In 1998, the nation’s leading cigarette manufacturers signed the Master Settlement Agreement (MSA) with 46 states, five U.S. territories and the District of Columbia. The MSA was an historic agreement that imposed significant restrictions on a range of cigarette marketing activities and required the participating manufacturers to make billions of dollars of settlement payments to the states.
Legislation has been a critical element of the MSA. As part of the MSA, the states were encouraged to enact model legislation requiring non-participating manufacturers (or NPMs) to make certain payments into an escrow account on each cigarette sold in the state. The purpose of the escrow account is to ensure that funds are available to satisfy state claims, such as for health care costs, in the event a state obtains a judgment against an NPM. Although all MSA states enacted this legislation, it became clear soon after that many NPMs were simply not making the payments that these laws required. In addition, it became clear that some NPMs were exploiting a loophole by withdrawing their escrow deposits in a way that conflicted with the intent of the legislation.
In order to address these issues, the National Association of Attorneys General drafted additional model legislation:
Complementary Enforcement Legislation: This legislation provides a range of enforcement tools to state Attorneys General to ensure that NPMs make the required escrow payments. These tools include requiring NPMs to report cigarette sales volume; requiring state departments of revenue to publish lists of non-compliant NPMs and their brands; and prohibiting wholesalers and retailers from stamping or selling cigarette brands of NPMs that are not in compliance with their escrow obligations.
Allocable Share Legislation: This legislation closes a loophole in the state escrow statutes by preventing NPMs from making withdrawals of escrow payments that were never contemplated when those statutes were enacted.
Philip Morris USA strongly supports the enactment of Complementary and Allocable Share legislation in those states that have not enacted it. We believe this legislation will ensure that the original purpose of the MSA is carried out fully and effectively.
