A Review of the Department of Revenue’s Enforcement of Mississippi’s “Unfair Cigarette Sales Law”
Executive Summary
Introduction
In 1954, in order to protect the public against the effects of unfair business practices in the sale of cigarettes, the Mississippi Legislature passed what is now codified as MISS. CODE ANN. Section 75-23-1 et seq., known as the “Unfair Cigarette Sales Law.”
Recently a legislator brought concerns regarding the adequacy of the law and its success in achieving the above-stated intent to the PEER Committee’s attention. The substance of the legislator’s concerns was that retailers around the state may not be complying with federal and state requirements for pricing standards for cigarettes and that certain retail outlets may be selling cigarettes at prices below required minimums, thus creating an unfair market environment for vendors that fully comply with pricing laws.
PEER reviewed enforcement of the Unfair Cigarette Sales Law to determine the adequacy of the current law and how well the enforcement efforts of the Department of Revenue (DOR) help to ensure compliance with that law.
Background
Minimum pricing of cigarettes is envisioned to have two primary effects: to promote fair trade and to counteract the effects of manufacturers’ discounting on consumption, thus helping to protect public health.
Mississippi’s Unfair Cigarette Sales Law sets a minimum markup for wholesalers and retailers but also allows wholesalers and retailers to meet the price of a competitor who is selling the same cigarettes at cost as defined by law. The federal Robinson-Patman Act was intended to prevent monopolies and prohibit price discrimination between different purchasers of commodities of like grade or quality.
Twenty-five states have minimum pricing laws governing the sale of cigarettes. In the southeast, Mississippi, Louisiana, Tennessee, and Arkansas have minimum pricing laws, while Alabama, Georgia, and Florida do not.
Conclusion
Mississippi’s Unfair Cigarette Sales law establishes a formula for determining the legal minimum price of cigarettes but does not set a minimum price applicable to all wholesalers and retailers. Further, the Department of Revenue’s enforcement efforts are hampered by an insufficient number of staff assigned to enforcing the law and a provision of the law that allows pricing below legally mandated prices in order to meet a competitor’s price.
Mississippi’s Unfair Cigarette Sales Law does not establish a minimum price applicable to all wholesalers and retailers. Even when complying with the legally mandated pricing structure, wholesalers’ and retailers’ minimum prices may vary depending on their individual costs.
The Department of Revenue’s enforcement of Mississippi’s Unfair Cigarette Sales Law is hampered by an insufficient number of staff assigned to enforcing the law and provisions of the law that allow pricing below minimum price requirements to meet competitors’ prices. Also, a single employee of the department’s Miscellaneous Tax Bureau has, in addition to other responsibilities, the responsibility of enforcing the Unfair Cigarette Sales Law.
Even if a wholesaler or retailer is found selling cigarettes at prices below that required by the Unfair Cigarette Sales Law, MISS. CODE ANN. Section 75-23-15 (a) (1972) allows wholesalers and retailers to sell below minimum prices to meet a competitor’s price.
Recommendation
The Legislature should consider the following options or a combination of options to determine which option or options represent the most appropriate public policy and promote the best interest of the state.