Joshua Knelman is the author of Firebrand: A Tobacco Lawyer’s Journey.
The future of Canada’s tobacco industry is being decided behind closed doors in a historic mediation between Big Tobacco and provincial governments – a process which entered its sixth year in March and is potentially worth hundreds of billions of dollars. These talks have dragged on for far too long, and it’s time for the provinces and the tobacco companies to reach a deal.
A quick recap: in 1998, a class-action lawsuit was filed on behalf of smokers in Quebec suffering from tobacco-related diseases against the three largest tobacco companies in Canada: Imperial Tobacco, Rothmans, Bensons & Hedges, and JTI-Macdonald; all are owned by larger multinationals. Let’s call them The Three Smokes.
In a landmark 2015 legal decision which implicated the Canadian companies as well as their multinational owners, the Quebec smokers prevailed, and were awarded a king-sized sum: about $15-billion in moral and punitive damages. All the Canadian provinces joined the legal action, demanding an additional $500-billion to cover tobacco-related health costs, a number so titanic it could extinguish the Canadian tobacco industry as well as its multinational proprietors.
In response, The Three Smokes filed for creditor protection in Ontario, halting all legal action and setting in motion the private mediation process now taking place between the provinces, The Three Smokes and an Ontario Court-appointed mediator.
Five years have now passed, with no news on the mediation’s progress, except when a “stay” is requested, to extend the period of mediation (and creditor protection). The latest extension was granted on March 25. Health organizations, including the Canadian Cancer Society, Canadian Lung Association, Heart and Stroke Foundation, ASH Canada and Physicians for a Smoke-Free Canada, are fuming at having no input into the exclusive process or its outcomes.
This coalition of health organizations helped propel Canada’s globally renowned anti-tobacco strategy, which has cut our national smoking rate from over 50 per cent in the 1960s to just above 10 per cent today – where it seems to have levelled off. They view this moment as a unique opportunity for the provinces to push our national smoking rate even lower, by introducing more restrictions on tobacco products as well as financial penalties for tobacco companies if Canadian smoking rates don’t continue to sink.
The organizations argue that punishment should go further than financial rewards for provinces: Part of the settlement should go toward an independent fund aimed at reducing tobacco use, all tobacco promotion should be ended and secret internal tobacco industry documents should be disclosed.
This leads to a larger conundrum that looms over the negotiations. It’s been 60 years since the U.S. Surgeon General announced the link between cancer and cigarettes. A consumer product proven to be harmful when used as intended should have been pulled from shelves. Instead, cigarettes entered into a murky consumer paradox with governments around the world warning citizens not to smoke, while simultaneously inhaling billions of dollars in excise taxes from their continued legal sale.
This paradox only deepens with the mediation scenario playing out in Canada.
With hundreds of billions of dollars at stake, any major payout from Big Tobacco to our provinces will most likely occur over years, or decades, as was the case with the Master Settlement Agreement in the U.S. – where in 1998, all major American tobacco companies agreed to pay over US$200-billion to U.S. states.
If Canada follows this model, the higher the payout to the provinces, the more cigarettes future Canadians will have to smoke for the manufacturers to make their payments. Thus, even if tighter restrictions and anti-smoking strategies are agreed to and deployed – leading to fewer Canadian smokers – presumably, this will have an effect on the profit pipeline that feeds those provincial coffers as part of any settlement.
For those Quebec smokers who won the initial lawsuit filed in 1998, 25 years have now passed and the clock is ticking, as hundreds have perished from smoking-related illnesses without ever having seen a penny of their legal settlement, because creditor-protection status and the continuing mediation have paused any payouts.
For now, as any current smoker knows, it’s business as usual for Big Tobacco in Canada, with its supply chain and profits protected, even as our governments and the tobacco companies continue to raise the price of a pack of sticks at the counter.
Our provinces are in a powerful position to decide whether Canada’s tobacco industry will be forced to transform the way it operates or simply allowed to continue simmering.
This will depend on provincial priorities. Will our provinces help Canada kick its addiction to the business of tobacco, or simply line their own pockets for decades to come?