[Intl-tobacco] Italy fines Philip Morris, ETI for price fixing

[Robert Weissman]

Reuters
UPDATE - Italy fines Philip Morris, ETI for price fixing
Friday March 28, 10:46 am ET
By Giselda Vagnoni

ROME, March 28 (Reuters) - Italy's antitrust agency said on Friday it
had fined tobacco company Philip Morris International 50 million
euros ($53.5 million) and local cigarette maker Ente Tabacchi Italiano
(ETI) 20 million euros for price fixing.

"The Guarantor Authority for Competition has determined
there was an agreement to restrict
competition...between the two key players in Italy's
tobacco market, Philip Morris and ETI," the watchdog
said in a statement.

It added that between June 1993 and March 2001,
state-owned ETI and five Philip Morris (NYSE:MO -
News) units coordinated price increases that helped
them maintain control of 90 percent of the market and
that at times limited competition.

Philip Morris International, a unit of New York-based
Altria Group Inc. (NYSE:MO - News), said in a statement
it would appeal against the fine.

"The antitrust authority has condemned Philip Morris for
implementing price increases that were required by the
Italian state as part of its fiscal and budget policies,"
said Mark Friedman, a vice president at Philip Morris.

"This decision ignores the reality that the cigarette
market in Italy has been controlled by the Italian state
for many years, principally through the state monopoly."

ETI declined to comment, saying it still had not received
notification of the decision.

Italy's antitrust agency launched an investigation into pricing by
tobacco companies in its domestic market in June, 2001. It
reviewed pricing tendencies between 1993 and 2001.

Other firms investigated were cleared, including British American
Tobacco (London:BATS.L - News), Japan Tobacco (Tokyo:2914.T -
News), Altadis (Madrid:ALT.MC - News), Seita (Paris:SEIT.PA - News) and
Gallaher (London:GLH.L - News).

ETI owns distribution rights in Italy for Philip Morris products
including its Marlboro brand cigarettes.

UPCOMING SALE

The Italian Treasury is in the process of privatising ETI and the sale
is expected to raise about 1.2 billion euros ($1.3 billion).

The head of the antitrust authority later told Reuters the watchdog's
ruling would not effect ETI's sale.

"I really do not think so, I do not think (the fine) will create a
problem... I don't even think it will make it less valuable," antitrust
Chairman Giuseppe Tesauro said.

Earlier this week a Treasury under-secretary said the sale should be
completed by July.

Binding bids are due to be handed in by the end of April.

Five groups have voiced an interest in the group, which produces Toscano
cigars, including a consortium grouping British American
Tobacco and Swedish Match (Stockholm:SWMA.ST - News), Japan Tobacco, and
a consortium led by Spain's Altadis.

The Treasury has said it reserves the right to float ETI on the market
if the offers it receives are unsatisfactory.