1. (a) Cost of doing business.

   1. (1) The cost of doing business is presumed to be four percent (4%) of the basic cost of cigarettes to the wholesaler unless a different cost of doing business is determined by a cost study conducted by the Director of Arkansas Tobacco Control.

   2. (2)

      1. (A) Unless approved for a lower cost of doing business or meeting competition, as provided by this part and the Unfair Cigarette Sales Act, Arkansas Code § 4-75-701 et seq., or falling within the statutory exceptions in Arkansas Code § 4-75-703, the wholesaler may not advertise, offer to sell, or sell cigarettes to a retailer at less than the basic cost of the cigarettes involved to the wholesaler, plus the wholesaler’s statutorily presumed four percent (4%) cost of doing business, if the wholesaler does so with the intent to injure competitors or destroy or substantially lessen competition.
      2. (B) Evidence of advertisement, offering to sell, or sale of cigarettes at a price less than the cost of the cigarettes involved to the wholesaler, plus the wholesaler’s cost of doing business, shall be prima facie evidence of intent to injure competitors and destroy or substantially lessen competition.

2. (b) When to file application. A wholesaler who wishes to advertise, offer for sale, or sell at less than four percent (4%) presumed cost of doing business shall submit an application to the director, for approval by the Arkansas Tobacco Control Board:

   1. (1) At least forty-five (45) days before the desired effective date; or
   2. (2) Other times as may be authorized by the director.

3. (c) Application to contain certain information.

   1. (1) An application for permission to advertise, offer for sale, or sell at less than four percent (4%) presumed cost of doing business shall contain:

      1. (A) A summary of expenses associated with the business, on a form to be provided by the director, with the cigarette portion of the business separately listed, and using the information set forth in the most recently filed federal income tax return;
      2. (B) The certificate statement signed by the owner, partner, or a responsible corporate officer indicating that the summary of expenses as contained on the form required by subdivision (c)(1)(A) of this section is true and accurate;
      3. (C) A statement signed by a certified public accountant indicating the CPA has reviewed the information provided and that it accurately reflects the information shown in all material respects;
      4. (D) A copy of the most recently filed federal income tax return form with all associated schedules and attachments; and
      5. (E) Any other information requested by the director, as may be necessary to review the application.
   2. (2) If the wholesaler engages the services of an independent accounting firm, the statement provided under subdivision (c)(1)(C) of this section shall be signed by a CPA associated with that firm.

4. (d) Review and determination.

   1. (1) The director shall review and evaluate the information provided by the wholesaler and shall make a recommendation to the board regarding the approval of the wholesaler’s application to sell at less than the statutorily presumed cost of doing business.
   2. (2) The director shall inform the applicant of his or her recommendation prior to submitting the application, and the director’s recommendation, to the board.
   3. (3) The director shall notify the wholesaler of the final action on the application and, if approved, the specified percentage cost of doing business approved shall remain in effect until the next application and approval or until withdrawn by the director.
   4. (4) If a person with permission to sell at less than the statutorily presumed cost of doing business fails to submit a new application by May 15, then the permission previously given shall be automatically withdrawn on July 1.

5. (e) Meeting competition.

   1. (1) A wholesaler may advertise, offer for sale, or sell at a lower cost of doing business while meeting competition.

   2. (2) The following criteria shall be considered when meeting competition:

      1. (A) The competitor shall have:

6. (i) Been approved for a lower cost of doing business in accordance with this section; or

   1. (ii) Sold, or made a definite bona fide advertisement or offer to sell cigarettes at a lower price to a specific retailer; and

      1. (B) A written offer to sell is considered prima facie evidence of competition at a particular retailer.
7. (f) Remedy. Notwithstanding approval by the director and the board of a lower cost of doing business, an affected party who claims to be injured may pursue remedies in a court of competent jurisdiction as provided by Arkansas Code § 4-75-713.

Codification Notes: “CPA” means certified public accountant.