DG SANCO’s Consultation on the possible revision of the Tobacco Products Directive 2001/37/EC (TPD) JTI’s Full Response 16 December 2010 JTI is a member of the Japan Tobacco Group of Companies (JT), a leading international tobacco product manufacturer. It markets world-renowned brands such as Winston, Mild Seven and Camel. Other international brands include Benson & Hedges, Silk Cut, Sobranie of London, Glamour and LD. With headquarters in Geneva, Switzerland, and net sales of USD 9.6 billion in the fiscal year ended December 31, 2009, JTI has more than 25,000 employees and operations in 120 countries. For more information, visit www.jti.com. JTI is a registered interest representative, number 31290853542-43, within the meaning of EU’s European Transparency Initiative. EXECUTIVE SUMMARY A BETTER APPROACH TO TOBACCO REGULATION Tobacco products carry risks to health. Appropriate and proportionate regulation of the tobacco sector is thus both necessary and right. Among JTI’s core beliefs are that: x Minors should not smoke, and should not be able to obtain tobacco products. It is central to our Code of Conduct, marketing practices, operational policies and the way JTI does business. x Adult smokers should be appropriately informed about the health risks of smoking before they make the decision to smoke. For these reasons, JTI supports legislative and regulatory measures on tobacco control which meet the principles of Better Regulation (which are explained more fully below). The Consultation does not clearly articulate DG SANCO’s objectives for reform of the Tobacco Products Directive (TPD). However, the apparent key policy rationale for various of DG SANCO’s proposals is aligned with JTI’s core beliefs, as articulated above. It is therefore in everyone’s interest that any measures which may ultimately be adopted with the aim of preventing minors from smoking and/or reiterating and emphasising the health risks of smoking, are effective. DG SANCO’s policy and proposals will not, however, be effective if they are not based on, and consistent with, a credible and scientifically rigorous understanding of smoking behaviour. Knowing how and why minors decide to experiment with tobacco products and how they obtain tobacco products are prerequisites for the design of regulatory interventions that will be effective in changing their behaviour. Understanding how adult consumers weigh up the risks and benefits of smoking is critical to designing effective methods to communicate with them about those risks in a way that is likely to cause them to change their behaviour. Leading experts (notably Professors Steinberg, Dhar and Nowlis) prepared reports for JTI which give their independent opinions on the basis of contemporary scientific thinking, on how the smoking behaviour of adults and minors should best be understood. These experts present DG SANCO with a coherent analysis of smoking behaviour, against which the need for further regulatory interventions can be assessed and their likely success judged. JTI considers that this framework reflects the best contemporary science. It also dictates a new approach to tobacco regulation by DG SANCO. It flows from these experts’ findings that: x measures to reduce smoking among minors will only be effective if they control minors’ ability to obtain tobacco products and remove cigarettes from the social networks of teenagers. Access-based solutions take due account of the fact that minors are naturally more prone to risk-taking behaviour than adults. As Professor Steinberg explains, decision-making during adolescence is characterised by a heightened emphasis on rewards over risks; a tendency to focus on the immediate, rather than longer term, consequences of a decision; a susceptibility to peer influence; and weak self-regulation. Minors are well aware of the risks of smoking, but may choose to experiment anyway. These factors, together, explain JTI’s Full Response to DG SANCO’s Consultation, 16 December 2010. Page 2 why a psychological profile characterized by sensation-seeking, peer and family influence (i.e. peers and family members who smoke) and the availability of cigarettes are the main risk factors for smoking. Accordingly, the provision of further information about the health risks of smoking or measures focussed on packaging are unlikely to be effective; and x for measures directed at adult smoking behaviour to be effective, they would need to target adults’ decision-making at the point of consumption, taking due account of the analysis that adults employ when making decisions about risk. They would also need to be more individualised and to be positively framed, in the light of the triggers to smoking behaviour. Professors Dhar and Nowlis therefore dismiss the likely effectiveness of interventions that reflect the so-called “traditional model” of consumer decision- making, which is based on the notion that rational consumers will shift their smoking behaviour in accordance with the evaluation of information on the health risks of smoking. DG SANCO’S ANALYSIS PRODUCES INAPPROPRIATE PROPOSALS DG SANCO’s proposals are based on fundamentally misconceived and outdated notions of smoking behaviours, namely that tobacco packaging and its display are predictors of smoking initiation and that the provision of yet more information about the health risks of smoking will change smoking behaviour. These notions are wrong, and are not supported by the science. Specifically, even if there is a legal basis for EU action, many of the proposals identified in the Consultation – including plain packaging for tobacco products, hiding tobacco products from view at retail outlets, mandating larger pictorial health warnings and banning all types of smokeless tobacco products – are based on misconceived and out- dated notions of smoking behaviour. They fail to take into account how minors and adult consumers think and act, and would not therefore be effective at changing behaviour if they were introduced. Against this background, it is unsurprising that the proposals in the Consultation are inappropriate and ineffective. There is simply no reliable evidence to support the key proposals in the Consultation. DG SANCO has the burden to provide clear and reliable evidence to justify the initiatives; it is unable to do so. Indeed, leading experts have looked carefully at the evidence advanced in support of DG SANCO’s proposals, notably by RAND Europe, and they agree that there is no reliable evidence that those proposals would actually work. Many of DG SANCO’s proposals would involve the unparalleled deprivation of intellectual property rights and brands, which are – as for any producer of consumer products – JTI’s most valuable assets. Various proposals unjustifiably infringe fundamental legal rights to property, expression and trade, which JTI considers are critical to protect. Indeed, certain proposals will potentially place the EU and its Member States in breach of their WTO, TRIPS and bilateral investment treaty obligations. It is wrong for any regulator in a free market economy to go this far, particularly in circumstances where the evidence to support the effectiveness of the proposals is so weak. JTI’s Full Response to DG SANCO’s Consultation, 16 December 2010. Page 3 The negative effects of the proposals would be widespread, and show no signs of having been properly considered to date by DG SANCO. In particular: x Contraband and counterfeit tobacco products would become easier to make, distribute and sell if proposals such as plain packaging and ingredients bans were introduced. These and other proposals would not stop adults or minors from buying or otherwise obtaining tobacco products: they would simply encourage access from the cheaper, illegal and unregulated market. This undermines the real progress made by OLAF, national enforcement bodies, JTI and other stakeholders to tackle the trade in illicit products and to take action when criminal gangs are caught. x The proposals would cause serious and unnecessary damage to competition. Evidence shows that competition would be reduced and barriers to new market entrants increased by measures such as plain packaging and display bans. They remove the last means by which adult smokers are able to make informed choices about which brand to buy. Consumer choice and product switching will be reduced and confusion created. x Proposals would adversely impact Small and Medium sized Enterprises, retailers and tobacco growers. The negative effects of the proposals in the Consultation will be far wider and deeper than currently envisaged in the RAND Report. For example, there has been no attempt made to date to assess the impact on farmers of Burley and Oriental tobacco if ingredients regulation effectively prohibits the manufacture of classic American blend cigarettes (of which those tobaccos form part). JTI believes that the proposed approach is so misconceived, the evidence is so weak, and the negative impacts of the proposals so serious, that DG SANCO must fundamentally reassess its approach and its proposals, and must consider the alternative solutions put forward in JTI’s response and summarised below. AN OPPORTUNITY FOR BETTER REGULATION Unfortunately, in addition to the flawed approach to smoking behaviour, the procedure followed to date by DG SANCO has obvious and serious flaws, and stakeholders have been denied the opportunity to comment on critical issues. For example: x the Consultation excluded any analysis of the threshold issues of legal basis, subsidiarity and proportionality; x neither the Consultation nor the RAND Report has assessed or presented evidence on fundamental EU policies that would be impacted by the Consultation’s proposals, including the impact of the proposals on illicit trade, the protection of intellectual property rights, competition and competitiveness, and consumer choice. Whilst many of these were identified early on by RAND Europe as key work streams, there has been no out-put and no evidence, analysis or policy has been provided to stakeholders for comment; and x DG SANCO has contracted out large areas of work to a body – RAND Europe – whose work is both incomplete and fundamentally flawed.