Bloomberg News

Altria Loses Bid for End of U.S. Tobacco Sales Oversight

June 01, 2011

(Updates with judge’s reasoning in fourth paragraph.)

June 1 (Bloomberg) -- Tobacco companies including Altria Group Inc.’s Philip Morris USA unit lost a bid to dismiss the federal government’s 1999 racketeering case.

U.S. District Judge Gladys Kessler in Washington ruled today that her authority over the case wasn’t ended by a 2009 law that empowered the U.S. Food and Drug Administration to monitor the industry and establish restrictions on the sale, promotion and distribution of tobacco products.

The defendants, which also include Reynolds American Inc.’s R.J. Reynolds Tobacco and Lorillard Inc.’s Lorillard Tobacco, argued that the FDA’s new role meant court oversight of the industry is no longer needed.

Kessler said the cigarette makers continue to challenge the law that created the FDA’s regulation of the industry and if they prevail, “it will be all the more necessary for them to be restrained by this court from any future violations” of the Racketeer Influenced and Corrupt Organizations Act.

In 2006, Kessler found that the companies violated the law by conspiring to hide the dangers of cigarettes. She ordered the companies to stop marketing cigarettes as “light” and “low- tar” and to make statements about the health effects of smoking in newspapers and magazines and on cigarette packages.

British American Tobacco Plc, Europe’s largest cigarette maker, was dropped from the lawsuit in March after Kessler said a 2010 ruling by the U.S. Supreme Court in a securities case restricts the U.S. from finding liability in “what is essentially foreign activity.”

Government ‘Pleased’

“At first blush, we’re pleased,” Charles Miller, a Justice Department spokesman, said of the ruling.

“We continue to believe that the FDA is the appropriate agency to regulate tobacco products and are considering our appellate options,” said Steven Callahan, a spokesman for Altria.

Greg Perry, a spokesman for Lorillard, declined to comment immediately. Representatives at Reynolds American’s public relations department didn’t immediately reply to a phone message seeking comment.

The case is U.S. v. Philip Morris USA Inc., 99-cv-02496, U.S. District Court, District of Columbia (Washington).

--Editors: David E. Rovella, Charles Carter

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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