Us Tobacco Firms In Talks Over Legal Threats

Philip Morris and RJR Nabisco, the two biggest US tobacco companies, have confirmed for the first time that they are holding peace talks with anti-tobacco lawyers about a multi-billion dollar deal to end the legal threats facing the industry.

In filings with the Securities and Exchange Commission, both companies say they are meeting state attorneys-general, plaintiffs lawyers and others to explore the potential for new laws that would resolve the threat of anti-tobacco lawsuits.

Philip Morriss filing says: A resolution of the type being discussed would require the industry to make an up-front payment of several billions of dollars and payments of additional billions of dollars annually. In addition to the monetary payments, major changes in the marketing and regulation of tobacco would in all likelihood be part of the resolution.

 

Last month it emerged that the tobacco companies were talking to anti-tobacco lawyers about a deal under which they would accept tougher regulation and financial penalties totalling up to $300 billion (185 billion) over 25 years in return for a degree of immunity from litigation. The tobacco industry, however, had resolutely refused to confirm the talks existed.

The leaks came from the anti-tobacco lobby, raising doubts as to how far the tobacco industry was commited to the negotiations. Thursday Martin Feldman, an analyst at Smith Barney, a Wall Street brokerage, said: In our opinion, the inclusion of these comments in the (SEC filings) illustrates the determination of both companies to reach a compromise.

Advocates are particularly concerned that the negotiations could end in a mutually beneficial settlement between the tobacco industry and the lawyers, doing little to discourage youth from taking up smoking.

They also resent the idea that the tobacco industry should gain immunity from lawsuits. If an agreement were reached, Wall Street analysts say the tobacco companies could easily offset the cost by putting about 50 cents on the price of a pack of cigarettes in the US, which at present are the cheapest in the developed world.

Philip Morris filing warns that if a settlement is reached, the financial position of the company would be materially adversely affected in the year of implementation, and the volume, operating revenues and income of the company would be materially adversely affected in future years.