Tobacco Companies Escaping Liability

Having experienced unprecedented reversals in the regulatory arena, the courts and the court of public opinion, Big Tobacco is seeking to escape from unbounded liability for the massive damage it has inflicted on human health and from anticipated new regulatory and legislative initiatives.

As always, the tobacco companies’ forum of choice is a closed backroom. Earlier this year, the tobacco titans sat down with state attorneys general who had launched innovative lawsuits against the industry, private trial lawyers and two public health advocates, and in secret hammered out a grand, sweetheart deal.

Because of the breadth of the deal, it requires federal legislation to be enacted. President Clinton’s advisers have reviewed the deal in recent months and will soon submit their assessments.

News reports suggest President Clinton may support a revised version of the deal But to preserve his legacy as the president who began to turn the tide against Big Tobacco, Clinton should reject the deal entirely, or at least postpone taking a position. The deal is fundamentally flawed and cannot be fixed.

— The deal would effectively deny industry victims, including the youthfully addicted and victims of second-hand smoke, the right to sue the industry, granting the tobacco giants virtual immunity from litigation. The deal would prevent class actions or any consolidation of individual suits, and would stop individuals from recovering punitive damages. Under these conditions, virtually no one will bring private suits, since it costs so much to fight the industry.

— The proposal would enable Big Tobacco to continue to conceal its secret documents — widely believed to show how the companies lied to regulators, deceived the public and connived to sell cigarettes to children.

— The deal would handcuff the Food and Drug Administration (FDA) in any future efforts to regulate nicotine and other cigarette ingredients, stripping the agency of much of its existing authority. It imposes onerous requirements for FDA action, and provides a wide array of opportunities for clever tobacco company lawyers — masters of obstruction — to delay agency initiatives interminably.

— The deal says nothing about the international operations of the tobacco cartel, and would give the companies a free hand to expand their activities in the Third World, Eastern Europe and the former Soviet Union. In many of these regions, the companies operate with virtually no restraint, hooking children with free cigarette samples, television advertisements, rock concert sponsorships and an array of marketing devices that would not be tolerated in the United States.

— Even the best selling point of the deal — the requirement that the tobacco companies pay $368 million over 25 years — is overblown. The payments would be tax deductible, meaning taxpayers effectively pick up 40 percent of the costs. Discounted over time and for the tax deduction, the cost to the industry is about $122 billion. The industry will pass this cost on to consumers with a 50-to-70 cent price increase — an amount that industry analysts say will not affect company profits.

These are the components of a deal that no politician should rush to embrace. President Clinton, at the very least, should postpone taking a formal position on the deal until next year. In January, the state of Minnesota is scheduled to begin its case against the industry. Minnesota Attorney General Hubert Humphrey III promises that he will be introducing not just smoking guns, but “smoking howitzers” in the case. When he does, the proposed terms of the deal are likely to look even more generous to the industry than they do now.

Clinton would lose nothing by waiting to adopt a position, because Congress is not expected to consider legislation to implement the proposal until next year.

The public health gains are likely to be far greater without a deal than with one. Without a deal, the state suits and the class actions will proceed, with ever increasing rates of success.

The Mississippi and Florida individual state settlement show what can be extracted from the industry, without promising any victims’ rights. The lawsuits will also bring more and more document disclosures, revealing the tobacco companies’ historic mendacity. That will change the political climate, making higher tobacco taxes and tough industry regulations, potentially including limits on the companies’ overseas operations, possible.

There are some in the Clinton administration who advocate the president support the deal, as long as few of its most objectionable provisions are fixed. This is a mistaken approach, because the basic framework of the compact is irreparable; it makes concessions to the industry when it should only make demands. The United States doesn’t permit horse-trading with hard drug dealers, and it should not be allowed with tobacco drug dealers either.

Recent Posts

The Official Site of Ralph Nader