Making sense of the alphabet soup: ASR and the MSA
The concept of allocable share release (ASR), designed to make the MSA payments required of small companies, on a state-by-state basis, to be the same as major companies, is not easy to explain. It has proved much easier to misrepresent this provision of the MSA in the 39 states that have repealed ASR.
Attempting to maintain the price cartel the MSA effectively established for them, major cigarette manufacturers:
➢ misrepresent ASR as an unintended loophole.
➢ portray ASR as a tax program rather than a legal settlement.
➢ demagogue companies that get an ASR as “cheap cigarettes makers who sell their products to kids” even though over 90% of underage smokers acquire brands manufactured by the majors.
As states have repealed ASR, small cigarette manufacturers have turned to the courts to seek justice. Many of the cases were rejected but in 2002, a coalition of small manufacturers zeroed in on the Achilles hill of the MSA in an anti trust action filed in New York. In September of 2004, the court issued a preliminary injunction against New York’s repeal of ASR. Similar lawsuits were filed in Kentucky, Tennessee, and Oklahoma.
A temporary restraining order has been issued, blocking enforcement of the Oklahoma ASR repeal law. With these positive rulings in New York and Oklahoma, a motion was made to the Multiple District Litigation Board to consolidate the New York, Oklahoma, Kentucky and Tennessee cases into one court. Motions have been filed in Kentucky and Tennessee for a Stay of Enforcement until a decision is made by the MDL Board.
In March, the court granted a Stay in Kentucky until 30 days after the MDL Board decides on the consolidation motion. A hearing was held in Tennessee on the motion for a Stay on March 30. A decision in Tennessee is expected prior to mid April.
An order to consolidate the cases and a subsequent positive ruling upholding ASR could set the stage for a return of free enterprise and competition in the cigarette market.