Tobacco Industry - Industry Outlook in The United States

Industry Outlook in The United States

The tobacco industry in the United States has suffered greatly since the mid-1990s, when it was successfully sued by several U.S. states. The suits claimed that tobacco causes cancer, that companies in the industry knew this, and that they deliberately understated the significance of their findings, contributing to the illness and death of many citizens in those states.

The industry was found to have decades of internal memos confirming in detail that tobacco (which contains nicotine) is both addictive and carcinogenic (cancer-causing).

The suit resulted in a large cash settlement being paid by a group of tobacco companies to the states that sued. Further, since the suit was settled, other individuals have come forth, in class action lawsuits, claiming individual damages. New suits of this nature will probably continue for a long time.

Since the settlement is a heavy tax on the profits of the tobacco industry in the US, regressive against smokers, and further settlements being made only add to the financial burden of these companies, it is debatable if the industry has a money-producing long term outlook.

The tobacco industry has been largely successful in this litigation process, with the majority of cases being won by the industry. During the first 42 years of tobacco litigation (between 1954 and 1996) the industry maintained a clean record in litigation thanks to tactics described in a R.J. Reynolds Tobacco Company internal memo as "the way we won these cases, to paraphrase Gen. Patton, is not by spending all of Reynolds' money, but by making the other son of a bitch spend all of his." Between 1995 and 2005 59% of cases were won by the tobacco industry either outright or on appeal in the US, but the continued success of the industry's efforts to win these cases is questionable.

In June 2009, U.S. President Barack Obama signed into law the Family Smoking Prevention and Tobacco Control Act which has been called a "sweeping anti-smoking" bill. Amongst other restrictions, this Act banned the use of any constituent, additive, herb or spice that adds a "characterizing flavor" to the tobacco product or smoke (Section 907)(a)(1)(A). The aim of this ban is to prevent children and teenagers from becoming addicted to cigarettes at a young age with the U.S. Department of Health and Human Services citing that "studies have shown that 17 year old smokers are three times as likely to use flavored cigarettes as are smokers over the age of 25". This ban however does not apply to menthol cigarettes, which are exempt from the bill.

Lawsuits against the tobacco industry are primarily restricted to the United States due to differences in legal systems in other countries. Many businesses class ongoing lawsuits as a cost of doing business in the US and feel their revenue will be only marginally affected by the activities.