Tobacco companies unlikely to shift business models despite proposed settlement: prof

Lawyers and plaintiffs speak to the media during a news conference October 18 in Montreal. Tobacco companies have offered to pay close to $25 billion in compensation to smokers and their loved ones. (THE CANADIAN PRESS/Ryan Remiorz)

Tobacco policy experts say without further pressure, major companies are unlikely to shift their business models toward less harmful alternatives despite a proposed settlement reached that would see three industry giants pay out billions to smokers and their families.

Under a newly proposed deal filed in court on Thursday, JTI-Macdonald Corp., Rothmans, Benson & Hedges, and Imperial Tobacco Canada Ltd. would pay nearly $25 billion to provincial and territorial governments.

More than $4 billion would go to Quebec class-action members and another $2.5 billion would be paid to smokers in other provinces and territories who were diagnosed with lung cancer, throat cancer or chronic obstructive pulmonary disease between March 2015 and March 2019.

The three tobacco companies would also pour more than $1 billion into a foundation to fight tobacco-related diseases.

But University of Toronto professor Michael Chaiton, who studies tobacco and addiction, said the agreement offers little incentive for companies to abandon tobacco products that continue to drive their profits.

"The lesson of these lawsuits is that cigarettes ... should not be a profitable consumer product and that there are alternatives available," he said.

"Functionally, I think some of the settlement protects the companies to allow them to continue to sell those products in particular, rather than switching over."

Chaiton said major industry players have maintained a willingness in recent years to promote tobacco-based products and fight proposed regulations that would curb their use, despite offering alternatives such as e-cigarettes.

He said companies have marketed vaping products as a way to transition toward a "smoke-free world," but their actions haven't matched that pledge.

"We haven't seen a huge number of people who used to smoke cigarettes move over to these products," he said.

"The large percentage of the people who use vaping products are those people who have never smoked cigarettes at all. So it's really not been a public health thing."

David Hammond, a public health professor at the University of Waterloo, said he was disappointed the proposed settlement does not require the companies to adopt reforms affecting their business models.

"Their business practices essentially haven't changed and won't change," said Hammond.

"The industry still generates billions of profits from cigarettes, and so I think they will continue the practices that have been generating that revenue."

He said industry revenues from cigarettes have actually increased over the past decade as companies have adopted "aggressive" price increases. Now facing billions of dollars in damages, the companies are unlikely to phase out their most profitable products, said Hammond.

"If they're trying to find ways of paying for these settlements, well, if nothing else, it gives them even more incentive to increase those revenues," he said.

The $32.5-billion agreement proposal, which is subject to a vote by creditors and court approval, is the result of a corporate restructuring process set off by a legal battle over the health effects of smoking.

The three companies sought creditor protection in Ontario in 2019 after Quebec's highest court upheld a ruling ordering them to pay nearly $15 billion in two class-action lawsuits.

Jacob Shelley, co-director of the Health Ethics, Law and Policy lab at Western University in London, Ont., said this case has broad implications for other industries beyond tobacco that manufacture food or beverages that can cause harm.

”At the end of the day, we have a bunch of products currently on the market where the same obligations to provide warnings for the risks that follow from their use exist," Shelley said.

"We know that alcohol is a carcinogen. We know of the risks, but we also know that consumers aren't aware. We know that they're not aware of the risks of cancer."

Shelley said the same legal principle applies to products such as highly-caffeinated energy drinks and sugary drinks.

"If you're putting a product into the market ... you have an obligation to ensure that you warn consumers about the risks," he said.

"You can't just bury your head in the sand."

This report by The Canadian Press was first published Oct. 18, 2024.