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Last Updated: Friday, 9 July, 2004, 12:05 GMT 13:05 UK
Cigarette giant settles $1bn row
Marlboro and other cigarettes on the shop shelf
Smuggled cigarettes may have cost the EU millions
Philip Morris, the maker of Marlboro cigarettes, is to pay $1.25bn to settle a dispute with the European Union over accusations of cigarette smuggling.

The EU had accused the company of colluding with smugglers, thus evading European taxes and customs duties.

The firm has denied the accusations, but will pay the money over 12 years to help fight against contraband and counterfeit tobacco products in the EU.

In return, the EU has agreed to drop all legal action against the firm.

Lost duty

European Budget Commissioner Michaele Schreyer said the agreement "represents a major step forward in the battle against contraband and counterfeit cigarettes".

Analysts have said that a well-funded crackdown on smuggling could yield results.

Big tobacco firms are alleged to have shipped large quantities of cigarettes to countries that could not absorb them all, knowing that the excess would then be smuggled into the EU.

In 2000, the EU is estimated to have lost about 1m euros ($1.2m; 660,000) in duties per truckload of tobacco, leading to an annual loss of more than 1bn euros.

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