FOR IMMEDIATE RELEASE                                                    AT
MONDAY, NOVEMBER 14, 1994                                    (202) 616-2771
                                                         TDD (202) 514-1888

                  JUSTICE DEPARTMENT WILL NOT CHALLENGE
                  TOBACCO COOPERATIVES' INVENTORY SALES

     WASHINGTON, D.C.-- The Department of Justice's Antitrust
Division will not challenge three separate proposals by tobacco
cooperatives to sell a substantial portion of their inventories
to domestic cigarette manufacturers because each cooperative will
set prices unilaterally.
     In 1985, a similar proposal by one of the cooperatives
involved in today's decision, was reviewed by the Antitrust
Division and also was not challenged.  
     The Department's position was stated in a business review
letter from Anne K. Bingaman, Assistant Attorney General in
charge of the Antitrust Division, to Flue-Cured Tobacco
Cooperative Stabilization Corporation of Raleigh, North Carolina,
the Burley Tobacco Growers Association of Lexington, Kentucky,
and the Burley Stabilization Corporation of Knoxville, Tennessee.
     Bingaman said that each of the cooperatives functions as a
contract agent for the Commodity Credit Corporation of the
Department of Agriculture in administering the government's loan
program for tobacco.  Each cooperative's members' crops are
automatically consigned to the cooperative at the government
support price if they do not bring at least the support price on
the open market.  The cooperatives' purchases of tobacco from
their members is financed with loans from the Commodity Credit
Corporation.  The cooperatives incur interest and storage costs
until they resell the tobacco.  To protect the Commodity Credit
Corporation against losses on the resale of the tobacco by the
cooperatives, the growers and purchasers are assessed an amount
on each pound of tobacco sold.  The assessments are held by the
Commodity Credit Corporation as a reserve fund.  The amount of
the assessment per unit increases as the cooperatives'
inventories grow.
     The increased carrying expenses and assessments are not the
only costs to the tobacco growers that can result from the
inability of their cooperative to resell its tobacco inventory
quickly.  Under the governing statutes, if a cooperative still
has on hand more than 15 percent of the previous year's quota
prior to the time for determining the next year's quota, that
excess is factored into a formula in a manner that reduces the
quota, i.e., the amount of tobacco that may be grown, for the
next year.  This may impose additional assessment and other costs
on tobacco growers.
     To avoid these various costs, Bingaman stated that each of
the cooperatives, whose marketing activities are exempt from the
antitrust laws under the Capper-Volstead Act, had proposed to
attempt to sell all or a substantial portion of its tobacco
inventory to domestic cigarette manufacturers.  Each cooperative
proposes to negotiate a price for the tobacco with individual
customers, which price shall be contingent on the cooperatives'
ability to move its entire inventory.  Each cooperative intends
to offer the tobacco to all customers at the same price.  One
effect of such a sale would be materially to lower the current
high carrying costs for the inventory which are borne by the
tobacco growers, Bingaman said.
     Bingaman said that after reviewing the proposal with the
cooperative and consulting with the United States Department of
Agriculture, the Department has concluded that it has no present
intention of challenging the proposal.
     Under the Department's business review procedure, an
organization may submit a proposed action to the Antitrust
Division and receive a statement as to whether the Division would
challenge that action under the antitrust laws.
     A file containing the business review request and the
Department's response will be made available in the Legal
Procedure Unit of the Antitrust Division, Room 3235, Department
of Justice, Washington, D.C.  20530.  After a 30-day waiting
period, the documents supporting the business review request will
be added to the file.
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94-652