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September, 2008

United States
US Legislature gives FDA regulatory abilities
Washington D.C. - At the end of July, the US House of Representatives approved legislation for H.R. 1108, the bill that would give the Food and Drug Administration the ability to regulate the tobacco industry.

The measure, which came down to 326 votes for, and 102 against, would allow the FDA to require the disclosure of tobacco ingredients, ban fruit- and candy-flavored cigarettes, and mandate larger health warnings as well as the reduction and possible elimination of harmful substances from tobacco products.

In a statement released shortly after, the Bush Administration said that because it believes “the bill will unfortunately undermine one of the nations premier public health and regulatory institutions…[it] would mandate significant added responsibilities for the Food and Drug Administration (FDA) that conflict with [the] FDA’s mission of ensuring the safety and effectiveness of drugs, biologics, and medical devices. Significantly, it also would create a new tax that would be paid disproportionately by low-income individuals. Therefore, if H.R. 1108 were presented to the President, his senior advisors would recommend that he veto the bill.”

The statement continued to list other potential shortcomings if the bill were to be passed, such as stretching the FDA’s resources, personnel, and budget too thin in order to create a new infrastructure, saying that the “FDA does not have the expertise needed to investigate cigarette smuggling and perform other functions clearly beyond the scope of the Agency’s mission and expertise…

“In addition, the bill may spend more than it raises in revenues. ...The existing authority already addresses which tobacco products can lawfully appear in the domestic market, and the record keeping requirements and inspection rights pertaining to those involved in tobacco-related transactions.”

While Philip Morris USA supports H.R. 1108, all other members of the tobacco industry are opposed.

Imperial Tobacco Canada, federal government and provinces reach resolution on contraband tobacco investigation
Montreal - Imperial Tobacco Canada has announced that it has reached a resolution with the federal and ten all ten provincial governments of Canada with respect to the investigation regarding the exporting of Imperial Tobacco Canada products into the United States during the 1980s and ’90s.

Imperial Tobacco Canada pleaded guilty to a violation of the Excise Act and has paid fines, and in addition, entered into a 15-year civil agreement, the Comprehensive Agreement.

Benjamin Kemball, President and CEO of Imperial Tobacco Canada, said, “We are pleased to have resolved this issue… Today’s events give our business the stability it needs to move forward to address, with clarity and focus, the issues, opportunities and challenges it faces today and will face in the future.”

The fine that Imperial Tobacco Canada paid was in the amount of $200 mn, and in keeping with the Comprehensive Agreement, must pay to the Canadian government “$50 mn in 2008 and a percentage of Imperial Tobacco Canada’s annual net sales revenue going forward for 15 years up to a maximum of $350 mn,” explained a statement from Imperial Tobacco Canada.

Rothmans, Benson & Hedges Inc. (RBH) entered into a similar agreement, and RBH will work with the government to fight the illegal tobacco market in Canada.

German Tobacco Group with new web presence
Frankfurt - German Tobacco Group AG, Frankfurt has created a new website to communicate the “company philosophy and strategy,” at the domain germantobacco.com.

The company released a statement saying that the website is an “honest, transparent, and educational approach” towards tobacco, and both German and international smokers “and non-smokers.”

Thomas Deng Mahmoud Schumann, the Chairman of German Tobacco, said “The essence of our new homepage is corporate, social, and individual responsibility, freedom of choice, and tolerance which will be also highlighted in the upcoming marketing and public relations campaign.

Schumann added, “German smokers, tobacco retailers, and tobacco companies finance Germany’s wealth with an annual contribution of e14 bn (US$20 bn)…representing the most stable and fourth highest tax income stream for Germany’s finance ministry.”

United States
More tobacco, less smoke
Richmond - Altria, owner of Marlboro, announced that though it will continue to produce cigarettes, more time and energy will be spent focusing on smokeless products such as snus and snuff.

Test markets established last year for Marlboro Snus have been expanded to include Indianapolis, and Chief Executive Michael Szymanczyk said, “We’re making remarkable progress…We’ve learned a lot that will allow us to efficiently develop our products further.”

General Cigar prevails in trademark infringement and counterfeiting suit

Richmond - General Cigar Co. Inc. announced that the District Court for the District of Nevada has granted its motion for “summary judgment, awarding damages and permanently prohibiting the import, marketing, distribution and sale of infringing COHIBA Caribbean’s Finest cigars and rum.”

General Cigar claimed the defendants were liable for “trademark infringement, dilution, counterfeiting, unlawful importation, unfair competition, and cybersquatting,” and General Cigar was awarded compensatory damages in addition to a permanent injunction.

General Cigar will continue to employ a special task force of attorneys and private investigators to assist in further trademark enforcement efforts.

Philip Morris International to Acquire Rothmans Inc.

New York - Philip Morris International (PMI) announced that it has entered into an agreement with Rothmans Inc. to purchase all outstanding common shares of Rothmans at the rate of CAD$30.00 per share, with a total value amounting to CAD$2 bn.

Once this transaction is completed, Rothmans, Benson & Hedges Inc., Canada’s largest tobacco company, will be wholly owned by PMI, who agreed to make a settlement of CAD$550 mn.

“This proposed acquisition is a win-win for both Rothmans and PMI shareholders,” said Louis C. Camilleri, Chairman and CEO of PMI. “Rothmans shareholders will receive a significant cash premium and PMI consolidates its presence in a market that we deem financially attractive and of strategic importance going forward. The transaction is projected to be modestly accretive to PMI’s earnings per share in 2009. We look forward to welcoming the talented management team and employees of RBH into the PMI family and building upon their solid track record of growth.”

Tobacco International - September, 2008

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