Tobacco regulations unfolding in Philip Morris’ favor

As President Obama and a credulous media continue to portray the administration’s economy-wide push for more regulation as a frontal attack on industry giants, the current wrangling over tobacco regulation shows how the opposite is true: Heightened government regulation tends to put big business in the driver’s seat, at the expense of the little guys.

When Obama last June signed the Family Smoking Prevention and Tobacco Control Act, he declared, “Today, despite decades of lobbying and advertising by the tobacco industry, we’ve passed a law to help protect the next generation of Americans.”

Sen. Ted Kennedy, D-Mass., cheered that Washington “has finally said ‘no’ to Big Tobacco.” Sen. Tom Harkin, D-Iowa, declared, “This bill is about standing up to the power of Big Tobacco.”

Meanwhile, the biggest tobacco company — controlling half the U.S. cigarette market with most of the industry’s lobbyists — applauded the bill. “Philip Morris USA Supports Federal Regulation of Tobacco,” the company’s home page blared. Most of the media ignored this detail that derailed their regulators-vs.-big business narrative.

The law hasn’t been implemented yet, but as the Food and Drug Administration develops regulations, we already see how Philip Morris benefits while the small guys suffer — and why big government tends to favor the biggest businesses.

For instance, Altria, Philip Morris’ parent company, has retained K Street lawyer/lobbyist Coleen Klasmeier to work with the FDA on the proposed rules. Klasmeier, who heads the FDA regulatory practice at the K Street firm Sidley Austin, worked in the FDA until 2005. She gave the maximum contribution to Obama in 2008 plus $1,000 to the Obama Victory Fund.

Her letters reinforce that Philip Morris “actively supported the passage of the FSPTCA for more than eight years,” and try to mold the law to the company’s advantage.

But filings by Philip Morris’ smaller competitors are different. Smokin Joes, an Indian tribe-owned cigarette maker, worries to the FDA about the proposed ban on free samples, asking whether “manufacturers cannot give free samples of their cigarettes to wholesalers so the wholesalers can determine if it is a brand they are interested in carrying?”

But filings by Philip Morris’ smaller competitors are different. Smokin Joes, an Indian tribe-owned cigarette maker, worries to the FDA about the proposed ban on free samples, asking whether “manufacturers cannot give free samples of their cigarettes to wholesalers so the wholesalers can determine if it is a brand they are interested in carrying?”

If you’re not vitasmoke Philip Morris, you need to hustle for distribution. Constraining publicity cements Philip Morris’ market share.

But Smokin Joes doesn’t have a K Street firm doing its bidding. Company attorney Karen Delaney submits these queries.

Unlike Klasmeier, Delaney hasn’t been through the revolving door, doesn’t work on K Street and doesn’t grease politicians’ palms. That sort of help is probably outside of Smokin Joes’ budget.

The National Association of Tobacco Outlets represents retailers and wholesalers. President Andrew Kerstein wrote to the FDA in September, “Most of our retail members are small business owners who do not have the wherewithal to hire counsel to help interpret letters issued by the FDA.”

Regarding a proposed ban on flavored cigarettes, Kerstein wrote, “The very first enforcement action by the FDA is a letter which creates confusion over which products are banned. It requires us to somehow interpret the letter correctly or, as the letter so clearly warns, possibly face confiscation of inventory, monetary fines and criminal prosecution.”

Aside from the cost of actually complying with new regulations (testing one’s products, and profits lost from not advertising and not selling some products), figuring out how to comply is expensive. Philip Morris has already invested in that: Altria spent $12.8 million on lobbying in 2009, retaining 19 different firms, including well-connected Republicans and Democrats such as FDA alumna Klasmeier.

Think about this pitched battlefield when Obama paints his regulatory pushes as broadsides to Wall Street or the health care sector. Regulation favors those who can play the K Street game.
By: Timothy P. Carney, Washingtonexaminer
February 5, 2010

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