August 1, 2007

Bootleggers, Baptists & Televangelists: Regulating Tobacco by Litigation

  • Andrew Morriss

    Dean, Anthony G. Buzbee Dean's Endowed Chairholder, Texas A&M University School of Law
  • Bruce Yandle

    Distinguished Adjunct Fellow
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Highlights Our Findings The 1998 Master Settlement Agreement ("MSA") among the major U.S. cigarette companies, 46 state attorneys general, and private plaintiffs' attorneys represented the culmination of decades of tobacco regulation that came about through coalitions between tobacco company "bootleggers" and health interest group "Baptists." Where transaction costs are low enough, bootleggers and Baptists can grease government machinery to produce regulation. But bootleggers' economic interest and Baptists' ostensibly public interest often conflict. This conflict raises transaction costs and leaves untapped political gains that might be achieved by a more efficient alliance led by a political broker - a "televangelist" - who can deal effectively with the major parties. In the tobacco story, televangelist plaintiffs' attorneys and televangelist state attorneys general stoked Baptist fervor in the state Medicaid suits. In the end, the players at the MSA bargaining table - the televangelists and bootleggers - split the spoils of the deal at the expense of those least represented in the negotiations: consumers, small and upstart tobacco companies, and Baptists themselves. Breakdowns in the MSA since its signing show the poor flexibility and transparency inherent in using litigation to regulate. Examples include large tobacco companies' marked decrease in market share despite cartel-creating measures in the agreement, the paucity of anti-tobacco spending by states with their MSA money, and the implicit (at times explicit) MSA-created alliance among bootlegger tobacco companies, states, and televangelist private attorneys. Conclusions While bootlegger-Baptist coalitions are pernicious, they are preferable to televangelist-bootlegger coalitions because, for all its flaws, the pre-televangelist world was a place where the actors were politically accountable. The MSA coalition is indicative of harm caused by televangelist-bootlegger coalitions generally because it shifts fundamental state constitutional powers like the power to tax from legislatures to attorneys general; it undercuts the democratic process and the commingling of voices that process provides; and it has funded televangelists in perpetuity, creating an unaccountable group whose activities undermine core principles of the Anglo-American legal system. Two broad suggestions to avoid these alliances: (1) increase transparency about litigation and settlements by public actors. Proposed settlements should be published in the Federal Register or state administrative publications (depending on level of government), details of fees should be published, etc. (2) Restrict opportunities for cash transfers. The attractiveness of these transfers could be reduced through a general statute that all such cash transfers must be turned over to the legislature for allocation through the normal appropriations process.