Critics say the 1998 Master Settlement Agreement has not turned out as expected as big players accused of wrongdoing wound up with market protections while small businesses were forced to pay up….Sullum thinks this is all to the bad—the small tobacco companies that didn't engage in massive fraud and mislead their consumers are being penalized, while the four major tobacco companies that did all the wrongdoing now get to set up a state-enforced cartel as a reward. That sounds pretty bad, but let's see.
Under the deal, the big cigarette companies agreed to restrict their marketing, fund stop-smoking efforts and make annual payments to the states for 25 years.
But attorneys on both sides knew the large companies would raise cigarette prices to make their payments, so they built in protections to prevent companies outside the agreement from taking too much market share.
But, frivolous libertarian complaints notwithstanding, wouldn't a federal settlement be a boon to the health of the country by funding countless health initiatives and stop-smoking programs? Not likely. First, in six European countries where tobacco ads have been completely banned, overall tobacco sales have increased.Why on earth would that be? A-searching we go. David Cutler and Edward Glaeser recently asked the question, "Why Do Europeans Smoke More than Americans?" One-half of the difference, they found, can be accounted for by differences in beliefs about the health effects of smoking. "Europeans are generally less likely to think that cigarette smoking is harmful." What that has to do with tobacco cartels, I can't say, but it's all very curious.