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The Federal Trade Commission won its federal district court challenge of the proposed acquisition of the loose leaf chewing tobacco business of National Tobacco Company, L.P., by Swedish Match North America Inc., a wholly owned subsidiary of Swedish Match A.B. In a 42-page opinion issued on December 14, 2000, Judge Thomas F. Hogan of the U.S. District Court for the District of Columbia granted the FTC's motion for a preliminary injunction against the proposed acquisition.

Swedish Match, which sells under the "Red Man" and other brands, and National Tobacco, which sells under the "Beech Nut" and other brands, are today the first and third largest sellers of loose leaf chewing tobacco in the U.S. The companies contested the FTC's claim that loose leaf chewing tobacco and moist snuff constitute separate antitrust markets. The court agreed with the FTC, finding that although the products are functionally interchangeable, they do not constrain each other's prices.

As the FTC had argued, the court found that the acquisition would give Swedish Match control of approximately 60% of the loose leaf chewing tobacco market, and that two firms would control approximately 90%. The evidence presented by the defendants failed to rebut the presumption that the merger would adversely affect competition. In particular, the court rejected the argument that declining sales and significant industry excess capacity would keep the post-merger market competitive. The court stated, " . . . the weight of the evidence demonstrates that a unilateral price increase by Swedish Match is likely after the acquisition because it will eliminate one of Swedish Match's primary direct competitors."

The Director of the FTC's Competition Bureau, whose staff litigated the case for the FTC, said he was gratified that the federal court agreed with the FTC's position. "Consumers have won and competition has been preserved," said Richard G. Parker, the Bureau Director. "This decision reflects the court's understanding that the Commission should make the ultimate determination whether an acquisition violates the antitrust laws." Judge Hogan also agreed with the Commission that loose leaf tobacco consumption would not decline significantly if post-merger prices increased, and that therefore there was no public health benefit to allowing the merger.

The federal court decision paves the way for the Commission staff to issue an administrative complaint seeking a permanent injunction against the merger. The FTC has 20 days within which to determine whether to issue the administrative complaint, which would challenge the merger on antitrust grounds and mark the beginning of the administrative trial process.

Copies of the Court's Memorandum Opinion are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the online complaint form. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

Media Contact:

Brenda Mack

Office of Public Affairs

202-326-2182

Staff Contact:

Richard Parker or Richard Liebeskind

Bureau of Competition

202-326-2574 or 202-326-2441

(FTC File No. 001-0120)
(Civil Action No. 00-1501 (TFH)

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