According to Philip Morris spokesman Mike Pfeil, gray-market Marlboros may have a different tobacco quality, inferior packaging, and lack proper Surgeon General warnings. The company alleges the stores committed trademark infringement by selling the gray-market cigarettes rather than the regular packs.

"The number of consumer complaints we get is significant over this issue because of packaging issues or the taste is not the same," said Pfeil.

Some store owners disagree, claiming they've heard no complaints about the discounted cigarettes. One California retailer says all of the government agencies he called told him selling the gray-market cigarettes was not illegal. That situation is about to change.

Seventeen states have already passed legislation banning gray market cigarettes, and on January 1, 2000, federal legislation kicks in making them illegal nationwide.

Philip Morris is seeking monetary damages for trademark infringement, trademark dilution, and unfair competition from the retailers named in the suit. The company has also asked a judge to prohibit all defendants selling gray-market cigarettes. In March, a similar lawsuit was filed against five retailers in Indiana.

Gray market cigarettes are manufactured domestically for export, but then re-imported by wholesalers. They are priced considerably lower than domestic versions of the same brands, and formulated for foreign smokers.

"The blend used for many gray market cigarettes is materially different from the blend used for the same brand style manufactured for U.S. smokers," an internal memo from R.J. Reynolds states.

Some regional markets are reportedly being flooded with the imports, which account for up to a third of all cigarettes available in South Florida, according to industry estimates.

Packs of gray market cigarettes clearly state "U.S. Tax Exempt, for Use Outside U.S.," in small gold letters on their side.

United States District Court Judge Frank W. Bullock, Jr. issued a preliminary injunction against Philip Morris until a lawsuit filed by three of the company's rivals can be heard. The rivals - R. J. Reynolds Tobacco, the Lorillard unit of the Loews Corporation, and Brown & Williamson, part of British American Tobacco - argue that Philip Morris's Retail Leaders promotional program forced retailers to relegate their brands to the back shelves away from the counter.

Judge Bullock cited store displays as an important means for companies to capture customers who switch brands - a group comprising 14 percent of all smokers during the last two years. Switch-over sales occur due in large part to the ads and product displays on the back bar shelf behind the counter, according to the Judge. He added that companies that do not have such space could not adequately compete.

The gathering was hosted by Bill West and Beverly Donnelly at their home in Fort Collins and served as the official launch party for West's new book Your Garagenous Zone: The Complete Garage Organizer. In addition to a complimentary smoke, guests took in the couple's model garage and were treated to a patio barbecue.

Nevada legislators recently passed a law requiring wholesalers and manufacturers to set up escrow accounts with approximately one cent for each gray-market cigarette. The escrow funds are open to lawsuits from the state to recover health care costs stemming from the consumption of those cigarettes. If the state does not bring a suit within 25 years, funds from the escrow accounts will revert to the wholesalers and manufacturers.