The Unfair Cigarette Sales Below Cost Act prohibits wholesalers and retailers from selling cigarettes “below cost.” The purpose of the Act is to prevent unfair competition from sales below cost. In practice, it restricts common sales techniques and much price competition. The Act has been supported by anti-smoking advocates because it raises the price of cigarettes.
The Act states that if dealers sell cigarettes at a combined price with another good or service, the minimum pricing rules apply to other commodities and these commodities cannot be sold below actual cost. It is intended to prevent tying of cigarettes with another commodity to effectively avoid the minimum pricing rules. Thus, dealers cannot sell a combination of cigarettes and some other product.
The Act prevents “injuring a competitor, destroying or lessening competition” through “unfair competition. The Act does not encourage competition, but rather protects the margins and profits of some cigarette sellers. The Act restricts competition by prohibiting standard sales techniques used in the retail and wholesale businesses.