Predatory prices on tobacco market

By Pittaluga Abogados

The Commission for Competence Defense and Promotion, a deconcentrated body of the Ministry of Economy and Finances of Uruguay, fined tobacco company Abal Hermanos with 250 thousand dollars for incurring in predatory practices against its competitors.

Newspaper El País informed that the case begun on April 2010 when tobacco company Montepaz SA filed at the Commission a complaint against Abal Hermanos (local subsidiary of Philip Morris International) and British American Tobacco (BAT) for commercializing between the end of 2009 and the beginning of 2010 both their national and their imported brands of cigarettes below the average variable price.

Marlboro, Benson & Hedges, Silver Mint, Fiesta, Philip Morris, Casino, Next and L&M were among the brands of Philip Morris International, while Kent, Kool, Lucky Strike and Pall Mall belonged to BAT.

The Commission requested a technical investigation to the Accountability Professorship of the Economics Science School of the University of the Republic. The report conclusions, presented on July, determined that Abal Hermanos "clearly intended to displace, partly or wholly, current or future competitors" off the market by selling its cigarettes below the established price on a "prolonged lapse of time". The Commission resolution sustains that such behavior would´t have been possible if Abal Hermanos didn't had the support of Philip Morris International.

According to the Commission BAT tried to follow the same practice but finally decided to reduce its operations in Uruguay and restricted its marketplace only to the department of Maldonado, where tourism hot spot Punta del Este is located.

Uruguay and Philip Morris are having since 2010 a dispute over international treaties violations regarding anti-tobacco actions adopted by Uruguay.