Tobacco industry, state unite to fight ‘gray market’ sales

Thursday, April 29, 1999 | 11:56 a.m.

CARSON CITY -- Health officials and tobacco representatives joined hands in a rare alliance Tuesday to fight the so-called "gray market" -- the sale of cigarettes manufactured for foreign countries but sold in the United States at big discounts.

But conflicting testimony left the Assembly Taxation Committee confused and asking for help from its legal advisers to find out who was telling the truth.

Cigarettes manufactured for overseas distribution may be of an inferior blend or tailored for the smoking taste of that particular country. The packages often carry warning labels that are different from the requirements of the federal government.

But the cigarettes for various reasons do not make it to the foreign countries and are returned to the United State, where they are bought by distributors for resale. Discounts may be as high as 30 percent.

Legislators were told a federal law goes into effect in January that tobacco companies say will prohibit the "gray market" sales, but Matthew Fairshter, an attorney for companies dealing in the low-cost cigarettes, said there is nothing in the federal law to prohibit the sale.

The tobacco companies and the health advocates asked Nevada legislators to stop the sales immediately through Senate Bill 244.

Distributors of the low-cost cigarettes said big-time tobacco companies just want to stop the competition in the market.

"We are not smugglers or bandits. This is all about price competition," Tina Spaziani, who runs a small business distributing the cigarettes in Las Vegas, told the committee. "Give the small companies of Nevada a chance."

She and others said the distributors pay taxes on the cigarettes.

The low prices are the problem, Dan Geary of the American Cancer Society and Maureen Brower of the American Heart Association argued. Children and the elderly most often buy cigarettes based on the price, and the lower the cost, the more they buy, they said.

Geary said his organization has worked long to raise the price of cigarettes to discourage smoking.

They were joined by lobbyists from the big tobacco companies and the Nevada Retail Association, who are fearful of the loss of sales. Witnesses testified that in California, 30 percent of the cigarettes being sold came from the "gray market."

Attorney General Frankie Sue Del Papa also sent a letter in support of the bill.

The committee did not take any action on the bill.