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Senate Tightens Grip on Cigarette Makers

Jeanine Poggi

Cigarette makers -- never exactly the most sympathetic of U.S. corporate interests -- could be in for a new round of regulatory hurdles.

The Senate voted Thursday to grant the Food and Drug Administration new powers to limit nicotine in cigarettes, drastically curtail ads and ban candied tobacco products targeting children and teens.

While the legislation will transfer a huge chunk of control from cigarette makers to the FDA, Altria Group(MO), maker of Marlboro, Parliament and Virginia Slims, said it supports the legislation. "For more than eight years, Altria Group has supported tough but reasonable federal regulation of tobacco products by the Food and Drug Administration and we are glad to see the progress Congress has made toward that goal," the company said in a statement.

Its competitors, like Reynolds Tobacco(RAI) and Lorillard Tobacco(LO), however, are against the restrictions.

The bill would place fees on tobacco makers, which will cut into profits of smaller sellers moreso than giants like Philip Morris. Stricter advertising rules would also put a damper on marketing efforts that could prevent these lesser-known companies from gaining market share.

Thus, the support of the behemoths.

The 79-17 Senate vote now sends the measure back to the House, which in April passed a similar version. House acceptance of the bill would send it directly to President Barack Obama, who supports the action.

This bill is among the mounting hits the tobacco industry has taken in recent years. In 1998, the industry agreed to pay the states $206 billion to help cover health-care costs, and this year Congress raised the federal cigarette tax by 62 cents, to $1.01 a pack, to fund a health-care program for children.

Shares of cigarette makers remained steady in late afternoon trading. Altria gained 1% to $16.95, Reynolds was up slightly .5% to $37.49 and Lorillard spiked 2% to $67.19.