Will Taxes And Regulation Rein In The Booming E-Cigarette Market?

Comments : 0

October 2, 2013 / Forbes / — Lorillard’s announcement it will pay as much as $100 million for a top British e-cigarette manufacturer demonstrates the rapid evolution of what started out as a niche business. On top of Lorillard’s $135 million purchase of blu eCigs in April 2012 and the entrance of high-profile entrepreneurs like Sean Parker and Peter Theil – they invested $15 million into NJOY earlier this year – Lorillard’s investment signals the e-cig business has arrived.

It also increases the odds that electronic cigarettes, which heat nicotine into a vapor instead of burning tobacco, will be dragged into the same web of taxes and regulations that state, federal and local authorities have used to control the cigarette business. Right now e-cigs operate virtually free of federal regulation and only one state, Minnesota, subjects them to more than ordinary sales taxes.

“The category came on them quickly,” said Miguel Martin, an 18-year Altria veteran who joined independent e-cig manufacturer LOGIC Technology’s president in July. “There’s an expectation there will be some level of taxation” within the industry, as well as tighter federal regulation.And the biggest e-cig manufacturers are OK with that. While there are hundreds of companies selling e-cigs in stores and online, the business is already concentrating. In what has become a familiar pattern in American capitalism, as anti-tobacco activists and attorneys general call for more regulation, the biggest companies are quietly joining in. Just as the Master Settlement Agreement the AGs negotiated in 1998 was a boon for Philip Morris by making it harder for small tobacco companies to compete, increased regulation of e-cigs may help reduce competition from unruly competitors selling their products on the Internet.READ THE FULL ARTICLE