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Legislation requiring loose packs of cigarettes be displayed only behind store counters and ending self-service displays has passed the New York Legislature and is awaiting action by Gov. George Pataki.
While sponsors say the measure is meant to further reduce smoking by young people, one major cigarette maker claims it's really part of an attempt by New York-based Philip Morris Cos. Inc., the nation's largest cigarette company, to extend its market domination.
"This has nothing to do with preventing youth from access to cigarettes. Whether they are behind the counter or not is not going to increase or decrease youth smoking," said Mark Smith, a spokesman for Brown & Williamson Tobacco Corp., the nation's third-largest cigarette maker. "This is an attempt to help Philip Morris maintain its stranglehold on retail shelf space."
Philip Morris spokesman Brendan McCormick shot back, "We didn't take a position on the bill ... This is not legislation we were advocating."
At issue, according to the report, is Philip Morris's success in sewing up favorable display space through its Retail Leaders incentive programs. While most tobacco companies have such programs, competitors say Philip Morris has used its market dominance and the incentive program to effectively relegate competitors to second-rate space.
A federal antitrust lawsuit has been filed in North Carolina against Philip Morris's incentive program by other tobacco companies, the report said. That lawsuit is still pending.
According to Brown & Williamson officials and lobbyists, the New York legislation would further reduce the display space available in stores and thus make Philip Morris's attempts to dominate such space even more effective.
In fact, over the past year, Philip Morris began offering retailers bigger financial incentives to display cigarettes only behind the counter as part of what McCormick says is an effort to promote marketing "in a responsible way to help keep tobacco out of the hands of kids."
The move to behind-the-counter display has also been prompted by growing concerns about theft.
Sponsors of the New York legislation said the bill was worked out in consultation with anti-smoking advocates and convenience store owners. They expressed little concern over Brown & Williamson's complaints.
Brown & Williamson lobbyists maintain, however, that they don't have a level playing field in the marketplace and that in reality most retailers must play ball with Philip Morris. If they don't, the store down the road could wind up selling Marlboros, which account for almost 40 percent of cigarette sales in America, at cheaper prices due to more favorable financial incentives, the report said.
Asked if the legislation would make things tougher for competitors, Philip Morris's McCormick told Reuters, "That would be a question you would have to ask them. From our standpoint, there continues to be competition."
Facing an uphill battle to derail the behind-the-counter legislation, Brown & Williamson has managed to gain influential backing, in the form of state Assembly Ways and Means Committee Chairman Herman Farrell Jr., for a measure that would outlaw direct or indirect payments to retailers for favorable display space. The measure would take effect, if approved, on the same date as the behind-the-counter legislation, the report said.