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The Tobacco Master Settlement Agreement (MSA) is an agreement, originally between the four largest US tobacco companies and the Attorneys General of 46 states, that provides for restrictions on practices by the companies and payments by them to the states to compensate for the cost of providing health care for persons with smoking-related illnesses. In exchange, the state settled existing litigation on these matters, and the companies are protected from most forms of future litigation regarding harm caused by tobacco use. The MSA is the largest civil settlement in United States history.¹

Provisions

The MSA arose out of many separate legal actions brought by various individual States against the tobacco industry for Medicaid costs associated with smoking-related diseases. The agreement was originally negotiated between the four largest tobacco companies and 46 U.S. states and 6 U.S. territories. The MSA ultimately exempted the companies from tort liability from state governments and settled the lawsuit in exchange for a combination of yearly payments to the states and voluntary restrictions on advertising and marketing of tobacco products. The MSA also created and currently funds the American Legacy Foundation, an anti-smoking advocacy group that is responsible for such campaigns as The Truth. The settlement dissolved the tobacco industry groups Tobacco Institute, the Center for Indoor Air Research, and the Council for Tobacco Research. ^2:25

The agreement is meant to provide state governments with compensation for smoking related medical costs and to help reduce smoking in the United States. There is no limit to the yearly settlement payments; they are perpetual.

History of adoption

The Global Settlement Agreement was a first attempt at a settlement between the state attorneys general and the tobacco companies. On June 20, 1997, Mississippi Attorney General Michael Moore and an group of other attorneys general announced the details of the settlement. The settlement included a payment by the companies of $365.5 million, agreement to possible Food and Drug Administration regulation under certain circumstances, and stronger warning labels and restrictions on advertising. In exchange the companies would be freed from class-action suits and litigation costs would be capped.^3:422

The attorneys general did not have the authority to grant all this by themselves: the Global Settlement Agreement would require an act of Congress. Senator John McCain carried the bill, which was much more aggressive than even the global settlement.^{3:422, 427} But the bill failed, due to a lack of consensus among the public health community over whether there should be a settlement, renewed lobbying by the tobacco industry, and lack of interest among the general public.^3:423–429 The agreement was then revised in a much weaker form as the Tobacco Master Settlement Agreement; the restructuring created an agreement that could be made by the attorneys general and the tobacco companies without any action from Congress.^3:432

The MSA was originally signed in November of 1998 by the four largest tobacco companies, Philip Morris USA, R. J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corp., and Lorillard Tobacco Company. The agreement was later joined by over 40 other tobacco companies. Every U.S. state and 6 U.S. territories signed the agreement. Florida, Minnesota, Texas and Mississippi had already reached individual agreements with the tobacco industry.

Criticism of the MSA

Some anti-smoking advocates, such as William Godshall, have criticized the MSA as being too lenient on the major tobacco companies. In a speech at the National Tobacco Control Conference, Godshall made claims that "[W]ith unprecedented future legal protection granted by the state A.G.'s in exchange for money, it appears that the tobacco industry has emerged from the state lawsuits even more powerful."⁴

An article in the Journal of the National Cancer Institute described the MSA as an "opportunity lost to curb cigarette use", citing public health researchers' views that not enough of the MSA money was being spent on anti-smoking measures.⁵ Dr. Stephen A. Schroeder wrote in the New England Journal of Medicine that "Although U.S. smoking rates are slowly declining, progress toward that end [decreasing smoking] would be faster if federal policymaking matched both the rigor of the scientific evidence against tobacco use and the resolve of antitobacco advocates."⁶ Cigarette consumption in the United States fell to a 50 year low in 2004.^{citation needed}

Another criticism is the alleged favoritism shown to the major tobacco companies over smaller independent tobacco growers and sellers. Proponents of this argument claim that certain restrictions on pricing make it more difficult for small growers to compete with "Big Tobacco". Twelve states have successfully fought against this argument in court during the last two years and the enforcement of the MSA continues throughout the United States in perpetuity.

Fellows within the Cato Institute, such as Robert Levy, assert that the lawsuit that brought on the tobacco settlement was instigated by a need to make beneficiary payments to Medicare recipients. Following the passage of laws that eliminated the tobacco companies' ability to provide evidence in court for their defense, the tobacco companies were forced to settle. The big four tobacco companies agreed to pay the state governments several billion dollars but the government in turn was to protect the big four tobacco companies from competition. The Master Settlement Agreement, they argue, created an unconstitutional cartel arrangement that benefited both the government and big tobacco.⁷⁸

Robert Levy states,

"For 40 years, tobacco companies had not been held liable for cigarette-related illnesses. Then, beginning in 1994, led by Florida, states across the country sued big tobacco to recover public outlays for medical expenses due to smoking. By changing the law to guarantee they would win in court, the states extorted a quarter-trillion-dollar settlement, which was passed along in higher cigarette prices. Basically, the tobacco companies had money; the states and their hired-gun attorneys wanted money; so the companies paid and the states collected. Then sick smokers got stuck with the bill."⁹

Securitization

In the ten years following the settlement, many states have been persuaded to sell so-called "tobacco bonds." They are a form of a securitization. As a result, many states have a perverse incentive to support the tobacco industry, on whom they are now dependent for future payments against this debt. ¹⁰

See also

• Operation Berkshire

Notes

1. ^ Milo Geyelin (November 23, 1998). "Forty-Six States Agree to Accept $206 Billion Tobacco Settlement", Wall Street Journal. 
2. ^ (1998). "Master Settlement Agreement" (PDF). National Association of Attorneys General. Retrieved on 2008-07-30.
3. ^ ^{a b c d} Brandt, Allan M. (2007). The Cigarette Century: the Rise, Fall and Deadly Persistence of the Product That Defined America. New York: Basic Books, a member of the Perseus Books Group. ISBN 9780465070473. 
4. ^ Giving 10% to gain eternity, Tobacco Control 1999;8:437-439 (Winter)/
5. ^ Renee Twombly, Journal of the National Cancer Institute, Vol. 96, No. 10, 730-732, May 19, 2004 DOI: 10.1093/jnci/96.10.730 [1]
6. ^ Steven A. Schroeder, M.D., Tobacco Control in the Wake of the 1998 Master Settlement Agreement, New England Journal of Medicine, January 15, 2004.
7. ^ http://www.cato.org/pubs/pas/pa371.pdf
8. ^ Reason Magazine - Puff, the Magic Settlement
9. ^ The Cato Institute: Speakers Bureau - Robert A. Levy
10. ^ http://redtape.msnbc.com/2008/11/ten-years-later.html

External links

• Text of the Master Settlement Agreement
• Tobaccodocuments.org Database of documents released under the terms of the MSA.

Wikipedia content modification information:

• This page was last modified on 22 November 2008, at 03:59.

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