Source: www.miamiherald.com
Author: staff

A Broward e-cigarette distributor gave up a legal fight with Oregon over the sale of its products there, as the industry waits to see if it will sell its products as a drug device or tobacco product.

A leading distributor of electronic cigarettes, Weston-based Smoking Everywhere, has agreed to halt sales in Oregon, Attorney General John Kroger announced Monday.

The Oregon official said Smoking Everywhere did not seek U.S. Food and Drug Administration approval and provides no evidence to support claims that “e-cigarettes” are a safe alternative to conventional tobacco products. He also expressed concern that the company geared its marketing toward young people.

Oregon last year became the first state to go to court to block the sale of the devices, some of which are designed to look like traditional cigarettes.

Smoking Everywhere’s electronic cigarettes have a battery-powered heating element and a replaceable plastic cartridge that contains chemicals, including liquid nicotine. The heat vaporizes the liquid for inhalation.

In settling the suit, Smoking Everywhere admitted violating Oregon’s Unlawful Trade Practices Act. Besides no longer selling its products there, the company agreed to pay more than $95,000 to the Oregon Department of Justice. Elico Taieb, the company president, will pay another $25,000 and is barred from doing any business in Oregon that involves tobacco, nicotine or electronic cigarettes.

Taieb’s attorney, Jason Weaver, said, “We believe the product is safe,” and fought with Oregon on the premise of the product being sold when it was not approved by the Food and Drug Administration.

Smoking Everywhere and Sottera, which does business as the e-cigarette brand NJOY, won a case against the FDA in January, where it was ruled that the agency doesn’t have the authority to regulate electronic cigarettes as a drug-device combination. The U.S. Court of Appeals takes up the matter next month.

“Since we are not part of the appeal, it just made sense for us to settle out with Oregon and be done with it,” Weaver told The Miami Herald. “We just didn’t have a dog in the fight.”

Ray Story, a Smoking Everywhere shareholder who is in litigation against Taieb, did not approve of the settlement. “At the end of the day, he’s made some very dumb mistakes, and he’s continuing to make those,” Story said.

E-cigarette products with nicotine have no legal classification — they are neither a medical device nor a recreational tobacco product which creates the legal issues. The FDA has clashed with e-cigarette companies on the question of whether the product helps people quit smoking. If it’s marketed as a medical device, then it needs FDA approval. If it was a tobacco product, it would follow the same laws as a regular cigarette and could not be sold online, nor would the companies be able to advertise on the radio.

Story, who stepped down as CEO earlier this year because he felt the company was “on the wrong track,” contends Smoking Everywhere is a cigarette company and needs to act as such. Story said he and Taieb have disagreed on that point.

“We did $1 million a month initially,” Story told The Miami Herald, adding that companies like Smoking Everywhere don’t want to ‘shut off the cash cow’ of Internet sales. Story has started a new e-cigarette company based in Atlanta called Wannavape, which does not sell e-cigarettes online.

Hallandale Beach-based Vapor Corp., which has 20 percent of the market share of the electronic cigarette industry, was not banned from selling in Oregon but voluntarily pulled the product from distributors in Oregon to avoid any issues, company attorney Adam Laufer told The Herald. “We’re basically waiting to see and be reactive to whatever the proper and current law is,” he said.

Vapor’s profits in 2009 were near $8 million and it sells under the brands of Fifty -One, Krave, EZ Smoker, Smoke Star and Green Puffer. Laufer said the company is preparing for the courts to decide if it should be sold as drug or tobacco product.

“It’s possible we can have two products we’re simultaneously selling,” Laufer said. One would be a drug aid to quit smoking, competing with the $3 billion a year industry of gums, patches, lozenges and inhalers, and another as a less-harmful recreational smoking product — more than a $100 billion industry.

Story said e-cigarettes are less harmful than conventional cigarettes and less intrusive to nonsmokers. He sharply criticized Kroger for keeping the product away from Oregonians. “The attorney general there really doesn’t know what he’s talking about,” he said. “A state cannot ban a product without it banning every product within that same category.”

The attorney general last year got two travel store chains to stop selling e-cigarettes in Oregon and persuaded another e-cigarette company, Sottera, to leave the state. Smoking Everywhere declined a request to restrict its Oregon sales, leading to the suit filed last year in Salem.