No Min. Price in Mass.

State can't set floor for cigarettes

Published in CSP Daily News

BOSTON -- Massachusetts can no longer set a minimum price for cigarettes, and retailers are free to charge whatever they want for Marlboros and Kools, according to a lawyer who successfully challenged the state's cigarette pricing regulations, reported the Boston Globe.

People are going to start shopping for the lowest price cigarettes the same way they shop for anything else, Joseph P. Fingliss Jr. of Fall River said after receiving a final decision from the state Appellate Tax Board.

But a spokesperson for the Massachusetts [image-nocss] Department of Revenue, the loser in the case, said the agency intends to ask Attorney General Thomas F. Reilly to appeal the tax board's decision in the courts. In the meantime, the spokesperson said, the agency believes the minimum-pricing regulations remain in effect.

Timothy Connolly , the Department of Revenue spokesman, declined to say what action the agency would take if retailers begin selling Marlboros for less than the state-set minimum price of $4.78 a pack. I don't know how that would play out, he told the newspaper. We don't consider this a precedent-setting decision.

A state law passed roughly 60 years ago barred retailers from selling cigarettes below cost to drive rivals out of business, said the report. But in recent years, enforcement of the law has had the effect of establishing a pricing floor for cigarettes. When the state set minimum prices for every brand of cigarettes in 2003, some retailers were forced to raise their prices as much as 90 cents a pack.

The Department of Revenue suspended Expedito Duarte's license to sell cigarettes in 2003 after a competitor complained that the operator of two New Bedford convenience stores was selling below the state minimum. Duarte appealed the suspension to the Appellate Tax Board, arguing that he had to lower prices to compete with other retailers in his area, most of whom were selling below the state-set minimums.

In its ruling, the Appellate Tax Board, a quasi-judicial administrative body, said the enforcement efforts were arbitrary, unconstitutional and not in compliance with the state law prohibiting sales below cost. The tax board said the cigarette pricing regulations were invalid and of no legal effect.

A spokesperson for CVS Corp. told the Globe that the company was not aware of the ruling and has no plans to change its pricing strategy. An official at gas station/c-store retailer Hess Inc., told the paper that the company will match the lowest cigarette prices in the market.

Fingliss said Duarte is selling many cigarettes below the state minimum. For example, said the report, he was selling Marlboros for 26 cents a pack less than the state minimum yesterday, while his carton price was $8.49 below the state minimum of $48.48.

The state has no right to set the price of tobacco products, Fingliss said.

Fingliss and Carlin Phillips, a Dartmouth lawyer, are preparing to file a class-action lawsuit charging that the Revenue Department illegally inflated the prices and taxes of cigarettes by establishing minimum prices, the report said.