Quick overview

In each of the forty-six (46) states, which entered into the Master Settlement Agreement (“MSA”) with Big Tobacco, the corporation which oversees compliance of the terms of the MSA, the National Association of Attorneys General (“NAAG”) is currently promoting legislation which will substantially alter the original MSA agreement.   These proposed changes will require regional, independent, small-business tobacco manufacturers to pay into MSA escrow accounts as if they were doing business in all 46 MSA states, as does Big Tobacco, not just the states in which they are actually selling their products. 

The MSA originally required the independent, small business regional manufacturers to pay into the escrow accounts only of states in which they did business, approximately the same amount on a per carton basis that each state received in MSA payments from Big Tobacco.  These escrow payments however, were in fact substantially more than the average per carton payment made by Big Tobacco because of various offsets, reductions, and exemptions enjoyed by Big Tobacco in the terms of the MSA. 

In any event, the original MSA provisions requires the independent small business companies to reserve these funds in an escrow account for twenty-five (25) years, in order to pay for any judgments against these companies if they are ever successfully sued by a state for the same type of marketing fraud and deception of which Big Tobacco was engaged and sued for in the 1990s. 

It was the fraud and deceit by Big Tobacco – not the independent small business companies, which led to the MSA agreement in which Big Tobacco agreed to make annual payments to each state in exchange for the states dropping their lawsuits against Big Tobacco.  

The independent small business manufacturers have not contested the requirement that they pay the prescribed amounts under the MSA, what is in reality, a higher amount, into the states’ escrow accounts in which they do business (as these are the only states in which the independent small business manufacturers would potentially incur legal liability). 

Now, in an effort to artificially drive up the price of the independent small business manufacturers’ brands, NAAG and your state attorney general and governor have developed a scheme to make companies that typically sell their products to only a handful of states, to pay into the escrow accounts of all forty-six (46) MSA states, even though they are doing business in only a handful of these states.  What is so deceptive about these efforts is that this scheme is not designed to raise any additional revenue for the states to pay for health care costs, or help tobacco farmers. 

The only purpose of this proposed new burden on the independent small business manufacturers is to stifle competition and drive independent small business manufacturers out of business in order to establish and insure a Big Tobaccode-facto monopoly, which will allow Big Tobacco to raise its prices as desired, when desired, unopposed and thereby directly increase the annual MSA pay-offs to the states.