Big tobacco stubs out e-cigarette competitors

Coming soon to a convenience store near you: Vuse, an electronic cigarette that delivers nicotine without the use of tobacco and is benefiting from the combined marketing power of  R.J. Reynolds and state government regulators.

Reynolds is testing the Vuse brand e-cigarette in limited distribution and is expected to roll it out nationwide.

In anticipation of Reynolds’ first effort in the e-cigarette market, the company’s lobbyists are pushing laws at the state level that could add costs, paperwork and headaches onto smaller competitors that have largely served the e-cigarette market so far.

More worrisome is that the online activities of thousands of e-cigarette consumers, who are looking for a tar-free alternative to smoking, could be effectively outlawed.

In particular, a bill passed by the Oklahoma state Senate on March 6 could boost the price of e-cigarettes by restricting online sales and preventing retailers from selling to consumers without going through a wholesale middleman first.

“We really feel this is a push by Big Tobacco to gain some more control over the market,” said Rob Ragan, owner of VaporKings, a store with four locations in and around Tulsa selling e-cigarette kits and related accessories, also called vapor products. Ragan estimates that there are about 45 such stores throughout the state that would be affected by this legislation, SB 802.

“Transform Tobacco,” a website sponsored by R.J. Reynolds, alerts visitors to “tell your state legislators to SUPPORT SB 802!”

It’s not hard to see why Reynolds wants to break into e-cigarettes, which allow smokers to get nicotine without the chemicals and tar in regular cigarettes.

In February the Centers for Disease Control and Prevention reported that the number of American smokers who have tried e-cigarettes doubled from 10 percent in 2010 to about 21 percent in 2011.

E-cigarettes’ gain appears to be at traditional cigarettes’ loss. According to a March research report from Morgan Stanley, the “most logical” explanation for the weaker-than-expected cigarette volume for large tobacco companies is that a growing number of smokers made New Year’s resolutions to switch to e-cigarettes.

Despite evidence that e-cigarettes can help smokers to turn away from more harmful products, the devices have met with skepticism from regulators. Several states have explored heavy restrictions on e-cigarettes, such as a recent proposal in California that would outlaw the use of the devices anywhere smoking is banned. And the Food and Drug Administration is expected to issue national regulations that could limit e-cigarettes.

Against this backdrop of regulatory scrutiny, in February Reynolds met in Washington, D.C. with a number of nonprofit groups and e-cigarette proponents. According to people who attended the meeting, Reynolds unveiled its strategy to avoid the worst restrictions: direct its in-state lobbyists to support taxing e-cigarettes, but at a lower rate than other tobacco products.

“They said, ‘We are going to advocate for a very low tax on e-cigarettes, because if you tax e-cigarettes, then they are legitimate legal products,'” said one meeting attendee, Bill Godshall, the executive director of Smokeless Pennsylvania and a longtime activist for less harmful alternatives to cigarettes.

The strategy carried over to SB 802, which would ban e-cigarette sales to minors and also tax e-cigarettes at a rate 90 percent lower than the tax on conventional cigarettes, coming out to five cents per vapor product unit.