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Illicit tobacco

Industry-funded International Tax and Investment Center responds to criticism by attempting to muddy the waters

24 Jun, 16 | by Marita Hefler, News Editor

Karen A Evans-Reeves, Anna B Gilmore and Andy Rowell

Tobacco Control Research Group, University of Bath,

The tobacco industry is under attack. In just two weeks, in May 2016, its tactic of challenging any law that threatens its profits, took a big hit. The arbitration panel, that tobacco giant Philip Morris International (PMI) had hoped would overturn standardised packaging legislation in Australia, published its full ruling that the company’s self-serving claims were inadmissible. Just days later, all four major tobacco companies lost their challenges against both the European Union’s Tobacco Products Directive and standardised packaging legislation in the UK.

The UK, France and Ireland, which have already enacted standardised packaging legislation, will now go ahead with this brand removal. Further afield Canada, New Zealand, Hungary and Norway are due to follow suit and other countries which have expressed an interest will be buoyed by the way the industry’s legal and trade challenges to plain packs are being soundly rejected. The World Health Organization’s (WHO) slogan for World No Tobacco Day 2016 was “Get Ready for Plain Packaging” recognising that the removal of branded tobacco packaging is “going global.”

Each jurisdiction to consider standardised packaging legislation has received sustained attacks from tobacco companies, using both their own voices and those of third parties which they fund. By commissioning and publicising research reports and opinions from seemingly independent experts, tobacco companies have created not only the impression of a large network of opposition but of an illusory body of evidence, particularly in relation to the industry argument that standardised packaging will increase the illicit tobacco trade.

PMI private documents, leaked to Action on Smoking and Health (UK), revealed that “broad third-party media engagement” and “high profile opinion pieces” would be used to raise awareness of such arguments among “decision makers and the general public” as part of its attempt to prevent standardised packaging in the UK. These documents also revealed that PMI intended to use the International Tax and Investment Centre (ITIC) as one of its key “media messengers”. Since 2012, PMI has paid ITIC (in collaboration with global advisory firm, Oxford Economics) to produce annual reports on the illicit trade in Asia. These claimed that illicit trade is increasing in the region but have been accused of being methodologically flawed. When publicly available routine data was used in an attempt to replicate ITIC’s findings in Hong Kong, illicit levels were found to be under half of what ITIC had estimated.

Key to the industry’s use of third parties is its attempt to shift the paradigm by presenting third parties as ‘independent experts’ and their research as ‘trustworthy and rigorous’ while simultaneously positioning public health academics as ‘advocates’ and ‘zealots’ and their research as ‘advocacy’. This presentation of corporate pawns as informed moderates producing quality work and public health researchers as misguided fundamentalists producing poor quality work is a public relations tactic employed for decades by corporations in relation to environmental and health issues.

Over the last few weeks this tactic has been adopted by the tobacco industry third party, ITIC, in a series of letters sent to Non-Governmental Organisations (South East Asia Tobacco Control Alliance (SEATCA), ASH (UK), EU SmokeFree Partnership), the University of Bath in the UK, and the Editors of Tobacco Control, all of whom had criticised ITIC’s activities, some in letters, reports and webpages. ITIC’s letters made three inter-related claims, each of which we explore in the paragraphs below.

First, that public health research should be seen as advocacy while, by contrast, ITIC’s research (none of which appears to be peer-reviewed) should be seen as high quality. For example, in his letter to the University of Bath the President of ITIC, Daniel Witt, claimed:

We have become increasingly concerned about how the integrity of reputable institutions and individuals is maligned by overzealous advocacy ….. and ….by what passes for academic research when it is clearly constructed to fulfil an advocacy agenda”.

This denigration of public health research has been strongly criticised by independent experts. In her 2006 verdict in an extortion case against the tobacco industry in the United States Judge Gladys Kessler noted:

Much of the Defendants’ [i.e. the tobacco industry’s] criticisms of Government witnesses focused on the fact that these witnesses had been long-time, devoted members of “the public health community.” To suggest that they were presenting inaccurate, untruthful, or unreliable testimony because they had spent their professional lives trying to improve the public health of this country is patently absurd”.

The recent high court ruling on the challenges made by British American Tobacco, PMI, Japan Tobacco International and Imperial Tobacco to UK standardised packaging legislation made a similar point, citing Sir Cyril Chantler’s 2015 review of the evidence:

Chantler … rejected the criticism made by the tobacco companies that those that advised the Government were biased against the industry. Conversely, he articulated scepticism about the methodological efficacy of research results generated by the tobacco companies. He also criticised the tobacco companies for adopting unrealistic criticisms of the output of existing researchers…

This ruling drew upon two peer-reviewed papers, one confirming the poor quality of industry evidence in comparison to public health evidence on standardised packaging and the other paper showing how BAT and JTI  went about distorting and misrepresenting public health evidence.

ITIC’s second claim is that it is not a lobby group. Yet based on widely accepted definitions of lobbying, ITIC’s own descriptions of its activities, and the global health communities’ observations of its behaviour, ITIC clearly acts as a lobbying organisation. Indeed, it has persistently boasted of its lobbying success. in 1995, ITIC produced a document which outlined how “ITIC has developed trusted, advisory relationships with key, senior-level policy makers…..[which]…provide channels for private sector expertise to reach the Government before, during and after the official policy-making process. This combination…… provides ITIC and its sponsors a ‘seat at the policy-making table’”. And in 2004, Daniel Witt, ITIC’s President noted: “ITIC is a public policy organization actively working to change public policy in a pro-investment direction.” Although ITIC claims to be an “independent, non-profit research and educational organization” it receives tobacco company funding and has industry representatives on its Board of Directors.  Outputs such as the Asia-11 and Asia-14 illicit trade indicator studies, commissioned by PMI and published by ITIC along with global advisory firm Oxford Economics, have been critiqued by Dr Hana Ross (on behalf of SEATCA) for opaque methodology and “unverifiable” results that were “inconsistent with results from other studies” in the region (for more on this issue, read here). In 2014, ITIC attempted to destabilise the proposed guidelines on tobacco tax and price policy by convening a meeting with Parties and Observers to the Framework Convention on Tobacco Control (FCTC) immediately prior to the sixth Conference of the Parties (COP6). The Convention’s Secretariat blasted ITIC for this move.

Finally, in each letter, ITIC’s President, Daniel Witt argues that public health organisations ought to engage with ITIC given its tax expertise. This position displays a fundamental misunderstanding of the FCTC’s Article 5.3 which aims to protect policy making from the vested interests of the tobacco industry. It also displays a fundamental lack of understanding of public attitudes to ITIC. For example, the World Bank withdrew from an ITIC event in India, following a letter from the Institute of Public Health in the country,  similarly, following a letter from ASH (UK), the UK Department for International Development (DfiD) asked ITIC to remove its name, from its list of sponsors on ITIC’s website as DfiD has never been a sponsor, and the FCTC Secretariat has urged all governments not to engage with ITIC.

SEATCA and the University of Bath have respectively published and sent to ITIC detailed rebuttals of ITIC’s letters to them. These rebuttals and the aforementioned high court rulings are unlikely to deter ITIC from trying to influence tobacco control policies such as standardised packaging across the globe and undermining Article 5.3 of the FCTC. But the more people who reject engagement with ITIC, the harder it will be for ITIC to boast that it can get its tobacco industry clients a “seat at the policy making table”.

Liability: untapped potential in the Framework Convention on Tobacco Control

11 Apr, 16 | by Marita Hefler, News Editor

Chris Bostic, Richard Daynard and Tamar Lawrence-Samuel

The history of the Framework Convention on Tobacco Control (FCTC) is filled with one unprecedented victory after another (see page 21). The next milestone for the treaty can—and should— tap the potential of Article 19 to hold the industry liable. Though the implementation of measures in line with Articles 5.3 and 13 has dramatically shifted the way the tobacco industry can operate globally, Article 19 has similar—if not greater—potential to curb the operations of the industry, and therefore the tobacco epidemic. As we look to the next Conference of the Parties (COP) in November, Parties should be looking to make sure that Article 19 achieves its potential.

For many who participated in the drafting of the FCTC, Article 5.3 (protecting public health policies from the tobacco industry) and Article 13 (banning tobacco advertising, promotion and sponsorship) seemed too visionary. Many thought these articles would be politically and technically impossible to implement. But a decade later, Parties are prioritizing these articles— and the effects are startling. Today, tobacco industry marketing is being rolled back across the globe. And dozens of countries have barred the industry from the policymaking table, creating space for effective policies to take hold.

But still the industry continues to be enormously profitable, with the top six corporations raking in $44 billion of profits in 2013. This, in part, because it breaks national laws and is not held accountable for what its products cost society. Governments pay billions of dollars in healthcare costs due to the tobacco epidemic. And evidence continues to mount of the tobacco industry’s illegal activities, which it currently appears to engage in with relative impunity—from illicit trade to widespread and systematic bribery.

To take the next big step in reducing the industry-driven tobacco epidemic, we must be able to hold the industry civilly and criminally liable. We must appreciate the visionary potential in Article 19. And we must take bold, courageous action to realize the world that Article 19 can make possible.

A vast ocean of possibility

Successful civil liability litigation in the U.S. and Canada has proven this tactic has great, global potential. It can provide an avenue for governments to hold the industry accountable for breaking laws, whether it be illegal marketing practices or illicit trade. Financially, it can shift the cost of the tobacco epidemic to the industry, where it belongs, raise the price of tobacco products (which reduces consumption), and provide funds for tobacco control campaigns. And finally, civil liability suits can expose internal industry documents, which provide invaluable insight into the industry’s tactics and help pave the way for even more effective legislation and litigation.

Holding the tobacco industry criminally liable, on the other hand, is admittedly venturing into less tested waters. But the ocean of possibility is vast.

Research on criminal liability provides cause for hope. A successful criminal prosecution would dramatically change the landscape for the tobacco industry. Tobacco executives could face potential prison time for violating tobacco control laws or for misleading people about the lethality of their products. The negative publicity generated with such charges would go far in denormalizing the tobacco industry and would chill the recruitment of talent.

Moral and financial imperative

To be sure, successful implementation of liability measures will prove to be challenging. And it will look different in each country given the range of legal systems across Parties. But the moral and financial imperatives are clear. Parties in the Global South, such as those recently targeted by British American Tobacco’s bribery, are now calling for tools to advance Article 19. These are some of the same Parties who championed Articles 5.3 and 13 during the FCTC negotiations.

We can and must follow these Parties’ visionary lead once again. During COP7, Parties should adopt strong guiding principles to advance implementation of Article 19. These include principles for developing and reforming legislation, and best practices for litigating in civil and criminal liability regimes in both civil and common law jurisdictions and systems.

Without a doubt, litigating against the tobacco industry is costly and intimidating. But many governments are already locked in defensive legal battles with the industry as it turns to litigation more and more to undermine strong tobacco control policies around the world. If governments are going to be in court with the industry, they should be doing it on their terms, proactively holding the industry liable for its myriad of abuses. And to do so, they need tools and guidance for implementation of Article 19 from the treaty, the Secretariat, and the COP. We have the ability to bring the untapped potential of Article 19 into fruition and to rein in the tobacco industry as we have never seen before. We have no time to lose. We must act, as a global community, now.

Chris Bostic is Deputy Director for Policy at Action on Smoking and Health (Twitter: @AshOrg). Richard Daynard is University Distinguished Professor of Law at Northeastern University and President of the Public Health Advocacy Institute . Tamar Lawrence-Samuel is Associate Research Director at Corporate Accountability International. (Twitter: @StopCorpAbuse)

Lithuania: FCTC breaches undermine tobacco control progress

28 Jan, 16 | by Marita Hefler, News Editor

Vaida Liutkutė

Health research institute
Lithuanian University of Health Sciences

(Note: this is an edited version of an article published in the January 2016 edition of News Analysis). 

The FCTC took effect in Lithuania on 16 March 2005, making it among the earliest countries to be subject to its legal obligations. Despite this, violations of Articles 5.3 and 13 continue to occur. Under an agreement signed in late 2014 with the Interior Ministry, Philip Morris Baltic (PMB) contributes 104,000 EUR to the police department. Part of the donation is allocated to support police officers with a good track record against illegal tobacco, while the remaining portion is used to support police commissariats in different regions of Lithuania.

One of the most successful police officers has already received a cash bonus of 10 000 EUR based on the agreement. Commemorating the day of Criminal Police (October 27th) another 10 officers also received bonuses. The parties also agreed to actively cooperate in this field by exchanging information, developing common prevention projects and criminal offences detection. To assist with these aims, the State Border Guard Service received a donation from PMB of 9 Land Rovers and more than 300 pieces of different equipment, including reconnaissance equipment. Alberto Bernardi, director general of PMB tells he is proud to help governmental institutions to fight illegal tobacco market.

In the very same week The United Nations public health agency in charge of tobacco control has warned EU policymakers to keep their distance from industry as they consider reforms to fight cigarette smuggling. Given Philip Morris International’s extensively documented history of involvement in smuggling, such blatant violations of FCTC Article 5.3 appear particularly absurd.

PMB also sponsors a social project called Lietuva be šešėlio (Lithuania without a shadow) which encourages the public to use an interactive map to report places where tobacco, alcohol or fuel are being illegally sold. According to project coordinators, more than 500 illegal places were closed based on reports lodged with this interactive tool. Project Lietuva be šešėlio is also actively developing information campaigns related to smuggled cigarettes, together with support from the Lithuanian government, State Border Guard Service, Police Department, Customs of the Republic of Lithuania, State Tax Inspectorate, Ministry of Finance of the Republic of Lithuania. The latest social information campaign is Nusikaltimai vyksta ne pakelyje (Crimes do not happen in packages).

lithuania photo 1

The Philip Morris supported campaign ‘Crimes do not happen in packages’

The donation to the police service follows an agreement signed on June 25th 2014 between the State Tax Inspectorate under the Lithuanian Ministry of Finance and the Digital Coding and Tracking Association (Codentify), established by British American Tobacco, Imperial Tobacco Group, Japan Tobacco International and Philip Morris International. The agreement raises serious concerns about the independence and integrity of Lithuania’s measures to tackle illicit tobacco.

In addition to the clear failure of the Lithuanian government to implement comprehensive measures to protect policy from the tobacco industry, Lithuanian youth continue to be exposed to tobacco industry advertising, in contravention of FCTC Article 13.

Despite widespread complaints from the public health community, PMB supports various science projects for students. Activities have included industry financing of student internship projects, while the latest PMB-sponsored project is Mokslo pieva (Science meadow), involving three main universities and other science institutions.

A poster to promote the Philip Morris sponsored event 'Science Meadow'

A poster to promote the Philip Morris sponsored event ‘Science Meadow’

According to the Law on Tobacco Control, industry is prohibited from sponsoring events designed for persons under 18 years of age as well as radio and television programmes and also events and activities involving, or taking place in, several countries or otherwise having cross-border effects. Sponsorship of events such as these generates exposure which acts as surrogate advertising, both to young adults and their peers under the age of 18, and helps to create an impression of a legitimate and respected industry.

 

 

Philip Morris agreement with Spanish police: undermining the FCTC?

2 Dec, 15 | by Marita Hefler, News Editor

On 29 October, Philip Morris Spain signed an agreement with the Spanish police to fund equipment including underwater cameras, night vision systems, and scanners for verifying authentication and tracking of tobacco products. The agreement also includes support during inspections and seizures of counterfeit products to assess possible illegal activities regarding the entire production and distribution chain, as well as research and studies about illicit tobacco.

The agreement takes place against the backdrop of a hotly contested battle for the European Commission’s approach to track and trace technology to meet the requirements of the revised European Tobacco Products Directive (TPD). Unlike the WHO protocol to Eliminate Illicit Trade in Tobacco Products (which the EU has signed, but not ratified), the TPD doesn’t exclude the tobacco industry from a central role in fighting illicit tobacco. The track and trace system supported by the TPD also doesn’t require secured markings on tobacco packages.

The tobacco industry is arguing for its own technology Codentify – a system developed by Philip Morris and licenced at no cost to BAT, Imperial Tobacco Group and Japan Tobacco International – against a Swiss company SICPA. Officials at the European Anti-Fraud Office, OLAF, have already thrown support behind Codentify and expressed concern that the SICPA technology may be incompatible with working agreements currently in place with the tobacco industry to combat smuggling.

OLAF’s support ignores significant concerns about the adequacy of Codentify, particularly its use of relatively unsecured equipment and potential for codes to be used more than once. Use of Codentify also opens up the possibility that investigations and inquiries could be transparent to the tobacco industry, and therefore potentially beneficial in shaping its reponse.

OLAF has noted that efforts to disrupt illicit tobacco rely on the input of the industry, a situation created by anti-smuggling agreements between tobacco companies, the EC and EU member states. The agreements were enacted with companies from 2004, following a case in the 1990s in which cigarettes were legally exported from the US and later appeared on the black markets of countries such as Italy, Spain and other European countries. The anti-smuggling agreements, due to expire in 2016, require tobacco companies to control their supply chain and set penalty payments for cigarette seizures. The agreements have generally been ineffective due to a range of loopholes, particularly because customs officials rely on industry to determine counterfeit cigarettes.

In the mid 1990s, it was estimated that 16% of the Spanish cigarette market was illegal. This was reduced to 2% in 2001, following a focused operation which included inter-jurisdictional cooperation, coordinated customs activity and participation in the EU investigation of cigarette smuggling by transnational tobacco companies. The main source of illegal cigarettes had been products from transnational tobacco companies supplying Spain via seaports. A 2014 OLAF report suggests that the illicit tobacco market in Spain has re-emerged and is fuelled by contraband originating in Gibraltar.

There is a lack of technical expertise in tracking and tracing in many European countries, creating a significant opportunity for the industry to step in and fill the gap. In addition, a comprehensive two year strategy and action plan to tackle illicit tobacco published by the EU in June 2013 – which aims to target supply and demand in illicit products, decrease smuggling incentives (primarily through tax harmonisation), improve security of the supply chain through tracing and tracking, and strengthen and coordinate enforcement – has no new budget allocation.

Philip Morris is likely to benefit from the agreement with the Spanish police in several ways. Apart from the obvious public image benefit of being seen to support strong law enforcement, providing apparently welcome assistance to police agencies in individual countries in Europe helps to cement the industry’s positioning as an essential partner in the fight against smuggling. Supplying research and ‘academic’ advice provides an opportunity for PMI to shape law enforcement expertise based on research favourable to its position.

In 2011, Philip Morris gave a donation of $23 million to Interpol; as with that donation, this agreement with the Spanish police generates goodwill within law enforcement and makes it appear that Philip Morris is part of the solution rather than a root cause of the problem.

Additional links:

Big tobacco, Interpol & Codentify: potential problems with industry product tracking systems

17 Jun, 15 | by Marita Hefler, News Editor

In 2013, Tobacco Control published an article which examined Codentify, an industry tracking and tracing standard (click here for open access full text). It traces events from 2011, when Interpol accepted a substantial donation from Philip Morris International. Shortly afterwards, in 2012, Interpol announced the creation of the Interpol Global Register (IGR) to help ensure authenticity of products threatened by illicit trade. At the same time, Interpol announced it would work the four major transnational tobacco companies (British American Tobacco, Imperial Tobacco Group, Japan Tobacco International,  and Philip Morris International) to make the industry’s supply chain control system, Codentify accessible via the IGR.

This collaboration took place in the lead up to the adoption of the Framework Convention on Tobacco Control (FCTC) Illicit Trade Protocol in November 2012, which is focused on technological solutions to global illicit trade. The article examines how the tobacco industry promoted Codentify, portrayed itself as part of the solution to illicit trade and integrated itself into FCTC processes. It notes that while limited information was available, the pan-industry deal to develop and promote the PMI tracing and tracking standard is potentially problematic, given the standard has significant limitations, and particularly in light of the fact that the industry has been accused of involvement in tobacco smuggling.

Recently, a new independent blog has appeared, called Why It’s Bad, which aims to explain and further investigate Codentify. The author is a student at the Open University of London, who states: “This blog will be primarily dedicated to explaining the scam that is Codentify. I will try my best to use my background as an information systems student to explain these technical issues in simple terms.” Given the lack of research about this issue and the potential danger of regulatory capture by the tobacco industry in the area of illicit tobacco, the blog has the potential to provide interesting insights about Codentify. (Note: Why It’s Bad is external content. BMJ has not verified, and takes no responsibility for, the content in this external link).

 

 

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