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BOSTON -- Fearful that Massachusetts retailers and smokers would be hurt if a state-imposed prohibition on retail cigarette discounts takes effect next week, the administration of Acting Governor Jane M. Swift yesterday started backing away from the ban.
The surprising reversal came as Philip Morris, the nation's largest cigarette manufacturer, said it was preparing to eliminate its retail price promotions in Massachusetts for at least the next two months, a move that was expected to boost the price of a pack of Marlboros and other brands by 60 cents each, according to the Boston Globe.
Kevin Sullivan, Swift's secretary of administration and finance, said he wanted to "take a second look at the directive on retail cigarette discounts issued by the Massachusetts Revenue Department," the report said. The directive had been in the works for months and was scheduled to take effect this week.
The fallout from the retail discount ban, coupled with a proposed 75-cents-per-pack increase in the cigarette excise tax passed by the House and Senate, could have made cigarettes in Massachusetts the most expensive in the country.
Some retailers who rely heavily on cigarette sales and the foot traffic they generate have warned that the rapid increase in prices would spur consumers to buy cigarettes in other states or on the Internet.
Sullivan said he would like to reverse the Revenue Department's directive or, if necessary, get legislation passed that would continue to allow cigarette manufacturers to offer retail discounts. ''I think the retailers have put up a good argument,'' he said.
Sullivan said he plans to meet with officials from the New England Convenience Store Association later this week on the matter. The association says its members derive one-third of their revenue from cigarette sales, with cigarette buyers accounting for a large portion of other purchases as well.
The new policy on buydowns came about after an internal review of the state's fair-pricing law at the Massachusetts Revenue Department. The 1945 statute requires the department to set a minimum price for cigarettes, to prevent a retailer from slashing his prices to drive competitors out of business.
The state's minimum price is calculated using the invoice price the manufacturer charges the wholesaler. Currently, it is $4.46 for a pack of Marlboros at chain stores and $4.52 at other stores. Most retailers are able to charge 50 to 60 cents less than the minimum price because of buydowns offered to them by cigarette manufacturers, the report said. The Revenue Department recently concluded the buydowns violated the terms of the fair pricing law and banned them as of July 1.
Above: Acting Mass. Governor Jane M. Swift