BAT plays down report of payouts to cancer victims

BAT Industries, the British tobacco giant struggling against a tide of US anti-tobacco regulation, last night played down reports that it was ready to make a dramatic about-turn on payments to cancer sufferers as part of a deal to avoid further multi-million dollar litigation.

As the industry today launches a legal counter-attack against what it sees as draconian new curbs on tobacco, it was suggested last night in the BBC's Money Programme that the British group would consider making compensation payments as part of wider settlement of a series of legal actions from smokers and US states.

It was also reportedly said to be putting out feelers to the US government to reach a compromise over plans to shift the regulation of tobacco to the powerful Food and Drug Administration.

In the past, the industry has prided itself on never having paid a penny in legal claims, but, in what appeared to be a change of tack, Martin Broughton, BAT chief executive, said last night on the Money Programme that the time had come to end the state of "permanent warfare" in which the tobacco industry operates. He said that "clearly there would have to be some kind of payment to somebody" if they were to rid themselves of the legal actions. "They want to be paid off and we want a peaceful life."

Clarifying the remarks later, BAT spokesman Michael Prideaux said that Mr Broughton had meant that they had a duty to shareholders to look at any reasonable offer, but they felt under no pressure to pay any compensation while the industry continued to win court actions.

"There is clearly a price which would be worth paying to end all this. But we haven't had any approaches and we don't yet know what that price is." He added that it was the US government rather than BAT which appeared to be reaching for some sort of settlement to the regulation issue.

The news came as America's tobacco companies go to court this morning in an effort to kill a new federal crackdown on the sale of cigarettes to young people. The companies, which include Philip Morris, RJ Reynolds as well as Brown & Williamson, a US offshoot of BAT Industries, will argue that in announcing the regulations in 1995, the Food and Drug Administration overstepped its legal powers and violated the US constitution.

The new provisions, some of which would come into effect this month, would oblige retailers to check the age of every young customer before selling cigarettes to them. In addition, the tobacco giants would have to end advertising near schools and playgrounds, suspend handouts of samples, give up sponsorship of sports events and remove brands from hats, T-shirts and other products.

Beyond their practical effects, however, the new rules hold even broader legal significance because they constitute the first time that the US government has declared tobacco products as "drugs" and thus made them subject to regulation. Defeating this notion would be an important victory for the tobacco firms.

The hearing in a federal courthouse in Greensboro, North Carolina, also marks a culmination of sorts for the departing FDA Commissioner, David Kessler who in 1992 aggressively investigated the tobacco firms.