Spain's smoking restrictions spark tobacco price war

Spain's effort to discourage smoking by banning it in the workplace and increasing taxes on cigarettes is not having quite the effect that the government intended.

Since the law went into effect on 1 January Spaniards have duly stopped smoking in offices, schools, and hospitals and on public transport and can now be seen lighting up in huddles on the pavements outside.

But a tax increase designed to make cigarettes more expensive and to discourage smoking has instead started a price war between companies determined to keep their place in the Spanish market.

Philip Morris, which makes Marlboro cigarettes, and Spain's top manufacturer, Altadis, have both lowered prices sharply.

The price …