What Does Airline Security Have to Do with the Government's Litigation Against Cigarette Makers?
One of them may reduce smoking
19 Aug 2006 in Regulatory Economics, Regulatory Policy, Litigation
On August 17, US District Court Judge Gladys Kessler issued a 1,000+ page opinion (which will be posted here) in the long-running federal case against cigarette makers. A oft-cited element of the judgment is that cigarette makers are ordered to initiate a new advertising campaign correcting specific statements they made which the court found to be deceptive. On August 10, the Transportation Security Administration banned liquids and gels from carry-on luggage, including products purchased in the "sterile" area" of US airports that previously were presumed to be free of substances that could be used to make bombs. We blogged on this after experiencing the new rules firsthand.
What does airline security have to do with new advertisements warning about the risks of smoking?
Unlike reporters for the Washington Post, the Associated Press, and dozens of other press outlets who have summarized the opinion and helpfully interpreted it for readers, Neutral Source hasn't read it. Big Tobacco is reported to have lost the case, won the case big, or lost the case but escaped harm. There seems to be consensus that shareholders of tobacco stocks won. On Friday, share prices increased 4% for Altria, 1.4% for Reynolds American, and 1.1% for British American Tobacco.
Kessler's ruling is clearly good for newspapers and good for broadcast TV networks ABC, NBC, and CBS. They will profit on new cigarette makers' advertisements apologizing for deceptive past conduct. For that financial reason, newspapers and broadcast networks have an incentive to promote and support the court's judgment. Because Fox and other cable networks apparently were excluded from the court's order, they have no such financial incentive.
The ruling also benefits the states, which are no longer at risk of having to share profits from their $264 billion multi-state settlement in 1998. The settlement created a de facto government cartel with cigarette makers to preserve high rates of cigarette consumption for decades. If cigarette consumption vanished tomorrow, the states would lose billions of dollars in future tax revenue.
Meanwhile, the Transportation Security Administration's new restrictions on carry-on luggage are generating attention. The Wall Street Journal's weekend edition has an interesting article describing how rules have changed since September 11, 2001 (subscription may be required). A sidebar to the article lists a few facts about carry-on restrictions, including the following:
Of the more than 60 items the TSA prohibits from carry-ons, lighters constitute 80% of items confiscated, according to the agency. Security screeners seize roughly 37,000 of them a day. The TSA has collected some 17 million lighters since the ban went into effect last April.
Obviously, TSA has no idea how many smokers didn't try to smuggle lighters onto aircraft, and it's not clear what incremental benefit to airline security was achieved by banning them. But the ban has probably encouraged some smokers to quit — possibly more than will be persuaded to do so by the required advertisements.
