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Issue Date: Vol. 45, No. 8, August 2005, Posted On: 9/7/2005

Jury Finds For Philip Morris In Vendors' Anti-Trust Suit

Nick Montano

- A federal jury here has found that Philip Morris USA did not act unlawfully when it discontinued a trade program for vending machine operators in 1998, while continuing to offer an analogous promotional and merchandising program to other tobacco retailers.

The suit was filed by a group of operators who asserted that the termination of the vending promotion while other retail merchandising programs remained in place had put them at a competitive disadvantage. They charged that this was unfair and had led to a decline in sales.

At issue was the legality of Philip Morris's termination of its "Plan MV" placement payment program for vending operations late in 1998, and its subsequent initiations of new programs offering convenience stores price, product and incentive promotions. The vendors complained that, after those programs took effect, they were unable to compete with the c-stores' low prices, thus suffering substantial losses.

The tobacco manufacturer countered by arguing that eight of the 10 vendors engaged in the suit did not purchase directly from Philip Morris, and the other two only purchased some of their cigarettes directly; thus the operators did not have standing. It argued further that the vendors did not prove that cigarette sales had declined in response to the promotional programs, and finally, that the vendors did not prove that their machines were in competition with the convenience stores.

Philip Morris USA executive vice-president and general counsel Denise Keane hailed the verdict. "Philip Morris USA designs and implements its trade programs to meet consumers' needs in a highly competitive marketplace," Keane explained. "The jury decided this case on the evidence, which clearly demonstrated that vending machines do not compete with convenience stores, grocery stores and other retail outlets, and therefore Philip Morris USA's business decision not to have a trade program for vending machines was lawful."

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