Small tobacco-makers get a break
Renegade Holdings Inc. received some breathing room last week — at least for the short term — regarding its cigarette brands.
In a case that could affect at least 520 Triad employees of smaller tobacco manufacturers, a U.S. District Court judge approved a stay Wednesday that prevents the Food and Drug Administration from enforcing a rule it adopted March 19.
The rule does not allow a manufacturer to use a brand name it began marketing after Jan. 1, 1995, if that name is also used as a brand by another company for a nontobacco product.
The FDA planned to begin enforcing the rule June 22. FDA officials could not be reached for comment yesterday.
Examples include Renegade’s Tuscon, Tracker and Barton brands — all registered as trademarks after September 2004. In addition to the cigarette brands, there is an automobile brand named Tuscon, a handheld computer for playing bingo called Tracker, and an alcoholic beverage called Barton.
Such tobacco brands would be considered as “misbranded” by the government, with products subject to seizure and destruction. There also could be civil and criminal penalties against manufacturers and sellers of those products.
“This was a major victory for our little company against the FDA’s heavy-handed control of the industry,” Mike Mebane, the president of Renegade, said yesterday. Seneca-Cayuga Tobacco Co. of Oklahoma joined Renegade in the lawsuit, filed May 7.
Renegade has 140 employees in Mocksville.
Also affected is General Tobacco Co., with 120 employees in Mayodan, and Commonwealth Brands Inc., with about 260 employees in Reidsville.
Congress denied a similar regulatory effort by the FDA in 1996, saying that the agency did not have oversight over tobacco. After the FDA was given that oversight last year, it essentially revived its 1996 regulation.
Renegade said it could face claims of $3.5 million for goods that could be designated as misbranded. It also would be forced to write off $1.2 million in finished goods and raw materials.
“These factors will force Renegade to stop doing business and close its doors,” the company said.
The vast majority of cigarette brands used by Philip Morris USA, R.J. Reynolds Tobacco Co. and Lorillard Inc. debuted before Jan. 1, 1995 — thus they are not subject to the rule.
However, for most manufacturers not participating in the initial Master Settlement Agreement, their brands debuted after that date. The plaintiffs said that the regulation, if permitted, should be enforceable after March 19, 2010, not Jan. 1, 1995, thus not giving the major manufacturers a competitive advantage by limiting, if not eliminating, the product mix of many discounters.
Mebane said that “it would take an impossible amount of time and cost to attempt to obtain the regulatory approvals necessary to introduce a new brand. There are so many road blocks that regulators would erect that I doubt you would ever get one approved.”
The judge requested that the FDA consider amending the rule. If the FDA chooses to enforce the original or amended regulation, it must give Renegade 90 days notice of its action.
Casey Francis, a spokeswoman for Commonwealth, said that the company “would like to think that the industry as a whole will receive a notice of 90 days before the FDA commences on any action.”
“However, it is one month away, and we still have heard nothing.” Francis said.
By Richard Craver
Journalow, May 25, 2010
