State Cigarette Mob Can't Kick the Habit

Reason reports:

Colorado Treasurer Mark Hillman calls the deal under which the top cigarette manufacturers pay the states billions of dollars a year "a protection racket." In truth, it's worse than that.

The so-called Master Settlement Agreement (MSA), which resolved state lawsuits against the largest tobacco companies, is not a classic extortion scheme in which a business pays to be left alone. Instead Philip Morris et al. are paying for protection against their competitors, and they are passing the cost on to their customers, the very people whose victimization by Big Tobacco supposedly justified the lawsuits in the first place.

A decade ago, states started suing cigarette makers, demanding compensation for the cost of treating smoking-related illnesses under Medicaid. They accused the tobacco companies of tricking people into smoking by denying its health hazards and keeping them hooked with carefully calibrated doses of nicotine.

In 1998, to avoid potentially ruinous liability, the industry's main players agreed to payments totaling more than $200 billion during the first 25 years of the deal. But there was a problem: If the participating companies raised their prices to cover the payments, what would stop existing or new cigarette makers that had not signed the MSA from underselling the big manufacturers and whittling away at their market share?

The answer was a government-sponsored cartel that forces nonparticipating companies to make payments into an escrow account based on their sales, ostensibly to cover their future liability. Under this arrangement (which has been challenged in federal court), cigarette makers that have been nothing but honest with the public pay a penalty so the sleazy, sneaky companies the states sued don't have to.

As Murray Rothbard would say the state is nothing more than a criminal gang.