Earlier this week, the 7th U.S. Circuit Court of Appeals struck down part of an Indiana law regulating the manufacture and sale of electronic cigarettes and vaping liquids. The law was considered controversial, because it applied to manufacturers operating outside of Indiana, which the court ruled was “unconstitutional.” Furthermore, the Federal Bureau of Investigation is now looking into how the law was written and passed – and whether or not it illegally favored in-state manufacturers by shutting out-of-state companies out of the Indiana market.
In the ruling, Circuit Judge David Hamilton wrote that Indiana's Vapor Pens and E-Liquid Act was
“...written so as to have extraterritorial reach that is unprecedented, imposing detailed requirements of Indiana law on out-of-state manufacturing operations.”
The law imposed specific requirements on “sinks, cleaning products, and even the details of contracts with outside security firms and the qualifications of those firms' personnel.” The three judge panel ruled that imposing such regulations on out-of-state manufacturers was a violation of the Dormant Commerce Clause of the U.S. Constitution, which prohibits any state from passing a law that “improperly burdens or discriminates against interstate commerce.”
The lawsuit was filed by Legato Vapors, Rocky Mountain E Cigs and Derb E Cigs, along with an e-cigarette trade group, the Right to be Smoke-Free Coalition. According to Robert Epstein, counsel for the plaintiffs, the Indiana law virtually prevented them from entering the Indiana market for e-cigarettes and vaping products by increasing costs and subjecting out-of-state manufacturers to confusing and inconsistent regulations, since individual states have their own laws governing e-cigarette products.
Now, the FBI may be looking into the possibility of corruption and antitrust violations. Phil Boots, a GOP member of state senate who has represented Indiana's 23rd District for over ten years, was questioned by the FBI. “They asked me if I knew anything anyone might have gotten out of this legislation,” he told the media.
At the moment, the FBI will neither confirm nor deny that an investigation is being carried out. What is known is that the law gave control of the e-liquid market over to a very few in-state producers. This happened because the law mandated that any company selling e-liquids in the state of Indiana be certified by a “qualified” security firm.
Coincidentally, the only security firm in the country that was “qualified” under the law is based in Lafayette, located about an hour northwest of the State Capitol. Significantly, Lafayette is represented by GOP State Senator Ron Alting, who co-sponsored the law. Alting insists that the law's intent was only to make the products safer, not to favor specific players in the market. He says, “I know nothing about this. I'm kind of shocked by it.” He has also said that he will work on making changes to the law.