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Saudis to Sue Tobacco Companies

The Saudi government is threatening to sue American tobacco companies such as Philip Morris to force them to pay the healthcare costs of Saudi smokers. The lawsuit may seem laughably inconsistent with the basic idea of personal responsibility. But the Saudis are just imitating America's own trial lawyers. in 1998, American trial lawyers, assisted by 46 state attorneys general, succeeded in getting Big Tobacco to pay $250 billion over 25 years to state governments, supposedly to pay for smokers' healthcare costs, in a backroom deal called the Master Settlement Agreement. (An extra $14 billion was paid to the lawyers. CEI is challenging the settlement in federal court as a violation of the Constitution's Compact Clause). Big Tobacco shortsightedly went along because the trial lawyers added a sweetener to the deal to offset its costs. One of the deal's conditions was that the states, as a condition of receiving their share of the loot, would impose anticompetitive restraints called escrow statutes on little tobacco companies that often underprice Big Tobacco, forcing them to make payments on each cigarette they sell. That preserves Big Tobacco's market share at their expense, even if it raises prices, and thus enables it to pass along the full cost of the tobacco settlement to consumers. The Saudis are now following in the footsteps of that bad 1998 tobacco settlement, seeking to make the tobacco companies pay for smokers' healthcare costs. But unlike American trial lawyers, who offered a sweetener to get the tobacco companies to pay up, the Saudis are offering nothing but threats, rejecting their settlement offers as inadequate. And if Big Tobacco objects, the Saudis will no doubt point to Big Tobacco's 1998 settlement, as a concession that it is in fact liable for smokers' healthcare costs. The settlement itself may not have directly injured Big Tobacco, which managed to shift its costs to consumers. But the precedent the 1998 settlement set will surely harm the tobacco industry, and other industries, in the long run. It's too bad Americans can't turn around and sue the Saudi government for 9/11. After all, many of the 9/11 hijackers were Saudi, and the Saudi government created the repressive, anti-Western environment and educational system that sired the hijackers. It is surely more culpable for 9/11 than a tobacco company is for the consequences of a smoker's voluntary decision to smoke.