Credibility eroding, tobacco giants talk

Last week’s revelation that Philip Morris and RJR Nabisco are holding secret settlement talks with plaintiffs suing the tobacco industry represents a critical development in decade-long efforts to curtail the nation’s smoking addiction. The deluge of legal, regulatory and public pressures confronting the tobacco industry have apparently pushed the leading corporations into conceding the causal link between nicotine use and exposure to smoke to a variety of noxious illnesses and deadly diseases.
No doubt, the tobacco giants are broaching the possibility of a settlement mainly to shield themselves from an increasing number of liability charges for health damage caused by smoking. In exchange for judicial protection, the industry is reportedly willing to contribute as much as $300 billion dollars over the next 25 years to a smoker’s compensation fund. More federal regulations and stricter limits on advertising are also possible.
Both smokers and non-smokers who insist their illnesses were caused by secondhand smoke are costing the industry millions of dollars a year. Tobacco companies are also facing class-action lawsuits, and lawsuits by states and cities seeking compensation for Medicaid spending on smoking-related illnesses. Last year alone, the industry spent about $600 million in legal fees, employing more than 350 law firms across the nation.
Shareholders suing tobacco companies have opened yet another legal front. Investors contend that the corporations’ failure to disclose damaging information responsible for curbing industry profits have inflated share prices. Criminal investigations are also underway that may bring allegations of perjury and other incidences of wrongdoing against the top companies.
In fact, it is the publicity surrounding charges of conspiracy to hide the addictiveness and dangers of smoking from the public that has cost the industry its credibility in the nation’s courtrooms and on Wall Street. Juries are no longer as willing to put the entire blame on smokers for their illnesses and have begun demanding compensation from corporations. News coverage has also seriously undermined Wall Street’s confidence that the industry can win its courtroom battles. As a result, the flow of investments to the tobacco giants has slowed.
In February, the Food and Drug Administration began implementing the first phase of a series of regulations the industry opposes. Retailers are now required to request photo identification from anybody purchasing tobacco products who appears 27 or younger. More regulations are to take effect in August, including a ban on the use of human images, such as the Marlboro Man, in advertising.
What the final settlement will entail remains to be seen. Fundamental disputes between the negotiators are certain to confound the discussions. Talks concerning the amount of money the industry will offer, the extent to which it will be sheltered from liability suits and the FDA regulations it will accept are already provoking considerable debate. But the mere discussion of industry concessions is a welcome sign that the corporate barons have finally abandoned their stubborn and arrogant refusal to acknowledge the debilitating effects of smoking on the nation’s health and economy.