[Intl-tobacco] Tobacco giants 'discussed pricing' (fwd)

[Robert Weissman]

Tobacco giants 'discussed pricing'

by John Willman in London and Andrew Edgecliffe-Johnson / in New York 
LATIN AMERICA;
Source: Financial Times, Tuesday, 2/15/00

 Two of the largest tobacco companies met to discuss prices and
market-sharing arrangements in Latin America, according to a file note of
one of the meetings obtained by the Financial Times.

 The note covers a meeting between Philip Morris, the world's largest
cigarette manufacturer, and British American Tobacco, now number two, at a
hotel outside London in August 1992. Those present at the meeting included
Keith Dunt, then head of BAT's Latin American operation but now the
group's finance director.

 Items on the agenda included prices in Guatemala, Costa Rica, El Salvador
and Venezuela. The file note, drawn up by BAT, also refers to agreements
between the two companies on pricing and market share and policies to
avoid "destabilisation" of one market. The minutes referred to "good
co-operation between both companies" and ended with a proposal for another
meeting in November "possibly in a Caribbean venue".

 The six-page document, marked "secret", is one of more than 8m pages on
public display in Guildford in the UK following a US tobacco litigation
settlement in 1998. It has come to light a week after a class action was
launched against five tobacco companies alleging price-fixing in the US
for at least 17 years.

 On Monday the company said the file note first emerged during litigation
in Washington state in the US. "The issues were looked at at the time and
the review indicated we didn't have a problem." A subsequent investigation
by Venezuela had exonerated the company, BAT added. Philip Morris said it
could not comment.

 The file note says Philip Morris complained that BAT's Guatemalan
subsidiary had lowered the price of Lucky Strike cigarettes in a
supermarket chain to below that of Marlboro. BAT undertook to investigate
this and subsequently noted it was a short-term promotion run for three
weeks to clear stock. It added that this followed a precedent set by
Philip Morris with Marlboro.

 The note says Philip Morris also complained about promotions in Costa
Rica, leading BAT to say it needed to recover market share and "resolve
price gaps that had been eroded (albeit with agreement) over the last few
years". The note says BAT promised to consider a "share agreement". One
industry executive said if any discussions had taken place, they thought
they were within the law. "We find examples of governments encouraging us
to come together to discuss issues such as pricing," he added.

 The file notes' appearance follows allegations that BAT, the UK's biggest
tobacco company, was involved in cigarette smuggling in Latin America and
Asia. These were based on other documents in the Guildford depositary
which appeared to show the company supplied wholesalers and distributors
with cigarettes that found their way into the hands of smugglers.

 At the time, BAT refused to comment on the allegations and said they were
based on "highly selective and out-of-context extracts from old
documents".