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The Tobacco Deal

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Case Analysis: The Tobacco Deal

"Tobacco has been used as a medical plant, as well as for ritual and pleasure Ð'-

and the tobacco plant has been viewed as both work of the Devil and as God's gift to man." ( It is estimated that thousands of Americans die each year from diseases related to smoking ( One of the biggest contradictions in the tobacco industry is that cigarette companies are spending millions of dollars on anti-smoking advertisings. Nevertheless, the people had been deceived and lied to for decades. Despite scientific evidence, the Tobacco Committee concealed the evidence in order to promote and prosper in the tobacco selling industry. Both smoking and anti-smoking lobbyists launched legal and public relation campaigns to reach positive results for the tobacco consumers, who had filed complaints against the tobacco companies. Throughout history, independent consultants had filed hundreds of lawsuits against the Tobacco Companies, loosing one case after another, and eventually in 1996, the final settlement was reached (

The purpose of the "Tobacco deal" was to make people aware of the health related risks involved in smoking cigarettes and to make the tobacco industry pay for misinforming the public. Based on documentaries reported on the Internet, the case study below will elaborate on the data investigating, and the various aspects of the Tobacco deal such as the political involvement, economic and health effects the settlement, and the effectiveness of the agreement.


In the early 1950s, scientific studies reported the side effects of tobacco and the health related issues of people around the world. The evidence exposed documents that contained information showing the direct relation of tobacco, cancer, and fetal illnesses with cigarettes. ( Upon learning of such documents, the tobacco industry started to become alarmed. Tobacco companies informed senior level management of the business risk through internal memos and meetings. "Fighting desperately for its economic life, the tobacco industry launched what must be considered the costliest, longest-running and most successful PR "crisis management" campaign in history ( In 1954, an unnamed member of the council wrote an internal memo to Phillip Morris; "It is extremely important to show that the industry continues to spend its dollars on research to show that we don't agree that the case against smoking is closed." (

By acquiring assistance from John Hill, the founder of the PR mega firm, Hill & Knowlton, the tobacco industry's research committee instantly prepared an exhaustive campaign published in over 400 newspapers distributed to approximately 43 million Americans ( Participating tobacco companies recognized their responsibility to society, and pledged to educate themselves of the concerns about smoking and health side effects and sponsor independent research; however, the settlement was not agreed upon and signed until 1996.

Contributors to the Economy

The Tobacco industry is frowned upon by various organizations and political figures. One major factor that some overlook is the tobacco industry is a major contributor to the economy. "It added over $55 billion annually to the gross domestic product. Federal, state, and local taxes collected from the sale of cigarettes and other tobacco products in the United States totaled $13.1 billion in 1996." (Lawrence, 1998). Tobacco companies employed over 700,000 people, who also contributed to the economy of the southeastern states where workers resided, spent their money and paid their taxes. Not to mention all the attorneys and public relations personnel that were employed by the industry.

Costs to the Economy

Many argue about how much the tobacco industry costs the economy in additional healthcare, which is estimated at $50 billion. The economic savings to reduce the amount of health related illnesses due to smoking is approximately $43 billion. One study commissioned by the tobacco industry argued, "Smoking actually saved the U.S. health-care system money, for the simple reason that many smokers died early, sparing the system the cost of caring for them in old age." (Lawrence, 1998)

Survival of the Tobacco Industry

Even though many tobacco opponents would like to witness the demise of the tobacco industry, it would be wise to understand what the ramifications could be. The overall impact on the U.S. economy would be devastating. The number of unemployed people, and lost tax revenue would grow to new proportions never before seen in the U.S. economy. There are, however other tobacco products in the market that do not get as much negative press as cigarettes, such as chewing tobacco and cigars.

Effects on Health

Health issues related to tobacco use and cigarette smoking were becoming evident as early as the 1950s. In 1964, shortly after the Surgeon General first announced that smoking causes cancer, the American Medical Association (AMA) began accepting research funds from the Tobacco Institute (Taylor, 2001) for researchers to study cigarette smoking and its effect on health. These studies determined that anyone inhaling cigarette smoke, whether directly or second-hand is at a serious health risk. Smokers began developing illnesses such as lung, throat and mouth cancers, heart disease, stroke, bronchitis and emphysema. Children living with smoking parents developed respiratory problems, chronic coughs, asthma, increased risk for heart disease, as well as decreased lung growth and function. Babies of expectant mothers who smoked during pregnancy, suffered from nicotine withdrawal, low birth weight, were more excitable, tense, and showed increased signs of stress and behavioral problems (O'Neil, 2003).

Researchers found that there are 50 different cancer-causing agents in tobacco smoke (Todd, 2001). One such carcinogen, benzopyrene, had been found to cause cancerous mutations in human lung cells (Lawrence, 1998). When this information was uncovered, researchers working for the cigarette manufacturers, such as Frank Colby of RJ Reynolds, were instructed to destroy such evidence. Research was also conducted on the effects of nicotine. Results of these studies showed that nicotine is highly addictive,



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