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BOSTON -- In a surprise announcement that benefits convenience store retailers and tobacco companies, Massachusetts State officials said they no longer intend to follow through with a pledge to eliminate special manufacturer discounts that could have raised the price of a pack of cigarettes by 60 cents.
Revenue Department Commissioner Alan LeBovidge had said last month that he planned to eliminate "buy-downs" by the middle of this month, but a spokesman said that plan has been shelved. "We are going to withhold judgment on this until the Legislature acts," said Revenue Department spokesman Tim Connolly. "We've been told the Legislature will consider a bill that will solve this buy-down problem."
Convenience store operators had pleaded with the Revenue Department not to eliminate the buy-downs. They feared another spike in cigarette prices, so soon after the 75-cent-per-pack tax increase that took effect this summer, would have driven even more customers to border states or to the Internet for cheaper cigarettes. Smokers account for a third of convenience store foot traffic and nearly half of all sales, according to the Boston Globe.
State Representative Paul Caron, a Democrat from Springfield who has been heading up a special commission on tobacco taxes, said legislation is being prepared to preserve buy-downs. "I am very pleased they decided to back down," Caron said, adding that cigarette sales have already slowed and would have been dealt another major blow if prices increased another 60 cents a pack.
The issue surfaced last summer when Revenue Department officials noticed that the rapidly rising discounts cigarette manufacturers were offering to retailers were subverting the state's minimum pricing law for cigarettes. The minimum pricing law was passed more than 40 years ago to prevent a retailer from lowering his cigarette prices to force a competitor out of business. Under the law, the state sets a minimum retail price based primarily on invoice prices charged to the cigarette wholesaler, the report said.
Manufacturers like buy-downs because the discounts give them more control over shelf display and retail pricing. Revenue Department officials, however, concluded that the buy-downs made a mockery of the minimum pricing law. They held hearings on the matter during the summer and announced plans to ban buy-downs next July 1. They delayed the ban after Acting Governor Jane Swift's aides heeded retailer pleas for more time. They delayed again in early October on similar grounds, but LeBovidge said at that time that the law compelled him to act.