Exclusive: With feds slow to act, states target e-cigarette sales to minors
Frustrated by the slow pace of federal action, state attorneys general are waging their own campaigns against the sale and advertising of e-cigarettes to minors.
More than a dozen AGs, including those in New York, California, Indiana and Ohio, are using new state and local laws - some of which they helped craft - to put pressure on the industry at all levels, from neighborhood vape shops to big tobacco companies like Altria Group (MO.N) and Reynolds American Inc (RAI.N).
Much of the campaign so far has involved threats to sue violators or appeals to a company's sense of responsibility, though some lawsuits have been filed, too.
State actions have accelerated in the wake of government data released in April, which showed that teen use of e-cigarettes tripled in 2014 alone, making them more common for youngsters than tobacco.
"The key is to avoid another generation being addicted to nicotine," Indiana Attorney General Greg Zoeller said in an interview.
State attorneys general played a pivotal role during the 1990s in battling tobacco companies over conventional cigarettes.
The Master Settlement Agreement (MSA), an accord reached in November 1998 between the state attorneys general of 46 states, five U.S. territories, the District of Columbia and the five largest tobacco companies, resulted in significant changes to cigarette marketing and required the tobacco industry to pay the states about $10 billion annually for the indefinite future.
FEDERAL ACTION URGED
Nearly a year ago, a group of AGs asked the U.S. Food and Drug Administration to take a tougher line on e-cigarettes, the risks and benefits of which are still being studied.
In April of 2014, the agency proposed banning the sale of e-cigarettes to people under the age of 18, but did not recommend prohibiting advertising, flavored products or online sales – all of which help make the devices attractive to youngsters, according to public health advocates.
The FDA proposal has been under review ever since, which has meant that vaping remains legal for youths in states that haven't passed laws banning it. The agency is likely to finalize its new e-cigarette regulations later this summer, though it could be several years before the federal rules go into effect.
Federal regulations and the 1998 Master Settlement prohibit makers of conventional cigarettes from targeting youth and from advertising on television, billboards and mass transit, but the rules don't apply to e-cigarettes.
So far, however, 46 states have passed laws banning their sale to minors. Twelve of those states have also passed laws requiring child-proof packaging for e-liquids and e-cigarettes, according to the Campaign for Tobacco-Free Kids.
AGs are using these laws, as well as others not directly tied to e-cigarettes, to force companies to drop ads appealing to teens, switch to child-proof packaging and spend thousands of dollars on more vigilant age verification systems for their websites and online deliveries.
In June, New York Attorney General Eric Schneiderman announced settlements with four companies that were not complying with the state's rule about child resistant packaging for nicotine liquids.
Reuters spoke with more than 10 e-cigarette and vaping companies - including Reynolds American, which sells Vuse, and Altria Group, which sells MarkTen and Green Smoke – that acknowledged they have been contacted by state law enforcers or by the National Associations of Attorneys General. Reynolds and Altria say their brands were not in violation of local laws.
Some of the AGs have coordinated their efforts. One group is pressuring certain e-cigarette manufacturers and vendors to limit ads that appeal to teens, especially on company websites and places like YouTube.
Ohio Attorney General Mike DeWine, along with colleagues from several other states, sent a letter in April to privately-held manufacturer NJOY, asking it to "immediately instruct YouTube to restrict" access to its advertisements to adults.
NJOY said in an April letter to DeWine that more than 90 percent of the U.S. viewers who have watched its hosted YouTube videos are at least 18, and the company said it would suspend videos if that figure fell to 85 percent or less.
NJOY, which previously settled a case with California over allegations of targeting minors and deceptive marketing, would not comment further.
California has sent letters to more than 150 e-cigarette and vaping companies in recent years "to encourage voluntary compliance with applicable state and federal laws," including a ban on sales to youth, according to documents reviewed by Reuters.
The state is also pursuing companies that sell fruit- flavored vaping liquids that appeal to teens and those that make false or misleading statements in their advertisements. One letter sent by the state asked a manufacturer to quit claiming that "electronic cigarettes are one of the safest forms of nicotine available" and that "when you exhale, you are exhaling harmless water vapor."
"Many companies have taken some or all of our recommended steps," said Kristin Ford, a spokeswoman for Attorney General Kamala Harris.
AGs are paying particular attention to sales on websites, a popular source of vaping materials for teens, who trade information about which ones require little proof of age.
Jan Verleur, CEO and co-founder of electronic cigarette company VMR Products, said his company changed its age verification system in some states after being contacted by a state AG. He estimated the cost per order would increase by about 50 cents, but would not say if VMR would absorb any of that. The company makes about half its sales online.
"This is bad news for the smaller players and good news for the tobacco companies, whose business model relied on mass manufacturing, not personalized products," said Philip Gorham, an equity analyst at Morningstar who covers consumer products.