Let's Make a Deal

As the proposed tobacco settlement heads to Congress, the anti-smoking movement is divided over whether it's a good deal after all. A guide to the players, the alliances they've established, and who hopes to get what.

By historical standards, the historic nationwide settlement approved by the tobacco companies last summer was a stunning capitulation. On June 20, an industry whose motto had always been "never settle" announced that it was ready to cough up a ton of money and swallow a mass of humiliating requirements. Among other things, the tobacco companies agreed to pay what amounts to a huge fine ($368 billion) for the crime of selling cigarettes, conceded FDA authority over tobacco products, accepted sweeping restrictions on advertising and promotion (including an end to outdoor ads and the use of human or cartoon figures), endorsed a federal ban on smoking in most nonresidential buildings, promised to finance a $500-million-a-year national media campaign aimed at discouraging consumption of their products, and committed themselves to utterly unrealistic goals for reducing smoking by teenagers, under the threat of further fines.

Implausible as these concessions would have seemed just a year or two earlier, they immediately established a new baseline for the expectations of anti-smoking activists, who treated the compromises hammered out through months of arduous negotiations as an opening offer. John F. Banzhaf, executive director of Action on Smoking and Health, summed up this attitude at a June 25 meeting of the Advisory Committee on Tobacco Policy and Public Health: "I think, as a basic rule of thumb, that anything they are happy to agree to probably is not going to be the most that we can expect, nor very beneficial for the public health." Dr. Jonathan Fielding, vice chairman of the Partnership for Prevention, tried to inject a note of caution: "There's kind of an underlying, fundamental question of whether one wants to see a settlement or not, under any circumstances. We have to always keep in mind that the more we push and the further we push away, the less likely [a settlement] will be....As we add things on, we increase that risk."

The advisory committee, chaired by former Surgeon General C. Everett Koop and former Food and Drug Commissioner David Kessler, seemed to lean toward Banzhaf's view. Its report, delivered to the White House in early July, was a wish list rather than a serious proposal for legislation that Congress can be expected to enact when it takes up the matter this fall or winter. Along with the numerous anti-smoking measures in the proposed settlement, the committee called for big increases in tobacco taxes, elimination of exposure to secondhand smoke, mandatory health insurance coverage for smoking cessation programs, "zero tolerance" smoking policies in schools (including bans on clothing bearing cigarette brand logos), and lots of additional money for anti-smoking groups and researchers. The committee opposed any limits on liability or the Food and Drug Administration's authority over tobacco--the main advantages, aside from settlement of the current lawsuits, that the deal offered the tobacco companies. In fact, the report urged more litigation, saying, "All elements of Federal, State, and Local tobacco control policies should be enforceable through lawsuits [brought] by individual citizens."

The dynamic at work in the committee can be seen in its handling of the targets for reducing teenage smoking. Under the proposed settlement, daily smoking by high school seniors is supposed to drop by 30 percent after five years, 50 percent after seven years, and 60 percent after 10 years. Since the baseline for these reductions is a 10-year average, and since smoking by teenagers has been rising in recent years, the agreement actually requires sharper reductions from current smoking levels than these percentages imply. For some, they were not sharp enough. "Some time short of year 10, we should come to 100 percent," said Robert Graham, executive vice president of the American Academy of Family Physicians. "This is an illegal activity. We do not believe that anyone underage should smoke or use tobacco products." Banzhaf agreed: "The tobacco industry does have total control over this. They can, through a system of licensing, bring down noncompliance to zero....They can, by raising taxes, decrease the level to anything they want." Fielding bravely demurred: "I just don't think that's realistic, frankly." Visibly nervous about seeming to take the industry's side, he suggested that factors other than company behavior might affect smoking by teenagers. After he received support from several committee members, including Koop, it became clear that the final report would insist only on the unreasonable, not the impossible. Instead of eliminating underage smoking within a decade, it called for "specific and increasingly stringent targets," beginning in the second year.

The committee's discussion of the penalties for missing the targets followed a similar pattern. Under the settlement proposal, the companies would pay $80 million for each percentage point by which they missed the targets, a figure based on an estimate of the profit generated by additional customers. The task force assigned by the committee to study the issue instead recommended a fine of $240 million for each percentage point, citing the precedent of triple punitive damages. This turned out to be the moderate position. Banzhaf said the main point of the fine should be deterrence, so the higher, the better. Why not 10 or 100 times the estimated profit? "The penalty in the current settlement," he said, would amount to just a nickel a pack, so it "would be a five-cent license to continue to addict and kill children." In the end, the committee declared the $80 million penalty inadequate and called for "predictable financial penalties sufficiently severe to act as a strong deterrent." It also rejected the proposed $2 billion annual cap on penalties and a provision allowing companies to obtain a rebate of up to 75 percent if they could show they had made a good-faith effort to reduce underage smoking. In other words, even if the tobacco companies do everything they're supposed to do, they would still be penalized should teenagers fail to cooperate.

The deliberations of the Koop-Kessler committee reflected splits within the anti-smoking movement caused by the settlement proposal. No one was prepared to say the deal was satisfactory as written. Everyone agreed the FDA should have unqualified, immediate authority to regulate tobacco products--including the power to dictate their content or remove them from the market--rather than the limited, phased-in authority described in the proposal. Nobody liked the liability provisions, which would allow lawsuits by individuals while eliminating punitive damages for past conduct, banning future class actions, and capping yearly outlays. But while some committee members were relatively cautious about attaching new conditions to the settlement, fearing that demands too numerous or too extreme might sink the whole deal, others did not hesitate to insist that the industry make additional sacrifices in return for less protection. Major players in this intramural debate can be roughly divided into three groups: the dealers, who seem committed to making the settlement work, albeit with some modifications ("yes, but..."); the skeptics, who insist on major changes but recognize the need for compromise ("no, but..."); and the militants, who oppose any arrangement to which the industry would conceivably agree ("no way"). The classifications are based on the tone and timing of people's comments as well as the substance of their demands.


The Attorneys General. About 40 states have sued the tobacco companies, seeking compensation for the costs of treating smoking-related illnesses under Medicaid. Mississippi Attorney General Mike Moore pioneered this kind of suit in 1994, based on an untested and dubious legal theory, and spearheaded the negotiations. Moore and the other attorneys general can brag that they brought the tobacco companies to the table, gaining money for their state treasuries and concessions that will "improve the public health"--achievements that may help them win higher office. Not all of them are enthusiastic about the deal, however. While Mississippi dropped its lawsuit, which would have gone to trial in July, Minnesota Attorney General Hubert H. Humphrey III (see below) threatened to continue with his case, scheduled for trial in January.

The Private Attorneys. The states farmed out their suits to plaintiffs' lawyers, many of whom are also involved in private tobacco cases. Among these are 17 class actions sponsored by a consortium of 65 prominent law firms and hundreds of
lawsuits filed on behalf of individual smokers or their families. Lawyers who played an important role in the negotiations included Florida attorney Hugh Rodham, President Clinton's brother-in-law; Mississippi attorney
Richard Scruggs (Senate Majority Lead-er Trent Lott's brother-in-law), who represented most of the states; and South Carolina attorney Ronald Motley, who had a hand in both the state lawsuits and the class actions. Scruggs and Motley both got rich suing asbestos companies, and they stand to get even richer as a result of the tobacco deal. The attorneys agreed to handle these suits in exchange for a share of any damages: 10 percent to 25 percent in the state lawsuits and 30 percent or so in the private lawsuits. Their percentage of any nationwide settlement will be much lower, lest public outrage threaten the deal, but they are still likely to earn the biggest legal fees in history. Proposals have ranged from $2 billion to $18 billion.

National Center for Tobacco-Free Kids. Established in 1996 with $30 million in grants from the Robert Wood Johnson Foundation and the American Cancer Society, the center immediately became the best-funded and most conspicuous anti-smoking organization, arousing resentment from groups with a longer history. The center's vice president, Matthew Myers, was the main anti-smoking activist involved in the negotiations. An attorney with solid anti-tobacco credentials, having worked for the Federal Trade Commission and the Coalition on Smoking or Health, Myers nonetheless has been criticized by other activists for his readiness to compromise. His boss, publicist William Novelli, pleaded for realism with the Koop-Kessler committee: "I hope we're not going to miss this opportunity, but what I heard this morning makes me afraid...that the committee is going to produce a utopian policy blueprint and a separate letter on the settlement proposal that will threaten to drive the industry and its legislative allies away." Novelli's group is well positioned to claim the lion's share of the billions set aside for anti-smoking messages, smoking cessation, and other "tobacco control" efforts.

American Cancer Society. When the settlement proposal was announced, ACS CEO John R. Seffrin said he was "encouraged by the public health concepts" it embodied. A few weeks later, the society issued a statement saying the FDA should have "complete and unfettered authority" to regulate nicotine and other tobacco ingredients, and it recommended stronger penalties for missing the smoking reduction targets. But ACS President Myles Cunningham said the society "still believes at this point that a settlement agreement with tobacco companies has more potential for advancing public health than the uncertain outcome of lengthy continued litigation or piecemeal legislation."

American Medical Association. Lonnie Bristow, then president of the AMA, sat in on the settlement talks. In June he called the deal "a marked advance" but said the organization would not take a formal position until a task force had reviewed the issue. The AMA, which was still taking research money from the tobacco companies in the 1970s and is viewed as a Johnny-come-lately by some longtime anti-smoking activists, has to tread carefully in any area involving compromises with the industry.

American Heart Association. The day the proposed deal was announced, AHA President Jan L. Breslow said, "The American Heart Association is encouraged by the fact that the settlement talks have produced a document for the health community to review. The American Heart Association recognizes our important responsibility to carefully consider such a proposal that could potentially prevent millions of people from dying prematurely." In addition to insisting on full FDA authority, the AHA said "the rights of victims of the tobacco industry should not be abridged in any way."


David Kessler. The former FDA chief claimed jurisdiction over tobacco products in 1994, contrary to the position taken by every one of his predecessors, by the federal courts, and even by tobacco's opponents in Congress. Not surprisingly, he mainly objects to the tobacco deal's limits on FDA authority, which require the agency to show that restrictions on nicotine content would reduce health risks, would be technologically feasible, and would not create a significant black market. The deal would also prevent the FDA from banning nicotine from cigarettes for at least 12 years. Despite his reservations, Kessler has a strong interest in salvaging the industry's concessions, since the same federal judge who upheld the FDA's jurisdiction last April also said the agency could not regulate tobacco advertising and promotion. "I'd like to see a resolution," Kessler said on Meet the Press in June, "and I certainly support some of the elements." He took a harder line in congressional testimony on July 29. "You can do better than the settlement," he said. "You don't need the industry's money....All you need is the nation's collective courage."

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