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Philip Morris Targets Internet VendorsPhilip Morris USA has filed two lawsuits against the Internet-based cigarette retailers www.paylessmoke.com and www.cigmall.net. The suits charge that these and other Internet tobacco retail sites are marketing illegally imported cigarettes with PM USA’s trademarks, including the Marlboro brand.
According to the charges, the Internet sites are selling cigarettes imported in violation of the Imported Cigarette Compliance Act of 2000, have made false statements about the legality of the sales, and failed to comply with applicable tax laws and the federal Jenkins Act, which requires Internet cigarette retailers to report all sales to the customer’s home state taxing authority. The lawsuits are part of a comprehensive strategy by Philip Morris USA to address the sale of illegally imported, counterfeit, stolen, and untaxed or under-taxed cigarettes, according to a spokes-person for the company. “PM USA supports efforts by authorities to enforce laws regarding cigarette trade,” said the spokesperson. “In addition, the company advocates enhanced federal and state-level legislation to address the sale of contraband cigarettes, along with pursuing litigation or other actions against parties that undermine law-abiding retailers and wholesalers.” • DomRey Cigar Distributes Royal AgioThe company wins exclusive U.S. rights.DomRey Cigar, Inc. is now the exclusive distributor of the Royal Agio Cigar brands, Panter and Mehari’s, in the U.S. DomRey currently distributes the Cuvee, Cusano, and Perfect Cut brands.
Both DomRey Cigar and Royal Agio “are committed to delivering a new level of enthusiasm and support in order to grow the Panter and Mehari’s brands in the U.S.,” says a company spokesperson, who adds that retailers can look forward to an introductory special for all Royal Agio products followed by the launch of the new Panter Dessert Filters, “with their rich, creamy coffee taste and pleasant aroma.” For further information, retailers can reach DomRey Cigar at 800-347-1921, while wholesalers should contact CTS Concepts, a wholly owned subsidiary of DomRey Cigar Inc., at 888-347-1923. • Oregon Considers Cigarette TaxState asks voters to decide on a tax hike.Arguments that a proposal to raise the state’s cigarette tax to fund children’s health insurance violates Oregon’s constitution was rejected by an Oregon judge. As a result, a ballot vote in November will determine whether Oregon adopts a proposed 84.5 cent tax hike. The state has estimated that the increase will generate approximately $153 million for the current two-year budget, and earmarked the funds to provide health insurance for 100,000 Oregon children. However, tax increases adopted for similar reasons in New Jersey and South Dakota have fallen far short of such estimates, due to smokers crossing borders and going online to purchase cigarettes without paying the state tax.
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Philip Morris Cuts ProgramOff-invoice program slashed by major manufacturer.Philip Morris USA (PM USA) slashed its wholesale off-invoice promotional allowances by 50 cents per carton for a number of its brands, and by $2 per carton on another brand in September. The 50-cent cut brought the promotion from $4 to $3.50 per carton on Marlboro, Parliament, Basic, and L&M brands. The company’s Virginia Slims brand’s off-invoice promotional allowances will be slashed in half, dropping from $4 to $2, and other PM USA brands will see a price increase of 50 cents per carton. “We continue to analyze the marketplace to determine the appropriate level of promotional level to achieve our objectives,” said a PM USA spokesperson commenting on the changes. Citigroup tobacco analyst Bonnie Herzog said the program cuts are surprising in view of the fact that “a federal excise tax increase is likely.” She added that PM USA is an industry leader, which suggests that other tobacco companies will fall in line with similar pricing actions. • Florida Case MultipliesA legal tug-of-war ends with an opening for individual cases.The U.S. Supreme Court declined the tobacco industry’s appeal of what was originally a $145 billion verdict in Florida’s class action lawsuit. The Florida tobacco litigation—R.J. Reynolds Tobacco Co. v. Engle—began back in 1994 as a class-action lawsuit filed in Miami-Dade County. A lengthy trial resulted in the award of actual damages for three plaintiffs, as well as $145 billion in punitive damages to be split among the class following hearings on each individual case. In 2006, the tobacco industry won a favorable ruling from the Florida Supreme Court, which refused to reinstate the $145 billion in punitive damages awarded by a Florida jury or to revive the lawsuit’s class-action status. However, the court allowed some 700,000 individuals participating in the case (who could have won judgments under the original verdict) to use findings from the extensive jury trial to file new cases. Defendants in the case include Philip Morris USA, a unit of Altria Group Inc.; Brown and Williamson Holdings Inc., a unit of British American Tobacco PLC; Lorillard Tobacco Co., a unit of Loews Corp.; and R.J. Reynolds Tobacco Co., a unit of Reynolds American Inc. The tobacco companies asked the Supreme Court to bar smokers from using the existing jury findings to file new cases, and also argued that federal tobacco advertising laws bar state-level lawsuits over tobacco marketing and the failure to warn of smoking risks. “The Florida Supreme Court has abandoned a fundamental due process limitation,” the companies charge. The Supreme Court rejected that appeal, leaving the open the structure allowing plaintiffs in the case to bring new actions through January 2008. Philip Morris responded to the ruling with a promise to “vigorously defend” individual lawsuits. • General Tobacco and Premier Manufacturing SettleCourt ruling prompts resolution of a trademark dispute.General Tobacco (GT) resolved its trademark dispute against Premier Manufacturing after GT won a preliminary injunction in a Kentucky federal court, reports Vidal Suriel, founder and president of the Miami-based company. The judge in the case found that the horse logo and the associated trade dress have an established identity with the Bronco brand. His ruling, which was to become effective upon General Tobacco’s posting of a substantial bond, would have prevented Premier’s use of its current Wildhorse cigarette packaging. It will now be held in abeyance pending the completion of the terms of the settlementbetween General Tobacco and Premier. “General Tobacco has spent a considerable amount of time and money establishing our Bronco and Silver brands in the market as high quality products sold at a discount price,” says Suriel. “The horse on our packaging signifies the strength and quality of our product and has become associated with many of our products by consumers.” “We are pleased with the judge’s order and also pleased that we were able to subsequently engage in positive discussions with Premier that bring an micable resolution to this dispute,” adds J. Ronald Denman, executive vice president and general counsel for General Tobacco, which also makes the GT One, Silver, 32 Degrees menthol cigarettes, and Vaquero Little Cigars lines. “Hopefully both companies can now proceed to conduct business without the possibility of confusion among consumers.” • HOTLINESuit DeniedAn appeal by Southern and Western cigarette wholesalers alleging that Philip Morris USA and R.J. Reynolds engaged in price discrimination was recently rejected by the U.S. Supreme Court. The wholesalers had charged that wholesale incentive programs used by the tobacco companies to boost cigarette sales were designed to crowd out third-tier products, and that they suffered profit losses because customer demand for less expensive cigarettes kept them from meeting Philip Morris and R.J. Reynolds requirements for wholesale price breaks. India & UK Require Pictorial WarningsIndia and the United Kingdom are the latest countries to mandate large picture warnings on packs of cigarettes and other tobacco products. Approximately 14 countries now require such pictorial warnings. Nowell Joins RJR’s BoardLionel L. Nowell III, senior vice president and treasurer of PepsiCo, has been lected to the board of directors of Reynolds American Inc., and will serve on the board’s audit committee. • |
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“Philip Morris USA will protect our brands and the law-abiding businesses that sell them from unfair competition,” said Charlie Whitaker, vice president of compliance and brand integrity for PM USA in a statement about the suits. “We do not want our trademarks misused and do not want our brands associated with illegal activity.”
Agio Cigar, in operation since 1904, was awarded the “Royal” designation by the Queen of Holland in 2004. Royal Agio products have sales of 800 million cigars in 130 countries. The Panter brand, which was developed in 1932, is a global leader in the small cigar market.
In Oregon the tax increase proposal (Measure 50) is on the ballot as a constitutional amendment, a request that voters write the tax hike into the state’s constitution. Retailers in the state, who banded together to argue against the constitutionality of the proposal, say that it sets a dangerous precedent—and one that could lead to other categories receiving the same treatment.