When first introduced in Joseon late in the 16th century, tobacco immediately became popular on the peninsula. The widespread consumption even led to a government-imposed ban on the product at one point (from 1692-1717) because of fire risks. In the early years of tobacco consumption, Lee Ik (1681-1763), a well-known scholar of the “realist” school of Confucianism, praised it as a cure-all medicine. The revered King Jeongjo (1752-1800), also known as a heavy smoker, noted in his book “Hongjaejeonseo” that tobacco had helped him recover from fatigue and brought on sound sleep.
Tobacco was then added to the list of items that were sold through the Government Monopoly Administration in 1921 along with ginseng. The government agency became a public corporation in 1987, and was privatized in 2002 under the name KT&G. Public corporations are established through enabling statutes and are considered government-affiliated entities under Korean law.
The decades-old governmental involvement in tobacco sales puts an interesting twist on the recent decision of the National Health Insurance Service to bring a lawsuit against tobacco manufacturers for the financial losses it has allegedly suffered as a result of tobacco-related diseases. The NHIS, a public organization under the supervision of the Ministry of Health and Welfare, is seeking compensation for health care costs associated with such diseases. The NHIS alleges that it pays as much as 1.7 trillion won ($1.6 billion) each year for medical costs related to consumption of tobacco products.
The domestic and foreign tobacco manufacturers being targeted include KT&G, Philip Morris, British American Tobacco and Japan Tobacco International. These manufacturers, through a joint press conference last week, dismissed the NHIS’ plan as having “little legal merit” and described the lawsuit as an attempt to disguise the organization’s own budget problems. In fact, in the previous four tobacco litigations in Korea, brought about by individual smokers, the tobacco companies largely prevailed due to the difficulty of proving a direct causal relationship between smoking and the diseases and any ill intentions on the part of the manufacturers. Most likely, the same issues will be vehemently argued and tested in the NHIS case.
Besides the legal claims and defenses associated with the cigarette litigation, what is noteworthy here is that it is the NHIS, a public corporation, that plans to bring about legal action. As mentioned, KT&G was privatized in 2002, but had been affiliated with the government until that time ― as a public corporation until 2002 and as a government agency until 1987. As the NHIS data, statistics and financial losses may well go back to before 2002, it is possible that the government may be shown to be partly responsible. The tobacco manufacturers already argue that if they are held liable the government should be held at least partially liable for any alleged damages.
No wonder the plan winds up the government. Both the Ministry of Health and Welfare and the Ministry of Strategy and Finance are reported to take a cautious approach to this complicated relationship. The NHIS might want to avoid this complication by confining the scope of its claims to post-2002, but the defendant manufacturers, multinational tobacco giants included, may have their own defense agenda.
Warning signs began to be printed on the packages of cigarettes sold in Korea in 1976. First as a government agency, then a public corporation, KT&G was adroit at managing the conflicting objectives of securing public health on the one hand and maintaining a key national monopoly business on the other. The 2002 privatization was supposed to end this, but it turns out that not all the ties may have been cut.
Whoever emerges victorious from this lawsuit, it will be an important test case which will determine the future course of the country’s tobacco policy.
By Lee Jae-min
Lee Jae-min is an associate professor of law at Seoul National University. ― Ed.