ATTORNEYS GENERAL, LORILLARD REACH AGREEMENT TO REDUCE ILLEGAL INTERNET CIGARETTE SALES
New protocol will reduce supply to illegal Internet cigarette traffickers

Maryland Attorney General J. Joseph Curran, Jr. today announced that Lorillard Tobacco Co. (“Lorillard”) has agreed to implement new measures to prevent the illegal sale of its cigarettes over the Internet and through the mail. These protocols are being adopted nationwide and voluntarily by Lorillard pursuant to an agreement reached with 33 Attorneys General across the country. A similar agreement was reached with Philip Morris USA in January. “Internet sales of cigarettes can and do harm kids,” said General Curran. “Most internet age verification systems are inadequate, and without that critical safeguard it is much more difficult to keep cigarettes out of the hands of kids. Studies show however, the longer we keep those cigarettes out of kids hands, the better the chance they will NOT become lifetime smokers.”

The protocols provide for: (a) termination of shipments of cigarettes to any of Lorillard’s direct customers that the Attorneys General have found to be engaging in illegal Internet and mail order sales; (b) reduction in the amount of product made available to direct customers found by the Attorneys General to be engaged in the illegal resale of Lorillard’s cigarettes to the Internet vendors; and (c) suspension from the company’s incentive programs any retailer found by the Attorneys General to be engaging in such illegal sales.

The Attorneys General believe that virtually all sales of cigarettes over the Internet are illegal because the sellers are violating one or more state and federal laws, including: (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; (6) the federal Contraband Cigarette Trafficking Act. Many of the sales made by foreign websites also violate federal smuggling, cigarette labeling and money laundering laws.

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