Shining a Light on Tobacco Black Markets
By Angel Abcede on Nov. 28, 2018WASHINGTON -- One of the inherent qualities of an illegal enterprise—such as a black market for tobacco—is mystery. But some of that fog may be lifting after the U.S. Food and Drug Administration’s (FDA’s) public discussion around nicotine levels in cigarettes.
In July 2017, the agency said it may possibly regulate levels of nicotine in cigarettes to reduce their addictive qualities, and it asked the tobacco industry, consumers and the public for their opinions over a 90-day comment period that ended this past July. Many commenters who argued against regulating nicotine levels pointed to a black-market connection—and, in the process, shared data that helped define “illicit trade” in cigarettes sold in the United States.
“History has demonstrated that banning products that millions of consumers want creates demand for contraband product,” wrote officials with Altria Client Services, Richmond, Va., in its public comments to the FDA. “As we approach the 100-year anniversary of Prohibition, we are seeing … the reality of black markets: Even well-intentioned regulatory interventions restricting access to a product create serious black-market problems.”
The nation’s three largest tobacco manufacturers all addressed illicit trade in their public comments to the FDA, which released those documents in midsummer.
Citing various sources, officials with Reynolds American Inc., Winston-Salem, N.C., said black-market cigarettes are a nearly $60 billion annual problem worldwide. Approximately 8.5% to 21% of the U.S. market for cigarettes is made up of contraband products, which equates to 1.24 billion cigarettes at the low end and as many as 2.91 billion cigarettes at the high end, the company said.
Those figures account for a loss in state and local tax revenues of $2.95 billion to $6.92 billion, Reynolds officials reported. Higher percentages of contraband product exist in New York, Arizona, New Mexico and Washington.
Tobacco manufacturers argue that lowering nicotine levels in cigarettes ...
Photograph: Shutterstock
Undercuts tobacco-prevention efforts among youth.
Contrary to FDA goals to discourage youth from tobacco use, Reynolds officials pointed to Canadian studies that found illicit trade promotes underage smoking, because it provides unregulated access to these products for underage consumers.
Black-market expansion “strongly correlates with an increased rate of smoking by adolescents,” Reynolds officials said. The company cited one study that found that “[b]etween 1991 and 1994, the period during which black-market sales peaked … smoking prevalence among 15- to 19-year-olds rose by 35% percent in Ontario and by 14% in Quebec.”
Those figures stood in stark contrast to a 10% increase in the prevalence of youth smoking in the rest of Canada, Reynolds officials said.
Image by CSP Staff | Sources: Altria, ITG Brands and Reynolds
Degrades product quality.
Officials with ITG Brands, Greensboro, N.C., cited a 2010 fact sheet from the Department of Justice’s Bureau of Alcohol, Tobacco, Firearms and Explosives that said counterfeit cigarettes had 75% more tar, 28% more nicotine and 63% more carbon monoxide than legal cigarettes.
ITG officials also pointed to research from the National Center for Environmental Health at the Centers for Disease Control and Prevention that found counterfeit cigarettes had far greater levels of cadmium, thallium and lead in the smoke people exhale than authentic brands.
Image by CSP Staff | Sources: Altria, ITG Brands and Reynolds
Creates a law-enforcement nightmare.
As with Prohibition, lower nicotine standards would drive millions of otherwise law-abiding citizens into illegal activity, Altria officials said. “For the cigarette black market, enforcement responsibility is spread among numerous federal, state and municipal agencies, all with limited resources to address the problem and a panoply of other priorities, like the opioid crisis,” the company said. “But the most significant impediment would be the size of the tobacco black market itself, which, in the face of the contemplated product bans, may dwarf law enforcement’s ability to contain it short of efforts that would be incompatible with what the American public will accept.”
Image by CSP Staff | Sources: Altria, ITG Brands and Reynolds