ALBANY, N.Y. (AP) Legislation requiring loose packs of cigarettes to be displayed only behind store counters and ending self-service displays has passed the New York Legislature and is awaiting action by Gov. George Pataki.

While sponsors say the measure is meant to further reduce smoking by young people, one major cigarette maker is complaining it is really part of an attempt by Philip Morris, the nation's largest cigarette company, to extend its market domination. ''This has nothing to do with preventing youth from access to cigarettes. Whether they are behind the counter or not, is not going to increase or decrease youth smoking,'' said Mark Smith, a spokesman for the Brown & Williamson Tobacco Corporation, the nation's third largest cigarette maker. ''This is an attempt to help Philip Morris maintain its stranglehold on retail shelf space,'' Smith added. Disputing that, Philip Morris spokesman Brendan McCormick said, ''We didn't take a position on the bill ... This is not legislation we were advocating.'' At issue is Philip Morris' success in sewing up favorable display space through financial incentive programs available to retailers. While most tobacco companies have such programs, as do cola makers, competitors say Philip Morris has used its market dominance and the incentive program to effectively relegate competitors to second-rate space. A federal antitrust lawsuit has been filed in North Carolina against Philip Morris' incentive program by other tobacco companies. That lawsuit is still pending. According to Brown & Williamson officials and lobbyists, the New York legislation would further reduce the display space available in stores and thus make Philip Morris' attempts to dominate such space even more effective. In fact, over the past year, Philip Morris began offering retailers bigger financial incentives to display cigarettes only behind the counter as part of what McCormick says is an effort to promote marketing ''in a responsible way'' to ''help keep tobacco out of the hands of kids.'' The move to behind-the-counter display has also been prompted by growing concerns about theft. There are fears among Philip Morris competitors that success for the display legislation in New York could lead to similar laws in other states. More than a half-dozen states, including Texas and Vermont, have already adopted such legislation as have a number of counties within New York. Sponsors of the New York legislation said the bill was worked out in consultation with anti-smoking advocates and convenience store owners. They expressed little concern over Brown & Williamson's complaints. ''I don't know what the effect on the marketing of cigarettes will be, but the bill is not intended to give any edge to any one sector over another,'' said state Assemblyman Martin Luster, an Ithaca-area Democrat. ''The bill is intended to keep cigarettes out of the hands of underage kids.'' ''I thought about that for a while and I thought, You know what, that's kind of a worry for people in business to deal with,'' said state Sen. Kemp Hannon, a Long Island Republican. ''It's a question of bidding (for display space). If they want to bid, they can bid.'' Brown & Williamson lobbyists maintain, however, that they don't have a level playing field in the marketplace and that in reality most retailers must play ball with Philip Morris. If they don't, the store down the road could wind up selling Marlboros, which account for almost 40 percent of cigarette sales in America, at cheaper prices due to more favorable financial incentives. Asked if the legislation would make things tougher for competitors, Philip Morris' McCormick said, ''That would be a question you would have to ask them. From our standpoint, there continues to be competition.'' Facing an uphill battle to derail the behind-the-counter legislation, Brown & Williamson has managed to gain influential backing, in the form of state Assembly Ways and Means Committee Chairman Herman Farrell Jr., for a measure that would outlaw direct or indirect payments to retailers for favorable display space. The measure would take effect, if approved, on the same date as the behind-the-counter legislation. While Philip Morris has not taken an official position on that Farrell-sponsored measure, spokesman McCormick said, ''We don't think there's any reason for the state to interfere with fair competition in the marketplace.'' He said such decisions should be up to store owners. Hannon said he is unfamiliar with that second piece of legislation. Luster said he has no interest in it.

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