Another big New York Times article on how the U.S. Chamber of Commerce is shilling around the world on behalf of Big Tobacco.
In the past several years, the U.S. Chamber of Commerce, which used to be a fairly nonpolitical organization, but it has been transformed, mostly by its executive director Thomas Donohue, into a highly politicized lobbying organization.
And lately, much of the Chamber’s lobbying efforts have been directed toward not only defending Big Tobacco but aggressively attacking countries attempting to reign in tobacco marketing and packaging. The New York Times story uses the example of the Irish prime minister who visited the U.S. Chamber offices to lobby for investments, business opportunities in Ireland, and instead Donohue lobbied him to drop new Irish laws requiring plain packaging on tobacco products.
From the New York Times article:
Since taking over in 1997, Mr. Donohue has transformed the chamber into a powerful lobbying force, an evolution most starkly epitomized by its aggressive advocacy for tobacco. While the organization represents a variety of industries, its strategy has been a boon for cigarette makers, which have relied heavily on the chamber to push their agenda at home and abroad.
Few allies of Big Tobacco are as enduring as Mr. Donohue, who has personally lobbied the speaker of the House, the United States trade representative and the Irish prime minister on the industry’s behalf. A review of industry records, which came to light during government litigation, highlights the longevity of his ties.
In the 1990s, after taking over the chamber, Mr. Donohue fought the Justice Department’s tobacco litigation, personally lobbied against antismoking legislation in the Senate and promised “a unique role in determining the future direction of the U.S. Chamber of Commerce” to a big cigarette maker in a letter.
U.S. Chamber Executive Director Tom Donohue — New York Times photo
The US. Chamber’s lobbying efforts around the world on behalf of Big Tobacco has been talked about a lot in the past year. I’ve written about it and there’s been a number of major articles about it, including CVS Pharmacy quitting the U.S. Chamber over its tobacco lobbying. John Oliver has likewise taken on Big Tobacco’s battles against smaller countries.
This is specifically what’s changed just in the past year or two. While the U.S. Chamber has been for some time now lobbying for Big Tobacco in the U.S., it’s been putting a ton of energy into lobbying for Big Tobacco around the world lately. According to the Times article, it has gotten to the point that officials with the World Health Organization are literally calling the U.S. Chamber a “front group” for the tobacco industry.
According to the Times, a few weeks after Donohue took over at the U.S. Chamber in 1997, he received a letter from a Philip Morris executive. According the to the New York Times:
Mr. Donohue’s ambition, he wrote in a reply to the Philip Morris executive, was “to build the biggest gorilla in this town.” He scrapped the chamber’s in-house cable network and magazine, which were centerpieces of his predecessor.
“The chamber has become the antithesis of its former self,” a Philip Morris memo reported in 1999, while an executive said in an internal email, the “chamber is doing good work.”
There’s even been a revolving door between Philip Morris and the U.S. Chamber. A former Philip Morris executive is now one of the top executives in the U.S. Chamber … and better yet, a former U.S. Chamber employee is now a spokeswoman for Philip Morris International.
John Oliver of “Last Week Tonight” did a follow-up story on his show’s creation of “Jeff the Diseased Lung.”
Jeff the Diseased Lung is a trademark designed by Oliver and his show for the tobacco industry which is fighting efforts in smaller countries around the world to limit tobacco industry advertising and branding. Oliver’s show took out billboards in Uruguay and sent out t-shirts to Togo starring Jeff the Diseased lung.
Since, then, Jeff and the Twitter hastag #jeffwecan have taken off far beyond what Oliver expected. Also, there are a number of YouTube videos made by Jeff the Diseased Lung fans. Here’s one, here’s two, here’s a third. The first two are great, but that third one was … WTH?
Someone even made their own Jeff the Diseased Lung costume in Mexico City.
Oliver’s epic rant against the tobacco industry, more than 18 minutes long, savaged Big Tobacco over its efforts to harass and intimidate smaller countries that are trying to control tobacco advertising. Australia is one country that now requires simple plain packaging on tobacco products, along with graphic warnings.
As Oliver points out in last week’s piece, Ireland is another country that has joined Australia in requiring plain packaging. Hey, I wrote about that weeks ago, I beat John to the punch. He finds an incredible argument in Philip Morris’ lawsuit against Ireland: Philip Morris argued that, “a dance is only meaningful when it is danced, as a trademark is only meaningful when used.”
As Oliver retorts: “You know you have a pretty weak legal argument when it sounds like a rejected @#$%ing Jewel lyric.”
RJ Reynolds, Lorillard and Philip Morris have reached a $100 million settlement of 400 Engle cases in Florida. I thought they might do this. I’ve been writing for months that, every way I cut it, it was in their interest to do this.
The Engle (named after Howard Engle, a smoker who died several years ago) cases came from a Florida Supreme Court decision throwing out a $145 billion class-action judgement against Big Tobacco for its years of lies and cover-ups over the dangers of smoking. However, while throwing those cases out, the state Supreme Court opened the way for individual plaintiffs to file separate lawsuits against Big Tobacco.
Since then, literally thousands of lawsuits have been filed in Florida and Big Tobacco has been losing about two-thirds of these cases, with hundreds of millions of judgements awarded in favour of over a hundred plaintiffs. Most of those judgements have been upheld on appeal.
Rather than go through at least another decade of losing these cases (not to mention all the legal fees), I figured sooner or later, Big Tobacco was simply going to settle.
This settlement involves 400 cases filed in federal court. That’s $250,000 per plaintiff. I’m guessing there’s going to be more settlements, because I believe there’s several thousand more lawsuits ongoing, and that a lot of them are in state courts. So this settlement may have solely been to deal with the federal cases. And in fact, the NBC story is careful to say “it’s the first settlement by Big Tobacco to settle a chunk of Engle cases.”
Under the agreement, Lorillard will pay $15 million, while RJR and Philip Morris will each pay $42.5 million. This settlement won’t affect cases that have already been settled.
Great news for these families devastated by smoking! I’ll be keeping an eye out for future Engle settlements in Florida.
In John Oliver’s recent epic rant about the tobacco industry, he touched on this issue (more on that in a subsequent post).
Yes, the tobacco industry has taken some big hits in the past 30 years. A sharply declining smoking rate, from over 50 percent in the 1960s to approximately 18 percent today; the massive $280 billion Master Settlement Agreement in 1998; the Engle judgements out of Florida; and higher taxes in most states over the past 15 years.
However, from the Business Cheat Sheet story.
Then came the good news. According to a Credit Suisse research report released last week, tobacco is America’s most successful industry. The report states that the average returns from a company listed on the stock exchange was about 10% per year from the period between 1900 and 2010. Tobacco stocks, however, produced annualized returns of 14.6% during the same period. In terms of hard cash, this means that a single dollar invested in tobacco stocks was worth $6.3 million by 2010, while a dollar invested in a stock market index would only be worth $38,255.
However, as Business Cheat Sheet points out, the tobacco industry has simply rolled with the changes. There’s a reason the average cost of cigarettes has gone from $1.50 a pack in 1990 to $5.50 a pack in 2015. All those added costs — taxes and settlements — have simply been passed on to cigarette consumers.
According to this article, the $280 billion MSA and other litigation raised the cost of cigarettes by 10.9 cents a pack in the late 1990s. However, the price of cigarettes increased by an average of 14 cents a pack. The industry simply kept the change. When your customers are addicted to nicotine, there’s nowhere else to go.
Business Cheat Sheet also points out that the tobacco industry is an oligopoly — a large industry basically controlled by a very small number of companies. In the U.S., there’s really only four major tobacco companies — Philip Morris, RJ Reynolds, Lorillard and British-American Tobacco. And when the merger of RJ Reynolds and Lorillard is complete, that number will be down to three (BAT, which is big internationally, has a tiny share of the market in the U.S.). In fact, get this, there has not been a new major tobacco company formed in 56 years.
Worldwide, a mere five major companies — Philip Morris, BAT, Japan Tobacco International, Reemsta and Altadis — control 45 percent of the market. A huge percentage of the rest of the world market is in state-controlled in China.
To quote from the article:
As a result, competition within the industry is rare and the incentive to innovate on products and prices is low.
To add to that, cigarettes have an inelastic demand curve. This means that demand stays constant, even in times of recession. Thus, the tobacco industry manages to make profits because product margins improve, even if the overall product volume sold decreases.
The tobacco industry is booming in developing nations.
The third reason the industry continues to thrive — burgeoning markets in the Asia and Africa.
The smoking rate has not only declined dramatically in the U.S., but through most of the Western World. This was historically where the tobacco industry made the bulk of its revenues. But, as John Oliver pointed out last week, the developing world is completely different, where there is not as much education about the dangers of smoking and frankly for a lot of people, living conditions are so poor, there’s a level of apathy toward the dangers of smoking even when they are known. U.S. tobacco companies simply drool over these huge markets in Brazil, Africa, India, Indonesia the Philippines. (They’d be going after China, too, but China won’t allow it).
It can seem a daunting task fighting an industry that continues to thrive despite losing so many regulatory, legal and PR battles. Killing the industry won’t happen tomorrow and won’t happen next year or in the next decade. It’s definitely a process of chipping away at it.
This is yet another in a long line (literally thousands) of Engle Case lawsuits in Florida. The Engle case was a Supreme Court decision that overturned a $145 billion class-action judgement against Big Tobacco, while at the same time allowing individual lawsuits against various tobacco companies to be filed. This opened up a floodgate of lawsuits and jury awards in the hundreds of millions (perhaps even billions by now, I don’t know if anyone is keeping track.)
According to Wikipedia, the tobacco industry has lost 77 of the 116 Engle cases that have gone to trial so far.
This case is in Jacksonville and the plaintiff is a 64-year-old woman’s whose legs were amputated due to vascular disease caused by 40-plus years of smoking. The jury found the plaintiff, Donna Brown, 45 percent to blame and Philip Morris 55 percent to blame for lying about and covering up the dangers of smoking and awarded Brown $9 million in punitive damages and $8.3 million in compensatory damages.
From the article:
“The jury recognized that every person has a right not to be hurt by the careless, intentional misconduct of another, and Donna was hurt very badly by Philip Morris’ reckless and intentional misconduct,” attorney Nathan Finch said Friday.
Brown was a Marlboro smoker, but she also occasionally smoked Winstons, made by RJ Reynolds, which apparently reached a settlement with her.
The woman tried to quit several times, using Chantix, nicotine patches, nicotine gum, even a hypnotist, but nothing worked. She was not able to quit until she finally had a stroke in 2014 (Sounds like my mom, who kept smoking through cancer, heart attacks, chronic bronchities, etc., and only quit when she had a severe COPD episode.).
I’m glad someone did an article on this (NBC News) because frankly, this is something I’ve been wondering about myself for the past couple of years.
With a total of four states now with legal marijuana (Colorado, Washington, Oregon and Alaska), might the day come when pot sales will be controlled by huge corporations, perhaps even a single massive mega-corporation?
Boy, there are dollars to be made there. Billions upon billions of them. Too much profit to keep Big Business out for long. It’s legal now for about 18 million people in the U.S. — and I guarantee that number will continue to escalate, maybe a LOT and maybe soon. California might be next in line to legalize pot.
According to NBC:
“My concern is the Marlboro-ization or Budweiser-ization of marijuana,” said Ethan Nadelmann, executive director of the Drug Policy Alliance. “That’s not what I’m fighting for.”
“It’s a cultural thing,” said Keith Stroup, founder of the National Organization for the Reform of Marijuana Laws, the country’s oldest consumer pot lobby. “All of us have at least a little bit of discomfort with the corporate stuff.”
Which brings me to big tobacco. “Marlboro-ization.” I’ve long suspected that Big Tobacco is keeping an eye on the effort to legalize pot … and drooling in the process. The tobacco industry has been in a long, slow decline for about 20 years now. So the industry will have to diversify. One way to accomplish this is by selling more cigarettes overseas — but the gargantuan market of China is off-limits because the Chinese government doesn’t want American tobacco companies taking over its state-owned market.
So, that leaves … marijuana. I would not be shocked. Not in the slightest if RJ Reynolds or Philip Morris got into the marijuana-selling business in the next 10 to 20 years. Pot advocates see it looming on the horizon. They mention beer companies, too.
NBC News:
“Beer, wine and tobacco people—I’ve met with them all,” said Allen St. Pierre, the executive director of NORML, which is above all a consumer rights organization. He doesn’t love the idea of Big Pot, but he believes it will help guarantee that users get a quality product at a fair price.
He recalled two lunches in Washington, D.C., (one at DC Noodles, the other at Pizza Paradiso); several office visits; and a grand tour through Savor, the district’s popular beer and food conference.
“It’s been so surreal,” he said, reflecting on more than two decades as a marijuana lobbyist, all of it spent outside the warm circle of the other vice industries.
“I always dreamed of these meetings,” he added. “I pictured balding guys, with comb-overs, red suspenders, eating in quiet restaurants—and lo-and-behold that’s what they’ve been.”
The article focuses pretty heavily on the alcohol industry and whether beer and spirits distributors might want to get involved in the marijuana business someday, or if they see marijuana simply as a competitor.
I’m focusing a bit more on the Big Tobacco aspect, because frankly at this point, I think it’s more likely Big Tobacco would get involved in pot rather than beer companies.
My old pal Stanton Glantz (one of the most prominent anti-tobacco crusaders of the past 30 years) is quoted extensively in the story.
NBC News:
Tobacco executives, meanwhile, have been studying the marijuana industry for years, according to Stanton Glantz, a professor of medicine at the University of California, San Francisco. His research has drawn an 80-million page archive of tobacco industry documents, spanning the 1960s to the late 1990s. Many of the documents reference softening pot laws, rising use, and the dual threat/opportunity of a third major vice industry.
In early 1970, for example, an unsigned memorandum distributed to Philip Morris’ top management read, “We are in the business of relaxing people who are tense and providing a pick up for people who are bored or depressed. The human needs that our product fills will not go away. Thus, the only real threat to our business is that society will find other means of satisfying these needs.”
“These documents reveal that since at least 1970, despite fervent denials, three multinational tobacco companies, Phillip Morris, British American Tobacco, and RJ Reynolds, all have considered manufacturing cannabis cigarettes,” according to an investigation by Glantz and two colleagues, published this summer in Milbank Quarterly, a peer-reviewed journal of public health.
Make no mistake. Pot will be legalized, if not everywhere in the U.S., than in most of the U.S. And I’m predicting sooner rather than later. The political will to keep it illegal is slowly caving. And it is big, big, big business, a multi-billion business. You can be damned sure Philip Morris and RJ Reynolds are thinking about it.
The question is … would that be a bad thing?
In my mind, only if they completely abandoned the scourge of the 20th century — tobacco.
This case is one of the thousands of Engle cases winding their way through the Florida courts. R.J. Reynolds will appeal this verdict (oh, yes they will) but several of these verdicts have been upheld by appeals courts.
The Engle cases stem from a huge $145 billion class-action judgement in 2000. In 2006, the Florida Supreme Court overturned that settlement, but made an important decision to allow individual lawsuits against tobacco companies. Since then, several thousand lawsuits have been filed against tobacco companies, primarily Philip Morris, R.J. Reynolds and Lorrilard, and judgements ranging between a few million to $23.6 billion have been handed down by juries (I believe that $23.6 billion judgement will get tossed on appeal as excessive … when I Googled it, Google asked me “do you mean $23.6 million?”).
According to the article:
Attorney Kenneth Byrd of the Nashville office of national plaintiffs’ law firm Lieff Cabraser Heimann & Bernstein, LLP, announced that a jury in federal court in Florida today returned a verdict of $41.1 million against Philip Morris USA Inc. and R.J. Reynolds Tobacco Company for conspiring for decades to conceal the hazards of smoking and the addictive nature of cigarettes. The jury award consists of $15.8 million in compensatory damages and punitive damages in the amounts of $15.7 million against Philip Morris and $9.6 million against R.J. Reynolds.
“The cigarette industry argues that as Engle class members and their spouses die, their lawsuits die with them. We will continue working night and day to see that these class members get their day in Court.”
Interesting that was in federal court, I’m positive other Florida cases were in state courts.
This case is also a little unusual because most of these Engle cases at this point are being filed by relatives of people who died from lung cancer. This one was filed by the smoker, who is still alive and is suffering from COPD, not lung cancer. I believe that’s the first major judgement I’ve seen against a tobacco company for its role in giving a person COPD. I’m sure there’s been some, I just don’t remember ever coming across a story about it until now.
According to the article:
“At trial Philip Morris and R.J. Reynolds sought to place all the blame on Mr. Kerrivan for becoming addicted to nicotine as a teenager in a time when the defendants widely marketed smoking cigarettes using celebrities and famous athletes and advertised on television shows popular with children and teenagers. Thankfully, the jury rejected this defense and held Philip Morris and R.J. Reynolds accountable for their decision to target an entire generation of post-World War II American teenagers with a lifetime addiction to nicotine,” stated Mr. Byrd. “The cigarette industry argues that as Engle class members and their spouses die, their lawsuits die with them. We will continue working night and day to see that these class members get their day in Court.”
The No. 2 tobacco company in America — R.J. Reynolds — is in talks to buy the No. 3 tobacco company in America — Lorillard (which I have misspelled Lollilard more times than I can count.). Imperial Tobacco is also involved in the deal.
This deal would create a $56 billion company and would create a monster rival to the dominant No. 1 tobacco company in America — Altria, otherwise known as Philip Morris (its dominant brand is Marlboro, of course).
Reynolds and Lorillard would combine for 42 percent of the cigarette market, joining Reynolds’ big product — Camel — what Lorillard’s — Newport. Other Lorillard brands are Kent and Old Gold, while other Reynolds’ other brands are Pall Mall, Winston, Salem and Kool. But, Camel and Newport are the dominant brands.
The new joint company then would sell off several of their smaller brands to Imperial Tobacco, a British-owned company that would then become the No. 3 company in America.
According to the New York Times, declining cigarette sales are driving this move, as both companies work to restore their past profits. E-cigs are also a factor in this deal, as the e-cig industry is booming (got mixed feelings about that), and Lorillard owns the No. 1 e-cig brand, Blu E-Cigarettes.
According to the New York Times:
Still, a takeover of Lorillard by Reynolds would represent the industry’s boldest response yet to a declining, if still profitable, market. A general drop in smoking rates and aggressive public health campaigns aimed at curbing smoking have cut into sales in the United States.
About 42 million people in the United States, or nearly 18 percent of the adult population, smoke cigarettes, according to the Centers for Disease Control and Prevention. That compares with about 21 percent of the adult population nearly a decade ago and 43 percent of the adult population in 1965, according to the C.D.C.
What remains of the traditional cigarette industry is dominated by Altria, whose Philip Morris arm sells one out of every two cigarettes in the United States.
Opportunity has beckoned in the new business of e-cigarettes. A deal by Reynolds to buy the leading purveyor of e-cigarettes could spur other mergers within the industry as manufacturers jockey for position.
“This transaction in our view will be very positive for the global tobacco industry and could be just the beginning of future transactions with e-cigs/vapor being the underlying catalyst,” Wells Fargo analysts wrote in a note.
Anyway, interesting story as the industry adjusts to a rapidly changing and evolving market. This deal is not cast in stone, as it must be approved by federal regulators and could face scrutiny over
Incredible, yet another “Marlboro Man” dies from smoking. By my count, that makes four.
Eric Lawson, who portrayed the iconic Marlboro Man cowboy in Marlboro ads from 1978 to 1981, died this week of COPD at the relatively young age of 72. He appeared in anti-smoking ads after he worked for Philip Morris.
Lawson joins Marlboro Men models Wayne McLaren, Dick Hammer and David McLean, all of whom died of lung cancer. McLaren testified in favour of anti-smoking laws many years ago and Philip Morris tried to claim he was never a Marlboro Man model, but McLaren still had pay stubs calling him the Marlboro Man (what, a tobacco company LYING…?)
Superman coming out of one of those ubiquitous Marlboro trucks
Just watched Man of Steel and had to absolutely crack up at the nonstop product placement through the whole movie — man, I really hadn’t noticed product placement in a movie in years. Man of Steel was one of the more blatant I’ve ever seen — Superman has a battle with Zod’s minions in the streets of Smalltown, right in front of a 7/11, then in front of a Sears, then Zod’s minion picks up a U-Haul van and throws it at Superman, then Superman throws one of the baddies through the wall of an IHOP (there’s also an obvious ad for Nokia earlier in the movie.). Pretty funny. Like, we’re too stupid to notice. This movie grossed more than $500 million worldwide, do they really need the extra $100 million from advertisers?
Anyway, the reason this resonates with me, is the 1978 and 1980 version of Superman (and Superman II) is an absolutely despicable chapter in the sordid marriage between Big Tobacco and Hollywood.
Product placement in Hollywood films began in the 1970s, and Big Tobacco was quick to join in. There was also a long history of Hollywood glamorizing smoking in films, but the tobacco industry never had to pay a nickel of advertising — Hollywood was literally doing this out of the goodness of their hearts.
That changed in 1978 with Superman and Superman II (actually filmed as a single production). Philip Morris not only paid to have Marlboro logos put into Superman movies, they also paid to have Lois Lane chain smoke through the movie — Lois Lane never smoked in the comic book. What’s especially craven about this is those Superman movies as we all know were geared toward kids and teens. They were rated PG and were wildly popular with kids, like Star Wars and Close Encounters. I mean, the whole thing is just criminal to me (since cigarette advertising had been banned on TV for eight years because kids watch TV), on both the part of Philip Morris and the Hollywood studios (three studios were involved in the Superman movies, including Warner Bros.).
Ironically years later, in 2006, a scene was added in Superman Returns in which Lois is attempting to light a cigarette and Superman, using his super-breath, blows out her lighter over and over, partly as an homage to the smoking in the Superman movies from 20 years earlier.
Weirdly enough, perhaps out of some sort of need for penance for the 1978 Lois Lane scandal, DC did a special Superman anti-smoking campaign in the 1980s (and accompanying cartoon — seems to be British.), in which Superman battles a villain called “Nick O’Teen.” Nick O’Teen is incredibly lame. He wears a cigarette butt for a hat and has yellow teeth and has these weirdly pedo dreams about handing cigarettes to little girls (Not even remotely exaggerating).
Unfortunately, this cartoon is so dreadful it’s just going to have the same effect as those lame anti-drug movies they made us watch in high school; it’s just going to encourage kids to do what you’re telling them not to do.
Superman product placement (and more Nick O’Teen)!
