rss
Tob Control 2004;13:356-361 doi:10.1136/tc.2003.007229
  • Research paper

Impacts of the Master Settlement Agreement on the tobacco industry

  1. F A Sloan1,
  2. C A Mathews2,
  3. J G Trogdon3
  1. 1Center for Health Policy, Law & Management, Duke University, Durham, North Carolina, USA
  2. 2C F X Media
  3. 3School of Economics, University of Adelaide, Adelaide, Australia
  1. Correspondence to:
 Professor Frank A Sloan PhD
 Box 90253, Center for Health Policy, Law & Management, Duke University, Durham, NC 27708, USA; fsloanhpolicy.duke.edu
  • Received 15 December 2003
  • Accepted 14 July 2004

Abstract

Objective: To assess effects of the Master Settlement Agreement (MSA) and the four individual state settlements on tobacco company decisions and performance.

Design: 10-K reports filed with the US Securities and Exchange Commission, firm and daily data from the Center for Research in Security Prices, stock price indices, market share and advertising data, cigarette export and domestic consumption data, and newspaper articles were used to assess changes before (1990–98) and after (1999–2002) the MSA was implemented.

Subjects: Five major tobacco manufacturers in the USA.

Main outcome measures: Stockholder returns, operating performance of defendant companies, exports, market share of the original participants in the MSA, and advertising/promotion expenditures.

Results: Returns to investments in the tobacco industry exceeded returns from investments in securities of other companies, using each of four indexes as comparators. Domestic tobacco revenues increased during 1999–2002 from pre-MSA levels. Profits from domestic sales rose from levels prevailing immediately before the MSA. There is no indication that the MSA caused an increase in tobacco exports. Total market share of the original participating manufacturers in the MSA decreased. Total advertising expenditures by the tobacco companies increased at a higher rate than the 1990–98 trend during 1999–2002, but total advertising expenditures net of spending on coupons and promotions decreased.

Conclusion: The experience during the post-MSA period demonstrates that the MSA did no major harm to the companies. Some features of the MSA appear to have increased company value and profitability.

Footnotes

    This Article

    1. Abstract
    2. Full text
    3. PDF

    Responses

    1. Submit a response
    2. No responses published

    Register for free content

    The full back archive is now available for all BMJ Journals. Institutional subscribers may access the entire archive as part of their subscription. Personal subscribers will also have access to all content when logged in. Non-subscribers who register have free access to all articles published before 2006 right back to volume 1 issue 1. Register hereto access the free archive of all BMJ Journals.

    Don't forget to sign up for content alertsso you keep up to date with all the articles as they are published.