How Big Tobacco will benefit from US anti-smoking laws

The US Congress will soon pass an aggressive bill to bring cigarettes under the control of US health authorities. Perversely, this couldn't be better news for American tobacco firms. Eoin Gleeson investigates, and looks at one tobacco giant set to benefit.

This is a landmark year for US tobacco. After years of being coddled by the Bush administration, Congress will soon pass an aggressive bill that will bring cigarettes under the control of US health authorities. Strict rules on advertising will be introduced and the path will be paved for Congress to raise federal cigarette taxes by 61 cents, to $1 a pack. "I think that 2009 has the potential to be the most historic year in making progress on tobacco since the first surgeon general's report in 1964," Matthew Myers of the Campaign for Tobacco-Free Kids told The New York Times.

Why then has US tobacco giant Altria, maker of Marlboros, given its full support to the bill? Well, because the firm has read the small print. "This legislation might as well be dubbed the Altria Earnings Protection Act," says Fortune magazine. For starters, the bill prevents the US Food and Drug Administration (FDA) from ever banning cigarettes. But just as importantly, the wording makes it extremely unlikely that the FDA will ever approve a new cigarette product because the entrant would have to be deemed "appropriate for the protection of the public health". So the bill basically featherbeds the dominant tobacco groups' share of the market. It even mandates a crackdown on sales of counterfeit cigarettes, which have been a major thorn in the industry's side in recent years.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.