B.A.T Industries p.l.c. and its subsidiary, Brown & Williamson Tobacco Corporation, have applied for Federal Trade Commission approval to divest six brands of discount cigarettes and a plant in Reidsville, North Carolina, to Commonwealth Tobacco, LLC, a subsidiary of Commonwealth Brands, Inc. The brands to be divested are: Montclair, Riviera, Malibu, Bull Durham, Crowns, and Special Tens. The FTC is seeking public comments on the application for 30 days, until August 27, 1996.
B.A.T is based in London, England, and Brown & Williamson is based in Louisville, Kentucky.
Prior approval of the divestitures is required under an April 1995 consent order signed by B.A.T and Brown & Williamson. The order settled FTC charges that B.A.T’s acquisition of American Tobacco Company would violate antitrust laws by substantially reducing competition in the U.S. cigarette industry, potentially giving B.A.T and other firms remaining in the market greater ability to collude. The order requires B.A.T to divest to a single purchaser within 12 months the six discount cigarette brands named above (formerly owned by American Tobacco), as well as three American Tobacco full-revenue brands (Tareyton, Silva Thins and Tall), and the American Tobacco manufacturing facility in Reidsville, North Carolina. Under the order, the FTC may permit the acquirer to purchase only the six discount brands and the plant, if it determines that such divestitures remedy the alleged law violations.
If the required divestitures are not completed in a timely manner, the settlement permits the Commission to appoint a trustee who would divest the six American Tobacco discount brands, the Reidsville facility, and Brown & Williamson’s Belair full-revenue brand.
B.A.T previously applied to divest the assets to Lorillard Tobacco Company. That application was rejected by the Commission on April 10, 1996.
B.A.T and Brown and Williamson state in the application that the Commission requirement that the divestiture must result in a viable competitor and restore the necessary degree of competition into the market would be met by the sale to Commonwealth. According to B.A.T, Commonwealth is not one of the five large established cigarette manufacturers in the U.S. The proposed sale to Commonwealth, the application states, will address the concerns expressed by the Commission in its rejection of the Lorillard application, will satisfy the requirements of the Order and remedy the lessening of competition resulting from the Acquisition alleged in the Commission’s complaint.
Unlike Lorillard, the application said, Commonwealth will have a great incentive to compete agressively in the “value” segment of the cigarette market. In addition, it said divestiture of the Reidsville plant, which was not included in the Lorillard application, would remove the excess capacity of the Reidsville from the control of B.A.T.
Comments on the application should be addressed to the FTC, Office of the Secretary, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
Copies of the application and the consent order are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site: http://www.ftc.gov
(FTC Docket No. 9271)