DOJ: News Release

McGrath: Tobacco Company Agrees to Plan to Curb Illegal Internet Tobacco Sales

HELENA – Attorney General Mike McGrath said today that Montana is one of 33 states to reach an agreement with Lorillard Tobacco aimed at preventing illegal sales of cigarettes via the Internet and through the mail. Attorneys general reached a similar agreement with Philip Morris USA in January.

“Selling or buying cigarettes over the Internet is illegal,” McGrath said. “Cutting off the supply of cigarettes to Internet vendors is an important step. I hope other tobacco companies will take similar action.”

The agreement announced Monday provides for:

  • termination of shipments of cigarettes to any of Lorillard’s direct customers that the Attorneys General have found to be engaging in illegal Internet and mail order sales;
  • reduction in the amount of product made available to direct customers found by the Attorneys General to be engaged in the illegal re-sale of Lorillard’s cigarettes to the Internet vendors and
  • suspension from the company’s incentive programs any retailer found by the Attorneys General to be engaging in such illegal sales.

McGrath said that the attorneys general believe that most sales of cigarettes over the Internet are illegal because the sellers are violating one or more state and federal laws, including:

  • state age verification laws;
  • the federal Jenkins Act (which requires that such sales be reported to state authorities);
  • state laws prohibiting or regulating the direct shipment of cigarettes to consumers;
  • state and federal tax laws;
  • federal mail and wire fraud statutes; and
  • federal anti-racketeering laws.

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

“Internet cigarette sales can also present a real risk to public health,” McGrath said. “Vendors may not charge taxes, leading to lower prices which can lead to increased smoking rates.

“And while retailers check photo IDs to prevent children from buying cigarettes, the majority of Internet sellers have age verification systems that are inadequate at best.”

“Lorillard always has supported compliance with laws dealing with the illegal sale of our products, and has instituted measures to punish those who are determined to be in violation of the law,” said Ronald S. Milstein, Senior Vice President, Legal and External Affairs of Lorillard. “We are pleased to enter this voluntary accord with the attorneys general to provide a framework for further cooperation with law enforcement and add additional safeguards against the illegal sale of our products. We believe that these measures will assist our active efforts to combat counterfeit product sales and will help us and our customers to comply with the laws and regulations intended to stop sales to and consumption of our products by youth.”

Today’s agreement is another development in multi-part efforts by state Attorneys General to restrict the payment, shipment and supply operations of the illegal Internet cigarette traffickers. In March 2005, 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, DHL, UPS and FedEx agreed to stop shipping packages for the vendors engaged in these illegal sales.

The negotiations with Lorillard were led by the New York Attorney General’s Office. Other Attorneys General joining the agreement are Alabama, Arkansas, California, Connecticut, Delaware, District of Columbia, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Nebraska, Nevada, New Hampshire, New Mexico, Northern Mariana Islands, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia and Wyoming.

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