Commentary: Big Tobacco Makes A Stinky Bedfellow

No sooner had the attorneys general of eight states inked their historic deal with Big Tobacco than antismoking activists were pleading with other fence-sitting states: Don't sign it. Smoking foes argued that the $206 billion settlement was riddled with loopholes.

No such luck. By Nov. 20, just one week after the deal was announced, the 46 states that hadn't already settled with tobacco signed--to meet a deadline pushed by the industry. "It's hard to say that getting $7 billion over 25 years isn't in the long-term interests of Massachusetts citizens," says George K. Weber, chief of tobacco litigation for the state.

He's right--if the goal is fattening state coffers. The governors can't wait to collect so they can enact popular tax cuts or education programs. Says University of Florida law professor Lars Noah: "This was the state AGs deciding to get as much as they can while the industry was still interested in making a deal."

On the other hand, if the goal is to reduce smoking and tobacco-related health-care costs, then it's not very successful. For example, Big Tobacco agrees not "to take any action the primary purpose of which is to initiate, maintain, or increase the incidence of youth smoking." But kids will still be able to get tobacco-branded clothes and gear from coupons in cigarette packs--and a survey in Massachusetts showed that kids with such merchandise were three times as likely to smoke. Large billboards advertising smoking are banned. But companies can coat neighborhoods with smaller signs.

Or consider the $1.45 billion to fund a national foundation to reduce smoking. Under the agreement, the money can't be used to tell consumers how the industry manipulates public opinion--even though studies have shown that's the most effective antismoking message for kids. When it comes to public health, the deal "is a complete sham," concludes cardiology professor and antismoking activist Stanton A. Glantz of the University of California, San Francisco.

The deal also closes off key lines of attack for antismoking litigators. Suppose a city wants to sue tobacco to recover the costs of smoking-related illnesses, much as the city of Chicago is now doing in suing gun manufacturers. The deal precludes such local suits--even though no city is party to the deal.

The deal's worst flaw, however, is that the money puts the states squarely into bed with industry. Big Tobacco added a provision that shrinks the payout to states if companies' market share drops or the federal government hikes cigarette taxes. That means every dollar collected by new federal taxes would mean a dollar less for the states, and a 35 cents per pack tax hike would leave the states with nothing.

State lawyers say higher cigarette prices are a good thing, period. "Our true goal is reducing smoking. We are willing to give away state dollars to do that," says one AG aide. But imagine what will happen if Congress decides to raise cigarette taxes. Suddenly, 46 governors would risk losing much or all of the tobacco money they'd expected. The deal gives them a strong incentive to lobby against the move. No wonder Wall Street has bid up shares of Philip Morris Cos. and RJR Nabisco Inc. by 9.8% and 12.4%, respectively, since details of the deal began to surface Nov. 9.

This may be the best settlement anyone could have struck with the industry. And it's less frightening than the one proposed in June, 1997, which would have given companies immunity from private suits. Still, state AGs should have learned from the story of Dr. Faustus: Some deals are better not made at all.