NEW YORK — A ban on tobacco product discounts in New York City will go into effect Aug. 1 after the Big 3 manufacturers opted not to appeal a ruling by a U.S. District Court judge, according to the Winston-Salem Journal.
Altria Group Inc., Lorillard Inc., and Reynolds American Inc. had argued that not allowing discounts violated their free-speech rights, and that city-level limits were superseded by state and federal laws.
Judge Thomas Griesa ruled in June that “the ordinance only regulates an economic transaction — the sale of tobacco products below the listed price. It does not restrict the dissemination of pricing information and thus, it does not violate the First Amendment.”
A pack of cigarettes in New York are subject to a city tax of $1.50, a state tax of $4.35 – highest in the country – and the federal tax of $1.01, for a total tax of $6.86.
The discounts allow stores to sell tobacco products below list prices. Discounts can include running sales, redeeming coupons, offering bulk discounts or providing free lighters or other non-tobacco products with purchases.
According to industry analysts, discounting can be worth billions of dollars a year industry-wide in the United States.
Anti-tobacco groups say the discounts are offered in part to keep product prices low enough to attract more smokers, including youths, than they would with pricing already affected by local, state and federal excise taxes.
Officials from Altria, Lorillard and Reynolds declined to comment directly on the ruling or their litigation strategy.
Reynolds spokesman Bryan Hatchell said the law has the potential to be counterproductive to the goals of the anti-tobacco groups, including “efforts to keep tobacco out of the hands of children.”
“By further driving up the price of tobacco at legitimate retail outlets, black market sellers, who do not verify age and routinely sell products to children, will profit even more,” Hatchell said.
When the companies were asked if they were concerned about a legal precedent being set on discounting, Hatchell said Reynolds declined to comment.
Robert Bannon, director of investor relations for Lorillard, said a precedent “can always be a concern, but in this case, we decided not to pursue the appeal process.”
Susan Liss, executive director of the Campaign for Tobacco-Free Kids, said the discounting ban “is a big win for kids and public health that New York City can move forward with implementing this law.”
“These rulings show that tobacco discount bans stand on firm legal ground. They supply strong legal support for an important new tool that state and local governments should use to increase the price of cigarettes and other tobacco products and reduce tobacco use, especially among kids.”