Going Down in Flames

By Dan Holler
Monday, December 05, 2011

It is easy to see why one-in-five small businesses list regulations as their biggest obstacle; just look at Tampa-based J.C. Newman Cigar Company.

At 116 years old, it is America's oldest family-owned premium cigar maker. In 1895, J.C. Newman borrowed $50 and started a cigar company. At the time, he was an unemployed cigar maker eager to achieve the American Dream. He did just that, building a small business that withstood 19 recessions, three panics, two depressions, two world wars and the Cuban embargo. Newman Cigar Co. innovated and adapted to a changing world, and today employs 125 people.

Like many other premium cigar companies, Newman is successful because they manufacture quality products geared to an appropriate target audience – adults who typically smoke a cigar while relaxing with friends and family. They are not breaking any laws, asking for a special tax credit or trying to gain an advantage over their competitors; they just want to be able to make cigars the same way for another 116 years.

Unfortunately, forthcoming regulations from the Food and Drug Administration (FDA) could make that all but impossible by deeming premium cigars subject to regulation under the one-size-fits-all Tobacco Control Act. Before going any further, we need to understand the history and context of the Tobacco Control Act, which became law in 2009. It was, ostensibly, about two things: 1) cigarettes, smokeless tobacco and roll-your-own-tobacco; and, 2) keeping those products away from children.

Let’s work backwards.

The very first “finding” in The Tobacco Control Act set the tone: “The use of tobacco products by the Nation’s children is a pediatric disease of considerable proportions…” Much like the sponsors of the Tobacco Control Act, representatives from the FDA infer their priority is to make it harder for kids to get their hands on tobacco products. For a variety of reasons, premium cigars don’t typically fall into the hands of kids.

It is also worth looking at the words of the aforementioned lead sponsor, Congressman Henry Waxman (D-CA). He kicked off the closing debate by using the word “cigarette” five times in roughly five minutes, while never mentioning the word “cigar.” Throughout the debate, the word “cigar” was mentioned just a hand full of times, and usually to note its ABSENCE from the bill.

Clearly, the intent of Congress was never to regulate premium cigar manufacturers, nor did they consider youth use of premium cigars a concern. Nonetheless, the Act could be used to regulate them anyway. How? Retailers could not display brands in their stores. Walk in humidors could be banned. Advertising could be curtailed. New, seasonal and vintage blends could be increasingly difficult to bring to market. The list goes on.

For premium cigar manufacturers, like Newman, that could be the end of the line. And it’s not just hyperbolic scare tactics. Newman’s 125 employees understand the precedent has already been set.

Those absurd regulations exist today in Canada, and some groups are pushing the FDA to follow that model, which would put premium cigar companies out of business, period. Just two years ago, Hav-A-Tampa closed its doors – doors that first opened in 1902 – and the city of Tampa saw nearly 500 jobs disappear because Congress increased taxes on cigars by 700% to pay for an unrelated health problem.

Congress should learn from its mistakes.

The Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2011 (H.R.1639/S.1461) would prevent the FDA from regulating premium cigars under the Tobacco Control Act. It is not a handout or a bailout; it’s just a bipartisan bill that reflects the original intent of Congress. Representatives Bill Posey (R-FL) and Kathy Castor (D-FL) led the way, and despite coming under intense scrutiny from certain groups, they have built some amazing bipartisan support inside of Congress: 127 Representatives (25 Democrats, 101 Republicans) and 4 Senators (2 Democrats, 2 Republicans).

Representative Posey summed it up nicely: “It shows a breakdown in common sense in Washington that an Act of Congress is needed to rein in a federal bureaucracy from threatening thousands of jobs and decimating the premium cigar industry. Such regulation ignores the self-evident and well known distinctions of the premium cigar market, with its own artisan tradition, cultural niche, and customers from other tobacco products that Congress specifically authorized the FDA to regulate.”

If Congress could only adopt some commonsense, perhaps job creators wouldn’t be regulated out of business and Congress’s approval ratings just might break double digits.