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MO Wins Marlboro Lights Suit

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Tobacco maker Altria Group Inc.’s (MO - Free Report) subsidiary, Philip Morris USA (PM USA) received a favorable ruling in a case filed by the plaintiffs, way back in Jun 1997 in the California Superior Court. The plaintiffs claimed that PM USA has violated California’s Unfair Competition Law and False Advertising Law by using terms like “Lights” and “Lowered Tar and Nicotine” on its Marlboro cigarette packages and therefore claims that the company should pay the clients who bought Marlboro Lights between 1998 and 2001.

However, the judge ruled that the plaintiffs were ineligible to receive any money  as they could not prove having suffered any loss by smoking the cigarettes.

The judges’ ruling, if upheld, will help the tobacco company gain reputation and boost its sales amid several anti-tobacco campaigns and restrictions imposed by governments around the world.

In a separate development in August, PM USA won a case in the Non-Participating Manufacturer Adjustment (NPM Adjustment) dispute related to the NPM adjustment provisions of the Master Settlement Agreement (MSA). The agreement was inked between 46 states and major tobacco players, including Altria, Reynolds American Inc. , Philip Morris International Inc. (PM - Free Report) and Lorillard Company .

The dispute arose over the amount that these tobacco companies had to pay to the state governments. The tobacco manufacturers argued that they lost market share in these states to other local cigarette makers who did not enter the agreement. Also, at least 15 states had failed to diligently collect escrow payments from manufacturers that did not sign the 1998 agreement. This failure entitled participating manufacturers to lower payments.

The cigarette makers won against six of the 15 states. The panel ruled that those states who failed to enforce escrow payments laws would not be entitled to collect the payments from tobacco manufacturers either. Altria, which currently carries a Zacks Rank #4 (Sell), revised its guidance upward to reflect the financial benefit from the lower MSA payment.

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