JULY 17, 2000

Big tobacco takes a big hit

TOBACCO has been the biggest supporter of motor racing since the late 1960s but the pressure on cigarette companies continues with another huge award of damages last week in a Miami court where a jury decided that the tobacco companies should pay $145 billion in punitive damages in what is known as "a class action" brought by thousands of individuals suffering from smoking-related illnesses.

TOBACCO has been the biggest supporter of motor racing since the late 1960s but the pressure on cigarette companies continues with another huge award of damages last week in a Miami court where a jury decided that the tobacco companies should pay $145 billion in punitive damages in what is known as "a class action" brought by thousands of individuals suffering from smoking-related illnesses. This comes on top of settlements with each individual state government in the United States which amounts to $246 billion over 25 years. In addition there have been other individual cases including a 1999 case which resulted in Philip Morris (the parent company of Marlboro) paying $57m in damages to an individual. To make life even more difficult several other governments have filed suits in the US courts seeking the recovery of healthcare costs. These include Bolivia, Guatemala, Nicaragua and Venezuela.

Tobacco companies are making big profits but these are beginning to be eaten up by the damages payments and investors are becoming increasingly disenchanted with tobacco stocks. This means that less and less money will be available for sponsorships in future and with tobacco advertising bans spreading all the time, the value of F1 to the tobacco industry is reducing rapidly. The FIA has agreed to ban all tobacco sponsorship in motor racing by October 2006 but it may not be necessary as tobacco companies may have disappeared from F1 by then.