Smokers Lose Challenge in Court

Monday, October 30th 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — The Supreme Court turned aside a challenge to the 2-year-old national tobacco settlement Monday.

The court refused to consider whether smokers wound up paying illegally higher prices for their cigarettes as a result of the landmark $246 billion deal.

In late 1998, the tobacco industry ended a slew of health-related lawsuits by agreeing to yearly payments to states. Payments are spread over 25 years.

The money was to compensate states for the cost of treating smoking-related illnesses of people on Medicaid.

Two men, Leo Hise and Jack Isch, filed suit in federal court in Oklahoma a month after the settlement was signed. They claimed the settlement violated antitrust laws because the nation's biggest tobacco companies went into the deal intending to pass on the costs to smokers.

A federal court ruled in favor of the tobacco companies in 1999, and the men appealed unsuccessfully to the 10th U.S. Circuit Court of Appeals in Denver.

The tobacco companies noted that other antitrust challenges to the settlement have failed, and argued that there was no need for the Supreme Court to get involved.

Philip Morris Inc., which with its Marlboro label and other brands commands more than half the U.S. market, argued in court papers that retailers, not cigarette makers, decide how much to charge.

The suit also named R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Co.; Lorillard Tobacco Co.; and The Liggett Group.

Together the firms control all but a fraction of the U.S. tobacco market.

In July, cigarette manufacturers announced a wholesale price increase of 6 cents a pack, which was expected to eventually result in a 7- or 8-cent increase to consumers.

Analysts said the move was in anticipation of increased settlement payouts. The companies paid about 51 cents per pack to the states this year, tobacco analysts said, and next year that will increase to about 59 cents.

The price increase was the latest in a string since the settlement was announced. A wholesale increase in January 2000 added as much as 18 cents to a pack of cigarettes.

The case is Hise v. Philip Morris, 00-337.