Philip Morris International (PMI), the worlds biggest tobacco manufacturer, agreed to pay the European Commission a billion dollars in compensation as part of a landmark deal to combat smuggling of tobacco on Friday 9th July 2004.
In the past tobacco industry representatives have denied they have aided smuggling activity or could have done anything to prevent it.
But the European Respiratory Society (ERS), an EPHA member, believes that the new agreement casts major doubts over this.
Cigarettes are the worlds most widely smuggled legal consumer product. Despite denials from tobacco companies - the combination of stories in the media and law suits - points to the facilitation of smuggling activity to penetrate closed markets and increasing sales by reducing the price of cigarettes.
The key points of the settlement are as follows:
Philip Morris will now be penalised if its cigarettes are smuggled into Europe.
The company will have to pay the taxes due on any genuine Philip Morris cigarettes seized by European customs. And if more than 90 million cigarettes a year are found to be smuggled, it will have to pay damages of 400%. This would amount to fines of 7.5 million euros for each additional container.
The company is now also required to mark all its cigarettes with the country of destination and to have tight controls on all the contractors it supplies, so the route by which cigarettes are smuggled can be tracked and traced.
This agreement applies to Philip Morris, but it is likely there will now be pressure on the other two companies in the law suit, RJ Reynolds and JT International, to settle too.
The ERS believes that the settlement is a major move forward in cutting tobacco smuggling on an international stage as it provides a baseline for a protocol on smuggling under the new international tobacco treaty, the Framework Convention on Tobacco Control (FCTC).
Professor Walter McNicholas consultant lung specialist and President of the ERS said: The tobacco industrys shadowy business practices have been well documented over recent years and we are delighted that the European Commission (EC) has managed to secure such a resounding victory to combat tobacco smuggling. It is real step forward and a victory for European public health.
For a long time tobacco industry executives have said that systems to deal with this illicit trade were not possible. It is interesting that they have changed their minds at the same time as the EC was given the green light for a money laundering law suit against them.
The EC must now put forward proposals for a Directive that binds all Member States and tobacco manufacturers to the same conditions of todays agreement.
