to be repealed – yesterday or sooner!!) even if they never smoked. And I bet very few, if any, deaths are before the age of 20 or 30. YES!! They also like to demagogue by saying they care about kids!! Absolute nonsense!!!! These liberal morons always rant about the tobacco and fast food industries, whose products could harm kids later in their adult years. If they really cared about kids, wouldn’t they instead go after the abortion industry?? Abortions outnumber tobacco deaths 2 to 1!! Thanks to the “Roe vs. Wade” ruling by the SCOTUS, abortions kill nearly a million more kids than the tobacco and fast food industries combined!! Think about it, nearly a million infants die long before they can smoke their first cigarette or eat their first Big Mac!! And let’s not forget the environmentalist wacko fascists. Thanks to the ban on DDT, millions of children have needlessly died of malaria. These demon-crats/ statists could care less about kids!!!!

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