Are Cigarette Manufacturers Stifling Competition?

Discussion
Jun 26, 2003
George Anderson

By George Anderson


Philip Morris USA is not engaged in unfair anti-competitive practices through its Retail Masters program. That was the finding of the Fourth Circuit Court of Appeals in Virginia, which upheld a previous ruling handed down by a District Court.


The lawsuit was brought against Philip Morris by competitors British American Tobacco, Brown & Williamson and R.J. Reynolds.


In a separate story, Philip Morris and RJR have ruffled feathers in the wholesale community in recent months by allegedly requiring distributors to achieve market share numbers for the manufacturer’s brands to gain discounts.


A wholesaler, requesting anonymity, told RetailWire, “Cigarette manufacturers obtained legal rights years ago that would allow them weekly access to all competitive brands and quantities of cigarettes sold by every distributor to each and every retailer. Now they are using these numbers to require distributors to meet their expected market share target or be penalized with increased pricing.


“The real reason these two cigarette companies have started using market share numbers to squeeze the distributor, is their ultimate goal is to force distributors to stop selling competitive cheap or fourth-tier cigarettes that have been growing in demand and popularity.”


Moderator’s Comment: Do cigarette manufacturer trade
sales and promotion programs differ substantially from manufacturer programs
in other categories? What impact are the current programs from cigarette manufacturers
having on wholesale and retail distributors?


We naturally hesitate to use a source that requests anonymity.
In this case, however, the wholesaler executive convinced us his/her employer
would suffer financially if identified.
[George
Anderson – Moderator
]

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