FTC Approves B.A.T Proposal To Divest Cigarette Brands and Certain Assets to Commonwealth

The Federal Trade Commission has approved B.A.T Industries' application to divest six discount cigarette brands and certain related assets, including a manufacturing plant, to Commonwealth Tobacco, LLC, a subsidiary of Commonwealth Brands, Inc. The brands to be divested are: Montclair, Riviera, Malibu, Bull Durham, Crowns and Special Tens. Commonwealth plans to purchase and operate the manufacturing facility located in Reidsville, North Carolina. Commonwealth, a relatively new entrant into the discount segment of the cigarette industry, is headquartered in Bowling Green, Kentucky.

B.A.T, the parent company of Brown & Williamson Tobacco Corporation, is required to divest the discount cigarette brands, as well as the Reidsville plant, under an April 1995 FTC consent order. Brown & Williamson acquired the brands and the plant in its acquisition of American Tobacco Company. The FTC challenged that acquisition, charging that it violated federal antitrust laws by substantially reducing competition in the U.S. cigarette industry, potentially giving B.A.T and other firms remaining in the market greater ability to collude. The FTC negotiated the 1995 consent order to resolve these allegations, and the divestiture requirement included in that settlement is intended to restore competition lost in the merger.

B.A.T previously applied to divest the assets to Lorillard Tobacco Company. That application was rejected by the Commission on April 10, 1996, because the Commission was concerned that Lorillard would not compete aggressively in the discount cigarette market and that the divestiture that did not include the Reidsville plant would leave that plant's manufacturing capacity in the control of B.A.T -- one of the major producers in the market.

Because the Commission has determined that divestiture to Commonwealth will accomplish the order's purposes by transferring the assets to a firm with the incentive and ability to compete in the discount segment of the market, thereby restoring competition lost at the time of B.A.T's acquisition of American Tobacco Company, it has voted to approve B.A.T's divestiture to Commonwealth.

B.A.T's application to the Commission for approval to divest the assets to Commonwealth was filed on July 25, 1996. The FTC sought public comments on the application for 30 days.

The Commission vote to approve the application was 5-0.

Copies of the application, the Commission's letters and the consent order are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases, relevant documents, and other materials also are available on the Internet at the FTC' World Wide Web site: https://www.ftc.gov

(FTC Docket No. 9271)