The e-cigarette industry has filed a lawsuit against the FDA, claiming that recently proposed regulations are anti-competitive and protect Big Tobacco at the expense of alternative smoking manufacturers. The regulation in contention requires manufactures of tobacco products, including e-cig and vaping device producers, to obtain a pre-market tobacco application before being approved for continued availability on the market. E-cig makers must prove that their products are safer than regular cigarettes, and that they help smokers quit. The new law would indeed benefit the major tobacco players, and it exemplifies what makes Altria (NYSE:MO) such a great company. The firm's ability to influence regulations in its favor is the secret to the firm's long-term success.
E-cigarettes have become a growing threat to Big Tobacco. With consumers fully aware about the dangers of smoking, US tobacco consumption has steadily declined over the past 30 years (Figure 1). At the same time, alternatives to cigarettes have risen in popularity (Figure 2) Consumers have gravitated to these new products, which deliver nicotine hits by heating liquid rather than burning tobacco, for their perceived health benefits. In response, major cigarette producers have developed their own e-vapor devices. Altria's MarkTen brand, introduced in 2014, has performed well. But why spend money developing a product you have little experience making (and for which consumer adoption is less certain) when you can ban the competition outright? This is what Altria is attempting to do, as these new regulations would put an abrupt halt on the progress e-cigs have made in recent years.
