News from the Cigarette Trust
Soemtimes it's not what oligopolies get the government to do, but what they get them not to do. Like not to use antitrust laws.
The US Federal Trade Commsiion gave a green light to the merger of the #2 and #3 cigarette companies, R.J. Reynolds and British-American Tobacco (Brown & Williamson). RJR is the maker of such brands as Camel and Winston, while B&W sells Lucky Strike and Kool. This decision was unanimous, in spite of the recommendations of the commitee's legal staff that the merger would break antitrust law.
Thenewly merged company will own 32% of the US market. Philip Morris (Altria), manufacturer of market leader Marlboro, owns a 50% market share. Together with current #4 Lorrilard, the top three manufacturers will control over 90% of the market.
Reynolds managed to press its point that in the light of growth by off-brand and generic cigarette markers, the market remains competitive. Expectation was that, at the least, the new company would have to sell off some of its competing brands, such as menthol cigarettes Salem (Reynolds) or Kool (B&W). But there were no conditons imposed. Not only that, but the deal will be tax-free for stockholders of both companies.
The cigarette companies have their troubles, with law suit liabilities, higher taxes, and decreasing US use. But the more they can eliminate competition while filling shelves with nominally different brands, the easier their job. And the bigger the remaining companies, the more likelihood that the next time government policy is made (and smoking is a major area for government policy), the more power they will have to get special treatment. Plus, the easier it is for them to determine costs by specifying whatt they will pay the farmers. A political decision, not a legal one.
