How should governments deal with multinational consulting firms that work for the tobacco industry?

 

George Thomson, Louise Delany

Department of Public Health, University of Otago, Wellington, New Zealand

george.thomson@otago.ac.nz

The New Zealand Ministry of Health is currently using a consulting firm EY (formerly Ernst & Young) to research the impacts of tobacco taxation, despite EY’s work locally and internationally for tobacco companies. This decision may breach the Framework Convention on Tobacco Control (FCTC), at least in spirit. This blog provides some context, asks whether Government agencies should use consultants to tobacco companies, and argues that the Ministry should seek and consider advice from the FCTC Secretariat.

The background

Tobacco industry internal documents show the industry’s concern about ‘the effectiveness of large cigarette excise tax increases as a potent policy for governments in their efforts to reduce tobacco use, particularly among the young’.

The industry pressures governments on their tobacco tax policies using many tactics. Their approaches include commissioning ‘independent expert’ reports that are intended to change the policies of government. Prominent among those who write such reports are the ‘big four’ multinational consulting firms KPMG, EY, Deloitte, and Price Waterhouse Cooper. While local branches of these firms may sometimes attempt some independence from the global firms, the firms have global branding and ties which require real and continuing relationships.

In NZ, examples of these services to the tobacco industry include a 2018 KPMG report which presented estimates of illegal tobacco sales in NZ, commissioned by Imperial Tobacco. This report was prefaced by the following disclaimer: ‘we have not sought to establish the reliability of the information sources by reference to other evidence. This Report has not been designed to benefit anyone except the Beneficiary [Imperial].’

EY and the tobacco industry

EY has produced a number of reports for tobacco companies, and in 2010 reported working with ‘10 of the 12 tobacco companies listed in the Forbes 2000’. The EY reports included one in 2014 for BAT. BAT Australasia (which owns BAT NZ) attempted to use this report to discredit the tobacco plain packs policy in Australia: it quoted the EY finding that they ‘found no evidence that plain packaging has reduced total consumption.’

In 2010, EY had prepared a report for British American Tobacco (BAT) on illegal tobacco in NZ. Concerns about the quality of this report led ASH NZ to commission an independent review of it from the NZ Institute for Economic Research (NZIER) which found major flaws.

The 2018 Government review of tobacco taxation and EY

In March 2018 the NZ Government announced a review of their tobacco taxation policy, and sought a provider for the work. In June, an item on the Ministry of Health (MoH) website announced that ‘EY has been selected as the provider’ for the review.

EY have approached tobacco control experts in NZ, seeking interviews to help with the review.

Letter to the NZ Associate Minister of Health

Because of EY’s record of working for tobacco companies, in July 2018 several researchers wrote to the Associate Minister of Health, Jenny Salesa, outlining their concerns.

On 2 August 2018, the Minister replied, saying that ‘EY notified that to the best of their knowledge no actual or potential conflicts would prevent them from undertaking this work’. On 6 August, the MoH posted a statement on their website from EY:

EY formalised our position in Oceania on the provision of services to the tobacco industry, approximately three years ago. The Oceania Partnership, supported by our global executive, made an explicit decision to limit the services we provide to the tobacco industry to only compliance based tax and accounting services. The nature of this decision is not a passive position. Partners and staff are prohibited from proactively seeking the provision of consulting services to the tobacco industry and we decline requests for tender, even if a company wishes to directly appoint EY.

…. While we acknowledge that EY, as a large global organization, may have from time to time provided professional services to the tobacco industry, we can confirm we have provided no advisory services that support or advocate consumption or sale of tobacco. As stated previously, if any interest becomes apparent we will declare it immediately and deal with the conflict transparently.’

This appears to be carefully constructed language that doesn’t address a range of issues, including potential influences favourable to the tobacco industry beyond supporting or advocating the ‘consumption or sale of tobacco’. We return to this point below.

The application of New Zealand’s international treaty obligations to this situation

The FCTC, to which NZ is a signatory, states in Article 5 (3) that ‘In setting and implementing their public health policies with respect to tobacco control, Parties shall act to protect these policies from commercial and other vested interests of the tobacco industry …’ The preamble to the FCTC reinforces this legal obligation in affirming that signatories ‘need to be alert to any efforts by the tobacco industry to undermine or subvert tobacco control efforts and the need to be informed of activities of the tobacco industry that have a negative impact on tobacco control efforts’. The FCTC established in 2009 a Protocol ‘to ensure efforts to protect tobacco control from commercial and other vested interests of the tobacco industry are comprehensive and effective.’

Conclusions

Is this episode a case of: ‘I talked to the fox who wanted to guard the hen house, and the fox reassured me that they are now vegetarian’?

By employing EY to advise on tobacco taxation, the NZ Government risks breaching the intentions and spirit of the FCTC. To avoid the perception of contracting with tobacco industry consultants, we suggest the Government seek advice from the FCTC Secretariat to ensure their interpretation of the FCTC Article 5(3) aligns with WHO expectations. Such advice would inform future procurement of consulting services, again ensuring compliance with the letter and spirit of NZ’s FCTC obligations.

We remain concerned by the EY statement ‘we have provided no advisory services that support or advocate consumption or sale of tobacco’ as this appears disingenuous. Rather it is their work that challenges and undermines tobacco control policy that is our concern, and their statement doesn’t appear to address that work at all. The statement ‘if any interest becomes apparent we will declare it immediately and deal with the conflict transparently’ appears to be highly problematic, as we don’t know how they will identify an interest, what they consider an ‘interest’ to be, or how the statement could be validated without constant independent external audits.

Finally, EY appears to be asking us to accept that the Oceania Partnership of EY will maintain a relationship to the tobacco industry that differs from that of the rest of EY. The EY assertion that their work for the tobacco industry is now limited would be more convincing if applicable to the whole of EY, not just one regional grouping. How likely is this difference between divisions to be completely and constantly maintained, while EY daily exchanges information, ideas, services and resources across EY entities? Is a claim of some changes adequate to comply with the intention of Article 5(3)? We would be interested to have the FCTC secretariat’s take on this.

If others have information on EY’s current or recent work for the tobacco industry, or if any experts in tobacco taxation and its impacts have been approached to be interviewed for this or other reviews, we would be grateful for any details. The authors can be contacted by email george.thomson@otago.ac.nz.

Declaration: No group from our Department of the University of Otago tendered for the tobacco tax review work. We have in the past done similar work, data from which has been used by the NZ Government.

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