[Intl-tobacco] EU drops objections to Spanish tobacco licence deal (fwd)

[Robert Weissman]

EU drops objections to Spanish tobacco licence deal
Source: Reuters, Friday, 2/23/01

BRUSSELS, Feb 23 (Reuters) - The European Commission said on Friday it had
dropped its objections to a cigarette licensing agreement between Philip
Morris and Spanish tobacco firm Tabacalera after the companies changed the
pact.

U.S. tobacco giant Philip Morris agreed with Tabacalera in 1999 to produce
and sell its Marlboro and L&M cigarettes in Spain. Tabacalera subsequently
merged with Seita of France to form Altadis .

The companies notified the agreement to the Commission for regulatory
clearance.

The Commission, the European Union's antitrust watchdog, formally objected
to the agreement in June 2000 on the grounds it gave Tabacalera exclusive
or partial rights to produce Marlboro and L&M cigarettes in Spain.

The Commission said the agreement prevented Philip Morris from making the
cigarettes outside Spain and shipping them onto the Spanish market,
something the Commission believed Philip Morris could profitably do.

The Commission was also concerned about the companies' combined 75 percent
share of the Spanish tobacco market.

In response to the Commission's objections, Philip Morris and Tabacalera
offered to shorten the licensing agreement by one year, so that it now
ends in 2004 for Marlboro and 2003 for L&M.

The production volumes authorised under the agreement will be reduced each
year and the licensing agreements will eventually be phased out,
satisfying the Commission.