Tax Increases Spurs Profiteering by Philip Morris and Other Big Tobacco Companies

Philip Morris USA, a unit of Altria Group, Inc., announced in early March that it would raise tobacco prices yet again. Philip Morris claimed that the price increase was necessary to address floor stock taxes brought about by the Federal Excise Tax (State Children’s Health Insurance Program - SCHIP) legislation passed in February 2009. In fact, Philip Morris’s price rise was three weeks ahead of the SCHIP tax increase. “This is just big companies using their market power to drive up their profits at the expense of adult consumers,” said Kevin Altman, a representative of the Council of Independent Tobacco Manufacturers of America (CITMA).

This pricing pattern is consistent with the behavior of the major tobacco companies related to the cigarette Master Settlement Agreement. After that Agreement was signed in 1999 by the states and the major companies, in lock step, those companies raised prices to new highs. Profits at the major companies increased substantially and reached record levels, and all at the expense of consumers.

This most recent excessive price hike has provided substantial profits to Philip Morris at the expense of consumers. “By adding an extra $6.17 under the pretense it was wholly related to the increased tax to support health care, Philip Morris and the other large tobacco companies, continue to undermine the confidence of adult consumers. This latest hike only helps promote a negative perception of the big companies leveraging the market dominance that was created for them as a result of the cigarette Master Settlement Agreement (MSA),” stated Altman.

Altman further noted that, “like consumers, the small independent tobacco companies who sit outside of the MSA are also punished for trying to sell cigarettes at reasonable prices to their customers, as these massive companies, in concert with the State Attorneys’ General, try to put force new fees and taxes on them ,or even try to regulate small private manufacturers out of business. It is time for consumers to stand up and say ‘NO TO BIG TOBACCO,’ and protest these new highs in cigarette prices and fight for the rights of small companies. Consumers need to let their state and federal representatives know that they are tired of some officials representing Big Tobacco and not their constituents,” added Altman.

Background: The Council of Independent Tobacco Manufacturers of America (CITMA) is a trade association representing the interests of the small independent domestic and foreign tobacco companies who are not parties to the Tobacco Master Settlement Agreement, but who are compliant with the state escrow statutes. CITMA believes in the operation of the free market, and promotes the concept of fair and equal tobacco tax policies as an alternative to the discriminatory payments enforced on small manufacturers as a result of the MSA and other state tobacco settlements.

SOURCE Council of Independent Tobacco Manufacturers of America

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