A Couple of Quick Thoughts on Tobacco Regulation
1. I have observed before that many Nanny-state initiatives are driven by politician's own personal experience and weaknesses. Mike Huckabee started a kids obesity program because he had trouble with his weight, and now Barack Obama regulates tobacco because he has had trouble quitting smoking:
Obama, who has spoken of his own struggle to quit smoking, praised the bill, saying it "will make history by giving the scientists and medical experts at the FDA the power to take sensible steps."
Couldn't politicians just focus on their own behavior without projecting their personal weaknesses on me? Let's just be glad that we avoided whatever regulatory regime that would have occurred had these guys had a male enhancement issue.
2. I know zero about smoking and cigarettes. However, it is my understanding that while the nicotine is the addictive part, it is other components of combustion that cause the health risk. If this is the case, then doesn't regulated reduction in nicotine content of cigarettes actually pose a health risk? Won't folks suck on more cigarettes with reduced nicotine, trying to get back to their preferred nicotine dose, and thereby consume more rather than less cancer causing substances?
3. There is nothing that regulators hate more than free market alternatives to themselves for solving problems. It is clear they are going to mandate reduced tar and other components in cigarettes, but they want those mandates to come from them, not emerge on their own from the market. Thus:
[the new FDA rules will] prohibit use of words such as "mild" or "light" that give the impression that the brand is safer
Yep -- wouldn't want private folks getting credit for exactly what the regulators intend to mandate.
4. I have often observed that regulation tends to favor incumbent companies. Regulations tend to raise barriers to new entrants, and it imposes costs that are more easily born by larger players in the market. Further, incumbents often have the political muscle to influence regulation in their favor (and in fact potential future new market entrants don't even exist today, so they certainly have no lobbying voice). And, we see this same effect here:
Altria Group, parent company of Philip Morris USA, the nation's largest tobacco company, issued a statement Thursday supporting the legislation and saying it approved "tough but reasonable federal regulation of tobacco products" by the FDA. Rival companies have voiced opposition, saying FDA limits on new tobacco products could lock in market shares for Philip Morris, maker of Marlboro cigarettes.
No surprise there. Despite all the fighting words about the evils of big Tobacco around the Tobacco settlement a decade or so ago, the result was big gains for the major tobacco companies.
Big tobacco was supposed to come under harsh punishment for decades of deception when it acceded to a tort settlement seven years ago. Philip Morris, R.J.Reynolds, Lorillard and Brown & Williamson agreed to pay 46 states $206 billion over 25 years. This was their punishment for burying evidence of cigarettes' health risks.
But the much-maligned tobacco giants have subtly and shrewdly turned their penance into a windfall. Using that tort settlement, the big brands have hampered tiny cut-rate rivals and raised prices with near impunity. Since the case was settled, the big four have nearly doubled wholesale cigarette prices from a national average of $1.25 a pack (not counting excise taxes) in 1998 to $2.10 now. And they have a potent partner in this scheme: state governments, which have become addicted to tort-settlement payments, now running at $6 billion a year. A key feature of the Big Tobacco-and-state-government cartel: rules that levy tort-settlement costs on upstart cigarette companies, companies that were not even in existence when the tort was being committed.
