Shaping Retail: Undermining National Regulations

Smoking incurs significant costs. These are not limited to the health of the individual (through sickness, pain, and death); but also include economic (lost productivity); ¹ and environmental costs (cigarette litter and destructive farming practices). Reductions in both tobacco sales and the number of people smoking therefore has the potential to generate significant benefits, both individual and societal.

Transnational tobacco companies (TTCs) [nonetheless] have a history of leading and/or partnering with retailers to oppose, delay, and circumvent regulatory changes which could affect tobacco sales.

Background

A wide range of tactics are deployed by TTCs. These can be categorised into arguments (sometimes referred to as ‘frames’) that centre upon the financial costs of regulation, disseminated through multiple channels including media releases, websites, print advertisements and social media, ² and direct action methods used to co-opt or induce retailers into opposing, delaying and circumventing regulation.² These arguments and methods are detailed below.

Arguments

Some of the most commonly arguments used by TTCs, and the retailers that sell their products, are that if strong tobacco control legislation is introduced, it will result in costly compliance for retailers³, lost revenue for both retailers and governments through reduced sales and reduced tax intake,⁴ and the potential for increased illicit trade sales as tobacco users seek alternative (cheaper) products.⁵

Country specific examples of industry arguments against regulation and its impact on retailers include the following.

Costs to retailers

Between 2012 and 2015, TTCs opposed the removal of point-of-sale (POS) displays in the UK. Arguments made reflected long-term tobacco industry objections including that it would threaten retailer safety, increase crime rates, result in reduced income, and impede competition, all with little benefit to public health and at significant additional cost to retailers. ⁶⁷ TTCs also used third-party techniques, such as retail groups, to lobby against government proposals. For example during the run-up to the ban in the UK, the Association of Convenience Stores (ACS) – a lobby group representing retailers and whose members include British American Tobacco (BAT), Imperial Brands, Japan Tobacco International (JTI), and Philip Morris International (PMI) – estimated that the cost of implementation would be up to GB£10,000 per store. Experience from Ireland nonetheless showed the average cost was in fact GB£300, with TTCs covering over 90% of the expense in four out of every ten shops.⁷

Immediately after the EU proposed revising the Tobacco Products Directive (TPD) at the beginning of 2013, BAT targeted small shopkeepers and retailers selling tobacco products. These groups, and the concerns they raised, were considered more likely to be viewed sympathetically when compared to the tobacco industry, and therefore more likely to win over the public and politicians.² As part of their campaign BAT Benelux took out a two-pages advert in Tabak2day (a free monthly magazine distributed to small tobacco sellers) which warned that – without collective action to oppose the proposed regulation – standardized packing could threaten the survival of their businesses.²

In 2018, Nairobi County, in Kenya proposed a tobacco bill that would require retailers to acquire a tobacco license, and manufacturers and wholesalers to adhere to stronger tobacco control laws. The proposals were opposed by BAT and the Retail Association of Kenya. Both organizations cited the potential for “unintended consequences” caused by restrictions at the POS including harassment and arrests, and an additional unknown license fee for retailers which, they argued, appeared to be driven by the need to increase the tax intake than addressing public health. They suggested that this would negatively disrupt the country’s tobacco sector, and would unfairly target small businesses, but risk putting many of them out of work.⁸

Shift to illicit trade

In the Latin America region, Panama has a particularly well-developed regulatory system that includes a smoking ban in all indoor public spaces, and a near total ban on tobacco advertising, promotion and sponsorship (TAPS), including tobacco POS. BAT Panama nonetheless challenged, unsuccessfully, the constitutionality of these laws.⁹ Underpinning TTC challenges were misleading arguments, similar to those used in other countries, that more stringent laws would encourage smuggling and affect the commercial interests of a legal industry.⁹

Following EU proposals to revise the TPD at the beginning of 2013, Phillip Morris Benelux campaigned against the introduction of plain packaging legislation, the main arguments against which were outlined in a report and accompanying press releases. These suggested that standardized packaging would “dramatically aggravate the problem of counterfeit cigarettes” by making counterfeiting tobacco products much easier, less costly to produce, and more difficult to identify,¹⁰ all of which could severely impact legitimate retail sales. The report also argued that the introduction of plain packaging would involve enormous costs for the Dutch government in terms of lost tax revenue.¹⁰ This despite the fact that TTCs have a long history of being complicit in the illicit tobacco trade.

Methods

In addition to a range of arguments against tobacco control laws TTCs have a history, with varying degrees of success, of partnering with retailers directly to oppose, delay and circumvent legislation. Direct action has included funding and orchestrating campaigns, attempts to delay regulation, and efforts to circumvent regulation through developing new products. Country specific examples include the following.

Funding and orchestrating campaigns

TTCs have a history of working successfully with retailers to block proposed tax increases. In 2017, for example, Altria and R.J. Reynolds (owned by BAT) spent hundreds of thousands of dollars to successfully block a tax increase in Montana. In doing so they coached retailers to testify before legislative committees and flooded retail outlets including small shops, vape shops and petrol stations with signs urging customers to express their opposition by contacting legislators.⁴

In opposition to a proposed increase of US$1.75 per pack in cigarette taxes in Colorado, Altria employed a tactic of funding a US$17 million campaign against the tax. Included within this funding were the cost of campaign materials which were distributed to small shops and petrol stations, thereby targeting consumers and voters at the POS. ⁴

Between 2020 and 2022, many US states and localities, including California and Washington DC, introduced proposals to ban flavoured tobacco product sales. In response, tobacco companies including Reynolds American Inc. (BAT) and Altria encouraged retailers to contact policymakers to oppose legislation, and funded signs to be placed in small shops and petrol stations urging customers to oppose the regulatory measures. ⁴

Delaying and opposing regulation

In 2012, Imperial Brands sought to delay the proposed implementation of POS display bans and cigarette vending machines use in retail settings in Scotland by repeatedly appealing to the UK Supreme Court. Imperial argued that the proposal was outside the legislative powers of the Scottish parliament and could harm retailers.¹¹

In order to co-opt small retailers to oppose new tobacco control legislation the Tobacco Retailers’ Alliance (TRA) (funded by the Tobacco Manufacturers Association which represents three of the big four tobacco companies) argued that new measures were “unwanted, unjustified, and unnecessary”. The TRA, for example, produced an interactive briefing document for retailers which suggested that: the cost of implementing the display ban was GB£5,000 per store; 86% of retailers believed the display ban would slow customer response times; 95% of retailers believed the display ban was inconvenient for their staff; and more than a third believed the display ban had made them feel more vulnerable to crime.¹² Contrastingly, a 2019 survey conducted by Action on Smoking and Health (ASH) found that the majority of small retailers supported both tobacco display prohibition and plain packaging.¹³ For more information, see Industry Arguments Against Plain Packaging 

In October 2023 the UK Prime Minister Rishi Sunak announced the intention of the government to introduce a generational endgame policy that would prohibit tobacco product sales to anyone born after 1 January 2009. In response, JTI carried out a survey of 1000 retailers who reported concerns that the ban would harm businesses, increase the illicit trade, and make ID checks more complicated for staff. ¹⁴ Similar arguments were echoed by retail associations with tobacco industry members including the ACS and Scottish Grocer’s Federation (SGF). ¹⁵¹⁶ For more information see,  Interference with Endgame Policies

Tobacco retailer licencing is an important part of a comprehensive tobacco control strategy. Numerous countries in Europe, include Hungary, Spain and France, operate either a tobacco licensing or a registration scheme for retailers. ¹⁷ However, Scotland and Norway chose to implement simpler registration schemes. These decisions were taken after significant opposition from retailers and, particularly in the case of Scotland, with support from TTCs which lobbied parliamentarians, and encouraged retailers to speak out against the policy. Objections centred upon lost revenue should retailers be unable to meet all the criteria required to obtain a license.¹⁸

Circumventing and undermining regulation

EU menthol ban

In 2016, the EU implemented a ban on flavoured cigarettes, including menthol. Retailers had a year to sell existing stocks of other flavours but, after intense lobbying by tobacco companies, menthol products were granted a phase-out period until 2020. BAT launched a swap or buy-back scheme so that retailers could sell menthol cigarettes right up to the deadline without risk of holding onto non-compliant stock.¹⁹

Tobacco companies also exploited regulatory loopholes. JTI developed new product ranges including mentholated accessories; cigarettes with levels of menthol which did not meet the criteria for the ‘characterising flavour’; and cigarette-like cigarillos which were not covered by the ban, were taxed lower than cigarettes and could be bought as a pack of ten.²⁰²¹ JTI representatives encouraged shopkeepers, including in the UK, to stock these products ahead of the ban. This appears to have been successful as after the ban sales of the cigarillos increased significantly.²²

Tobacco companies also developed new menthol flavoured products, including heated tobacco products (HTPs), which were not included in the ban.²³  PMI promoted IQOS starter kits as “a massive opportunity for retailers to say to smokers there’s still a product that’s closer in experience to cigarettes.”²⁴ PMI said that not taking action would cost retailers an average of GB£13,5000 in cigarette sales.²⁴

• For more details, see Menthol Cigarettes: Industry Interference in the EU and UK

Undermining regulations

Nigeria: has introduced numerous anti-tobacco measures including prohibiting tobacco advertising in the media (2001), ratifying the WHO Framework Convention on Tobacco Control (WHO FCTC) (2005), and banning smoking in public places (2008). Despite this, BAT has continued to engage in numerous practices including advertising its products through one-to-one promotions that encourage retailers to communicate key advertising messages. ²⁵ BAT maintains that it is fully compliant with existing laws and that it holds itself accountable, and to a more detailed set of standards than those required by Nigerian law. ²⁵

Colombia: the tobacco industry challenged the total ban on TAPS in domestic courts. The courts nonetheless upheld the ruling that POS displays are a form of advertising.  TTCs have circumvented the ban by replacing large posters with well-lit tobacco displays which are often placed near sweets and other items aimed at children and youth.⁹ A similar tactic has been observed in Costa Rica which also has strong TAPS laws, including in relation to POS. In both cases, enforcement has been complicated by government guidance which seemingly contradicts the law by establishing criteria for displaying cigarettes (Supervisory Authority for Industry and Trade, Columbia), and guidelines separating tobacco advertising and display (Ministry of Health, Costa Rica).⁹

Indonesia: TTCs have exploited historically weak tobacco control legislation by investing heavily in POS advertising, using branded shop decoration, and using promotional girls to sell cigarettes. They have also encouraged retailers to violate regulations through regular visits, free merchandise, sales rewards for meeting sale targets, and hosted events for retailers.²⁶

Thailand: TTCs have circumvented the country’s tobacco display ban by employing mobile cigarette shops and transparent POS displays that feature brand logos and colours. In tourist areas such as Pattaya PMI have also employed sales girls to staff mobile shops.²⁶²⁷

Vietnam: a ban is in place on advertising at the POS. Nonetheless, tobacco companies have worked with retailers to build advertising into display shelves that are enhanced by tobacco power walls to circumvent the POS advertising ban. Tobacco companies have also conducted promotional activities for customers at POS.²⁸

Morocco: parliamentarians have criticized the government for falling to enforce a 30-year-old anti-smoking law that prohibits tobacco advertising and promotion, and smoking in certain public areas. They attributed widespread tobacco advertising and the presence of attractive cigarette packaging in stores to successful lobbying by TTCs who have also prevented the government from ratifying and signing the WHO FCTC treaty.[Translated]²⁹

South Africa: In May 2018, the Minster of Health proposed the Control of Tobacco Products and Electronic Delivery Systems Bill. This bill called for measures such as introducing plain packaging, banning cigarette displays, and regulating e-cigarettes. However, the tobacco industry has employed various strategies and arguments to challenge this proposed legislation. For more information, see South Africa: Industry Interference with the Control of Tobacco Products and Electronic Delivery Systems Bill

E-cigarette promotion

In New Zealand e-cigarettes were classified as oral tobacco products and therefore prohibited from sale under existing legislation. In 2018 this classification was challenged by PMI which successfully argued in court that tobacco control legislation did not cover ‘aerosol products. Although the government introduced e-cigarette legal restrictions in 2020, in the intervening two years retailers were able to promote and sell products without any restrictions. ³⁰ In 2018, the e-cigarette retailer VPZ secured a GB£12.5 million loan from Phillip Morris Limited (PMI’s UK subsidiary) to support its store opening programme. After the company began offering “vape clinic” cessation services in its stores, in August 2022 ASH Scotland complained to the Advertising Standards Authority (ASA). The complaint was upheld on the basis that adverts must not contain medical claims unless the products advertised are authorised by the Medicines and Healthcare products Regulatory Agency (MHRA), and the advert was banned. ³¹ For details see VPZ

Tobacco Tactics Resources

• Tobacco Industry Tactics
• Flavoured and Menthol Tobacco
• Shaping Retail: The Tobacco Industry’s Playbook
• Shaping Retail: The Role of Incentives
• Shaping Retail: Targeting Specific Communities 

TCRG resources

• Tobacco industry tactics to circumvent and undermine the menthol cigarette ban in the UK, R. Hiscock, K. Silver, M. Zatonski, A. Gilmore, Tobacco Control, 18 May 2020, doi:10.1136/tobaccocontrol-2020-055769
• Cigarette-like cigarillo introduced to bypass taxation, standardised packaging, minimum pack sizes, and menthol ban in the UK, J. Branston J, R. Hiscock, K. Silver, D. Arnott, A. Gilmore, Tobacco Control, Online First, 26 August 2020, doi: 10.1136/tobaccocontrol-2020-055700
• Effects of and challenges to bans on menthol and other flavors in tobacco products, K. Przewoźniak, C. Kyriakos, R. Hiscock et al, Tobacco Prevention & Cessation, 2021; 7 (November): 68, doi: 10.18332/tpc/143072
• Policies regulating retail environment to reduce tobacco availability: A scoping review, R. Alebshehy, Z. Asif, M. Boeckman, 2023; 11: 975065, Front Public Health, doi: 10.3389/fpubh.2023.975065
• Public perception of policies reducing tobacco availability by regulating the tobacco retail environment: A case study in Egypt, R. Alebshehy, E. Elsebaie, O. Razum, Tobacco Prevention and Cessation, doi: 10.18332/tpc/197384