CEI vs. Big Business

Today the Competitive Enterprise Institute filed a federal lawsuit challenging the constitutionality of the 1998 agreement that settled state lawsuits against the leading tobacco companies. The so-called Master Settlement Agreement in effect established nationwide restrictions on advertising and promotion, imposed a nationwide cigarette tax increase, and created a price control system designed to prevent nonparticipating companies from gaining market share by underselling Philip Morris et al. CEI argues that this anticompetitive scheme violates the Compact Clause, which says "no State shall, without the Consent of Congress…enter into any Agreement or Compact with another State." According to its complaint, which was filed on behalf of two small cigarette manufacturers, a distributor, a tobacconist, and a smoker, "The States became business partners in establishing one of the most effective and destructive cartels in the history of the Nation."

I did a bit of consulting work for CEI in the early stages of this project, and I'm glad to see it proceed. One good thing about the tobacco settlement is that it offers an opportunity to demonstrate the difference between defending big business and defending free markets. In this case, big business conspired with big government to screw over consumers and the competition, undermining the rule of law in the process.