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ASH PRESS RELEASE:
FOR IMMEDIATE RELEASE: Wednesday, March 16, 2005 // ATTN: Business,
Consumer, Health Editors
Internet Cigarette Sales Spark Enforcement Meeting, Possible Crackdown
Postal Service Meets With Attorneys General on Thursday [3/17]
The U.S. Postal Service will meet with representatives of various state attorneys general on Thursday to discuss how the Service can avoid legal liability for its role in delivering cigarettes sold illegally on the Internet. The result could be an agreement to curtail delivery of such cigarettes, or requirements that the sellers take steps such as verifying the age of purchasers, insuring that state cigarette taxes are paid, etc.
The meeting was sparked by a letter threatening the postal service with civil -- and possibly even criminal -- liability if it continues to deliver cigarettes purchased over the Internet. The nation's attorneys general have concluded that "virtually all" online tobacco retail sales are illegal, and several other companies which facilitate these sales have taken steps to reduce their potential legal liability by requiring Internet cigarette sales sites to provide proof that they fully comply with the law.
The letter to the Postal Service which sparked the meeting was sent by Action on Smoking and Health (ASH), a national antismoking organization. It warned that "under several legal theories which have already been sustained in court and/or resulted in settlements – companies selling cigarettes on the Internet appear to be guilty of crimes and also may be civilly liable. Those who facilitate the illegal sales – e.g., by delivering them – may share in that liability as co-conspirators, accomplices, and/or accessories."
ASH quoted a recent document prepared by 44 attorneys general which concluded that:
“Additionally, virtually all online tobacco retailers engage in illegal sales for at least one of the following reasons:
(1) they make no effort to verify the age of their customers, as required by state and local laws [See, e.g., http://slati.lungusa.org/ under “Youth Access”]
(2) they do not report shipments of cigarettes to the tobacco tax administrator of the state into which such shipments are made as required by 15 U.S.C. § 375 et seq. (‘the Jenkins Act’);
(3) they violate laws in certain states specifically regulating and/or prohibiting the sale of tobacco products over the Internet [See, e.g., Cal. Bus. & Prof. Code § 22963, and N.Y. CLS § 1399-ll];
(4) they violate state tax laws [See, e.g., http://slati.lungusa.org under “Tobacco Excise Tax”], and/or
(5) they utilize the Internet and the mail to complete illegal tobacco transactions, in violation of federal wire fraud and mail fraud statutes
[18 U.S.C. § 1341 and 1343].”
ASH's letter warned that if the Postal Service "provides delivery services for these purchases, or otherwise facilitates them, it may share in the potential legal liability, as well as the public embarrassment likely to result if the company is charged with such conduct [e.g. under the RICO statute] after it has been put on notice by the Attorneys General of the illegality of the sales and its role as facilitator. "
ASH's letter also pointed out that:
* At least one court has upheld the legal theory under which states as well as municipalities may file suit for such violations under the Racketeering and Corrupt Organizations Act [RICO].
* Several state law suits based upon online sales have resulted in favorable settlements. See, e.g., http://ash.org/internetsalescases.html.
* Several Attorneys General have met or are about to meet with credit card companies to urge them to review the legality of processing online cigarette purchases.
* PayPal has not only blocked Internet cigarette sales to customers in New York and California – which have laws which “prohibit or severely restrict the sale of tobacco over the Internet to residents in these states” – but also requires sellers to have “appropriate screening systems in place to prevent sales [of cigarettes] to California and New York residents.”
* Paypal also “requires sellers of tobacco to be prepared to show evidence that all necessary regulations are met, including but not limited to age verification requirements and payment of applicable sales and excise taxes.”
* MasterCard has reportedly begun blocking cigarette sales from certain Internet tobacco sites to customers in two states, and is actively reviewing the legality of credit card sales to customers in others.
* At least one Attorney General has urged postal officials and private carriers to stop delivering cigarettes bought online or face legal sanctions.
* Officials from the Federal Bureau of Alcohol, Tobacco, Firearms, and Explosives [BATFE] are meeting with credit card companies to explain how such sales can be illegal.
* Law enforcement officials have begun seizing cigarettes shipped illegally.
ASH was advised of tomorrow's meeting in a letter faxed to it today by the General Counsel of the U.S. Postal Service. The Postal Service's letter states in part:
"This is to acknowledge the receipt of your letter dated March 9, 2005, wherein you express concern about Internet sales of cigarettes . . .We take this matter very seriously and intend to respond to the substance of your letter once we have had the opportunity to consider the legal representations you assert in your correspondence. . . . I wish to assure you that we are sensitive to the concerns raised by you and state attorneys general concerning practices by certain cigarette retailers."
PROFESSOR JOHN F. BANZHAF III
Executive Director and Chief Counsel
Action on Smoking and Health (ASH)
2013 H Street, NW
Washington, DC 20006, USA
(202) 659-4310
http://ash.org
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