Discount cigarette companies sue Colorado

Three discount cigarette makers sued Colorado in U. S. District Court last week, claiming a ballot measure raising the state’s tobacco taxes gives their larger competitors an unfair advantage by setting a minimum price on all brands, and that the provision was created in a “backroom deal” with the country’s largest cigarette maker.

The little- known provision that sets a minimum price would cause the discount makers to lose ground to Philip Morris USA in their ability to sell their products at much lower cost than name brands such as Marlboro, according to the lawsuit.

The lawsuit was filed Thursday by Liggett Group, Vector Tobacco and XCaliber International, who are asking the judge for a temporary injunction that would prevent the state from enforcing the minimum price mandate should the ballot measure pass. Gov. Jared Polis, Attorney General Phil Weiser and the state general assembly’s legislative council, a nonpartisan research staff, are defendants.

The ballot measure, known as Proposition EE, would increase taxes on cigarettes and tobacco products and add a new tax on vaping supplies, which are not subject to tobacco taxes under current state law. The lawsuit was filed almost a week after Colorado ballots were mailed on Oct. 9 and after more than 300,000 residents have cast their votes.

The plaintiffs say the ballot proposal was written in partnership with Philip Morris USA, the country’s largest cigarette company, who has spent millions in past

Colorado elections to defeat tobaccorelated ballot measures. Philip Morris didn’t want to spend money in Colorado in 2020 so the company made sure it was protected, the lawsuit says. Lawmakers intentionally tried to keep the minimum price provision secret, it says.

The deal was reached in May 2020 when Philip Morris said it would not oppose the ballot measure if a minimum price provision was included in the law. That agreement was acknowledged during a public hearing by Healthier Colorado’s executive director, who said, “We have a deal with the largest tobacco company in America, who was the exclusive funder of the opposition campaign last time,” according to lawsuit.

In Colorado, new taxes must be approved by voters but the legislature must approve a bill to get those measures on ballots. The bill creating Proposition EE includes the minimum price mandate, but nothing distributed to the public about the ballot question includes information on the minimum price, the lawsuit says.

The bill would set a $ 7 minimum price on a pack of cigarettes starting Jan. 1, and that minimum would go up to $ 7.50 per pack on July 1, 2024. That price increase would not send new money to the state coffers but instead would benefit retailers, who would pocket the proceeds of the price increase, the lawsuit says.

“Retailers will therefore be able to sell fewer discount cigarettes at higher profit margins,” the lawsuit said. “This comes at the expense of the Plaintiffs and other out- of- state cigarette manufacturers, who will lose sales, profits

and market share as a result…”

Discount cigarettes, which grew in popularity after a massive settlement in the 1990s between the federal government and tobacco companies, sell in Colorado at average prices between $ 3.80 to $ 5.32 per pack, the lawsuit says. In contrast, a pack of Marlboro sells for $ 6.55. That means the price increase for low cost cigarettes would be at a much higher rate.

As for the tax increase, cigarette taxes would rise to $ 1.94 a pack from 84 cents each if voters approve Proposition EE.

Shelby Wieman, a governor’s spokeswoman, said Polis does not comment on pending lawsuits.