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Senate Bill Prompts Tobacco to Withdraw From Settlement

Senate Bill Prompts Tobacco to Withdraw From Settlement

WASHINGTON--The mood in Washington is to press ahead with comprehensive anti-tobacco legislation with or without the participation of the tobacco industry.

The overwhelming approval given the first piece of comprehensive tobacco legislation to clear a committee prompted an angry reaction from the tobacco industry and a threat to fight rather than settle. The bill, approved in the Senate Committee by a 19-to-1 vote, would raise the estimated cost of the settlement to tobacco companies by at least another $150 billion and would not give the industry the liability limits it has sought.

Some in Congress and the White House believe the industry’s announced withdrawal from negotiations with Congress and the President is just a bargaining ploy to push Congress back in the direction of the deal negotiated between the industry and state attorneys general in June 1997. The tobacco companies are now expected to blitz the public and Congress with anti-tax and big government arguments, and to try to enlist tobacco farmers to their cause.

Industry to Pay Over $500 Billion

The deal with state attorneys general would have cost the industry $368.5 billion over 25 years and provided immunity from class action lawsuits. The bill passed by the Senate Commerce Committee vote would raise that cost considerably, from $516 billion to $574 billion over 25 years, and would not ban class-action lawsuits. The Senate bill would merely cap civil liability payouts at $6.5 billion per year and settle current class action and state attorneys general suits.

The President reacted strongly to a declaration by R.J. Reynolds CEO Steven Goldstone that his company will oppose Congressional efforts to write tobacco legislation. "We’re going to get this done. Now!" the President said. "The tobacco industry can be part of it or they can fight it, but, I think they ought to be part of it."

The legislation crafted by Sen. John McCain (R-Ariz) and Sen. Ernest F. Hollings (D-SC) would increase the federal tax on cigarettes to 68 cents in 1999, and raise this to $1.21 over 5 years. "The health and well-being of America’s children is a cause that transcends party affiliation," Sen. McCain said.

The legislation includes provisions granting broad authority to the FDA to regulate tobacco products as well as their advertising and distribution. Class action suits and punitive damages against the industry would be permitted.

New warning labels would be affixed to cigarette packs. Penalties would be imposed on cigarette makers of up to $3.5 billion per year if they fail to meet targets to reduce youth smoking.

Outside of the committee bill, Sen. Kent Conrad (D-ND) and Sen. Judd Gregg (R-NH) successfully attached an amendment to the Senate’s version of the Budget Resolution expressing a sense of the Senate that the tobacco industry has no special protection or immunity from past or future legal actions.

House Commerce Committee Chairman Thomas Bliley, Jr. (R-Va) has said that four House committees will work simultaneously to create the House’s tobacco bill. Rep. Bliley’s committee is expected to create provisions involving the authority of the FDA, while the House Ways and Means Committee will handle additional taxes on cigarettes. The Agriculture Committee will look at provisions to protect tobacco farmers, and the Judiciary Committee will consider the appropriate compensation for attorneys who helped states sue the industry.

Tobacco Tactics

There are several issues that the tobacco industry can exploit to slow down passage of any tobacco legislation. Restrictions on advertising by the industry could be attacked as an unconstitutional limitation on free speech. The Senate version includes $28.5 billion to aid tobacco farmers, but agricultural interests are powerful in Congress, and if they team up with tobacco, major arguments could ensue.

 
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