Sen. Ted Kennedy, D-Mass., and Rep. Henry Waxman, D-Calif., speak as if they are going after Big Tobacco with their bill to heighten regulation of cigarettes, but their most important ally is the embodiment of Big Tobacco: the Altria Group, parent company of Philip Morris.Indeed, the liberal lawmakers may be doing wonders for the cigarette behemoth’s bottom line with their legislation.
Kennedy and Waxman, along with Republican Sen. John Cornyn, R-Texas, have introduced bills this month that would grant the Food and Drug Administration the authority to regulate the manufacture, sale and advertisement of cigarettes and smokeless tobacco.
President Bill Clinton had tried to do that unilaterally in 1996, but the Supreme Court nixed that effort, saying only Congress could thus expand the FDA’s authority. The Senate passed a bill in 2004, but it died in the House, supposedly under pressure from President Bush, spurring an angry Sen. Tom Harkin, D-Iowa, to charge, “I lay this right at President Bush’s door. He concurred with Big Tobacco.”
In truth, it was Waxman, Kennedy and Harkin who were concurring with Big Tobacco, if by “Big Tobacco” you mean Philip Morris, the huge corporation selling a majority of cigarettes in the U.S. Philip Morris’ many cigarette brands, led by Marlboro, Basic and Virginia Slims, account for 50.4 percent of the cigarettes sold in American stores.
Philip Morris’ parent company, Altria, is an unabashed, enthusiastic and persistent proponent of Waxman and Kennedy’s legislation. On Feb. 15, Altria issued a news release stating the company had, “reaffirmed their longstanding support for granting the Food and Drug Administration authority to effectively regulate tobacco products, and urged Congress to take quick action.”
Why would a cigarette giant fight to be regulated? The company lists plenty of reasons, stating generally on its Web site, “Altria and Philip Morris USA believe regulation of tobacco products by the [FDA] would establish a comprehensive national tobacco policy that could potentially create a competitive framework within which manufacturers are focused on reducing the harm tobacco use causes.”
But when they write “a competitive framework,” you have to wonder if Philip Morris really means an “uncompetitive framework.”
All regulation adds to overhead, which disproportionately hurts the smaller companies and is more easily absorbed by bigger companies. The Waxman and Kennedy bills would likely lead to federally mandated ingredient testing at the cost of the cigarette company.
It would also give the FDA authority to regulate nicotine and other ingredients. All of these costs will make it much more expensive to manufacture cigarettes, but Philip Morris, with its economies of scale, will be less affected. If legislation adds to your costs, but adds to your competitors’ costs even more, it’s a net gain for you.
This bill would also further restrict tobacco advertisements, possibly even banning all cigarette ads — another way the government could help Philip Morris. Studies find that cigarette ads do much more to sway brand choice of smokers than to make new smokers or cause smokers to buy more cigarettes.
If there were never another cigarette ad in America, the primary effect would be locking current market share in place. Two of every five cigarettes sold in a store in America is a Marlboro. Philip Morris’ other brands account for about 10 percent of that market, giving Philip Morris more than half of the U.S. retail market, not counting Internet sales, according to the company.
Another key factor is access. In 2005, Altria spent $13.6 million on tobacco lobbying, much more than every other tobacco company combined. The same story has been true in most recent years.
Philip Morris has far better access to politicians and bureaucrats than any of its competitors. If the FDA starts regulating cigarettes, you can be sure they will be doing it with Philip Morris’ input. Philip Morris can pay the most to hire the lobbyists with the closest ties to the important regulators and politicians, ensuring the final language of the regulation comes out in the corporation’s favor.
A final factor is Philip Morris’ huge and growing presence in Europe, where these regulations won’t apply. The other American tobacco companies don’t have that advantage.
Much of the media continue to present this debate as a battle between health groups and Big Tobacco. In truth, it is a battle between Biggest Tobacco and the rest of the industry, with Philip Morris often being praised for supporting a bill that will boost the company’s bottom line by hurting its competitors.
Examiner columnist Tim Carney is author of “The Big Ripoff: How Big Government and Big Business steal your money.”
