It’s a new age for high risk internet merchant services, but apparently an e-cigarette and e-liquid manufacturer in California hasn’t received the memo.
Recently, there was a piece in the Boston Herald about how Massachusetts Attorney General Maura Healey issued a cease and desist letter to an e-cigarette company in California, for breaches of the state’s law. Specifically, the online e-cigarette merchant is operating with questionable judgement by directly and indirectly having their products appeal to minors.
Someone needs to inform this e-cig merchant that this is a new age for high risk merchants; that the feds are cracking down on such rogue practices, and precautions must be taken. We’ll even go as far to argue that the e-cigarette industry is among the most controversial high risk business types at the moment.
After navigating to the website of the company in question, we’re pretty certain that it’s not just Massachusetts that has blocked its sales, but perhaps many other states. We could be wrong, but the website is displaying several signs of having lost its merchant account, which, for an e-cigarette business, is a difficult predicament to say the least.
So what did this merchant do wrong?
A merchant classified as high risk and in need of internet merchant services must operate as if the federal officials — for example, the Food and Drug Administration, Consumer Finance Protection Bureau or the Department of the Treasury — are watching. We don’t feel that the feds are spying on high risk businesses, but they’re certainly paying attention to some industries more than others, such as payday lenders, online gambling, CBD, and e-cigarettes.
The e-cigarette merchant in question is guilty of poor judgement, in several forms:
- Upon navigation to its website, there was no verification to certify visitors were 21 or older (there is now).
- The merchant was advertising on educational websites frequented by minors, visitors as young as kindergarten to seniors in high school.
- The merchant advertised e-liquid flavors such as strawberry milk, green apple candy, coffee milk, milk & cookies and cinnamon roll.
- In Massachusetts, the law requires an adult, 21 or older, to sign for e-cigarettes and e-liquids shipments. The California e-cig company was not enforcing this.
Currently, the website rightfully displays the message, ‘WARNING: This product contains nicotine. Nicotine is an addictive chemical,’ throughout the website and on the products that appear in photographs. A more disturbing message appears at the top of the site, notifying visitors that the merchant is ‘temporarily putting a hold on all orders, which signals that they may be in need of a new high risk internet merchant services solution.
Our advice: Cater to adults only
We’ve been in high risk internet merchant services since 2001. Whenever we’ve seen a federal agency crack down on a certain industry and establish new regulations, it is best to comply.
The movement against e-cigarette use among minors is mindful of when Camel cigarettes rebranded to the animated ‘Joe Camel’ in the late 1980s, drawing the ire of health organizations and anti-smoking activists nationwide. R.J. Reynolds, which owns the Camel brand, discontinued the campaign in 1997. Reynolds never admitted that it cancelled the brand due to outside pressure, but we’d guess it played a significant role.
On November 13, we blogged about how the FDA was working to ban sales of most e-liquid flavors from gas stations and convenience stores in the U.S., permitting only the flavors of mint and menthol. Thus, such a ruling would result in e-liquid merchants selling their other flavors online. From an e-commerce perspective, we expect this would trigger an uptick in the online sales of e-cigarettes and related products.
Online merchants need to be smart about this. When branding a product, any connotation that contains the hint of catering to minors will surely draw scrutiny. We certainly don’t recommend naming flavors ‘bubble gum rush,’ or ‘cotton candy infusion.’ Merchants and their marketing teams will need to get creative and compliant.
High risk internet merchant services – it can be done
With a large network of partnerships with acquiring banks, ISOs and competing payment service providers, Instabill continues to offer solutions for e-cigarette merchants and those selling related products. While state and federal regulations continue to be placed upon not just e-cig merchants but many industries needing high risk internet merchant services, Instabill has solutions.
A conversation with a live merchant account expert can be had today by calling 800-530-2444.
