The problems of monopoly and oligopoly in the American tobacco industry

Abstract

A history of tobacco and its use by the Indians of South, Central, and North America is discussed and its gradual spread of use to Spain, England, and the Continent is given.

The formation of a monopoly by James B. Duke in establishing the American Tobacco Company, and the price policies, product differentiation, and advertising expenditures used in the development of the Trust is discussed. The Sherman and Clayton Anti-trust Acts are presented and their use in the dissolution of the trust and the establishment of an oligopoly are covered extensively.

The Lexington, Kentucky Case of 1940-1946 shows the tobacco industry again prosecuted by the government for conspiracy in restraint of trade, monopoly, and attempts to monopolize resulting in a decision against the eight companies indicted and the assessment of fines totaling $255,000. The companies developed business practices after this trial that would enable them to stay within the letter of the law and have successfully avoided prosecution from 1946 to 1962.

The current financial positions of the major tobacco companies is given and the long-run prospects of the tobacco industry are those of gradual growth and expansion based on an increase in population and the growth of national income as regard domestic sales and expansion of foreign trade by nearly all of the major producers.

Finally, some general observations concerning monopoly and oligopoly are given and their relationship to the tobacco industry as a whole are explained.