Nader Seeks Probe of Cigarette Price Hikes

Consumer activist Ralph Nader has asked the Justice Department to investigate recent across-the-board price increases by the cigarette industry, contending they appear to “constitute a conscious case of price-fixing.�

Nader made the request in a letter to Joel Klein, assistant attorney general in charge of the antitrust division.

Nader’s letter notes that late on Friday, Aug. 29, Philip Morris, the nation’s leading cigarette manufacturer, announced it was raising its price by 7 cents a pack. Later that weekend, R.J. Reynolds and Brown & Williamson, the second- and third-largest domestic cigarette firms, announced they would raise their prices by the same amount. Soon thereafter, Lorillard and Liggett followed suit.

“In the absence of a common increase in . . . costs or the imposition of an excise tax, it is difficult to imagine an explanation for the near-simultaneous announcement� other than price-fixing, contends the letter, also signed by Robert Weissman, director of Essential Action, a Washington human rights group. Weissman and Nader have been vocal opponents of the proposed $368.5-billion national tobacco settlement.

Their letter notes that the settlement served as a backdrop for the price increases. Industry executives said after the deal was announced that they would raise prices by 62 cents over a period of years to finance settlement payments.

The settlement specifically contains an antitrust exemption that would permit across-the-board price hikes to finance the deal.

Earlier this week, the Federal Trade Commission issued a report sharply criticizing the proposed settlement, saying the antitrust exemption was particularly troublesome.

The provision would permit tobacco companies “to jointly confer, coordinate or act in concert� to reach the settlement’s goals, including the elimination of billboard advertising and vending-machine sales. Company attorneys said industry executives believe they need the exemption to accomplish the goals without violating anti-trust laws.

But FTC Chairman Robert Pitofsky said the clause would permit the tobacco companies to coordinate their behavior and raise prices “far in excess of levels necessary� to cover the annual settlement payments while being able to keep extra profits for themselves.

In response, settlement advocates said they understood the concern about the antitrust issue but stressed that substantial hikes in cigarette prices--however achieved--would serve the salutary purpose of helping to reduce smoking by teenagers. Indeed, last week President Clinton called for a $1.50-per-pack hike in cigarette prices to reduce smoking by minors.

A Justice Department spokeswoman said the agency had received the letter and would review it. A Philip Morris spokeswoman said that as a matter of policy the company would not comment on price increases.

Scott Williams, an industry spokesman in Washington, said that company representatives had spoken to FTC representatives during settlement negotiations and told agency representatives that the deal would contain an anti-trust exemption.