Kirby McInerney LLP | Financial Litigation Law Firm | Small cigarette wholesales accuse large companies of violating state tax laws
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Small cigarette wholesales accuse large companies of violating state tax laws

02/07/2018 |
Published by on Wednesday, February 7, 2018

ALBANY — A lawsuit filed this week accuses five of the state’s largest tobacco wholesalers of giving secret rebates to customers to drive down competition as part of an alleged scheme which may have violated state laws that set minimum prices on cigarettes.

Five tobacco wholesale companies, many family-owned, filed the lawsuit in state Supreme Court in Kings County. Their complaint accuses the larger wholesalers — some based out of state — of “systemic violations” of a 1985 law that was intended to stabilize the cigarette industry and allow New York agents and dealers to compete with out-of-state companies that were able to sell cigarettes for much less.

The defendants are Harold Levinson Associates, Core-Mark Midcontinent, McLane/Midwest, McLane/Eastern, Plainfield Tobacco and Candy Co. (also known as Resnick Distributors), and Consumer Product Distributors (also known as Polep Distribution Services).

The companies that filed the lawsuit — Amsterdam Tobacco Co., Donohue Candy and Tobacco, Kingston Candy & Tobacco, Mountain Candy & Cigar, and Sunrise Candy & Tobacco — allege the larger wholesalers have “repeatedly violated (state law) by giving secret rebates to customers ... with the intent to harm competitors or destroy or substantially lessen competition.”

Randall M. Fox, a Manhattan attorney for the plaintiffs, said his clients have complained to state lawmakers about the allegedly illicit practices they contend have crushed their businesses. At least one state legislator relayed the complaints to the state tax department, he said.

“As far as I know, nothing’s happened,” Fox said. “Certainly nothing public has happened and nothing visible within the industry. It will be a good question to pose to the tax department.”

Officials with the agency did not immediately respond to a request for comment Wednesday afternoon. Officials for the five companies named as defendants in the complaint could not be reached for comment.

Fox said the fallout has been dramatic for the smaller wholesalers, who sell cigarettes mostly to convenience stores, gas stations and small grocers.

“It’s been pretty horrific. They’ve lost large numbers of customers,” he said, adding one of the companies, Amsterdam Tobacco, was forced to give up its New York cigarette licensing agent. “They could not stay in that business anymore. This is a company that’s been around since 1924 ... and they’re just getting squeezed.”