Spain Busts Fake Cigarette Racket - Analyst Blog

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The Spanish government has confiscated 561,000 fake cigarettes, which were imported from China and were paving their way into the Spanish market through the port of Valencia. The cigarettes were being transported in a container marked "synthetic fiber".

China is the hub of fake cigarette dealers and they are mostly traded online. The trade of illegal cigarette products in large quantities on the internet has also increased dramatically, casting a huge shadow over the lawful cigarette trade in the country.

In November 2011, China Police busted around 122 criminal dens and arrested 78 suspects, following a raid in nine regions to crack a bogus cigarette manufacturing ring. Fake cigarettes were usually produced and stored in city outskirts and disguised as normal goods for delivery, with fake cargo and ownership details.

Puffing the fake cigarettes in large quantities or for a prolonged time will inevitably leave the smokers vulnerable to serious health damages. As per the lab findings of "The Organized Crime and Corruption Reporting Project" fake cigarettes from China are reported to contain 80% more nicotine and 130% more carbon monoxide, and impurities harmful for health.

These cigars are available at a cheaper price, and budget-constrained consumers end up smoking the fake ones.

In June, 2011 Philip Morris International Inc. ( PM ) had filed a case in U.S. District Court against local retailers in Miami for selling fake Marlboro cigarettes. The New York-based cigarette company tracked down 17 retailers who have been selling these cigarettes.

The extensive collection includes not only counterfeit smokes, but cigarettes with counterfeit tax stamps for almost all countries.

Other tobacco giants are also joining the fight against rampant black marketing of bootleg cigarettes on city streets. Way back in 2003, Lorillard Inc. ( LO ) had come forward to demolish the fake cigarette market and sued about 75 retailers in five states, 26 of whom were from Los Angeles alone.

In June 2011, British American Tobacco Plc. ( BTI ) Australia initiated legal action against six tobacco sellers, alleging them of selling Winfield Blue and Winfield Gold look-alike packets at two-third of the real price.

Spain's war with fake cigarette owners had won a huge victory in November 2010, when the country's biggest ever counterfeit cigarette network was dismantled in an operation. It had led to the seizure of 90 million fake cigarettes and the arrest of six men.

While Lorillard and British American Tobacco holds Zacks #3 Rank implying Hold rating, Philip Morris holds a Zacks #2 rank implying Buy rating.

BRITISH AM TOB ( BTI ): Free Stock Analysis Report

LORILLARD CO ( LO ): Free Stock Analysis Report

PHILIP MORRIS ( PM ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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