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Court: NY Can Ban Online Cigarette Sales

Although it's a law that would seem patently difficult to enforce, a federal appeals court has upheld a New York State law that prohibits the sale of cigarettes online or via mail order.

While it's as easy to circumvent as a plain brown wrapper, New York banned Internet cigarette sales in 2000, saying that such transactions posed a serious threat to public health and the economy. The law was challenged by several tobacco companies.

Ironically, one of the things pushing demand for online cigarette sales in the Empire State is that New York City has imposed a new tax making the Big Apple the most expensive place in the nation to buy a pack of smokes. In July, the first month the tax was in effect, cigarette sales were halved.

The 2nd U.S. Circuit Court of Appeals reversed a federal court ruling that had thrown out the state law. Not that the lower court had endorsed smoking - it based its decision on a finding that the statute favored local tobacco retailers over out-of-state competitors.

The challenge to the state law was brought by Brown & Williamson Tobacco, a unit of British American Tobacco PLC, and Santa Fe Natural Tobacco Co., now a unit of R.J. Reynolds Tobacco Holdings.

The law was intended to make it more difficult for children to get cigarettes and to allow fewer smokers to avoid a state excise tax on cigarettes.

New York State Attorney General Eliot Spitzer hailed the appeals court decision, and was quoted as saying that although state laws ensure that the sale of cigarettes to individuals remains legal, the ruling "reaffirms the power of the state to prevent the circumvention of those laws by Internet, mail order and telephone sellers."

The lower court judge had said that Brown & Williamson had proven that the law discriminates against interstate commerce (and by extension e-commerce) by trying to isolate New York from the national cigarette retail market. It's unclear whether the tobacco companies will pursue another avenue of appeal.