<h1>Cheap cigarettes from little tobacco companies </h1> </br> <a href="http://www.cigline.net">Cheap cigarettes</a> from little tobacco companies have fouled up the $246 billion deal that big tobacco companies made with taxpayers. <p> Little companies grabbed eight percent of the market from 1997 to 2003, according to a March 27 report from the Brattle Group in San Francisco.<p> The report could trigger a reduction of annual payments from tobacco companies to the 46 states that signed the 25-year agreement.<p> Illinois is supposed to receive more than $9.1 billion -- or approximately $364 million annually -- from the Master Tobacco Settlement Agreement through the year 2025. llinois' payout is the fifth largest from MTSA, after California, New York, Pennsylvania, and Ohio, respectively. <p> Companies have paid $41 billion so far, according to the March 28 Financial Times. <p> The agreement calls for companies to pay $6.5 billion on April 17, but it also requires adjustment if states have failed to enforce laws that should cripple competition.<p> Under identical law in 46 states, companies that did not sign the agreement gain no financial advantage by staying out. Outsiders must pay into escrow accounts.<p> Outsiders get their escrow back in 25 years, if no state successfully sues them.<p> From an outsider's angle, the agreement looks like a state sponsored cartel. <p> "The agreement made states directly interested in the profits of the big companies," said Everett Gee, general counsel of S & M Brands Inc. in Keysville, Va.<p> S & M Brands makes Bailey cigarettes. Gee said the Bailey family has grown <a href="http://www.cigline.net">tobacco</a> for five generations. He said they started making cigarettes in 1994.<p> Gee disputed the Brattle Group's finding that companies lost market share because of the agreement. He said they lost market share because of greed. <p> He said they increased prices more than enough to pay the states. He said, "These prices shocked the consumer." <p> He said signers of the agreement would have lost more than eight percent of the market if states had not protected them. <p> "At those prices you would expect 60 to 70 percent," he said. <p> In 1998, Gee said, the Baileys received a letter from a law firm giving five days to sign the master settlement agreement. <p> "We would have had to pay in states where we never sold a cigarette," he said. <p> The Baileys did not sign. They started making escrow payments. <p> "We have paid our escrow always," Gee said. "We are under the largest scrutiny." <p> He estimated the escrow at $4.35 per carton, but won't know until next year. <p> For companies that signed the agreement, the Brattle Group report gave owners three weeks to decide whether to adjust payments. <p> R.J. Reynolds in Winston-Salem, N.C., had not decided as of April 5. <p> He said states would have to prove to arbitrators that they diligently enforced the laws. <p> States and companies that signed the agreement jointly hired the Brattle Group. States do not permit taxpayers to read the report. <p> States and companies that signed the agreement jointly employ Price Waterhouse to calculate market shares. States do not permit taxpayers to read the report. <p>