EU cracks down on illegal cigarette smuggling after $1.25bn settlement with Philip Morris

Stephen Castle,Rachel Stevenson
Saturday 10 July 2004 00:00
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The European Commission launched a major crackdown yesterday on counterfeit and smuggled cigarettes after making Philip Morris, the American tobacco giant behind the Marlboro brand, pay $1.25bn towards fighting illegal cigarette trade.

The European Commission launched a major crackdown yesterday on counterfeit and smuggled cigarettes after making Philip Morris, the American tobacco giant behind the Marlboro brand, pay $1.25bn towards fighting illegal cigarette trade.

Under yesterday's deal, the European Commission agreed to drop a long-running legal court case against Philip Morris. The Commission had accused the company of aiding the large-scale trade in smuggled cigarettes. In exchange for ending litigation against it, the tobacco giant agreed to hand over a sum of about $1.25bn over a 12 years. This will be invested in anti-counterfeit and smuggling measures.

Michaele Schreyer, the European budget Commissioner, hailed the deal as a "landmark agreement" and said the EU was "losing hundreds of millions, if not billions of euros, per year from smuggling and counterfeit cigarettes".

She wants to enter similar negotiations with other tobacco companies. RJ Reynolds and Japan Tobacco are also the subject of litigation by the EC. But yesterday the EC widened its call to all tobacco companies to develop a tougher stance on tackling counterfeiting and smuggling. In total, 580 billion cigarettes are sold legally in the EU's 25 member states.

The authorities in Brussels want to spend the $1.25bn to beef up its efforts to combat the illegal trade in cigarettes, but it will be up to the EU member states to decide on what the cash will be spent on.

Philip Morris has refused to accept any "fault or wrongdoing" as part of the settlement, but has instead agreed to co-operate with the EC to combat counterfeited cigarettes. David Davies, senior vice-president for Philip Morris International, said: "This is a good settlement because we have moved from conflict to get to a point of co-operation. We are losing hundreds of millions of dollars to the counterfeit trade; governments are losing billions. They are the law enforcement folks, we are the knowledge folks. We are going to make it much easier for them. This agreement is going to pay for itself and pay high dividends for the governments."

He also called on other companies to join forces. "The more people participating in these efforts, the more effective we are going to be in doing battle against this trade," said Mr Davies. The company has agreed to tougher controls on those to whom it sells its produce.

Gallaher, Imperial Tobacco and British American Tobacco, none of whom are involved in any litigation with the EC, said they welcomed any attempts to fight counterfeiting in Europe.

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