Tuesday, January 13, 2004

Rights & Reason: The War at Home

Following up on my post below, the Washington Post reports today that numerous states are looking to destroy, once and for all, price competition in the cigarette market to protect government revenues:
When Virginia tobacco farmer Mac L. Bailey started a cigarette manufacturing company 10 years ago, his business consisted of little more than a secret tobacco blend, a couple of hand-held rolling machines and a burning desire to take on the big tobacco companies that paid farmers like him a relative pittance for the lucrative product they grew.

"I saw years when I didn't have enough to pay my expenses," said Bailey, 60. "I looked at what the farmer was getting and what the big manufacturers were getting, and I said, 'That's too much money for the big guys.' "

Today, Bailey owns a private jet, and his company, S&M Brands of Keysville, Va., produces about 1 million cartons a month. The growth of discount cigarette companies such as Bailey's has reshaped the industry -- and led to an odd alliance between big tobacco companies and many of the states that sued them over the public cost of smoking.

Numerous states are considering or have adopted legislation aimed at increasing the price of discount cigarettes and protecting the market share of the "Big Four" tobacco companies -- Philip Morris, Lorillard, Brown & Williamson and R.J. Reynolds. The Big Four are vowing a push this year in the Virginia General Assembly.
Under the 1998 master tobacco settlement, upstarts like Bailey have a choice: Pay the state an annual ransom or agree not to compete for the settling companies’ market share. And the states are dead serious about stamping out discount cigarettes. The Post reports the National Association of Attorneys General—normally the most pro-antitrust organization in the country—is leading the charge for greater restraints of trade to prevent the loss of as much as $600 million in future tobacco settlement payments.

This should be a national scandal. Everyday small businessmen face antitrust prosecution for conduct that no rational person would condemn as illegal, yet four of the nation’s largest cigarette manufacturers and 46 state governments are allowed to run around and openly exterminate lawful businesses. This goes far beyond hypocrisy. The perpetrators of these actions are evil men, and they should be condemned as enemies of the American people, just as surely as we condemn those who commit any act of aggression against the United States.

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