[Intl-tobacco] Internet cigarette sales

[Robert Weissman]

This is a written as a U.S. story, but it highlights what is surely going
to be one of the major challenges facing tobacco control advocates in
coming months. We need more thinking about solutions, including agreements
through the Framework Convention.

-- 
Robert Weissman	<rob@essential.org>
Essential Information
P.O. Box 19405, Washington, DC 20036, USA
Tel: 1-202-387-8030
Fax: 1-202-234-5176
www.essential.org

Cigarette shoppers turn to the Internet
by Bruce Mohl / mohl@globe.com
Source: The Boston Globe, Friday, 2/16/01

Smokers who can't kick the habit are finding the cheapest and most
convenient way to fuel it is on the Internet.

Cigarettes that go for $35 to $40 a carton at most retailers here in
tax-heavy Massachusetts sell for about $10 less, including shipping, at
Internet vendors based on Native American lands or in low-tax states such
as Virginia and Kentucky.

Smokers are considered notoriously bad shoppers and few are aware that
cigarettes are available over the Internet. But many specialists believe
Internet tobacco vendors with such names as DirtcheapCig.com and
Smokin4Less.com are poised for explosive growth as smokers, facing
spiraling cigarette taxes and prices, start shopping around.

US Representative Martin Meehan of Lowell, cochairman of the Congressional
Task Force on Tobacco and Health, said Internet sales are expected to hit
$10 billion, a fifth of the total tobacco market, over the next five
years.

Whether or not that projection is another Internet fantasy, state
officials and antismoking advocates are taking it very seriously. They
fear Internet sales of cigarettes will not only cut into state tax
revenues, but undermine efforts to curb smoking, eliminate cigarette
advertising, and keep tobacco products from children.

''It's frightening,'' said Dr. Gregory Connolly, head of the tobacco
control program at the Massachusetts Department of Public Health. ''I
think it has the potential to curb every advance we've made in fighting
smoking.''

Meehan said he was shocked at how easily minors can get their hands on
cigarettes over the Internet and how unregulated the business is. He has
filed legislation that would specifically bar Internet vendors from
selling tobacco products to minors and require sites to print the surgeon
general's health warning. His bill has made little headway so far.

Massachusetts Revenue Commissioner Frederick A. Laskey said the rising
price of cigarettes has prompted many smokers to do what any smart
consumer does: search for the best deal. But he said some of those deals
are illegal and others sidestep the law.

''There is really an added incentive now for people to fly under the radar
screen and create complications for us,'' he said.

Maryann of Milton, who asked that her last name not be used, is one of
those people. She started buying her Virginia Slims on the Internet two
months ago and found it to be more convenient and cheaper. Smokin4less.com
of Virginia delivers two cartons every other week to her home, saving her
about $60 per month.

But Laskey argues that Maryann and anyone else buying cigarettes in
another state - in person, by catalog, or on the Internet - should be
paying to Massachusetts the 76-cents-per-pack cigarette excise tax.
(Laskey is not currently seeking the 5 percent sales tax on Internet
cigarette transactions, because he doesn't know what the consumer paid. He
tries to collect sales and excise taxes on purchases from catalogs - from
the consumer directly or the company itself if it has a physical presence
in Massachusetts.)

Last summer, Laskey tried to enforce his interpretation of the law. Citing
a 50-year-old federal statute originally intended to halt cigarette
shipments to anyone other than a licensed distributor, he sent out 100
letters to Internet cigarette vendors asking for the names and purchases
of their Massachusetts customers. Only 20 vendors responded and only two
of the 20 agreed to provide names.

The low response rate wasn't surprising. Vendors on Native American lands
insist they are not subject to the laws of other states and most vendors
in other states say their sales are subject to the tax laws of their own
state.

Many of the Web sites adopt a defiant tone toward government intervention,
which feeds into the anger many smokers feel toward efforts to regulate
smoking and how much it costs.

Dirtcheapcig.com of Paducah, Ky., for example, vows it will not release
the names of its customers. ''It is our researched legal opinion that we
are not required to furnish such information,'' the Web site said. ''We
are the last refuge of the persecuted smoker.''

So far, Laskey hasn't taken any action against vendors who ignored his
request for customer names. He acknowledged the legal issues involved are
dicey. Still, he collected excise taxes from the 50 individuals identified
as customers of the two Web sites that did comply with his request.

New York, which has the highest cigarette excise tax in the country at
$1.11 a pack, has gone even further. It passed a law last year banning the
sale of cigarettes by mail order, telephone, and the Internet. The law
calls such sales a ''serious threat'' to public health and the state's
economy.

The law hasn't taken effect yet because it is being challenged by Brown &
Williamson Tobacco Corp., the nation's third-largest cigarette maker. The
Louisville-based company says the law is ''an unconstitutional
interference with interstate commerce.''

Brown & Williamson, the maker of Lucky Strike and Kools, filed suit
because it is trying with direct sales via mail, phone, and the Internet.
A company spokesman said the firm is verifying that only adults purchase
its products by checking a customer's stated age against other databases,
including driving records. He said the company is also collecting sales
and excise taxes assessed by the customer's home state.

Most Internet vendors, however, are not going that route. They see their
role as helping smokers sidestep oppressive taxes and regulations.
Qcigs.com of Louisville, for example, was founded on the principle ''that
the cigarette consumer is becoming increasingly frustrated with escalating
prices, reduced distribution of certain brand styles, and cigarettes being
locked up or behind a counter where you can't get at them without an
attendant.''

Many Internet vendors openly hawk duty-free, or diverted, cigarettes,
which is illegal under a federal law that just took effect. According to
discount-cigarettes.org, an online shopping and pricing guide for
cigarettes, duty-free cigarettes are made in the United States for
overseas markets and have different packaging, promotional offers and
blends.

Internet vendors sell duty-free cigarettes for $6 to $8 less a carton than
the corresponding brand made for domestic consumption. A pack of duty-free
Marlboros, for example, costs $19 instead of the regular Internet price of
$26.

Smokers are gravitating to Internet vendors because the prices are low,
service is good, and deliveries are often free if five or more cartons are
ordered. For many smokers, the convenience beats driving to New Hampshire
or paying annual dues to a warehouse club store, two places where prices
are competitive.

According to Maryann of Milton, the only downside of Internet cigarette
shopping is that one tends to smoke more. ''I don't know if it's because
they're less expensive, or you just seem to have an abundance of them,''
she said. ''If someone is trying to stop, I don't think this would be the
way to do it.''

Smoking out the best deal

Smokers are notoriously poor shoppers. They buy packs rather than cartons
and rarely shop around. But as cigarette prices and taxes have increased,
more and more smokers are looking for better deals, and finding then on
the Internet or in New Hampshire.

VendorPrice/ carton

Smokin4Less.com?$25.99

Cycocigs.com?$27.08

7-Eleven, Salem, N.H.?$27.49

BJ's, Avon? ?$28.44

Senacasmokes.com?$29.25

DirtcheapCig.com?$29.98

CVS, Dorchester$37.47

Stop&Shop, Quincy$37.79

?-On sale;

? -Price includes shipping charges based on shipment of five cartons;

? -Does not include cost of annual membership. Prices are based on the
purchase of Marlboro Medium 100s.