Background: Fair Trade?
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SPOKESMAN: Do you swear that the testimony you are about to give is the truth, the whole truth, and nothing but the truth?
MARGARET WARNER: The fortunes of the nation’s tobacco companies have suffered setbacks since this day in 1994 when their top executives insisted in sworn testimony before Congress that nicotine was not addictive.
SEN. WYDEN: Do you think nicotine is addictive?
TOBACCO EXECUTIVE: I believe nicotine is not addictive, yes.
EXECUTIVE: I believe nicotine is not addictive.
EXECUTIVE: I believe that nicotine is not addictive.
MARGARET WARNER: In the three years since then, the $50 billion-a-year tobacco industry has been attacked from several quarters. On the regulatory front, President Clinton and then Food and Drug Administration chief David Kessler last August announced steps to regulate tobacco as a drug on the grounds that it contains an addictive drug, nicotine.
PRESIDENT CLINTON: Cigarette smoking is the most significant public health problem facing our people. The human cost is by far the most important issue. We have carefully considered the evidence. It is clear that the action taken today is the right thing to do scientifically, legally, and morally.
MARGARET WARNER: The new regulations aim to cut teenage smoking in half, with far-reaching restrictions on advertising and marketing tobacco to minors. The tobacco companies protested, and vowed to block the new rules in the courts.
PHILIP MORRIS SPOKESMAN: There is too much common ground on this issue to allow the FDA to illegally seize regulatory authority from Congress, and threaten to trample on the rights of the 45 million Americans who choose to smoke.
MARGARET WARNER: Meanwhile, in the states there are a growing number of public and private legal challenges to the industry. Private lawsuits by cancer sufferers have proliferated and for the first time last August, one was successful. A Florida jury ordered Brown & Williamson Tobacco Corp. to pay $750,000 to a 66-year-old woman lung cancer victim; the company is appealing that decision. Several more major private lawsuits are scheduled to come to trial over the next five months, seeking billions of dollars in potential damages. Separately, some 23 state governments have filed suit against cigarette makers in the past three years, seeking to recoup billions of dollars for smokers’ Medicaid bills.
LAWTON CHILES: For decades now the tobacco companies have turned an enormous profit while their victims have turned to the taxpayers for treatment. It is time for those responsible to pay back.
MARGARET WARNER: Industry officials, noting that states have been enjoying tobacco tax revenues for years, vowed to fight these cases.
GREG LITTLE, Assistant General Counsel, Philip Morris: It is the height of hypocrisy for the state to bring a lawsuit against the tobacco industry when they’ve been practically full partners in the sale of tobacco, and we are confident that ultimately, that their theories will not pass muster legally, that the law still counts, and factually they are so flawed that they will not succeed.
MARGARET WARNER: Last month, the states scored a major breakthrough when the fifth-largest U.S. cigarette maker, the Liggett Group, signed a deal with the state attorneys general. To settle the state suits, Liggett executives agreed; to admit that cigarettes are addictive and cause cancer; to admit that some tobacco marketing has been directed to minors, and refrain from that in the future; to give the states and the courts access to internal industry documents; and to pay a quarter of their pre-tax profits to the states for the next 25 years to cover health care costs and an anti-smoking advertising campaign.
The larger tobacco companies denounced the settlement at the time. But this week, the Wall Street Journal reported that the country’s two largest tobacco companies, RJR Nabisco and Philip Morris, were holding secret talks themselves with the attorneys general. The report said the two tobacco companies are seeking a sweeping settlement in which they would agree to be regulated by the Food and Drug Administration; accept major restrictions on advertising; and create a huge fund from tobacco revenues to cover the cost of smoking-related illnesses. In return, the report said, the companies want immunity from all future lawsuits. News of the secret talks significantly boosted the stock prices of the two companies.