American Tobacco Company
The American Tobacco Company (ATC), founded in 1890 by James Buchanan Duke and his brothers in Durham, North Carolina, rapidly grew into a dominant force in the tobacco industry by acquiring numerous competitors and establishing a monopoly on tobacco products in the United States. By 1911, ATC controlled over 86% of the American cigarette market, utilizing aggressive tactics to undermine rivals, which ultimately led to significant economic struggles for independent tobacco farmers. The rise of the company sparked resistance, notably from the Night Riders, a vigilante group formed by farmers in Kentucky and Tennessee protesting ATC's business practices. Legal challenges culminated in a Supreme Court ruling that broke up ATC in 1911 under antitrust laws.
Despite its initial success, ATC faced increasing scrutiny in the mid-20th century as research linked cigarette smoking to serious health risks, such as cancer and heart disease. The company adapted by diversifying its offerings and engaging in extensive advertising, particularly through partnerships with Hollywood to promote its leading brand, Lucky Strikes. However, as public awareness of the dangers of smoking grew and regulations tightened, ATC's market began to decline. By the late 20th century, the company was acquired by British American Tobacco Company, continuing its legacy within the global tobacco industry, while also grappling with the legal and social repercussions of its products.
American Tobacco Company
In the final decade of the nineteenth century, James Buchanan (Buck) Duke (1856-1925) began steering the American Tobacco Company (ATC) into creating a monopoly of American tobacco products that was modeled after John D. Rockefeller’s (1839-1937) Standard Oil Trust. A group of farmers in the Black Patch of southwestern Kentucky and northwestern Tennessee who depended on tobacco for their livelihood reacted by forming the Night Riders, a vigilante group that sought to drive out farmers affiliated with ATC. It was, however, the Supreme Court that ended the Duke monopoly by finding both Standard Oil and the American Tobacco Company in violation of the Sherman Antitrust Act of 1890 and forcing both companies to break up. By the mid-twentieth century, increasing knowledge of the link between cigarette smoking and diseases such as cancer, heart disease, and high blood pressure completed the downfall of ATC. American Tobacco was acquired by the British American Tobacco Company in the 1990s.
Brief History
The American Tobacco Company was established in 1890 by James Buchanan (Buck) Duke and his brothers Brodie and Benjamin in Durham, North Carolina. Over the next seven years, Duke bought out forty-three rivals and created a monopoly over cigarettes, plug tobacco, smoking tobacco, and snuff. By 1911, ATC controlled 86.1 percent of the American cigarette market. Competitors Buck Duke could not buy out, he destroyed by underselling. Between 1900 and 1904, the price of tobacco was driven down from six to eight cents a pound to two to three cents a pound, making it almost impossible for independent tobacco farmers to survive. As farms folded, the impact spread throughout local economies.
In the summer of 1904, Felix Ewing, a Nashville tobacco owner, decided to take action by forming a local association of tobacco farmers to work together to fight ATC. The five thousand people who came to the first meeting in Guthrie, Kentucky, included professionals, politicians, storekeepers, clergymen, and journalists who came to support farmers and local economies. Membership continued to expand, and a splinter group of thirty-two members broke off under the leadership of Ewing and Dr. David Amoss to form the Night Riders, who disguised themselves in black hoods and carried rifles. The Night Riders made surprise attacks on ATC-affiliated farmers and their seed beds by muffling the hooves of their horses with burlap. By 1906, membership had risen to two thousand, and tactics had grown more sophisticated. The association gained the trust of local farmers by paying mortgages and feeding hungry families, then the Night Riders used increased membership to take over local police, fire stations, and newspaper offices to prevent interference as Duke’s warehouses were destroyed. The increased notoriety and viciousness of their activities combined to turn public opinion against the Night Riders. The state militia was called in, and members were arrested, tried, and fined.
In 1911, the Supreme Court held in U.S. v. American Tobacco Company (221 US 106) that ATC was in violation of American antitrust laws and ordered the company to break up its monopoly. The company was divided into American Tobacco, Liggett and Myers, and P. Lorillard. At that time, Buck Duke retired.
American Tobacco was acquired by American Brands in 1969 and later by Fortune Brands. In 1994, what had been ATC was acquired by the British American Tobacco Company (BAT), which had been founded in 1902 as a joint effort of ATC and the United Kingdom’s Imperial Tobacco Company.
Impact
In the late 1920s, American Tobacco was still a major player on the American business scene, and the appearance of "talkies" created new opportunities for hawking cigarettes. American Tobacco formed numerous partnerships with Hollywood studios to promote films and highlight celebrities such as Jackie Gleason, George Gershwin, Helen Hayes, Claudette Colbert, and Al Jolson. The major focus was on promoting Lucky Strikes, which had become American Tobacco’s leading brand. Lucky Strikes were advertised as smoothing throats and protecting voices. In 1929, American Tobacco spent $6.5 million (over $119 million in 2020s prices) on print and radio advertising using Hollywood stars. Testimonials were written by advertisers, and celebrities were paid for their time. The amount spent by American Tobacco was three times that spent by its rival R. J. Reynolds, the maker of Camels. Some ads targeted females and young people, leading to a sharp rise in the number of smokers among both groups.
In the 1950s, evidence began to surface, linking cigarette smoking to everything from cancer and heart disease to eye problems and a deterioration of morals. Public health researcher Ernst Wynder became a pioneer in the campaign to prove the dangers of smoking. In 1953, American Tobacco joined other tobacco companies in establishing the Tobacco Industry Research Committee and hiring the New York-based public relations firm Hill and Knowlton to fight what the committee insisted were unfounded rumors. H&K suggested that cancer was more likely to be caused by asphalt on highways or by consumption of various fuels than by tobacco. As smoking rates decreased, American Tobacco was forced to diversify, branching off into distilled spirits, life insurance, office supplies, cosmetics, and hardware.
In 1965, the United Kingdom banned television advertising of cigarettes, and the United States followed suit in 1971. Ten years later, new evidence on the dangers of second-hand smoke led to a further decline in cigarette use. Smokers who were not deterred by warnings about health dangers were deterred by higher prices that resulted from increased taxes on cigarette products. As more and more people stopped using tobacco products, tobacco companies turned to sports sponsorships to make up lost revenues. Even though tobacco sponsorships of sports were banned in both the United Kingdom and Canada, between 1995 and 1999, American tobacco companies sponsored 1,930 sporting events at a cost of $226.8 million. The goal of those sponsorships was to create goodwill among politicians and the general population and distance the image of tobacco companies from cancer and other health risks.
In the mid-1990s, states began suing major tobacco producers, referred to collectively as Big Tobacco, as they tried to recover costs of tobacco-related illnesses paid for Medicare patients and veterans. In a historic suit in 1998, tobacco companies were ordered to pay $246 billion over a twenty-year period for the damages suffered from the products they sold. In 1999, the Department of Justice filed suit under the Racketeer Influenced and Corrupt Organization Act (RICO), charging tobacco companies with continuing to defraud the public after it became known that tobacco use was linked to cancer, heart disease, and other conditions. Tobacco companies were found liable under RICO in 2007, but punishment was limited to refraining from racketeering and false advertising and public acknowledgment of the harm they had caused through newspapers, television, the Internet, and cigarette packaging.
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