MIAMI, April 18 /PRNewswire/ -- Notwithstanding the favorable treatment
and discounts the states provide to its competitors, yesterday, General
Tobacco was able to comply with its obligations under the 1998 Landmark
Master Settlement Agreement (MSA) reached between the major tobacco
companies and 46 states by making a payment of more than $96 million.
General Tobacco also chose to withhold more than $11 million to which it
believes entitled as a reduction in its annual payment pursuant to a credit
provision under the MSA due to the loss of market share it has experienced
as a result of joining the MSA.
Under the terms of the MSA, an arbitration process was established to
provide credits to participants in the MSA. On March 28, an independent
economics firm determined that the MSA was a significant factor in the loss
of market share to participants of the MSA. Consequently, an arbitration
panel will hear argument on whether the states diligently enforced laws
created to implement the terms of the MSA. The states dispute that they
have failed to "diligently enforce" their statutes, although two state
courts have already ruled otherwise.
General Tobacco, which sells the Bronco(R), GT One(R), Silver(R) and
Champion(R) brand cigarettes, and Vaquero Little Cigars(R), began its
operation in 2000. Although no state has ever sued General Tobacco for the
type of conduct that gave rise to the MSA, the creation of the MSA resulted
in artificially restrictive market conditions that precluded fair
competition between MSA and non-MSA participants. As a result of these
unfair market conditions and the states representation that they would
diligently enforce the MSA statutes designed to protect MSA participants,
General Tobacco was forced to seek entry into the settlement agreement in
August 2004. Yet, to become a member of the MSA, the states forced General
Tobacco to enter into a separate agreement to make sizeable payments to the
states as though it had been part of the MSA since its inception.
Notwithstanding, the states neglected to provide General Tobacco with the
same yearly discounts the states provide to other members of the MSA, some
of whom were the subject of the very lawsuits that gave rise to the MSA.
General Tobacco, who has never been sued for the type of conduct that gave
rise to the MSA, has discovered that the state discounts amount to hundreds
of millions of dollars per year.
"General Tobacco has always voluntarily complied with the marketing
restrictions of the MSA, even before it was permitted entry into the MSA.
We have also fully complied with the separate punitive financial
obligations the states made us pay before they would let us join the MSA.
We have done all this, notwithstanding the hundreds of millions in
discounts the states arbitrarily provide to our competitors. However, due
to the finding of the independent economics firm that market share has been
affected by the MSA, we have chosen to hold back the amount to which we are
entitled as a credit. We are not the first company to hold back, and doubt
we will be the last. Should the final ruling indicate that General Tobacco
is not entitled to the full credit, we will try to comply with any further
payment obligations at that time," said J. Ronald Denman, General Tobacco's
Vice President and General Counsel."
As one of the largest tobacco companies in the country, General Tobacco
continues to abide by the advertising and marketing restrictions imposed by
the MSA, while following its mission of selling premium quality cigarettes
to the adult consumer at value prices.
SOURCE General Tobacco
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Related links:
http://www.generaltobacco.com
CONTACT:
J. Ronald Denman, General Tobacco,
+1-305-500-9595, ext. 223, or jrdenman@gtonecentral.com
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