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US tobacco firms settle 400 Engle progeny cases

| February 26, 2015

The three biggest US tobacco companies have tentatively agreed to pay $100 million to resolve 400 Engle progeny lawsuits pending against them in the Florida federal court. Final approval of the deal is subject to an agreement to participate by all the plaintiffs.

Under the terms of the agreement, Philip Morris USA and R.J. Reynolds Tobacco Co will each pay $42.5 million and Lorillard will pay $15.0 million.

“This agreement presented a unique opportunity to essentially close out the federal docket, and we are pleased to put the federal Engle litigation behind us,” said Jeff Raborn, vice president and assistant general counsel for R.J. Reynolds. “With respect to the cases pending in state court, we will continue to defend them vigorously, which includes appealing adverse verdicts.”

PM USA and Lorillard said that they too would continue to defend Engle progeny cases not covered by the agreement and appeal adverse verdicts.

In announcing the tentative agreement in a note on the Altria website, Philip Morris USA said the Engle case, which was originally filed in 1994, had attempted to certify a national class action of smokers. ‘The class was subsequently limited to Florida residents and ultimately decertified in 2006 by the Florida Supreme Court,’ explained PM USA. ‘In doing so, the Florida Supreme Court also ruled that former class members could file their own lawsuits and use certain general findings from the class action trial. The court gave former class members until January 2008 to file their lawsuits, which are commonly referred to as Engle progeny cases. Plaintiffs filed their suits in U.S. District Court and various state courts throughout Florida.’

A Fitch Ratings report said that the cases subject to the tentative agreement involved only those cases pending in federal court, which totaled about 700 at the end of 2014, but did not address the state actions that collectively numbered more than 3,000 cases.

‘Significant litigation risk, which includes product liability, consumer fraud and health recovery cases totaling in the thousands, will weigh on the industry for years to come, the Fitch report said. ‘Fitch sees the highest litigation risk for the industry stemming from the Engle Progeny legal actions in Florida, which currently consist of nearly 3,900 state and federal cases.

While welcoming the agreement, Bonnie Herzog, managing director Beverage, Tobacco & Convenience Store Research at Wells Fargo Securities, said there was a low probability that a similar agreement could be reached in respect of the outstanding 3,000 plus state cases.

Nevertheless, she said this was a favorable conclusion for all three companies to a substantial outstanding legal battle.

‘While no individual Engle case posed any significant financial risk to any of the three manufacturers, we do believe the elimination of the aggregate financial risk from all federal cases and the headline risk of any individual case will be viewed favorably by the market,’ she added.

Revised TPD the most lobbied EU dossier

| February 25, 2015

The tobacco industry deployed ‘massive’ third party lobbying to subvert revisions to the EU Tobacco Products Directive (TPD), according to a BMJ piece citing research published online by Tobacco Control (TC).

TC was said to have found also that regulatory reforms seemed to have made it easier for corporate interests to influence public health legislation.

The 2014 TPD, which becomes national law next year, is a revised version of the 2001 directive. It provides for an increase in the size of graphic health warnings, a ban on certain flavourings, restrictions on the size and shape of cigarette packs, and regulation of e-cigarettes.

‘But it is weaker than the original proposals,’ said the BMJ.

‘The process for revision also took over five years, and was beset by controversy, amid claims of tobacco industry interference and the forced resignation of the Health Commissioner John Dalli.

‘The Directive has been described as “the most lobbied dossier in the history of EU institutions”.’

The BMJ piece is at: http://www.bmj.com/company/wp-content/uploads/2015/02/toba-lobb.pdf

The TC study is at: http://tobaccocontrol.bmj.com/content/early/2015/02/06/tobaccocontrol-2014-051919.full.

Greece agrees to crack down on tobacco smuggling

| February 25, 2015

One of the reform measures conceded by the Greek government before Tuesday’s agreement on the extension of the country’s bailout for four months was a crack down on tobacco smuggling, according to a story by Jim Yardley for the New York Times.

Euro zone finance ministers and other creditors agreed to extend the Greek bailout program for another four months, with caveats, after signing off on a reform plan hurriedly put forward by the Greek government, Yardley wrote.

But he added that the accord would probably not last long: the fact that both sides were claiming victory underscored the fuzziness and fragility of the new agreement.

‘Tuesday’s accord does not resolve Greece’s dire economic situation and pushes many of the major problems down the road,’ Yardley wrote. ‘Nor has this latest Greek crisis forced Europe’s leaders to address the fundamental problems of the economic and political structure of the euro zone.’

The reform measures, submitted to Brussels by the Greek finance minister, Yanis Varoufakis, included plans to crack down on the smuggling of fuel and tobacco, which is said to cost the Greek economy billions of euro a year in unrecovered tax revenue; modernize the pension system; and confront nonperforming bank loans.

“The most important challenge, a make-it-or-break-it thing, is their ability to deliver on tax evasion, corruption and smuggling of tobacco and oil,” Yardley quoted George Pagoulatos, a political analyst and professor at Athens University, as saying. “If they manage to make a difference on that, they will be able to raise the revenues that will allow them to fund their social programs and also be financially sound at the same time.”

The New York Times story is at: http://www.nytimes.com/2015/02/25/world/europe/in-greek-crisis-rare-moment-of-consensus.html?emc=edit_tnt_20150224&nlid=60534081&tntemail0=y&_r=0.

Indian government asked to spread tax burden

| February 25, 2015

Ahead of the 2015 budget, the Tobacco Institute of India has been calling on the country’s government to widen the tax base to include all tobacco products, according to a story in the latest issue of the BBM Bommidala Group newsletter.

The budget is due to be presented to the Indian parliament by the Finance Minister Arun Jaitely on February 28.

The Institute said that licit cigarettes accounted for only 12 percent of the tobacco products consumed in India.

And it said that levying excessive taxes on cigarettes had led to a double digit drop in licit cigarette volumes between July-December 2013 and July-December 2014.

Including other tobacco products in the tax net would help the government tap into new revenue sources.

It would also assist with the government’s tobacco control objectives.

Sporting role for Thailand’s smokers

| February 25, 2015

Thai smokers, who already contribute to the Thai Health Promotion Foundation and the Thai Public Broadcasting Services, will soon be providing money to help the country’s sporting efforts, according to a story in the Bangkok Post.

Retail prices for cigarettes and alcoholic drinks are said to be likely to go up by several baht next month as producers pass on a new two percent sports tax.

The Sports Act passed by the National Legislative Assembly in January and pending publication in the Royal Gazette will require manufacturers and distributors of tobacco products and alcoholic beverages to contribute to a new sports fund at a rate equivalent to two percent of the excise taxes they pay the Finance Ministry each year.

The ministry will collect the money and give it to the sports fund.

The Thailand Tobacco Monopoly, which earns about six billion baht annually in net profit, apparently told the media that its contribution to the sports fund would be about 2.8 billion baht annually.

The monopoly currently contributes 1.6 billion baht to the Thai Health Promotion Foundation and Thai Public Broadcasting Services.

Swisher sets up vapor business

| February 24, 2015

Swisher International is creating a new company, E-Alternative Solutions (EAS) to develop, market and distribute for the rapidly growing vapor market. Swisher’s senior vice president for sales and marketing will serve as the CEO of EAS.

“We have been carefully reviewing the e-cigarette space for a while through market research, customer feedback and in-depth reviews of the technological landscape,” says Miller. “Thanks to Swisher International’s world-class capabilities in combination with the best-in-class team we are assembling to lead EAS, we have the ambition to become a market leader in the evolving e-alternative category—just as Swisher has in the tobacco market for over 150 years.”

Jacopo D’Alessandris will serve as EAS president. D’Alessandris has almost 20 years of marketing and general management experience in consumer-packaged and electronics-goods products. Most recently he served as chief marketing officer for the consumer division of Philips North America. Prior to joining Philips in 2006, D’Alessandris was a global executive at L’Oreal for 10 years in various leadership roles in Europe and Latin America.

“I am excited to join the Swisher family to lead its sister company EAS,” said D’Alessandris. “The e-cigarette and vapor space has been growing rapidly but is still in its infancy. Breakthrough technology and innovative marketing, coupled with Swisher’s expertise in the tobacco space will be the key ingredients I will focus on to build EAS’ success.”

Initially, EAS will offer two proprietary liquid vapor product lines. The products are currently being tested in select markets and sold online. These liquids, which are used in electronic vapor devices, are manufactured in the U.S. using high-quality ingredients and the highest levels of quality control, according to EAS.

 

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