Commission prepares to take action against US tobacco giants

The European Commission said yesterday it was taking US tobacco giants Philip Morris and R J Reynolds to court in New York, accusing them of involvement in smuggling cigarettes into the EU.

In a statement, EU Budget Commissioner Ms Michaele Schreyer said lawyers filed a civil action last Friday against both multinationals "for their alleged involvement in smuggling cigarettes into the EU".

The case, based on the US Racketeer-Influenced and Corruption Organisations Act - "seeks compensation for financial losses the EU has suffered" as well as "injunctive relief in order to prevent further smuggling", Ms Schreyer said.

Philip Morris, best known for Marlboro cigarettes, is the world's biggest tobacco manufacturer. R J Reynolds, makers of Camel cigarettes, ranks fourth after Japan Tobacco and British American Tobacco, according to the Fortune Global 500.

Philip Morris said yesterday it had not seen the lawsuit. "Philip Morris Europe does not understand why, as a matter of law or practice, the European Commission has chosen to address the issue in a US court rather than through regulatory and co-operative actions within the framework of the EU," Mr David Davies, vice-president of corporate affairs for Philip Morris Europe, said in a statement.

Earlier in the day, an R J Reynolds spokesman said the company had not seen the lawsuit and that to suggest it had been involved in smuggling activity was "unsupportable and untrue".

Ms Schreyer's spokesman told reporters there was no fixed amount of damages attached to the civil action, which follows a July 20th warning by the European Commission that it would use the US courts to recover billions of euros in customs revenue lost to smuggling activities.

"Four months ago the European Commission decided on a legal action against a number of US tobacco companies in relation to cigarette smuggling," Ms Schreyer said. "The time has come to proceed.

"The protection of the financial interest of the EU is a high priority of the European Commission," she added. "The present case is a new step in our strategy to fight against fraud."

The US Act on which the EU case is built was passed by Congress in 1970 originally to combat organised crime. A successful plaintiff using the Act can recover up to three times the money lost from a pattern of proven criminal activity, plus legal costs.