The Ministry of Health received a complaint about Philip Morris' electronic tobacco product, Heets, from rival company British American Tobacco.
After the complaint, in 2016, ministry investigator Vickery Blake used a controlled purchase operation to purchase Heets from Philip Morris - after meeting an employee of the tobacco company in a Starbucks in Lambton Quay in Wellington and receiving a code to buy Heets online - and then laid charges as it considered them illegal under the Smoke-free Environments Act.
Heets are designed to heat up, but not burn, tobacco until it releases nicotine in a vapour.
The ministry originally brought two charges against the tobacco giant, one of importing and the other for selling Heets in New Zealand, but the first charge was dropped not long after the case began in the Wellington District Court on Monday.
Philip Morris said, after a number of meetings with the ministry over a period of months in 2016 and 2017, it was confident the Heets were legal.
The company's lawyer, David Boldt, asked Ms Blake at the hearing who made the original complaint about the Heets.
She replied British American Tobacco, who sell 65 per cent of all cigarettes and loose leaf tobacco in New Zealand.
"It's my duty to investigate all complaints from all quarters and we get them from BAT, Imperial and Philip Morris all the time - we do not have an agenda," Ms Blake said.
She confirmed the complainants wanted to be anonymous and did not want to involved in the investigation or in court.
Ministry lawyer Sally Carter on Monday morning said there was no argument over whether Heets contained tobacco but how the product fell under smoke-free legislation.
"This case will come down to statutory interpretation and whether this product is captured by the act, whether it is lawful," she said.
Mr Boldt said the general manager of Philip Morris New Zealand, Jason Erickson, may be called as a witness.
The charge Philip Morris faced had a maximum $10,000 penalty and could lead to Heets being banned.
The judge-only hearing is set down for five days.