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WINSTON-SALEM, N.C. -- As lawmakers in Washington negotiate a buyout of a federal tobacco program, Winston-Salem's R.J. Reynolds is lobbying hard to make sure it doesn't get stuck with some of the bill, reported the North Carolina-based NewsObserver.com.
At issue is legislation that the Senate passed last month requiring tobacco companies such as RJR to pay for the buyout, which would cost $12 billion during the next 10 years. The legislation also would give the U.S. Food and Drug Administration authority to regulate tobacco products.
RJR supports a tobacco buyout, but opposes the Senate version, putting the company at odds with the nation's biggest cigarette maker, Philip Morris of Richmond, Va.
Spokesman John Singleton said RJR would raise cigarette prices if forced to pay for the buyout. RJR, which makes Camel and Winston cigarettes, supports legislation passed by the House in June that would use tax dollars to pay tobacco growers and landowners $9.6 billion over five years.
"We only have one way of paying for any costs, and that's by sales of our cigarettes," Singleton said. "And the only way we could cover that is to increase prices, of course."
Philip Morris, which captures half of the U.S. cigarette market with Marlboro and other brands, has agreed to pay for the buyout, as long as FDA regulation is included. "We think FDA regulation of tobacco products will be very good for consumers. At the same time, it will be very good for the legitimate segment of the tobacco industry, meaning not the counterfeiters, not the smugglers," said Mark Berlind, legislative counsel for Altria Group, the parent company of Philip Morris.
But Singleton said FDA regulation would prevent RJR from increasing its market share by imposing strict marketing and advertising guidelines. Singleton said these guidelines "go far beyond any legitimate restrictions necessary to prevent underage access."
Last year, RJR eliminated 2,600 jobs, blaming increased competition from discount cigarette brands, rising state excise taxes, multibillion-dollar lawsuits and a decline in smoking. The company posted a $3.45 billion loss last year after a $44 million loss in 2002.