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The Colossus Confesses, with Proof in his Hands.
Antony Boccanfuso, attorney of the Arnold & Porter LLP Office in New York, is one of those lawyers who demolish the enemies of Philip Morris. On January 28th 2005, in his attempt to demolish Yesmoke, the lawyer informed Judge Kevin Nathaniel Fox that the exact number of containers of cigarettes manufactured by Philip Morris and sold illegally every 12 months by the on-line store amounted to 126. A little more than six million cartons a year.
The attorney brought watertight evidence in favor of his Big Tobacco client, with which he is asking Yesmoke, based on the 126 containers per year sold online without “authorization”, to pay $ 550 million in damages.
Business is business!
But no one seems to have noticed that out of those 126 containers, 109 arrived at Yesmoke from the factory itself, and this was a substantial share of the annual production of that factory. So the evidence provided by Boccanfuso would seem to affirm, in fact, that the manufacturer, when he sold, always knew very well which market his production was destined to.
The “proof” in the hands of Philip Morris goes beyond the recent Agreement signed with the European Economic Community (EEC) according to which Philip Morris undertakes to block any further commerce of its cigarettes outside its distribution channels, and to pay a fine of 1,200 million Dollars, in annual installments of 120 million each free of interest. It is a fine that may seem high, but for Big Tobacco it is insignificant.
The 126 containers represent a full confession of Philip Morris on the delicate theme of the so-called parallel cigarette market. It is Big Tobacco that created it, fed it and managed it. In short, it “authorized” it. Because that was its business.
Philip Morris & Yesmoke
Up to two years ago the La Suerte Cigar and Cigarette Factory manufactured Philip Morris cigarettes in the Philippines. In 2001, Philip Morris invested 300 million dollars in a state-of-the-art manufacturing facility, Philip Morris' largest investment in Asia, that since mid-2003 has been producing both for local and export sales.
Anyone who has looked for cigarettes on Internet knows these products well, the market was full of Marlboros made in the Philippines and the prices were competitive.
This factory until three months ago, was practically kept going by its on-line sales. It is said that the new Philip Morris plant in the Philippines has started up the production of L&M Soft and Marlboro Menthol Lights Soft again, that had been interrupted because there wasn't a great demand, thanks to the success of these brands on-line.
Yesmoke, in turn, sold and was successful on Internet thanks to this Philip Morris branch. The Marlboros made in the Philippines, in fact, were always available in all their possible variants, while of those made in Switzerland, a container could be found from time to time, almost by mistake.
“The proof”
The name is ComScore, a “global information provider and consultancy to which leading companies turn for consumer behavior insight that drives successful marketing, sales and trading strategies” as its site affirms. Comscore provides internet audience measurement services, similar to television audience measurement services. Using a randomly selected and demographically balanced panel of approximately 1.5 million consumers, a million of whom are located in the United States, ComScore captures data regarding their Internet viewing, buying and other behavior.
ComScore seems to have studied Yesmoke, and it appeared that Yesmoke allegedly sold on Internet an annual average of six million, three hundred thousand cartons of cigarettes manufactured by Philip Morris. And the Comscore study acquired the value of proof in the suit against Yesmoke. Congratulations to the Attorney!.
The accounts
Philip Morris estimated Yesmoke's profits at 177.2 million earned from the on-line sale of cigarettes manufactured by Philip Morris. Very close to the profits of Philip Morris for the sale of the same cigarettes to Yesmoke.
But, as these sales (only Yesmoke's obviously) were conducted “willfully” as well as “illegally”, the figure benefiting Big Tobacco must be tripled to 531.6 million dollars plus legal expenses.
In point of fact, Big Tobacco wants to hold on to its profits coming from the sale of its cigarettes to Yesmoke, and gain possession of Yesmoke's profits multiplied by three. A real poker of aces!
Philip Morris is claiming from Yesmoke the payment, without installments, of a sum equal to the amount the colossus of smuggling has to pay to the European Economic Community (EEC). The 1,200 million dollars PM owes in 10 years and without interest closely corresponds to about 600 million dollars paid all at once.
In the end, the ridiculous demands of Philip Morris, and the equally ridiculous fine of 1,200 million dollars over 10 years, given to a company whose top brand earns, by itself, a retail market share of 22 BILLION dollars in a single year, seems to lead to the following result: Yesmoke should pay 531.6 million dollars in one lump sum, that Big Tobacco can use to pay its European Economic Community (EEC) fine, in installments: Brilliant!
A. Calantzopoulos has signed the agreement with EEC
The degeneration of rates induced by the market colossi to sweep away their small competitors with lawyers fees, has led to the degeneration also of the lawyers, who are today full of money and full of work. They, who are used to being paid by the hour with sums that they don't deserve, seem not even remember their school lessons, and it doesn't occur to them that 1+1 is not always equal to 2.
It's not surprising, therefore, that they didn't notice the 109 containers that every year left the same factory, with all the potential consequences for their client, particularly in relation to the Agreement with the European Economic Community (EEC).
Useful links
- www.comscore.com
- See the detailed description of the Comscore study regarding Yesmoke at: Copy of Magistrate Judge Fox's Report and Recommendation
- Anti-Contraband and Anti-Counterfeit Agreement and General Release
- Appendix A: Policy Statement on Compliance with Fiscal, Trade and Anty-Money Laundering Laws
- Appendix B: Anti-Contraband and Anti-Counterfeit Agreement and General Release
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