Washington, D.C., August 10, 2010 — A federal appeals court Tuesday ruled against a challenge to the 1998 tobacco settlement brought by the Competitive Enterprise Institute on behalf of three plaintiffs. The lawsuit argued that the $240 billion, 46-state tobacco settlement violated the U.S. Constitution, which prohibits agreements between the states absent the consent of Congress.
“The court missed an opportunity to restore an important check on state government power set forth by the Founding Fathers,” said Hans Bader, CEI Senior Counsel. “The Constitution’s Compact Clause expressly requires that, when states combine to impose a national regulatory scheme, it must first be approved by Congress. In this case, 46 states acted jointly to engineer and end-run around the Constitution. We will appeal this to the Supreme Court.”
The Master Settlement Agreement was unveiled in November 1998, as an agreement between 46 state attorneys general and the four major tobacco companies. It required the companies to pay huge sums to the states (over $200 billion in 25 years) and to abstain from certain advertising and other practices. In return, the states would protect the companies from competition by imposing penalties on companies that don’t join the settlement. The tobacco companies passed the cost onto smokers in the form of a hidden tax.
“The MSA was an unconstitutional backroom deal that transferred money and power from citizens and legislators to state attorneys general, said Sam Kazman, CEI General Counsel. “It’s time to end this unlawful cartel.”