Tobacco Regulation Through Litigation: The Master Settlement Agreement

48 Pages Posted: 26 Oct 2009 Last revised: 27 Nov 2012

See all articles by W. Kip Viscusi

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Joni Hersch

Vanderbilt University - Law School; IZA Institute of Labor Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - College of Arts and Science - Department of Economics

Date Written: October 2009

Abstract

The 1998 Master Settlement Agreement resolved the unprecedented litigation in which the states sought to recoup the cigarette-related Medicaid costs. The litigation was settled through a combination of negotiated regulatory requirements and financial payments of about $250 billion over 25 years. Settlement payments received by states are strongly related to smoking-related medical costs but are also related to political factors. The payments largely took the form of an excise tax equivalent, raising potential antitrust concerns. The regulatory restrictions imposed by the agreement also raised antitrust concerns. However, there has been no evident shift in industry concentration. The increase in advertising and marketing expenses has largely taken the form of price discounts. The settlement sidestepped the usual procedures pertaining to the imposition of taxes and the promulgation of new regulations.

Suggested Citation

Viscusi, W. Kip and Hersch, Joni, Tobacco Regulation Through Litigation: The Master Settlement Agreement (October 2009). NBER Working Paper No. w15422, Available at SSRN: https://ssrn.com/abstract=1493014

W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

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HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Owen Graduate School of Management

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HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

Joni Hersch

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
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HOME PAGE: http://law.vanderbilt.edu/go/phdlawecon

IZA Institute of Labor Economics ( email )

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Vanderbilt University - Owen Graduate School of Management

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Nashville, TN 37203
United States

Vanderbilt University - College of Arts and Science - Department of Economics

Box 1819 Station B
Nashville, TN 37235
United States

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