Critics say selling cigarettes on the Web threatens to undo decades of public-health progress
The Barbi's Butts Web site isn't what you might think.
Visitors to BarbisButts.com can order a carton of Marlboros for $28.75 -- about a third less than in a bricks-and-mortar store in New York. Serious bargain hunters can buy cut-rate cigarettes with names such as Market and Niagara for as little as $10 a carton, or $1 a pack.
The Web site, decorated with a silvery profile of a buxom woman, says the company ships its wares from an Indian reservation near Salamanca in western New York State. Barbi's Butts promises that all information about customer orders will be kept "strictly confidential" -- which could make it easier for smokers to avoid paying state excise taxes on the cigarettes they buy.
Sites like Barbi's Butts are cropping up these days thanks to soaring prices for cigarettes in the wake of the 1998 tobacco settlement. As part of that deal, cigarette makers pledged to pay state governments $206 billion over 25 years. The companies are raising the money by charging more for cigarettes.
More than 200 Web sites peddle cigarettes, according to a recent survey by the Massachusetts Health Department. Among them: Nicotinecity.com, Cigarettesbymail.com and Halfpricecigarettes.com, which warns, "Smoking half price cigarettes will still kill you, you'll just die richer." Some, like Barbi's Butts, are based on Indian reservations. Others are the online outposts of small tobacco retailers and distributors across the country and abroad.
The proliferation of sites has antismoking activists and state officials worried. They fear that the widespread sale of cheap -- and often untaxed -- cigarettes will lead to increases in cigarette consumption and eventually cost state governments billions in lost tax revenue. They also say Internet sales could make it easier for kids to get their hands on cigarettes. And they worry that Web sites could turn into a powerful new marketing tool.
Online cigarette sales "could be devastating to the tobacco-control policies we've implemented over the past 20 years," says Gregory Connolly, director of the Massachusetts state tobacco-control program. He says strict government regulation of such sales is necessary so that "public-health interests outweigh commercial interests."
New York Ban
Currently, the electronic sale of cigarettes is legal in the U.S. A number of states, though, have moved to rein in the cigarette e-tailers, trying with varying degrees of success to enforce age restrictions and collect taxes. New York last year enacted a law banning the sale of cigarettes by mail order, telephone and the Internet. The law made it illegal for any company to sell cigarettes through these means to New York consumers; it also made it illegal for a shipper to deliver cigarettes to people in New York. The state Legislature said that such cigarette sales posed a "serious threat" to public health and the state economy. New York's cigarette excise tax is the highest in the nation, at $1.11 a pack.
But British American Tobacco PLC's Brown & Williamson unit, the country's third-largest cigarette maker, and Santa Fe Natural Tobacco Co., the small New Mexico company that makes American Spirit cigarettes, sued in U.S. District Court in Manhattan last year to overturn the law, saying it was an unconstitutional interference with interstate commerce. The judge hearing the case agreed and struck down the law earlier this year.
In her June ruling, Judge Loretta A. Preska wrote that the New York law was protectionist and discriminatory because it favored local tobacco retailers over out-of-state competitors. She said there were plenty of measures the state could use to accomplish its goals short of an outright ban on the home delivery of cigarettes. Judge Preska said the state could require Internet retailers to verify the age of their customers before shipping cigarettes and move to collect whatever taxes are due.
The state is appealing the ruling. A spokesman for New York Gov. George Pataki also says the governor will ask the state's congressional delegation to introduce federal legislation to regulate mail-order and Internet cigarette sales.
Collecting taxes on cigarettes sold online isn't easy. A federal law, the Jenkins Act, requires companies that ship cigarettes across state lines to report the names and addresses of buyers (other than licensed distributors) to state tax authorities. The law says companies must file those reports every month or risk being fined.
But state tax collectors say that the law is widely flouted. Many Web sites promise not to divulge the identity of purchasers and states generally haven't been aggressive about pursuing them since the amount of money involved is relatively small. "Compliance is really hit or miss," says Dennis Maciel, chief of the excise-tax division of California's tax department. He estimates that fewer than 10% of the out-of-state companies selling cigarettes through the mail to California residents are submitting Jenkins Act reports.
Internet tobacco sellers based on Indian reservations say they aren't bound by the Jenkins Act or other U.S. laws because the reservations are considered sovereign territories.
Smokesgalore.com, which says it is based on a reservation in upstate New York, tells customers: "We also do not report you to any states [sic] authority. Our position as a Native American retailer allows us to sell without reporting to any state."
Even when states do get the names of cigarette buyers, they are often loath to go after individual smokers for the taxes they owe. California has moved to enforce excise-tax payments, pushing out-of-state companies to submit lists of their California customers and then sending the customers tax bills. Between 45% and 65% of the smokers contacted by the state have paid up since the program started, according to Mr. Maciel.
Mr. Maciel figures that California is missing out on at least $15 million a year in cigarette excise taxes on sales from out-of-state sources. The state takes in a total of about $1.2 billion annually from tobacco excise taxes, he said.
Tax collection isn't the only headache states face when it comes to Internet cigarette sales. Enforcing age-restriction laws is also a problem. Kurt Ribisl, a professor at the University of North Carolina School of Public Health who studies online tobacco selling, says Internet shoppers should have to present the same kind of proof of age required to buy cigarettes in a regular store -- a government-issued photo ID.
Identification would need to be checked again when the cigarettes are actually delivered, he says, to ensure that they end up in the right hands. But policing such transactions wouldn't be easy, and making such a system work would require compliance not just by cigarette sellers but by delivery services.
Michigan, Oregon, Washington and other states have taken steps to prevent online tobacco merchants from selling to kids. Rhode Island, for instance, has enacted a law requiring an adult to sign for delivery of any cigarettes shipped to customers in the state. Bills before the U.S. Congress would also prohibit Internet cigarette sales to people under 18 years old.
State action isn't enough, says Mr. Ribisl. "Internet cigarette sales pose serious regulatory challenges," he says. "What we really need is some federal leadership."
So far, few kids are using the Internet as a way to get cigarettes. A study by the University of Michigan found that in 1999, fewer than 2% of teenagers who bought cigarettes did so through the mail. The American Legacy Foundation, an antitobacco organization in Washington, D.C., that closely tracks tobacco use by children, has found that almost no kids are actually buying cigarettes online.
In part, that's because there are usually a number of obstacles that discourage kids from online cigarette purchases. Generally, payment must be made by credit card. Often, there is a minimum order size. Kids also can't be sure that the cigarettes will be delivered at a time when the shipment won't be discovered by adults.
The main thing keeping kids from buying online, however, according to Dr. Ribisl, is that prevention measures for offline purchases haven't been so great. It is easier for kids to get cigarettes from stores or friends. "I don't think there's a big need for kids to turn to the Internet now," he says. But, he warns, that is likely to change if enforcement of minimum-age laws at stores improves.
Worries Over Marketing
Another concern is whether the Web will turn into a way to evade restrictions on tobacco advertising. German company Reemtsma GmbH, for example, has a Web site promoting its West brand of cigarettes. Visitors can view English-language television commercials that feature, among other things, a bikini-clad woman smoking. (Television advertising of cigarettes is illegal in the U.S.) The site also offers free e-mail to users, as well as video games including one with a Formula One car-racing theme -- which some critics say could appeal to children.
Major U.S. tobacco companies have moved cautiously online. The only brand offered online by a U.S. manufacturer is R.J. Reynolds Tobacco Holdings Inc.'s Eclipse cigarette -- which the company says may be less likely to cause cancer. The company says it uses strict controls to ensure that only people 21 years of age can purchase the cigarettes, which, rather than burn tobacco, primarily heat it using a carbon heating element embedded in the end of the cigarette and lit with a match. Brown & Williamson has said it eventually intends to start selling some of its smaller, less successful brands online, while Philip Morris Cos., the nation's largest cigarette maker, says it favors an outright ban on Internet tobacco sales. The company says it believes all cigarette sales should be conducted face-to-face so a purchaser's age can be verified.
Some tobacco manufacturers are, however, taking advantage of the fact that the Web provides more space to address more complex issues than is available on cigarette packaging. They are using Web sites mainly to discuss the health dangers of cigarettes and the fact that smoking is addictive. And some are using the Internet to provide more information about toxins in cigarettes and efforts to remove them. R.J. Reynolds has a Web site with detailed scientific data about Eclipse. Star Scientific Inc., a Chester, Va., tobacco firm, has posted an in-depth discussion of its work to remove cancer-causing chemicals from tobacco leaf.
But many tobacco-control activists believe it is only a matter of time before cigarette companies start using the Internet as a way to gather information about smokers and potential customers and use it to market their brands. If a regular customer quits smoking and stops placing orders, for example, says Dr. Connolly, the director of the tobacco-control program for Massachusetts, a cigarette company could theoretically try to lure them back with coupons or other enticements.
"That's the most frightening thing" about the electronic marketing of cigarettes, Dr. Connolly says.