Philip Morris (M) Sdn Bhd's decided to keep the price of the cigarettes in order to breakdown the well known practice in this field to raise the costs all together.

British American Tobacco (M) Bhd (BAT) and JT International Bhd (JTI) mentioned that the cost pushed up the prices of the cigarettes by RM1 a pack, while the unwillingness of Philip Morris to block the difference in pricing is being closely watched.

A denial to act in this respect will hint of a break-up in the oligopolistic nature of the industry where a floor price is set by the Government. If all three companies increase their costs, then their next steps might attract the attention of the Competition Commission.

The Philip Morris' cigarette brands whose prices remain the same are Sampoerna, Marlboro cigarettes and L&M. BAT's brands include Dunhill, Benson & Hedges and Kent and JTI's brands are Mevius, Salem, Winston and Camel.

Regardless of the inactivity by Philip Morris to raise its prices of cigarette brands by RM1, the analysts consider that it may be a matter of time before it follows suit.

"BAT is the market leader, so the other competitors would like to increase their prices as well," Kenanga Research analyst Soong Wei Siang told StarBiz.

"When these three tobacco manufacturers raise prices together, the consumers will not migrate between cigarette brands," he said.

In the past 10 years, it's the second time when BAT's move in raising prices. Most prices increase in tobacco industry came after the Government raised taxes or duties.

The first time BAT made the move was in June last year when prices went up by 3% for all its brands.

Last week, BAT raised the prices for the cigarettes prices by RM1 per pack for its best selling brands. BAT said directly that the operating environment remained "very challenging".

We did our best to diminish these demands by introducing all cost effective measures available, while at all times maintaining the quality of our products.

Yet, these steps cannot completely recoup our increase in operating prices and deliver against shareholders expectations, BAT Malaysia managing director Stefano Clini said on September 7th.

JTI followed BAT's action a few days later when it increased prices for all its brands by RM1 effective last Friday.

Even though, Philip Morris mentioned that the costs of its tobacco brands are fixed for now.

"At the moment the costs remain the same due to rivalry cause. We do not reveal news concerning our product costs and do not expound any business plans" Philip Morris corporate affairs director Ozan Ibrisim told StarBiz.