Word: tobacco
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Look who's talking now. For four decades, tobacco giants Philip Morris (Marlboro) and R.J. Reynolds (Camel) have hotly denied that cigarettes cause illness and have successfully stubbed out every claim for damages brought against them. But the danger of suffocation from mushrooming lawsuits, rising political hostility and shareholder agitation have finally compelled the two companies to discuss a settlement. It was disclosed last week that the tobacco giants had begun complex negotiations with state attorneys general, private lawyers and antismoking advocates...
...landmark talks began shortly after the tiny Liggett Group struck a separate deal with 22 state attorneys general last month, breaking ranks and opening the way for the tobacco industry to put the legal onslaught--and $600 million in annual legal fees--behind it. "These cases were a gun to their heads," says John Coale, lead counsel for a coalition representing 60 law firms suing tobacco companies, who has been participating in the talks. "Now the industry has to prove its good faith...
...industry has the wherewithal to raise $300 billion, the highest figure yet floated, payable over 25 years, to compensate plaintiffs for smoking-related ailments. Together, market leader Philip Morris and No. 2 Reynolds command a 72% share of the $45 billion U.S. tobacco industry. Cynics noted that demand for cigarettes is inelastic--the companies would just force nicotine junkies to cough up an additional 25 cents a pack, which now averages $1.80. The industry would also scrap its outdoor advertising and remove human and human-like figures from remaining ads, thereby laying to rest the images of the Marlboro...
Wall Street responded with enthusiasm to the prospect of an end to the uncertainties associated with tobacco stocks. But any talk of a final settlement appeared wildly premature. For one thing, antismoking forces in the Administration and Congress stress that the Food and Drug Administration must retain the power to regulate tobacco as a drug, as well as limit the nicotine content of cigarettes--conditions that the industry has resisted. And some lawyers were dismissive of the $300 billion as not nearly enough compensation...
Even more daunting is the signal opposition to the outcome Big Tobacco most craves: freedom from future legal claims, a provision that would require an act of Congress. "No one is prepared to give the industry blanket immunity," says Matthew Myers, executive vice president of the National Center for Tobacco-Free Kids and a participant in the talks. Moreover, Myers adds, "this is a movie in mid-plot." The plot will thicken as negotiations continue this week...