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What is the Master Settlement Agreement?

October 16, 2019

What is the Master Settlement Agreement?

Vaping is a relatively new phenomenon that started around the mid-2000s. Today, the vaping industry is staring down a variety of regulations and criticisms: flavor bans, the premarket tobacco product application (PMTA) deadline in May 2020, and negative media coverage. Overall, the industry is under both media and regulatory microscopes as of this writing. What is the source of all this? The source of all of this can be found in the Master Settlement Agreement (MSA).



The History of the Master Settlement Agreement

The origins of the MSA came well before the 1998 settlement. As early as the 1950s to 1994, over 800 private claims were brought up against tobacco companies in state courts. Some of the claims included negligent manufacture, negligent advertising, fraud, and violation of consumer protection statutes in various states. The tobacco industry won these lawsuits initially, but by the early 1990s, over 40 states filed lawsuits against the tobacco industry. Then-Mississippi Attorney General Mike Moore was the first to do so in 1994. Moore said, “The lawsuit is premised on a simple notion: you caused the health crisis, you pay for it.”

The MSA was an agreement between 46 states, the District of Columbia, Puerto Rico, four American territories, and tobacco companies such as RJ Reynolds, Philip Morris, and other smaller tobacco manufacturers. Four states (Mississippi, Minnesota, Florida, and Texas), had separate settlements with these tobacco companies. One of the goals of the MSA was to reduce cigarette smoking in the United States. The effects of the MSA are profound: despite the doubling of the U.S. population since 1951, cigarette smoking rates are at its lowest since that year, and per capita, they are at their lowest since the 1930s.

Manufacturers who are part of this agreement made an agreement to pay the states annually and in perpetuity billions of dollars. In addition, they restricted permanently the advertising, promotion, and marketing of cigarettes, as well as contributed $1.5 billion to establish the American Legacy Foundation (ALF), an organization dedicated to counter-advertise and educate the public about the effects of cigarette smoking.


What does this have to do with vaping?

Many consumers have reported switching to vaping from cigarettes when speaking about their vaping experiences. This has brought vaping under increased scrutiny as various health agencies and government officials have questioned the safety and efficacy of vaping. The recent string of vaping-related illnesses and deaths is mostly due to black market vaping products containing THC, rather than the legitimate products you can buy on eJuices.com or other retail websites that do NOT sell THC products.

However, the MSA adds yet another layer of information regarding vaping that consumers may not be aware of, and the states may just be pushing for more than just public health concerns. According to a ProPublica report , many states were still getting millions and millions of dollars under the MSA in 2014, although a lot of money is still outstanding. Many states took out tobacco bonds right around the time of the MSA in 1998 and demanded that the tobacco companies pay upfront as per the terms of the MSA. State governments, assuming the rate of smoking would remain constant, saw this as a way to raise revenue in perpetuity per the stipulations of the MSA. In fact, there were massive decreases in smoking rates, which also saw tobacco companies paying less and less money to the states as their revenue fell.

For example, California (which has a flavor ban in many localities and is proposing a statewide flavor ban) has nearly $8 billion in proceeds from selling tobacco bonds that are still outstanding as of 2014. California’s risky bet on the future using tobacco bonds may have had effects that not only affected the tobacco companies but also begs the question regarding the state’s fiscal health: what if California never purchased those tobacco bonds in anticipation of future tobacco revenue?

Another example is Massachusetts. The state is currently under a temporary flavor ban and received $282 million in 2014 alone from the MSA. However, the state only spent 1.4% of that money on smoking prevention efforts. Doing the math, that’s only $3.95 million spent in that state for smoking prevention efforts that year. What could have been done if more money went towards smoking prevention efforts, which was the initial intent of the MSA when it was agreed on in 1998?


What can I do when advocating for vaping?

With the subsequent rise in vaping since the beginning of this decade, there is a close relationship between states with flavor bans and proposed flavor bans and how much settlement money each state is receiving under the MSA. This should put into perspective why these flavor bans are being proposed all throughout the country. This relationship leads to a lot of questions regarding flavor bans and other regulations that are being proposed that you can ask when you take action and speak up for the vaping industry.

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