Over the past 20 years, governments in Canada have been waging legal battle with the tobacco industry. The objective, officially, has been to extract billions of dollars from the cigarette companies in compensation for the health damage caused by their products.
Terence Corcoran
Financial Post
Tue, 18 Jun 2019 12:19 UTC
Trials are pending across the country. Each province has separately taken the industry to court, collectively claiming $120 billion in compensation. On top of these provincial government health claims are private class-action suits seeking additional billions from the industry. But while corporations are being forced to pay penalties for profiting from tobacco, the biggest tobacco profiteers over the years have in fact been Canadian governments.
It is obvious that the tobacco companies would be unable to pay if all the suits in all jurisdictions and all class actions succeeded.
That became clear in March when Imperial Tobacco, Rothmans, Benson & Hedges and JTI-Macdonald all filed for court protection from the claims to protect their companies from being bankrupted by them. They did so after the Quebec Court of Appeal approved a $15.5-billion lower-court penalty against the industry for the health effects of its products. Essentially, the companies are claiming they do not have the resources to pay for even one multibillion-dollar lawsuit, let alone others.
In short, this looks like the last drag for the provinces’ court cases and any other class-action suits. The companies were forced to deposit $1 billion with the court, but it is unclear what comes next. All cases are on hold while the appointed monitors for each company – Imperial Tobacco, Rothmans, Benson & Hedges and JTI-Macdonald – review the fiscal and financial crisis created by the existing and pending legal claims.
Judging by the monitor’s reports on one company, Imperial Tobacco, nothing will be happening soon, and what does happen will not be worth much.
By forcing the companies into court protection, the Quebec case highlights the legal charade behind the provincial science-rigged take down of the industry.
Quebec Superior Court Judge Brian Riordan, in his 2015 decision against the companies, said that the tobacco companies were “reaping huge profits.” He concluded that “by choosing not to inform either the public health authorities or the public directly of what they knew, the Companies chose profits over the health of their customers. Whatever else can be said about that choice, it is clear that it represents a fault of the most egregious nature and one that must be considered in the context of punitive damages.”
When it comes to tobacco profits, however, the biggest winners have been governments.
Over the past three decades, Ottawa and the provinces have collected almost $200 billion in taxes from the sale of cigarettes – taxes paid by cigarette smokers (see accompanying chart). The industry’s profits over that period are hard to know precisely, but a good estimate, based on data from Physicians for a Smoke-Free Canada, is that over the same three decades, tobacco companies’ after-tax profits may not have exceeded $20 billion.
By assessing moral and punitive damages of $15.5 billion on an industry whose current net value is likely little more than $15.5 billion, there is zero chance any real money will be collected for class-action lawsuits and less than zero chance that any of the provincial governments will see any payouts from their science-rigged claims, if they were ever to get to trial.
Seems to me that the government should have legislated against smoking rather than profiteering from it and that smoking was a choice made despite knowing the risks.
Agreed Angelica.