Regulator opposes BAT's dollars 1bn acquisition plan
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Your support makes all the difference.NEW YORK - BAT's proposed dollars 1bn acquisition of American Tobacco is facing stiff resistance from the staff of the US Federal Trade Commission, writes Larry Black.
Members of the country's largest cigarette wholesalers group, the American Wholesale Marketing Association, confirmed they had received letters from the FTC suggesting the merger of the third- and fourth-ranking tobacco producers was anti-competitive, and soliciting evidence for an anti- trust case against the acquisition.
While BAT's Brown & Williamson Tobacco subsidiary and American Tobacco, a subsidiary of American Brands, account for only 18 per cent of the US market, they have a substantially larger share of the fast-growing discount- cigarettes business. Reports said the FTC letter included predictions that discount prices would rise as a result of the merger.
Neither company would comment on the FTC's remarks, which tobacco analysts say is unprecedented. Both reiterated their belief that the merger is 'pro- competitive, creating a more effective competition for Philip Morris and RJ Reynolds with their huge market shares'.
A spokesman for the wholesalers' association said the regulators' monopoly arguments were difficult for many distributors to accept, particularly as their own profit margins had been hurt by price wars.
Rising market shares for discount brands forced big cuts in the retail price of premium cigarette brands 18 months ago, they said.
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