Tobacco Master Settlement Agreement - Criticism of The MSA

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 "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."

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. 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 would be faster if federal policymaking matched both the rigor of the scientific evidence against tobacco use and the resolve of antitobacco advocates." Cigarette consumption in the United States fell to a 50 year low in 2004.

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.

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."

The argument the Master Settlement Agreement created a cartel of the major U.S. cigarette makers, allowing them to charge "supracompetitive" prices for their product, was rejected by the U.S. Court of Appeals for the Ninth Circuit in 2007. The appellate court concluded that the Plaintiffs had not alleged sufficient facts to show that the MSA and two related state laws violated the federal Sherman Act.