New Deloitte report reveals that packaging laws have not directly reduced smoking
4 May 2011
An international Deloitte report, commissioned by British American Tobacco, reveals that increasing the size of health warnings on packs and introducing graphic warnings has not directly reduced tobacco consumption – and calls into question whether plain packaging will achieve government health objectives.
Deloitte believes its report, which assessed 27 countries covering a period of 14 years, is one of the most comprehensive and rigorous independent studies on tobacco packaging regulation to date.
Lawrence Hutter, a senior Deloitte UK Partner, said that these findings have been developed by Deloitte professionals who specialise in assessing regulatory impacts on business and the wider economy. They are based on objective research and rigorous quantitative modeling:
"Our analysis did not identify any statistically significant direct relationship between tobacco packaging regulation, including the size and type of government health warnings, and changes in legal tobacco consumption," he said.
The report also highlights potential unintended consequences if plain packaging for tobacco products were introduced – including a increase in the illegal tobacco market, lost tobacco tax revenues, potentially significant legal and compensation costs for governments and cost burdens on small retailers.
The report casts doubt over the effectiveness of tobacco packaging laws and suggests that Governments consider potential intended and unintended impacts of plain packaging.
"Consistent with good regulatory practice, in advance of deciding to implement new forms of packaging regulation, we suggest that governments conduct more robust research into these impact areas," the report said.
British American Tobacco commissioned the report in the absence of any comprehensive global studies on the impacts of tobacco packaging and hopes governments will study it.
Bede Fennell, British American Tobacco’s International Regulatory Affairs Manager said: "We are concerned that health warning and plain packaging proposals are being rushed through without proper thought as to the real impact."
He said commentators, including the Australian government, recognize that plain packaging could lead to an increase in illegal trade.
"The plainer the pack, the simpler it is to counterfeit. Illegal tobacco costs taxpayers billions and makes criminals rich. The black market significantly undercuts legitimate retailers and doesn’t ask for proof of age, so a move designed to discourage youth from smoking could perversely end up having the exact opposite effect," said Fennell.
British American Tobacco has also said that plain packaging may infringe various legal rights relating to international trademark and intellectual property laws, resulting in potential costs to government.
"If plain packaging measures are pursued by governments, and they need to defend their plans, or pay tobacco companies compensation for loss of intellectual property – then it will be taxpayers who end up footing the bill," said Fennell.
Read the full report:
Notes to editors
In 2010 the Australian Government said that it wants to make tobacco product plain packaging law in 2012, making it the first country in the world to commit to legislation.
- Recognising the importance of such developments to governments, to consumers and to the industry, British American Tobacco (BAT) asked Deloitte to develop an objective, international report on the potential impacts (intended and unintended) of Pack Space Appropriation regulation (i.e. government health warnings) and Plain Packaging regulation on a specified set of impact areas.
- Read the full Deloitte report at www.bat.com/deloittereport
- The contents of the report have been prepared by Deloitte in the UK and are based on econometric analysis and a broad review of publicly available information and research on the topic. The purpose of this report is to provide a platform for informed debate, discussion and constructive engagement with relevant stakeholders.
- The countries examined in the econometric analysis are Australia, Argentina, Belgium, Brazil, Canada, Chile, Colombia, Egypt, France, Germany, Greece, Italy, Japan, Malaysia, Mexico, Nigeria, Pakistan, Poland, Romania, South Africa, South Korea, Netherlands, New Zealand, Spain, Switzerland, Turkey, and the UK.
- British American Tobacco is the world’s second largest publicly quoted tobacco group by global market share with brands sold in more than 180 markets. In 2010 its subsidiary companies produced 708 billion cigarettes and employed more than 60,000 people. Leading global brands are Dunhill, Kent, Pall Mall and Lucky Strike.
- Deloitte LLP is a leading UK professional services organisation with 12,000 employees. Deloitte LLP provides audit, tax, consulting, and corporate finance services to public and private clients spanning multiple industries. Deloitte LLP is the UK member firm of Deloitte Touche Tohmatsu Limited, a globally network of member firms with approximately 170,000 professionals in more than 140 countries.