Model Legislation Establishing
a Minimum Retail Sales Price for
Cigarettes [and Other Tobacco
Products]
changelabsolutions.org
Funded by grant number CA154281 from the National Cancer Institute at the National Institutes of Health.
Developed by ChangeLab Solutions, a nonprofit organization that provides legal information on matters relating to
public health. The legal information in this document does not constitute legal advice or legal representation. For
legal advice, readers should consult a lawyer in their state. © 2013 ChangeLab Solutions
November 2013
Introduction and Report
This Model Legislation Establishing a Minimum Retail Sales Price for Cigarettes and Other
Tobacco Products (Model Legislation) is based on ChangeLab Solutions’ legal research and
analysis, as well as the research and evidence base linking the price of cigarettes and other
tobacco products with use and initiation prevalence.
This Introduction and Report summarizes the rationale for setting a minimum retail price for
cigarettes and other tobacco products as one possible tobacco control policy intervention. It
is intended for broad distribution to the public. Our presentation of this Model Legislation is
based on our independent analysis of the relevant law, evidence, and available data, and it
should enable readers to draw their own opinions and conclusions about the merits of this
Model Legislation.
In the United States, 480,000 people die in the United States from tobacco-related diseases
every year, making tobacco use the nation’s leading cause of preventable death.1To address
this, states and local governments have instituted a variety of policy and programmatic
approaches to reduce use and consumption. Many states have implemented educational and
media campaigns on the risks of tobacco use, offered resources to help smokers quit,
increased cigarette excise taxes, and adopted restrictions on the sale and public use of
cigarettes and other tobacco products.
A Close Relationship Exists Between Retail Price and Consumption
This Model Legislation would increase the price of cigarettes and other tobacco products by
creating a statutory minimum sales price for these products and eliminating retail price
manipulation by the tobacco industry as a public health intervention.
The link between retail price and tobacco consumption is well documented. Numerous
academic studies conclusively show that when cigarettes cost more, fewer people smoke—
fewer people start, more people quit, and fewer former users relapse—and those who
continue to smoke consume less frequently. 2, 3, 4, 5, 6, 7 Studies also indicate that increases in
smokeless tobacco prices reduce the prevalence of smokeless tobacco use.8
Due to price elasticity, a 10 percent price increase on a pack of cigarettes would reduce
demand by approximately 2.5 percent to 5 percent.9 Conversely, the availability of
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inexpensive cigarettes and other tobacco products leads to an increase in use and
consumption.10
Youth and Price Sensitivity
Research demonstrates that youth are particularly price sensitive and responsive to changes
in price.11 When cigarettes cost more, fewer adolescents start smoking.12 According to the
U.S. surgeon general’s 2000 report, “[r]esearch indicates that increasing the price of tobacco
products would decrease the prevalence of tobacco use, particularly among minors and
young adults.”13 Since the vast majority of adult smokers began smoking before the age of
18, any strategy that impacts youth initiation would also eventually reduce adult smoking
rates.14
While some early research has been used to dispute the link between price and youth
smoking,15 numerous studies demonstrate that youth are more sensitive to price than
adults.16 In addition, the majority of the research supports the finding that higher cigarette
prices discourage youth from smoking.17
Income Disparities in Tobacco Use
Smoking rates among low-income populations are higher than in other income groups18 and
a price increase for cigarettes and other tobacco products has the potential to impose a
disproportionate financial burden on this population, especially those who are addicted.
However, since low-income tobacco users are also responsive to price changes, a price
increase should lead to the largest declines in smoking among this group,19 especially when
supplemented with culturally appropriate interventions designed to facilitate smoking
cessation in low-income communities and communities of color.20 One result of a policy to
increase price is that low-income tobacco users, who currently bear a disproportionate share
of the burden of disease caused by tobacco,21 will reap the largest share of positive health
gains associated with an expected decline in tobacco consumption.
The Costs of Smoking and Appropriateness of Government Intervention
The Model Legislation would enable the government to establish a baseline minimum price
for cigarettes and other tobacco products, rather than having the minimum price set by the
tobacco industry.
One common argument against any government-mandated pricing schedule is that in a free
market economy, the government should not be setting prices for consumer goods.
However, the “negative externalities” of tobacco use are extreme, and the price of cigarettes
and other tobacco products to consumers does not reflect their actual costs, which are borne
by government and, ultimately, taxpayers.22 For example, between 2005 and 2009, average
annual smoking-related health care expenditures were $132.5 to $175.9 billion per year,
with another $151 billion in lost productivity, making the total economic burden of smoking
between $289 and $332.5 billion per year. 23These costs are not reflected in the market price
of cigarettes and other tobacco products.
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Therefore, any public health pricing strategy must be balanced against our traditional
market-driven economy. In some cases, government-mandated pricing is appropriate. For
example, minimum pricing laws have often been proposed for alcohol, which, like tobacco,
imposes significant unrecouped costs on society.
A report published by the Institute of Alcohol Studies at the University of Victoria
concluded that minimum pricing in the United Kingdom would have immediate and longterm health, crime, and economic benefits, stating that “[b]enefits would be experienced
most by those population groups and in regions of the country where rates of hazardous and
harmful drinking are the highest.”24 The report also concluded that substitution of cheap
alternatives would occur only to a small degree and only slightly offset the benefits of a
minimum price law for alcohol.25 Similarly, increased prices for alcohol in Canada resulted
in a steep overall reduction of alcohol consumption, resulting in crime reduction, reduced
health care costs, and increased work productivity.26
State Excise Taxes, Minimum Price Laws, and Tobacco Industry Tactics
State and local governments have long recognized the benefits of pricing strategies for
cigarettes and other tobacco products, and have used policy approaches to impact price and
reduce consumption. The federal government, all 50 states, the District of Columbia, and
many local governments currently impose excise taxes on cigarettes27 both to decrease
tobacco use and to generate revenue.28
Excise taxes remain the most commonly used and proven pricing strategy. Although every
state has imposed a cigarette excise tax at some level, increasing taxes further is not
politically feasible in many jurisdictions, due to a lack of political will among legislators or
lack of popular support, sometimes coupled with supermajority voting requirements for tax
measures and gubernatorial veto power.
In addition to cigarette excise taxes, cigarette minimum price laws are another policy
intervention that have already been used by state governments in an attempt to impact price.
As of November 2013, 25 states plus the District of Columbia and New York City have
minimum price laws for cigarettes.29 With the exception of the New York City law
(discussed below), all of the existing laws are so-called markup style laws. A markup law
uses the manufacturer’s invoice price as a base, and requires a minimum percentage markup
at both the distributor and retailer levels.
One significant difference between the two strategies is that, unlike a tax, a minimum price
law does not raise revenue for the government and therefore cannot provide support for
tobacco cessation and prevention programs. In addition, a minimum price could benefit
tobacco sellers rather than state and local governments by increasing per pack profits.30 The
primary goal of a minimum price law enacted to promote public health is to reduce the
overall consumption of other tobacco products, not to raise revenue or penalize tobacco
sellers.
Existing Minimum Price Laws
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The existing minimum price laws have generally not resulted in higher cigarettes prices than
in states without regulation.31 One reason for this is that the existing state-level minimum
price laws were enacted to promote economic competition (and not to protect public health)
and merely prohibit sales at a loss, or require a very small percentage markup.32
Another reason for the ineffectiveness of existing pricing strategies is that the tobacco
industry has effectively and aggressively used price discounting tactics to blunt the effects
for price-sensitive smokers so that they do not experience a sudden price jolt that might
prompt them to quit.33
In 2011 alone, tobacco companies spent nearly $7 billion of their $8.4 billion advertising
and promotional expenditures on price discounts paid to cigarette retailers and wholesalers,
including off-invoice discounts, buy downs,34 “master type” programs,35 voluntary price
reductions, volume rebates, incentive payments, and value-added servicesapproximately
84 percent of their total advertising and promotional expenditures.36
The tobacco industry also spends hundreds of millions of dollars to directly provide
consumers price reduction opportunities such as coupons, cartons, and multipack discounts
in order to reduce the per pack costs of cigarettes for consumers.37 For example, in 2011, the
tobacco industry spent $171.2 million alone on coupons for consumers.38 These price
reduction opportunities are extremely popular among consumers. An estimated 55.4
percent39 of adults who smoke use some price-minimizing strategy and save an average of
$1.27 per pack.40 19.8 percent of adults who smoke cigarettes use coupons to purchase
cigarettes,41 and 24.3 percent of adults who smoke cigarettes purchase cartons of
cigarettes,42 which results in an average savings of $0.75 per pack.43
The use of price-minimizing strategies is not only common but also hinders smokers from
attempting to quit or reduce cigarette consumption.44 From a public health perspective, these
marketing practices can blunt or negate health initiatives and the effects of tax and price
increases.45
A strong, well-crafted minimum price law that also addresses industry discounting tactics
can result in a statutory minimum price that is high enough to have a public health impact.
This Model Legislation contains strong language for three types of minimum price laws: (1)
a flat rate minimum price law, (2) an improved mark-up style minimum price law, and (3) a
combination of the two approaches. Although all three models have the potential to increase
tobacco prices and reduce consumption, we note that the flat rate approach has several
advantages, including being easier to enforce. However, we have included all three options
in this Model Legislation because states with an existing markup law may prefer to amend
their law within the existing framework rather than adopt a different system.
Whereas under a “flat rate” approach the government establishes a specific price below
which no cigarettes or other tobacco products could be sold, a “markup” system uses the
tobacco industry’s base price and establishes different minimum prices for all brands based
on statutorily required percentage markups.
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Option #1—Flat Rate Style Minimum Price Law
This Model Legislation provides language for an innovative approach—a flat rate minimum
price law that sets a simple threshold minimum price that will be adjusted automatically for
inflation. With a flat rate law in place, no retailer could sell cigarettes or other tobacco
products below the threshold minimum price set by the state legislature. This approach
would completely remove from the market all cigarettes and other tobacco products that
typically sell for a price below the statutory minimum (unless the price of those products
was increased to the statutory minimum).
In order to address one of the major loopholes in existing minimum price laws, discounts
must not be allowed to bring the actual sales price (the amount a consumer actually pays for
the product) below the statutory minimum. This Model Legislation includes provisions to
completely prohibit redemption of coupons (broadly defined) and sales of cigarettes and
tobacco products through multipack offers. As a result, the minimum price should not be
diluted by these types of industry tactics.
As with any law, a flat-rate minimum price law will not work without effective
enforcement. Unlike a markup style law, which results in different minimum prices for
every brand of cigarettes, a flat rate law establishes a single minimum price, which will not
only be easy for inspectors to verify, it will also make it easier for retailers to comply. While
a flat rate law will be much simpler to enforce, however, it is still critical to engage
enforcement personnel early in the process to develop a workable enforcement plan.
In October 2013, New York City became the first jurisdiction in the United States to adopt a
flat rate minimum price when an ordinance was passed by the New York City Council that,
among several other things, establishes a flat rate minimum price of $10.50 for a package of
cigarettes and an equivalent rate for little cigars.46 This proposal, which also prohibits many
price discounting tactics and sales below the “listed price,” is the first of its kind and will
yield valuable evaluation data about the effectiveness of this approach and implementation
and enforcement advantages. The combination of the flat rate minimum price and
restrictions on price discounting could be a very effective combination to reduce
consumption by price sensitive populations.
Option #2—Effective Markup Style Minimum Price Law
This Model Legislation also provides language for a stronger, more effective markup style
law with a significantly higher retail markup rate (higher than the market rate) and similar
restrictions on coupons and multipack offers. In 2007, the average retail markup for
cigarettes was 18 percent, whereas the average statutory minimum retail markup was much
lower, at 8 percent.47 The statutory markup rate should exceed the market rate markup if the
law is going to have an impact on price.
Enforcement of existing markup laws has proven difficult for a variety of reasons. This
Model Legislation includes several different enforcement mechanisms for consideration, but
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the most effective way to enforce this type of law could be to incorporate the requirements
into a strong retailer licensing law. In states without strong tobacco retailer licensing, this
would also require strengthening those laws as well. As with enforcement of any law, it is
critical to engage all government agencies and other stakeholders early in the process so that
an enforcement plan is developed that will actually be carried out.
Option #3—Hybrid Markup/Flat Rate Minimum Price Law
This Model Legislation includes a third option, which combines a flat rate law with a strong
markup law. This approach would not only remove very cheap products from the market, it
would also increase the price of products that sell for more than the flat rate statutory
minimum price.
Prohibiting Discounts
In addition to establishing a minimum price, this Model Legislation also prohibits
redemption of coupons and sales of cigarettes and other tobacco products through multipack
discounts. As noted above, the tobacco industry employs a variety of price manipulation
tactics to blunt the effectiveness of pricing strategies. Prohibiting these tactics is critical to
ensure that a minimum price law will result in higher prices. Although there are legal issues
implicated by these types of restrictions, recent court decisions (discussed below) have
upheld similar prohibitions in Providence, R.I.
A Minimum Price Law That Covers Other Tobacco Products
Existing state-level minimum price laws cover only cigarettes. Some degree of substitution
occurs when cigarette prices are high relative to other tobacco products,48 which can be
partially offset by increasing the price of non-cigarette tobacco products as well.49 A
minimum price law establishing a minimum price for both cigarettes and other tobacco
products is, therefore, the most effective way to reduce consumption of all other tobacco
products and prevent substitution.
This Model Legislation includes a definition of “Other Tobacco Products” that is broad
enough to encompass all foreseeable types of emerging products, including e-cigarettes that
include nicotine (other than those that are approved as cessation devices by the FDA).
However, because there are so many different tobacco products (and non-tobacco nicotine
products) coming on the market each year, instituting a minimum price for products other
than cigarettes will require diligent and rigorous enforcement.
It is also important to address the possibility that a minimum price law would be ineffective
if price-sensitive smokers respond to higher prices by finding cheaper cigarettes outside of
the state.50 Other complementary policy interventions should be considered to address the
online and “black market” purchase of cigarettes.51
Implementation and Enforcement
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Implementing and enforcing a comprehensive, effective minimum price law will require
coordination among several different government agencies. As noted above, it is critical to
engage all agencies and other stakeholders during the development of the law so that their
input can be incorporated. This Model Legislation calls for designating one government
agency or department as the lead enforcement agency; the lead department will be
accountable to convene all relevant stakeholders throughout the process.
This model includes several different enforcement mechanisms, including administrative,
civil and criminal penalty structures. Which enforcement method to implement depends on
your jurisdiction, but it is wise to leverage existing enforcement infrastructure whenever
possible—where enforcement is working in one area in your state, similar methods of
enforcement should be used to enforce related laws.
A tobacco retailer licensing system can be an extremely effective system for enforcing all
tobacco control laws, including minimum price requirements. For states that lack a robust
tobacco retailer licensing system, this Model Legislation includes language that can be
adapted to institute a strong licensing system (and ChangeLab Solutions has many
additional resources available). If your state already uses retailer licensing effectively, you
can consider amending the licensing law to incorporate new pricing requirements. For
example, many states use their licensing systems to enforce tobacco tax laws, and those
resources can be leveraged to enforce non-tax pricing requirements.
Legal Issues
State governments considering this Model Legislation should review legal issues related to
the state’s authority to enact the law and relevant federal laws, which are discussed below.
Note also that enacting a minimum price ordinance at the local level, as opposed to statelevel legislation, requires a separate and distinct legal and policy analysis.
Police Power
“Police power” is the term used to describe the power of government to regulate private
conduct to protect and further the public’s health, safety, or general welfare.52 It is the
primary source of authority for nonfederal health-related statutes, regulations, and
ordinances.53 Courts have generally held that cigarette minimum price laws and related
restrictions are a proper exercise of a state’s police power.54
Relevant Federal Laws
Federal laws regulating tobacco products sometimes preempt, or prohibit, certain local or
state laws on the same issue. Three key federal laws are discussed below.
Antitrust—The Sherman Act. Federal antitrust laws prohibit monopolistic behavior and
collusion between private businesses in setting prices. Whether a minimum price law is
preempted by the Sherman Act depends largely on whether the minimum price is set by the
government itself. Laws that require or facilitate collusion among private market
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participants in setting prices violate the Sherman Act and are generally preempted.55 Laws
in which the government is regulating a market and establishing baseline prices are
generally not preempted.56 A minimum price law must be carefully crafted to ensure that the
law does not foster or facilitate collusion among tobacco companies in setting the minimum
prices. This Model Legislation clearly sets forth the actual (flat rate) minimum price, or the
formula for establishing the minimum price, and does not require or facilitate collusion
among private businesses.
The Federal Family Smoking Prevention and Tobacco Control Act. While the Federal
Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act) gives the
Food and Drug Administration regulatory authority over tobacco products, the act contains
language that expressly reserves certain areas of tobacco regulation to state and local
governments:
Except as provided in paragraph (2)(A),57 nothing in this chapter, or rules
promulgated under this chapter, shall be construed to limit the authority of […] a
State or political subdivision of a State […] to enact, adopt, promulgate, and
enforce any law, rule, regulation, or other measure with respect to tobacco
products that is in addition to, or more stringent than, requirements established
under this chapter, including a law, rule, regulation, or other measure relating to or
prohibiting the sale, distribution, possession, exposure to, access to, advertising
and promotion of, or use of tobacco products by individuals of any age[…].58
This non-preemption is very broad and expressly allows state and local regulation of
tobacco sale, distribution, advertising, and promotion. It is likely that the Tobacco
Control Act would not preempt a state or local law that establishes a minimum price
for cigarettes.59
First Amendment—Freedom of Speech. The First Amendment to the U.S.
Constitution forbids the government from making any law “abridging the freedom of
speech” and provides some degree of protection for corporate advertising and
promotion—in legal terms, “commercial speech.”60 Under Supreme Court case law,
“commercial speech” has come to mean that the right of corporations to advertise
and promote their products and services can outweigh the government’s right to
regulate commercial speech to safeguard public health, safety, and welfare.61
Our proposed policy focuses on sales practices—prices, redemption of coupons, and sales
through multipacks. Insofar as it regulates sales practices, the policy should not be viewed
as implicating any right to free speech. That said, the tobacco industry would likely argue
that the First Amendment is implicated by a minimum price policy that also prohibits
coupons and multipack offers.
In September 2013, the 1st Circuit Court of Appeals analyzed a First Amendment challenge
in an analogous context, involving an ordinance adopted in Providence, R.I., that prohibits
the redemption (but not distribution) of coupons and sales of tobacco multipacks.62 The
appellate court upheld the trial court’s ruling, finding no First Amendment violation because
the restrictions were a means to control the price of tobacco products and did not implicate
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commercial speech at all—the tobacco companies were still able to distribute coupons and
otherwise advertise and promote their products.63
Similarly, this Model Legislation should be construed to address sales practices (prices,
coupon redemption, multipack bundling) and not advertising.
Federal Cigarette Labeling and Advertising Act (FCLAA)
Before it was amended by the Tobacco Control Act in 2009, the Federal Cigarette
Labeling and Advertising Act (FCLAA) preempted any state or local laws related to
cigarette advertising and promotion if the law was based on health-related concerns.
(As noted earlier, existing cigarette minimum prices laws were enacted to protect
economic competition, whereas this Model Legislation is intended to promote public
health.)
The FCLAA states, “[n]o requirement or prohibition based on smoking and health
shall be imposed under State law with respect to the advertising or promotion of any
cigarettes...”64 The Tobacco Control Act leaves that part of the FCLAA language
unchanged, but added language to expressly allow state or local governments to
impose “specific bans or restrictions on the time, place, and manner, but not content,
of the advertising or promotion of any cigarettes.”65
Even if the provisions of this Model Legislation establishing a minimum price or
prohibiting redemption of coupons were found to fall within the scope of FCLAA (if
a court finds that the provisions regulate advertising or promotion), if challenged it
stands a good chance of being upheld under the exceptions added by the Tobacco
Control Act for regulations affecting the “manner, but not the content” of
promotion.66 Recently, the appellate court that decided the case upholding the
Providence pricing ordinance discussed the “manner” exception at length and
concluded that the ordinance does not regulate the “content” of the promotional
materials, but merely the “manner” of how cigarettes could be sold and purchased.67
Likewise, this Model Legislation does not regulate the content of any advertising or
promotional materials, and even if FCLAA is implicated by some provisions, the
“manner” exception should apply.
Developing Legislation
The language in this Model Legislation is designed to be tailored to the needs of each state.
The language written in [brackets] provides different options or explains the type of
information that needs to be inserted in the blank spaces in the legislation; the areas left
blank represent policy decisions for stakeholders in your state. For example, the restrictions
on “Other Tobacco Products” are included in brackets; if your state decides to include
minimum prices or other regulations on tobacco products other than cigarettes, include the
bracketed language.
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The comment boxes provide additional information and explanation. In considering which
options to choose, the community should balance public health benefits against practical and
political considerations in the particular jurisdiction. One purpose of including a variety of
options is to stimulate broad thinking about the type of provisions decision makers in your
state might wish to explore, even beyond those described in the model.
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AN ACT TO ESTABLISH A MINIMUM RETAIL SALES PRICE FOR
CIGARETTES [AND OTHER TOBACCO PRODUCTS]
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF [_______________]:
SECTION ONE. See APPENDIX A: Findings
COMMENT: A draft statute based on this model legislation should include “findings” of fact that
support the purposes of the legislation. The findings section is part of the statute and legislative
record, but it usually does not become codified in the state codes. The findings contain factual
information supporting the need for the law—in this case, documenting the potential benefits of
increasing the price of cigarettes and other tobacco products and restricting retail price
manipulation of tobacco products to promote the public health. A list of findings supporting this
model legislation appears in “Appendix A: Findings.” States may select findings from that list to
insert here, along with additional findings addressing the specific conditions in the particular state.
SECTION TWO. [State Code] is hereby amended by adding thereto a new chapter to read
as follows:
CHAPTER [__]
MINIMUM RETAIL SALES PRICE FOR CIGARETTES [and OTHER TOBACCO
PRODUCTS]
§__-1. Title of chapter.
This chapter may be cited as the Cigarette [and Tobacco Products] Retail Price Law.
§__-2. Legislative intent.
It is the intent of the Legislature, by adopting the Cigarette [and Tobacco Products] Retail
Price Law, to address retail price manipulation tactics that decrease the price of Cigarettes
[and Other Tobacco Products] in order to lure new users and diminish the capacity of
existing users to quit.
§__-3. Definitions. For purposes of this chapter:
COMMENT on definitions: If you incorporate minimum price requirements into an existing
retailer licensing law (or other law), or are amending an existing state minimum price law, many
terms will already be defined. Include only the definitions that are necessary and review all
definitions for consistency.
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(__) “Base Cost” means the Tobacco Retailer’s actual cost of acquiring or producing
a Cigarette [or Other Tobacco Product], plus the full value of any taxes imposed on
the sale or distribution of the Cigarette [or Other Tobacco Product] by federal, state,
or local law, if the tax is not already included in the Tobacco Retailer’s Base Cost.
COMMENT: The definition of “Base Cost” is necessary to establish a meaningful minimum
price in section (__-5) if you are going to institute a markup style minimum price or a law
that incorporates percentage markups along with a flat rate. For a markup law the minimum
retail sales price is set at a certain percentage over the retailer’s cost to acquire the
cigarettes from a distributor or wholesaler, plus all applicable taxes.
Note that the tobacco industry will be able to manipulate somewhat the base cost by
controlling the cost at which retailers can purchase cigarettes and other tobacco products
from distributors or wholesalers.
(__) “Cigar” means any roll of tobacco other than a Cigarette wrapped entirely or in
part in tobacco or in any substance containing tobacco. For purposes of this Chapter,
“Cigar” includes, but is not limited to, tobacco products known or labeled as
“cigar,” “cigarillo,” “tiparillo,” or “little cigar.”
COMMENT: Use this definition of “cigar” if you include the substantive provisions relating
to other tobacco products.
(__) “Cigarette” means: (1) any roll of tobacco wrapped in paper or in any substance
not containing tobacco; and (2) any roll of tobacco wrapped in any substance
containing tobacco which, because of its appearance, the type of tobacco used in the
filler, or its packaging and labeling, is likely to be offered to, or purchased by,
consumers as a cigarette described herein.
(__) “Consumer” means a person who purchases a Package of Cigarettes [or Other
Tobacco Product] for consumption and not for Sale to another.
(__) “Coupon” means anything that can be exchanged or used to acquire a Cigarette
[or Other Tobacco Product] for less than the Full Retail Price, whether in paper,
digital, or other form.
(__) “Department” means the State Department of [_______________].
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COMMENT: This definition should identify the state department or agency that will be
responsible for overseeing administration of the minimum price law; often this will be the
same department or agency that is responsible for administration and collection of state
taxes.
The designated department may delegate enforcement responsibility, or portions thereof,
to various other state or local agencies.
(__) “Full Retail Price” means the price listed for a Package of Cigarettes [or Other
Tobacco Product] on its packaging or on any related shelving, advertising, or display
where the Package of Cigarettes [or Tobacco Product] is sold or offered for Sale,
including all applicable taxes.
(__) “Other Tobacco Product” or “Tobacco Product” means any product containing
tobacco, derived from tobacco, or containing synthetically produced nicotine, other
than a Cigarette, but does not include any cessation product approved by the United
States Food and Drug Administration for use in treating nicotine or tobacco
dependence.
COMMENT: Include this definition if you include the substantive provisions relating to other
tobacco products.
This definition is intended to include all products containing tobacco or nicotine, other than
cigarettes. It is intended to be broad enough to cover emerging products such as electronic
nicotine delivery devices that contain nicotine. Cigarettes are not included because they
are separately defined and subject to a separate minimum price in Section [__-5].
(__) “Package of Cigarettes” means a pack of twenty (20) Cigarettes in a
manufacturer’s original consumer packaging designed for individual retail sale to a
Consumer.
(__) “Person” means any natural person, partnership, cooperative association,
limited liability company, corporation, personal representative, receiver, trustee,
assignee, or any other legal entity.
(__) “Roll-your-own tobacco” means any tobacco that, because of its appearance,
type, packaging, or labeling, is suitable for use and likely to be offered to, purchased
by, or used by consumers as tobacco for making Cigarettes.
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COMMENT: Include this definition of “roll-your-own-tobacco” if you include the substantive
provisions relating to roll-your-own tobacco.
(__) “Sale” or “Sell” means any transfer, exchange, barter, gift, offer for sale, or
distribution for a commercial purpose, in any manner or by any means whatsoever.
(___) “Tobacco Retailer” means any Person who Sells Cigarettes [or Other Tobacco
Products] to a Consumer. This definition is without regard to the quantity of
Cigarettes [or Other Tobacco Products] Sold.
§__-4. License required.
COMMENT: Since most states already require licenses for tobacco retailers, the minimum price
requirements could be implemented by incorporating them into an existing licensing law or crossreferencing the licensing law. Requiring tobacco retailers to comply with the minimum price law as
a condition of their license can assist in efficient administration of the law by enabling the
department or tax administrator to more easily identify and track these businesses.
If you need to create a new licensing system to implement the minimum price law, adapt the
language of this section; for more detailed information on establishing a licensing system for
tobacco retailers, including model legislation, please refer to:
www.changelabsolutions.org/publications/model-TRL-Ordinance.
Whether to include a licensing scheme, and how the license scheme should be designed and
implemented, is a policy matter and depends on the structure of the law in your jurisdiction. This
act can also be implemented without issuing licenses; it contains independent enforcement and
penalty provisions in Section __-10.
(a) Every Tobacco Retailer doing business in the State shall file with the Department an
application for a license to engage in such business, for each place of business owned or
operated by the Tobacco Retailer. An application for a license shall be filed on forms to be
furnished by the Department for that purpose. An application must be subscribed and sworn
to by a person with legal authority to bind the business. The application shall identify the
owners of the applicant, the applicant’s mailing address, the place of business to which the
permit shall apply, and the nature of the business in which engaged, and any other
information the Department may require for the enforcement of this chapter.
(b) Upon receipt of a complete application and any license fee hereafter provided for, the
Department shall issue to the applicant, for the place of business designated, a nonassignable
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permit, authorizing the Sale of Cigarettes [and Other Tobacco Products] in the State. No
Person shall Sell Cigarettes [or Other Tobacco Products] without first obtaining a license to do
so under this chapter. Licenses issued pursuant to this section shall expire on January 31 of
each year and may be renewed annually.
(c) A license cannot be transferred from one Person to another, and a license shall at all
times be prominently displayed in a Tobacco Retailer’s place of business. The Department
may refuse to issue a permit to any Person previously convicted of violations of this chapter
under such procedures as the Department may establish by regulation. The Department may
also suspend or revoke a Tobacco Retailer’s license, after notice and an opportunity to be
heard, under such procedures as the Department may establish by regulation.
(d) Requirements and Prohibitions.
COMMENT: If you are creating a new licensing system, list all conditions of the license in this
section. Any violation of a condition is a violation of the license. One condition would be
compliance with the minimum prices established by this chapter. For examples of other conditions
that can be imposed on licensees, please refer to the resources located at:
www.changelabsolutions.org/publications/model-TRL-Ordinance.
(e) Eligibility for License.
COMMENT: If you are creating a new licensing system, list any restrictions on eligibility for a
license in this section (what types of businesses, and where, cannot get a license). For examples
of eligibility restrictions that can be imposed on licensees, please refer to the resources located at:
www.changelabsolutions.org/publications/model-TRL-Ordinance.
§__-5. Minimum Retail Sales Price for Cigarettes [and Other Tobacco Products].
COMMENT: This section offers language for three alternative options to establish a minimum
price: a flat rate minimum price, a minimum price based on percentage markups, and a
combination of both. Each method has certain advantages and disadvantages in terms of impact,
implementation, and enforcement, as noted in the comments following each option. Note that the
minimum prices in this section could also be combined with other restrictions on specific
products—for example, a community may also want to prohibit sales of single cigars or flavored
products, or require a minimum pack size for little cigars and other tobacco products. In that case,
the minimum price language should be tailored for consistency with other substantive policies
impacting sales of certain products.
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DEFAULT OPTION: FLAT RATE
(a) A Tobacco Retailer may not Sell to a Consumer:
(1) a Package of Cigarettes for less than [$X.00];
Alternatives to address Other Tobacco Products:
[(2) conventional moist snuff smokeless tobacco for less than [$X.00] per 1.2
ounces;
(3) a Cigar weighing more than four and a half pounds per thousand for less
than [$____] per Cigar;
(4) a Cigar weighing less than four and a half pounds per thousand for less
than [$X.00] per 20;
(5) any Other Tobacco Products not listed above sold in discrete single-use
units or packages of such single-use units (such as smokeless lozenges,
tablets or snus) for less than [$______] per 20 units;
(6) Roll Your Own Tobacco or other loose tobacco for smoking for less than
[$X.00] per 0.65 ounces; and
(7) any Other Tobacco Product not listed above for less than [$X.00] per
package or [$X.00] per ounce, whichever is higher.]
or
[(2) any Other Tobacco Product for less than a price that is at least
equivalent to [$X.00] for a Package of Cigarettes, as determined by the
Department through regulations published at least quarterly.]
COMMENT ON OTHER TOBACCO PRODUCTS: For states that want to establish
a minimum price for tobacco products other than cigarettes, this subsection
includes two options. The first option would establish specific minimum prices for
various different other tobacco products, intended to be equivalent to the minimum
price for cigarettes. This approach is often used in states that have strong tobacco
tax laws. The second alternative would authorize the department to establish the
minimum prices for other tobacco products through regulations, but specifies that
the prices established by the department must be at least equivalent to the
minimum price for cigarettes.
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(b) The minimum prices established in this section shall be adjusted annually by the
Department in proportion with the Consumer Price Index: All Urban Consumers
for All Items for the [region] Statistical Area as reported by the United States
Bureau of Labor Statistics or any successor to that index.
(c) This section shall apply to all Cigarettes [and Other Tobacco Products]
distributed or sold through any means, including vending machines and
Cigarettes [and Other Tobacco Products] purchased through the mail or internet
and delivered to a Consumer within the State of [_____________]. Any Package
of Cigarettes [or Tobacco Product] offered for Sale for less than the amount
established in this section shall be prima facie evidence of a violation of this
section.
COMMENT ON FLAT RATE MINIMUM PRICE: Every cigarette minimum price law in existence
as of 2013 is a markup style law similar to the alternative option in this Model Legislation. (There
are no existing state-level minimum price laws that apply to other tobacco products.) There is a
substantial body of research into those laws and their effect on retail prices, as noted in the
legislative findings in Appendix A.
For a flat rate minimum price, the law simply states that no package of cigarettes [or other
tobacco product] can be sold for less than a specified dollar amount (for example, $5). This does
not alter the price of every brand of cigarettes and other tobacco products—those that are
normally priced above $5 could continue to be sold for whatever price the market can bear. For
lower-tier brands that are normally priced below $5, retailers either have to increase the price or
stop selling those brands. The effect of flat rate minimum price law is that there will be no
cigarettes or other tobacco products available below the minimum price, but brands that normally
sell for more would be unaffected.
To ensure a public health impact, the minimum price should be set at or above the highest perpack level for which premium cigarettes are being offered within your state at retail in the absence
of any discounts.
A variation of the flat rate approach would be to require that the minimum price for any package of
cigarettes or other tobacco product be set at least a specified dollar amount above the sum of
federal, state, and local excise taxes applicable to the products. As taxes are increased at various
levels of government, the minimum price will automatically increase accordingly.
A flat rate minimum price will likely be much easier to implement and enforce than a law requiring
percentage markups. Rather than hundreds of different minimum prices depending on brand,
there is only one; inspectors can readily verify whether any cigarettes or other tobacco products
are for sale below the baseline minimum price. Likewise, compliance should be much easier for
retailers; rather than checking a website to learn the minimum prices for all the brands and
varieties sold by the retailer, the retailer can merely ensure that nothing falls below the baseline.
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ALTERNATIVE OPTION: MINIMUM MARKUP REQUIRED
(a) A Tobacco Retailer may not Sell a Package of Cigarettes to a Consumer for less
than one hundred twenty-five per cent [125%] of its Base Cost.
(b) [A Tobacco Retailer may not Sell any Other Tobacco Product to a Consumer for
less than one hundred twenty-five per cent [125%] of its Base Cost.]
(c) This section shall apply to all Cigarettes [and Other Tobacco Products]
distributed or sold through any means, including vending machines and
Cigarettes [and Other Tobacco Products] purchased through the mail or internet
and delivered to a Consumer within the State of [_____________]. Any Package
of Cigarettes [or Tobacco Product] offered for Sale for less than the amount
established in this section shall be prima facie evidence of a violation of this
section.
COMMENT: This option prohibits a tobacco retailer from selling cigarettes [or other
tobacco products] for less than a certain percentage over its defined “base cost.” (See
definition of base cost, which is equal to the amount actually paid by the retailer, plus all
applicable taxes.)
The percentage markup can be adjusted based on community goals; the default used in
this model is a 25 percent retail markup. The markup should be set at no less than 10
percent because, as noted in the Findings (see Appendix A), a 10 percent price increase
for cigarettes is likely to cause a 2 percent to 5 percent drop in use rates. Also as noted in
the Findings, the average retail market rate markup for cigarettes is approximately 18
percent, so anything below that would not impact retail prices.
In addition, because the tobacco industry retains control over the prices at which
distributors and wholesalers can sell to a tobacco retailer, the amount of the markup should
be substantial enough to ensure that the law will actually result in higher retail prices for
cigarettes (and other tobacco products).
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CALCULATING “MARKUP” MINIMUM PRICES:
Invoice cost:
Federal excise tax:
State excise tax:
“Base cost”
markup (25%)
Retail sales price:
+
+
=
+
=
$2.50 (hypothetical)
$1.01 (as of 2009)
$1.48 (as of December 2012)
$4.99
$1.25
$6.24 + sales tax (if applicable)
ALTERNATIVE OPTION: FLAT RATE COMBINED WITH MARKUP
COMMENT: This option combines a flat rate with a minimum percentage markup and is the most
comprehensive approach. This approach would impact the entire spectrum of cigarettes and other
tobacco products: extremely cheap cigarettes [and other tobacco products] would be eliminated
from the market altogether, and prices for higher-end cigarettes [and other tobacco products]
(those priced above the flat rate) would also increase pursuant to the markup calculation.
(a) A Tobacco Retailer may not Sell to a Consumer:
(1) A Package of Cigarettes for less than [$X.00];
Alternatives to address Other Tobacco Products:
[(2) conventional moist snuff smokeless tobacco for less than [$X.00] per 1.2
ounces;
(3) a Cigar weighing more than four and a half pounds per thousand for less
than [$____] per Cigar;
(4) a Cigar weighing less than four and a half pounds per thousand for less
than [$X.00] per 20;
(5) any Other Tobacco Products not listed above sold in discrete single-use
units or packages of such single-use units (such as smokeless lozenges,
tablets or snus) for less than [$______] per 20 units;
(6) Roll Your Own Tobacco or other loose tobacco for smoking for less than
[$X.00] per 0.65 ounces; and
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(7) any Other Tobacco Products not listed above for less than [$5.00] per
package or [$X.00] per ounce, whichever is higher.]
or
[(2) any Other Tobacco Product for less than a price that is at least
equivalent to [$X.00] for a Package of Cigarettes, as determined by the
Department through regulations.]
(3) The minimum prices established in subsection (a) shall be adjusted
annually by the Department in proportion with the Consumer Price Index:
All Urban Consumers for All Items for the [region] Statistical Area as
reported by the United States Bureau of Labor Statistics or any successor
to that index.
(b) In addition to the requirements of subsection (a), a Tobacco Retailer may not Sell
a Package of Cigarettes to a Consumer for less than one hundred twenty-five per
cent [125%] of its Base Cost.
(c) [In addition to the requirements of subsection (a), a Tobacco Retailer may not
Sell any Other Tobacco Product to a Consumer for less than one hundred twentyfive per cent [125%] of its Base Cost.]
(d) This section shall apply to all Cigarettes [and Other Tobacco Products]
distributed or sold through any means, including vending machines and
Cigarettes [and Other Tobacco Products] purchased through the mail or internet
and delivered to a Consumer within the State of [_____________]. Any Package
of Cigarettes [or Tobacco Product] offered for Sale for less than the amount
established in this section shall be prima facie evidence of a violation of this
section.
§__-6. Posting Full Retail Price; Discounts Prohibited
(a) A Tobacco Retailer shall [prominently] display the Full Retail Price of all Cigarettes
[and Other Tobacco Products] offered for Sale, at the point of display or at the point
of sale.
(b) Notwithstanding any other provision of this chapter, no Tobacco Retailer or other
Person shall:
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(1) Honor or redeem, or offer to honor or redeem, a Coupon to allow a consumer to
purchase a Cigarette for less than the Full Retail Price;
(2) Sell, or offer for Sale, any Cigarettes to a consumer through a multi-package
discount or otherwise provide any Cigarettes to a consumer for less than the Full
Retail Price in exchange for the purchase of any other Cigarettes, Other Tobacco
Products, or any other item by the consumer;
(3) Provide any free or discounted item to a consumer in consideration for the
purchase of Cigarettes at Full Retail Price; and
(4) Sell, or offer for Sale, a Cigarette to a consumer for less than Full Retail Price.
(c) [Notwithstanding any other provision of this chapter, no Tobacco Retailer shall:
(1) Honor or redeem, or offer to honor or redeem, a Coupon to allow a consumer to
purchase any Tobacco Product for less than the Full Retail Price;
(2) Sell, or offer for Sale, any Tobacco Product to a consumer through a multipackage discount or otherwise provide any Tobacco Product to a consumer for less
than the Full Retail Price in exchange for the purchase of any other Cigarettes, Other
Tobacco Products, or any other item by the consumer;
(3) Provide any free or discounted item to a consumer in consideration for the
purchase of a Tobacco Product at Full Retail Price; and
(4) Sell, or offer for Sale, a Tobacco Product to a consumer for less than Full Retail
Price.]
COMMENT: This section requires retailers to post the retail price of cigarettes and other tobacco
products so that consumers are aware of the price.
This section also requires that cigarettes and other tobacco products be sold for the posted full
retail price, and prohibits discounting mechanisms such as coupons and multipack offers that would
reduce the retail price. The language from this section is similar to recent ordinances adopted in
Providence, R.I., and New York City.
This section complements the minimum prices established by section (__-5). Together, these
sections ensure that (1) the retail price for cigarettes and other tobacco products is posted, (2) no
cigarettes or other tobacco products are sold for less than the posted price, (3) no cigarettes or
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other tobacco products are sold for less than the statutory minimum, and (4) coupon redemption
and other forms of price manipulation are prohibited.
§__-7. Recordkeeping requirements.
(a) Every Tobacco Retailer shall maintain on its premises all records, including legible
invoices of Cigarette [and Tobacco Products] purchases and sales, as may be necessary to
determine the amount the Tobacco Retailer paid to obtain the Cigarettes [and Tobacco
Products], for a period of [two] years following each purchase. The Department shall have
the right to inspect, examine, and copy such records at any time during normal business
hours. Refusal to allow full inspection, examination, or copying of such records constitutes a
violation of this Chapter.
(b) If a Tobacco Retailer does not maintain the necessary records or fails to produce such
records during normal business hours, the Department may determine that Tobacco
Retailer’s Base Cost for Cigarettes [and Tobacco Products] based upon the records provided
by similarly situated businesses in the same County as the Tobacco Retailer. Such
determination shall be prima facie evidence of that Tobacco Retailer’s Base Cost in any
subsequent administrative or judicial proceeding.
COMMENT: For
an enforcement officer to know what the wholesale price is to determine
compliance, retailers will need to maintain records or purchases and sales, and the
enforcing agency needs to be able to associate purchase and sales records. The tax
collection agency in your state likely already requires retailers to maintain at least some of
these records for tobacco tax enforcement purposes, so this provision may impose no
additional burden on retailers.
The number of years the invoice records must be maintained on site can be adjusted as
desired.
§__-8. Exemptions.
(a) The following shall be exempt from the tax imposed by section [__-5]:
(1) Cigarettes [and Other Tobacco Products] sold by American Indian Tribal
Governments to members of an American Indian Tribe;
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(2) Cigarettes [and Other Tobacco Products] sold to a Tobacco Retailer expressly
for resale by the Tobacco Retailer to a Consumer;
(3) Cigarettes [and Other Tobacco Products] sold in a bona fide clearance sale for
the purpose of discontinuing trade in such Cigarettes [and Tobacco Products];
(4) [Other exemptions as determined by your jurisdiction]
[(b) The Department, at its sole discretion, may authorize additional exemptions to this
chapter on an individual basis. The Department shall establish an administrative
system for receiving and resolving applications for an additional exemption. The
Department shall only grant an additional exemption after holding a public hearing
and recording written findings of fact that establish the need and justification for the
exemption.]
COMMENT: Many existing cigarette minimum price laws allow an exemption if a retailer claims
that it was selling below the minimum price to meet a lower price charged by competitors. This
law is intended to be vigorously enforced against any tobacco retailer that sells below the
statutory minimum price regardless of the reason. However, enforcement lags behind retail sales,
sometimes significantly, and you should carefully consider whether this exemption is necessary to
enable retailers to protect their market share during the enforcement lag.
Optional subparagraph (a)(4) is included if your jurisdiction would like to include additional
exemptions. Whether to include additional exemptions is a policy decision, but note that any
additional exemptions would dilute the effectiveness of the law.
Similarly, option subsection (b) would allow the department discretion to allow additional
exemptions after a hearing at which a tobacco retailer proves the need for an exemption, and the
department makes written findings of fact establishing the need for the exemption. Whether to
include this process is also a policy decision, but it is also important to note that including this
exemption could lead to numerous requests for a hearing, which would be burdensome for
government.
§__ - 9. Outreach and Education.
The Department [in conjunction with [public health agency]] shall develop and conduct a
retailer outreach and education program designed to inform Tobacco Retailers about the
requirements of this chapter and the link between Cigarettes, Tobacco Products, and chronic
disease. Any written materials and trainings developed pursuant to this subsection shall be
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offered in [language], in addition to English. Nothing in this section shall create a right of
action in any licensee or other Person against the State or its agents.
§__ - 10. Evaluation.
The Department [in conjunction with [public health agency]] shall develop criteria and
components for an independent evaluation to assess the impact that the minimum prices
established by this chapter have on consumption of products subject to the minimum prices.
The evaluation shall seek to determine the impact of the minimum price on Cigarette [and
Tobacco Product] prices, consumer purchasing behavior, and health outcomes.
COMMENT: Evaluation is critical to determine whether the law actually results in higher retail
prices. Carefully determine the correct agency to conduct the evaluation. It may be advisable to
choose an agency other than the agency charged with enforcing the law.
§__-11. Enforcement and Penalties.
COMMENT: Penalties should be determined by your state legislative body for consistency with
other penalty provisions that apply to Tobacco Retailers for violation of tax laws or illegal retailing
practices. As no law is effective without vigorous enforcement, it is important to use a system that
will work in your state.
This and the following sections contain sample language and a variety of enforcement options,
including administrative, civil, and criminal enforcement, that could be adapted as appropriate for
use in your state. Including a broad array of options is intended to provide maximum flexibility.
As noted in the Introduction and Section ( -4), incorporating these minimum price provisions as a
condition of a retailer licensing law can be very effective if the penalties for violation of the licensing
law are significant and the licensing law includes vigorous enforcement. In many states retailer
licensing laws are not adequately enforced and the penalties are minor fines; under those
circumstances, incorporating the minimum price requirements as a condition of the license would
be effective only if the license itself was strengthened to include suspension and revocation of the
license for violations. An alternative approach is to incorporate enforcement with enforcement of tax
laws if your state’s tax laws are adequately enforced.
A key factor in the success of an enforcement system is to designate one government agency in
charge of enforcement, and to require a mandatory number of retailer inspections per year. These
requirements will result in increased accountability. Even if one agency has primary responsibility,
however, numerous agencies may still be involved with enforcement. For example, the state
Department of Revenue and the Department of Health can each have a role in enforcement.
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Another factor to consider is whether this type of law is better enforced by a state agency or
through local law enforcement agencies, as some states designate local agencies to enforce their
tobacco retailer licensing laws.
(a) Violations. Each Package of Cigarettes [or Tobacco Product] Sold [or offered for Sale]
in violation of this chapter shall constitute a separate violation. Each day of a continuing
violation of this chapter shall constitute a separate violation.
(b) Administrative Enforcement and Penalties. Any Person who violates any of the
provisions of this chapter shall be subject to an administrative penalty, not to exceed
$[___________] for each violation, and not to exceed $[___________] in total for each
thirty (30) day period. Administrative penalties authorized by this section shall be assessed,
enforced and collected in accordance with [State Administrative Procedures Act].
(c) Civil Enforcement by Injunctive Relief. The [State Attorney General, and any city or
county prosecutor] is hereby authorized to bring an action for injunctive relief to enjoin a
violation of this ordinance.
(d) Civil Enforcement by Civil Penalties.
(1) Any Person who violates this chapter may be liable for a civil penalty, not to
exceed $[___________] per violation, and not to exceed $[___________] in total
for each thirty (30) day period.
(2) The [State Attorney General, and any city or county prosecutor] may bring a
civil action to recover civil penalties for the violations of this chapter.
(3) The [State Attorney General, and any city or county prosecutor] also may seek
recovery of the attorney’s fees and costs incurred in bringing a civil action
pursuant to this section.
(e) Criminal Enforcement. Any Person who violates this chapter is guilty of a
misdemeanor, punishable by a fine of not more than [___________] or by imprisonment for
a period of not more than [___________], or by both such fines and imprisonment.
§__-12. Rules and regulations.
The Department is hereby empowered to make such rules and regulations, and provide such
procedural measures, in cooperation with the state auditor, as may be reasonably necessary
to accomplish the purposes of this chapter.
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§__-13. Preservation of local authority. Nothing in this chapter shall preempt or prohibit
adoption and implementation of any policy related to Cigarettes [or Other Tobacco
Products] by a municipal government or political subdivision of the State.
§__-14. Severability.
If any provision of this chapter, any rule or regulation made under this chapter, or the
application of this chapter to any person or circumstance is held invalid by any court of
competent jurisdiction, the remainder of the chapter, rule or regulation, and the application
of the provision to other persons or circumstances shall not be affected. The invalidity of
any section or sections or parts of any section of this chapter shall not affect the validity of
the remainder of the chapter.
SECTION THREE. This act shall take effect and be in force from and after [date].
COMMENT: It is wise and probably necessary to provide some time for implementation and
retailer compliance.
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U.S. Department of Health and Human Services. (2014). The Health Consequences of Smoking — 50 Years
of Progress. A Report of the Surgeon General. Available at: www.surgeongeneral.gov/library/reports/50years-of-progress/full-report.pdf
2 Chaloupka, F.J., et al., (2002). “Tax, Price and Cigarette Smoking: Evidence from the Tobacco Documents
and Implications for Tobacco Company Marketing Strategies.” Tobacco Control 11: i62-i71
3 Chaloupka, F., Yurekli, A., and Fong, G. (2012). “Tobacco Taxes as a Tobacco Control Strategy,” Tobacco
Control. 21: 172–180
4 Centers for Disease Control and Prevention. (2010). State Cigarette Minimum Price Laws—United States,
2009.” Morbidity and Mortality Weekly Report 59: 389–392. Available at:
www.cdc.gov/mmwr/preview/mmwrhtml/mm5913a2.htm
5 Community Preventive Services. (2012). Reducing Tobacco Use and Secondhand Smoke Exposure:
Increasing the Unit Price of Tobacco Products. Available at:
www.thecommunityguide.org/tobacco/increasingunitprice.html
6 U.S. Department of Health and Human Services. (2014). The Health Consequences of Smoking — 50 Years
of Progress. A Report of the Surgeon General. Available at: www.surgeongeneral.gov/library/reports/50years-of-progress/full-report.pdf
7 Institute of Medicine. (2007). Ending the Tobacco Problem: A Blueprint for the Nation. Washington, DC:
The National Academies Press.
8
U.S. Department of Health and Human Services. (2000). Reducing Tobacco Use: A Report of the Surgeon
General. Atlanta, Georgia: U.S. Department of Health and Human Services, Centers for Disease Control and
Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and
Health, p. 11. Available at:
www.cdc.gov/tobacco/data_statistics/sgr/2000/complete_report/pdfs/fullreport.pdf; Chaloupka, F. (2010).
Tobacco Control Lessons Learned: The Impact of State and Local Policies. Chicago, IL: University of
Illinois at Chicago, p. 11. Available at:
www.impacteen.org/generalarea_PDFs/ITResearch38_Chaloupka.pdf; Tauras, J.A., Powell, L.M.,
Chaloupka, F.J., et al. 2007. “The Demand for Smokeless Tobacco Among Male High School Students in the
United States: the Impact of Taxes, Prices and Policies.” Applied Economics 39:31–41 (results of study
indicate that higher smokeless tobacco taxes would significantly reduce the number of male high school
students who use smokeless tobacco). Available at:
www.tandfonline.com/doi/abs/10.1080/00036840500427940#.Uz2ncE3n_cs
9
World Health Organization. 2011. Report on the Global Tobacco Epidemic, p. 66. Available at:
www.who.int/tobacco/global_report/2011/en_tfi_global_report_2011_implementation_effective_measures.p
df (estimating that each 10% increase in retail price reduces consumption by about 4% in high income
countries); U.S. Department of Health and Human Services. (2000). Reducing Tobacco Use: A Report of the
Surgeon General. Atlanta, Georgia: U.S. Department of Health and Human Services, Centers for Disease
Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on
Smoking and Health, p. 337. Available at:
www.cdc.gov/tobacco/data_statistics/sgr/2000/complete_report/pdfs/fullreport.pdf (“[M]ost studies, using a
wide variety of data and methods with various strengths and weaknesses, predict that a 10-percent increase in
price will reduce overall cigarette consumption by 3–5 percent.”); Chaloupka, F.J., Cummings, K.M.,
Morley, C.P., et al. 2002. “Tax, Price and Cigarette Smoking: Evidence from the Tobacco Documents and
Implications for Tobacco Company Marketing Strategies.” Tobacco Control 11:i62-i72. Available at:
http://tobaccocontrol.bmj.com/content/11/suppl_1/i62.abstract (The “implication from most estimates of
price elasticity of cigarettes is that if cigarette prices rise by 10%, overall cigarette smoking will fall between
2.5 and 5%”); Tauras, J.A., O’Malley, P.M., and Johnston, L.D. 2001. Effects of Price and Access Laws on
Teenage Smoking Initiation: A National Longitudinal Analysis, 5. Chicago, IL: University of Illinois at
Chicago. Available at: www.impacteen.org/generalarea_PDFs/AccessLaws.pdf (“A National Cancer Institute
sponsored gathering of economists and other experts concluded that the overall price elasticity of adult
cigarette demand falls in a narrow range of -0.3 to -0.5, suggesting that a 10% increase in the price of
cigarettes would decrease overall adult consumption of cigarettes by approximately 4%.”).
1
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10
Institute of Medicine. (2007). Ending the Tobacco Problem: A Blueprint for the Nation. Washington, DC:
The National Academies Press, p. 183. Available at:
www.legacyforhealth.org/content/download/571/6842/file/tobacco_final_report.pdf
11
Chaloupka, F. (2010). Tobacco Control Lessons Learned: The Impact of State and Local Policies. Chicago,
IL: University of Illinois at Chicago. Available at:
www.impacteen.org/generalarea_PDFs/ITResearch38_Chaloupka.pdf; U.S. Department of Health and
Human Services. (2012). Preventing Tobacco Use Among Youth and Young Adults: A Report of the Surgeon
General. Available at: www.surgeongeneral.gov/library/reports/preventing-youth-tobacco-use/full-report.pdf
12
U.S. Department of Health and Human Services. (2012). Preventing Tobacco Use Among Youth and Young
Adults: A Report of the Surgeon General. Available at: www.surgeongeneral.gov/library/reports/preventingyouth-tobacco-use/full-report.pdf
13
U.S. Department of Health and Human Services. (2000). Reducing Tobacco Use: A Report of the Surgeon
General. Atlanta, Georgia: U.S. Department of Health and Human Services, Centers for Disease Control and
Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and
Health, p. 20. Available at:
www.cdc.gov/tobacco/data_statistics/sgr/2000/complete_report/pdfs/fullreport.pdf
14
Centers for Disease Control and Prevention.( 2012). “Current Tobacco Use Among Middle and High School
Students – United States, 2011.” Morbidity and Mortality Weekly Report 61: 581–604. Available at:
www.cdc.gov/mmwr/pdf/wk/mm6131.pdf
15 Pierce J., Gilmer T., Lee L., et al. (2005). “Tobacco Industry Price-Subsidizing Promotions May Overcome
the Downward Pressure of Higher Prices on Initiation of Regular Smoking.” Health Economics; 14: 10611071, 1061.
16 Pierce J., Gilmer T., Lee L., et al. (2005). “Tobacco Industry Price-Subsidizing Promotions May Overcome
the Downward Pressure of Higher Prices on Initiation of Regular Smoking.” Health Economics; 14: 10611071, 1061.
17 U.S. Department of Health and Human Services. (2012). Preventing Tobacco Use Among Youth and Young
Adults: A Report of the Surgeon General. Available at: www.surgeongeneral.gov/library/reports/preventingyouth-tobacco-use/; Institute of Medicine. (2007). Ending the Tobacco Problem: A Blueprint for the Nation.
Washington, DC: The National Academies Press, p. 183. Available at:
www.legacyforhealth.org/content/download/571/6842/file/tobacco_final_report.pdf
18
Campaign for Tobacco Free Kids. 2013. Tobacco and Socioeconomic Status. Available at:
www.tobaccofreekids.org/research/factsheets/pdf/0260.pdf.
19
Centers for Disease Control and Prevention. 1998. “Response to Increases in Cigarette Prices By
Race/Ethnicity, Income, and Age Groups—United States, 1976–1993.” Morbidity and Mortality Weekly
Report 47: 605–609. Available at: www.cdc.gov/mmwr/preview/mmwrhtml/00054047.htm
20 U.S. Department of Health and Human Services. (2000). Reducing Tobacco Use: A Report of the Surgeon
General. Atlanta, Georgia: U.S. Department of Health and Human Services, Centers for Disease Control and
Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and
Health, p. 398–400. Available at:
www.cdc.gov/tobacco/data_statistics/sgr/2000/complete_report/pdfs/fullreport.pdf
21 Campaign for Tobacco Free Kids. 2013. Tobacco and Socioeconomic Status. Available at:
www.tobaccofreekids.org/research/factsheets/pdf/0260.pdf
22 Cherukapalli, R. 2010. “A Behavioral Economics Perspective on Tobacco Taxation.” American Journal of
Public Health 100:609–615. Available at: www.ncbi.nlm.nih.gov/pmc/articles/PMC2836334/
23 U.S. Department of Health and Human Services. (2014). The Health Consequences of Smoking — 50 Years
of Progress. A Report of the Surgeon General. Available at: www.surgeongeneral.gov/library/reports/50years-of-progress/full-report.pdf
24
Institute of Alcohol Studies. 2013. Is Alcohol Too Cheap in the UK? The Case for Setting a Minimum Unit
Price For Alcohol, p. 17. Available at: www.ias.org.uk/uploads/pdf/News%20stories/iasreport-thomasstockwell-april2013.pdf
25 Institute of Alcohol Studies. 2013. Is Alcohol Too Cheap in the UK? The Case for Setting a Minimum Unit
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Price For Alcohol, p. 17. Available at: www.ias.org.uk/uploads/pdf/News%20stories/iasreport-thomasstockwell-april2013.pdf
26
The University of Sheffield. 2012. Model-Based Appraisal of Alcohol Minimum Pricing in Ontario and
British Columbia: A Canadian Adaptation of the Sheffield Alcohol Policy Model Version 2, p. 98-100.
Available at: www.carbc.ca/Portals/0/PropertyAgent/558/Files/240/AlcMinPricingOntBC.pdf
27 U.S. Department of Health and Human Services. (2000). Reducing Tobacco Use: A Report of the Surgeon
General. Atlanta, Georgia: U.S. Department of Health and Human Services, Centers for Disease Control and
Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and
Health, p. 338. Available at:
www.cdc.gov/tobacco/data_statistics/sgr/2000/complete_report/pdfs/fullreport.pdf; U.S. Department of
Health and Human Services. (2012). Preventing Tobacco Use Among Youth and Young Adults: A Report of
the Surgeon General. Available at: www.surgeongeneral.gov/library/reports/preventing-youth-tobacco-use/;
Campaign for Tobacco Free Kids. 2012. State Cigarette Excise Tax Rates & Rankings. Available at:
www.tobaccofreekids.org/research/factsheets/pdf/0097.pdf
28
U.S. Department of Health and Human Services. (2000). Reducing Tobacco Use: A Report of the Surgeon
General. Atlanta, Georgia: U.S. Department of Health and Human Services, Centers for Disease Control and
Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and
Health, p. 359. Available at:
www.cdc.gov/tobacco/data_statistics/sgr/2000/complete_report/pdfs/fullreport.pdf
29 Centers for Disease Control and Prevention. (2010). State Cigarette Minimum Price Laws—United States,
2009.” Morbidity and Mortality Weekly Report 59: 389–392. Available at:
www.cdc.gov/mmwr/preview/mmwrhtml/mm5913a2.htm; New York Ordinance No. 1021-2013 (2013)
(signed into law on November 19, 2013.)
30 Tynan, M.A., Ribisl, K.M., and Loomis, B.R. 2013. “Impact of Cigarette Minimum Price Laws on the Retail
Price Of Cigarettes in the USA.” Tobacco Control 22:e78-85, p. 85. Available at:
http://tobaccocontrol.bmj.com/content/22/e1/e78.short
31
Tynan, M.A., Ribisl, K.M., and Loomis, B.R. 2013. “Impact of Cigarette Minimum Price Laws on the Retail
Price Of Cigarettes in the USA.” Tobacco Control 22:e78-85, p. 85. Available at:
http://tobaccocontrol.bmj.com/content/22/e1/e78.short
32 Minnesota House of Representatives Research Department. 2000. The Unfair Cigarette Sales Act, p. 2.
Available at: www.house.leg.state.mn.us/hrd/pubs/ucsa.pdf (“The stated purpose of the act is to prevent
unfair competition from sales below cost.”); Feighery, E.C., Ribisl, K.M., Schleicher, N.C., et al. 2005.
“How do Minimum Cigarette Price Laws Affect Cigarette Prices at the Retail Level?” Tobacco Control, 14:
80–85.
33
Chaloupka, F.J., et al., (2002). “Tax, Price and Cigarette Smoking: Evidence from the Tobacco Documents
and Implications for Tobacco Company Marketing Strategies.” Tobacco Control 11: i62-i71; Centers for
Disease Control and Prevention. (2010). State Cigarette Minimum Price Laws—United States, 2009.”
Morbidity and Mortality Weekly Report 59: 389–392. Available at:
www.cdc.gov/mmwr/preview/mmwrhtml/mm5913a2.htm
34
A “buy-down” is a reimbursement program that allows retailers to provide customers an immediate price
reduction on certain brands for a specific period of time, e.g. 50 cents off each pack of Marlboro sold from
the store’s inventory for 30 days. The consumer gets an instant price reduction and, at the end of the
incentive period, the retailer gets reimbursed by the manufacturer for the price reduction on the cigarettes
sold at the reduced price.
35
A “master-type” program is a promotional program sponsored by the manufacturer and administered through
a cigarette wholesaler. The wholesaler agrees to pay the retailer a rebate and is later reimbursed by the
manufacturer. The wholesaler may also be paid a fee to administer the program. The payments are not
deducted from the manufacturer’s list price shown on the invoice from the manufacturer but are paid or
credited separately after the sale to the retailer.
36
Federal Trade Commission. (2013). Federal Trade Commission Cigarette Report for 2011. Available at:
www.ftc.gov/os/2013/05/130521cigarettereport.pdf
37
Choi, K., Hennrikus, D., Forster, J., et al. 2013. “Receipt and Redemption of Cigarette Coupons, Perceptions
of Cigarette Companies and Smoking Cessation.” Tobacco Control 22: 418-422. Available at:
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30
http://tobaccocontrol.bmj.com/content/early/2012/10/08/tobaccocontrol-2012-050539.abstract; Xu X., Pesko,
M.F., Tynan, M.A., et al. 2013. “Cigarette Price-Minimization Strategies by U.S. Smokers. American
Journal of Preventive Medicine 44: 472–476; Federal Trade Commission. (2013). Federal Trade
Commission Cigarette Report for 2011. Available at: www.ftc.gov/os/2013/05/130521cigarettereport.pdf
38
Federal Trade Commission. (2013). Federal Trade Commission Cigarette Report for 2011. Available at:
www.ftc.gov/os/2013/05/130521cigarettereport.pdf
39
Xu X., Pesko, M.F., Tynan, M.A., et al. 2013. “Cigarette Price-Minimization Strategies by U.S. Smokers.”
American Journal of Preventive Medicine, 44: 472–476.
40
Xu X., Pesko, M.F., Tynan, M.A., et al. 2013. “Cigarette Price-Minimization Strategies by U.S. Smokers.”
American Journal of Preventive Medicine, 44: 472–476.
41
Xu X., Pesko, M.F., Tynan, M.A., et al. 2013. “Cigarette Price-Minimization Strategies by U.S. Smokers.”
American Journal of Preventive Medicine, 44: 472–476.
42
Xu X., Pesko, M.F., Tynan, M.A., et al. 2013. “Cigarette Price-Minimization Strategies by U.S. Smokers.”
American Journal of Preventive Medicine, 44: 472–476.
43
Pesko, M., Licht, A, and Kruger, J. (2013). “Cigarette Price Minimization Strategies in the United States:
Price Reductions and Responsiveness to Excise Taxes.” Nicotine & Tobacco Research 15: 1858–66.
44
Choi, K., Hennrikus, D., Forster, J., et al. 2012. “Use of Price-Minimizing Strategies by Smokers and Their
Effects on Subsequent Smoking Behaviors.” Nicotine & Tobacco Research 14: 864–870. Available at:
http://ntr.oxfordjournals.org/content/early/2011/12/21/ntr.ntr300.short?rss=1; Choi, K., Hennrikus, D.,
Forster, J., et al. 2013. “Receipt and Redemption of Cigarette Coupons, Perceptions of Cigarette Companies
and Smoking Cessation.” Tobacco Control 22: 418-422. Available at:
http://tobaccocontrol.bmj.com/content/early/2012/10/08/tobaccocontrol-2012-050539.abstract
45
Chaloupka, F.J., et al., (2002). “Tax, Price and Cigarette Smoking: Evidence from the Tobacco Documents
and Implications for Tobacco Company Marketing Strategies.” Tobacco Control 11: i62-i71. Available at:
http://tobaccocontrol.bmj.com/content/11/suppl_1/i62.abstract; Keeler, T., Hu, T., Ong, M., et al. 2004. “The
US National Tobacco Settlement: The Effects Of Advertising And Price Changes On Cigarette
Consumption.” Applied Economics 36: 1623–1629. Available at:
http://ideas.repec.org/a/taf/applec/v36y2004i15p1623-1629.html
46 New York, N.Y., Ordinance No. 1021-2013 (2013) (signed into law on November 19, 2013.)
47
Tynan, M., Ribisl, K., and Loomis, B. (2013). “Impact of Cigarette Minimum Price Laws on the Retail Price
Of Cigarettes in the USA.” Tobacco Control 22:e78
48 U.S. Department of Health and Human Services. (2000). Reducing Tobacco Use: A Report of the Surgeon
General. Atlanta, Georgia: U.S. Department of Health and Human Services, Centers for Disease Control and
Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and
Health, p. 336. Available at:
www.cdc.gov/tobacco/data_statistics/sgr/2000/complete_report/pdfs/fullreport.pdf
49 U.S. Department of Health and Human Services. (2000). Reducing Tobacco Use: A Report of the Surgeon
General. Atlanta, Georgia: U.S. Department of Health and Human Services, Centers for Disease Control and
Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and
Health, p. 337. Available at:
www.cdc.gov/tobacco/data_statistics/sgr/2000/complete_report/pdfs/fullreport.pdf
50
Hyland, A., Bauer, J.E., Li, Q., et al. 2005. “Higher Cigarette Prices Influence Cigarette Purchase Patterns.”
Tobacco Control. 14:86–92, p. 91. Available at:
http://tobaccocontrol.bmj.com/content/14/2/86.full.pdf+html; Choi, K., Hennrikus, D., Forster, J., et al. 2012.
“Use of Price-Minimizing Strategies by Smokers and Their Effects on Subsequent Smoking Behaviors.”
Nicotine & Tobacco Research 14: 864–870. Available at:
http://ntr.oxfordjournals.org/content/early/2011/12/21/ntr.ntr300.short?rss=1
51
Chaloupka, F. (2010). Tobacco Control Lessons Learned: The Impact of State and Local Policies. Chicago,
IL: University of Illinois at Chicago, p. 38. Available at:
www.impacteen.org/generalarea_PDFs/ITResearch38_Chaloupka.pdf (“In an effort to address large scale
cigarette smuggling, California adopted a new, high-tech, difficult to counterfeit tax stamp that could be
quickly scanned by enforcement agents to determine whether or not taxes had been paid. Coupled with more
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aggressive enforcement, early experiences suggest that the new stamps have been quite effective in
generating new revenue and curbing smuggling.”).
52
See Hodge, J.G. Jr. 1997. “Implementing Modern Public Health Goals Through Government: An
Examination Of New Federalism And Public Health Law.” J. Contemp. Health L. & Pol’y 14: 93-126, p. 94;
see also Gostin, L.O. 2008. Public Health Law: Power, Duty, Restraint. Berkeley, CA: University of
California Press, p. 79. (Gostin defines police power as: “The inherent authority of the state (and, through
delegation, local government) to enact laws and promulgate regulations to protect, preserve, and promote the
health, safety, morals, and general welfare of the people. To achieve these communal benefits, the state
retains the power to restrict, within federal and state constitutional limits, private interests—including
personal interests in autonomy, privacy, association, and liberty, as well as economic interests in freedom to
contract and uses of property.”)
53 See Hodge, J.G. Jr. 1997. “Implementing Modern Public Health Goals Through Government: An
Examination Of New Federalism And Public Health Law.” J. Contemp. Health L. & Pol’y 14: 93-126, p. 94;
see also Gostin, L.O. 2008. Public Health Law: Power, Duty, Restraint. Berkeley, CA: University of
California Press, p. 79. (Gostin defines police power as: “The inherent authority of the state (and, through
delegation, local government) to enact laws and promulgate regulations to protect, preserve, and promote the
health, safety, morals, and general welfare of the people. To achieve these communal benefits, the state
retains the power to restrict, within federal and state constitutional limits, private interests—including
personal interests in autonomy, privacy, association, and liberty, as well as economic interests in freedom to
contract and uses of property.”)
54 See generally, Francis M. Dougherty, Validity, Construction, and Application of State Statutory Provisions
Prohibiting Sales of Commodities Below Cost – Modern Cases, 41 A.L.R. 4th 612 (1985); see, e.g.,
Simonetti v. State, 132 So.2d 252 (Ala. 1961) (upholding an Alabama statute prohibiting any wholesaler or
retailer to sell, offer to sell, or advertise cigarettes at less than cost under the state’s general police power).
55
California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980) (the Supreme Court
held that California’s wine pricing law was preempted by the Sherman Act because it gave wine producers
the power to eliminate competition by setting minimum prices).
56
See Fisher v. City of Berkeley, 475 U.S. 260, 270 (1986) (Unilateral action by government in setting rent
ceilings does not violate antitrust laws.); Flying J, Inc. v. Hollen, 621 F.3d 658, 662–3 (7th Cir. 2010) (the
Seventh Circuit held that Wisconsin’s gasoline pricing law was not preempted by the Sherman Act because
the law did not require the businesses to act together to set prices and the amount of the minimum gasoline
markup was established within the law itself).
57
This paragraph reserves certain areas of tobacco regulation to the FDA: “No State or political subdivision of
a State may establish or continue in effect with respect to a tobacco product any requirement which is
different from, or in addition to, any requirement under the provisions of this chapter relating to tobacco
product standards, premarket review, adulteration, misbranding, labeling, registration, good manufacturing
standards, or modified risk tobacco products.” 21 U.S.C.A. § 387p(a)(2)(A).
58
21 U.S.C.A. § 387p(a)(1).
59
As of the date of publication of this model legislation, the FDA has authority over only cigarettes and
smokeless tobacco products, but is likely to uses its deeming authority to assert jurisdiction over other
tobacco products as well. If so, the non-preemption language would apply equally to all other tobacco
products.
60 Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976).
61
Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 565–66 (2001).
Nat’l Ass’n of Tobacco Outlets, Inc. v. City of Providence et al., C.A. No. 12-96-ML., 2012 WL 6128707 (
D.R.I. Dec. 10, 2012); Nat’l Ass’n of Tobacco Outlets, Inc. v. City of Providence, 731 F.3d 71 (1st Cir.,
2013).
63
Nat’l Ass’n of Tobacco Outlets, Inc. v. City of Providence et al., C.A. No. 12-96-ML., 2012 WL 6128707 (
D.R.I. Dec. 10, 2012); Nat’l Ass’n of Tobacco Outlets, Inc. v. City of Providence, 731 F.3d 71 (1st Cir.,
2013).
64
15 U.S.C.A. § 1334(b).
65
15 U.S.C.A. § 1334(c).
62
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66
67
15 U.S.C.A. § 1334(c).
Nat’l Ass’n of Tobacco Outlets, Inc. v. City of Providence et al., C.A. No. 12-96-ML., 2012 WL 6128707 (
D.R.I. Dec. 10, 2012); Nat’l Ass’n of Tobacco Outlets, Inc. v. City of Providence, 731 F.3d 71 (1st Cir.,
2013).
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