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July 10, 2006

Miller: Lorillard Tobacco Agrees to Steps to Reduce Illegal Internet Cigarette Sales

The measures will reduce the supply of cigarettes to illegal Internet traffickers.

DES MOINES.   Attorney General Tom Miller said today that Lorillard Tobacco Co. has agreed to several measures to combat the illegal sale of its cigarettes over the Internet and through the mail. The protocols are being adopted voluntarily by Lorillard pursuant to an agreement reached with 33 Attorneys General across the country. [Click here for a copy of the agreement.]

"The bottom line here is that kids will have less access to cigarettes," Miller said. "And that's very important because most smokers start when they are young.

"Most traditional retailers check photo IDs to prevent children from buying cigarettes, but the great majority of Internet sellers have wholly inadequate age-verification systems," he said. "This will help prevent cigarettes from being available to kids over the Internet."

The protocols provide for: (a) termination of shipments of Lorillard's cigarettes to any of its direct customers that the Attorneys General have found to be engaging in illegal Internet and mail order sales; (b) reduction of product made available to direct customers who are found by the Attorneys General to be engaged in the illegal re-sale of Lorillard cigarettes to Internet vendors; and (c) suspension from Lorillard incentive programs of any retailer found by the Attorneys General to be engaging in such illegal sales.

A similar agreement was reached between the states and Philip Morris USA in January. The agreements are part of a comprehensive effort by state Attorneys General to restrict the supply, payment and shipment operations of illegal Internet cigarette traffickers. Last year, all the major credit card companies agreed to stop processing credit card payments for Internet cigarette retailers, and DHL,UPS and FedEx have agreed to stop shipping packages for vendors engaged in these illegal sales. Miller said state attorneys general also have asked the U.S. Postal Service to refrain from delivering cigarettes for Internet sellers.

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The Attorneys General believe that virtually all sales of cigarettes over the Internet are illegal because the sellers are violating one or more state and federal laws, including: state age verification laws; the federal Jenkins Act (which requires that such sales be reported to state authorities); state laws prohibiting or regulating direct shipment of cigarettes to consumers; state and federal tax laws; federal mail and wire fraud statutes; and the federal RICO law. Many sales made by foreign web sites also violate federal smuggling, cigarette labeling, and money laundering laws.

In January, Philip Morris USA came to an agreement similar to the Lorillard agreement announced today and was the first tobacco product manufacturer to agree to reduce the supply of cigarettes to direct customers who supply vendors engaged in the illegal re-sale of its cigarettes on the Internet.

Idaho Attorney General Lawrence Wasden said: "Lorillard should be commended for taking a major step to cut off the supply of cigarettes for subsequent illegal Internet sales. I hope other tobacco companies will take similar steps to ensure that they do not supply these illegal vendors." Wasden and Iowa Attorney General Tom Miller are Co-Chairs of the Tobacco Committee of the National Association of Attorneys General.

Lorillard's Ronald S. Milstein, Senior Vice President, Legal and External Affairs, said: "Lorillard always has supported compliance with laws dealing with the illegal sale of our products, and has instituted measures to punish those who are determined to be in violation of the laws. We are pleased to enter this voluntary accord with the attorneys general to provide a framework for further cooperation with law enforcement and add additional safeguards against the illegal sale of our products. We believe that these measures will assist our active efforts to combat counterfeit product sales and will help us and our customers to comply with the laws and regulations intended to stop sales to and consumption of our products by youth."

The negotiations with Lorillard were led by the New York State Attorney General's Office. The Attorneys General from the following jurisdictions joined the agreement: AL, AR, CA, CT, DE, DC, GA, HI, ID, IL, IA, KS, KY, LA, MD, MA, MT, NE, NV, NH, NM, NY, Northern Mariana Islands, OK, OR, SC, SD, TN, UT, VT, WA, WV, and WY.


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