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 Continues Corporate Commitment to the MSA; Vibo Corporation, Operating as General Tobacco, Makes $11.5 Million Payment to the Master Settlement Agreement (MSA)
June 06, 2006
MIAMI–(BUSINESS WIRE)–June 6, 2006–General Tobacco announced today the payment of $11.5 million to the Master Settlement Agreement (MSA) as part of its commitment to the multi-state agreement by seven tobacco companies setting forth strict guidelines for tobacco marketing as well as the finance of a $1.5 billion anti-smoking education campaign.
General Tobacco paid over $96 million in April 2006, but withheld the additional amount because it believed it was entitled to a reduction resulting from the loss of market share it experienced after joining the MSA. This adjustment is currently being litigated across the country by General Tobacco and virtually every other tobacco company in the MSA. While General Tobacco maintains its position that it is entitled to approximately $70 million in total reimbursements for the years 2003, 2004, and 2005, it will make the full payments pending final adjudication regarding the actual final payments due when released by the states.
“Despite having had to substantially increase the price of our tobacco products when we joined the MSA in 2004, we were able to maintain the market share we had gained prior to joining because of our quality. Fortunately, the MSA provides a mechanism for relief in connection with that market share loss. Rather than continue to withhold full payment pending the court rulings, we decided to voluntarily pay in advance to demonstrate our corporate commitment to social responsibility and our financial strength in this competitive market,” said J. Ronald Denman, Vice President and General Counsel.
The MSA is a comprehensive accord formed in 1998 with the Attorneys General of 46 states and five territories that has fundamentally changed how tobacco is marketed, advertised and promoted. General Tobacco voluntarily joined the MSA in 2004 to support the MSA’s mission of improving public health and reducing youth smoking. General Tobacco’s voluntary participation demonstrates the company’s commitment to fully comply with the marketing and advertising restrictions addressed in the MSA.
General Tobacco, with approximately $300 million in annual sales, is one of the newest members to join the MSA pact. Its mission is to distribute superior quality tobacco products at competitive prices. The company began its operation in 2000 distributing its own cigarette brand, GT One(R). Because of the popularity of this value-priced excellent quality product, the company now distributes three additional brands of cigarettes: Bronco(R), Silver(R) and a new line of little cigars, Vaquero(R). As one of the largest tobacco companies in the country, General Tobacco continues to hold a leading position in the value-priced cigarette market and is committed to distributing premium quality tobacco products at competitive prices.
General Tobacco Makes Annual Payment to MSA
April 18, 2006
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 Web Site: http://www.generaltobacco.com
April 18, 2006
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 Web Site: http://www.generaltobacco.com
