Tobacco industry moves toward federal oversight
JOE MAHONEY/TIMES-DISPATCH
Retail displays would be among the elements of the tobacco business that would come under expected Food and Drug Administration regulations.
Published: June 12, 2009
Updated: June 12, 2009
The tobacco industry, a force in Virginia's economy and culture for 400 years, is headed toward potentially sweeping changes under legislation approved by the U.S. Senate yesterday.
In a step hailed as historic by public health groups, the Senate voted 79-17 to give the U.S. Food and Drug Administration authority to regulate the content and advertising of cigarettes and other tobacco products.
The legislation now goes back to the House, which in April passed a similar but not identical bill. House Speaker Nancy Pelosi said that "from what I have seen so far, I believe it will be possible for us to accept [the Senate] bill and send it right on to the president."
President Barack Obama said he was eager to sign the legislation after minor differences with the House version are resolved.
The legislation would, for the first time, give the FDA power to require changes in how tobacco companies make and market their products, including imposing a ban on terms such as "light" or "mild" to describe cigarettes.
It also would place more restrictions on marketing, such as limiting tobacco displays at retail stores to black-and-white text. The FDA could set product standards, evaluate tobacco products and ban dangerous ingredients, but it could not ban nicotine, the addictive substance in tobacco.
Tobacco companies would have to get FDA approval for new products. Flavorings deemed attractive to children would be banned, but menthol cigarettes would not.
"The power given to the FDA will contribute very significantly to the overall effort to reduce the number of Americans who die from tobacco use," said Matthew L. Myers, president of the Campaign For Tobacco-Free Kids.
"Forty-five years after the first surgeon general's report on tobacco, over 400,000 American still die from tobacco use every year. This bill can help cut that number dramatically."
Many details of the FDA's implementation of the new regulations still are to be determined, setting up a potential ongoing battle between supporters and opponents of tougher restrictions on the industry.
"The devil is going to be in the details," said Gerry Roerty, vice president and general counsel at Swedish Match North America, a Chesterfield County-based maker of smokeless tobacco and cigars.
Roerty said the company was "comforted" that the FDA legislation, while cracking down further on some advertising, still leaves room for the company to market its products by providing samples to adults at venues where minors are not allowed.
Other issues, such as setting product-manufacturing standards, could be more tricky.
"If [the FDA] takes a sensible approach and sticks to the language that is in the bill that says they must adopt technologically feasible standards, then that is something we will be able to work with," he said.
Congress has debated proposals to regulate tobacco for more than a decade. The U.S. Supreme Court ruled in 2000 that only Congress could grant the agency that power, after the FDA attempted to assert authority over the industry.
Soon after the ruling, the nation's largest tobacco company, Henrico County-based Philip Morris USA, came out in favor of federal oversight of the industry.
Philip Morris' parent company, Altria Group Inc., said yesterday that the legislation is, on balance, "an important step forward to achieve the goal we share with others to provide federal regulation of tobacco products."
However, the company said the bill "is not perfect" and that it had First Amendment concerns about some of the restrictions. The company declined further comment.
Critics have charged that the legislation mostly would benefit Altria, solidifying the company's dominant U.S. market share by restricting advertising and imposing new regulatory burdens that smaller competitors might struggle to meet.
Altria's two largest competitors, Reynolds American Inc. and Lorillard Tobacco Co., opposed the legislation.
Maura Payne, a spokeswoman for Reynolds American, said yesterday that many details still must be worked out through the FDA's rule-making process.
"It is our intention to be part of the rule-making process, and certainly upon completion of that process to fully comply and successfully compete for the business of adults who choose to use tobacco," Payne said.
Opponents, led by Republican Sen. Richard M. Burr of the leading tobacco-growing state of North Carolina, argued that the FDA, which is in charge of ensuring the safety of food and drug products, was the wrong place to regulate an item that is injurious to health.
Burr unsuccessfully proposed the creation of an agency that would regulate tobacco products and encourage efforts to make cigarettes less harmful.
Contact John Reid Blackwell at (804) 775-8123 or
.
The Associated Press contributed to this report.
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Reader Reactions
Whitty1 :
Again you seem to be confusing the industry with PM. They have 50% of market, it doesn’t matter if that is only 1/2 the actual sales of 15 years ago, it still is 50% of the market which is a market share most companies would kill for. Is it a bad industry right now? Maybe, but they are still leading the pack.
As for your comment about Marlboro, frankly it’s ridiculous. So what if Marlboro is their cash cow? If you took Newport out of the equation for Lorillar they probably wouldn’t exist. To use another industry as an example, if you took windows away from Microsoft the company would be irrelevant.
As for the master settlement. Backing the settlement saved them billions by preventing future lawsuits.
It may be a bad industry, or at least an industry that you may not want to invest in, but PM is a well run company, and has been recognized as such for a long time.
I should also point out that revenues have been up for them.
That depends how you define “leader”? Being the biggest doesn’t make them the best? They have built their success on ONE brand, Marlboro. Take that away and what are they? PM has grown to where they are by growing and taking market share with one brand, just like Lorillard is today.
Oh PM pushed the master settlement which increases their costs every year (which marked the beginning of PM’s sales slide), they pushed banded paper which consumers don’t like ( the attitude is it doesn’t matter what they want, it is what they are going to get ) and now it is the FDA bill. I don’t believe in more government regulation in any industry. But I guess PM is afraid of competition? Never mind that they raised prices 3 times this year just to boost profits, let the long term volume be darned.
So they lock in their market share and stomp out the competition? Did you not hear the stated goal of Chris Dodd saying that “one smoker was one too many”? So we will see where this leads 10 years from now? They may lock in their 50% market share, but 50% of 1/2 the sales is what?
The people leading the company today are NOT the same ones that made PM was it is. But management is so arrogant that they can’t see the folly of their ways, but at least, they are politically correct. I don’t know anything the government runs efficiently, but PM wants to run their business like the government, and by the government. So eventually, they will be as profitable as the government. Short term gain at the expense of the long term health. It is the new corporate American way?
Whitty1 maybe you can explain how PM created the market conditions. They are still the industry leader with no one else even close, including Lorillard
Lorillard is increasing market share but only because they make a very specific porduct, Newport, a menthol cigarette. Menthol is the only growth market in cigarettes today. The new FDA regulations could very well hinder the menthol market which ulitmately would help PM
Market conditions that they helped create. Since you mention Lorillard, have you also noticed that they are gaining sales and market share and outperforming the industry?
Industry as a whole has been steadily declining at a rate between 2 and 3% for the past several years. Your argument doesn’t hold water because you are not including numbers from RJR, Lorillard, and other tobacco companies. Their numbers have gone down as well. It seems your argument centers around tobacco being a bad industry to get into rather than the actions of Philip Morris.
whitty1: Every tobacco company in the U.S. is losing volume on cigarettes because there are fewer people smoking. P.M. loss in volume isn’t indicative of any internal corporate problems but more indicative of the market as a whole. In light of the realities of the tobacco market, I don’t understand your argument. The legislation would have been passed with or without P.M’s blessing, but they still stand to be the biggest beneficiary of FDA regulation because said regulation will hinder their competition more than it will hinder P.M.
I may add that in 1996, PM USA produced 400 billion sticks in the USA and this year, they will struggle to produce 180 billion. Loosing 1/2 your sales in a little over 10 years is not a picture of health.
So downhill that they are loosing volume every year. Smokeless products will never replace cigarettes for profits. By the end of July, they will have shut down 2 factories in the last 10 years. They are highly profitable right now, but any thinking person can see that eventually, they will not be able to constantly increase profits on less and less volume. Not to mention the constant raising of taxes and smoking bans. The FDA bill will add to their costs too. Philip Morris is sinking and management keeps drilling holes in the bottom of the hull of the ship to let the water out.
Whitty1: So downhill that they still control 50% of the market? So downhill that they had the foresight to diversify into smokeless tobacco and cigars, the only growing segments of the tobacco industry? These do not sound like the warning sirens of a company running headlong into bankruptcy.
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