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BRUSSELS, Belgium -- Philip Morris International (PMI) agreed Friday to pay up to $1.25 billion to help the European Union (EU) combat smuggling and fakes, ending years of legal wrangling over an illegal trade that costs both sides hundreds of millions of dollars annually, reported the Associated Press.
PMI, a unit of Altria Group Inc., will make the payments --the most ever extracted from a single company by the EU -- in varying amounts over 12 years in return for ending litigation on both sides.
The cigarette maker and the EU head office hailed the deal, the outlines of which were revealed last April, as a "major step forward in the battle against the common enemy of counterfeit and contraband cigarettes." They aim to wipe out the illegal black market in cheap cigarettes, usually run by crime gangs, which deprives manufacturers of sales and governments of tax revenue.
The money will go to the EU budget and the 10 countries that joined the EU's lawsuit against the company: Belgium, Finland, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Portugal and Spain.
The civil lawsuits filed in New York accused the company of complicity in smuggling Marlboro and other brands into the EU -- where cigarettes generally are heavily taxed --by intentionally oversupplying countries with lower duties. The excess would allegedly be smuggled into EU countries and sold on the black market, depriving treasuries of tax and customs revenue.
PMI has denied the charges. But part of Friday's deal requires the company to make sure sales volumes are "commensurate with legitimate market demand." It also provides for additional, unspecified payments to the EU "in the event of future seizures in the [EU] of its genuine products above defined quantities."
The payments would be made regardless of fault or wrongdoing by PMI.