Lorillard Sues Store

Didn't know smokes were counterfeit, retailer says

Published in CSP Daily News

, N.C. A customer's complaint about a pack of Newports has landed a Greensboro, N.C., convenience store in federal court, where Lorillard Inc. is pursuing an ongoing legal war to stamp out sales of counterfeit cigarettes, reported The Business Journal of the Greater Triad Area.

Lorillard is suing Casey's CITGO Inc. over the sale of a few dozen packs of counterfeit Newport cigarettes, the report said.

Casey's claims it did not know the cigarettes were fakes and that it acted responsibly by notifying Lorillard when a customer complained [image-nocss] about the cigarettes in early March.

The trademark-infringement case, filed in March in the U.S. District Court in Greensboro, is just one of scores of such lawsuits that Lorillard has filed since 2002 in an effort to combat the growing sales of counterfeit cigarettes nationally.

Our goal is to stop any counterfeiting of our product and to keep it out of the marketplace, Hanna Hasl-Kelchner, associate general counsel for Lorillard and the corporate attorney responsible for overseeing the legal battle against counterfeits, told the newspaper. Our main concern is preserving the integrity of our product.

Phil Martin, vice president for consumer goods at Dallas-based Authentix Inc., said a carton of counterfeit cigarettes (10 packs) can be made for as little as $2 in countries such as China. Authentix helps companies identify and track counterfeit products, including cigarettes, though the firm has no U.S. cigarette makers as clients.

The gap between the cost of making fakes and their potential sales price leaves a huge profit margin for counterfeiters. According to the Business Journal, citing figures from the Department of Homeland Security, cigarettes were the most-counterfeited item discovered by U.S. Customs agents in 2003, with $41.7 million worth of the cigarettes seized.

Lorillard executives said they are not sure how much of an impact counterfeits are having on the company's earnings, but since 2002, the company's annual report has warned investors that counterfeits adversely impact sales by the manufacturer and potentially damage the value and reputation of those brands.

Local, state and federal governments all lose out on millions of dollars of lucrative cigarette taxes, said the report. Tobacco industry executives and others say the growing problem of counterfeits in the United States is in part due to higher taxes imposed on cigarettes in recent years. U.S. law enforcement agencies say, cigarette counterfeiting, as well as smuggling, have become major businesses for organized crime and even terrorist groups.

Newport is a target for counterfeiters because it is the country's leading menthol brand and the second-leading brand overall, behind Philip Morris' Marlboro, which is also a favorite target of counterfeiters, the report said.

Lorillard has pursued counterfeiters aggressively. In one major Illinois case, a judge has imposed almost $4.5 million in fines on people and companies that Lorillard accused of selling fake Newports. The company has cases pending in 10 other states, including North Carolina.

The lawyer for Casey's CITGO, Gerald C. Parker, told the paper that he could not comment in detail on the case, but he hoped it would end in a settlement. I think Lorillard really would like to know who in the hell got these cigarettes and counterfeited them more so than they are interested in us, he said. We just wish this damn thing would go away.

Parker said he and his client are sharing information with Lorillard on who they bought the counterfeit Newports from, but that distributor himself may not have known they were counterfeit. We don't want to fight Lorillard, Parker told the paper. It's like fighting the federal government.

Lorillard also would not comment in detail on the lawsuit. Pretrial hearings in the case are scheduled for May, the report said.

If there's anybody out there that thinks, It's only a few packs, it doesn't matter', Hasl-Kelchner warned, we basically have a zero-tolerance policy.