Marketplace Report: Selling Mini Cigars

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Officials in 40 states want the U.S. Treasury Department to investigate tobacco companies that market single-sale miniature cigars, which are very similar to ciagarettes. They suspect the sale of the "cigars" is one method to circumvent regulations governing cigarette sales. Madeleine Brand talks with Bob Moon of Marketplace.


Back now with DAY TO DAY. What's the difference between a cigarette and a little cigar? That's exactly what some state officials want federal regulators to clarify. They're concerned that big tobacco companies are trying to hook young smokers and skirt cigarette taxes and regulations with products they're labeling little cigars.

Bob Moon joins us now from the MARKETPLACE News bureau in New York. And Bob, you know, Freud said sometimes with cigars, it's just a cigar. So what is a little cigar?

BOB MOON (reporter Marketplace):

Well there is a federal rule, Madeline, that's been around for decades and it does allow for this separate designation of little cigars. Thing is, they can be same as cigarettes, right down to their size, weights, their appearance, all except for one thing, they have brown wrappers instead of white ones. So the Attorneys General of 40 states have signed on to this request, they're asking the Treasury Department, the bureau that oversees tobacco taxes, to tighten up these rules.

BRAND: And why are they so concerned with this?

Mr. MOON: Well these state officials are complaining that even though many of these so-called little cigars smoke the same as a regular cigarette, the smoke is actually inhaled, unlike a cigar. The tobacco companies realize some benefits by selling them as little cigars when they label them that way. The tobacco companies are able to pay lower federal and state taxes. They also aren't required to comply with the advertising restrictions and the special payments that they have to make under that big 1998 legal agreement between the tobacco companies and all the fifty states.

The cigar industry argues that there is a legitimate type of little cigar but there's a difference here on how to draw the line between the different categories. The Treasury Department group that would draw that line says it could take a few months.

BRAND: And are people buying these little cigars? Is there a market for them?

Mr. MOON: Well the industry says little cigar sales amount to about $360 million a year. That compares to $80 billion for cigarettes, but officials do say that the number of little cigars sold has doubled to about 4 billion a year since 1998. And they're worried that this rate of growth could actually erase the progress in reducing overall smoking in recent years.

Some anti-smoking groups say these little cigars are being marketed to appeal to younger smokers, especially the ones with chocolate and raspberry flavorings.

Today, in the MARKETPLACE newsroom, we're watching a growing investigation into stock options.

BRAND: Thank you, Bob. Bob Moon of public radio's daily business show MARKETPLACE produced by American Public Media.

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