Congressman Organizes Campaign to Block B&W Merger

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Congressman Organizes Campaign to Block B&W Merger

ATLANTA -- U.S. Rep. Jim Marshall (D-Macon, Ga.) said he organized a coalition of small cigarette manufacturers and distributors and convenience store owners last month to lobby federal regulators to block the proposed merger of Brown & Williamson Tobacco Corp. and R.J. Reynolds, according to a story in the Macon Telegraph.

The group of companies sent letters to the Federal Trade Commission saying their businesses would be greatly harmed if RJR were allowed to purchase B&W. Marshall, a first-term Democrat, said he and his top aide spent countless hours working to put the effort together in an effort to preserve the 2,100 jobs at B&W's Macon factory, according to the report.

Previously, none of Middle Georgia's elected officials had released details of their attempts, if any, to try to directly lobby the FTC to block the B&W-RJR deal.

U.S. Senators Saxby Chambliss and Zell Miller in October co-authored a letter to the FTC, urging federal regulators to consider the "enormous blow" to Middle Georgia if the two tobacco companies merge and close the Macon factory, but stopped short of asking them to block the merger, the report stated.

Gov. Sonny Perdue has met with local officials in Middle Georgia to discuss strategies for bringing the community together in the wake of the B&W announcement, and has met with B&W executives and union leaders.

The FTC is expected to issue a decision on the proposed merger any day now, Marshall said. The decision will be either to let the B&W acquisition go through, or to ask the companies to provide additional information for a more thorough review.

Marshall said that although the FTC probably received dozens of letters just before Thanksgiving from the companies that oppose the merger, he thinks he's fighting an uphill battle.

"I can't handicap this thing," Marshall said Monday. "But I think this is a longshot and I don't want to give anyone false hope."

The main reason these small cigarette manufacturers and distributors oppose the deal is because only two companies would control more than 80 percent of the U.S. cigarette market. That concentration would let the two companies -- Philip Morris and Reynolds American, the proposed name of B&W and RJR once merged -- squeeze smaller cigarette brands out of convenience stores, opponents argue.

"You've got to have visible shelf space," said Everett Gee, general counsel for S&M Brands Inc. of Keysville, Va., the maker of Bailey's brand cigarettes. "You can have the best cigarette in the world, but if you can't see it in the stores, you can't sell it."

Gee and others are afraid that they'll be run out of business by the two giant tobacco companies, who would consult in secret to set prices and try to win over retailers with commissions that smaller companies like S&M couldn't match.

B&W tried to fight the predatory practices of Philip Morris, maker of Marlboro, and R.J. Reynolds, Gee told the Telegraph.

"B&W were one of the few companies of any size that stood up to the draconian position that other tobacco companies had in retail," Gee said.

Gee, a former student at Mercer University's School of Law, consulted with Marshall on how to best lobby the FTC to block the merger. George Mason University Law School Professor Ernest Gellhorn, who has filed lawsuits against big tobacco companies on behalf of smaller distributors, also consulted with Marshall.

"I had my staff gather everything that we could find that had been written about this," Marshall said. "Then I assigned this to my top aide. I told him this is way too big a deal, that we needed to find time to work on this, whether it's at midnight or not, I don't care."

The letters were mailed to Morris Blum, assistant director of the Bureau of Competition for the FTC. The exact number of letters sent to the FTC won't be known, because the review process is confidential, Marshall said.

Marshall did not reveal his work on the letter-writing campaign until now, because some of the letter-writers feared retribution from the big tobacco companies.

"There are billions of dollars at stake and individuals who might speak up against it can be retaliated against," Marshall said.

Representatives for B&W and R.J. Reynolds said they expected their proposed combination to be approved.

"Rep. Marshall's concerns are understandable and the FTC is the forum for these types of things to be discussed and decided," said B&W spokesman Fred McConnell. "But I think it's good to reiterate that employees will still have an opportunity to be with the new company and for those folks that won't have that opportunity, we'll be doing everything we can to make sure they are taken care of."

"As with any proposed merger, the FTC will draw their own conclusions, but we believe the merger should be approved," said R.J. Reynolds spokeswoman Carole Crosslin.

Calder Clay III, a Republican who is running against Marshall for the 3rd Congressional District, applauded Marshall's moves on the letter-writing campaign.

"Saving jobs there is critically important to Middle Georgia," Clay said. "I applaud any effort to support B&W and the overall tobacco community. I'd say that it's a congressman's job to be proactive to protect jobs."

Monday, a spokesman for Miller said there's little that can be done to stop the merger.

"Make no mistake about it: Sen. Miller does not want this plant to close," said Miller spokesman Anthony Coley. "Unfortunately, the decision is not his to make. If plant officials are determined to close the plant, then, short of a miracle to change their hearts and minds, there's not much else anybody can do to keep it open."

Last month, Chambliss said in an interview on WMAC-AM that there was little that elected officials could do to stop the merger.

"Sen. Chambliss has made it clear that he stands ready to work with local business, government, and community leaders to help the people of Middle Georgia hardest hit by this decision," Chambliss spokeswoman Angie Lundberg said Monday.

Separately, the North Carolina state legislature was called into special session this week to consider a series of corporate tax breaks. Chief among them is a proposed $135 million tax break for R.J. Reynolds, which plans to move 800 B&W jobs to North Carolina from Macon. Some North Carolina lawmakers have questioned whether to approve the tax breaks, because R.J. Reynolds recently laid off 1,700 workers in Winston-Salem, N.C.