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Almost 20 years after a $206 billion dollar settlement, legislatures are again stepping up to fight an inflated tobacco industry. This time they are cautioning the public on the risk of e-cigarette usage, especially in young people. In an effort to protect citizens, legislatures are using their constitutionally given powers to limit, restrict, and tax tobacco products in an effort to deter a new generation from a lifetime of nicotine use.
In 1901, when the tobacco industry was in its infancy, it sold 3.5 billion cigarettes to the United States. This market ballooned, but now, thanks to advertisements and legislation, is steadily declining. The number of cigarettes sold to wholesalers and retailers nationwide decreased from 203.7 billion in 2020 to 190.2 billion in 2021, according to the Federal Trade Commission.
However, tobacco saw an increase in market share in recent years after a series of emerging companies created a new e-cigarette market targeting teenagers and young people. Companies such as Juul, SMOK, Aspire, Vaporesso, Voopoo, Geek Vape, Innokin, and IQOS created e-cigarette brands that revived a declining tobacco market. Juul made $2 billion in 2021 and still commands a large revenue today.
State Action
To fight these new tobacco companies, state legislatures are using their policing powers to impose legislation that deters buyers from tobacco. With this power, states and municipalities are able to regulate behavior and enforce laws for the betterment of the health, safety, morals, and general welfare of their inhabitants.
So far, however, few states have used such powers fully. Cities in California are following San Francisco’s lead, where the sale of all vaping products is banned. Some states are more reluctant to ban the products outright because of the huge tax revenues the tobacco industry generates. California brings in over $100 million in tax revenue each year from tobacco products. Other states are reluctant to use constitutionally permitted powers because many of their economies are reliant on tobacco. In 2022, North Carolina produced over 249 million pounds of tobacco, which is a large stream of revenue for their local economy.
Past Settlements
In the late 90’s, tobacco industries settled with states throughout the country for $206 billion. This settlement, known as The Master Settlement Agreement, was formed between 52 state and territory attorneys and the four largest tobacco companies in the United States. The states sued tobacco companies to recover money spent on health problems caused by smoking. As a result, more than 45 tobacco companies reimbursed the health care costs associated with smoking-related illnesses. Given that courts have been favorable towards states for their legislation and other legal battles against the tobacco industry, courts are most likely to rule in favor of further bans and restrictions imposed on e-cigarette use.
Some states, like Nevada, are still using this settlement money to benefit the public in the form of scholarships for Nevadans schooled in the state. If states have learned anything from the history of tobacco settlements, they will be sure to continue to impose stricter regulations to protect the public and younger generations.
Recent settlements have already affected the e-cigarette market. Juul settled on a consent agreement lawsuit with 32 states and paid $438 million to lawsuit participants. Since Juul did not admit to any wrongdoing, more lawsuits like these are likely to be filed potentially resulting in even larger settlements, given the low standard for complainants.
Tobacco Companies Look to the Court
As more and more regulations seem to pour in throughout the country, the tobacco industry has sought relief from the courts. Prior to the passage of Assembly Bill 935, R.J. Reynolds Tobacco Company made deliberate efforts to delay enforcement of California’s new tobacco laws. R.J. Reynolds Tobacco is the second largest tobacco company in the United States, and sells roughly one-third of the cigarettes purchased domestically. R.J. Reynolds Tobacco includes within its portfolio the three best selling cigarette brands: Newport, Camel, and Pall Mall. In addition, Reynolds American Inc. serves as the U.S. parent company for other smaller tobacco companies.
In 2020, California Governor Gavin Newsom signed Senate Bill 793 to reduce sales of flavored tobacco products in stores and vending machines. Responding to this bill, R.J. Reynolds Tobacco asked the California Southern District Court to declare Senate Bill 793 invalid and unenforceable based on an express preemption claim. R.J. Reynolds Tobacco Co. v. Cty. of L.A. 9th Circuit Court of Appeals. Under the Family Smoking Prevention and Tobacco Control Act (TCA), a preemption claim balances federal and local power by establishing the federal government’s authority to set the standards for tobacco products while reserving for the states authority to otherwise regulate tobacco products. In this vein, the California Southern District Court reiterated Congress’s intent to preserve the states’ role in regulating, and even banning, sales of tobacco products. Therefore, the California Southern District Court denied R.J. Tobacco’s attempt to invalidate Senate Bill 793.
With the recent passage of Assembly Bill 935, R.J. Reynolds Tobacco made another attempt to stall the passage of the new law. In R.J. Reynolds Tobacco Co. v. Bonta, R.J. Reynolds Tobacco alleges that Senate Bill 793 violates the Commerce Clause, which “bars states from discriminating against out-of-state entities by directly controlling commerce occurring outside the boundaries of a State.” The California Southern District Court disagreed with the tobacco company’s portrayal of the bill, and found that the bill treats all companies similarly and prohibits an item regardless of who or where it’s produced. As a result, voters will continue to affirmatively enact legislation in favor of Assembly Bill 935.
Closing Remarks
As legislatures continue to pass stricter guidelines for tobacco companies, there will surely be more legal disputes within local and regional courts throughout the country. Even as this litigation ensues, consumers will most certainly be reminded of the constitutional powers that states and municipalities possess. With these powers, they will continue to regulate personal consumption behaviors for the betterment of the health, safety, and general welfare of their inhabitants.
*The views expressed in this article do not represent the views of Santa Clara University.