Re: Deja vu all over again?

["Michael R. Ward" <ward1@ux6.cso.uiuc.edu>]

  BTW, I was told that the proposed tobacco deal provides an explicit
  exemption from antitrust laws and erects entry barriers (entrants not part
  of the deal would pay a new tax).  Also, proposed restrictions to marketing
  and R&D would make market shares more stable, and collusion more profitable.
  Public health advocates do not mind because higher prices and marketing
  restrictions should reduce smoking.  However, this means more parties might
  seek to amend the deal.  Antitrust authorities do not like to see their turf
  shrink and potential foreign entrants could possibly lodge a complaint with
  the WTO.
  
  One could easily argue that, while the deal would decrease smoking, it would
  also increase the industry's profits.  (Didn't the stock market say so when
  the deal was announced?)  I doubt many politicians (outside of NC and VA)
  would like to be accused of putting more money in the pockets of the tobacco
  interests.
  
  Just my $0.02, Mike Ward
  
  At 10:45 PM 9/11/97 -0400, Bob Lande wrote:
  >Could the cigarette makers be explicitly conspiring to raise prices to pay
  >for the announced and possible settlements? 
  >
  >Bob Lande
  >
  >On Wed, 3 Sep 1997 BOWENJ@acad.ripon.edu wrote:
  >
  >>      In 1946, the Supreme Court, in a ruling hailed by some as
  >> proclaiming a "new" Sherman Act, used the doctrine of "conscious
  >> parallelism" to find that the then Big Three cigarette companies
  >> had violated antitrust law.  Though there was no direct evidence
  >> of conspiracy to fix prices, the Court found the use of price
  >> leadership to drive low-cost brands from the market persuasive. 
  >> The leader, Reynolds, had lowered its price; American and Liggett
  >> & Myers had followed.  Smaller firms lost most of their market,
  >> and Reynolds, again immediately followed by the other two, then
  >> put the price back up.
  >>      Today's newspaper reports the second cigarette price
  >> increase of the year, announced by Phillip Morris and matched by
  >> Reynolds and Brown & Williamson.  This increase follows, and
  >> accelerates, the industry price hikes that have occurred since
  >> the major firms slashed prices in 1993, a measure taken to limit
  >> the market inroads then being made by cheaper discount brands.
  >>      The similarities here seem evident enough.  But we would, I
  >> think, be quite surprised were the Antitrust Division to question
  >> the price behavior of the 1990's.  
  >>      What accounts for the change?
  >> 
  >
  >
  >
  ----------------------------------------------------------------
  Michael R. Ward                                   (217) 244-5667
  Dept. of Ag. and Consumer Econ.                   ward1@uiuc.edu
  University of Illinois          http://www.uiuc.edu/ph/www/ward1