The continuing legal issue in both matters involves the fairness of the MSA, which dictates that later market entrants, [image-nocss] such as GT, have to pay the states substantially more than certain competitors pay.
J. Ronald Denman, executive vice president of General Tobacco, said none of the largest cigarette companies, which were sued by the states for decades of misleading the public about the harms of tobacco products, paid anything for pre-MSA sales. "In addition, to induce some of the oldest tobacco companies to join the MSA, the States agreed to yearly sales exemptions giving those companies hundreds of millions of dollars in free sales. GT was offered no such exemption and must pay the MSA for every sale made each year," he said.
Arkansas alleges GT must pay a debt for cigarettes sold prior to its entry into the MSA. General Tobacco seeks to defend the Arkansas lawsuit on grounds of violation of its equal protection and a variety of other legal claims.
Denman said the company will continue legal action and added, "Arkansas' suit is an attempt to collect on an obligation that it believes is owed by General Tobacco. We intend to show that the U.S. Constitution and trade laws preclude such a lack of fairness against select companies."
He continued, "General Tobacco remains confident that it will be successful in its appeal of the lower court ruling in California so that it can show Big Tobacco got away with billions before the MSA, and now seeks to squeeze its competitors out of business under the auspices of the MSA so that it can make many more billions."
General Tobacco, which has paid almost $600 million to the MSAfar more than many similarly situated competitors, it saidbelieves the effect of the MSA is to unfairly and drastically limit future competitors from fair market competition. The decision does not impact GT's current payment to the MSA. The company paid $80 million in April and another $17 million since. It also continues to accrue funds to pay its ongoing obligations.
The MSA was created in 1998 by the 46 States, the District of Columbia and five U.S. territories, along with the large tobacco companies that then controlled more than 97% of the market. The MSA was structured so that certain companies in the market in 1998 would receive future preferential payment terms while "new members" such as GT would have to pay substantially more than the original preferred members, the company said.
General Tobacco, the sixth largest tobacco company in the nation with approximately $300 million in annual sales, began its operation in 2000 distributing its own cigarette brand, GT One. It now distributes Bronco, Silver, Vaquero Little Cigars and a new premium menthol cigarette, 32 Degrees. General Tobacco continues to hold a leading position in the value-priced cigarette market.
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