Cracks in the Tobacco Cartel

At Forbes.com, Scott Woolley offers an update (sign-up required) on the seemingly quixotic efforts of tiny discount cigarette companies to fight the cartel established by the 1998 deal that settled state lawsuits against the leading tobacco companies. Amazingly, upstart tobacco companies are required to pay about 40 cents a pack toward the settlement even though they were not parties to the deal and did not even exist at the time of the torts alleged in the state lawsuits. The explicit aim is to prevent them from underselling the major firms and taking market share from them, which might endanger the states' tobacco profits.

"It is very common for vice to masquerade as virtue," noted one 2nd Circuit judge who heard a challenge to this cozy deal, which would be a clear violation of antitrust law if it hadn't been blessed by 46 attorneys general. Woolley reports that "a second zinger came after a deputy attorney general for New York declared that to believe the states had sold out to Big Tobacco, you would have to assume that 46 attorneys general are liars. 'That's tempting,' Judge Guido Calabresi shot back. 'It may be that when the states were offered a stake in a monopoly, they took it.'"

[Thanks to Christine Hall-Reis for the link.]