After successfully challenging e-cigarette restrictions benefitting a single company in Indiana, three e-cigarette liquid manufacturers are asking a federal judge to force the Indiana Alcohol and Tobacco Commission to accept e-cigarette liquid manufacturers’ applications to do business in the state.
The overturned law, passed in 2015 and revised by lawmakers in 2016, required e-cigarette liquid manufacturing companies located outside Indiana to sign five-year contracts with security companies meeting a defined set of standards satisfied only by a single company in the state: Mulhaupt’s, Inc.
In January, judges on the U.S. Court of Appeals for the Seventh Circuit “[reversed] the judgment of the district court dismissing this case,” returning the case to U.S. District Court for the Southern District of Indiana Judge Sarah Evans Barker “with instructions to enjoin enforcement of the challenged provisions against the plaintiffs and to declare the challenged provisions unenforceable against out-of-state manufacturers.”
In February, lawyers representing the plaintiffs—Legato Vapors, Jet Setter Juice, Rocky Mountain Ecigs, and Derb E Cigs Indiana—filed paperwork asking Barker to “enter the tendered proposed judgment order and permanent injunction in accordance with the mandate made by the Seventh Circuit court.
Christopher Snowdon, a director of lifestyle economics at the Institute of Economic Affairs, says the Indiana law is an example of the economic principle known as “rent-seeking,” which describes efforts to obtain income without creating any new wealth.
“The case in Indiana looks like a straightforward example of rent-seeking and cronyism,” Snowdon said. “In that respect, it is no different to the nationwide overregulation of e-cigarettes in the United States, which seems to be driven by a desire to maintain sales of cigarettes and pharmaceutical nicotine products.”
Picking Winners and Losers
Guy Bentley, a consumer freedom research associate at the Reason Foundation, says the Indiana e-cigarette law is “disturbing” for several reasons.
“The case of Indiana was disturbing, to say the least—not just for the threats it posed to business and public health, but to the integrity of the political process,” Bentley said. “The regulations were mendacious, anti-competitive, and clearly designed to benefit a single company. The law had nothing whatsoever to do with ensuring safe e-liquid for vapers and everything to do with protecting some businesses at the expense of others.
Tangled Web of Cronies
Bentley says the regulation in question was created as a political favor.
“The requirement for e-liquid manufacturers to work with a security company was unprecedented,” Bentley said. “The fact that only one security company based in Indiana met all the requirements was more than a coincidence, especially as the company’s vice president was the president-elect of the Door and Hardware Institute, which is—as the U.S. District Court for the Southern District of Indiana highlighted—the certifying organization identified in the statute for the architectural hardware consultant certification.”