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    Philip Morris Sues 300 California Retailers

    Small operators accused of counterfeiting, "shocked" by the suit.

    NEW YORK -- Philip Morris Co. has sued nearly 300 Northern California retailers -- many of them small delis, corner stores and produce markets -- claiming that they're misleading smokers and cheating the tobacco giant by selling counterfeit packs of Marlboro cigarettes, The San Francisco Chronicle is reporting.

    In two lawsuits filed in U.S. District Court in San Francisco and Sacramento, Philip Morris named 48 San Francisco gas stations, convenience stores and liquor stores among the businesses it accused of selling cigarettes that came in Marlboro packaging but weren't authentic. Philip Morris owns the Marlboro brand, the nation's top-selling cigarette.

    Also named as defendants were 31 retailers in Oakland, 25 in San Jose and 22 in Sacramento. Stores in Sonoma, Gilroy, Los Altos, Pacifica and Santa Clara also are among those listed.

    Earlier this year, Philip Morris USA - the Richmond, Va.-based subsidiary of the Altria Group Inc. in New York City -- sued about 1,500 Southern California retailers and several cigarette importers, followed by another 200 stores in the San Joaquin Valley, in a yearlong national sweep that has focused heavily on California, the report said. The company believes that counterfeit cigarettes, which it says are made primarily in China, are prevalent in California due to the proximity of ports that trade with Asia. Philip Morris said Wednesday that it has sued retailers in 10 other states as well.

    The Northern California probe took place mostly in June and July. That's when Philip Morris sent undercover investigators into about 10,000 retailers to buy and examine Marlboro cigarettes, said Jack Holleran, the company's senior vice president for compliance and brand integrity.

    "They walk in, and they, in essence, buy just like any other adult consumer would," Holleran said. Marlboro packages suspected of being counterfeit were bagged, marked and sent by secure mail to Richmond, Va., where the company determined whether the cigarettes were made or licensed by Philip Morris, he said.

    "As soon as we find counterfeit cigarettes, we turn [the suspected retailers'] names over to law enforcement," Holleran said. "It doesn't matter to us whether it's a big chain or a mom and pop.''

    Two storeowners contacted Wednesday by The Chronicle said they didn't know about the lawsuit. "I have no idea,'' said Bishara Bahu, who, as the owner of the Roxie Food Center in Berkeley, Calif., said he buys the cigarettes he sells from reputable discount chains. "I'm worried about it. I don't know how to check what's real," Bahu said.

    He said the cigarettes he carries all have what appear to be the legally required excise tax stamps. What's more, Bahu said, he hardly sells enough cigarettes to fight about -- three or four packs a day -- and some customers give him a hard time for carrying them at all.

    Francisco Javier Gomez, who with his brother owns the Mi Rancho Market on South Van Ness in San Francisco, said he too buys his cigarettes from prominent wholesale clubs. He carries only one brand, Marlboro, to please a few regular customers who buy them, he said.

    "I'm really shocked," Gomez said, adding that it could be intimidating to go up against a major tobacco corporation.

    Philip Morris, meanwhile, says it has government agencies including local police departments and the U.S. Bureau of Customs and Border Protection and Bureau of Alcohol, Tobacco and Firearms, as well as trademark laws on it side.

    In previous reports, the California Board of Equalization has estimated that the state loses $270 million a year in taxes due to sales of counterfeit cigarettes carrying bogus stamps. Philip Morris rival RJ Reynolds has said that it doesn't believe its brands are heavily counterfeited; others in the tobacco industry -- which has been fighting declining cigarette sales -- have said counterfeits are increasingly common.

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