Blumenthal Strikes Agreement On Internet Cigarette Sales

Attorney General Richard Blumenthal announced that Philip Morris USA has agreed to adopt measures to combat the illegal sale of PM USA cigarettes through the Internet and mail systems.

Under the agreement, reached with 37 attorneys general across the country, PM USA has agreed to the following:

¬Termination of shipment of cigarettes to any of PM USA’s direct customers engaging in illegal Internet and mail order sales;

¬Reduction in the amount of product made available to direct customers found to be engaged in the illegal resale of PM USA cigarettes to Internet vendors;

¬Suspension from the company’s incentive programs any retailer engaging in such illegal sales.

“This powerful step will help strangle product supply to illegal Internet cigarette sellers,” Mr Blumenthal said. “Internet cigarette sales are blatantly illegal, but difficult to block. This step is hugely significant in stopping such sales at the source by shutting down the supply. Lacking any age verification, the Internet virtually invites illegal sales to children. The Internet’s cloak of invisibility should not be a portal for illicit tobacco commerce — luring children into smoking and lifetimes of addiction.

“This agreement with Philip Morris — by far the nation’s largest tobacco company — should set an example for the entire industry. Our coalition of attorneys general across the nation is aggressively pursuing similar agreements with other tobacco companies to continue the fight against this fatal addiction.”

The state attorney general said all retail Internet cigarette sales in Connecticut are illegal because they violate Connecticut law prohibiting the direct shipment of cigarettes to consumers; age verification laws; the federal Jenkins Act (requiring that such sales be reported to state authorities); state and federal tax laws; federal mail and wire fraud statutes; and the federal RICO law.

Many sales made by foreign websites also violate federal smuggling, cigarette labeling, money laundering, and contraband product laws.

Such sales mean huge loses in tax revenue because most illegal Internet vendors fail to charge taxes. Equally important, these vendors do not verify age, leading to widespread purchases by children. Lower cigarette prices lead to increased smoking rates, especially by underage smokers.

Numerous studies have shown that the earlier an individual begins to smoke, the more likely that the person will become addicted, making age verification vital to protect children from a lifetime of smoking. The recent agreement is the third major development in the attorneys general effort to restrict the payment, shipment and supply operations of the illegal Internet cigarette traffickers.

In March 2005, the attorneys general announced that the major credit card companies had all agreed to stop processing credit card payments for the Internet retailers. Later in the year, both DHL and UPS agreed to stop shipping packages for the vendors engaged in these illegal sales.

PM USA has previously penalized direct consumers and retailers who sold cigarettes illegally over the Internet and through the mail. The company is the first tobacco product manufacturer to agree to reduce the supply of cigarettes to direct customers who supply vendors engaged in the illegal re-sale of PM USA cigarettes on the Internet.