How Philip Morris benefits from tobacco regulation
By: Timothy P. Carney
Examiner Columnist
April 7, 2009
As Sen. Edward M. Kennedy, D-Mass., and Rep. Henry A. Waxman, D-Calif., push bills this spring to heighten federal regulation of tobacco, expect newspapers to present “both sides” of the story by quoting cigarette giant RJ Reynolds opposite a group like Campaign for Tobacco-Free Kids — painting the kind of industry-versus-do-gooder picture that characterizes coverage of most regulatory battles.
But, as usual, that picture is false. The most important ally of the “Family Smoking Prevention and Tobacco Control Act” is Philip Morris, the largest cigarette maker in the world. The anti-smoking groups, which have only a fraction of Philip Morris’ lobbying clout and no generous political action committees, are sideshows in this debate.
There’s a metaphor popularized by economist Bruce Yandle that is useful in explaining efforts to regulate anything from energy to toy safety. Call it the Tale of the Baptist and the Bootlegger.
Picture a small-town Southern politician after Prohibition’s repeal. Call him Jones. Jones’ campaign needs both cash and a winning issue. The state’s most prolific bootlegger comes and offers Jones both. “I can bankroll your entire campaign. You just need to outlaw alcohol in the county. If you close down the bars and clear the liquor out of the corner stores, the men will all have to come to me for their fix.”
Jones, with newly heavy pockets, walks down to the Lady’s Temperance Hall and declares, “Ladies, I’m running to end the scourge of alcohol in this town, and I’m asking for your support.” At his campaign kickoff the next week, Jones has the entire Temperance Union and the local preacher onstage endorsing him, and of course, he’s got the pipeline of alcohol cash from the rumrunner who will get even richer when the county goes dry again.
Philip Morris is the “bootlegger” today — the undisputed giant of the industry. The company controls more than half of the U.S. cigarette market, and its sister company, Philip Morris International, is rapidly expanding in the growing overseas market. Parent company Altria has hired three new lobbying firms so far this year, bringing its army to 19 different lobbying firms plus a powerful in-house shop.
And Philip Morris, openly and without qualification, backs Kennedy’s and Waxman’s bills to heighten regulation of tobacco.
Philip Morris stands to benefit from this regulation in many ways. First, all regulation adds to overhead, and thus falls more heavily on smaller firms. Second, restrictions on advertising help Philip Morris’ Marlboro, a brand everyone already knows, by keeping lesser-known brands in the shadows. (Existing restrictions on advertising have already helped Philip Morris in this regard, with an added benefit spelled out in Altria’s annual report: “Marketing and selling expenses were lower, reflecting regulatory restrictions on advertising and promotion activities. … ”)
Finally, if the bill passes and the FDA gets added control over the industry, Philip Morris, more than any of its competitors, will have access to those bureaucrats and agency heads making the decisions. For all these reasons, RJ Reynolds and other tobacco companies oppose the bills Kennedy and Waxman are pushing.
To be fair, Kennedy and Waxman are not quite the Southern politician in the metaphorical tale — they don’t pocket Philip Morris cash. But plenty of other pro-regulation lawmakers do, including, for instance, Sen. Max Baucus, D-Mont.
Baucus was a co-sponsor last year of Kennedy’s tobacco regulation bill. Among congressional PACs, Baucus’ Glacier PAC has received the most money ($30,000) from Altria’s PAC since 2004. Altria has given an additional $10,000 in campaign funds to Baucus in that period, while Altria executives have given him more than $11,000, including contributions from two of Altria’s in-house lobbyists, John Scruggs and John Hoel.
Also, Baucus’s former chief of staff, Jeff Forbes, is now an Altria lobbyist, at the firm Cauthen Forbes & Williams.
The “Baptists” in this case — the moral crusaders fighting what they perceive as a true evil — are Campaign for Tobacco-Free Kids and similar groups. The Campaign for Tobacco-Free Kids ramped up its lobbying last year, spending $719,000. That’s about as much as Altria spent on lobbying every three weeks last year — and 2008 was a slow year for Altria lobbying.
When President Barack Obama signs the “Family Smoking Prevention and Tobacco Control Act” this year, he’ll probably appear with anti-smoking groups in the Rose Garden, where he’ll offer them extravagant congratulations. But the real victors will be Altria executives and their lobbyists, who will celebrate with highballs and perhaps even a cigarette or two.
