Commenting in Forbes on the recently announced proposed takeover of Lorillard by Reynolds American, Daniel Fisher said the deal would join the No.2 and No.3 US tobacco companies under the control of British American Tobacco, which would own 42 per cent of the combined company shorn by Imperial Tobacco of a number of brands and Lorillard’s distribution network.
‘In any other industry,’ he said ‘this concentration of market power would send Justice Department economists scurrying for their calculators to tot up the resulting Hirfendahl-Hirschman Index. ‘But tobacco is no ordinary industry. It’s already a virtual cartel, by design, thanks to the Master Settlement Agreement that the state attorneys general negotiated in 1998…’
Fisher went on to say that the stated premise behind the tobacco settlement, as well as Food and Drug Administration regulation of cigarettes, was to restrict the marketing and sale of cigarettes because they are deadly.
‘The reality is they are also one of the world’s most reliable sources of tax revenue, and tax authorities love the predictability of cartels,’ he said. ‘As the dominant companies’ continuing fight over how the settlement is enforced against new entrants shows, there is no incentive to let the unruly forces of market capitalism intrude into this industry.’
Fisher’s piece (which is well worth taking the trouble to check out) is at http://www.forbes.com/sites/danielfisher/2014/07/15/reynolds-lorillard-merger-will-create-just-the-kind-of-monster-tax-authorities-love/