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US: Antitrust motives clash in cigarette merger review

By  |  October 30, 2014

Cigarette manufacturer Reynolds American announced earlier this year that it planned to acquire smaller rival Lorillard. But according to reports, an antitrust review of the deal could clash with political policy.

Antitrust authorities reviewing a deal must ensure that a merger will not lead to higher prices for consumers. But as reports note, recent public policy is looking to deliberately increase the price of cigarettes to discourage smoking.

A combination of Reynolds and Lorillard would result in a company with a market share of about 40 percent; the new firm would rival current top cigarette competitor, Altria, which holds 49 percent of the industry.

Antitrust expert Herbert Hovenkamp says that two companies holding 90 percent of the industry is “clearly up in the problem area” in this case.

The Federal Trade Commission will be reviewing the transaction, which was reportedly inked for $27.4 billion.

Full content: Reuters

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