The Predatory Practices of the Tobacco Industry
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The Predatory Practices of the Tobacco Industry. Dr Anna Gilmore MBBS DTM&H MSc FFPH PhD. [email protected] EUROPEAN CENTRE ON HEALTH OF SOCIETIES IN TRANSITION London School of Hygiene and Tropical Medicine. Tobacco’s health impacts. 1 in 2 long term smokers killed by tobacco

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The Predatory Practices of the Tobacco Industry

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The predatory practices of the tobacco industry

The Predatory Practices of the Tobacco Industry

Dr Anna Gilmore

MBBS DTM&H MSc FFPH PhD

[email protected]

EUROPEAN CENTRE ON HEALTH OF SOCIETIES IN TRANSITION

London School of Hygiene and Tropical Medicine


Tobacco s health impacts

Tobacco’s health impacts

  • 1 in 2 long term smokers killed by tobacco

  • On average, among 1000 20-year-olds who smoke cigarettes regularly:

    • about 1 will die from homicide

    • about 6 will die from motor vehicles

    • about 250 will be killed by smoking in MIDDLE age alone

    • 250 more will be killed by tobacco in OLD age)


Deaths from tobacco

Deaths from tobacco

Annual deaths attributed to smoking

M=million deaths / year (Peto, Lopez et al, 1994)

1990 2030

Developed 2M 3M

Developing~1M~7M

World total 3M ~10M

1 in 101 in 6


Trends in cigarette consumption increasing in the developing world

Trends in cigarette consumption:Increasing in the developing world

Annual cigarette consumption per adult

(no. cigarettes)

Source: World Bank Report 1999


Tobacco s challenge to public health

Tobacco’s Challenge to Public Health

“Tobacco use is unlike other threats to global health. Infectious diseases do not employ multinational public relations firms. There are no front groups to promote the spread of cholera. Mosquitoes have no lobbyists.”

(WHO Committee of Experts 2000)

- Essentially a political issue


The global tobacco industry

The global tobacco industry

4 companies now control almost 70% of world cigarette market:

  • (CNTC) 32.6%

  • Philip Morris 14.5%

  • BAT 12.2%

  • JTI 7.8%

Marlboro, Chesterfield,

State Express 555, Lucky Strike,

Benson & Hedges, Rothmans

Mild Seven, Salem

Source: ERC 2005 data


Big 3 transnational tobacco companies sales various countries gross domestic product gdp

Big 3 transnational tobacco companies’ sales &various countries’ gross domestic product (GDP)

Philip Morris

BAT

Japan Tobacco

Peru

Bangladesh

Hungary

Sri Lanka

Ghana

Senegal

Kenya

US$ billions


The 9 ds of industry survival

The 9 Ds of industry survival

  • Deny the health consequences of smoking

  • Deceive consumers about the true nature of cigarettes through marketing and public relations

  • Damage the credibility of industry opponents

  • Direct advertising to women and youth, in addition to men, to maximize sales volume

  • Develop new markets around the world

  • Defeat attempts to regulate the industry or control smoking

  • Delay legislation if it can't be defeated

  • Destroy legislation once it passes, either by trying to overturn the law in court, by disobeying the law, or by exploiting the loopholes.

  • Defend lawsuits filed against the industry

Cunningham. Smoke and Mirrors: The Canadian Tobacco War. 1996


The 9 ds of industry survival1

The 9 Ds of industry survival

  • Denythe health consequences of smoking

  • Deceive consumers about the true nature of cigarettes through marketing and public relations

  • Damage the credibility of industry opponents

  • Directadvertising to women and youth, in addition to men, to maximize sales volume

  • Developnew markets around the world

  • Defeat attempts to regulate the industry or control smoking

  • Delay legislation if it can't be defeated

  • Destroy legislation once it passes, either by trying to overturn the law in court, by disobeying the law, or by exploiting the loopholes.

  • Defend lawsuits filed against the industry

Cunningham. Smoke and Mirrors: The Canadian Tobacco War. 1996


Deception and denial nicotine addiction

Deception and Denial:Nicotine addiction

  • “Nicotine is highly addictive, to a degree similar to or in some respects exceeding addiction to ‘hard’ drugs such as heroin or cocaine”

    Royal College of Physicians UK, 2000)

  • Most smokers do not smoke out of choice but because they are addicted


Industry s private response to nicotine addiction

Industry’s private response to nicotine addiction

  • 1962: “we now possess a knowledge of the effects of nicotine far more extensive than exists in published scientific literature”

  • 1963: “We are, then, in the business of selling nicotine, an addictive drug”

  • 1970s - optimising the effect of nicotine by increasing the pH of cigarettes (increases the unbound form of nicotine which increases its physiological impact)

  • “if we meekly accept the allegations of our critics and move toward reduction or elimination of nicotine in our products then we shall eventually liquidate our business”


The predatory practices of the tobacco industry

Public response: Denial US Congressional hearings 1994: “I do not believe that nicotine is addictive” CEO B&W


The predatory practices of the tobacco industry

Trinidad, 1998


Directing advertising

Directing advertising

Players gold leaf


Russia female smoking prevalence

Russia: female smoking prevalence


The predatory practices of the tobacco industry

Developing new marketsDestroying legislation

How BAT bought Uzbekistan


Bat in uzbekistan

1994 BAT established monopoly

Invested > $300 M

>31% of total FDI (1992-2000)

Uzbekistan’s largest investment to date

Prime Minister Utkir Sultanov: "British American Tobacco is a model foreign investor"

BAT in Uzbekistan


President karimov

Two of Karimov’s quotes:

"Such people must be shot in the forehead! If necessary, I'll shoot them myself" (1998)

"I'm prepared to rip off the heads of 200 people, …in order to save peace and calm in the republic…If my child chose such a path, I myself would rip off his head.” (1999)

President Karimov


The predatory practices of the tobacco industry

1st Presidential decree: BAT avoid a tender

Note to the board of BAT Industries plc: Central Asian republics - briefing paper 27/1/94


The predatory practices of the tobacco industry

2nd Presidential Decree: establishes BAT monopoly


Health decree 30

Health Decree 30

  • Issued by Chief Sanitary Doctor July 1994

  • Discovered by BAT in August 1994

  • Implemented highly effective tobacco control measures

  • Highlighted adverse health impacts of tobacco

  • Noted “large scale” tobacco advertising


Yet just one year earlier marketing environment

Yet, just one year earlier, marketing environment:

"very primitive, limited use of stickers.…. a single-site sophisticated electronic billboard .. seen on the outskirts of Tashkent.”

“unique in the world in terms of its singularly unexploited advertising and promotional environment”

Uzbekistan: Preliminary marketing report following visit to Tashkent & Samarkand 26 - 30 July 1993


Bat claimed

BAT claimed

  • HD 30 would jeopardise foreign investment (one supported by Karimov)

  • “still a controversy about smoking and health”

  • “smoking has not been proven to actually cause” diseases

  • “world wide experience consistently shows that advertising bans do not reduce consumption”

  • “advertising … is not intended to increase the overall market”

    (500898516-21, 500898525-7, 500852336-9)


Yet bat marketing plans

Yet, BAT marketing plans

  • Projected 45% increase in cigarette consumption between 1993 and 1999

  • Potential to expand sales to women:

    “Historically, local products have been too strong to attract large numbers of female smokers. Female smoking is now more socially acceptable and females can be drawn into the market via menthol offers or lighter brands”

    “growth in incidence among women”

    (203465973-93, 301734356-406)


Yet bat marketing plans1

Yet, BAT marketing plans

  • Projected 45% increase in cigarette consumption between 1993 and 1999

  • Potential to expand sales to women:

    “Historically, local products have been too strong to attract large numbers of female smokers. Female smoking is now more socially acceptable and females can be drawn into the market via menthol offers or lighter brands”

    “growth in incidence among women”

    (203465973-93, 301734356-406)


Health decree 301

ORIGINAL DECREE

" The following will be permanently prohibited:

1.2 Advertising of local and foreign brand tobacco products including advertising through the mass media (television, radio, cinema, newspapers, magazines etc.),

AMENDED DECREE

1.2 Advertising of local and foreign brand tobacco products, including advertising through the mass media, (tv, radio, cinema, newspapers, magazines etc) will be restricted according to the attached code [at this point they intend to use the Russian voluntary code]

Health Decree 30


The predatory practices of the tobacco industry

ORIGINAL DECREE

" The following will be permanently prohibited:

1.3 smoking in public places, on the transport, at health care institutions, kindergartens, schools and other institutions for children, colleges and universities…..”

AMENDED DECREE

1.3 “smoking at healthcare institutions, kindergartens, schools and other institutions for children will be prohibited. At other institutions and enterprises, and on public transport, both smoking and nonsmoking areas will be provided”


The public face

The public face

(BAT Bulletin, August 1995, p22, emphasis added)

A new voluntary code for advertising, developed jointly by BAT and the government of Uzbekistan, has been introduced in the Central Asian Republic. The document crowns almost a year of intensive work by BAT and Uzbek government agencies. It has the legal force of a government decree, which all tobacco companies operating in Uzbekistan will be obliged to comply with.

Entitled The Provision of Tobacco Advertising Conduct, it sets out guidelines for tobacco advertising, in accordance with the norms adopted in a number of countries throughout the world. BAT’s key role in formulating the code, is seen by many as a reflection of the company’s responsible attitude to its advertising practices.


Influencing taxation

Influencing taxation

  • Established allies in Ministries of Taxes and Finance including Deputy Finance Minister who was

    “very keen that BAT should work with him and his officials on the drafting of indirect tax legislation…. which he admits they have neither the personnel or expertise to do.”

    (Dufty C. Uzbekistan - indirect tax meeting with Ministry of Finance. 03/03/1994.)


Influencing taxation1

Influencing taxation

“The excise authorities appear very receptive to excise proposals.. …..

The impression was that BAT could have almost any exemption it wanted” (Notes from visit to Tashkent, Jan ‘94)

Managed to secure:

  • A >50% reduction in excise rates

  • Design of an excise system to benefit its brands and disadvantage competitor’s brands (Ad valorem taxes “to hit Marlboro”)

  • Tax marker system to police imports (from which it would be exempt)


Outcome uzbekistan

Outcome - Uzbekistan

  • Overturned 3 most effective tobacco control measures

  • Cigarette prices lowest in WHO European region

  • Production capacity increased 5 to 30 bn pa

  • By 1999 BAT had market share of over 70%

  • Consumption increasing: 7-8% annually primarily among young people, WTF estimates 50% increase in sales between 1990 and 1996

  • BAT has secured major benefits including extension of its preferential tax-exempt status for an additional 5 years

  • Tobacco control remains incredibly weak


Further restricted competition

Further restricted competition

  • Absorbed potential competitors

  • Exclusive manufacturing rights

  • No other business could be licensed to process leaf

  • No other brands could be registered without BAT approval

  • Exclusive dealing: state distribution agency & local advertising agencies

  • “Protection of the domestic tobacco products market” through excise reform


References

References

Gilmore A, McKee M. Tobacco and transition: an overview of industry investments, impact and influence in the former Soviet Union. Tobacco Control 2004;13: 136-142.

Gilmore A, Collin J, McKee M. British American Tobacco’s erosion of health legislation in Uzbekistan. British Medical Journal 2006;332:355-358.

Gilmore A, Collin J, Townsend J.Transnational tobacco company influence on taxation policy during privatization: the case of BAT in Uzbekistan (in press) Am J Public Health.

Gilmore A, McKee M, Collin J. The invisible hand. How British American Tobacco precluded competition in Uzbekistan (in press) Tobacco Control.


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