Tobacco Cos, Justice Dept Continue To Battle Over Restrictions

The U.S. Department of Justice and major tobacco companies continue to struggle over how to implement restrictions imposed on the industry by a 2006 court ruling.

According to court filings submitted Wednesday, the parties can't even agree on whether they're making progress in adopting the rules issued by a federal district judge as part of a 1,653-page opinion.

A group of the tobacco companies--including Altria Group Inc. (MO) and its Philip Morris USA unit, R.J. Reynolds Tobacco Co. and Lorillard Inc.'s (LO) Lorillard Tobacco Co.--wrote in a status update that they "have made no substantial progress" in resolving any of the issues.

The topics addressed include exactly what corrective statements the tobacco companies need to issue regarding the health risks of their products and which elements of the court ruling are still relevant after the Food and Drug Administration gained oversight of the tobacco industry in 2009.

The filing by the tobacco companies alleges that the government hasn't been a good faith partner in myriad negotiations held over the past few months.

"Defendants have attempted to negotiate in good faith with the government and intervenors on these issues, but have been met with an almost total lack of responsive proposals, except on the more minor points," the filing states. Specifically, the tobacco companies said the government hasn't yet detailed the required corrective statements or how it proposes to judge their efficacy.

The government, meanwhile, wrote that the parties "have reached agreement on several issues and made substantial progress in reducing disagreements on several further issues."

The government said it has begun focus group testing of various corrective statements, to be completed in early December, and will have details of its final proposals ready for submission in late January.

Despite continued disagreements, the two sides at least have resolved part of one outstanding concern. Five of the six tobacco companies have paid certain costs, totaling $391,227.52 each. The sixth, British American Tobacco PLC (BATS.LN, BTI), has argued it isn't obligated to pay. British American Tobacco filed its status update separately on Wednesday.

Meanwhile, the tobacco companies told the court they believe a mediator or negotiator is necessary to resolve the outstanding issues, while the government said it doubted such a third-party presence would help.

The 11-year-old case dates back to a Clinton administration lawsuit alleging that nine tobacco companies and two related trade associations engaged in a 50-year conspiracy to deceive the public about the dangers of smoking.

The tobacco companies and the Justice Department are scheduled for another hearing Dec. 20.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

--Brent Kendall contributed to this story.

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