State Departments Information for Governments NJ Business NJ People New Jersey Home Page My New Jersey Home Page Treasury Home Page

Office of the State Treasurer


January 30, 2006

Lee Moore
(609) 292-4791

    Tom Vincz, NJ Treasury
(609) 633-6565
N.J. Enters Multi-State Agreement with Phillip Morris to Combat
Illegal Cigarette Traffic; Firm Will Put Voluntary Protocols in
Place to Discourage Unlawful Internet, Mail-Order Sales

 TRENTON – New Jersey has entered into a landmark, multi-state agreement with Philip Morris USA whereby the tobacco company will incorporate policies and procedures aimed at combating the illegal sale of Philip Morris cigarettes over the Internet and through the mails.

 In announcing the new agreement, Acting Attorney General Nancy Kaplen noted that Philip Morris is adopting the protocols voluntarily, as part of an agreement reached with New Jersey and 36 other participating state Attorneys General across the country.

 Under terms of the agreement, Philip Morris will halt the shipment of cigarettes to any of the tobacco firm’s direct customers who have been found by the participating states to be engaging in illegal Internet and mail order sales.

 In addition, the company has agreed to reduce the amount of product made available to direct customers found by the states to be engaged in the illegal resale of Philip Morris USA cigarettes to Internet vendors. Philip Morris will also suspend from the company’s incentive programs any retailer found by the states to be engaging in such illegal sales.

 “This is an important agreement -- one we anticipate will make a difference in discouraging the illicit sale of cigarettes by reducing the available supply of product to illegal sellers. This agreement sets a new standard for the industry, one we encourage other cigarette manufacturers to follow,” said Kaplen.

 Said New Jersey Division of Taxation Director William Thompson, ”We are pleased that a major retailer has taken a leadership role to stem the illegal sale of cigarettes by mail order and internet vendors. This agreement is one of several recent steps undertaken industry-wide
to combat illegal sales, prevent illegal use of cigarettes and stop evasion of cigarette tax law."

 According to Acting Attorney General Kaplen, the participating 37 Attorneys General across the United States believe that virtually all sales of cigarettes over the Internet are illegal because the sellers are violating one or more state and federal laws.

 Those laws include: (1) state age verification laws; (2) the federal Jenkins Act (which requires that such sales be reported to state authorities); (3) state laws prohibiting or regulating the direct shipment of cigarettes to consumers; (4) state and federal tax laws; (5) federal mail and wire fraud statutes; and (6) the federal Racketeer Influenced and Corrupt Organizations law. Many of the sales made via foreign Web sites also violate federal smuggling, cigarette labeling, money laundering and contraband product laws.

 The participating states also maintain that Internet cigarette sales present a significant risk to public health, because most Internet vendors fail to charge taxes, and it is well-established that lower cigarette prices lead to increased smoking rates.

 Moreover, while “brick-and-mortar” retailers check photo IDs to prevent children from buying cigarettes, the vast majority of Internet sellers have age verification systems that are inadequate or non-existent. Numerous studies have shown that the earlier an individual begins to smoke, the more likely it is that the person will become addicted, and thus age verification through photo IDs is essential to protect children from a lifetime of smoking.

 Today’s agreement is the third major development in the states’ multi-faceted effort to restrict the payment, shipment and supply operations of illegal Internet cigarette traffickers. In March 2005, the participating Attorneys General announced that the major credit card companies had all agreed to stop processing credit card payments for Internet retailers. Later in the year, both DHL and UPS agreed to stop shipping packages for vendors engaged in these illegal sales.

 Philip Morris USA 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 company-manufactured cigarettes via the Internet. Acting Attorney General Kaplen said that participating Attorneys General will continue to encourage other tobacco product manufacturers to take steps to reduce the supply of their cigarettes that are re-sold by illegal Internet cigarette traffickers.

>>Return to Previous Page