Since the FDA’s deeming regulations went into effect on August 8, 2016, anyone selling tobacco products must verify that the purchaser is over 18 years old. In a face-to-face transaction, that sounds simple enough—just instruct your employees to verify your customer’s age by asking for a government-issued photo I.D. (As the chart at right shows, most brick-and-mortar shops do that fairly well.) Online, however, it becomes much more difficult.
That’s an issue that may well reshape the competitive landscape in vapor retail, where Internet retailers account for a significant percentage of overall sales. As Jacopo D’Alessandris, CEO of Darien, Connecticut-based E-Alternative Solutions, notes in our cover story on page 66, age verification is far more complicated and expensive to do over the Internet.
Those who primarily sell online initially tried to solve this issue by outsourcing to one of the many age-verification services that claimed to be able to streamline the process for both seller and customer. In theory, rather than having signed documents attesting to a buyer’s age as well as a filed copy of their government-issued I.D., the third-party verification service would use software to cross-check a buyer’s age against a database of personal information.
Unfortunately, in many cases the claims of third-party companies to be able to perform that check proved unfounded. As one shop noted in a website post directed at its customers, “The technology doesn’t quite seem to be there to fully support proper age-verification techniques.” That notice went on to detail the issues that the company had experienced with a top-ranked age-verification supplier, and to note that “the next-largest age-verification provider available only has a 60 percent match rate for age verification data.”
Further complicating matters, some states have adopted their own more restrictive age-verification standards. For example, in California, online retailers are required to call customers after 5 p.m. to verify the order before shipping.
As with most FDA requirements, the challenge of meeting both national and state requirements is more difficult for smaller operations. Larger direct-to-consumer retailers like VMR have found ways to meet the age verifications, says founder and CEO Jan Verleur. But even those companies are sometimes stymied by local rules like the phone call requirement in California. “There are one or two states we don’t sell into because we can’t get through the checkout process,” Verleur admits.
At this point, the ability to navigate state restrictions on this and other tobacco-sale related matters has become as important as having a quality product. As Verleur notes, “We have grown very accustomed, as the nation’s largest online retailer of vapor products, to seeing every form of government interference at the state level. We have had to make concession whether it be [for] Amazon nexus laws related to taxation, different tax rates built in for reasons or [the] Prop 65 regulation in California. To address different age requirements in certain states, we have built a flexible platform that enables us to tailor the online experience based on the region from which you access the site, so we are pretty set up for that now.”
And companies that sell vapor products online will need to be “set up.” The fine for selling vapor products to minors ranges from $500 to $600 for the first offense and can climb as high as $6,000 for multiple offenses. The bottom line: Until online merchants find ways to navigate the federal and state age verification requirements, brick-and-mortar retailers will have a competitive edge in selling tobacco products.
– By Jennifer Gelfand
This story first appeared in the May/June 2017 issue of Tobacco Business magazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.