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Fitch: FDA Oversight Of Tobacco Helps Bigger Cos.

The Associated Press

NEW YORK (AP) — Rating agency Fitch said Wednesday that pending legislation to give the U.S. Food and Drug Administration authority to regulate tobacco products would help the industry's more-established players.

"Looking further ahead as more-restrictive advertising limits are imposed on all tobacco products, not just cigarettes, the brands with large market share will maintain those shares," Fitch Ratings Associate Director Christopher Collins said in a report.

A proposed bill, sponsored by the ailing Sen. Edward Kennedy, D-Mass., would give the FDA authority to regulate the production, sale and marketing of tobacco products to protect the public health. The Senate was expected to consider the bill Wednesday and possibly vote on it.

The House passed a very similar bill earlier this year and President Barack Obama, who is struggling with his own smoking habit, supports it.

Fitch noted that if the law passes, tobacco makers face higher compliance costs, which will disproportionately hurt smaller sellers. The smaller companies would also be hurt since there would be stricter rules on advertising that would hamper marketing efforts that could disrupt the brand rankings among consumers.

Such a bill has been in the works for at least a decade and went through several iterations.

The nation's biggest cigarette maker, Virginia-based Philip Morris USA, first said it was open to regulation in 2000.

Its smaller competitors oppose the bill, arguing that its increased regulation would restrict the introduction of new products and solidify Philip Morris USA's No. 1 position. Philip Morris USA is owned by Altria Group Inc.

No. 2 R.J. Reynolds Tobacco Company and No. 3 Lorillard Tobacco Company, both based in North Carolina, are against it. RJR is owned by Reynolds American Inc.