Philip Morris Sues to Block Internet Cigarette Sales
New York, Sept. 23 (Bloomberg) -- Philip Morris Cos., the world's largest tobacco company, said it sued to block illegal sales of Marlboro and other cigarettes over the Internet, as black market sales increase because of higher U.S. prices.
The New York-based company's cigarette unit, Philip Morris U.S.A., said it filed eight lawsuits in New York and Los Angeles against more than a dozen Web sites, seeking to block the sales. The suits accuse the Web vendors of using Philip Morris trademarks to promote and sell illegally imported cigarettes and making false claims about the legality of the sales.
The tobacco industry increased prices after agreeing to a $206 billion settlement with 46 states in 1998, and many states and cities also levied additional taxes, putting the price of a pack of cigarettes to as much as $7.50 in New York City. More than 600 Web sites illegally sell cheaper cigarettes and ``it appears to be growing,'' said Philip Morris spokesman Brendan McCormick.
``In the past, we have brought lawsuits against people using the black market in more traditional ways,'' he said. ``Now they are using the Internet.''
The sites, with names such as cheapmarlboro.com, 18orless.com and dutyfree-cigarettes.com, are based overseas, such as in Russia, Spain and Switzerland, according to the suits.
Shares of Philip Morris rose 46 cents to close at $43.15 in New York Stock Exchange composite trading.
The black market cigarettes are either made in the U.S. and packaged for overseas sales or made overseas for sale there, McCormick said. All Philip Morris cigarettes sold in the U.S. are made in this country, and the company has notified the U.S. Customs service that it has not given permission for anyone to use its trademarks on imports, he said.
The only legal remedy for Philip Morris is to sue for trademark infringement, false advertising and unfair competition. Only the states and federal government can sue for the lost tax revenue, McCormick said.
The Web sites fail to ensure the cigarettes aren't sold to children and don't pay taxes, falsely claiming their products are tax-exempt, Philip Morris said. The company said it expects to file more suits as its investigation continues.
In the suits, Philip Morris asks that a court order the sites to stop using company trademarks and halt the illegal importation. It also can ask the court to order the Internet service providers to shut down the sites, McCormick said.
``Philip Morris U.S.A. is committed to pursuing all available options to ensure that its products are sold in strict compliance with the law,'' Jack Holleran, vice president of brand integrity for Philip Morris U.S.A., said in a statement.
In the 1998 settlement, the cigarette makers said they would pay about $206 billion over 25 years to settle the 46 states' lawsuits seeking to recover their cost of treating smoking-related illnesses. As part of the settlement, the industry agreed to restrictions on outdoor advertising, brand-name sponsorships, and distribution of free samples and apparel that display cigarette brand names.
The companies settled separately with the other four states.