Earlier in October, the Food and Drug Administration (FDA) released new guidance on free cigar samples. As part of the guidance, manufacturers and consumers are getting a little relief. Hot damn!
The guidance discusses “what activities and which persons are subject to the regulations, as well as how the prohibition of distributing free samples applies to the distribution of tobacco products through:
- Non-monetary exchanges;
- membership and rewards programs;
- contests and games of changes; and
- business-to-business exchanges.”
In 2010, the FDA issued final regulations that prohibit “the distribution of free samples of tobacco products. . . ” This rule was based on Section 21 of Code of Federal Regulations which states, “. . . no manufacturer, distributor, or retailer may distribute or cause to be distributed any free samples of cigarettes, smokeless tobacco, or other tobacco products. . . “
This guidance eliminated two long-standing traditions regarding free cigar samples. First, manufacturers typically share free cigar samples of their cigars with retailers so the retailers can try the cigar before ordering boxes for resale. This makes it difficult to make a sale on a new cigar when the retailer has no opportunity to try the cigar for free. Second, retailers typically hand out free cigar samples of new cigars to their best customers in hopes of convincing the customers to buy more of the cigar.
Business-to-Business: Cigar manufacturers and retailers complained to the FDA about the prohibition on giving free samples to retailers and holy crap, the FDA relented. Here is the new guidance on “business-to-business exchanges”:
“FDA does not consider this regulation to apply to businesses distributing free samples in a limited quantity (i.e., no more than necessary to achieve a business or market goal, such as awareness of and exposure to the product for the purposes of product or inventory selection) to another business as part of a genuine effort to sell or market a tobacco product to that business.”
The FDA also relaxed rules for sales of cigars from retailers to consumers in three areas: coupons and discounts, membership and rewards programs, and contests and games of chance.
Coupons and Discounts: According to the FDA, “the free sample ban does not prohibit manufacturers, distributors, and retailers from selling tobacco products at a discount or accepting coupons that allow consumers to purchase tobacco products at a discount. The guidance specifically allows coupons and discounts such as selling cigars at a percentage discount, e.g., 10% off, or accepting coupons that discount the purchase price of cigars. “Buy one get one free” or “two for the price of one” type discounts are also allowable as long as the free cigar is part of the same transaction as a cigar purchase.
Membership and Rewards Programs: As long as a sale is made as part of the membership and rewards programs, these types of programs are now legit. A number of online cigar retailers offer membership and rewards programs and they can continue to offer these programs. For example, CigarPage has a rewards program where consumers receive a point for every dollar spent that can be applied to a future purchase of cigars. As long as the consumer does not receive all cigars for free using the membership or rewards program, this is allowable. For example, if you have enough points to get a free box of cigars, you will be required to buy something else as part of the transaction. Not a big deal. While I have never heard of such a program for a brick and mortar retailer, this is acceptable as well.
Contest and Games of Chance: Contests and games of chance are no longer prohibited as long as the prize corresponds with a purchase of a cigar. For example, if your local shop has a raffle for a super cool humidor with a bunch of limited edition cigars, the winner will have to purchase at least one cigar. The guidance is a little unclear as to whether the purchase must correspond with the purchase of the raffle ticket or when the winner picks up the prize.
To read the complete guidance from the FDA, click HERE.
Smokey Butts and I had planned on handing out a free box of Padron 1964s to the first person who posted a comment on this post but dammit, the FDA still prohibits this! Happy herfing on your own dime!