Cigarette makers lose challenge to new NYC pricing law

Reuters News
Posted: Jun 18, 2014 4:02 PM

By Jonathan Stempel

NEW YORK (Reuters) - A federal judge said on Wednesday New York City may prevent retailers from offering discounts on cigarettes and other tobacco products, rejecting an industry effort to halt enforcement of a law designed to curb tobacco purchases.

U.S. District Judge Thomas Griesa in Manhattan said the city may block stores from selling the products at below list price, whether by running sales, redeeming coupons, offering bulk discounts or providing free lighters or other non-tobacco products with purchases.

Industry trade groups, as well as cigarette makers, including Philip Morris parent Altria Group Inc, Reynolds American Inc and Lorillard Inc, complained that the limits violated their free speech rights and were pre-empted by other federal and state laws.

The limits on discounts were part of a sweeping law signed last November by former Mayor Michael Bloomberg as part of an effort to dissuade people from smoking.

Other changes included raising the minimum legal age to buy tobacco to 21 from 18, setting a minimum $10.50 price for a pack of cigarettes, boosting penalties for illegal tobacco sales and increasing enforcement against non-payment of excise taxes.

In upholding the limits on discounts, Griesa said pricing restrictions "designed to discourage consumption of a potentially harmful product" were constitutional so long as retailers could still provide "truthful, non-misleading information" to consumers.

"The ordinance only regulates an economic transaction - the sale of tobacco products below the listed price," he wrote. "It does not restrict the dissemination of pricing information and thus, it does not violate the First Amendment."

A lawyer for most of the plaintiffs referred a reporter to Altria, which did not have an immediate comment. Lawyers for Reynolds American and Lorillard did not immediately respond to requests for comment.

"This is a huge victory for the city's comprehensive efforts to reduce tobacco usage," Nicholas Ciappetta, a senior lawyer for the city, said in a statement.

Bloomberg's more than decade-old campaign to ban smoking in various public and private places and to discourage New Yorkers from smoking altogether has become a blueprint for other cities.

The City Council has estimated that the enacted changes have helped reduce smoking rates in the city by nearly one-third for adults and roughly one-half for children.

Bloomberg left office 5-1/2 months ago, after serving 12 years as mayor.

The case is National Association of Tobacco Outlets Inc et al v. City of New York et al, U.S. District Court, Southern District of New York, No. 14-00577.

(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)