FTC Rejects Tobacco Firm Sale of 6 Brands

The Federal Trade Commission has rejected Brown & Williamson Tobacco Corp.’s proposed sale of six discount cigarette brands on the grounds that it would not improve competition.

The agency said Wednesday that the proposed buyer, Lorillard Inc., would not compete aggressively in the discount cigarette market and such a sale probably would lead to the closure of a cigarette plant in Reidsville, N.C.

BAT Industries, the parent of Louisville, Ky.-based Brown & Williamson, has to find a new buyer and obtain FTC clearance before the sale can be completed, the agency said in a statement.

The six brands are Montclair, Malibu, Bull Durham, Riviera, Crowns and Special Tens.

Brown & Williamson, the third-largest U.S. cigarette maker, acquired the discount cigarette brands and the North Carolina plant, along with premier brands such as Lucky Strike and Carlton, when it purchased American Tobacco Co. in late 1994.

The FTC challenged Lorillard’s proposed purchase as a violation of antitrust laws. Under a 1995 consent agreement, Brown & Williamson was required to sell the discount brands and factory to restore competition in the discount cigarette market lost in the American Tobacco merger.

The FTC staff said Lorillard devotes most of its resources to menthol and premium brand cigarettes such as Newport and Kent.

“The concern at the time that BAT bought American was that we were eliminating a real aggressive marketer of discount brands,” said William Baer, director of the FTC’s bureau of competition. “Our goal was to find someone just as aggressive as American. Lorillard didn’t give us that comfort.”

The decision puts the federal agency in the odd position of promoting aggressive price competition in an industry that has been under attack from state prosecutors and civil litigants over the health hazards of cigarettes. The Food and Drug Administration has proposed that it regulate cigarettes and smokeless tobacco as delivery devices for nicotine, which already is regulated when sold in drug form.

“That irony was not lost on anyone around here,” Baer said. “But our job, for any product that’s sold lawfully in the United States, is to ensure that consumers get the best prices. We intend to do that vigorously.”

Lorillard, the No. 4 tobacco firm, is a subsidiary of Loews Corp., which held a controlling interest in CBS Inc. until the network’s recent acquisition by Westinghouse Corp.

In November, citing legal concerns, CBS’ “60 Minutes” pulled a scheduled interview with Jeffrey Wigand, a former B&W; executive and whistle-blower. Some critics claimed that the interview was canceled to avoid upsetting Lorillard’s plan to purchase the six cigarette brands--a charge CBS executives have denied. “60 Minutes” eventually aired the Wigand interview in February.

Lorillard, based in New York, didn’t immediately return a telephone call seeking comment on the FTC decision.

Brown & Williamson spokesman Joe Helewicz said: “We now move on and try to find a buyer that would satisfy the FTC.”