Philip Morris pays $1.25bn to settle case

The European Union on Friday dropped money-laundering and smuggling claims against Philip Morris International in a $1.25bn settlement it claimed could herald similar deals with other tobacco companies.

The EU legal team, which is pursuing RJ Reynolds and Japan Tobacco in the US courts, believes the deal with the makers of Marlboro cigarettes is a benchmark for future settlements.

Philip Morris said it hoped the $1.25bn pay-out, spread over 12 years, would help the EU tackle smuggling and counterfeiting.

But the settlement reflects the company’s need to work with governments to tackle the growing trade in bogus cigarettes.

Analysts welcomed the resolution and the prospect of tougher action against illegal trade in cigarettes, but some questioned why Philip Morris had to pay more than $1bn when co-operation with the EU on tackling the problem would benefit both sides.

Two Congressmen said the EU deal should encourage lawmakers in the US to clamp down on smuggling.

The settlement related to allegations that Philip Morris colluded in the smuggling of genuine Marlboro cigarettes into the EU to avoid duty and taxes.

Yesterday, Philip Morris said contraband in genuine products was “non-existent in the EU”, but that the trade in counterfeit cigarettes accounted for up to 2 per cent of the total market.

“We can’t stop the sale of counterfeit cigarettes by ourselves,” said André Calantzopoulos, Philip Morris International chief executive. “But close co-operation between business and government is a big part of the solution.”