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May/June, 2010

Romania Report: Cracking down on smuggling would net Romania €1 bn

Bucharest - British American Tobacco, the Romanian cigarettes market leader, as well as Japan Tobacco International Romania and Philip Morris Romania reported abrupt losses on the sales volume at the beginning of 2010. The BAT sales dropped by 15–17 %, and up to 40 % for JTI.

These losses are largely attributed to cigarette smugglers and counterfeiters. Manufacturers have asked for dialogue with the authorities in the attempt to cut down on this phenomenon. The tobacco industry is one of the biggest contributors to the Romanian state budget. The three major companies provided the state with over ?2 bn in 2009, from VAT and other taxes. Last year, the state confiscated more than 202 mn smuggled cigarettes.

Romania is not the only country facing this phenomenon. In the US, President Obama has recently signed a bill created (PACT) to stamp out tobacco smugglers, in an attempt to restore significant amounts of revenue lost because cigarette taxes are not being paid. In Ireland local Police cracks down on smugglers, as convictions for tobacco smuggling are up 100% at the end of March 2010. In Switzerland the World Health Organization’s plan against tobacco smuggling is stalled over ways to trace products, duty free sales etc. The program would “Implement carton tracking in risk markets.”

In March Romanian officials announced a new national strategy to fight cigarettes smuggling was to be implemented in 45 days. The Government formed a Work Group that would prepare the national strategic plan for fighting the illegal cigarettes traffic in the next two years. This order was also published in the Official Monitor. According to this document, ANAF will coordinate the new structure, which will include members of the National Customs Authority, the Financial Guard and of the police.

More lawsuits?
Ottawa - Canada’s federal government can appeal court rulings that named it as a defendant in a multibillion-dollar lawsuit launched against tobacco firms, the Canadian Supreme Court recently announced.

The province of British Columbia is seeking bns of dollars in health care costs from the tobacco industry in a case that is due to go to trial in September 2011. The province’s appeal court ruled last December that the federal government should be a third-party defendant, meaning it may have to share in any liability awarded by the province’s courts. The firms targeted are: R.J. Reynolds Tobacco Co, Japan Tobacco’s JTI-Macdonald unit, and Rothmans Benson & Hedges Inc.

The tobacco industry argued that government should share in any responsibility for damages because they were partners in the sale of tobacco by keeping it legal and collecting tax revenue from it.

Several of Canada’s provinces have sued the industry for bns in damages, but the British Columbia case - based on legal action by US states - was filed first and Canadian courts are using it as the lead case.

The Canadian government was also named as a third-party defendant in a separate action by British Columbia smokers against Imperial Tobacco Canada Ltd. The claimants allege they were misled into believing cigarettes labeled mild or light were safer to smoke.

United States
Florida’s largest tobacco trial in death of 80-year-old smoker
Fort Lauderdale - R.J. Reynolds Tobacco Co. must pay $29.1 mn to the widow of a Florida man who started smoking at age 13 and died of chronic obstructive pulmonary disease in 2008 according to a Fort Lauderdale jury.

The unanimous verdict today by six state jurors includes $4.1 mn in compensatory damages and $25 mn in punitive damages. After deliberating for five hours at the end of a three-week trial, the jurors found R.J. Reynolds 77.5% responsible for Matthew Buonomo’s illness and death at age 80. They said Buonomo was 22.5% responsible.

“Certainly we’re disappointed with the jury’s findings in this case,” said R.J. Reynolds spokesman David Howard. “We will appeal.”

Jurors in Florida have delivered more than $230 mn in verdicts for smokers and their families since February 2009. The plaintiffs in the cases sued after the Florida Supreme Court decertified a state-wide smokers’ class action in 2006. In that decision, the Florida high court ruled that smokers can’t sue as a class and overturned a $145 bn punitive damages verdict in the case. The court said that former class members in the Engle case, named for lead plaintiff Howard Engle, can sue individually.

Tobacco International - May/June, 2010

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