Leaf Tobacco Is Focus of Justice Dept. Probe

The Justice Department is conducting a preliminary investigation into possible antitrust violations in the leaf tobacco industry, a government spokesman said Friday.

Government lawyers are “looking into possible anti-competitive practices involving leaf tobacco,” said Justice Department spokesman Bill Brooks.

In a separate development, the owner of Liggett Group said that the smallest of the major tobacco companies has agreed not to market cigarettes to children and pledged it would not oppose government regulations on tobacco products.

Bennett LeBow, whose Brooke Group Ltd. owns Liggett, which broke ranks with other tobacco companies to settle anti-smoking lawsuits last spring, said his company was complying with a request by Rep. Henry Waxman (D-Los Angeles) to sign a “pledge to parents” not to market cigarettes to children.

“I am proud to offer Liggett’s support to the campaign to eliminate underage smoking,” LeBow said in a statement.

Liggett stunned other tobacco companies last March by agreeing to settle anti-smoking lawsuits brought by state officials. In the settlement, Liggett agreed to pay states 25% of its pretax profit for 25 years. In return, it got immunity from future lawsuits.

Other major cigarette makers, including Philip Morris Cos., the largest cigarette maker, RJR Nabisco Holdings Corp. and BAT Industries, reached a proposed $368.5-billion settlement with state officials last June that would offer protection from future class-action suits.

Wall Street showed little reaction to LeBow’s statement. Tobacco stocks were mixed Friday.

The government probe doesn’t target U.S. cigarette makers, though that could still happen, according to a person familiar with the case. The Wall Street Journal, in an article Friday, said the major cigarette makers were targets of the probe.

The Justice Department won’t say whether the probe is civil or criminal in nature. A preliminary inquiry means that an investigation is in its early stages and that no grand jury has been convened.

Any antitrust probe of leaf tobacco could involve the three companies that dominate the industry--Universal Corp., Dimon Inc. and Standard Commercial Corp.

Those companies buy leaf tobacco from farmers, process it and store it before selling it to cigarette companies. Leaf dealers generally work closely with cigarette makers, often reaching an agreement with a cigarette manufacturer before buying tobacco from a farmer.

A spokesman for Danville, Va.-based Dimon declined to comment on the probe. Representatives for Richmond, Va.-based Universal and Wilson, N.C.-based Standard Commercial weren’t available.