This is a Gravina Crime Family mission.
"Selling black market cigarettes and weapons brings in big money for Sal Gravina. He doesn't care what his street dealers sell or who they sell to, even to kids. Find the dealers and beat some social responsibility into them. No guns though - practice what you preach!"
This is another simple mission. Run up to the first marked dealer in an alleyway and start a fistfight. He should go down after two light combos. It’s even faster if you manage to push him against the wall and do the context sensitive kill.
Repeat the same trick for the second. The third dealer will have two gangsters with him who will open fire as you approach. Take them out and you will find the dealer hiding behind a nearby dumpster. Despite what the mission brief said, you have to use a gun on this one so draw your weapon and deal with him. End the mission by going to the nearby safe zone.