Enforcing State Tobacco Laws

In conjunction with the MSA, states passed certain legislation that regulates tobacco companies that did not settle under the MSA.

• The Escrow Statutes require non-settling tobacco manufacturers to pay into an escrow account an amount nearly equal to the amount that manufacturers must pay under the MSA.
• The Directory Statutes require tobacco manufacturers and their brands to first quality for listing on the state’s approved directory before they can lawfully sell their cigarettes in the state.

These state laws achieve several objectives, such as:

• Preventing tobacco manufacturers from selling cigarettes at artificially low prices that fail to internalize the health care costs caused by smoking.
• Creating a fund against which the states can seek payment if they obtain a judgment against tobacco manufacturers for the harm caused by the marketing, sale, or smoking of their cigarettes.
• Removing manufacturers who fail to timely deposit escrow or comply with other qualifications from states’ approved directories, resulting in their cigarettes becoming contraband and seized by the state.