Big Tobacco Facing Lawsuit, FDA Oversight
Big Tobacco is facing two daunting challenges: a civil Racketeer-Influenced & Corrupt Organizations Act (RICO) lawsuit filed by the U.S. Justice Department, and a bill in Congress to give the Food and Drug Administration (FDA) authority over the tobacco industry, BusinessWeek reports in its Sept. 13 issue.
Opening arguments in the lawsuit are scheduled for Sept. 21. Although the tobacco industry has faced numerous legal challenges over the years, this one is more threatening because it claims that tobacco companies have participated in an illegal conspiracy since 1953. The government is seeking $280 billion, nearly the entire profits of the six companies named in the lawsuit during the five-decade period.
FDA regulation is something tobacco companies have tried to avoid over the years. However, the bill has passed the Senate and could come up for a vote in the House of Representatives as soon as October.
Both the lawsuit and the FDA regulation have split the industry, something that has not occurred in the past. While the lawsuit could prove devastating to Altria Group, Reynolds American, and Liggett, it could be helpful to new, low-cost cigarette makers not named in the suit, such as Commonwealth Brands, Inc., and General Tobacco.
Altria Group is the only cigarette maker that supports FDA regulation.
"This is not only controversial because it's about tobacco," said Martin Feldman, a tobacco analyst with Merrill Lynch & Co. "It's controversial because you have the industry split."
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