Iowa A.G.: There's no Tobacco Cartel

Iowa's Attorney General, Tom Miller, called me the other day to complain about a story I wrote in Governing's October issue. The piece, about the states' legal settlement with cigarette-1.jpg   Big Tobacco, was called "Puff of Collusion" (scroll halfway down the screen). It basically aired out the case that the Competitive Enterprise Institute has been making that the states and tobacco companies formed a cartel.

The A.G. believes I've inhaled a puff of delusion. Here's his take:

"There's been a group of people in conservative organizations that have really hated the tobacco settlement for a long time. They have a right to that. Part of their rhetoric and opinion is based on some real issues.

But what they have gone to is making very misleading propaganda against the agreement. The first and foremost one is that it's a cartel. That's totally false.

The four original signees of the Master Settlement Agreement in 1998 had 97 percent of the market then. Today they have 84 percent. If there were a cartel, it's very unlikely that they'd lose that much market share.

If it were a cartel you also wouldn't have a situation within those four companies--it's now three with the merger of RJ Reynolds and Brown & Williamson--where there's a significant market share shift. Philip Morris is gaining, and Reynolds is down, within the 84 percent.

So there's nothing inherently in the settlement that brings about a cartel, there's no effects of a cartel, and it doesn't exist except that they keep saying it and saying it. The more they say it, the more people pick up on it, as you did."