FTC called to investigate cigarette sales trust violations

September 09, 1999|By Scott Shane | Scott Shane,SUN STAFF

Anti-smoking groups in Maryland and neighboring states are asking the Federal Trade Commission to investigate whether cigarette makers have violated antitrust laws by cutting prices at stores near Maryland's border to boost cross-border cigarette sales.

Tobacco companies deny any such discounting and say the anti-smoking groups created a cross-border smuggling problem by pushing for an increase in Maryland's tax.

Maryland raised its cigarette tax July 1 from 36 cents to 66 cents per pack, the highest rate in the mid-Atlantic region. Anti-smoking activists and Gov. Parris N. Glendening had sought a much steeper increase, to $1.36 per pack, arguing that the higher price would discourage teens from smoking.

Since July 1, some Delaware stores have reported increased sales to Marylanders, who are violating the law if they bring more than two packs into the state at a time. In addition, three alleged large-scale cigarette smugglers have been arrested in Maryland since the tax increase took effect.

In a complaint to be filed today with the FTC, an anti-smoking organization, Smoke Free Maryland, says tobacco industry documents suggest that the industry used discounting in New England in 1993 to boost the cross-border trade and discredit an increase in Massachusetts' cigarette tax. The complaint is joined by three other anti-smoking organizations: Smoke Free Delaware, Coalition for a Tobacco Free Pennsylvania and the Cause Children Count Coalition of Washington, D.C.

The complaint notes a Tobacco Institute document and an American Tobacco Co. document, both from 1992, that discuss strategies to blunt a scheduled increase in the Massachusetts cigarette tax. The American Tobacco Company document outlines the "Massachusetts Tax Buster" program that included discounts in bordering states.

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