Fair Trade Missouri taking tobacco loophole fight to a TV screen near you

– When Missourians go to watch the Final Four basketball games on Saturday, they should expect to hear a message from Fair Trade Missouri.

The organization – which is backing legislation to close the loophole given to so-called “Little Tobacco” from the Master Settlement between several states and “Big Tobacco” – has bought television ad time statewide during basketball games this weekend, and is targeting Jefferson City with the ad next week.

“Why don’t lawmakers in Jefferson City understand that? Our state is going to lose nearly $70 million this year alone because legislators are letting some tobacco companies exploit a loophole. These funds could be better spent on any number of valuable programs, instead of going back into the pocket of tobacco companies,” the 30-second spot says. “Ask your legislator why some tobacco companies are more important than Missouri families.”


Under Missouri law, Little Tobacco – known as “non-participating manufacturers under 1998 Tobacco Master Settlement Agreement – is supposed to pay into an escrow fund that the state can use to fund lawsuits against them, as a way to level the playing field between them and Big Tobacco companies that are on the hook for millions in payments to states each year.

The settlement, and enacting legislation, included a provision that allows those escrow funds to be returned to Little Tobacco companies under a provision called the allocable share release.

Missouri sales of discount brand cigarettes – nearly a quarter of the state’s total sales – ranks among the highest in the nation, while its escrow collection rate was found by an arbitration panel in 2003 to be around 24 percent, the lowest among 15 states involved in arbitration. Attorney General Chris Koster has said this allows Little Tobacco to “game the system,” receiving some $80 million annually back from the escrow account. Koster, and Jay Nixon while he was Attorney General, has called for elimination of the clause built into the law that allows those escrow funds to be returned.

Missouri now stands to lose more than half of the $130 million that it could receive in payments from the settlement later this year from the tobacco settlement.

For nearly a decade, Missouri lawmakers have refused the requests from the Office of the Attorney General – under both Nixon and now Koster, Democrats – to change the law to eliminate a price advantage currently allowed for “Little Tobacco,” smaller companies not involved in the MSA with the nation’s four largest tobacco companies, “Big Tobacco.”

In the 1998 settlement, Big Tobacco companies like Phillip Morris and R.J. Reynolds made a master settlement with 46 states suing over the cost of damages to citizens (and in turn, state Medicaid and other public health spending) due to the negative side effects of smoking cigarettes. The settlement allows states get payments from the companies based on a formula relating to the national sales by Big Tobacco companies.

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