Another Tobacco Lawsuit (Yawn)

By Holman W. Jenkins, Jr.
Copyright 1999 Wall Street Journal
September 29, 1999

Contrary to anything you might read, piling up lawsuits on tobacco companies doesn't do anything to stop smoking. Even driving tobacco companies into bankruptcy wouldn't mean they'd stop producing cigarettes.

Banning their advertising doesn't stop people from smoking cigarettes either. Brand names do not die because they are not advertised. Remember Burma Shave? Nor would it make smoking any less of a rite of passage. Nobody advertises "bidi" cigarettes from India, packing several times the nicotine and tar of a normal cigarette. Yet these have become the latest teenage craze.

Stopping their ads would simply freeze the relative positions of the brands in the marketplace so the Big Four could raise prices without losing sales. The Big Four--Philip Morris, R.J. Reynolds, BAT and Lorillard--aren't the only cigarette makers in the U.S. There are about 50 others. In fact, this would be a good time to start a new one.

These smaller companies won't pay the lawsuit tax, so they'll be free to make huge profits under the umbrella of Big Tobacco's price hikes. The states have agreed not to sue Little Tobacco as long as they don't increase their market share by more than 25%, which would cut too much into the government's take from the Big Four.

So the government war on smoking has become pretty much a joke, and that includes the latest lawsuit. Wherever Bill Clinton got the idea of a federal case against the Big Four that he slipped into his State of the Union speech earlier this year, it didn't come from the Justice Department. The pros there said a federal suit wouldn't fly.

Lo and behold, a suit was filed last week anyway. Like an unhappy spouse, though, the career staffers got their revenge in the fine print.

For one thing, the damages sought aren't the $20 billion the government claims to spend annually on sick smokers. The damages are only the portion attributable to the offenses with which the tobacco companies are charged--i.e. obfuscating the dangers of smoking.

The operative assertion that the government would have to prove appears on page 54 of the complaint: "Members of the public believed in the truth and completeness of the statements made by defendants and their co-conspirators. They relied upon the statements by defendants and their co-conspirators ... and demonstrated that reliance by purchasing and smoking cigarettes, and by refraining from trying to quit or reduce their consumption of cigarettes."

Somebody at Justice has a sense of humor. Surveys as far back as 1974 have shown that 99% of seven-year-olds understand the dangers of smoking.

Second, under Medicare and other health-care recovery laws, the government can claim damages going only back six years, at most.

Enter Al Gore, witness for the tobacco companies.

From 1966, every pack had a warning on it. That warning was revised in 1984 under the auspices of a certain congressman from Tennessee. "This bill represents a progressive and courageous step by the tobacco industry that caught many by surprise," Mr. Gore, himself a former tobacco farmer, said at the time. "This has been a bitter pill for them to swallow, but in doing so they have made stiffer punitive legislation less likely in the years ahead."

Notice the suggestion of implied immunity?

The government presents itself as victim in this case. Yet everybody now agrees the government collects more in taxes and saves more in Social Security payments than it pays in medical expenses.

Last week's lawsuit was launched to revive the tobacco issue for next year's election. The cigarette industry issued its usual statement about how about it would fight the case to the death. We've heard that before.

Two years ago, the industry agreed to a financial settlement, plus advertising restrictions and other regulations, beyond anything contemplated in this case or the lawsuits already settled by the states. Once the election is over, this case will be settled too. The industry has figured out that its future lies in helping the government become more complicit in the tobacco habit. The government has figured out it needs the industry's private shareholders as a figleaf even as government becomes the main beneficiary of tobacco profits.

Already the states involved in the Medicaid settlement have fully incorporated tobacco revenues in their spending budget for the rest of time. Their dirty secret was their deliberate phasing in of higher prices, so smokers wouldn't quit from sticker shock.

In Ohio, they're having a fine debate about whether to spend the tobacco windfall fostering the biotech industry. That would make some biotech engineers and entrepreneurs very grateful. Other states are engaged in similarly delicious decisions. Politicians enjoy hanging around with people who are grateful.

At the federal level, the Democrats have Medicare expansion in mind and other entitlements for the middle class that, in elections ahead, they will want to accuse the Republicans of trying to take away. Tobacco money will help pay for these programs.

The crypto-nationalization of the Big Four, perversely, has made the cigarette industry attractive again for private enterprise. Spain's Tabacalera is just one of several foreign brands taking a new look at the U.S. market. Eventually there will be a flourishing smuggling trade as well. More than 15% of beer bought in France is now consumed in Britain. By the same osmosis, cartons of cigarettes have begun to flow back into the U.S. from tax-free Indian reservations and from Canada.

Why do politicians lie? Why is lying virtually a bodily function of politicians? We take a view of politics here that makes it hard to condemn them for being poll-driven mouthpieces, uttering whatever cant is currently in demand. This is a democracy. If you can find one thing everybody agrees with--say, teenagers shouldn't smoke--cling to it as the rock of salvation.

The life of a politician isn't all bad. The truth may be a foreign land about which they know little, but there is the satisfaction of bossing large amounts of money around. Under a deal between the Big Four and the private lawyers who represented the states, the lawyers will receive $500 million a year in perpetuity from future smokers. That's a lot of millionaires who will have to stay grateful to the politicians lest anything interrupt this flow of money. Like, say, a real war on smoking.

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