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Tobacco Bill Draws Harsh Industry Backlash

Legislation: Chief of RJR Nabisco says tougher curbs proposed in Senate would lead to bankruptcy, black markets. Companies would be forced to fight measure if enacted, he says.


WASHINGTON — Beleaguered tobacco companies went on the offensive Wednesday, raising the specter of a bankrupt industry and a thriving black market in cigarettes if tough tobacco control legislation becomes law.

After months of fruitless behind-the-scenes lobbying by the industry, Steven Goldstone, CEO of tobacco giant RJR Nabisco, came out swinging at the Clinton administration and Congress. Hoping to make more points with the public than the tobacco companies have with Congress, Goldstone accused lawmakers in a televised address at the National Press Club of pushing measures so harsh that the industry would have no choice but to challenge the legislation and continue warfare in the courts.

His remarks reflected the industry's horror over last week's 19-1 vote by the Senate Commerce Committee, which includes some tobacco state members, to adopt a bill far tougher than the proposed settlement reached last June between the industry and state attorneys general.

The Senate bill eliminates most legal protections that the industry thought it had won and vastly increases the cost of the deal, from $368 billion to $516 billion over 25 years.

"Let me assure you . . . that we are not, as they would like to have it, like a Brinks truck overturned on a highway," said Goldstone.

Although Goldstone's speech was widely described in news reports as an epitaph for the tobacco settlement, for many months lawmakers and the White House have not considered the agreement last June 20 anything more than an outline.

"I don't believe that Congress will be blackmailed or deterred by their [the tobacco companies'] threats," said Sen. John McCain (R-Ariz.), chairman of the Senate Commerce Committee.

"They can be part of it or they can fight it," President Clinton said in response to Goldstone's speech. "I think they ought to rethink their position because we're going to get this done one way or the other."

However, this turn of events puts in sharp relief the question of how strong an anti-smoking bill Congress can pass without the acquiescence of the industry. The initial reaction from lawmakers on Capitol Hill was that the industry's protests would make no difference.

But since Congress was in recess for Easter, it was difficult Wednesday to get a clear sense of the politics in the House, where no bipartisan legislation has yet emerged.

Traditionally, the industry has had its way in Congress and it had counted on lawmakers to implement the settlement by passing legislation that would have protected tobacco companies from the most threatening kinds of lawsuits. But the process spun out of the industry's control with lawmakers appearing to believe that they no longer could afford to appear to be doing the industry's bidding.

So RJR's Goldstone chose a televised speech as his vehicle to take his message directly to the people. Expressing a view shared by other cigarette manufacturers, Goldstone said that Congress is "playing the politics of punishment" instead of seeking a constructive resolution.

Goldstone portrayed the proposed legislation as a combination of the worst of big government and high taxes and said that it was an invitation to foreign smugglers to create a black market in cigarettes.

Asked at a press conference after the speech what the companies would do if the Senate Commerce bill becomes law, Goldstone said: "I don't think that's going to happen."

But if the bill is adopted, he said, his company would refuse to sign voluntary agreements that may be needed to implement certain advertising provisions such as a ban on tobacco billboards.

In the meantime, the industry will launch a public relations campaign to defend its position. While some events are not yet planned, the industry will begin running newspaper advertisements today that say the tobacco companies agreed to change the way they did business and had not agreed to go out of business.

Some industry experts said that RJR has never been as committed to the tobacco deal as some of its rivals, particularly Philip Morris. As the industry leader, Philip Morris would be least harmed by drastic curbs on advertising, which would tend to lock in market share. And its booming international business could cushion it against big payments and lost domestic sales.

Reynolds, on the other hand, is a fading second to Philip Morris in the industry and under the bill's advertising restrictions would have fewer marketing weapons that would enable it to play catch-up.

However, other companies, including Philip Morris, also went public Wednesday with their opposition to the Senate bill.

"We will actively oppose the Senate . . . bill because of its punitive impact on Philip Morris, our consumers, suppliers, retailers, growers and others," the company said in a statement.

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