Philip Morris to Halt Supplies to Illicit Dealers

ALBANY, N.Y. —  Philip Morris USA will stop supplying cigarettes to illegal Internet and mail-order dealers as part of an agreement with attorneys general for California and 36 other states and territories.

The nation’s biggest tobacco company voluntarily agreed to end shipments of any of its products to customers, Indian tribes and enterprises that the states deem illegal, New York Atty. Gen. Eliot Spitzer said Thursday.

The action is the third prong of the states’ efforts to curb the sale of cigarettes to minors over the Internet and by mail order, often to avoid substantial state sales taxes. In March, major credit card companies agreed to stop processing payments from Internet retailers. Months ago, shippers DHL and UPS Inc. agreed to stop shipping packages from the vendors.

“These illegal enterprises cannot remain in business without a steady supply of cigarettes, and thus restricting that supply can be very effective,” said Spitzer, who leads the group of attorneys general from 33 states, three territories and the District of Columbia.

A spokeswoman for Philip Morris, part of Altria Group Inc., said the agreement built on the company’s policies and programs to “preserve the integrity of our brands and the legitimate trade channels through which they are sold.

“Our voluntary agreement ... sets a framework for continued information sharing with law enforcement and support of their efforts to eliminate illegal sales of Philip Morris USA products,” spokeswoman Denise Keane said.

The company has agreed to change its practices nationwide, including:

* Ending shipments to any customers the attorneys general found engaged in illegal Internet and mail-order sales.

* Reducing the amount of cigarettes sold to customers that state officials find resell the product to Internet retailers.

* Suspending the incentive programs of any retailer engaged in the illegal sales.

The attorneys general consider all Internet cigarette sales to be illegal because they violate one or more state or federal laws aimed at stopping sales to underage smokers and collecting sales taxes. They said many of the sales through foreign websites also violate federal smuggling, cigarette labeling, money laundering and contraband laws.