Credit Card Firms Stop Handling Internet Cigarette Sales
The agreement, which was signed March 17 and took effect immediately, seeks to prevent the sale of cigarettes and other tobacco products over the Internet and is aimed at those who try to avoid sales taxes or who sell to underage customers.
Virtually all card companies, including Visa, MasterCard, American Express and Discover, no longer will process orders placed through Web sites nationwide and overseas that sell cigarettes and tobacco products.
Smokers will have to use checks, money orders or some other payment method. Tobacco products have never been a non-mailable substance in the United States, and they can be shipped by carriers including the U.S. Postal Service.
"We are taking a multifaceted, multi-jurisdictional approach to halting illegal Internet cigarette sales," said William H. Sorrell, Vermont attorney general and president of the National Association of Attorneys General. "We believe this is the most effective and efficient strategy to enforce state and federal laws regulating online sales."
Michael Bouchard, ATF assistant director for field operations, said "ATF investigations show that millions of dollars each year in illegal sales of cigarettes are diverted to fund terrorists and criminal organizations."
Attorneys general offices in New York, California and Oregon led the negotiations with the credit card companies.
New York attorney general Eliot Spitzer began the initiative in August when he contacted credit card companies and requested that they stop processing transactions for Internet retailers selling cigarettes into New York. In January, 42 attorneys general sent a letter to each of the card companies, asking that they not allow their cards to be used for illegal Internet purchases.
Details regarding the initiative were discussed at a March 17 meeting in Washington, DC, that included the attorneys general of Colorado, Oregon, Pennsylvania and Vermont as well as representatives from the offices of the attorneys general of California, Idaho, Louisiana, Maryland, New York and Wisconsin. Other participants included members of the ATF and the major credit card companies.
All credit card companies have longstanding policies prohibiting the use of their cards for illegal transactions. At the meeting, the state and federal authorities outlined the many laws that are violated when cigarettes are sold online.
The long-unchecked practice of buying cigarettes and chewing tobacco over the Internet across state lines is illegal in many states, but enforcement has been difficult, according to news reports. Attorneys general said virtually all sales of cigarettes over the Internet are illegal because the sellers violate 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 the direct shipment of cigarettes to consumers.
* State and federal tax laws.
* Federal mail and wire fraud statutes.
* The federal Racketeer Influenced and Corrupt Organizations Act (RICO), a law providing for extended penalties for criminal acts performed as part of an ongoing criminal organization.
Many of the sales made by foreign Web sites also violate federal smuggling, cigarette labeling, money laundering and contraband product laws, the attorneys general said.
Also, according to the attorneys general, cigarettes sold on the Internet are much cheaper than cigarettes sold by brick-and-mortar retailers because the Internet sellers falsely advertise that their cigarettes are tax-free.
And lower prices are offered on the Internet and in mail-order catalogs by tax-exempt Indian merchants and retailers in states with lower taxes.
The attorneys general added that while brick-and-mortar retailers check photo IDs to prevent children from buying cigarettes, the vast majority of Internet sellers have age-verification systems that are inadequate, often simply requiring the purchaser to click a button stating that he or she is 18 or older.
Along with adopting policies to prohibit the use of credit cards for the illegal sale of cigarettes over the Internet, the card companies also agreed to investigate and take action regarding any Internet sellers identified by law enforcement as using their cards for illegal online cigarette sales.