Tobacco.org

• Big Tobacco Sees A Windfall 

Now $1.2 billion they expect from this year's tobacco payout--and possibly more in future years--may be in peril. The major tobacco companies, including Altria Group's (nyse: MO - news - people ) Philip Morris USA and Loews' Lorillard, which were the original signatories to the deal, known as the Master Settlement Agreement (MSA), complain that their collective market share has fallen from 99.6% in 1997 to 92% in 2003.

An independent arbiter is expected to agree with the companies that competition from upstarts that don't pay into the MSA is to blame. Per the MSA, this is the first step before they can get their payments trimmed.

But Big Tobacco still faces a second hurdle: It has to be shown that the states have been negligent in cracking down on the upstarts. This will be trickier to prove. Under the MSA--which most fair-minded economists regard as a state-sponsored cartel--the signatories negotiated for protection against competition . . .

"Overall, we're not convinced that the major manufacturers will succeed in getting the $1 billion ... but this battle could lead to another settlement [and] an ironclad partnership between the states and tobacco manufacturers," wrote Bonnie Herzog, a tobacco analyst for Citigroup, in a report.

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