Friday, 3 June 2016

One year later

It was a year ago this week that Justice Brian Riordan's decision was made public and the first ruling was issued that confirmed the decades-long faults of the companies and their liability for billions of dollars in compensation.

It was BIG NEWS. And the case continued to be in the public light as the media followed the industry successfully fighting back the 'provisional execution' that would have required an early $1 billion payment, and then their failure to prevent an early deposit of almost $1 billion. Exciting times.

But now? Someone buying cigarettes in Quebec would be hard pressed to know that anything had ever happened. If the ruling has had an impact on the way tobacco companies voluntarily market their products,  it is not in a way apparent to this eye.

The companies are not backing down from their resistance to laws which specifically require the kinds of warnings which they were found liable for failing to voluntarily provide.

As far as I know, they are still maintaining their challenge to the current federal warnings (although the case has dropped far from sight). They are challenging a new Quebec law,  passed last summer, which requires a minimum size for health warnings on tobacco products.

No matter how strongly the errors of their ways were pointed out, they do not appear to have seen them.

Little perhaps can be expected during the long intermission between the ruling of the lower courts and hearing of the appeals. (The exact dates on which the Quebec Court of Appeal will hear the reasons they should accept or reject Justice Riordan's ruling are not known by me, but I think they will be sometime in the weeks of November 21 and 28th.)

The ruling may not have weakened the industry's resistance, but it may have strengthened government's willingness to regulate.

Since this time last year, a new wave of tobacco regulation has become apparent. After long delays, the Quebec government revised its tobacco legislation and strengthened its proposals to "bolster tobacco control".  During this process, Justice Riordan's conclusions were cited by members of the legislative committee reviewing the bill. This may have contributed to the committee considerably strengthening the proposed law and its decision to  impose improvements in package warnings.

This week the federal government moved further towards plain and standardized packaging, following last month's indication that menthol will soon be banned.

Time is money

By the end of this month, Imperial Tobacco and Rothmans, Benson and Hedges will have made their third deposit on the security payment. Imperial Tobacco will have deposited $324 million and Rothmans will have signed over $113 million.

To my ears, these are massive sums. Certainly they are well above what is spent by Canadian governments in trying to reduce tobacco use, even if they are only a (large) fraction of what the companies earn.

But in the long run, they may look quite paltry. If Justice Riordan's award is upheld, these seemingly high payments will not even meet the interest costs on the $15.6 billion award.

At a court-determined interest rate of 5%, the award chalks up $750 million a year in interest. The cost of delay by that scenario is $2 million per day.