The Federal Trade Commission has given final approval to a consent agreement with B.A.T Industries p.l.c. and its subsidiary, Brown & Williamson Tobacco Corporation. The agreement settles antitrust charges over B.A.T's acquisition of The American Tobacco Company, a subsidiary of American Brands, Inc. The Commission's action makes the consent order provisions binding on the respondents.
B.A.T is based in London, England, and Brown & Williamson is based in Louisville, Kentucky. American Tobacco is based in Stamford, Connecticut, and American Brands is based in Old Greenwich, Connecticut. The consent order ends federal district court and administrative litigation over FTC allegations that B.A.T's acquisition of American Tobacco would substantially reduce competition in the U.S. cigarette industry, potentially giving B.A.T and other firms remaining in the market greater ability to collude.
Under the final order, B.A.T and Brown & Williamson were permitted to go ahead with the acquisition of American Tobacco, but they must divest six American Tobacco discount cigarette brands -- Montclair, Riviera, Malibu, Bull Durham, Crowns and Special Tens. B.A.T and Brown & Williamson also must divest to the purchaser of these brands three American Tobacco full-revenue brands -- Tareyton, Silva Thins and Tall -- as well as the American Tobacco manufacturing facility in Reidsville, North Carolina. The Reidsville facility can be sold only to an entity that will use it to produce cigarettes in the United States principally for domestic sale and consumption.
The divestitures must be completed within 12 months, and B.A.T and Brown & Williamson are required to maintain the viability and marketability of the cigarette brands and the Reidsville facility pending divestiture. The FTC can allow the acquirer to purchase only the American Tobacco
discount brands if the Commission determines that this would remedy the alleged law violations. If the required divestitures are not completed on time, the consent order permits the Commission to appoint a trustee who then would divest the six American Tobacco discount brands, the Reidsville facility, and Brown & Williamson's Belair full-revenue brand.
Another provision in the settlement agreement requires B.A.T and Brown & Williamson, for 10 years, to obtain FTC approval before acquiring -- other than in the ordinary course of business -- any interest in a U.S. cigarette manufacturer or any assets used to manufacture or distribute cigarettes in the United States.
The consent agreement was announced for a public-comment period on Dec. 22, 1994. The Commission vote to issue it in final form occurred on April 19, and was 4-0, with Commissioner Christine A. Varney not participating.
NOTE: A consent agreement is for settlement purposes only and does not constitute admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions by the respondents. Each violation of such an order may result in a civil penalty of up to $10,000.
A news release summarizing the complaint and consent agree- ment was issued at the time the Commission accepted the consent agreement for public comment. Copies of that release, the complaint and final order, and other documents associated with this case, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580
(FTC Docket No. 9271)