The legal and political issues surrounding the tobacco industry include whether or not tobacco companies should be held liable for tobacco-related deaths of smokers and those related to second-hand smoke, as well as whether or not elected officials should be accepting money from the tobacco industry in order to win elections. When deciding where the responsibility lies in the case of tobacco, the facts can be turned to favor either side on the issue.
However, the tobacco industry has followed the governments guidelines, since guidelines have been established, while the government seems to want to place blame for peoples habits on the manufacturers of products that people choose to use. Tobacco Litigation: The first issue to examine is the issue surrounding the use of the judicial system in finding responsibility for the epidemic surrounding the tobacco industry. The tobacco industry is the defendant in the majority of cases brought before the judiciary and, historically, the majority of the cases have been decided in favor of the industry.
In a landmark case in 1988, the tobacco industry won a huge victory against Rose Cipollone. Ms. Cipollone died a horribly painful death from cancer. The defendant in the case was Philip Morris. Philip Morris council argued that it was the womans choice to smoke. This woman had even testified that she had gone to church every Sunday to pray that she would not get lung cancer. She knew the risks involved with smoking and chose to continue smoking. Philip Morris won the case. (Byrne, 189-190). For years the tobacco industry won case after case involving cancer victims that had smoked.
Even today, much of the litigation by smokers has been decided in favor of the industry. In July of 1999 the Louisiana District Court, 19th District decided the case of Robert Gilboy et al. V. The American Tobacco Co. , et al. in favor of the defense. The jury was not convinced that 45 years of smoking had caused Mr. Gilboys lung cancer. In the case of the Estate of Burl Butler, et al. V. Philip Morris, Inc. , et al. , the Jones County, Mississippi Circuit Court, 2nd District jury found the tobacco industry defendants not liable for the alleged second-hand smoke related wrongful death of Mr. Butler.
This case was decided in June of 1999. An important win for the defense was gained in Kansas City, Missouri in May of 1999. The case of Michelle Steele et al. V. Brown and Williamson Corp. was decided in U. S. District Court in Kansas City. The trial was the result of a wrongful death suit brought by the children of Charles Steele. The children were suing the tobacco company for their fathers death by lung cancer at age 56. Mr. Steele had smoked cigarettes for years. The outcome in this trial is not as important as the comments made by the jury foreman in the case.
Mr. White, the jury foreman, was quoted as saying that Mr. Steele knew what he was doing. He knew that cigarettes were bad for him, but that they gave him pleasure. He decided that the pleasure outweighed the dangers. (Trials, 1-3). While there have been some significant victories for the defense, there have been several recent verdicts from the judicial system in favor of the plaintiffs. The tobacco industry has already paid out billions of dollars in settlements over the past several years.
In an April 1999 case, Charles Connor V. Lorillard et al. six-person jury found in favor of the plaintiff for liability in the death of a former Kent smoker. The jury awarded $2 million in punitive damages and $225,000 in compensatory damages to Mr. Connor. The case was decided in a Baltimore, Maryland City Circuit Court. In March of 1999, Philip Morris suffered a loss in the case of Joann Williams-Branch v. Philip Morris, Inc. A Portland, Oregon jury ruled that the company was liable for the death of Jesse Williams and awarded $81 million to the plaintiff. This was not the first loss for Philip Morris.
In an earlier case, decided on February 9, 1999 by the Superior Court of California, San Francisco, Henley v. Philip Morris, Inc. , et al. , the jury awarded $50 million in punitive and $1. 5 million in compensatory damages to a smoker with lung cancer. The suit was brought on behalf of an older woman that was dying of lung cancer. She had smoked Marlboro brand cigarettes for most of her life. The jury found Philip Morris liable for product defect, failure to warn, negligence, fraud, false promise, express warranty, and conspiracy.
The trial judge reduced the punitive damages to $25 million, but the total award was still $26. illion for a person making a conscious decision to smoke cigarettes despite warnings that they are bad for a persons health. (Trials, 1-6). The U. S. Government Legislative Branch: While the main issue before the judicial system is liability, the legislative branch of the U. S. government has also been heavily involved in the tobacco issue throughout history. This brings the issue of regulations to the forefront in this matter. Since the first major restrictions, the 1965 Labeling Act requiring warning labels on all cigarette packages, there has been a steady stream of legislation concerning the tobacco industry.
In 1990, a federal law went into effect to permanently ban smoking on all flights within the continental U. S. , as well as flights between the continental U. S. and Puerto Rico or the U. S. Virgin Islands. This law covered flights of less than six hours that originated or terminated in Alaska or Hawaii, in addition to the flights within the continental U. S. In 1992, the International Civil Aviation Organization (ICAO) approved a resolution to urge restriction of smoking on all international flights. This led to the implementation of a complete smoking ban on any and all flights by July 1, 1996. (Involuntary Smoking, 1-2).
The following list, taken from the American Cancer Institute, the Centers for Disease Control and Prevention, and the Multistate Master Settlement Agreement of November, 1998, is just a smattering of the extensive legislation that has involved the tobacco industry over the years. This list is not all-inclusive and does not begin to tell the story of government interdiction into private industry: There are 46 states, including the District of Columbia, that restrict smoking in public places, the most extensive of the clean indoor air laws to include restaurants and private workplaces (20 states).
Forty-one states have laws that restrict smoking in state government worksites. All 50 states restrict the sale of tobacco products to minors. Twenty-three of the states may suspend or revoke a retail tobacco product license for violation of youth access laws. Twenty-two states restrict the distribution of free samples of tobacco products. Twenty-four states restrict the sale of tobacco products in vending machines. Forty-six states require licensing of anyone selling tobacco products. The multi-state Master Settlement Agreement (MSA) of 1999 requires the discontinuation of certain types of outdoor advertising, most notably billboards.
The MSA also prohibits the use of cartoons by participating manufacturers in advertising, promotion, packaging, or labeling of any tobacco products. All 50 states have an excise tax on cigarettes. Forty-two of these also have excise taxes on smokeless tobacco products. Thirty states have preemption provisions in their tobacco control laws, which means that localities cannot implement any more restrictive laws than the state has mandated. The above listing only touches the surface of tobacco legislation. The laws have become very restrictive of the tobacco industry. However, it was not always this way.
In 1933, the legislature actually passed laws that protected the industry. The Agricultural Adjustment Act of 1933 allowed the legislature to implement marketing quotas and price supports for tobacco farmers. These quotas and price supports effectively raised the farm-level price of tobacco. This led to slightly increased prices for tobacco products to consumers, which served to lower the consumption of tobacco products. It also allowed U. S. tobacco manufacturers to remain competitive in the world market for tobacco. Under the tobacco program, marketing quotas were set each year and were very successful in yielding higher prices for U. S. tobacco on both the U. S. and world markets. (Snell, 1).
The current legislative situation has changed dramatically from this law. There are currently over 50 bills pending in the House of Representatives and the Senate concerning tobacco in some way, the vast majority of which are for further restrictions being placed on the tobacco industry. This tremendous activity helps to explain why the executive branch of the U. S. government has also thrown its considerable resources against the tobacco industry by filing suit in the federal courts against the industry giants.
The U. S. Government The Federal Suit: The U. S. government, through the Department of Justice, filed a civil lawsuit against the major tobacco manufacturers for recovery of healthcare costs associated with the use of tobacco products. The government is attempting to recover billions of dollars the federal government spends yearly on smoking-related healthcare costs. The government alleges that the cigarette companies have conspired since the 1950s to defraud and mislead the public and to conceal information about the effects of smoking.
The governments suit relies on three federal statutes, including the Medical Care Recovery Act, the Medicare Secondary Payer Act, and the civil provisions of the Racketeer Influenced and Corrupt Organizations (RICO) statute. The government alleges that the RICO statutes apply to the cigarette companies because they have been defrauding the public by releasing misleading research, falsifying documents, and failing to warn consumers of research the companies conducted that confirmed that cigarettes were hazardous to health.
The federal governments suit is similar to the ones filed by the states, which resulted in more than $200 billion in a settlement paid to the states, but focuses on the costs incurred through the Medicare program, which is solely funded by the federal government. The government allegedly spends over $20 billion per year to treat smoking-related diseases. (DOJ, 1-3). The governments lawsuit alleges a substantial cost to American taxpayers for the care of millions of Americans who smoked and incurred alleged smoke-related illnesses.
The cost to the taxpayer is the central issue in the case. The cost the government reports is not the true cost when scrutinized in its entirety. Cigarette smoking actually results in a net gain for the government. The government spends more money treating nonsmokers, since they live much longer than smokers do. Also, since the government profits from excessive tax revenues received from smokers and tobacco companies, the government has greatly benefited from the tobacco industry. (Barr, 6).
To put the issue into perspective, figures are available for just three counties in northeastern North Carolina that show just a small amount of the exorbitant revenues the government collects from the tobacco industry. These three counties are not even located within the heart of tobacco country. However, they generate over $287. 4 million in excise and sales taxes for the state and federal government each year. Each acre of tobacco results in $21,616 in federal excise taxes per year. (Coltrain, 1). These figures do not include the subsequent sales tax levied on the purchase of a pack of cigarettes, effectively taxing the tax on a product.
The governments claim that smoking costs taxpayers money is unfounded. The government is making a net profit each year from the tobacco industry. The governments case is also hindered by the 1947 ruling by the U. S. Supreme Court that the federal government cannot recover medical damages from private companies without statutory authorization from Congress. The governments suit is simply an act of extortion, hoping the cigarette companies will settle the case out of court as they did with the states cases earlier.
When the tobacco industry settled the cases with the states, despite a string of victories in the courts, the precedent was set that the industry would rather settle than fight. The government has targeted this industry in the hopes that the industry will again cave in from the outside pressure of public opinion. (Barr, 7). This leads to the question of, why stop with the tobacco industry? The government could easily target other sectors of private industry. The alcohol industry is a prime target. There are over 105,000 deaths in the U. S. from alcohol-related causes. This is only 260,000 less than tobacco-related deaths per year.
Columbia, 1). The cost to society is estimated at around $50 billion per year. In spite of the statistics revealed concerning alcohol-related death, drinking and driving remains commonplace in the U. S. There has been inadequate attention given to the problem, since law enforcement and the judicial system have been completely ineffective in deterring drunken driving incidents. Despite these facts, the alcohol industry has increased its marketing spending in order to increase the consumption of alcohol. Most of this advertising has been focused on the young male (the same allegation levied against the cigarette industry.
Lucas, 1). These facts mirror the allegations the government has made against the tobacco industry. The major difference between the two industries is the fact that youth smoking is not illegal, but drinking underage is illegal in all states. The government is blaming the tobacco industry for youth smoking, yet a child can smoke a cigarette right in front of a policeman without fear of punishment. The only practice made illegal by the government is the sale of tobacco to minors. The sale of liquor to minors is also illegal, but the consumption of alcohol by a minor is also illegal.
Kids cannot drink liquor in front of a policeman without fear. The amount of money spent, annually, on alcohol related illnesses is not known, but it has to be substantial. Even so, the government has not tightened restrictions on the alcohol industry nor has it filed suit to recover any of these costs. The case is misleading. The government is suing the tobacco industry for the misuse of a lawfully manufactured product that is not defective in any way. The government alleges the industry misled the public and withheld information that would be detrimental to the sale of its product.
However, the government is setting a very dangerous precedent with this case. The government is to encourage free enterprise and also set forth the ideals of freedom and self-responsibility. Holding a manufacturer liable for the misuse of a lawfully manufactured product is unreasonable. (Barr, 8-9) The cigarette manufacturers have complied with every restriction the government has placed on the industry, including warning labels and non-advertising campaigns, as well as awareness campaigns concerning the dangers associated with smoking.
The government is now attempting to extort money from the industry on top of the windfall the government already receives each year. Tobacco as a Campaign Issue: This leads to the issue of accepting tobacco donations to campaign funds. Recent tobacco legislation has been thwarted in the Senate. Some say it is because of money from tobacco companies for certain candidates. However, the facts show that the tobacco industry contributes to a majority of the legislature, and the individual amounts of these contributions do not coincide with votes regarding tobacco issues.
As evidenced in exhibit 1, the Senate held a vote on June 17, 1998, at which opponents to the tobacco industry lost an important vote to push legislation through concerning the tobacco industry. The Senate needed 60 votes to limit debate and force a vote on the tobacco legislation. Exhibit 1 represents tobacco PAC and individual contributions to Senators for the last three election cycles (1993-98). The average total for the 42 Senators who voted against limiting debate (in favor of the tobacco industry) was $25,748. The average total for the 57 Senators who voted for limiting debate, however, was still $7,986.
The exhibit shows that both proponents and opponents of the tobacco industry willingly accept campaign contributions from the industry and from friends of the industry. The second issue is the use of huge tobacco litigation wins being used to bolster someone into a political office. The Democratic Party had hoped to capitalize on some large victories over the tobacco industry in last years major attorneys general class action lawsuit against the leading tobacco manufacturers to win gubernatorial seats in major states.
Two of the most outspoken opponents of the tobacco industry, attorneys general Hubert H. Humphrey III and Scott Harshbarger, ran for governor in their respective states of Minnesota and Massachusetts. Both of them are democrats and were instrumental in negotiating large settlements with the tobacco industry for their respective states. However, both lost their bids, Humphrey finishing a distant third behind Reform Party candidate Jesse Ventura and his Republican opponent, Norm Coleman in Minnesota. Both used the tobacco issue as a major part of his campaign platform.
There were several other potential candidates that lost major elections where the tobacco issue was heavily focused on in their platforms. (Torry & Schwartz, A02). Most agree that the issue had become impotent since the Senate Republicans had voted to kill the national tobacco bill last June and too much time had passed. Also, the industry made a concerted effort, through advertising campaigns, to paint the Democrats as candidates in favor of higher taxes. There was at least one election where the tobacco issue was used to defeat an opponent.
In Massachusetts, Acting Governor Paul Cellucci accused Harshbarger of being a taxer and spender because he supported a large tobacco tax, which was already in effect that funds Medicaid coverage for about 100,000 residents. Since Harshbarger ended up defending the tax, the campaign paid off for Governor Cellucci and he won reelection. The reason this tactic worked was not the tobacco issue itself, but the underlying elements in a candidates platform. The use of a victory over the tobacco industry has not been effective in winning an election, at least not yet.
Torry & Schwartz, A02). Philip Morris: In a recent article in Business Week, written by John A. Byrne, an in-depth view of the worlds largest tobacco manufacturing company shows the full scope of the tobacco issue. Philip Morris is one of the most reviled companies in the U. S. , however the company continues to be one of the worlds most generous corporations. The company contributes over $60 million in cash and $15 million in food to fight hunger, domestic violence, and to support the arts. Employees of the company contribute over $5 million a year to various charities.
But, the company fights an uphill battle, even when it comes to charitable contributions. Recently, the company awarded a $4. 3 million grant to the National 4-H Council but activists were quick to mount a lobbying effort to get state groups to reject the grants, alleging that Philip Morris generosity was little more than a public relations stunt to drum up new support for the ailing industry. More than half of the agencies have since turned down the funding. The company has been attempting to cut down on youth smoking by implementing forward-thinking campaigns against youth smoking.
Philip Morris has ended cigarette sampling, mail distribution of cigarettes, vending-machine sales, and mass-transit and outdoor advertising. The company has spent money and time to train more than 30,000 retailers on how to recognize face I. D. s and upped its investment in youth smoking-prevention programs to $100 million. This does nothing for the publics image of the tobacco firm and the stock has shown this disdain. In the words of the current Chairman and Chief Operating Officer, Geoffrey C. Bible, the company has become the dog of the Dow, whose stock has dropped off $83. 2 billion in value over the past several years.
All of this has forced the company to expand its overseas markets in order to survive in the corporate world. The main incentives to overseas marketing and capitalization are the fact that there are more tolerant nonsmokers abroad and the opposition is less organized, but the most important reason to move is the fact that overseas consumers are less litigious than in the U. S. But, the company plans responsibility in the overseas markets. The company now has 83 youth prevention programs in 55 countries in order to prevent attack on the industry. (Byrne, 176-192). The bottom line in the debate over the tobacco industry is responsibility.
This is a question that each person must answer for themselves, but the law is on the side of the tobacco firms and the political climate, though changing rapidly, must take into account the ramifications of regulations that are too stiff on an independent, legal industry before passing judgment. Tobacco is dangerous. No one disputes this claim any longer. However, the responsibility must remain with the individual. The state cannot hold an industry responsible for the misuse of a product. Tobacco is a risky product. Beer is a risky product. There are foods. that are risky products.
I think that adults are wise enough to make decisions about those things. I am concerned about a society that might restrict or restrain those choices. You know, today its tobacco. Tomorrow, maybe its beer. The next day, it might be hot dogs. I think Im capable of deciding whether or not I want to eat a hot dog. This quote is from Robert A. Eckert, Chief Executive Officer of Kraft Foods, Inc. (Byrne, 184) and vividly illustrates the slippery-slope possibilities surrounding more and more legislation of the tobacco industry. Economic Issues Since the 1930s, the United States government has strictly regulated the tobacco industry.
However, the last few decades have shown the most drastic regulations including the regulation of sale as well as advertising of tobacco in this country. The ultimate intention of the government is to reduce the amount of tobacco consumed by consumers in this country in order to provide healthier lives for the American population. The tobacco industry has seen the consumption of its products rise worldwide. It has grown in about 100 countries and takes in more than $275 billion in sales with about 1. 5 percent growth per year.
These numbers are in spite of a 2 percent decrease in the 1. illion smokers, which accounts for over one quarter of the worlds population, over the last decade (Hoovers). One may wonder how this is possible. One reason is that some government restrictions actually work in the tobacco companies favor. Since the tobacco companies are not allowed to spend virtually any money on marketing domestically, they have more money to spend on marketing overseas, where its markets continue to grow due to the prestige of the American blend cigarettes. This rise in tobacco use accompanies the rise of disposable income in these markets, where regulation and demonization have not had an impact yet (Masters, 87).
China consumes about 30 percent of all cigarettes produced, more than any other country. The China National Tobacco Corporation also leads the world in tobacco and cigarette production. The U. S. only accounts for about 10 percent, but the industry takes in about $45 billion yearly. This comes out to the average smoker spending more than $260 per year on tobacco products. Sales in the industry have also shown an increase in the past decade from just over $200 billion to well over $260 billion (Hoovers).
The U. S. bacco industry is extremely profitable because of the oligopoly the companies have, which makes entry into the market extremely difficult. The level of sales needed to justify the enormous legal cost associated with this controversial market also makes market entry difficult for new companies. Although tobacco companies profit margin is about double that of any other packaged good, the substantial costs of packaged goods on a national scale, along with the money it takes to acquire facilities for production and distribution, are major barriers to entry in the tobacco industry (Hoovers).
Higher selling prices and greater restrictions on where people are allowed to smoke have proven to be effective in lowering the consumption of tobacco. Another factor that has lowered consumption is Americas increased interest in healthy living, largely attributable to the baby boom generation. The older people get, the more they pay attention to what constitutes a healthy lifestyle. These factors have called for the increased government regulation of tobacco in its industry. The regulations the government has set forth however, have ironically made the tobacco companies more profitable.
The U. S. and state governments are direct beneficiaries of these profits receiving $11. 9 billion from excise taxes in 1993 (Coltrain). Tobacco, in this aspect, can be argued that it is a great economical asset to our governments. In 1998, a $206 billion agreement was reached between tobacco producers and 46 states to resolve all state claims for health costs related to smoking, which has forced the tobacco companies to make changes (Melillo). Earlier this year, advertising on billboards, sides of buses, subways, and tops of taxis has come to a halt.
Stadium advertising has also stopped and tobacco companies are only allowed one sponsorship per year per company. In addition to this agreement, President Clinton signed legislation in August of 1997 to reduce tobacco consumption even further. This legislation will increase the federal excise taxes (FET), on cigarettes to 34 cents per pack beginning on January 1, 2000. Taxes on other tobacco products will also increase accordingly. On January 1, 2002, the FET will increase again for all tobacco products with a 39 cents per pack increase for cigarettes.
In addition to the federal taxes, states can also impose taxes on tobacco products. These taxes range from one dollar per pack to as low as 2. 5 cents per pack. 43 states impose sales tax on cigarettes. The USDA has estimated that the taxes on tobacco have caused the consumption of cigarettes to decline nearly 10 percent from 1990 to 1998. The reason consumption has declined is because of consumers demand elasticity. Demand elasticity is a measure of how responsive a market is to price changes. Since the tobacco market is elastic, an increase in price would cause a drop in consumption (Standard & Poors).
The $206 billion dollar settlement that was reached last year between the tobacco companies and the 46 states was a compact replacement of the first attempted deal. The cigarette makers agreed to give the states $358 billion over 25 years, plus $10 billion up front in lump-sum damages. The money would have come from raising cigarette prices by 35 cents per pack straight away and by 62 cents after five years, plus allowances for evaluation. The only people this deal would hurt would be the consumers. This plan failed because congressional leaders were not brought on board, and for the plan to work they had to agree to it.
The bill was then recast as a company-bashing measure and the manufacturers backed out. This resulted in the $206 billion settlement, a multi-state deal that required no cooperation in Washington (Standard & Poors). It would have been better for states to impose an explicit, well-designed tax with more marketing restrictions. Instead, the settlement allows each participating state to levy a tax on cigarettes sold anywhere in America. The states that do not take part will still pay the tax and will receive no share of the revenues, which is a strong incentive for states to sign on.
The reasons the explicit, well-designed tax with more marketing restrictions was not imposed is because there would have been nothing in it for the lawyers. These taxes would have also required express legislative approval state by state, which the settlement was designed to get around, and because an explicit tax could only be levied by any particular state only on cigarettes sold within that state. In short, the lawyers have come up with the settlement so they can get a piece of the action (Economist).
Agriculture The nations crop of leaf is grown by tobacco farmers, located mainly in the southeastern U. S. , and accounts for 502,210 jobs (Capehart). Their crop is usually sold at public auction to the highest bidder. Leaf prices are supported under the Agricultural Adjustment Act of 1933, which has been amended many times over the years but the programs basic components remain in place. U. S. tobacco growers are guaranteed minimum prices through price supports and this system has made U. S. grown tobacco more expensive than most non-U. S. tobacco, which results in a decline in exports (Standard & Poors). The number of farms growing tobacco has declined rapidly during the last 40 years.
From 1992 to 1997 farm numbers declined more than any other period since 1950. This trend toward fewer, larger farms will continue, but at what rate will depend on several factors such as the factors covered earlier: policies and programs affecting tobacco, U. S. and world consumption of tobacco, and alternative crop and off-farm income opportunities for tobacco growers (Foreman). Ethical Implications Ethics is the general nature of morals and the specific moral choices an individual makes in relating to others.
Like most major issues, the tobacco issue poses some ethical questions that are difficult to answer. One factor that makes these ethical questions so difficult is that people generally search for the answer that pleases them the most. For example, if one were to ask a person who had developed lung cancer from smoking whether or not the big tobacco companies should be responsible for his or her disease, he or she would probably answer affirmatively. However, if someone were to ask a nonsmoker who should be responsible, he or she would probably answer that the individual himself is responsible.
Some of the ethical issues that society is facing with the tobacco industry are: the placement of responsibility on the consumer or the producer, the question of whether the producers have to pay compensatory damages for smoking illnesses, the issue of involuntary smoking, selling in foreign markets and lastly the promotion of tobacco products. Tobacco use accounts for at least 29% of all cancer deaths, is a major cause of heart disease, and is associated with conditions ranging from colds and gastric ulcers to chronic bronchitis, emphysema, and cerebrovascular disease.
On average, each cigarette pack sold costs Americans more than $3. 90 in smoking-related expenses. The fact is, when smokers purchase a pack of cigarettes at the store they know what they are buying! Like many other products that are sold today, they are dangerous to your health if used excessively. If it were to be decided that the tobacco companies were responsible for smoking related illnesses, it could open up a whole new view on product liability.
Take the alcohol industry for example: drinking an excessive amount of alcoholic beverages has been proven to increase the chances of developing serious health problems. Should the alcohol manufacturers be responsible for this? The logical answer is no! There have been warnings posted on cigarette packs since 1966 informing the consumer of the carcinogenic contents of cigarettes and their harmful effects. Consumers of tobacco products understand that there are certain health risks involved in smoking. It is not a case of merely educating people about the risks of smoking.
What it comes down to is personal freedom: people have the right to smoke. Accompanying any type of right or privilege are consequences and responsibilities. People make the conscious choice to smoke and must therefore accept the consequences of that choice. Smoking costs the United States approximately $97. 2 billion each year in health-care costs and lost productivity. The ethical question posed here is whether or not the government should be compensated for this cost.
