US cigarette sales fell to a 55-year low in 2005 after tobacco companies agreed to restrict advertising in a 1998 health-care settlement, a group of US attorneys general, including Utah's Mark Shurtleff, announced Wednesday.

Cigarette sales have declined by more than 21 per cent since the agreement with producers including Philip Morris USA, Iowa Attorney General Tom Miller said at a press conference in Washington with Shurtleff and the top legal officials for California and Idaho, Bill Lockyear and Lawrence Wasden. The drop accelerated after cigarette makers stopped billboard and sporting-event advertising, Wasden said. A reduction in youth smoking contributed to last year's drop to 378 billion cigarettes sold, he said. The settlement also called for companies to pay states an estimated US$ 206 billion over 25 years.

Cigarette price increases by major producers including Philip Morris USA to cover the settlement costs contributed to declining consumption. Higher taxes by state and local governments including New York City also pushed up cigarette prices. The average retail price of Marlboro was US$ 3.36 a pack in January, 31 cents higher than in January 2003, according to Prudential Equity Group LLC analyst Robert Campagnino in New York.

Smoking restrictions in the workplace, restaurants and bars have reduced cigarette consumption that, on a per-capita basis, was the lowest last year since the late 1930s, the attorneys general said.
Miller also said state attorneys general recently notified major cigarette makers in letters they may sue the companies over US$ 1.2 billion in disputed settlement payments.

The companies may withhold that amount from the US$ 6.5 billion they're scheduled to pay states on 17 April 2006, citing a provision that allows them to adjust payments if their collective market share decreases by more than 2 percentage points, the attorney generals said. That occurred in 2003, starting a two-year waiting period that prevented the companies from seeking the adjustment until now. Manufacturers have so far paid more than US$ 41 billion in settlement payments. Other conditions also have to be met before the companies can reduce payments. These include proving that states failed to diligently enforce certain statutes passed after the agreement, he said. Producers covered by the settlement accounted for 91.6 per cent of US market share in 2003, down from 99.6 per cent in 1997, said Philip Morris USA spokesman Michael Neese, citing PricewaterhouseCoopers, the settlement fund's auditor. Richmond, Virginia-based Philip Morris USA has not threatened to withhold a portion of its payment and will await an independent arbiter's final ruling on 27 March 2006 before deciding whether to do so, Neese said. The arbiter, the Brattle Group, ruled preliminarily 1 March 2006 that settlement restrictions significantly contributed to the big companies' market-share losses. (pi)