General Tobacco (GT) also continues to dispute the validity of the Master Settlement Agreement (MSA) under antitrust, constitutional and other federal and state laws, and GT claims its entitlement to more than $95 million in overpayments to the states. The de-listing does not pertain to the filtered cigars or pipe tobacco products sold by GT. These products can continue [image-nocss] to be sold in all states without interruption.
Since 2004, General Tobacco has made approximately $600 million in payments to the states under the MSA. J. Ronald Denman, General Tobacco's executive vice president and general counsel, said, "The states should consider not only the vast amount of money that General Tobacco has paid them, but also the interests of the consumer at stake here. Consumers should not have to lose the choice of GT's brands over what the company considers to be a bona fide dispute over the interpretation of the MSA and its validity under federal and state law."
Denman said the company will continue legal action and added, "Big Tobacco got away with billions in sales with no payments to the states before the MSA and is now squeezing its competitors out of business under the auspices of the MSA so that it can make many more billions. And, many of our competitors are getting a free pass for billions of cigarettes they sell each year because they have MSA payment exemptions, while the states want General Tobacco to pay for every single cigarette it ever sold. How can our government condone such disparate treatment among the companies, especially when some of the others have been found to have committed civil racketeering with respect to their business practices?"
GT is appealing a federal court's dismissal of the company's anti-trust claim, which never heard the essential facts because the court dismissed it saying the states and Big Tobacco were immune from the lawsuit.
Though General Tobacco intends to comply with any state's notice of de-listing, the company has informed the states that it is not in default on its MSA obligations because of the $95 million-plus credit, any de-listing action should be halted while arbitration to determine application of the credit is pending, and General Tobacco and customers have not been given constitutionally adequate notice of the de-listings.
GT continues to dispute those states' contention that GT is in default on its obligations to the states under the MSA. General Tobacco contends that any amount it currently owes to the states is far less than what the states argue and that General Tobacco is entitled to apply more than $95 million owed to the company in credits under the MSA toward any payment due.
On Jan. 14, 2010, General Tobacco raised its challenges to the MSA in papers filed in opposition to an action brought by the State of Arkansas in Pulaski County Circuit Court in Little Rock, Ark. Arkansas is the only state that has brought litigation against General Tobacco. General Tobacco also filed a notice in the United States Court of Appeals for the Sixth Circuit on Jan. 13, 2010, appealing a decision of the United States District Court for the Western District of Kentucky in a case challenging the MSA brought by General Tobacco against all of the 46 states, the District of Columbia, five U.S. territories and major cigarette manufacturers that are part of the MSA.
The MSA was created in 1998 by the 46 States, the District of Columbia and five U.S. island territories, along with the mega-tobacco companies, which 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 General Tobacco would have to pay substantially more than the original preferred members, according to GT.
Mayodan, N.C.-based General Tobacco, the sixth largest tobacco company in the nation with approximately $300 million in annual sales, is a full participating member of the Master Settlement Agreement. The company began its operation in 2000 distributing its own cigarette brand, GT One. The company now also distributes Bronco, Silver, Vaquero Little Cigars, and its new premium menthol cigarette, 32 Degrees. As one of the largest tobacco companies in the country, General Tobacco continues to hold a leading position in the value-priced cigarette market. Its mission is to distribute superior quality tobacco products at competitive prices.
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