The Master Settlement Agreement

The addition of subsequent participating producers meant that almost all cigarette manufacturers on the domestic market had signed the Multistate Settlement Agreement. Their addition was important. The majors were concerned that all cigarette manufacturers that were excluded from a transaction (non-participating producers or NPMs) would be free to increase their market share or enter the market at lower prices, which would radically alter the future profits of the majors and their ability to raise prices to pay for the comparison. The fact that pre-MSA trading discussions were widely known implies that MSA was not entirely unexpected to investors. To the extent that the payment was expected by investors prior to November 1998, these expectations would be expected to be reflected in the prices of the equity offers of these companies. Indeed, the share prices of these companies rose on the day of the arrival of MSA, to then fall below the prices that prevailed the day before the next day`s agreement.10 In addition, it offers states annual payments for an indeterminate future (about $206 billion by 2025 – including $4.5 billion for Washington State) – to reimburse Medicaid costs to the states. Tobacco billing is the largest financial recovery in the history of the law. Under the « qualifying law, » non-signatory tobacco companies (also known as « non-participating producers » or « NPMs ») must pay a portion of their income into a trust account.   The money in the receiver account serves as a reserve of responsibility.   If the NPMs are successfully sued for damage to cigarettes, the money in the trust accounts will pay the damages.

  The payment of each NPM is based on market share and is approximately the cost per cigarette, such as the amount that OPMs must pay to comply with the MSA. Payments can only be used to pay a judgment or transaction on a claim against NPM, up to the amount that the NPM would otherwise pay under the MSA. All remaining funds in the trust account return to the NPM after 25 years. As an incentive to join the transaction agreement, the agreement provides that when an MPS has entered into the transaction contract within ninety days of the date of execution of the transaction contract, that PMS is exempt from annual payment to the implementing states, unless the PMS increases its market share in the domestic cigarette market beyond its 1998 market share or beyond 125% of the market share of the 1997 MPS. If, in any given year, the market share of exempt MPS increases beyond these relevant historical limits, the MSA requires the exempt MPS to make annual payments to settlement states, similar to those of OPMs, but only on the basis of PMS sales, which represent the increase in the market share of the exempt MPS. [17] The National Association of Attorneys General (« NAAG ») introduced the Allocable Share Release Repealer (ASR Repealer) in late 2002, a model status that eliminated the RSA. In a September 12, 2003 memo, Attorney General William H. Sorrell of Vermont, president of the NAAG Tobacco Project, stressed the urgency that « all states take steps to combat the proliferation of NPM sales, including the adoption of additional legislation and allied action laws and the consideration of other measures to serve the interests of states to avoid a reduction in tobacco benefits. » He noted that « NPM sales across the country hurt all countries, » that NPM sales in each state reduce payments to any other state, and that states have an interest in reducing NPM sales in each state. [40] Companies that had decided not to join the MSA (non-participating producers or NPMs) were required to account funds on public trust accounts as reserves for future actions1,3 a provision to protect participating companies and to encourage producers to join the agreement.