Cigarette Makers Could Recoup $2 Billion From States

Smokers Always Welcome
Smokers Always Welcome

Such a strange settlement in the first place, but 1998 is a lifetime ago, and tobacco attorneys have been billing millions of dollars in the ensuing years. State budgets in 1998 were a lot more robust as well.

Big cigarette makers could recoup $2 billion under a proposed deal with state attorneys general to resolve a long-running dispute over payments required by the landmark 1998 tobacco settlement.

Negotiators for Altria Group Inc.’s Philip Morris USA and other tobacco companies have reached a tentative deal with officials representing the 46 states that signed the 1998 Master Settlement Agreement, say people familiar with the matter.

The accord would allow big tobacco companies to keep part of the money they have withheld from states or otherwise disputed under the 1998 pact, under which they agreed to pay more than $200 billion to help states recover the costs of treating sick smokers.

States and the companies have battled over $7.1 billion that the companies argue they shouldn’t have to pay on sales from 2003 through 2010. The dispute revolves around the companies’ contention that they have lost business because states haven’t adequately sought payments from smaller competitors not party to the 1998 pact.

The bigger companies say some of those rivals enjoy cost advantages that allow them to sell cigarettes at lower prices, luring more customers in a sluggish economy. The states maintain that their authorities have done what is required under the 1998 pact.

Under the new deal, cash-strapped states would collect several billion of the disputed dollars. The deal also would rewrite rules related to how states collect fees and taxes from smaller companies that haven’t joined the 1998 settlement.


If it goes through, the biggest loser could be Native American cigarette companies, which have become strong competitors with their low-priced brands. The deal would require states to adopt rules forcing these companies to start paying state excise taxes and fees for sales on tribal lands, which could force them to boost prices. Lawyers representing Indian cigarette interests are threatening legal challenges.



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