1410168

UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

COMMISSIONERS: Edith Ramirez, Chairwoman

Julie Brill

Maureen K. Ohlhausen

Joshua D. Wright

Terrell McSweeny

In the Matter of

REYNOLDS AMERICAN INC.,

a corporation,

and

LORILLARD, INC.,

a corporation.

Docket No. CCOMPLAINT

As authorized by the Clayton Act and the Federal Trade Commission Act, the Federal Trade 

Commission (“Commission”), having reason to believe that Reynolds American Inc.

(“Reynolds”), a corporation subject to the jurisdiction of the Commission, has agreed to 

acquire Lorillard, Inc. (“Lorillard”), a corporation subject to the jurisdiction of the 

Commission, in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and 

Section 5 of the Federal Trade Commission Act (“FTC Act”), as amended, 15 U.S.C. § 45, 

and it appearing to the Commission that a proceeding on this matter would be in the public 

interest, issues this Complaint, stating the following charges.

I. RESPONDENTS

1. Respondent Reynolds is a corporation existing and doing business under and by virtue 

of the laws of North Carolina, with its office and principal place of business at 401 

North Main Street, Winston-Salem, North Carolina 27101. Directly or by a subsidiary, 

Reynolds sold approximately 70 billion cigarettes throughout the United States in 2014.

2. Respondent Lorillard is a corporation existing and doing business under and by virtue 

of the laws of Delaware, with its office and principal place of business at 714 Green 

Valley Road, Greensboro, North Carolina, 27408-7018. Directly or by a subsidiary, 

Lorillard sold approximately 39 billion cigarettes throughout the United States in 2014.
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3. Each Respondent is, and at all times relevant herein has been, engaged in commerce, as 

“commerce” is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. § 12,

and is a company whose business is in or affects commerce, as “commerce” is defined 

in Section 4 of the FTC Act, as amended, 15 U.S.C. § 44. 

II. THE PROPOSED ACQUISITION

4. Pursuant to an agreement executed on July 15, 2014 (the “Agreement”), Reynolds 

proposes to acquire all of the voting securities of Lorillard for approximately $27.4 

billion (the “Acquisition”). The Acquisition is subject to Section 7 of the Clayton Act, as 

amended, 15 U.S.C. § 18. 

III. THE RELEVANT MARKETS

5. The relevant line of commerce for analyzing the Acquisition is the design, manufacture, 

and sale of traditional combustible cigarettes (“cigarettes”).

6. The relevant geographic area for analyzing the Acquisition is the United States.

IV. THE STRUCTURE OF THE MARKET

7. The U.S. cigarette market is already concentrated. After the acquisition, Altria Group, 

Inc. and Reynolds would have approximately 90% of all U.S. cigarette sales. As 

measured by the Herfindahl-Hirschman Index, the Acquisition would increase the 

concentration index of the market by roughly 775 points, to a post-merger level of 

roughly 4,250. This increase in concentration far exceeds the thresholds set out in the 

Horizontal Merger Guidelines for raising a presumption that the Acquisition would 

create or enhance market power.

V. BARRIERS TO ENTRY AND EXPANSION

8. Entry and expansion by other cigarette producers would not deter or counteract the

anticompetitive harm of the Acquisition. Entry is unlikely in light of the statutory and 

regulatory barriers to product development and advertising, and the contractual barriers 

to securing visible shelf space at retail.

VI. EFFECTS OF THE ACQUISITION

9. The Acquisition, if consummated, is likely to substantially lessen competition for the retail 

sale of cigarettes in the United States in the following ways, among others: 

(a) by eliminating current and emerging competition between Respondents Reynolds 

and Lorillard; 
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(b) by increasing the likelihood that Respondent Reynolds will unilaterally exercise market 

power; and 

(c) by increasing the likelihood of, or facilitating, coordinated interaction between the 

remaining participants in the relevant market. 

VII. VIOLATIONS CHARGED

10. The Agreement described in Paragraph 4 constitutes a violation of Section 5 of the 

Federal Trade Commission Act, as amended, 15 U.S.C. § 45.

11. The Acquisition described in Paragraph 4, if consummated, would constitute a violation 

of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC 

Act, as amended, 15 U.S.C. §45.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission 

on this _________ day of _______, 2015, issues this Complaint against the Respondents.

By the Commission.

Donald S. Clark

Secretary

SEAL: