North Carolina-based tobacco manufacturer and distributor General Tobacco said it is suing 52 U.S. attorneys general and 19 tobacco companies, as well as asking for damages in excess of $1 billion from competitors.
The company says its competitors allegedly conspired with the states to set up the Master Settlement Agreement (MSA) so later market entrants, such as GT, have to pay the states substantially more than certain competitors pay.
General Tobacco said it believes the effect of the MSA is to drastically limit future competitors from fair market competition. The company has paid approximately $470 million to the MSA and an additional $36 million in escrow.
The complaint was filed in U.S. District Court in Louisville, Ky., charging the 52 states and territories attorneys general with violating the Sherman Anti-Trust Act, its constitutional rights under the Equal Protection and Due Process Clauses of the Fourteenth Amendment, the Compact Clause and the Commerce Clause of the U.S. Constitution as well as violation of the Civil Rights Act, Title 42 USC Section1983.
The MSA was created in 1998 by the 46 states, the District of Columbia and five U.S. island territories, along with big tobacco companies, which then controlled more than 97% of the market.
General Tobacco said MSA was structured so that certain companies in the market in 1998 would receive future preferential payment terms while new members such as General Tobacco, would have to pay substantially more than the original preferred members.
J. Ronald Denman, executive vice president of General Tobacco, compared the MSA unequal treatment to a cartel.
"The structure for the MSA created an impossible business environment for future competitors especially small players such as GT. All we are asking for is a level playing field for everyone," Denman said.
The complaint asks for treble damages under the Sherman Act as well as for an injunction, attorney fees and other relief.
General Tobacco is the sixth-largest tobacco company in the nation with approximately $300 million in annual sales. The company began its operation in 2000, distributing its own cigarette brand, GT One.
The company also distributes Bronco, Silver, Vaquero Little Cigars and their new premium menthol cigarette, 32 Degrees.