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Court Sides With Tobacco in Price Case

September 23, 2003

ATLANTA (AP) _ A federal appeals court has sided with the nation’s largest tobacco companies in a price-fixing lawsuit brought by tobacco wholesalers.

The wholesalers wanted to file a class-action lawsuit alleging a conspiracy to fix wholesale tobacco prices by Philip Morris USA and R.J. Reynolds Tobacco Co.

Last summer, a U.S. District Court judge threw out the wholesalers’ lawsuit, saying they had no proof that the big tobacco companies were working together. The wholesalers appealed to the U.S. Court of Appeals in Atlanta, which ruled against them Monday.

The appeals court said the tobacco market of the 1990s was a time of price wars and intense competition among the big tobacco companies. The three-judge panel asked why the tobacco companies would illegally fix prices but then spend a lot of money on advertising.

``It makes no sense for firms that are fixing wholesale prices to then undermine the economic benefit of their collusion by spending more than twice the amount of their allegedly illegal profits on retail competition,″ the judges wrote.

The judges acknowledged that prices for Philip Morris and R.J. Reynolds cigarettes were comparable throughout the 1990s, but called the pricing behavior ``a perfectly legal phenomenon.″

In midday trading Tuesday on the New York Stock Exchange, Philip Morris parent Altria Group’s shares were down 17 cents at $44.31 while RJR shares rose 18 cents to $39.50.

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