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Editors' Note: Government Meddling at its Worst

| By David Savona , Marvin R. Shanken | From Mario Carbone, November/December 2016
Editors' Note: Government Meddling at its Worst

The summer of 2016 will be remembered for many things. The first commercial flight between the United States and Cuba in 55 years. A combative presidential campaign between two polarizing nominees. And the greatest number of new cigar brands, sizes and blends ever released upon the U.S. market.

The third item seems like good news, but comes with a cruel, savage caveat—it will almost certainly never happen again.

While summer is the traditional time for new releases, we've never seen anything like this past year. One cigarmaker launched more than 1,000 new SKUs. Most had dozens, some had hundreds. Why so many new cigars?

The answer is the U.S. government. The Food and Drug Administration, which now regulates the American cigar industry, was ready to enact a package of onerous and uncertain restrictions. August 8 was the deadline before they kicked in. Most cigars launched after that date would be illegal to sell in the United States without FDA approval. The government has been short with details, but two things are certain: it will be expensive—perhaps $100,000 or more per cigar brand—and it will be slow.

To get an idea of how submissions for new cigar releases may fare look at the cigarette industry, which has been regulated by the FDA since 2009. A 2012 Associated Press analysis found that innovation ground to a halt after the FDA took over. "Four hundred products submitted for review since March 2011 are being kept off the market," Michael Felderbaum wrote for the AP. Industry reviews estimated to take 90 days took years, in some cases, with "about 90 percent" of applications taking more than one year.

This is what's coming for handmade, premium cigars—an industry that relies on new releases far more than cigarettes.

New products are celebrated in the cigar market, and cigarmakers are artists who experiment with new shapes, tobaccos and blends. The consumer decides if a new brand lives or dies. These new restrictions will lead cigarmakers to focus their efforts on cigars that have already been sold, cigars that don't have to jump through, over and around the obstacles the government has placed in their path. Thankfully, we have the large number of new cigars that were just created to make that August 8 deadline. Over time cigar companies will parse them out. But what if a new company decides to enter the industry? Or a new tobacco type is developed? Or someone invents a new size or shape?

This is government meddling at its worst. How can new companies fairly compete? Where is the justice in making new product launches so difficult to bring to life that few would dare to even try?

If a company makes a product that the consumer doesn't want, it deserves to fail. That's capitalism. But when the government locks down an industry, that's stagnation by regulation.