Brown & Williamson Sues to Overturn Internet Sales
NEW YORK (Reuters) - Brown & Williamson Tobacco Corp. said on Monday it filed suit in federal court to overturn a New York state law banning cigarette sales via mail, phone and over the Internet, days after the No. 3 U.S. cigarette maker announced plans t
Brown & Williamson, U.S. unit of British tobacco giant British American Tobacco Plc, said last week it would use catalogs to sell some of its brands that are being squeezed off store shelves in an increasingly competitive retail market.
Last August, New York Gov. George Pataki signed a law that makes it a crime to ship or transport cigarettes sold via mail order, telephone or the Internet to residents of the state.
Brown & Williamson, the maker of Kool and Lucky Strike cigarettes, called the law an ``unconstitutional interference with commerce.''
``The (U.S.) Constitution prohibits any one state from regulating avenues of national commerce such as the Internet, the U.S. mails, and interstate shipping,'' David Remes, an attorney representing the company, said in a statement.
``I think they have a reasonable likelihood of being successful,'' Morgan Stanley Dean Witter tobacco industry analyst David Adelman said of Brown & Williamson's attempt to get the law overturned. ``There's not a law like this anywhere else (and) it's also an important initial test case, because this deals with certain federal issues and federal commerce.
``From a legal perspective, I think they have a very good argument,'' Adelman said.
Brown & Williamson, based in Louisville, Ky., said it formed a subsidiary, BWT Direct LLC, to sell Carlton, Tareyton, Raleigh and some other brands so customers will not switch to a competitor if they cannot find the cigarettes in stores.
The company's top-selling brands, Kool, Lucky Strike and GPC, will not be available through the program.
Retailers have become reluctant to sell smaller consumer brands as they look to cut costs, and the retail industry consolidates.
Brown & Williamson said it plans to launch direct selling in California, Kentucky, Florida, Georgia, Michigan, North Carolina, Texas, Oregon and Massachusetts, and would expand to other states later.
The company said smokers would be able to order cigarettes by mail, fax, telephone and, in the future, the Internet. The brands represent about 3.5 percent of the U.S. cigarette market, spokesman Mark Smith said.
Brown & Williamson also said it would ensure that all federal, state and local excise taxes are paid. It noted that New York's ban on mail, phone and Internet cigarette sales was passed after sales in retail stores dropped following a 55-cent per pack increase in New York's cigarette excise tax in March.
British American Tobacco's American Depositary shares climbed 1/8 to $13-7/16 on the American Stock Exchange.