The British Tobacco Industry

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The British Tobacco Industry Tobacco industry is a widely castigated industry, which has periodically been subject to royal disapprovals, the whims of fashionable use, medicinal studies, smuggling, trade disputes, and bans. Nevertheless, British cigarette market is known to be the most profitable market in the world. There are two main companies that dominate UK cigarette industry, which control almost 90% of the market. So, the purpose of my essay is to analyse the industry characteristics, which from my point of view have helped the organization and the effectiveness of the cartel between the tobacco leaders. I will be looking at specific factors affecting the probability of co-ordinated interaction between Imperial Tobacco, Gallaher and BAT as well as at “cigarettes” as a product, leading us to a conclusion that will summarize that there is a form of tacit collusion between these three firms. Collusion is defined as something very close, if not identical with, co-ordinated interaction. According to European Commission study the factors inhibiting or encouraging collusion will need to be examined on four levels in order to asses the likelihood of collusion. On the first of these levels, one needs to establish whether there are incentives to form a collusive agreement at the outset. There are specific factors affecting the probability of collusion in this particular case. The first factor is, the number of leading firms and the percentage of ... ... middle of paper ... ...the market is controlled by just 2 firms, there are substantially high entry barriers, and there is an evidence of collusion in the same market in the past. However investigations are still being carried out, and I have tried to apply my knowledge and research to show that there is and always have been tobacco cartels not only in UK market but other world-wide cigarette industries. There are many ways to reduce the incidence and severity of co-ordinated interaction, but in this case none of them would be relevant, because smoking kills, and bringing competition, thus more tobacco firms to an industry, will lead to expansion of such products. Whereas, the government should be concentrated in developing different product to encourage people to give up smoking, but this largely lies outside the scope of the current paper.

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