One week later....

A week after Canadian tobacco companies are hit with a stupendous penalty for having neglected their manufacturers' responsibilities and harmed Quebec smokers, it would appear that life goes on pretty much as it did before. And so does business.

The stock market's "muted" reaction

It is often to the stock-market that observers look for validation of the significance or impact of a legal ruling.

Those who set store by the collective wisdom of investors will have noted that in the week following the Quebec ruling, share prices of the multinational owners of the guilty Canadian operations went down slightly. Over the week, the value of Japan Tobacco stock fell by 3.42%, Philip Morris International by 3.65% and British American Tobacco by 4.5%. (See graphs pasted at the end of this blog)

The sky did not fall, but the roof bowed slightly.

Justice Riordan's ruling sheds light on the Canadian earnings of those companies, allowing us to compare the adjustment in share value with the proportion of multinational earnings that come from the Canadian companies. (How to adjust for currency fluctuations makes this exercise vulnerable to legitimate quibbles: I used average annual exchange rates).

                      Five-year average, 2009-2013
                      in millions of Canadian dollars

	Global earnings	Canadian earnings	Canadian  earnings (%)
BAT/ITL	$7,561	$483	6.4%
PMI/RBH	$11,435	$460	4.0%
JAPAF/JTIM	$5,230	$103	2.0%

Was the market response a muted one? Certainly investors had their choice of reassuring columns to read over the week. The consensus view seems to be that the penalties will be reduced by the higher courts.

 "Managers snub out unease over more tobacco lawsuits" reports the U.K.'s Financial Times, over a story quoting an investment analyst who predicts that the company will not have to "stump up the cash, or at least think the appeals process will kick the can into the very long grass."

"$15B tobacco ruling barely dents stocks as analysts predict penalty will come down", soothed Canada's Financial Post with a similar message that "the final payout will probably come down later in the appeals process."

The tobacco market's non-reaction

Warning-free cigar
and the purchase price

I have not yet observed any changes in the way tobacco products or other addictive and/or harmful consumer goods are presented for sale.

Justice Riordan sent a message - but to whom?
"[1037] Over the nearly fifty years of the Class Period, and in the seventeen years since, the Companies earned billions of dollars at the expense of the lungs, the throats and the general well-being of their customers. If the Companies are allowed to walk away unscathed now, what would be the message to other industries that today or tomorrow find themselves in a similar moral conflict?

I had occasion to drop by a tobacconist yesterday, and noted that there remain tobacco products for sale that still did not carry warnings. On its web-site, the company that manufactures this cherry-flavoured mini-cigar says it holds as a principle of responsible stewardship "that tobacco products should convey clear and accurate warnings about the potential risks associated with tobacco consumption". But the website is as silent as the package on what those risks might be.

Cigar, anyone?

The governments' non-response

I have been unable to find any instances of provincial or federal health authorities commenting on the ruling, nor their being pressured to do so by their elected peers or by the media.

The World Health Organization was a little more upbeat and issued its congratulations to the plaintiffs and their lawyers "on this hard-fought and important victory.""WHO and the WHO FCTC Convention Secretariat hail Canadian class actions against tobacco companies."

The distant cheering

The award for the most creative response to last week's event should surely go to a coalition of health groups in Western Australia, who used the event to encourage smokers to quit through a newspaper ad.

"However much tobacco companies may eventually pay in damages, it will never compare to the horrific suffering caused to smokers and their loved ones. Don't pay with your own life. Another good reason to quit smoking."



Share value, British American Tobacco, Philip Morris International and Japan Tobacco, last 30 days. The day of the ruling is indicated with a red line.
(Courtesy of Yahoo Finance)