In 1998, the major tobacco companies reached a deal with 46 state attorneys general. They agreed to pay a whopping $250 billion over 25 years, and more in perpetuity. In exchange, the states agreed to drop their lawsuits against Big Tobacco and pass statutes that would protect Big Tobacco’s market share against their competitors by imposing escrow fees on cigarettes sold by little tobacco companies.
This deal, known as the Master Settlement Agreement (MSA), is being challenged by CEI in a lawsuit in Louisiana.
The MSA itself wasn’t too bad for Big Tobacco in the short run, since it was structured to allow the tobacco companies to pass on their increased costs on to their customers, smokers. (Although the tobacco companies did end up paying $14 billion to the trial lawyers under the settlement).
But it set a bad precedent for other industries, encouraging state attorneys general to team up with trial lawyers to sue industries demanding billions of dollars.
And it also encouraged other plaintiffs to bring copycat lawsuits against the tobacco companies in hopes of extracting billions of dollars for themselves.
The latest state to sue the tobacco companies for billions is not in the United States, but in the impoverished African nation of Nigeria. A state in southwest Nigeria wants the British American Tobacco Company (BATCO) to pay it more than $20 billion.
BATCO is the parent company of Brown & Williamson, which earlier paid off American state governments to the tune of billions in the Master Settlement Agreement. No wonder the Nigerians decided to sue it for billions. It’s already shown itself to be a lucrative and inviting target.
Of course, Nigeria is not as rich as the United States. The average Nigerian lives on less than 3 percent of what an American makes, and much of Nigeria lives on less than a dollar a day.
So if BATCO is ordered to pay up by the Nigerian courts, it won’t be able to pass on the costs of that judgment to local consumers, the way it did in the American Master Settlement Agreement. Nigerian smokers, unlike American smokers, are just too poor to pay a high price for their cigarettes.
By paying off the American states in the MSA, the tobacco companies have encouraged other governments throughout the world to sue them in search of lucrative settlements.
Nigeria isn’t the only country demanding money from the tobacco industry. Saudi Arabia has also threatened to sue the tobacco industry.