1998 Tobacco Settlement Unconstitutional?

The entire country knows that in 1998, the four largest US tobacco companies and the Attorneys General of 46 states entered into what is now known as the Tobacco Master Settlement Agreement where “the companies agreed to curtail or cease certain tobacco marketing practices, as well as to pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costs of caring for persons with smoking-related illnesses.”

I don’t know of anybody, smoker, ex-smoker or never smoked that will argue the ill effects of prolonged tobacco use, so please don’t misconstrue what follows as arguing the effects. What will follow is what attorneys with the Competitive Enterprise Institute see as a “violation of the constitutional provision against multi-state agreements that have not been approved by Congress” and “a major power grab by state AGs at the expense of citizens.”

The attorney’s at CEI have been litigating this matter for 5 years now with a federal appeals court ruling against the challenge this past August.

Hans Bader, CEI Senior Counsel said at that time,

“The court missed an opportunity to restore an important check on state government power set forth by the Founding Fathers. The Constitution’s Compact Clause expressly requires that, when states combine to impose a national regulatory scheme, it must first be approved by Congress. In this case, 46 states acted jointly to engineer and end-run around the Constitution. We will appeal this to the Supreme Court.”

Yesterday, November 8, 2010, CEI filed a petition with the United States Supreme Court for a review of this case.

The issue, explained by Sam Kazman, CEI General Counsel,

“The tobacco settlement was hatched in a smoke-free backroom between tobacco companies and state attorneys general. The state AGs imposed a massive national sales tax on cigarettes, without a single elected legislator at any level of government voting for it. This was a major power grab by state AGs at the expense of citizens.”

Although the monies dedicated to the states from the tobacco companies were agreed upon to “compensate them for some of the medical costs of caring for persons with smoking-related illnesses,” we can see that state government, comfortable with receiving the extra funds, have used those funds for other matter, such as Illinois is currently trying to do by selling $1.5 Billion in bonds to “pay bills and balance its budget” backed by funds scheduled to be received from the Tobacco Settlement.

Not being considered in this that ever declining number of tobacco users that would pay the exorbitant taxes on the product means less funds coming in. And, we also see now that Anti-Smoking Programs Are Slashed by states across the country.

But, as troublesome as such matters might be, the crux of CEI’s lawsuit is the constitutionality of the original settlement under Article 1 Section 10 of our constitution, particularly, “No State shall, without the Consent of Congress …enter into any Agreement or Compact with another State, or with a foreign Power ….”

A November 9, 2010 Press Release from CEI asserts,

“The Compact Clause was specifically aimed at preventing states from collectively encroaching on federal power or from ganging up on the citizens of other states. The tobacco settlement, a multi-state compact, plainly violates that provision. The settlement set a dangerous precedent in disregarding constitutional protections against government power. The deal also violates federal antitrust laws, setting up a national tobacco cartel that allows Big Tobacco to raise prices while severely restricting its competitors.

According to the terms of the deal, major tobacco companies would make annual payments to the states in perpetuity, with an estimated cost of over $200 billion over 25 years. Even small tobacco companies that were never part of the state lawsuits or subsequent settlements are required to make major escrow payments to the states.

“The MSA is an economic, political, and legal abomination backed by powerful vested interests and upheld by inadequate and destructive legal reasoning,” the cert petition alleges.”

The Washington Examiner sees the settlement it as “a pinnacle of corporate-government collusion” where basically, “lawyers were enriched beyond anyone’s dreams, Big Tobacco Companies were protected from competition and States were to receive a steady flow of funds.”

As we recently saw in my own state, Washington, Tobacco has become the big cash cow for cash strapped states as massive tax increases have been placed upon individual packs while it is becoming increasingly difficult for someone who uses tobacco to frequent any place where use is allowed. With the latest smoking bans, even private homes are restricted under certain circumstances and some states are even looking into bans inside of privately owned vehicles, further eroding any funds to be collected off of the product.

The demonization of the evil weed, Tobacco comes from all aspects of our society today. Liberals, Conservatives, all have their advocates of this ‘backdoor prohibition’ with little or no regard to the constitutionality of how this settlement was reached. That it was reached and others must now ‘toe the line’ is what matters to them.

What remains to be seen now is if the Supreme Court will hear this case for review and if so, will the current justices “strike this abuse of power that the tobacco settlement falsely legitimized?”