Smith & Wesson Settlement: Backlash, Boycott, and Sale

The Smith & Wesson settlement was a March 2000 agreement in which the country’s oldest major handgun maker accepted roughly 80 binding changes to how it designed, distributed, and sold firearms, in exchange for the dismissal of lawsuits brought by the Clinton administration, two state attorneys general, and a coalition of cities and counties. Within a year, an industry boycott had cut the company’s sales by two-thirds, forced the sale of the business for a fraction of its prior value, and left the agreement effectively unenforced. No other major gun manufacturer has signed anything like it since.

What Smith & Wesson Agreed To

The deal, signed on March 17, 2000, contained about 80 specific reforms covering firearm design, dealer conduct, and distribution.¹ The core commitments were:

External locking devices on all firearms within 60 days, and internal locks within 24 months.
Two percent of annual firearm revenue dedicated to “authorized user” smart gun technology, with the technology required in all new models within 36 months.
No new firearms designed to accept magazines holding more than 10 rounds.
Handguns designed so they could not be readily operated by a child under six, with chamber load indicators and magazine disconnectors added within 12 months.
Sales restricted to authorized dealers who agreed to background checks on all gun-show sales, certified safety training for purchasers, security plans to prevent theft, and limits on multiple handgun purchases.
Suspension or termination of dealers whose guns turned up disproportionately in crime-gun traces within three years of sale.

The company paid no financial damages. A Smith & Wesson spokesman said damages would have been a “deal breaker.”² A five-member Oversight Commission, drawn from the manufacturer, participating governments, and the Bureau of Alcohol, Tobacco and Firearms, was set up to monitor compliance.³

Who Was on the Government Side

HUD Secretary Andrew Cuomo led the federal negotiation, and the Treasury Department and the Clinton White House joined the deal. New York Attorney General Eliot Spitzer and Connecticut Attorney General Richard Blumenthal signed on behalf of their states, and cities and counties including Los Angeles, San Francisco, Berkeley, Inglewood, Atlanta, Detroit, St. Louis, Gary, Camden, Miami-Dade County, Bridgeport, and Washington, D.C., signed on as well.⁴⁵ Each of them agreed to drop pending or potential suits against Smith & Wesson in exchange for compliance.

The leverage on the federal side was procurement: government agencies purchased an estimated one-third of all guns manufactured in the United States, and the plan was to steer that buying toward manufacturers that adopted the settlement’s standards.⁶

Why Smith & Wesson Signed

Smith & Wesson was a defendant in many of the more than 40 municipal lawsuits filed in the late 1990s that sought to hold gun manufacturers financially responsible for urban violence, using a legal theory modeled on the tobacco litigation of the mid-1990s.⁷ CEO Ed Shultz decided that a united industry defense would be “self-destructive” and chose to negotiate.² No other major manufacturer joined him.

The Backlash and Boycott

Three days after the deal was signed, the NRA’s Institute for Legislative Action published “The Smith & Wesson Sellout,” accusing the company of “craven self-interest” and running up “the white flag of surrender.”⁸ NRA President Charlton Heston appeared in television ads accusing Smith & Wesson’s British parent, Tomkins PLC, of trying to “reinstitute colonial control of the United States.” The National Shooting Sports Foundation accused Smith & Wesson of being manipulated by the administration.²

The NRA did not formally call for a boycott, but one materialized quickly. By the end of March, one of the country’s largest gun wholesalers had stopped carrying Smith & Wesson. Retailers and gun owners organized their own boycotts. At the NRA’s May 2000 convention, protest signs ringed the Smith & Wesson booth, and the organization added more than 200,000 members in the months after the settlement.⁸ One industry executive told the San Jose Mercury News that companies would rather risk “bleeding to death with legal bills” than face what Smith & Wesson was going through.

Spitzer and Blumenthal opened antitrust investigations into whether the industry’s coordinated retaliation was an illegal conspiracy. Blumenthal urged police agencies to buy Smith & Wesson guns to keep the company alive, and Spitzer warned that if Smith & Wesson was “left out to dry,” the government would lose all leverage to bring other manufacturers to the table.⁹

Financial Collapse and Sale

Annual sales fell from a record $150 million in 1995 to roughly $50 million by 2000.¹⁰ By summer 2000 the company had suspended most manufacturing. That fall it laid off 125 workers, about 15% of its workforce, cutting headcount from more than 1,000 to about 670.⁸ Shultz resigned.

Tomkins PLC, which had bought Smith & Wesson in 1987 for more than $100 million, put the company up for sale in January 2001. On May 11, 2001, Saf-T-Hammer Corporation, a small Arizona start-up that made trigger-locking devices, acquired Smith & Wesson for $15 million in cash plus a $30 million note payable over 10 years.¹⁰ In February 2002, Saf-T-Hammer renamed itself Smith & Wesson Holding Corporation.¹¹

How the Agreement Fell Apart

The change in administrations sealed the deal’s fate. Even before George W. Bush took office in January 2001, manufacturers that had opposed the settlement began dropping their legal challenges “in anticipation of [the Bush] Administration reversing this policy and refusing to enforce the agreement,” in the words of Congresswoman Jan Schakowsky, who urged Bush to honor it.¹² Glock general counsel Paul Jannuzzo was quoted in January 2001 saying of the agreement, “In effect, it’s over.”

Saf-T-Hammer chairman Mitchell Saltz told The Guardian the new owners were focused on “turning around this business” and would review “what [the agreement] really says and doesn’t say” later.¹³ The company planned to add its own trigger locks to its guns but made no commitment to the broader terms. The smart gun mandate, which required authorized-user technology in all new models by March 2003, went unmet.¹⁴ The Oversight Commission never functioned in any meaningful way, the federal government stopped pushing, and the new ownership made peace with the NRA.⁸

The promised dismissals also mostly failed to arrive. Only Boston actually dropped Smith & Wesson from its lawsuit. Courts dismissed eight other cases, but roughly 20 suits against the company were still pending in mid-2001, and the HUD-led case on behalf of public housing authorities never materialized.¹⁰

The PLCAA and What Was Left of the Lawsuits

In October 2005, President Bush signed the Protection of Lawful Commerce in Arms Act, which gave the firearms industry broad immunity from civil suits over the criminal misuse of their products. Supporters said the industry had spent more than $200 million defending against such suits without losing a case.¹⁵ The law contained a narrow “predicate exception” for suits alleging a knowing statutory violation that caused the harm, but by 2006 it had wiped out most of the remaining municipal cases, producing dismissals in at least 10 states beyond those already covered by state immunity laws.⁷ One legal analysis noted that with the threat of civil liability gone, Smith & Wesson had no remaining incentive to follow through on the smart gun commitment.¹⁴

Why It Still Matters

The Smith & Wesson settlement is the only time a major American firearms manufacturer has voluntarily accepted binding changes to its designs, distribution, and marketing. Government officials praised Ed Shultz’s “courage and vision” at the signing.² Within twelve months the company had lost half its revenue, its CEO, and its corporate parent, and the deal itself was dead. The message to the rest of the industry was received: no other manufacturer has attempted a comparable agreement since.

1
Clinton White House Archives. Fact Sheet on Historic Agreement With Smith and Wesson
2
Los Angeles Times. Smith and Wesson Settlement
3
Clinton White House Archives. Agreement With Smith and Wesson
4
U.S. Department of the Treasury. Smith and Wesson Agreement
5
Annenberg Classroom. Smith and Wesson Settles Municipalities Lawsuits
6
HUD Archives. Communities for Safer Guns Coalition
7
The Trace. Gun Industry Legal Immunity PLCAA
8
Washington Post. A Gunmaker Once Tried to Reform Itself. The NRA Nearly Destroyed It
9
New York Times. Smith and Wesson Antitrust Investigation
10
Los Angeles Times. Saf-T-Hammer Buys Smith and Wesson
11
U.S. Securities and Exchange Commission. Smith and Wesson Holding Corporation 10-KSB
12
Office of Congresswoman Schakowsky. Schakowsky Calls on President Bush to Honor Government Agreement With Smith and Wesson
13
The Guardian. Tomkins Sells Smith and Wesson
14
GR LLP. Smart Gun Technology
15
GovInfo. Protection of Lawful Commerce in Arms Act Debate