Chapter 3 Tobacco Industry Pricing, Price - Related Marketing and Lobbying

Chapter
3
Tobacco industry pricing, price-related marketing
and lobbying
Introduction
The effectiveness of tobacco taxation Tobacco Monopoly Administration unbranded products upon redemption
and other price-related policies and Chinese National Tobacco Co. of coupons or other proof of purchase,
depends in large part on how tobacco kept retail cigarette prices at the as in the “Marlboro Miles” and
companies respond through both same level as they were before the “Camel Cash” programmes). From
their lobbying efforts to prevent tax tax increase. the tobacco companies’ perspective,
increases or influence excise policies In addition to its direct pricing such price-reducing marketing
and their pricing and price-reducing strategies, tobacco companies can efforts have advantages over direct
marketing strategies. In general, influence price through a variety of pricing strategies in that they can be
tobacco product tax increases will price-reducing marketing efforts. more narrowly targeted to particular
lead to increases in the price of these These include: the distribution of segments of the market. For example,
products, with the extent of the price free samples of their products, the price-reducing promotions can be
increase varying based on how much distribution of coupons through used subnationally to reduce the
or little of the tax increase the industry print advertising and direct mail, immediate impact of subnational tax
decides to pass on to consumers on packaging, and via their web increases, can be applied to a limited
(which may vary brand by brand sites;; retail value-added promotions number of brands (e.g. those used
within the same market) and whether that involve free cigarettes (e.g. by populations of particular interest,
it raises prices on top. Two 2009 buy-one-get-one-free offers);; and such as young people), or directed to
tax increases illustrate this clearly. direct price discounts implemented more price-sensitive consumers (e.g.
In April 2009, the federal cigarette through payments to distributors distribution of coupons via direct mail
excise tax in the United States and retailers (e.g. through “buy- to selected users).
was increased by US$0.6167 per downs” trade programs). In addition, Finally, tobacco companies can
pack, with US cigarette companies other marketing techniques provide use their political influence to lobby
passing on the full amount of the tax added value at the same price policymakers to oppose tobacco tax
increase and raising prices further and can be thought of as price- increases or support tax rollbacks,
(e.g. Philip Morris USA raised prices reducing marketing, broadly defined. alter tax structures in a way favourable
on its leading brands by US$0.71 These include: retail value-added to at least some companies, resist
per pack and on other brands by promotions that involve non-tobacco earmarking of tobacco tax revenues
US$0.78 per pack). In contrast, in items (e.g. a free lighter with the for tobacco control programs, and/or
May 2009, China modified its tax purchase of two packs of cigarettes);; minimize the use and impact of other
structure and increased taxes on and specialty item distribution (e.g. policies that aim to increase tobacco
most cigarette brands, but the State giveaways of various branded or product prices. Similarly, tobacco
31
IARC Handbooks of Cancer Prevention
companies work behind closed used to drive searches are available Others were more fragmented,
doors with Ministries of Finance and in Appendix. with several smaller companies
others to provide guidance on tax We also consulted several key competing more aggressively with
levels and tax structures, as well as experts in the field (many of whom others. Still others were oligopolistic,
other aspects of tax administration are involved in authoring this volume) dominated by a few large firms that
(Gilmore et al., 2007). Such overt and put a call on GLOBALink, the together controlled nearly the entire
and covert activities can weaken most commonly used information- market. As a result, pricing strategies
the effectiveness of tax and price exchange point for tobacco control varied widely, with more competitive
policies in reducing tobacco use and researchers and practitioners, to markets likely to see lower prices and
its consequences. identify other papers. Although our more price competition than more
This chapter provides a review search strategy should have captured concentrated markets.
of these issues. The first section most studies that explore the issues Over the past two decades, the
provides a discussion of industry covered in this chapter in any detail, markets for tobacco products have
pricing strategies generally and of it is possible that some references become increasingly concentrated
how tobacco product prices change have been missed, particularly those and globalized as a result of
in response to changes in tobacco in languages other than English. privatization of government-run
taxes specifically. This is followed While we had aimed to limit the tobacco monopolies, reduced
by a review of the variety of price- evidence to scientific publications barriers to trade in tobacco and
related marketing strategies used obtained via the search strategies tobacco products, increased direct
by tobacco companies, and the above, the evidence base, investments by multinational tobacco
limited empirical evidence on the particularly in relation to parts (a) companies, and consolidation
use of price-reducing promotions (tobacco industry pricing strategies), through mergers and acquisitions.
in response to tax increases and (b) (price-related marketing) and (d) Together, worldwide, the top five
other tobacco control policies. We (interventions to reduce industry cigarette companies (Chinese
then turn to a discussion of industry price manipulation and lobbying), National Tobacco Co. (CNTC),
lobbying efforts to shape policy was limited, with most of the empirical Philip Morris International (PMI),
decisions concerning tobacco excise studies limited to the USA and a few British American Tobacco (BAT),
taxes, providing a systematic review other high- or high-middle income Japan Tobacco (JT), and Imperial
of the limited empirical evidence on countries. For this reason, the first t wo Tobacco Group (ITG)) account for
these activities between 1985 and sections explain industry behaviour more than 80% of global cigarette
2010. The final section discusses using theory and observation before production and consumption
interventions to reduce industry- turning to the empirical evidence, (Euromonitor International, 2009).
related price manipulation and and the fourth section outlines policy Excluding CNTC, which operates
lobbying. options, highlighting any relevant almost entirely in China with little
academic literature. competition from other companies,
Methods the top four companies account for
Tobacco industry pricing about 70% of global production and
A systematic approach was taken to strategies consumption. As shown in Table
searching for literature relevant to 3.1 for leading cigarette markets
this chapter. In total, 13 electronic Background: Market structure globally and in Europe, in most
databases were searched between countries cigarette markets are
October 2009 and March 2010. Historically, industry pricing dominated by some combination of
These covered academic research strategies have varied considerably these four companies. The 3-firm
and grey literature (i.e. manuscripts, across countries given the significant concentration ratio illustrates the
reports, technical notes or similar differences in the structures of highly concentrated nature of these
documents produced and distributed tobacco product markets in different markets—other than in Indonesia,
by governmental agencies, academic countries. Many markets were just three firms control at least 80%
centers or other non-commercial controlled by a domestic, often of the market, and in many markets
publishing entities). Full details of government-run, tobacco monopoly the top three firms account for more
the electronic databases and web whose primary objective may not than 90% (Gilmore et al., 2010).
sites, and the keywords, and terms have been profit maximization.
32
Table 3.1. Cigarette market shares (%) by global brand owner for the major cigarette markets, 2008
Company Brazil Canada China Germany India Indonesia Italy Japan Russian Federation UK USA
Philip Morris International Inc 9.7 21.3 0.1 36.2 12.1 22.6 52.9 24.4 25.4 6.3
British American Tobacco Plc 86.3 59.0 0.6 20.0 2.7 24.1 10.2 19.6 8.1
Japan Tobacco Inc 10.8 0.2 5.0 1.3 16.2 64.9 36.9 38.8 0.4
Imperial Tobacco Group Plc 25.6 2.9 9.2 43.9 4.0
China National Tobacco Corp (CNTC) 98
ITC Group* 58.3
Golden Tobacco Ltd 10.9
VST Industries Ltd 9.2
Godfrey Phillips India Ltd** 0.4
Gudang Garam Tbk Ltd** 28.3
Djarum PT 13.8
Bentoel Internasional investama Tbk PT 5.9
Nojorono Tobacco Indonesia PT 5.5
Philip Morris USA Inc 48.4
Reynolds American Inc* 26.5
Lorillard Inc 10.1
Liggett Vector Brands Inc 1.8
Societé industrielle des Tabacs du Cameroun 1.4

SA
Donskoi Tabak OAO 3.7
Private label 9.9 1.7
Others 2.6 8.9 1.2 3.3 7.8 21.2 4 0.5 5.2 1.3 8.8
Total 100 100 100 100 100 100 100 100 100 100 100
No. of companies with market share >10% 1 3 1 3 3 3 3 3 3 2 3
No. of companies with market share over 25% 1 1 1 2 1 1 1 1 2 2 2
3-firm concentration ratio (cumulative share 97.4 91.1 98.8 81.8 81.3 64.7 93.2 99.5 81.9 90.8 85
of market of 3 biggest companies by market
share)
Table reproduced with permission from Gilmore et al., 2010. Source: Euromonitor International from trade sources/national statistics. Data obtained: 23 September 2009
# Data given for the world’s largest cigarette markets (China, Russia, USA, Japan, Indonesia, Ukraine, Brazil, India), plus the 2 largest European markets (Italy and Germany) and the UK
NB – where companies other than those listed have a market share of 1% or less, their share has been added to the «other» category
Tobbaco industry pricing, price-related marketing and lobbying
*Part owned by BAT. **Part owned by Philip Morris International
33
This market concentration gives the agree on a shared excise framework. tending to decrease with the trend
tobacco companies greater pricing Historically the southern European toward greater industry consolidation
power and profitability, which in countries had state monopolies or described above.
turn may present problems to public small national industries and thus Unfortunately, there has been little
health as further explored below sought ad valorem systems to both research to date on pricing strategies
(Gilmore et al., 2010). protect their cheaper cigarettes in tobacco product markets, with the
Similar patterns are emerging in made using domestic tobacco and exception of some limited research
markets for other tobacco products, to enable them to compete with largely from the USA but also
although to a lesser extent than in higher-priced premium brands from covering Jamaica, Europe and South
cigarette markets and with greater the larger producers (Gilmore and Africa on the relationships between
variability across countries. Globally, McKee, 2004a). By contrast, the tobacco taxes and prices (discussed
non-cigarette product markets are transnationals favoured a wholly below). Instead, a few stylized facts
becoming increasingly concentrated, specific system to help protect their emerge from observations of pricing
and distinctions between cigarette more expensive brands. A similar strategies in various countries, from
companies and other tobacco product pattern continues to this day with, industry analyst and market reports
companies are disappearing as for example, PMI (whose high-price and from internal tobacco company
major cigarette manufacturers have brand Marlboro is the leader in many documents released following a
acquired leading smokeless tobacco markets) favouring a fully specific series of litigation cases in the USA,
product manufacturers (e.g. Altria’s system, Imperial Tobacco (which has which led to several major tobacco
(parent company for Philip Morris a mixed portfolio) favouring a mixed companies being required to make
USA) acquisition of US Smokeless ad valorem and specific system, and internal documents public.
Tobacco Co. in 2008 and Reynolds the small Greek companies lobbying Limited price competition. The
American’s acquisition of Conwood for a fully ad valorem system. This oligopolistic nature of most tobacco
in 2006) and have begun using the issue is covered further in the third product markets (Table 3.1) tends
same brands across product lines section. to result in relatively stable prices
(e.g. Marlboro and Camel cigarettes with limited price competition,
and snus) (McNeill and Sweanor, Tobacco industry pricing particularly in more mature markets
2009). The acquisition of independent strategies in high-income countries where
smokeless manufacturers will, by companies are better established.
reducing competition between In general, tobacco product markets This appears less true for markets
cigarettes and smokeless products, that have large numbers of producers in low- and middle-income countries,
increase the market power (their producing slightly differentiated particularly where the transnational
ability of to set prices) of the resulting products will see a relatively high tobacco companies are relatively
multiproduct tobacco companies. degree of price competition, with new players in the market and more
However, in some countries, where prices largely reflecting the costs likely to use price as one strategy
a much wider variety of tobacco of production and distribution for gaining market share for their
products is available, the markets (including taxes). At the other brands (Vateesatokit et al., 2000;;
for non-cigarette tobacco products extreme, markets that are entirely Szyilágyi and Chapman, 2003).
remain fragmented and highly or nearly monopolized by a single, However, as companies become
competitive (e.g. India, where there profit-maximizing firm will see prices more established, the extent of price
are thousands of small bidi producers). well above costs and relatively little competition appears to diminish,
price competition. However, most particularly in countries where
Background: Individual company tobacco product markets in most incomes are rising more rapidly and
interests countries are at neither extreme, but consumers, influenced by industry
are instead highly concentrated with marketing, increasingly switch to
Different companies vary in their a small number of highly profitable higher-priced brands. To the extent
brand portfolios and thus in their companies accounting for most sales that price competition does remain, it
preference for excise structures. (see Table 3.2). As a result, the nature tends to appear in the form of multiple
This is illustrated through industry of price competition can vary widely, price tiers (e.g. premium, mid-priced
lobbying on tobacco taxes in Europe, both across countries and over time, and economy brands). The existence
where different Member States must although globally competition is of multiple price tiers, more likely in
34
Table 3.2. Profitability (measured using EBITA Margin (%)) for Europe’s two major tobacco companies
and comparator European consumer staple companies
Company 2004 2005 2006 2007 2008* 2009* 2010* 2011*
Tobacco companies
British American Tobacco 24.0 28.1 28.7 30.0 30.7 31.1 32.1 33.7
Imperial Tobacco Group 40.2 41.5 42.9 45.0 28.2 37.7 39.4 39.5
Food companies
Cadbury 15.6 15.9 14.4 13.5 12.0 13.0 13.8 14.9
Danone 12.7 13.1 13.3 12.1 14.4 16.9 15.7 15.9
Nestle 12.7 12.9 13.5 14.0 14.3 14.4 13.0 13.2
Premier Foods 12.9 13.7 13.8 12.5 11.9 12.0 11.9 11.7
Consumer products companies
Unilever NV 15.5 14.8 14.3 14.5 14.6 14.7 14.9 15.1
Henkel 9.4 9.7 10.2 10.5 10.3 9.0 10.6 11.6
L’Oreal 15.3 15.6 16.4 16.6 15.5 14.3 14.9 15.5
Reckitt Benckiser 19.3 20.1 21.5 22.6 23.4 23.9 23.2 23.6
Beverage companies
Heineken NV 13.6 13.1 13.0 14.8 13.2 13.5 14.0 14.4
SABMiller 18.1 20.2 16.9 16.8 16.6 16.8 17.3 18.5
Carlsberg 8.8 8.7 9.6 11.5 13.2 16.0 16.3 17.1
Diageo 28.7 29.0 28.2 28.3 28.5 28.9 31.5 31.8
Table reproduced with permission from Gilmore et al., 2010

* Estimated values
35
markets with wholly ad valorem or The report goes on to describe The tobacco manufacturers involved
mixed tax systems (as explained in how Philip Morris had historically were Imperial Tobacco and Gallaher,
Chapter 2), will facilitate downtrading been one of the followers in the US who jointly account for around 80%
to cheaper brands, which may be cigarette marketing, matching the of the United Kingdom market (see
of particular importance in markets price changes initiated by American Table 3.1). Each manufacturer had
at the end stage of the tobacco Tobacco Co. or R.J. Reynolds, but a series of individual arrangements
epidemic when smoking increasingly noting that by the 1970s, Philip Morris with each retailer whereby the retail
becomes a habit of the more had become the leader: price of a tobacco brand was linked
economically deprived. However, in “We no longer follow the to that of a competing manufacturer’s
oligopoly markets, companies tend to market;; whether we initiate brand (Office of Fair Trading. http://
have brands in every price tier;; thus a price increase or not, our www.oft.gov.uk/shared_oft/press_
the existence of multiple price tiers decision is a key factor in release_attachments/Parties_and_
will not necessarily result in genuine establishing a new industry fines.pdf;; http://www.guardian.
competition. price level, and we must c o.uk /business/2010/apr/16/of t-
Price leadership. In more examine any price move in levies-225m-for- cigarette -price -
concentrated, oligopolistic markets, light of our own judgement of manipulation).
pricing strategies tend to be the appropriate level.” Prices below short-run, industry
characterized by price leadership, The report further describes profit maximizing level. While prices in
with one firm (usually the firm with how the relative absence of price highly concentrated tobacco product
highest market share) initiating a competition in the market allowed markets are above the competitive
change in prices and others almost prices to remain above competitive level, they have historically been well
immediately matching that change. levels, generating high profits which below the level that would maximize
As Chaloupka (2007) describes, were then used to support the other short-run industry profits. This is
cigarette pricing in the USA has been marketing activities through which likely to be explained by two factors.
characterized by this type of strategy US cigarette companies competed First, prices well above competitive
for the past century, with the “leader” more directly. levels would create opportunities
changing over time, but the strategy A similar pattern of price for new firms to gain a foothold in
staying constant. This is further leadership, limited price competition the market by selling cigarettes at
described in a 1976 report on “Pricing and high profitability is seen in relatively low prices. As Chaloupka
Policy” from Philip Morris’ Business Europe, although markets where PMI (2007) describes, this happened in
Planning and Analysis division: is the market leader (most markets in US cigarette markets in the 1930s,
“The cigarette industry is western Europe) tend to differ from when the leading companies at the
characterized by economists the United Kingdom and Irish markets time (American Tobacco Co., R.J.
as a ‘kinky oligopoly’. This because PMI is less prepared to Reynolds and Liggett & Myers) set
charming term implies that lose market share by increasing prices well above competitive levels
the general price level is prices, and thus price increases (US$0.14–0.15 per pack), using
determined by a small number have traditionally been lower in profits to compete primarily through
of firms (price leaders);; that these markets than the United their advertising campaigns. This
no economic advantage can Kingdom and Ireland (Spielman and created an opportunity for new firms
be obtained by any one firm Loveless, 2008a). This makes the to enter the market and for existing
pricing below the general United Kingdom market particularly small firms to gain market share by
price level;; and that major interesting as a case study of industry selling at considerably lower (but
disadvantages accrue to a attempts to maximize short-term still profitable) prices. Many did so
firm which attempts to price profitability, as outlined below. A with their “ten-cent” brands before
above the general level. In further issue worth noting is that of the industry leaders responded by
short, the general price level price-fixing, recently documented in cutting their prices. The ensuing price
results from some sparring the United Kingdom. The Office of Fair war drove most of the new firms from
among the potential price Trading recently fined two tobacco the market, but two – Philip Morris
leaders, after which the rest manufacturers and ten leading and Brown & Williamson – survived,
of the industry accepts the retailers £225m for price-fixing, going on to become major players in
resulting price structure.” decisions which are being appealed. the US cigarette market.
36
More recently, the tobacco dimmer and companies try to profit With respect to industry structure,
transnationals attempted to gain more from the existing pool of users economic theory suggests that
market share in newly opened in the short run. tobacco taxes will be fully passed on
markets (e.g. Thailand and Hungary This pattern is, for example, to users through an equivalent price
in the 1990s) by price discounting observed in western Europe where increase in a perfectly competitive
(Vateesatokit et al., 2000;; Szyilágyi competition in most markets is limited market with constant long-run costs
and Chapman, 2003). In addition, (see Table 3.1), giving the industry of production. At the other extreme,
there were numerous new entrants considerable pricing power and a profit-maximizing monopolist will
to the US market after the 1998 making these markets the industry’s pass on only part of the tax in price,
Master Settlement Agreement (MSA) most profitable globally (Spielman, with the pass-through greater as
in part because loopholes in the 2008a, 2008b;; Euromonitor demand is more inelastic.
agreement created opportunities International, 2009). The United In an oligopolistic market,
for non-participating companies Kingdom market, as outlined above, however, how much or little of the tax
to enter the market and undercut is one of the most interesting, and is passed through can vary based
prices. In most established markets, analyst reports suggest that the on how the industry reacts. Harris
however, marketing restrictions make industry has been able to increase (1987), for example, suggests that
it increasingly difficult for new market prices sufficiently to offset both companies in a highly concentrated
entrants to compete effectively with volume declines and negative mix tobacco product market can use
established brands, and reputational (downtrading to cheaper brands) a tobacco tax increase as an
and litigation risks provide further (Spielman, 2008a, 2008b). The fact opportunity for a coordinated price
barriers to market entry (Gilmore et that this may have been facilitated by increase that leads to an overshifting
al., 2010). tax policies is further outlined below. of the tax, with prices rising by more
A second factor explaining price Furthermore, by virtue of having than the amount of the tax. Using
levels below the short-run industry diverse brand portfolios in multiple data from the years around the
profit-maximizing level, and one price tiers, companies can utilize doubling of the US federal cigarette
perhaps more relevant currently in both strategies—keeping some excise tax (from US$0.08 to US$0.16
at least some declining markets, is brands cheap to “hook” new smokers per pack) on 1 January 1983, Harris
the trade-off between short-run and while maintaining prices on higher- observed that industry prices rose
long-run profitability. As Becker and end brands to offset the negative mix by more than manufacturing costs
his colleagues (1994) describe, the and maintain profits. It would appear in the months leading up to the tax
greater price sensitivity of young such practices may be occurring in increase, with the rise in industry
people (as discussed below in the United Kingdom, for example, prices starting after the tax increase
Chapter 6) and the addictive nature because despite a marked growth in was announced. In the end, he
of tobacco use may lead companies discount brands (Devlin et al., 2003, concludes that prices rose by more
with market power to set prices lower Talking Retail, 2006) the industry is than twice the amount of the tax
than the short-run profit-maximizing managing to grow its profits, and the increase.
level to “get more consumers ‘hooked’ United Kingdom market is among Harris’ (1987) hypothesis
on the addictive good” so that long- the most profitable (Spielman et al., appears to be confirmed by internal
run profits will be higher than they 2008a, 2008b). industry documents. When asked for
would be if prices were set higher his thoughts about how to pass on
in the short run and fewer young Tobacco tax increases and prices an anticipated additional increase
people took up tobacco use. To the in the US federal cigarette tax in
extent that tobacco product markets The effectiveness of tobacco tax 1987, Philip Morris economist Myron
are on the decline in some countries increases in reducing tobacco use Johnston recalled the industry’s
(e.g. in response to adoption and and its consequences depends, pricing strategies around the 1983
implementation of effective tobacco in part, on how increases in taxes increase (Johnston, 1987):
control strategies, including higher are passed on to users in price “Last time, of course, we
taxes), it becomes more likely that increases. The extent to which prices increased prices five times
industry prices will rise to nearer the rise following a tax increase depends between February of 1982
short-run industry profit-maximizing on multiple factors, most notably and January of 1983. In less
level as future prospects grow industry structure and tax structure. than a year, the price went
37
from $20.20 to $26.90 per paid and will be less likely to increases in South Africa (since
thousand ($2.70 more than suffer from ‘sticker shock.’ 1994) and Jamaica (in 2005), while
the tax), and this fact was As a result, they should be Delipalla and O’Donnell (2001) found
not lost on consumers, who less likely to use the price undershifting of cigarette taxes in
could legitimately blame increase as an incentive to 12 European Union countries in the
the manufacturers for the stop smoking or reduce their early 1990s, particularly in markets
price increases. While price consumption.” that were less concentrated.
increases of this magnitude Experiences with several federal Although there are no recent
might have been tolerated tax increases in the 1990s and empirical studies in the European
during the rapid escalation early 2000s show that wholesale Union, as noted above the market
in the overall inflation rate cigarette prices rose by the amount has seen considerable consolidation
between 1977 and 1981, of the tax increases or, at times, in recent years (Hedley, 2007), and
the increase in the price of being absorbed by the industry (e.g. other evidence suggests that the
cigarettes in 1982-83 was the US$0.05 increase in 2002). undershifting observed in the 1990s
made even more dramatic Most recently, however, the much (Delipalla and O’Donnell, 2001) has
by the fact that the overall larger (US$0.6167 per pack) 1 April reversed (Spielman and Loveless,
rate of inflation was slowing 2009 increase in the US federal 2008b). Although the countries in
considerably.” cigarette excise tax did lead to eastern Europe are in general at
Industry reactions, particularly some overshifting;; Philip Morris, for a different stage of the tobacco
by the dominant firm, however, can example, raised prices on its ‘growth epidemic with volumes of consumers
vary with circumstances. In the same and support brands’ (including and tobacco sold still increasing,
memo, Johnston goes on to note Marlboro) by US$0.71 per pack profits are also increasing as a
how the overshifting of the 1983 tax and on its ‘non-support brands’ by result of industry price increases
increase had a particularly negative US$0.78 per pack. Given its role as and consumers trading up to more
impact on Philip Morris because of the market leader in the USA over the expensive brands (Euromonitor
its greater impact on smoking among past few decades, other US cigarette International, 2009).
young people, where Marlboro’s companies have generally followed With regards to tax structure, both
market share was greatest. This led Philip Morris’ lead in responding to theoretical and empirical evidence
him to write (Johnston, 1987): the US tax increases. suggest that specific excise taxes
“I have been asked for my The limited empirical evidence tend to increase consumer prices
views as to how we should on this issue, almost entirely from relatively more than ad valorem
pass on the price increase high-income countries, reflects this excises, and hence lead to relatively
in the event of an increase in variability. Older US studies found higher reductions in consumption
the excise tax. My choice is to that cigarette taxes led to less-than- (Delipalla and Keen, 1992;; Delipalla
do what I suggested to Wally comparable price increases (Sumner and O’Donnell, 2001;; Chaloupka
McDowell in 1982: Pass on and Ward, 1981;; Bishop and Yoo, et al., 2010). The higher impact of
the increase in one fell swoop 1985;; Ashenfelter and Sullivan, specific excise taxes on consumer
and make it clear to smokers 1987);; others found that taxes prices is consistent with a greater
that the government is solely were fully passed on (Sumner and possibility of overshifting of specific
responsible for the price Wohlgenant, 1985);; and still others taxation relatively to ad valorem
increase, advertise to that found that prices rose by more than (Delipalla and Keen, 1992). Under
effect, suggest that people the tax (Barzel, 1976;; Johnson, 1978;; specific taxation, any increase
stock up to avoid the price Sumner, 1981). Most recent US- in producer price will go to the
increase, and recommend based analysis, however, find that producer as revenue and therefore
that they refrigerate their cigarette taxes are overshifted in the would increase producers incentive
cigarettes ‘to preserve their USA, leading to increases in retail to raise price. Economic theory
freshness.’... Then when cigarette prices greater than the tax also shows that industry profits
people exhaust their supply (Barnett et al., 1995;; Keeler et al., are relatively higher under specific
and go to the store to buy 1996;; Hanson and Sullivan, 2009;; taxation (Delipalla and Keen, 1992).
more, they will be less likely Sullivan, 2010). van Walbeek (2010) Moreover, a tax increase may lead
to remember what they last observes similar overshifting of tax to an increase in profits when tax
38
overshifting takes place: as a higher of marketing activities that lower the the cost of the items distributed, but
tax increases consumer price and price of or otherwise add value to subtracting any payments received
reduces demand, for profits to rise, their products. These activities are for the item. The costs associated
the after-tax mark up must rise. clearly defined by the US Federal with distributing non-cigarette items
All this suggests that relying Trade Commission (FTC) in its in connection with sampling or
heavily on specific excise taxation is annual reports to the US Congress retail-value-added programmes are
likely to increase market concentration on cigarette and smokeless tobacco reported in those categories, not as
and industry profits in the long run. company marketing activities specialty item distribution.
With respect to the public health (Federal Trade Commission, 2009a, 6SHFLDOW\LWHPGLVWULEXWLRQQRQ
perspective, while specific taxes offer 2009b);; as defined for cigarettes, branded: all costs of distributing any
greater public health benefits, there these include: item (other than cigarettes, items the
is a danger that the greater industry 3ULFHGLVFRXQWVSULFHGLVFRXQWV sole function of which is to advertise
profits that emerge may in turn paid to cigarette retailers or or promote cigarettes, or written or
be used to damage public health, wholesalers to reduce the price of electronic publications), whether
because these profits can be used cigarettes to consumers, including distributed by sale, redemption of
to increase industry marketing, or off-invoice discounts, buy-downs, coupons, or otherwise, that does not
fund lobbying or litigation efforts to voluntary price reductions and trade bear the name, logo, or an image
challenge public health policies. For programs, but excluding retail-value- of any portion of the package of
this reason, along with increases in added expenditures for promotions any brand or variety of cigarettes,
the specific tax (and its associated involving free cigarettes and including the cost of the items
great effect on price), governments expenditures involving coupons. distributed, but subtracting any
may find they need to implement 6DPSOLQJ VDPSOLQJ RI payments received for the item. The
other policies to counteract the cigarettes, including the cost of the costs associated with distributing
tobacco industry’s increased market cigarettes, all associated excise non-cigarette items in connection
power. taxes, and increased costs under the with sampling or retail-value-added
As described in the previous Master Settlement Agreement, and programmes are reported in those
chapter, this hypothesis is supported the cost of organizing, promoting, categories, not as specialty item
by descriptive data on taxes and and conducting sampling. Sampling distribution
prices globally, with prices higher includes the distribution of cigarettes 5HWDLOYDOXHDGGHG ERQXV
on average in countries that rely on for consumer testing or evaluation cigarettes: Retail-value-added
specific taxes than in those relying when consumers are able to smoke expenditures for promotions
on ad valorem taxes (World Health the cigarettes outside of a facility involving free cigarettes (e.g. buy
Organization, 2010). Chaloupka and operated by the Co., but not the cost two packs, get one free), whether or
colleagues (2010), in their empirical of actual clinical testing or market not the free cigarettes are physically
analysis using data from EU countries research associated with such bundled together with the purchased
over the period from 1998 through cigarette distributions. Sampling also cigarettes, including all expenditures
2007, provide additional support for includes the distribution of coupons and costs associated with the value
this hypothesis. They conclude that for free cigarettes, when no purchase added to the purchase of cigarettes
average cigarette prices are higher or payment is required to obtain the (e.g. excise taxes paid for the free
in EU countries relying more heavily coupons or cigarettes. cigarettes and increased costs under
on specific cigarette excises than on 6SHFLDOW\ LWHP GLVWULEXWLRQ the Master Settlement Agreement).
ad valorem excises. branded: all costs of distributing any 5HWDLOYDOXHDGGHG QRQ
item (other than cigarettes, items the cigarette bonus: Retail-value-added
Tobacco industry price-related sole function of which is to advertise expenditures for promotions involving
marketing efforts or promote cigarettes, or written or free non-cigarette items (e.g. buy
electronic publications), whether two packs, get a cigarette lighter),
Background distributed by sale, redemption of including all expenditures and costs
coupons, or otherwise, that bears associated with the value added to
In addition to directly setting prices the name, logo, or an image of any the purchase of cigarettes.
to tobacco products, tobacco portion of the package of any brand &RXSRQV $OO FRVWV DVVRFLDWHG
companies can engage in a variety or variety of cigarettes, including with coupons for the reduction of
39
the retail cost of cigarettes, whether (an issue explored in a later section). declining to about US$12.5 billion in
redeemed at the point-of-sale or by Various of the marketing techniques 2006. This rise in marketing spending
mail, including all costs associated outlined above may therefore be is even more dramatic when one
with advertising or promotion, used throughout much of the world. considers that US cigarette sales
design, printing, distribution, and For example, the United Kingdom during this period fell by over 43%.
redemption. However, when coupons Tobacco Advertising and Promotions Second, price-related marketing
are distributed for free cigarettes and Act (which was fully implemented has gone from accounting for a minor
no purchase or payment is required to in 2005) bans, inter alia, the use share of overall cigarette company
obtain the coupons or the cigarettes, of voucher schemes and direct marketing expenditures in the 1970s
these activities are considered to be consumer communication. However, to accounting for most of marketing
sampling and not couponing. recent evidence indicates both that spending in the 1990s and 2000s.
The Federal Trade Commission tobacco companies still provide In 2006, for example, spending on
(2009b) defines similar marketing display cabinets and incentives for marketing activities that directly
activities for smokeless tobacco displaying their products (Rooke et reduced cigarette prices (price
products in the USA;; the reporting al., 2010), and that the use of price- discounts, coupons, retail value
of these marketing expenditures based marketing has increased added promotions involving free
is required by federal legislation in following full implementation of this cigarettes, and distribution of free
the USA. Canadian legislation also legislation (Moodie and Hastings, samples) amounted to more than 85%
requires tobacco companies to report 2009). Although price-based, this of total cigarette company marketing
to the federal government on their marketing is not necessarily price- expenditures, as compared to an
promotional expenditures (http:// reducing and includes, for example, estimated less than 19% in 1975. In
laws - lois.justic e.gc.c a /en /SOR- price-marked packaging for discount contrast, spending on promotions
2000-273/FullText.html);; however, brands visible from the display involving merchandise (non-cigarette
such mandated reporting is rare and cabinets (Moodie and Hastings, retail value added promotions and
the detailed information contained is 2009). specialty item distribution) rose from
rarely made publicly available. Unfortunately, with the exception a minimal share of total spending
These and other marketing of the USA, detailed data on how in the 1970s to a peak of about 18
practices are prohibited in some extensively the industry uses these percent in 1994, before declining to
countries. Globally, WHO Report on price-related marketing strategies less than 2% in recent years (largely
the Global Tobacco Epidemic (World is virtually non-existent. However, as a result of the limits on this type
Health Organization, 2009) data trends in the use of price-related of marketing included in the Master
indicate that 79 countries, including marketing strategies in the USA are Settlement Agreement of 1998).
many LMICs, have implemented some informative given that these illustrate
form of restriction on price-based how tobacco companies have Price-related marketing and
marketing. For example, a 2003 EU adapted their marketing strategies tobacco use among young people
Council Recommendation (2003/54/ over time in response to new evidence
EC) recommended that Member on the impact of price on tobacco use In his testimony on price-related
States adopt various tobacco control and to implementation of restrictions marketing as part of the US tobacco
measures including those to prohibit on other marketing activities. litigation (USA v. Philip Morris et al.),
“the use and communication of sales Figure 3.1 illustrates trends Chaloupka (2004) described how the
promotion, such as a discount, a free in cigarette company marketing shift in tobacco company marketing
gift, a premium or an opportunity to expenditures in the USA from strategies towards increased use
participate in a promotional contest 1975 through 2006, as well as of price-reducing and other price-
or game.” A subsequent evaluation changes in the composition of these related promotions accelerated
(SEC(2009)1621) suggested that most expenditures over time. Two striking following the publication of early
Member States had implemented the trends are apparent from this figure. economic research on the influence
recommended measures but failed to First, overall cigarette company of price on smoking behaviour,
specify the proportion implementing. marketing expenditures in the USA particularly among young people
However, few countries have have risen dramatically, from just over (Lewit et al., 1981;; Lewitt and Coate,
comprehensive enough bans to cover US$491 million in 1975 to a peak of 1982). In their review of internal
all forms of price-based promotions over US$15.1 billion in 2003, before industry documents (now available
40
online at http://legacy.library.ucsf. Reynolds, wrote about the short and from teenagers. But, the loss
edu/), Chaloupka and colleagues long-run impact of cigarette price of younger adult males and
(2002) describe how the two studies increases based on the findings from teenagers is more important
by Lewit and colleagues generated the Lewit and colleagues studies to the long term, drying up
considerable attention among (Burrows, 1982a): the supply of new smokers to
leading US cigarette companies. “In terms of the immediate replace the old. This is not a
Of most interest were the findings impact, the effect of price fixed loss to the industry: its
on the greater price sensitivity of on males 35+ is the most importance increases with
smoking among young people, important. Half (50%) of the time. In ten years, increased
given the importance of youth and total drop in industry volume rate per day would have been
young adults to future profitability. is attributable to males 35+, expected to raise this group’s
For example, in a 1982 memo, Diane compared to 24% from consumption by more than
Burrows, a market researcher at R.J. younger adult males and 7% 50%.”
In related memos and reports,
Figure 3.1. Cigarette company marketing expenditures, by category, 1975-2006 Burrows (1982b, 1984) discussed the
marketing implications of the greater
price sensitivity and importance
of imagery to young people. For
example, in a 1984 Strategic
Research Report, Burrows wrote:
“Tactically, extended periods
of closely targeted pack
promotions (B1G1F (buy-
one-get-one-free), sampling)
in selected sites (e.g.,
convenience stores, military
exchanges, special events)
could lead to brand loyalty from
repeated trials. This should
be considered an investment
program.” (Burrows, 1984).
As Chaloupka and colleagues
(2002) describe, the combination of
price-reducing promotions with more
traditional advertising campaigns
Sources: Federal Trade Commission, 2009a;; Working Group’s calculations. played a key role in the growth of R.J.
Notes to Figure 3.1:
Reynolds’ Camel brand among young
$GYHUWLVLQJ LQFOXGHV QHZVSDSHUV DQG PDJD]LQHV RXWGRRU DQG WUDQVLW DQG SRLQWRIVDOH UHSRUWHG VHSDUDWHO\
beginning in 1975). people (most notably young males) in
3XEOLF(QWHUWDLQPHQWLQFOXGHVJHQHUDODXGLHQFHDQGDGXOWRQO\SXEOLFHQWHUWDLQPHQWUHSRUWHGLQDVLQJOHFDWHJRU\LQ the late 1980s and early 1990s. For
earlier years and reported separately beginning in 2002. example, a 1986 memo reported on
3ODFHPHQWLQFOXGHVSURPRWLRQDODOORZDQFHVSDLGWRUHWDLOHUVZKROHVDOHUVDQGRWKHUVUHSRUWHGVHSDUDWHO\EHJLQQLQJ the effectiveness of these efforts,
in 2002 and estimated for earlier years based on the percentage of the combined promotional allowances category
accounted for by these categories in 2002. which included ‘six pack’ promotions
3ULFH LQFOXGHV SULFH GLVFRXQWV DQG UHWDLOYDOXHDGGHG ERQXV FLJDUHWWHV UHSRUWHG VHSDUDWHO\ EHJLQQLQJ LQ (buy-three-get-three-free), the
coupons (reported separately beginning in 1997);; and sampling distribution. Estimates for earlier years are based on “Camel Cash” program, and other
shares in the previously aggregated categories that included these in the first years data are reported for disaggregated
categories. retail value added promotions:
0HUFKDQGLVH LQFOXGHV EUDQGHG DQG QRQEUDQGHG VSHFLDOW\ LWHP GLVWULEXWLRQ UHSRUWHG DV D VLQJOH FDWHJRU\ EHIRUH “The major factor contributing
2002 and separately beginning in 2002);; and retail-value-added non-cigarette bonus (reported separately in 2002 and to CAMEL’s dramatic growth
estimated for earlier years based on the share of combined retail-value added as reported in 2002).
among Mid-West 18–24 year
2WKHULQFOXGHVDOORWKHUFDWHJRULHVUHSRUWHGE\)7&LQFOXGLQJGLUHFWPDLOWHOHSKRQH,QWHUQHWFRPSDQ\ZHEVLWHVDQG
other), and other;; in earlier years, a portion of the F TC-reported other and direct mail expenditures are allocated to other old males appears to be the
categories (e.g. coupons and retail value added) based on shares of expenditures in the first year that expenditures in increased level of Mid-West
more disaggregated categories are reported.
promotional support, and in
41
particular, CAMEL’s targeted to at least partly offset the impact more is spent on comprehensive
promotions (which were of tax increases and other tobacco tobacco control programmes than
implemented the same time control efforts. Based on their review in states spending less (Slater et al.,
as the boost in CAMEL’s share of internal documents, Chaloupka 2001;; Loomis et al., 2006). Finally,
and completed just prior to the and colleagues (2002) described how Keeler and colleagues (1996) found
downward trend).” (Creighton, companies increased distribution that cigarette companies price-
1986). of coupons and use of multipack discriminated by setting lower prices
The changes over time in the promotions to soften the impact of in states with stronger state and local
composition of cigarette marketing state and federal tax increases, with tobacco control policies.
expenditures (shown in Figure 3.1) some of the print ads used to distribute
suggest that the importance of price- coupons referring to them as “tax Tobacco industry tax-related
related marketing efforts described relief.” Similar efforts were observed lobbying efforts
in these selected documents was after the April 2009 federal tobacco
recognized throughout the industry. tax increases, with Philip Morris, for Background
example, contacting smokers to let
Tobacco company price them know that they were increasing In addition to the systematic
and price-related marketing prices because of the tax increase but searches for relevant literature, we
and tobacco control that they could “register at Marlboro. also took a systematic approach to
com to become eligible for cigarette reviewing studies included in this
Feighery et al. (2004) examined coupons and special offers.” section. Hence, we tried to identify
the extent and impact of retailer Similarly, Ruel and colleagues all empirical studies (qualitative and
participation in industry incentive (2004), using observationally collected quantitative) focusing significantly on
programmes in 468 stores in 15 US data on cigarette marketing, and tobacco industry tax-related lobbying
states. They found that cigarette Loomis and colleagues (2006), using activities, and then applied inclusion/
companies engaged approximately scanner-based data, documented exclusion criteria to potentially
two thirds of tobacco retailers in an the increased prevalence of various relevant studies (see Figure 3.2).
incentive program. The study shows price-reducing promotions following Of the 2638 abstracts/titles located
that stores that participate in cigarette the significant price increases for this chapter overall, 2443 were
company incentive programmes resulting from the pass-through of excluded from this section on the basis
may have cheaper cigarette prices costs associated with the MSA and of the title and abstract alone. The
(and more prominent placement the subsequent implementation of the remaining 195 papers were retrieved
of cigarettes and advertising) than marketing restrictions included in the for full paper analysis to assess their
do stores that do not participate. agreement. Similarly, researchers relevance to this section, at which
Although participation in a Philip have used observationally collected stage 164 further studies were
Morris incentive programme was and scanner-based data to conclude excluded. Full analysis was conducted
not significantly related to the price that price-reducing promotions are on the 31 remaining studies that met
of (Philip Morris brand) Marlboro more prevalent in states where the full inclusion criteria.
cigarettes, the price of Lorillard’s
Newport cigarettes was significantly Figure 3.2. Inclusion and exclusion criteria
lower in stores participating in a
Lorillard incentive programme. The To be included in this section, studies had to:
study was however somewhat limited
- Significantly focus on tobacco industry lobbying activities that related to taxation
in its ability to detect links between (studies were included that did not primarily focus on this issue, but they had to focus on
incentive programmes and price it significantly and meet the other inclusion criteria;; studies in which tax-related lobbying
activities were only a minor/tangential issue were excluded);;
reductions because the questions
were limited to participation in - Draw on empirical evidence to support any claims made about tobacco industry tax
related lobbying;;
company- rather than brand-specific
incentive programmes. - Be written in English or another language spoken by a member of the IARC review team;;
Limited research from the USA - Be concerned with lobbying from 1985 onwards (studies which were only concerned with
documents tobacco companies’ use a period prior to 1985 were excluded;; studies which concerned periods both before and
after this date were included).
of price and price-related marketing
42
The data from these studies were Figure 3.3. Critical appraisal criteria
extracted and the studies were
critically appraised using critical These criteria were used to assess all of the included studies. The results of this process
appraisal criteria for qualitative are presented under the critical appraisal section of the results in Table 3.3.
papers, adapted from Rees et al. 1) How clear is/are the research question(s) and/or aim(s)?
(2006) and the United Kingdom 2) Was the methodology appropriate for addressing the stated aims of the study?
Public Health Resource Unit (2006)
3) Where applicable, was the recruitment/search strategy appropriate and/or was an
(see Figure 3.3). The appraisal and adequate sample obtained to support the claims being made (i.e. was the data collection
inclusion/exclusion criteria, were adequate and appropriate)?
piloted by two reviewers on five 4) Were the methods of data analysis appropriate to the subject matter?
relevant papers and then revised 5) Is the description of the findings provided in enough detail and depth to allow
accordingly. interpretation of the meanings and context of what is being studied? [Are data presented
to support interpretations, etc?]
As is common practice with
reviews of qualitative data (Smith et 6) Are the conclusions justified by the results?
al., 2009), the critical appraisal criteria 7) If applicable, are the theoretical developments justified by the results?
were used for descriptive purposes 8) Have the limitations of the study and their impact on the findings been considered?
only and to highlight variations in the 9) Do researchers discuss whether or how the f indings c an be transferred to other c ontexts
quality of studies (i.e. no quality score or consider other ways in which the research may be used?
was calculated but this assessment 10) If the answer to 9 is ‘yes’, do you agree these suggestions are appropriate, based on
the research?
allows us to comment on the quality
of the included studies). Narrative Source : Rees et al. ;; 2006 ;; United Kingdom Public Health Resource Unit
synthesis was performed to combine
the qualitative and quantitative Glantz, 1999;; Goldman and Glantz, se, as opposed to being concerned
evidence. Results are tabulated (see 1999;; Balbach et al., 2000;; Givel and about significant tax increases which
Table 3.3) as well as summarized in Glantz, 2001;; Morley et al., 2002;; would be used to fund tobacco control
the following text. Yerger and Malone, 2002;; Szilágyi activities. Nevertheless, we can
and Chapman, 2003;; Alamar and distinguish arguments and strategies
Results Glantz, 2004;; Levenstein et al., 2005;; used to counter the increases from
Balbach et al., 2006;; Givel, 2006, those use to counter/undermine the
The majority of 31 studies identified 2007;; Gilmore et al., 2007;; Nakkash, proposed earmarking.
focused on North America (22 2007;; Campbell and Balbach, 2008, The other main topic (covered in
focused on the USA, or states 2009;; Balbach and Campbell, 2009;; seven studies) concerned tobacco
within the USA, and two focused on Lum et al., 2009;; Raebeck et al., industry efforts to influence excise
Canada), although it should be noted 2009) or, in some cases, to lower structures (O’Sullivan and Chapman,
that several of the studies concerning existing taxes (Joossens and Raw, 2000;; Szilágyi and Chapman, 2003;;
state-level excise propositions related 2003;; Breton et al., 2006;; Kelton Gilmore and McKee, 2004b;; Gilmore
to the same policy development (Table and Givel, 2008). Of these, only four et al., 2005;; Delnevo et al., 2007;;
3.4). The rest covered a diverse set of covered policy influence outside North Gilmore et al., 2007;; Nakkash, 2007),
countries (Table 3.5). We found no America (Joossens and Raw, 2003;; and these have a very different
studies relating to tobacco industry Szilágyi and Chapman, 2003;; Gilmore geographic profile (Table 3.5). As
tax-related lobbying in South America, et al., 2007;; Nakkash, 2007). As Table there are far fewer studies on this
South Asia, Australasia or Africa or 3.3 summarizes, most of the US issue, and as this is not the main focus
examining influence on supranational studies focused on policy proposals of most of these studies, the picture
(e.g. European Union) tax policy. that included plans to substantially that emerges is far less clear than
The studies covered two main increase taxes and to earmark that relating to industry activities to
topics. The majority (27) discussed (hypothecate) all or most of the influence excise rates. Nevertheless,
tobacco industry efforts to counter revenue raised by these tax increases between them, these studies provide
proposed excise tax increases (Begay for tobacco control programmes. some important insights into how
et al., 1993;; Moon et al., 1993;; Koh, This means it is difficult to ascertain different companies have sought to
1996;; Traynor and Glantz, 1996;; to what extent the industry was influence tobacco excise structures
Heiser and Begay, 1997;; Bialous and concerned about tax increases per to their advantage.
43
44
Table 3.3. Summary of studies concerning tobacco industry (TI) tax-related lobbying. Closely related studies are assessed together.
Numbers in the column “CA criteria met” represent the quality criteria that each study met;; see* at the end of the table for further details.
Study Methods CA criteria met* Key findings
Aim of TI Arguments used Mechanisms employed Success of TI
Studies concerned with tobacco industry efforts to influence tobacco tax rates (and, where applicable, associated plans for earmarking of taxes)
Begay et al., (1993) - Analysis of reports 1-3,6,9, 10 To prevent a significant Not specified in this article - Found the TI was - Proposition 99 passed
by the California Fair tax increase being investing heavily in the in 1988, so the TI failed
Political Practices proposed in the McCain Californian legislature, to prevent it, but did
Commission, statements bill spending political money experience success in
filed with the California more intensively there diverting funds.
secretary of state’s than in the US Congress. - Claims “Although there
Political Reform Division, - Powerful individuals in is little evidence showing
and data on Proposition the legislature seem to that the tobacco industry
99 expenditures from have been particularly has «bought» legislators’
various official budget targeted, e.g. “In 1991- votes, early research
documents. 1992, the Speaker strongly suggests that
- Also conducted received $221 367, tobacco industry’s
“a multivariate making him the largest campaign contributions
simultaneous equations single legislative recipient are influencing the
statistical analysis of tobacco industry behaviour of California
of data on campaign contributions in the United legislators in matters
contributions from States” (explains the related to tobacco policy-
the tobacco industry Speaker of the Assembly, making, independent
to legislators in the the single most powerful of constituents’ support
1991-1992 election, member of the legislature for tobacco control.”
their records on tobacco and second only to the Notes the multivariate
control policy as scored governor in influence). simultaneous equations
by tobacco control - TI lobbying expenditures statistical analysis of data
advocates, members’ grew 10-fold from 1985– on campaign contributions
personal characteristics, 86 to 1987–88, when from the tobacco industry
and constituents’ Proposition 99 passed. to legislators indicated
attitudes towards - The TI also reorganized that the TI had “a
tobacco control.” its lobbying efforts, hiring statistically detectable
large, private firms to effect on legislative
lobby legislators and state behaviour”.
officials since Proposition - “Only 14.7% of revenues
99 passed, rather than were spent on tobacco
relying on organizations education and prevention,
like the Tobacco Institute, not the mandated 20%.
as they previously had. The underfunding
Some of the firms hired amounts to $174.7 million
also worked for medical redirected to medical
groups which TI wanted care programs from fiscal
to side with in efforts to years 1989-1990 through
divert revenue. 1993-1994, despite clear
- “In 1989, the Tobacco language in Proposition
Institute offered to 99 specifying how the
Begay et al., (1993) contribute $250 000 to money should be spent.”
(contd) the California Medical
Association to divert
Health Education Account
funds to medical care
programmes through a
Medical Association-
sponsored ballot initiative.”
Moon et al., (1993) Methodology is not 1,9,10 To prevent a proposal - The tax was framed as - Opponents to proposal On November 6, 1990,
described but the article for a state-wide tobacco «a trap set by ‘special ‘operated under the name Montana voters defeated
appears to be based on tax initiative in Montana, interests’ to subsidize «Citizens Against More Initiative 115 by 59% to
an analysis of various USA, which would have those people who live in Tax and Bureaucracy»’ 41%, so the TI succeeded.
data sources, including added an extra $0.25 to cities”. and they ‘had $1.47 million
media coverage of cigarettes, with money - TI highlighted that at their disposal.’ ‘[M]ore
the issue and other to be dedicated to TC passage of the initiative than 88% of the money
academic articles programmes would give Montana the came from Philip Morris,
highest cigarette tax in the R. J. Reynolds, Brown
nation. & Williamson, and the
- Undertook Tobacco Institute.’
advertisements during the - While the initiative
last week of the campaign, was still in draft form,
which built on above opponents conducted
(informing voters that numerous telephone
although they could not do tracking surveys to
anything about outrageous measure the possible
property taxes, they could impact of various
vote against the "selective campaign themes.
sales tax increase") Increased state taxes and
bureaucracy emerged
as pivotal issues, and
extensive television,
radio, and newspaper
advertisements
emphasized these
concerns.’
- Linked the proposed
increase tobacco tax with
proposed property tax
increases in rural areas
that were happening at the
same time (so framed as
part of broader debates
about tax rises);;
- Brochures were sent
to businesses asking
whether the business
could afford the increase.
45
46
Moon et al., (1993) - Multiple mailings were

(contd) sent to voters from a
Helena tobacco retailer
portraying the increased
tax as «a trap set by
‘special interests’ to
subsidize those people

who live in cities».’
“The Montana Alliance
for Progressive Policy
(MAPP), a liberal group
opposing the increase
as an unfair tax on poor
people, received $22,500
from a tobacco industry
lobby group to produce
and send brochures to its
50,000 members urging
rejection”.
Koh (1996) Methodology is not 1,9,10 To prevent the passage - The tax was unfair - The TI outspent the - TI failed to disrupt the
described but the article of Question 1, a proposal and regressive, Coalition for a Healthy signature gathering (two
appears to be based on to raise the tobacco tax in disproportionately Future by 10:1. rounds). In round one, the
an analysis of various Massachusetts by $0.25 affecting people with low - TI put forward an sheer volume put TI off
data sources, including to fund tobacco education incomes alternative, compromise questioning signatures.
media coverage of programmes - On that basis, it would proposal. - TI alternative proposal
the issue, personal contribute to class - TI legally challenged ignored.
correspondence with warfare (argued the tax earmarking of funds. - TI legal challenge on
some key players and pitted upper middle class - TI organised and funded earmarking failed.
other academic articles liberals – mostly white – a group to lobby against - The proposition passed
against lower middle class the tax increases, called so TI failed to prevent it.
working people – mostly ‘The Committee Against - Overall, state-wide
minority). Unfair Taxes’ tobacco consumption
- Warned that tax- - An ultra-conservative, subsequently declined by
generated monies would out of state Catholic more than three times the
be diverted from their organisation working national average.
intended purposes, as had with the EU to distribute - However, TI political
occurred in California. thousands of letters pressure led to governor
- Argued the tax would claiming that the Q1 funds and legislature diverting
harm small business in the would be used to fund more than $220 million out
state by motivating people abortion counselling and of the tobacco education
to buy cigarettes outside condom distribution in account, prompting a
the state. schools. Unclear if/how TI subsequent round of
connected. lawsuits.
Koh (1996) (contd) - Claimed the tax was - TI stepped up its media
unfair on smokers campaign in final weeks
before vote.
- TI focused on tax as
a generic category,
rather than specifically
discussing tobacco taxes.
- Employed a key former
legislator
Traynor and Glantz, Analysis of published 1,2,5-7,9,10 - To defeat Proposition - Tried to move the issue - TI invested significant - TI’s legal challenge
(1996) reports, public 99 in California (which away from smoking by resources into lobbying failed.
documents, personal proposed to add $0.25 focusing on generic Californian legislature. - But polls indicated the
correspondence, to state cigarette tax and increased taxation Worked with healthcare TI’s ads did have an
internal memos, polling use 20% of the revenue arguments. organisations to ensure effect, reducing public
data, and interviews on tobacco education and - Emphasised government funds were diverted away support for the initiative.
with representatives prevention programmes);; mismanagement of tax from TC programmes to - However, various factors
form organizations - Once Proposition 99 money medical care programmes. undermined one of TI’s
that participated in had based, the aim was - Suggested $0.25 was - Hired a political most popular arguments,
the Proposition 99 to divert earmarked funds too much of an increase consulting firm and formed that concerning smuggling
campaign. away from tobacco control on a single product. the Californians Against and police work, including
activities/programmes. - Claimed the increased Unfair Tax Increases an official report that
tax would lead to (CAUTI). concluded the effect on
increased smuggling and - CAUTI circulated its own smuggling was likely
small-scale smuggling. petition in 1988, as the to be negligible, which
- Built on this to claim pro Proposition 99 effort criticized CAUTI’s ads.
police attention would be was underway to gather Police groups which had
diverted away from other supportive signatures, supported the TI position
business and that more called ‘The Tobacco Tax subsequently dropped
money would be spent on Ripoff’. This was not their support. In addition,
guns and drugs. official and was merely it was revealed that the
- Argued tobacco tax used as a way of reducing ‘undercover policeman’
was just another way for the pool of available paid in the TI’s most effective
special interests, such as signature-gatherers (by ad had nothing more than
physicians, to become paying them more) and a desk job for the policy
richer. to confuse voters about and was also a part-time
- Framed tobacco tax as a Prop 99. actor. All of this largely
regressive tax that would - CAUTI held a press destroyed the small-
negatively affect blue- conference to present scale smuggling/crime
collar workers. its argument that the arguments the TI was
- Argued Proposition proposed tobacco tax using.
99 violated California’s was just another way for - In the end, Proposition
1978 property tax-cutting special interests, such as 99 passed in 1988, so the
initiative and other tax physicians, to become TI failed to prevent it.
rules. richer.
47
48
Traynor and Glantz, - TI, through CAUTI, - However, the TI was
(1996) (contd) saturated TV, radio and influential in helping
print media with paid ads ensure the subsequent
to promote TI position. underfunding of tobacco
Their most effective education and prevention
ad featured an alleged program.
undercover police officer

discussing the crime
implications arguments
(more time would be spent
on smuggled cigarettes,
hence less time on other
issues, and the increased
criminal money from
smuggling, etc would be
spent on drugs and guns).
- TI legally challenged
Proposition 99 on
the basis it violated
California’s 1978 property
tax-cutting initiative and
other tax laws.
- CAUTI secured the
endorsements of the
Californian Sheriffs’
Association and the
California Peace Officers’
Association, which
gave credibility to their
crime/smuggling related
arguments.
Heiser and Begay, Analysis of internal 1-3,5,9,10 To challenge/undermine - Cigarette tax is - Legally challenged - Legal challenges failed.
(1997) memos, meeting the development, then regressive;; the draft proposal, on - Signatures expert was
minutes, newspaper implementation of, - The proposed tax would basis it violated the unable to disqualify
articles, other internal Question 1, a proposal to hurt the state economy state constitution, and enough signatures to
documents, letters, raise the tobacco tax in because it would increase filed subsequent legal challenge the ballot.
newsletters, news and Massachusetts by $0.25 cross-border shopping;; challenges at later stages. - TI ad campaign was
press releases (many of to fund tobacco education The legislature would use - Used a signatures effective, however, in
which were provided programmes, in order to the extra money raised for expert to try to disqualify shifting public opinion,
reduce smoking related purposes other than those signatures supporting the according to poll data.
deaths in the state intended (e.g. to balance ballot proposal;;
budget);;
Heiser and Begay, through the American - The proposal was not - During the second - Q1 nevertheless passed
(1997) (contd) Cancer Society). Also legal required signature drive, so TI failed to prevent it.
used available polling the TI tried to disrupt However, funds were
data and undertook matters by offering two subsequently diverted,
some interviews compromises – both of with only just over 25%
(although these are which involved smaller tax being spent on tobacco
not discussed in the increase, with fewer funds education, apparently
Methods section) being allocated to tobacco justifying one of the TI’s
control programmes;; arguments (article does
- Funded a Committee not make any specific
Against Unfair Taxes to claims about TI’s influence
oppose the initiative;; over this diversion).
- Undertook a major
advertising initiative (TV,
radio and direct mail) to
garner public support for
opposing initiative
Bialous and Glantz, Case study using data 1-3,5-7,9,10 To prevent Proposition - Framed initiative as an - Used front-groups - - The Proposition passed
(1999) from semi-structured 200 in Arizona and then attempt by proponents to “Enough is Enough” and so TI failed to prevent it.
interviews “with key divert funds away from divert large amounts of “No More Taxes”, which - The TI also failed to
players in the initiative” TC programmes (NB taxpayer money to their were 99.96% financed divert funds away from TC
and written records the Proposition aimed own benefit. by Philip Morris and programmes.
(documentary data to increase the cigarette - Used the diversion of the Tobacco Institute, - However, the tobacco
gathered from written excise tax by US$0.40, health education funds respectively, to campaign education programme
records and newspaper with proportional into medical services by against the initiative. experienced a range of
clippings). increases in the tax on the California legislature - Increased lobbying of the other problems and was
other tobacco products. as an example of how the state legislature, with the never fully implemented as
Increased revenues tobacco tax funds were number of paid tobacco planned. Authors suggest
were earmarked: 23% going to benefit only the industry lobbyists rising TI lobbying played a role
for tobacco prevention/ hospitals.’ from approximately four in this
education programs, - Claimed that California’s to 18.
5% for tobacco-related tobacco control - Once Proposition had
diseases and prevention programme was misusing been passed, the TI
research, 70% to provide public funds legally challenged some of
medical care for the the contracts agreed with
poor, and 2% to offset health education funds.
future loss of tobacco - Threatened local level
tax revenues by the boards with legal action
Arizona Department of over tobacco control
Corrections) programs.
- Tried to pass pre-
emptive legislation to limit
local TC programs
49
50
Goldman and Glantz, Interviews with key 1-3,5-7,9,10 - To prevent Measure 44 - Taxing smokers to - Legally challenged - The legal challenge
(1999) informants and analysis becoming law, notably pay for healthcare for the initiative on various initially met with some
of public documents, by preventing it from everyone is unfair. grounds (language used;; success but was
internal memoranda, and gaining a majority public - Measure 44 contained failure to specify all eventually ignored as
news reports vote. Ballot Measure 44 no controls on how money the types of taxes that submitted late.
was a proposal to raise would be spent and were would be raised;; and a - Other TI lobbying efforts
cigarette taxes in Oregon likely to be wasted on misleading summary). also initially met with some
by US$0.30 per pack bureaucracy, etc, rather - "While signatures were success but later failed.
and to use the funds to than being spent on health being collected to qualify - Although TI outspent
support an Oregon Health care and health education;; Measure 44 for the ballot, Measure 44’s supporters
Plan and tobacco control - Healthcare providers the tobacco industry 7 to 1, the initiative passed
(it proposed a dedicated and insurance companies began contributing with 56% of the vote.
10% of the revenues were being greedy in money to a different ballot - TI also failed to divert
would be used for tobacco wanting these taxes;; measure campaign”, tobacco control funds
control). - The Measure would which the authors suggest to other uses or limit the
- Once Measure 44 had allow cuts in spending was designed “to disrupt scope of the program.
passed, to prevent the on programmes that the signature-gathering - Nevertheless, only
funds from being spent were currently funded by process and to dilute 10% of the revenues
on tobacco control tobacco tax [NB authors support for Measure 44” were devoted to tobacco
programmes say this was incorrect] and “to divert the energy control activities, even
and financial resources though public health
of the health insurers groups provided 37%
away from Measure 44.” of the campaign money
The money the industry (notes that this was partly
gave to this alternative
because public health
campaign, meant the
groups were not involved
signature-gatherers could
in the early phases of
be paid significantly more
the tobacco tax effort
than those for Measure
and therefore missed an
44, which enabled more
opportunity to affect the
signature-gatherers
allocation of funds).
to focus on the other
Overall, article concludes:
campaign and the tobacco
‘Despite being outspent
control lobby, eventually,
more than 7 to 1, Measure
to have to pay more for
44 passed with 56% of the
signatures.
vote on 5 November 1996.
- TI formed and funded
‘The end result was an
a registered campaign
committee, called 11% decline in per capita
Fairness Matters to cigarette consumption in
Oregonians Committee Oregon since 1996 and
(FMOC). Of the US$4 614 a decline of 35 000 in the
292 in cash contributed to number of Oregonians
FMOC to fight for Measure who smoke’.
Goldman and Glantz, 39 and against Measure - Philip Morris concluded

(1999) (contd) 44, all but US$30 came they ought to use third
from the Tobacco Institute. parties more heavily in
- Much of the above future campaigns in order
money was used to run to make voters ‘more
ads on radio, TV and via persuadable’ of their views
direct mail (TI significantly
outspent the public
health campaigners on
advertising).
- TI hid its involvement
in some advertising
campaigns (though
advertisers were
eventually required to
declare this).
- TI hired a former Oregon
governor.
- Used the support of a
dentist (i.e. medical care
worker).
- Once measure had
been passed, TI lobbied
legislators about how
the money should be
spent, hoping to weaken
the anti-tobacco ad
programme. This included
lobbying a Subcommittee
which consisted of three
senators and which had
to (by majority) had to
approve the budget
Balbach et al., (2000) Analysis of relevant 2-7, 9,10 - To defeat Proposition - Not made clear in this - Direct lobbying of Proposition 99 passed in
documents (published 99 in California (which article, which merely legislature (investing huge 1988, so the TI failed to
reports, public proposed to add US$0.25 notes that the TI built on financial resources). prevent it.
documents, personal to state cigarette tax and anti-tax, anti-regulation - Worked with private - However, the tobacco
correspondence, use 20% of the revenue and freedom-of-choice healthcare and groups education and prevention
newspaper accounts, on tobacco education and themes representing medics programmes which had
press releases, internal prevention programmes);; to ensure funds were been earmarked for
memos and some - Once Proposition 99 diverted away from receiving 20% of the
industry documents). had based, the aim was tobacco control education revenue did not receive
Files made available by to divert earmarked funds programmes and towards their full allocation, which
various public health / away from tobacco control medical care programmes was instead diverted
tobacco control groups, activities/programmes (which went against the (largely to healthcare
and lawsuits in 1994 and specifications of the public organizations).
51
52
Balbach et al., (2000) 1995. Interviews were ballot). This provided - Following lawsuits by
(contd) also undertaken with ‘crucial political coverage public health groups, and
38 “key participants” for the tobacco industry extensive media coverage
(although TI refused to and the politicians that of the issue, the health
be interviewed) supported it’ education account finally
- Helped establish the received its full allocation
Californians for Smoker’s in 1996

Rights (CSR) group to
promote TI arguments
and target tobacco control
programmes.
- Paid key officials (money
often went via advertising
agencies and law firms
so did not appear to be TI
money)
Givel and Glantz, (2001) Analysis of tobacco 1-3,6,9,10 Oppose all tobacco excise No arguments are For many of the lobbying Found that 20 states
industry documents, tax increases proposed at mentioned specifically tactics/mechanisms had low rates of tobacco
plus reviewed existing state level in USA in relation to taxation but outlined, it is unclear excise taxation (less than
case studies of TI state study notes tendency if they are related to US$0.25 per cigarette
level lobbying, plus data of TI to frame issues as taxation. On the issue pack). Concludes that this
from on the status of important because they of tobacco excises suggests TI has been able
state tobacco control impact on public / other specifically, the following to maintain a “favorable
legislation from the US sectors, rather than are highlighted: market.”
Centers for Disease because they impact on - work with and fund anti-
Control and Prevention, the TI itself tax groups
National Center for pre- - contribute funds to
emption data Chronic "national groups not
Disease Prevention and directly related to
Health Promotion, Office tobacco that make policy
of Smoking and Health. recommendations, which
Also used 1990 Coalition can effect state legislation
on Smoking or Health while allowing the tobacco
pre-emption data lobby to remain behind the
scenes", e.g., funding for
Women Involved in Farm
Economics (WIFE) and
the National Taxpayers
Conference (NTC). Both
of these groups "assisted
the tobacco lobby […] to
fight tobacco excise tax
increases"
Givel and Glantz, (2001) - Forming relationships

(contd) with minority and women’s
political caucuses “to
build coalitions to counter
tobacco excise taxes and
promote smokers’ rights
legislation”.
- Lobbying via National
Smokers’ Alliance (TI-
funded front group)
Morley et al., (2002) Analyzed TI 1-6,8 Not assessed in this Not assessed in this The findings from Not assessed in this
expenditures by state, article, which examines article this study support the article (although authors
using data from tobacco Tobacco Institute lobbying, hypothesis that in the note the Tobacco Institute
industry document but findings suggest the 1990s tobacco control was disbanded in 1998,
websites, and TI industry was particularly activities such as raising which suggests it was not
publication the Tax concerned about policy cigarette excise taxes, seen as successful at this
burden on tobacco. developments that were attracted TI resources to point)
Also collected cigarette likely to lead to increased undermine these efforts.
excise tax rates per cigarette taxes and - California and New
pack for each state for earmarked cigarette taxes York were ranked highest
1991 and 1997, to rank in 1990s in average Tobacco
states on the basis of an Institute spending, and
increase in excise tax Minnesota, Arizona and
rate over this Massachusetts also
ranked highly (all states
that had had public ballots
on raising tobacco excise
taxes and dedicated
some of the increased
revenue to TC).
On the whole, study finds
Tobacco Institute spending
correlated with state efforts
to introduce higher (and
often earmarked) tobacco
excise taxes as well as
to introduce other tobacco
control measures such as
public smoking restrictions
(relationship was stronger
for TI activities relating to
tobacco tax than smoking
restrictions, which authors
suggest may be because
the TI relied more on third
parties to lobby against
53
54
Morley et al., (2002) smoking restrictions than

(contd) it did on tobacco excise
issue)
Yerger and Malone, Analysis of tobacco 1-3,5-7,9,10 To avoid any significant Argued excise taxes - African American The success of the TI in
(2002) industry documents tobacco tax increases were regressive and groups with which the avoiding significant tax
and relevant secondary disproportionately unfair, TI had ties were used increases is not made
data sources including particularly to minorities to oppose tobacco tax clear in this study but the
newspaper and journal increase. For example, authors imply that it was
articles the Congressional Black successful in influencing
Caucus (CBC) shifted its the position on this issue
1981 support for a 10% of African American
increase in the tobacco groups and leaders
excise tax to
help restore funding
for social programmes
to a position opposing
increasing tobacco excise
taxes in 1984
(for undetermined
reasons).
- The TI then “sought
to leverage the caucus’
changed position.”
- Many other African
American groups were
also identified as being
willing to support this
position.
- CBC commissioned a
task force to review the
impact of excise taxes on
the poor, blacks, and other
minorities. The task force
issued a 1987 report,
which was used to lobby
politicians with (and which
the TI helped promote).
- TI produced economic
studies to support its
claims about taxes.
- TI relied on support
of Congress reps who
received TI money
Joossens and Raw, Analysis of tobacco 2,5-7,9,10 To maximise profits, both - Tobacco smuggling is - TI lobbies governments Does not assess success
(2003) industry documents tough legal and illegal caused by market forces, to reduce tobacco tax on in detail, although notes
plus draws on figures markets, whilst using the i.e. the price differences the basis that doing so will that taxes were lowered
concerning smuggling spectre of smuggling as between countries, solve smuggling problems in Sweden and Canada,
that are quoted in an argument for keeping which create an incentive and increase government following concerns about
published articles, taxes low to smuggle cigarettes revenues smuggling. Notes this did
in data provided by from cheaper to more not adequately deal with
customs, tax and health expensive countries smuggling
authorities
Alamar and Glantz, Analysis of tobacco 1-3,5-7, 9,10 - To prevent a significant - Attempted to frame the - Used Wall Street - TI was successful
(2004) industry documents. tax increase being bill as the ‘‘largest tax analysts to present (McCain Bill was defeated
proposed in the McCain increase in history’’ and a arguments about in June 1998)
Bill. bureaucratic mess. smuggling (TI briefed
- Claimed the increase analysts, who then
would lead to increased presented themselves as
levels of illicit trade and independent)
associated law and order
problems.
Levenstein et al., (2005) Analysis of tobacco 1,2,5-7,9,10 To prevent the passage of Tobacco excise taxes - TI set up the LMC - The LMC was “generally
industry documents two types of legislation – were framed as unfair and - From mid-1980s to late- successful in gaining
and union publications, excise taxes on tobacco regressive 1990s, the LMC “worked labour support in New
newspapers, and other products and workplace to elicit support in New York for positions on
general publications smoking restrictions. York by framing issues excise taxes and,
relevant to the case It aimed to prevent in terms that made them especially, worksite
study, plus examined questions on these issues salient to unions.” smoking restrictions.
New York case law and from qualifying for ballot - The unions sided with However, by the late
legislative history, and and to defeat those TI in hope “that such 1990s, the support had
analysed interviews with proposals that made it to cooperation would be largely evaporated, with
key personnel (unclear if the ballot of advantage to them in trade unions in New York
interviews were already their efforts to protect either in support of, or
undertaken as part of and strengthen their at least neutral on,” both
other project or if were organisation. The TI and issues.
part of this study) LMC did their homework, From 1985, tobacco
understood the concerns excise tax ‘increased only
of labor, and appeared slowly and marginally’ but
ready to champion these in 1999 it was doubled.
concerns.” This included - LMC succeeded in
assisting unions even on dividing public health and
issues of “no concern to labor for a while.
the TI”. - However, the LMC
largely failed to attract
support from public sector
55
56
Levenstein et al., (2005) - The TI’s focus was on unions in New York state
(contd) the leaders of unions / as they were dependent
labour groups, rather than on state budgets so could
their members as it was not be counted on to resist
these people who had any action that might help
political influence. replenish state coffers.
- The LMC lobbied and Hence, “While regularly

briefed elected officials at siding with the LMC on
all levels of government, the issue of smokefree
and worked to discourage worksites,” the New York
liberal and labour public sector unions did
coalitions from taking not tend to denounce
anti-tobacco positions, proposals for cigarette tax
built support for industry increases.
positions throughout the - The TI eventually gave
labour movement, and up trying to win public
provided general public sector union support on
communications this issue, which authors
decide was a “fatal error”.
- “By the late 1990s […]
most of labor in New York
had shifted to support for
anti-tobacco policies.”
Shift in support started
with excise but then
moved on to other TC
issues
Balbach and Campbell, Analysis of tobacco 1-7, 9,10 - Overall aim was to - That cigarette taxes - In 1984, the Tobacco - TI was successful in
(2009) and Balbach et industry documents and prevent tobacco excise are regressive and that Institute established influencing CLUW’s
al., (2006) other related documents increases. regressive and unfair to the Labor Management position on tobacco
(CLUW News, the Intermediate aims working women Committee (LMC), which excise taxes (CLUW did
in-house newspaper of included discouraging was composed of the campaign against such
CLUW) liberal and labour groups Institute and five unions increases & against
from taking anti-tobacco representing tobacco earmarking).
positions (including on industry employees. The - Authors acknowledge
tobacco excise) and LMC’s functions included: “it is difficult to know
shifting the focus of the (i) Lobbying and briefing how much or if the
debate away from the elected officials at all CLUW’s involvement in
effects of tax increases levels of government;; the policy process made
on cigarette consumption (ii) discouraging liberal a difference,” but say
and onto the effects on the and labor coalitions “there are indications
people paying cigarette from taking anti-tobacco that organized labor was
taxes positions, including on important in federal level
tobacco excise taxes;; policy making”.
Balbach and Campbell, (iii) building support

(2009) and Balbach et for industry positions
al., (2006) (contd) throughout the labor
movement;; and (iv)
facilitated general public
communication on
relevant issues.
- The TI provided financial
(at least $221 500
between 1988 and 1996)
and in-kind support to
the Coalition of Labor
Union Women (CLUW) in
order to engage CLUW’s
interest in smoke-free
worksite legislation and
tax increases.
- The Tobacco Institute
facilitated its relationships
with CLUW (and similar
groups) by working via the
LMC.
- The Institute supported
the production of a series
of studies by labour
groups, including CLUW,
which demonstrated
the regressive nature of
tobacco taxes.
- The Institute monitored
press coverage and
advised CLUW on how to
promote study messages
to the media.
- CLUW and similar
organizations were
encouraged to oppose
earmarked tobacco taxes,
such as those proposed
in Clinton universal
healthcare proposals.
- The TI was aware many
labour organizations,
including CLUW, were
generally supportive
of higher taxes so they
encouraged them to
57
58
Balbach and Campbell, push for higher taxes on

(2009) and Balbach et corporations, rather than
al., (2006) (contd) cigarettes. This included
assisting the Citizens for
Tax Justice group with the
promotion of its annual
examination of ‘‘corporate

freeloaders’’ – those
corporations that pay no,
or little, taxes.
- TI framed tobacco
taxation as part of generic
consumer excise taxes
(which also including
petrol and alcohol)
Breton et al., (2006) Analysis based of: 1,2,5,6,8 To reduce tobacco excise Initially, TI challenged tax - Various groups - Initially, the TI and its
(i) 569 articles from taxes: “When the cost increases primarily on supported the TI position allies had little influence
four Québec daily (in constant dollars) of economic grounds, with (retail sales sector and – the TI was seen to be
newspapers published tobacco caught up in arguments concerning the journalists). Unclear how in decline anyway in
between 1986 and 1998;; 1984 with its 1970 level, industry’s profitability. much the TI was linked to Canada.
(ii) 28 semi-structured the tobacco industry - Also argued taxes were groups/individuals in these - However, framing the
interviews and union leaders unfair on smokers. sectors. The Québec Food issue as a ‘contraband
with key informants, representing workers - Later focused on Retailers Association problem’ succeeded
and (iii) more than 200 in this sector began to arguments that the tax was a particularly active in winning support
government documents/ challenge decisions to increases were fuelling group, which called a from a broad coalition,
transcriptions of increase the taxes.” (So smuggling (including high press conference in 1992 including retailers, media
parliamentary debates initial aim was to avoid economic cost of this to and demanded “a 70% commentators and
relating to the problem of further tax increases). government and retailers, reduction in tobacco the representatives of
smoking However, “In early 1992, and failure to help control taxes to put an end to employers’ organizations.
a plea for a drastic tobacco use). smuggling”. Authors claim - The health lobby
reduction in tobacco taxes - Argued against export TI was involved in funding received less media
emerged.’’ taxes and better policing this group. coverage and was subject
as solutions to the - A group specifically to criticism that they had
smuggling problem. campaigning on this an ‘extremist’ stance.
- Presented taxes as issue, the Mouvement - Eventually, “a massive
excessive and TC groups pour l’abolition des taxes reduction in the Québec
as having dominated réservées aux cigarettes and federal taxes” was
policy. (MATRAC), was set achieved, not just in
- Following tax decreases, up but authors do not Québec but also ‘in the
the TI argued smoking comment on whether TI taxes levied by five other
rises in young people was involved in funding/ provinces, including
were unrelated to the establishing this group. Ontario’ and also at a
change in price federal level.
Breton et al., (2006) - Claims the TI was - This led to an increase
(contd) able to mobilize union in smoking rates amongst
representatives and its young people.
employees. - Political elites responded
- TI helped organize to this by implementing
small retailers, whose a range of strong TC
comments quoted in strategies (although
the media gained public they did not re-raise the
sympathy. tobacco tax).
- Ran an “effective media - Concludes, the TI’s
strategy”. success was mixed: “the
- Managed to get police smuggling crisis was an
support on smuggling event that, despite its
issue. unfortunate repercussions
- Disseminated the on tobacco taxes, helped
findings of surveys on put the tobacco problem in
different facets of the Québec, especially among
problem. young people, on the
- Arguments were government’s agenda.”
presented as being on
behalf of citizens, not
the TI
Givel, (2006) Analyzed data from the 1,2,5-7 To avoid tobacco excise Argued tobacco use is Study only highlights - “From 1990 to 2003,
State Tobacco Activities increases a matter of individual TI mechanisms/tactics there was a sharp
Tracking and Evaluation choice and it is therefore generally so the following mobilization by health
System, Tobacco Map reasonable to expect do not only concern tax- advocates in all states
Reports created by freedom from excessive related lobbying: and a significant rise in
the U.S. Centers for government regulations - Ongoing employment of new legislation to control
Disease Control and and taxes well established contract tobacco use. The tobacco
Prevention, National lobbyists, who are industry, nevertheless,
Center for Chronic managed and coordinated was able to generally keep
Disease Prevention and in a top-down manner by state tobacco taxes low
Health Promotion, Office TI. “The state contract and counter significant
of Smoking and Health lobbyists often have regulatory threats to
(CDC). Supplemented decades of experience tobacco sales.”
this with data from the and expertise in working - Concludes “the policy
Coalition on Smoking with state legislatures monopoly favoring the
or Health, American to advance or block tobacco industry did not
Lung Association, and legislation.” significantly change,
Federation of Tax. Also - Direct and indirect despite the symbolic
appears to also use campaign contributions;; appearance of punctuation
some TI documents - gifts and honoraria to in the policy system.”
(although this is not legislators;;
mentioned in description - occasional alliances with
of methods) other allied interest groups
(such as the hospitality
industry to counter clean
59
60
Givel, (2006) (contd) indoor air ordinances);;

- The development of
front groups allowed the
tobacco industry and
its political allies to act
without being publicly,
including the National

Smokers Alliance
(primarily funded by Philip
Morris).
- Tactics of the front
groups often included
orchestrated grassroots
advocacy campaigns
through the mail or phone
calls to pressure policy
makers.
- Providing testimony
before legislative bodies
Givel, (2007) Analysis of tobacco 1–3, 5–10 - To keep tobacco taxes - The NSA (TI front group - In 1993, TI established - “Despite the use of
industry documents, low and avoid undue – see next cell) argued the National Smokers traditional lobbying in
plus relevant newspaper regulations (avoid that adult tobacco use Alliance (NSA), “a public conjunction with the use
reports (Lexis Nexus), altogether or keep should not be hindered relations created front of public relations efforts,
all relevant articles weak), which formed by rigorous regulatory group funded by the attempts by the NSA to
from the Americans for part of broader efforts controls or higher tobacco tobacco industry, which dominate public policy
Nonsmokers’ Rights to “maintain, enhance, taxes. operated nationally from to weaken or neutralize
database (http://www. and protect the industry’s - Called into question the 1994 to 1999 to advocate stronger tobacco
tidatabase.org/), profits and market shares” potential health effects for adults using tobacco regulations and taxes
magazine articles, web of tobacco use and the products without vigorous were effective only for
pages, journal articles, viability of proposed regulation or increased some campaigns.”
and books tobacco tax increases. tobacco taxes.” - “From January 1994
- Presented smoking as - Burson-Marsteller, to June 1999, the NSA’s
socially acceptable for the PR firm, helped set record of political victories
adults this up for Philip Morris and shaping of public
(with some subsequent policies was mixed. At
financial assistance from the national level, the
other TTCs) and some NSA played an important
Burson-Marsteller staff supporting role in winning
worked for the NSA. four major campaigns and
- The NSA worked losing one. At the state
to “to ‘‘generate’’ the level, the NSA played an
appearance of public important supporting role
support through public, in losing three campaigns
Givel, (2007) (contd) relations, through the and winning one. At
engineering of consent the local level, the NSA
theory, by using editorials played an important
newspaper articles, and supporting role in winning
pro-tobacco columns that 19 campaigns and losing
called for the free use of 12.” (Not all campaigns
tobacco.” concerned tax increases).
- Also organized national - “[T]he NSA was
and regional press unable to successfully
conferences, issued press discredit tobacco control
releases, monitored media researcher Stanton
coverage of tobacco, Glantz.”
made radio talk show
appearances, issued
alerts to NSA members,
provided public speakers,
issued advertisements,
and corresponded with
legislators.
- Wrongly targeted
University of California–
San Francisco tobacco
control researcher and
Professor of Medicine
Stanton Glantz, alleging,
but not proving, Glantz
misused grant funds for
illegal political purposes
and lobbying.
- Filed a Senate ethics
complaint against
Sen. John McCain,
alleging he had used
“his Senate franking
privilege to bolster his
run for the presidency”
(PM disagreed with this
and withdrew financial
assistance for NSA over
this issue)
Campbell and Balbach, Analysis of tobacco 1-3,5-10 To challenge policy Tobacco taxes are - TI created and funded - In exchange for funding,
(2008) industry documents. interest in significantly regressive the Consumer Tax various labour/progressive
raising tobacco taxes by Alliance (CTA) in 1989 to groups did publicly
turning labour and middle- build opposition to excise take positions against
class opinion against taxes. The CTA focused increasing tobacco excise
prospective excise on garnering support from taxes.
61
62
Campbell and Balbach, tax increases. Initial focus credible liberal allies, - “The Tobacco Institute
(2008) (contd) was on federal increases particularly genuine public was pleased with the
but in 1991, efforts interest groups (groups impact of the [TV]
turned to state-based tax traditionally perceived to advertising [sponsored by
proposals be at odds with the TI). NB the CTA], as measured
The CTA appears to have by tracking polls
been dissolved in 1993. commissioned to measure

- Also focused on their effectiveness” which
garnering media coverage found they increased
of the issue (this included people’s opposition to
sponsorship of TV ads, tobacco excise taxes.
plus a media tour by CTA - Tobacco excise taxes
Executive Director). were increased in 1990
- By working via the CTA and 1993 at USA federal
(which did not divulge level, but the increase was
the industry’s role in its much less than originally
formation), the TI was able predicted (8 cents, rather
to obscure its own role in than 16 cents) and was
these efforts. introduced in two phases
(authors accept that it is
not possible to say whether
or how CTA activities
affected this outcome).
Kelton and Givel, (2008) Analyses TI documents, 1,2,4-7,9,10 To maintain/expand sales TI blamed rampant - TI “promoted smuggling - Smuggling hindered
newspaper reports, despite tax increases smuggling on excessive schemes” not only to Canadian tobacco tax
journal articles, scholarly and to use the issue of taxation increase profits but also increases from furthering
reports, court cases, smuggling as part of to “provide an argument a consistent reduction
government data, court campaign to reduce taxes for tobacco taxation in consumption rates in
testimony, and federal reduction.” Effectively, 1990s.
and state statutes the TI “secretly pushed - The Canadian
and regulations, plus for increased tobacco government responded
relevant information from smuggling so that it could to the influx of smuggled
websites argue against higher tobacco that culminated
taxes as a motivation to after the tax increases by,
smuggle.” in 1994, returning taxes
- “Because of the federal to their original level.
excise and export tax “The intention of the tax
breaks that apply on U.S. reduction was to alleviate
Native American land, for the growing illegal activity,
more than 10 years the but the illegal activity was
tobacco industry utilized more than just a result
this land as smuggling of high taxation. The
routes to avoid newly Canadian government was
Kelton and Givel, (2008) imposed Canadian taxes ill-prepared and unable
(contd) on tobacco products. to reduce or eliminate
By 1993, this tobacco tobacco smuggling.”
smuggling accounted for - “The tax rollback has
30 to 40 percent of the prevented the Canadian
total Canadian tobacco government from earning
market.” public finances estimated
in the billions of dollars
from tobacco taxes that
would have alleviated
the societal cost of
Canadian smokers. Lower
cigarette prices have also
injured the public health
by increasing smoking
prevalence to levels that
would not have existed if
the tobacco tax increases
had met their expected
goals.”
Campbell and Balbach, Analysis of tobacco 2,3,5-7,9,10 - To change the debate - That cigarette taxes - Tobacco taxation was - CTJ initially responded
(2009) industry documents and from the effects of are regressive and that framed as part of a broader to TI approach by saying
media reports (located cigarettes to the people regressive tax increases category of consumer tobacco excise was not
through searches on paying cigarette taxes. are unfair. excise taxes, also including a priority issue for the
Lexis—Nexus) - To discourage liberal and - That this is true even petrol and alcohol. organisation, but agreed
labour groups from taking when taxes are earmarked -Tobacco Institute’s to work with the TI when
anti-tobacco positions, for healthcare spending. strategy included it received funding,
including on tobacco - That there is little recruiting "organized labor, from 1984 onwards.
excise increases evidence that increasing minorities, and other liberal Relationship deepened
taxes on alcohol and groups" to provide early in 1986, as more funding
cigarettes reduces warnings of legislative tax was provided. CTJ took
consumption initiatives, help tobacco anti tobacco tax positions
industry lobbyists gain and lobbied on this issue,
access to legislators who including by testifying
were not industry allies, before the Senate Finance
demonstrate constituent Committee against an
support for pro-tobacco increase in the federal tax
votes, and testify on the on cigarettes.
industry’s behalf. The - TI appears to have been
Institute was successful pleased with activities on
in forging relationships tax undertaken by both
with—and providing CA and CTJ, including
significant financial on earmarking issue
support to two prominent (which included Clinton’s
progressive organizations. healthcare proposals).
63
64
Campbell and Balbach, Citizens for Tax Justice - The Tobacco Institute
(2009) (contd) (CT) and Citizen Action, was dissolved in 1998
to oppose cigarette excise as part of the Master
tax increases as part of its Settlement but “interest
policy efforts.” in cigarette excise
- As other articles outline, taxes remains high” and
the LMC was used to “controversy continues

obscure connections over the economic
between the Tobacco hardship they may cause
Institute and the labour for low-income smokers”
groups it worked with, and on “the fairness of
such as CTJ and CA. raising revenue from
- TI supported CTJ to one population subgroup
hold a conference in (smokers) for programs
1987, which focused on with broader social
promoting the arguments benefits.”
that had been used at
federal level to state level.
- CTJ lobbied Senate
Finance Committee.
- CTJ position pieces
covered in media.
- As tobacco tax concerns
moved increasingly to
state level, the TI (through
LMC) recruited Citizen
Action in a similar way
to CTJ and for similar
reasons (CA was better
organised at state level
though, being more of a
grassroots organisation).
- TI also recruited other
progressive tax groups.
- CA and CTJ were also
used to help the TI lobby
against proposals that
tobacco tax increases
would be earmarked for
health care spending
Lum et al., (2009) Analyzed proposed 1-3,5-10 To avoid tobacco excise - Argued proposed tax - TI developed a voter - “The industry effectively
ballot measures in US tax increases and, in increases did not dedicate segmentation model to influenced early voters.”
states (used various particular, to avoid enough to tobacco control determine which tobacco - Tobacco tax ballot
documentary sources) earmarked taxes and that hospitals and tax increases it could measures commonly
and TI documents. health maintenance defeat in USA states. allocated substantial funds
Used public and private organizations would profit - After doing market to medical services,
polls (obtained from (i.e. ‘‘only a small amount research on the issue, despite lack of public
proponents of the ballot of the tax increase will go sought to present tobacco support for this. Tobacco
measures, pollster to education about the taxes as part of broader tax companies “are becoming
websites or the tobacco hazards of smoking.’’). rise issues. more successful in making
industry documents) - Argued tax increases - The Tobacco Institute this use of funds an issue.”
to identify early levels are unfair […] organized its Tobacco - Between 1988 and 1998
of support for the tax - Built on popular themes Industry Ballot Issues the TI mounted extensive
proposals and how of ‘‘anti-tax/ HMO Committee, which provided opposition campaigns
this support compared scheme’’ and ‘‘what ‘‘oversight of all prevention, to all nine tobacco tax
with the final election they aren’t telling you’’ preparation, and execution ballot measures that
outcomes as effective arguments of tactics relating to ballot were proposed, but only
against ballot measures issues, as well as the place defeated four (44%) of
to discuss new strategies them. From 1998 to 2008
and technologies related to it only challenged five out
battles in this arena’’. of 13 of the tobacco tax
- TI was advised to: lobby measures and defeated
legislatures to ‘‘reform four (so 80% of those
initiative and referendum it challenged). Thus it is
laws to make qualification becoming more successful
of ballot issues more in campaigns it conducts
difficult’’, ‘‘encourage third but probably at least
party ballot issues which partially because it has
threaten […] opposition and become more selective.
impede their progress’’, - Claims TI “learned to
mount ‘‘legal challenges combine the argument
which complicate that the tax would
opposition progress’’ and primarily benefit hospitals
prevent ‘the opposition and HMOs with lack of
from using inappropriate funding for benefits for
funding sources for their smokers. When either of
political activities’. the two arguments was
- TI also conducted public used alone, the tobacco
relations campaigns, industry lost three out of
conducted benchmark four elections, but when
research and built they were combined,
partnerships with other they won three out of four
organizations that might be elections.”
needed in a campaign. - Claims TI spending alone
- In the 2000s, the industry does not explain outcomes
became much more of state proposals to
selective in which increase tobacco taxes.
65
66
Lum et al., (2009) (contd) campaigns it opposed

(although, after deciding
not to fight the tax
proposals in Washington,
it did also realize that not
opposing such increases
was likely to encourage

states to take action so
began also taking this into
consideration.)
- Drew on its “essentially
unlimited financial
resources”
Raebeck et al., (2009) Analysis of tobacco 1-3,5-7,9,10 - The goals of the LMC - Argued excise taxes are - TI provided significant - The TI did appear to be
industry documents and included lobbying elected regressive funding to African and successful in influencing
academic articles officials, discouraging American and Latino the position on tobacco
liberal and labour labour organizations and excise of some key African
groups from taking also sponsored special American and Latino
anti-tobacco positions, projects within these labour organizations
and building support for organizations, including (notes at least one key
industry positions among studies, brochures, and group appeared to shift
organized labour. Notes conference events. its position on tobacco
tobacco taxes and smoke- - Helped support these control issues between
free legislation were seen organizations’ priorities, 1984 and 1988). This is
to be most effective at even where they did not despite the fact that other
reducing smoking rates directly relate to tobacco. research the authors
(and implies, therefore, - Framed discussions of cite indicates these
that these were perceived tobacco taxes as part of groups’ core population
by the Tobacco Institute to debates about broader, constituencies did support
be the biggest threats) ‘consumer’ excise taxes. tobacco tax increases.
- Framed issues so that - According to a 1990
they would be more Institute briefing, the
appealing to labour and LMC’s use of allies,
minority groups which such as the African and
the TI was trying to work American and Latino
with, e.g. presented Labor Organizations
policies (tobacco taxation it was supporting,
increases and smokefree ‘‘demonstrate[d] to
legislation) as particularly legislators––particularly
detrimental to organized the liberal Democrats [sic]
labour and, specifically, to who are most likely to
people of colour. support increases to fund
- To facilitate working with social programs–– that
these kinds of labour consumer excise taxes
Raebeck et al., (2009) groups, the Tobacco are: Unfair Regressive
(contd) Institute established the Inconsistent with tax
Tobacco Industry Labor reform.’’
Management Committee - In 1993, when Clinton’s
(LMC) in 1984 (see healthcare plan included
above). a US$1 per pack cigarette
- The Tobacco Institute tax, the Tobacco Institute
then used the coalitions mobilized these groups to
it had formed with lobby the Congressional
these organizations “to Black and Hispanic
appeal to politicians Caucuses, respectively.
who were traditionally - Claims the TI’s
more responsive to such “reframing of ideas was
arguments, specifically particularly successful
Democrats, liberals, and because the points were
politicians of color.” valid – i.e. excise taxes
- The Institute, through are regressive…”
the LMC, supported the - Authors conclude:
release of studies, letters, “Whether the involvement
and op-eds opposing of [these organizations]
excise taxes. These were had a significant impact
often credited to the labor on tobacco policy
organizations that the decisions is unclear, but
TI was supporting via both organizations had
the LMC, rather than to political influence among
the TI, even though they policymakers, organized
were “usually written labor, and people of color.”
by the Institute or its
consultants”.
- The Tobacco Institute
paid a PR firm, Ogilvy,
Adams & Rinehart, to help
write a publication that
was officially by one of
the labour organizations
it was supporting, called,
‘‘Fair Taxes: Still a Dream
for African-Americans”,
and then promoted it ‘‘the
black and labor media’’.
- TI paid for studies that
highlighted regressive
nature of consumer taxes
(framing tobacco taxes as
part of this) and its impact
on these groups (e.g.
industry sponsored
67
68
Raebeck et al., (2009) study claimed “An African-

(contd) American family, with
both parents working, two
children and an income
of $25 000, will pay an
almost six times larger
share of its income on

federal consumer excise
taxes than a family making
$250 000 a year”).
Studies concerned with tobacco industry efforts to influence tobacco excise structures (** indicates that studies also touch briefly on lobbying around tobacco excise rates)
O’Sullivan and Analysis of tobacco 2-5,8 TTCs were "frustrated in In 1985, Clive Turner On tobacco tax issues Not assessed in this
Chapman, (2000) industry documents their export attempts to (managing director of the (which is not the main article (though presumably
China by tax barriers" and Asian Tobacco Council) focus of this study), the unsuccessful, given
wanted to promote a flat “sought to demonstrate to authors claim the TI: Chinese state monopolies
excise tax structure "to Asian governments that - Lobbied American trade still dominate).
reduce price differentials taxation across the Asian associations on the issue
between imported region was “over the top, of exports.
and locally produced and needlessly punitive” - Lobbied Chinese, US
cigarettes." and that excessive and UK officials and
taxation would “further politicians
- TTCs sought to persuade reduce the taxable base” - Tried to involve the
Chinese government that, for governments leading to Chinese monopoly in TI
in order to optimise their “a revenue reduction” organisations
revenue derived from the - TTCs tried to gain USA - Philip Morris proposed
cigarette industry, they support for its arguments some joint ventures.
should institute a “simple (and in so doing were
system, a flat excise tax careful to frame the
based on per thousand exports as being for
cigarettes.’’ existing smokers, rather
than potentially increasing
smoking rates)
Szilágyi and Chapman, Analysis of tobacco 1-3,5-7,9,10 - To keep tax increases - Tax increases will - Efforts to draw public - Philip Morris failed to
(2003)** industry documents low (BAT and Philip increase black market attention to high tobacco prevent a tax increase,
and media coverage of Morris);; - While companies taxes;; even though it achieved
the tax harmonisation - To secure a beneficial increased their prices - Use of economic significant political support
issues. This was tax structure (Philip to ensure their profits, impact studies to support on the issue. Officials who
supplemented by Morris lobbied for specific publicly they decried the arguments (e.g. a study were sympathetic to Philip
interviews with a finance structure, though other taxes imposed to them was produced by KPMG Morris’ position blamed
ministry official and an companies lobbied for to support arguments this failure on the “divided
investigative journalist other structures, e.g. BAT against introducing EU position of the industry as
lobbied for ad valorem);; tobacco tax excise levels well as heavy lobbying by
Szilágyi and Chapman, - To prevent the at time of Hungary’s BAT”.
(2003)** (contd) introduction of tax accession to EU, and - In line with TI hopes, the
stickers;; PM commissioned tax burden on cigarettes
- To get rid of import a study from the in Hungary decreased in
duties Institute for Economic real terms between 1990
Research (Italy), on ‘the and 1996.
consequences of rapid - Even so, retail prices
alignment to the EU’s of cigarettes increased
minimum tax on cigarettes dynamically as a result of
in five accession pricing policies instated by
countries’, including the industry itself.
Hungary). Such reports - The Hungarian budget
were largely sent to has still one of the lowest
relevant officials, although contributions from tobacco
sometimes also reported taxes among countries
in media;; of the former communist
- Created a coalition bloc.
against the proposed - TTCs were successful
tax stickers (which TTCs in “developing a sphere of
would have had to pay supporters within relevant
for);; ministries (with special
- Attempted to ‘divert regard to the agricultural
legislators’ attention’ and finance portfolios
away from proposed tax and MPs sympathetic
increases by offering to TTCs views) and
the creation of a special third parties (hospitality
fund to support tobacco industry, tobacco growers,
growing in Hungary (to advertising industry) ready
be levied via specific tax to react without delay in
increases on cigarettes) the case of government
attempts to raising
tobacco taxes.”
- More recently, in 1990s,
TI sources admit that
sales volumes have been
“severely affected” by
significant tax increases.
- Authors imply TI
helped shift government
position on derogation
period to meet EU
tax harmonisation
requirements, which
required tax increases.
69
70
Gilmore and McKee, Analysis of tobacco 1-3,5-7,9,10 In the context of - BAT argued the excise - BAT employed various Not assessed in this
(2004b) industry documents and persuading government to regimes it favoured would arguments to suggest that article (at least not in
supplementary data privatise state monopolies increase fiscal and excise it was a better TTC to deal relation to tax issues)
from tobacco industry (preferably through closed revenues received by with than its competitors.
journals, newspapers, deals), TTCs sought to targeted governments This included presenting
routine data, and other secure excise structures (even when BAT was itself itself as a helpful and
published reports that were favourable to involved in tax evasion supportive corporation
their products via smuggling and has which could help advise
in other circumstances a government on things like
track record of lobbying excise regimes.
for tax reductions, which - BAT attempted to
have the potential to establish good political
reduce revenues) connections/contacts to
promote these arguments,
sometimes working via
consultants.
Gilmore et al., (2005) Analysis of tobacco 1-10 BAT sought to acquire No relevant information on Not specified in relation At the time of writing, the
industry documents and a monopoly position this issue is provided by to BAT’s tax-related Moldovan state tobacco
supplementary data, (through an exclusive this study (focuses instead proposals (probably companies had still not
such as newspapers deal) and then bolster its on arguments used in because privatisation did been privatised, so BAT
position by influencing relation to privatisation) not proceed) had not succeeded
excise rules so that they
would “uniquely favour its
products” (which would
encourage smokers to
switch from filterless to
more expensive filter
brands, despite low
incomes).
- It hoped not to increase
its market share to over
80% within 4 years, by
“closing the market to
external competition” and
undertaking marketing
campaign.
- As part of efforts to
close the market to
external competition, BAT
wanted to use a system of
Banderols. It also wanted
to secure tax exemptions
for BAT products
Delnevo C et al., (2007) Statistical modeling, 1,2,6,9,10 To change the taxation - US Smokeless Tobacco No information on this Changes were
using ACNielsen data, of moist snuff from an ad argued the new tax issue in this study implemented, even
of what is likely to valorem to a weight-based system would raise ‘an though authors claim
happen to prices of moist system additional $2 million both arguments are
snuff and tax revenues in revenue’ and would flawed;; the authors
following implementation discourage ‘youth from calculate the revised
of changes promoted by buying it,’ by raising the tax system is actually
US Smokeless Tobacco price of the cheapest likely to encourage youth
in New Jersey available snuff purchasing
Gilmore et al., (2007)** Analysis of tobacco 1-7,9,10 Having secured a - Argued against the - Lobbying of government - BAT achieved a
industry documents, privatization deal in imposition of high taxation officials responsible for reduction of approximately
other documentary data Uzbekistan, BAT sought rates on the basis taxation policy. 50% in the excise tax on
and some interviews to: that high rates would - BAT offered to help cigarettes.
- introduce protective encourage smuggling officials in charge of - BAT achieved an excise
import taxes;; (even though BAT was tobacco taxation, who system it believed would
- equalize excise on involved in smuggling). were unsure of the issues benefit its brands and
imports and domestic - Argued its excise system involved and who were disadvantage those of its
production;; proposals would minimize inexperienced. Effectively, competitors (particularly
- ensure the proper smuggling and optimize BAT created “a symbiotic Philip Morris), this
control and collection government revenue relationship” between included the introduction
of taxes, particularly on (even though BAT internal BAT and the Ministry of of tax stamps in 1996, a
competitors’ import (e.g. docs indicate the driving Finance. licensing requirement for
through the introduction force was to achieve the - BAT staff produced import and export, as well
of a tax stamp system, best possible market papers on smuggling, as wholesale and retail
from which BAT would position for BAT and that which fed into the above distribution.
hopefully be exempted) the company was aware negotiations. - “The price of cigarettes
- achieve a reduction its recommendations - BAT bought up local in Uzbekistan is now the
in the excise tax on perhaps weren’t always TI to achieve market lowest of all countries
cigarettes (even though the best deal for the dominance and political in the World Health
rates were already low);; government) influence Organization’s Europe
- achieve the region, including
implementation of an those with which
excise system to benefit it is economically
BAT’s brands and comparable”.
disadvantage those of its Overall: “BAT thoroughly
competitors (particularly redesigned Uzbekistan’s
Philip Morris). This tobacco taxation system
involved a mixed excise to advance corporate
system, which would objectives” (achieved all
ensure high-end brands its objectives, bar one
(such as Marlboro) were – which it still hoped to
hit through maintaining an achieve at the end of the
ad valorem tax on inputs, study)
71
72
Gilmore et al., (2007)** and which also involved

(contd) having a specific element
for imports to try to reduce
cheaper imports (ideally,
BAT hoped this rate would
not apply to them).
- an ad valorem domestic

system of 40% on
filtered and 25% on plain
cigarettes. This was of
benefit to BAT, which
was focusing on the local
filterless brand Astra, and
planned to later introduce
other cheap local brands.
- a requirement for a
license to import and
export cigarettes, as well
as to provide wholesale
and retail distribution
Nakkash, (2007)** Analysis of tobacco 1-6,8-10 - TTCs lobbied to - BAT claimed its plan (This review only notes - BAT appears to have
industry documents, plus influence tobacco taxation would “afford some mechanisms listed been successful in
secondary documentary policy in Lebanon. protection to local in relation to TI tax influencing tax structure:
sources and 20 semi- - PM sought to achieve a manufacture;; […] swell the lobbying – more general “In May 1995, Macleod
structured interviews simplified excise system, government’s tax revenue mechanisms of TI reported an unconfirmed
with key informants with a unified flat charge [and]… […] improve influence/lobbying are report that the Lebanese
per case, effectively balance of payments also discussed in this Regie has finally come
changing the system from through import thesis): down on the side of an
ad valorem to specific substitution/local value - Lobbying of key officials, ad valorem structure
excise (circa early-mid added.” e.g. BAT set out to “[p] and has submitted a
1980s). - A BAT study warned repare lobby plan for recommendation to the
- PM and BAT were both that “significant and too Faoud Seniora Minister of Ministry of Finance”
concerned about possible frequent tax increases will Finance (known to BATCo - But taxes were
government intentions encourage a resurgence consultant).” increased: “In April
to raise tax rates as a of contraband on the one - Says BAT plan for excise 1999, tobacco taxes
control measure, and hand and discourage any reform had support from substantially increased
Philip Morris lobbied on outflow of goods from the IMF and implies BAT from 54% to 90% plus an
“the dangers of excessive market on the other.” Tax helped secure this support additional 48% as local
taxation and how a rise reform, it was claimed, consumption tax (total
in tax levels could run would “curb smuggling” 138%).”
counter to their prime - BAT argued against the - However, the April 1999
objective.” specific system Philip tax increase was later
Morris supported revoked, following claims
Nakkash, (2007)** - BAT wanted to avoid by implying it could that the rise resulted in
(contd) the specific structure exacerbate smuggling and further smuggling and
being promoted by Philip reduce the government’s losses to the Treasury
Morris and instead secure revenue.
the introduction of a tax - TI argued reducing
structure which would taxes could help reduce
render a similar return smuggling
on both premium and
low priced imports, as it
believed this would be
beneficial to its products
over the longer term.
- BAT also wanted to lobby
against any restrictions
on “imports through
increases in import duties”
* The following critical appraisal (CA) criteria were used to appraise all of the included studies (the numbers listed for each study in the CA column in Table 3.3, above, indicate the criteria for which that study met positively):
1. How clear is/are the research question(s) and/or aim(s)?
2. Was the methodology appropriate for addressing the stated aims of the study?
3. Where applicable, was the recruitment/search strategy appropriate and/or was an adequate sample obtained to support the claims being made (i.e. was the data collection adequate and appropriate)?
4. Were the methods of data analysis appropriate to the subject matter?
5. Is the description of the findings provided in enough detail and depth to allow interpretation of the meanings and context of what is being studied? [Are data presented to support interpretations, etc?]
6. Are the conclusions justified by the results?
7. If applicable, are the theoretical developments justified by the results?
8. Have the limitations of the study and their impact on the findings been considered?
9. Do researchers discuss whether or how the findings can be transferred to other contexts or consider other ways in which the research may be used?
10. If the answer to 9 is ‘yes’, do you agree these suggestions are appropriate, based on the research?
** indicates that studies also touch briefly on lobbying around tobacco excise rates
73
Table 3.4. Summary of the foci of North American studies to highlight Tobacco industry efforts to keep
potential overlap
tobacco taxes low and prevent
earmarking
North American policy development /
References focusing
tobacco industry tactic (categorised Total
on this development
according to main focus of article) Tobacco industry arguments to keep
tobacco taxes low
TI alliances with labour and minority (Yerger and Malone, 2002;; Levenstein et 6
groups in USA to counter tax increases al., 2005;; Balbach and Campbell, 2009;;
(mostly earmarked) Balbach et al., 2006;; Campbell The arguments employed by the
and Balbach, 2009;; Raebeck et al., 2009)
industry to prevent tobacco excise
TI establishment and use of front (Givel, 2007;; Campbell and Balbach, 2 increases or achieve reductions in
groups to counter tax increases (mostly 2008) current rates were relatively consistent
earmarked)
and (in order of prominence with
Various – US federal- and state-level (Givel and Glantz, 2001;; Morley et al., 5
lobbying to counter tax increases (some 2002;; Alamar and Glantz, 2004;; Givel,
which they featured in the studies in
of which covered various specific policy 2006;; Lum et al., 2009) this review) involved:
developments in this table – many were
earmarked)
Emphasizing the regressive nature of
Proposition 99 in California (earmarked) (Begay et al., 1993;; Traynor and Glantz, 3
tobacco taxation
1996;; Balbach et al., 2000)
Proposition 200 in Arizona (earmarked) (Bialous and Glantz, 1999) 1
The argument employed by the
Measure 44 in Oregon (earmarked) (Goldman and Glantz, 1999) 1
industry most often in the studies
Question 1 in Massachusetts (Koh, 1996;; Heiser and Begay, 1997) 2 included in this review involved
(earmarked)
pointing out that tobacco excises
Failed initiative in Montana (earmarked) (Moon et al., 1993) 1
are regressive and consequently
Tax increases in Canada in early 1990s (Breton et al., 2006;; Kelton and Givel, 2
claiming that higher taxes are unfair
2008)
on poorer and more marginal groups
TI lobbying of excise structure for moist (Delnevo et al., 2007) 1
tobacco in society (Koh, 1996;; Traynor and
Glantz, 1996;; Heiser and Begay,
Total 24 1997;; Yerger and Malone, 2002;;
Levenstein et al., 2005;; Balbach et
al., 2006;; Campbell and Balbach,
2008, 2009;; Balbach and Campbell,
Table 3.5. Geographic breakdown of studies 2009;; Raebeck et al., 2009). In
some cases, the industry went
No. of studies No. of studies as far as arguing that tobacco tax
No. of studies examining industry examining industry
Geographic focus increases would contribute to class
overall influence on excise influence on excise
rates structures warfare, pitting upper-middle-class
USA liberals (mostly white) against lower-
22 21 1
middle-class working people (mostly
Canada 2 2 0 minority) (Koh, 1996). By employing
EU countries* 2* 2* 1 (Hungary) this argument, the tobacco industry
was able to forge partnerships with
Former Soviet Union 3 1 3
non-traditional allies, such as labour
China 1 0 1 groups (unions, etc.) and organizations
Lebanon 1 1 1
representing minority ethnic groups
in their campaigns against tobacco
Total 31 27 7
tax increases (see below). Although
*One covered Hungary which was not at that time an EU Member State;; the other covered the
tobacco taxes represent a higher
United Kingdom and Sweden percentage of the income of poorer
consumers (Chaloupka et al., 2001;;
Cnossen, 2006) and because poorer
groups tend to consume more
74
tobacco products, the tax burden on the studies refer generically to the smokers with excessive taxes (Givel,
these groups is higher (Chaloupka “industry”, it should not of course 2006, 2007). Such arguments ignore
et al., 2001;; Cnossen, 2006), this be assumed that every tobacco the fact that nicotine is addictive
argument ignores research which company, major or minor, took part (Advisory Group of the Royal College
finds that tobacco tax increases tend in the smuggling, or other activities of Physicians, 2000) and, therefore,
to be progressive (Chaloupka et al., that are the subject matter of these that smoking is not a ‘choice’.
2001;; Gruber & Koszegi, 2008). studies and the others referred to in Indeed, research has repeatedly
This is explained further in Chapter this chapter. demonstrated that most smokers do
7. When promoting this argument, In one study (Traynor and Glantz, not want to smoke (Robinson and
one study (published as two articles) 1996), the authors found that the Bugler, 2008;; Gallup, 2010).
even reported that the industry had industry used arguments about
involved itself in a campaign calling for smuggling to claim that tobacco tax Denying links between price and
tax increases on large corporations increases would therefore lead to consumption
rather than on consumer products broader crime-related problems, such
such as tobacco (Balbach et al., 2006;; as more money being spent on guns One study in the USA found that the
Balbach and Campbell, 2009). This and drugs, with police attention being industry was denying the existence
is despite the fact that large tobacco diverted away from other crimes to of credible evidence that increasing
companies have themselves been tackle tobacco smuggling. Working taxes on cigarettes reduces
involved in efforts to avoid paying through a front group it had helped consumption (Campbell and Balbach,
high rates of corporate tax (Knorr, establish, Californians Against Unfair 2009). Another, in Canada, found that
1985;; Batuke, 1992;; Burgess, 1993;; Tax Increases (CAUTI), the industry following tax decreases there was
O’Callaghan, 1998) and are members was able to secure endorsements an increase in smoking rates among
of organizations, such as the US for these arguments from the young people, but the industry argued
Chamber of Commerce (Murray, Californian Sheriffs’ Association that these were unrelated to the
1989;; Molinelli, 1999), that are and the California Peace Officers’ change in price (Breton et al., 2006).
actively pushing for lower corporate Association, which lent credibility Such arguments were made despite
taxes (US Chamber of Commerce, to such claims (Traynor and Glantz, the overwhelming evidence on this
2011). 1996). However, various factors issue (see Chapters 4 to 7) and the
eventually undermined this element fact, as detailed earlier in this chapter,
Linking higher taxes to illicit trade of the industry’s campaign, including that the tobacco company internal
and organized crime an official report that concluded the documents show how the industry
effect of the increase on smuggling was fully aware of the relationship
The second most-popular argument was likely to be negligible, and between price and consumption and
employed by the tobacco industry which criticized an advertising was using such evidence to plan the
in this review involved claiming that campaign that CAUTI had funded nature and timing of price-related
tax increases lead to higher rates which highlighted this argument marketing campaigns (Chaloupka et
of illicit trade (Koh, 1996;; Traynor (the report led to police groups that al., 2002).
and Glantz, 1996;; Heiser and had supported the industry position
Begay, 1997;; Joossens and Raw, dropping their support) (Traynor and Tobacco industry arguments
2003;; Szilágyi and Chapman, 2003;; Glantz, 1996). to prevent earmarking
Alamar and Glantz, 2004;; Breton
et al., 2006;; Gilmore et al., 2007;; Claiming tobacco taxes are unfair to Where proposals to increase tobacco
Nakkash, 2007;; Kelton and Givel, smokers taxes included plans to earmark the
2008). Such arguments were use taxes to pay for health programmes
in spite of extensive evidence that The industry also argued, quite (particularly tobacco control initiatives
the industry has itself been involved simply, that high tobacco taxes were and health care programmes), the
in global smuggling operations unfair to smokers (Koh, 1996;; Breton industry also consistently argued that
(see Chapter 8) and specifically in et al., 2006;; Lum et al., 2009) and, by (again, arguments are listed in order
promoting smuggling following tax claiming that smoking was a matter of prominence in the studies included
increases, as explored further below of individual (adult) choice, insisted in this review):
(Kelton and Givel, 2008). Although it was unreasonable to burden
75
The extra funds would be diverted/ Claiming that earmarking would see Figure 3.4 (Moon et al., 1993;;
misused result in spending cuts for specific Koh, 1996;; Traynor and Glantz, 1996;;
programmes Heiser and Begay, 1997;; Bialous and
Many of the studies found the tobacco Glantz, 1999;; Goldman and Glantz,
industry, and various groups it lobbied The same study found evidence of 1999;; Balbach et al., 2000;; Givel and
through, claimed that earmarked the industry arguing that earmarking Glantz, 2001;; Levenstein et al., 2005;;
funds would be used in ways which would lead to cuts in spending on Balbach et al., 2006;; Givel, 2006,
the public did not support or which programmes that were currently 2007;; Campbell and Balbach, 2008;;
differed from those described in the funded by tobacco tax, even though Raebeck et al., 2009).
original proposal (Moon et al., 1993;; this was not true (Goldman and Such groups were used both to
Koh, 1996;; Traynor and Glantz, 1996;; Glantz, 1999). promote arguments directly (Moon
Heiser and Begay, 1997;; Bialous et al., 1993;; Koh, 1996;; Traynor and
and Glantz, 1999;; Goldman and Tobacco industry tactics to keep Glantz, 1996;; Heiser and Begay,
Glantz, 1999;; Lum et al., 2009). In tobacco taxes low and prevent 1997;; Bialous and Glantz, 1999;;
the context of the USA, where health earmarking Goldman and Glantz, 1999;; Balbach
care is largely private, the industry et al., 2000;; Givel and Glantz, 2001;;
used proposals to use some of the The tactics/mechanisms employed Levenstein et al., 2005;; Givel, 2006,
earmarked funds for health care of by the tobacco industry campaigns 2007;; Raebeck et al., 2009) and to
poorer groups to emphasize this to counter excise increases mirror help recruit credible allies (Traynor
issue, framing these developments industry activities on a range of other and Glantz, 1996;; Levenstein et al.,
as a diversion of the funds to doctors, issues (see, for example, Feldman 2005;; Balbach et al., 2006;; Campbell
hospitals and health care companies and Bayer, 2004;; World Health and Balbach, 2008;; Balbach and
rather than to the uninsured public Organization, 2009). These included Campbell, 2009), a tactic discussed
(Bialous and Glantz, 1999;; Traynor (in order with which they feature in in more detail in the following section.
and Glantz, 1996). Such efforts the studies included in this review):
were helped by the fact that health Working with credible allies
care/insurance organizations often Use of front groups
did want to divert the funds towards In addition to creating front groups,
healthcare costs and also worked To obscure its own economic the industry was able to ally itself
(sometimes in collaboration with the interests in promoting many of the with a wide range of pre-existing and
tobacco industry) to try to achieve arguments outlined above and credible public interest groups not
this (Begay et al., 1993;; Traynor & thereby increase their credibility, normally associated with tobacco,
Glantz, 1996;; Balbach et al., 2000). the studies reveal that the industry thereby increasing the perceived
frequently established “front groups”;; credibility of key arguments (Begay et
Arguing that policies requiring
smokers to subsidise policies
Figure 3.4. Front groups identified in the studies
benefiting others are unfair
One study found the industry framed 7REDFFR,QVWLWXWH¶V/DERU0DQDJHPHQW&RPPLWWHHPDGHXSRIXQLRQJURXSV

the use of earmarked funds from associated with the tobacco industry) (Levenstein et al., 2005;; Balbach et al., 2006;;
tobacco taxes to pay for healthcare- Balbach and Campbell, 2009;; Campbell and Balbach, 2009;; Raebeck et al., 2009),
related costs as equating to a tax on &DOLIRUQLDQVIRU6PRNHU¶V5LJKWV%DOEDFKet al., 2000),
smokers to pay for services for others, (QRXJKLV(QRXJK%LDORXVDQG*ODQW]

which it argued was unfair to smokers 1R0RUH7D[HV%LDORXVDQG*ODQW]
(Goldman and Glantz, 1999). &RQVXPHU7D[$OOLDQFH&DPSEHOODQG%DOEDFK
1DWLRQDO6PRNHUV¶$OOLDQFH*LYHODQG*ODQW]*LYHO
7KH)DLUQHVV0DWWHUVWR2UHJRQLDQV&RPPLWWHH*ROGPDQDQG*ODQW]
7KH&RPPLWWHH$JDLQVW8QIDLU7D[HV.RK+HLVHUDQG%HJD\
&LWL]HQV$JDLQVW0RUH7D[DQG%XUHDXFUDF\0RRQet al., 1993),
&DOLIRUQLDQV$JDLQVW8QIDLU7D[,QFUHDVHV7UD\QRUDQG*ODQW]
76
al., 1993;; Moon et al., 1993;; Traynor groups representing medics and police and was also a part-time actor
and Glantz, 1996;; Balbach et al., healthcare organizations in the USA (Traynor and Glantz, 1996).
2000;; Givel and Glantz, 2001;; Yerger (Begay et al., 1993;; Balbach et al.,
and Malone, 2002;; Levenstein et al., 2000). Mounting legal and other official
2005;; Balbach et al., 2006;; Breton challenges
et al., 2006;; Givel, 2006;; Campbell Traditional lobbying
and Balbach, 2008, 2009;; Lum et Seven studies reported industry
al., 2009;; Raebeck et al., 2009). Ten of the studies also reported efforts to mount legal or other official
By emphasizing the regressive evidence of the tobacco industry challenges to proposed and existing
nature of tobacco taxes, the using more traditional lobbying excise legislation (Koh, 1996;; Traynor
industry was able to entice various techniques by targeting key decision- and Glantz, 1996;; Heiser and Begay,
labour and minority ethnic groups makers, both directly and indirectly 1997;; Bialous and Glantz, 1999;;
(which it commonly approached (e.g. via consultants, campaign Goldman and Glantz, 1999;; Givel,
via the Tobacco Institute’s Labour groups, business organizations, etc) 2007;; Lum et al., 2009). For example,
Management Committee and an (Begay et al., 1993;; Traynor and where earmarked tax increases were
industry-created front group known Glantz, 1996;; Bialous and Glantz, being pursued via a public ballot
as the Consumer Tax Alliance;; see 1999;; Balbach et al., 2000;; Morley et system (a method which gained
below) to argue against tobacco tax al., 2002;; Joossens and Raw, 2003;; popularity among public health
increases (Yerger and Malone, 2002;; Levenstein et al., 2005;; Balbach et communities in eligible American
Levenstein et al., 2005;; Balbach et al., 2006;; Givel, 2006, 2007). states from the late 1980s onwards,
al., 2006;; Campbell and Balbach, in light of an apparent reluctance
2008, 2009;; Balbach and Campbell, Media campaigns by state legislators to pass such
2009;; Raebeck et al., 2009). legislation), one study reported that
Groups that were successfully Nine of the studies found evidence the industry legally challenged the
recruited to argue against tobacco of the tobacco industry using mass draft proposal on the basis that it
tax increases included the Coalition media and other publicity campaigns violated the state constitution, filed
of Labour Union Women (CLUW) to raise public awareness of policy subsequent legal challenges at
(Balbach et al., 2006;; Balbach and proposals and create/increase public later stages and also tried to use
Campbell, 2009), Citizens for Tax support for the industry positions a signatures expert to disqualify
Justice (Campbell and Balbach, (Koh, 1996;; Traynor and Glantz, signatures supporting the ballot
2009), Citizen Action (Campbell and 1996;; Heiser and Begay, 1997;; proposal (Heiser and Begay, 1997).
Balbach, 2009), Women Involved in Goldman and Glantz, 1999;; Breton As a result of this latter tactic, several
Farm Economics (Givel and Glantz, et al., 2006;; Givel, 2007;; Campbell studies reported that the supporters
2001), the National Taxpayers and Balbach, 2008;; Campbell and of later policy proposals insured
Conference (Givel and Glantz, 2001), Balbach, 2009;; Raebeck et al., themselves against this by collecting
the Congressional Black Caucus 2009). One study reported that the substantially more signatures than
(Yerger and Malone, 2002) and the most effective media campaign the law required (Traynor and Glantz,
National Black Police Association undertaken by industry groups 1996).
(Yerger and Malone, 2002). The involved an advert featuring an
industry also used claims that tobacco alleged undercover police officer Commissioning supportive/
tax increases would lead to increases discussing the crime implications of informative research
in smuggling to ensure the support of the proposed tobacco tax increases
business groups such as retailers’ (more time would be spent on Six of the studies reported evidence
associations (Moon et al., 1993;; smuggled cigarettes, hence less time of the industry commissioning
Breton et al., 2006) and police groups on other issues, and the increased studies to support and inform
(Traynor and Glantz, 1996;; Breton et criminal money from smuggling, industry positions on tobacco excise
al., 2006). Finally, in seeking to divert etc. would be spent on drugs and debates (Moon et al., 1993;; Yerger
earmarked funds away from tobacco guns) (Traynor and Glantz, 1996). and Malone, 2002;; Balbach et al.,
control programmes (see below), the However, it was eventually revealed 2006;; Breton et al., 2006;; Lum et
industry was able to ally itself with that the “undercover policeman” had al., 2009;; Raebeck et al., 2009).
private healthcare organizations and nothing more than a desk job in the This included market-research to
77
assess: (i) whether it was worth subsidies for uninsured groups (Begay increase which the industry managed
challenging a given proposal, and et al., 1993;; Koh, 1996;; Traynor and to defeat, the industry linked the
(ii) how best to challenge particular Glantz, 1996;; Heiser and Begay, 1997;; proposed tobacco tax increase with
proposals. For example, one study Bialous and Glantz, 1999;; Goldman proposals for property tax increases
found the industry was undertaking and Glantz, 1999;; Balbach et al., in rural areas that were happening
telephone research to assess the 2000). This approach not only helped simultaneously (Moon et al., 1993).
possible impact of various campaign the industry to limit state tobacco
themes (Moon et al., 1993). A review control activities that had potential Proposing alternative legislation
of state-level efforts to achieve to further reduce consumption, but
earmarked tobacco excise increases also provided evidence to support the Four studies found evidence of
via public ballots in the USA found industry argument that the funds are industry efforts to promote alternative
the industry had increasingly begun likely to be used in ways other than (weaker or irrelevant) proposals/public
to undertake a significant amount of those stated and/or which the public ballots to distract attention and energy
research before deciding whether to did not support (see above). from the original proposal (Koh, 1996;;
invest significantly in efforts to defeat Traynor and Glantz, 1996;; Heiser
the proposed legislation (Lum et al., Paying or providing gifts to policy- and Begay, 1997;; Goldman and
2009). In addition, the industry paid makers Glantz, 1999). One study (Goldman
for studies that supported some of and Glantz, 1999) found that while
the arguments outlined in the above Several of the studies found evidence signatures were being collected to
section, such as a series of studies by of the industry paying or giving gifts qualify the proposal for a ballot the
labour groups and political caucuses, to officials and political parties or tobacco industry began contributing
including CLUW, which highlighted campaigns to help attract political money to a different ballot measure
the regressive nature of tobacco support for the industry’s positions on campaign in order “to disrupt the
taxes (Yerger and Malone, 2002;; taxation (Begay et al., 1993;; Balbach signature-gathering process”, for
Balbach et al., 2006;; Raebeck et al., et al., 2000;; Yerger and Malone, the Oregon-based proposal (known
2009). The Tobacco Institute also 2002;; Givel, 2006). Key officials most as Measure 44), and “to divert the
produced some economic studies to likely to be able to influence decisions energy and financial resources of the
support its claims about taxes (Yerger about tobacco taxation were targeted health insurers”. Likewise, a study
and Malone, 2002). (Begay et al., 1993;; Balbach et al., of a similar proposal in California
2000), and funds were often provided reported that an industry-funded
Employing consultants via third parties, such as advertising group circulated its own petition at the
and public relations staff/firms agencies, so it was not obvious that same time as signatures were being
they originated from the industry gathered in support of the earmarked
Several studies demonstrate that, (Balbach et al., 2000). tax proposal as a way of reducing
to gain advice on and assistance the pool of available paid signature-
with lobbying, the tobacco industry Confusing debates about tobacco tax gatherers (by paying them more) and
has used a range of consultancy increases with broader tax debates confusing voters about the official
and public relations firms and other proposal (Traynor and Glantz, 1996).
lobbyists (Begay et al., 1993;; Koh, Four studies reported industry efforts Two other studies of similar state-level
1996;; Traynor and Glantz, 1996;; to frame debates about tobacco policy proposals found the industry
Bialous and Glantz, 1999;; Givel, excise increases within broader put forward compromise proposals
2006, 2007;; Raebeck et al., 2009). debates about general tax increases that involved smaller tax increases
to confuse the issue and to help and fewer funds being allocated to
Working to divert earmarked funds garner opposition to proposals for tobacco control programmes (Koh,
tobacco tax increases (Moon et al., 1996;; Heiser and Begay, 1997).
Some of the studies found that where 1993;; Balbach et al., 2006;; Lum et
earmarked tobacco excise increases al., 2009;; Raebeck et al., 2009). This Using friendly “experts”
were being pursued, the tobacco tactic was apparently supported by the
industry had worked to divert funds industry’s own market research (Lum Three studies found evidence of
away from tobacco control measures et al., 2009). In one of the few studies the industry using friendly experts
to other causes such as healthcare focusing on a policy proposal for a tax to present industry positions and
78
bolster the credibility of industry have been relatively successful, has in completely preventing excise
arguments (Traynor and Glantz, with the Canadian government increases (Begay et al., 1993;; Koh,
1996;; Goldman and Glantz, 1999;; responding “to the influx of smuggled 1996;; Traynor and Glantz, 1996;;
Alamar and Glantz, 2004). Examples tobacco that culminated after the Heiser and Begay, 1997;; Balbach
included Wall Street analysts who tax increases by, in 1994, returning et al., 2000;; Lum et al., 2009). The
had been directly briefed by the taxes to their original level” (Kelton industry’s success in doing this
tobacco industry before presenting and Givel, 2008). The study goes on in turn provides support for one
their opinions to officials but who did to note that although the intention of the industry’s most frequently
not disclose this (Alamar and Glantz, of the tax reduction was to alleviate used arguments used to counter
2004), a high-profile dentist (Goldman the growing illicit trade in tobacco future proposals for earmarked tax
and Glantz, 1999) and an alleged products, it did not succeed because increases, namely that revenue from
undercover police officer (who was ‘the illegal activity was more than just earmarked taxes will be diverted or
later found to be a desk officer and a result of high taxation’ (Kelton and misused. Indeed, part of the reason
part-time actor, as described above) Givel, 2008). this argument has been so effective is
(Traynor and Glantz, 1996). that there is a great deal of evidence
to support this claim;; in several of the
Trying to undermine tobacco control The success of tobacco industry US states that introduced earmarked
experts efforts to keep tobacco taxes low tax increases, the revenue was
and prevent earmarking used for purposes other than those
One study reported that the tobacco described in the original proposal. In
industry had wrongly targeted and In the USA, the industry has had some cases, the industry was found
tried to undermine the credibility of a some success in preventing proposed to have played a key role in helping
key tobacco control academic (Givel, earmarked excise increases (Moon to ensure funds were diverted, which
2007). This involved alleging (but not et al., 1993;; Lum et al., 2009), helped the industry from the point of
proving) that University of California– although many such proposals did view of limiting spending on tobacco
San Francisco Professor of Medicine pass (Begay et al., 1993;; Koh, 1996;; control activities and providing
Stanton Glantz had misused grant Traynor and Glantz, 1996;; Heiser and evidence to shore up this argument
funds for illegal political purposes Begay, 1997;; Bialous and Glantz, in future debates. However, the
and lobbying. 1999;; Goldman and Glantz, 1999;; industry alone cannot be blamed for
Balbach et al., 2000;; Lum et al., the success of this argument;; all of
Stimulating smuggling in the event of 2009). Key contextual factors that the studies that highlighted this issue
tax increases appear to have assisted passage found that a range of other actors,
and implementation of earmarked notably healthcare providers, worked
One of the two studies of tobacco tobacco tax increases include: (i) to divert funds away from tobacco
excise increases in Canada in coherent and adequately funded control programmes. As Bialous
the early 1990s, which were later campaigns by coalitions favouring and Glantz (1999) point out, this
revoked, claims that the industry the tobacco tax increase (in many highlights the importance of focusing
itself helped promote smuggling (via of the studies included here, these on the longer-term implementation
Native American reservations, which campaigns were partially funded of tobacco control policies as well
are not subject to the same taxation by voluntary health groups, such as as on their development and official
laws) during the period in which the the American Cancer Society, and acceptance into law.
tax increases were in place (Kelton healthcare organizations);; and (ii) However, when assessing the
and Givel, 2008). The authors claim budgetary deficits, which worked success of the tobacco industry in
the industry did this both because it to increase legislative support for preventing the numerous state-level
enabled them to maintain or increase proposals. proposals for earmarked tax increases
profit margins despite the tax-related Overall, the studies included in that emerged in the USA from the late
price increases and because it this review suggest that the industry 1980s onwards, it should be noted
provided support for the industry’s has been more successful in that there appears to have been a
claim that the tax increases led to a diverting earmarked funds away from research and publication bias towards
rise in illicit trade (Kelton and Givel, tobacco control activities, usually proposals that succeeded. Hence,
2008). This approach appears to at the implementation stage, than it this review includes seven studies of
79
successful proposals (three studies In contrast to the studies that the other studies in this section
of Proposition 99 in California, two concerning USA state-level efforts of the review reveal almost nothing
of Question 1 in Massachusetts, to increase and earmark tobacco about, because very few comment
and one each of Proposition 200 in taxes, most of the studies on industry on the extent to which different
Arizona and Measure 44 in Oregon) efforts to prevent national/federal tobacco companies worked together
and only one of a similar initiative in level tax increases, or to secure tax to influence policy. This company
Montana which was unsuccessful. decreases at this level, found the differentiation, however, features
This is a ratio of seven studies of four industry was successful. Studies somewhat more in the studies
successful proposals compared to report the industry was successful exploring industry efforts to influence
only one study of one unsuccessful in defeating both the McCain Bill tobacco excise structures (see
proposal. Yet, Lum and colleagues (Alamar and Glantz, 2004) and the following section).
(2009) report that between 1988 and Clinton administration’s healthcare The remaining studies concerning
2008 the industry attempted to defeat proposals in the USA (Campbell tobacco industry efforts to prevent/
14 out of 22 state-level earmarked and Balbach, 2009), although the undermine tobacco excise increases
tax proposals and was successful tobacco industry was clearly not the all focus on assessing how the
in 8 cases, giving a 57% success only interested party involved in the industry worked to persuade credible
rate (8 out of 14 attempts) where it defeat of these bills. The industry was interest groups to support the industry
attempted to challenge and a 36% also found to have helped reduce position on tobacco taxes (Yerger
rate at blocking state-level proposals the levels of federal tobacco tax and Malone, 2002;; Levenstein et al.,
for tobacco tax increases overall (8 increases implemented in 1990 and 2005;; Balbach et al., 2006;; Campbell
out of 22 proposals). 1993 (Campbell and Balbach, 2008). and Balbach, 2008, 2009;; Balbach
In terms of assessing which Studies also report the industry was and Campbell, 2009;; Raebeck et
arguments and tactics were most successful in achieving tax decreases al., 2009). These studies, which all
successful in defeating these in Canada (Joossens & Raw, 2003;; focus on the USA, report that the
state-level tax increases, Lum and Breton et al., 2006;; Kelton and Givel, industry was generally successful
colleagues (2009) claim that the 2008), Sweden (Joossens and Raw, in recruiting credible, existing public
amount of resources invested in 2003), Lebanon (Nakkash, 2007) and interest groups with an interest in
lobbying by the industry was a poor some former Soviet Union countries the issue between the 1980s and
indicator of success. Instead, the (Gilmore et al., 2007). In all of these early 2000s. In most cases, these
authors argue that industry success successful lobbying efforts, the groups already had at least some
was associated with the extent studies report that a key argument commitment to lobbying against
to which it was guided by market employed by the industry involved regressive taxation, although most
research (the authors report that after claiming that tax increases would fuel were not actively lobbying on tobacco
1998, the industry made increasing or were already fuelling illicit trade. tax issues before being encouraged
use of voter segmentation models and This argument was also identified by to do so by tobacco industry groups.
market research to decide whether one of the USA state-level studies as Recruiting the support of such
state-level excise proposals were being particularly effective (Traynor organizations was achieved by
worth challenging;; once the industry and Glantz, 1996). taking three main approaches: (1)
took this approach, its success rate However, the illicit trade argument emphasizing arguments concerning
increased). The same study suggests was also used in the only example of the regressive nature of tobacco
that the industry fared better when a study reporting that the industry did taxes, to demonstrate why this was
it combined arguments concerning not succeed in preventing/limiting tax an issue of interest to labour and civil
the diversion of funds to health care increases at the national level. This rights organizations;; (2) approaching
providers with arguments relating study involved industry lobbying in the groups indirectly via a union
to the unfairness of the proposals Hungary in the 1990s (Szilágyi and organization that, despite having
on smokers, pointing out that “when Chapman, 2003);; in this example, been established and funded by the
either of the t wo arguments was used Philip Morris’ efforts to prevent an Tobacco Institute, was not obviously a
alone, the tobacco industry lost three excise increase appear to have failed tobacco industry organization;; and (3)
out of four elections, but when they because of the “divided position of offering to support targeted groups in
were combined, they won three out the industry” (Szilágyi and Chapman, a range of ways, including on issues
of four elections” (Lum et al., 2009). 2003). This is an interesting factor that the industry had no interest in,
80
to develop the relationship. All of 2007) to protect a dominant market McKee 2004b.;; Gilmore et al., 2007).
the studies suggest the industry’s position. In contrast, when BAT and In this context, officials are therefore
success in recruiting these kinds of Philip Morris had not yet achieved a likely to have been far more open to
groups in the USA is likely to have significant market share in a country, tobacco company arguments than
aided efforts to prevent tax increases they both lobbied for lower import might otherwise have been the case.
because it provided far greater duties/fewer restrictions (O’Sullivan It is unclear to what extent the
credibility to arguments concerning and Chapman, 2000;; Szilágyi and approaches taken to lobbying on this
the unfair and regressive nature of Chapman, 2003;; Nakkash, 2007). issue were informed by the fact that
tobacco excise taxes. This allowed As far as it is possible to discern most of the countries involved were
the industry to claim that one of its any patterns from this limited data, at that time undergoing a process of
key arguments was widely supported, arguments that different tobacco political and economic transition and/
and it also facilitated the lobbying of companies use to promote their or were undemocratic (O’Sullivan
officials and politicians who would not preferred structures seem to focus on and Chapman, 2000;; Szilágyi and
normally be expected to side with the claims that their particular approach Chapman, 2003;; Gilmore and
industry (e.g. liberal Democrats). will increase government revenue McKee, 2004b;; Gilmore et al., 2007;;
(Gilmore and McKee, 2004b;; Delnevo Nakkash, 2007). More research is
Studies concerned with tobacco et al., 2007;; Gilmore et al., 2007;; required to better understand what
industry efforts to influence Nakkash, 2007) and reduce illicit different parts of the tobacco industry
tobacco excise structures trade (Gilmore and McKee, 2004b;; aim to achieve in relation to tobacco
Gilmore et al., 2007;; Nakkash, 2007). excise structures and how they lobby
From the limited available evidence The lobbying on this issue that was on this issue beyond the countries
concerning tobacco industry revealed by these studies tended to be that have been studied.
efforts to influence tobacco excise behind-the-scenes, mainly involving
structures, we know that different direct lobbying of relevant officials, Discussion and conclusions
companies favour different structures although this was sometimes directed
in different contexts. From the studies via third parties such as consultants This systematic review suggests that
included in this review, it appears (Gilmore and McKee, 2004b;; Gilmore the different parts of the tobacco
Philip Morris (which produces the et al., 2007). Two studies suggest industry tend uniformly to lobby
high-end Marlboro cigarettes) tends particular companies may have also against significant tobacco excise
to favour specific taxes (Szilágyi and actively sought support for their increases and, in particular, against
Chapman, 2003;; Nakkash, 2007), preferred excise structures from tobacco excise increases that are
whereas British American Tobacco international financial organizations to be earmarked for tobacco control
(which, historically at least, had a such as the IMF (Nakkash, 2007) activities. In challenging such
far more diverse brand portfolio and American trade organizations proposals, the arguments employed
including mid-price and cheaper, (O’Sullivan and Chapman, 2000). In most often and most successfully by
local brands) tends to support mixed former Soviet Union countries, BAT the industry involve claims that tax
excise structures, incorporating an appears to have been able to create increases are socially regressive,
ad valorem element (Szilágyi and a symbiotic relationship between and that they increase illicit tobacco
Chapman, 2003;; Nakkash, 2007;; itself and finance ministries, in which trade and therefore contribute to
Gilmore et al., 2007). One reason finance ministers perceived the broader crime problems. Yet these
BAT may prefer a mixed structure is company as a source of expert advice and the other most frequently used
because of the competitive advantage on excise issues (Gilmore and McKee, arguments (e.g. that tobacco taxes
it confers over Philip Morris (Gilmore 2004b;; Gilmore et al., 2007). This is are unfair on smokers and that tax
et al., 2007;; Nakkash, 2007). likely to have been made far easier by rises do not lead to reductions in
Other attempts to influence excise the fact that officials in former Soviet consumption) all have flaws, as
structures in ways which would give Union countries were, at that time, outlined above and explained further
one company an advantage over unused to regulating and dealing with in other chapters. The most effective
others included promoting the use free-market corporations and had argument used against earmarked
of tax stamps (Gilmore et al., 2005;; little if any experience of dealing with tax increases has been to claim that
Gilmore et al., 2007) and lobbying tobacco excise, which had previously the revenue from earmarked taxes
for high import duties (Gilmore et al., been dealt with centrally (Gilmore and will be diverted or misused, and
81
because this has occurred, in part as on tax-related lobbying is needed mass media campaigns (Axeland et
a result of tobacco industry efforts, in other geographical areas and in al., 1994), legal challenges (Neuman
such arguments carry weight. particular to better understand what et al., 2002), the commissioning and
Favoured industry tactics to different parts of the tobacco industry use of supportive research (Barnes
influence policy decisions about aim to achieve in relation to tobacco and Bero, 1996;; Grüning et al., 2006),
tobacco excise increases include excise structures. the use of professional consultants
traditional lobbying of relevant One argument that anecdotal and public relations services (Ong
officials (direct and indirect), allying evidence reports the industry and Glantz, 2001, Smith et al., 2010),
with credible political groups that employing to counter tax increases paying or providing gifts to policy-
have (or can be persuaded to (Chaloupka et al., 2001;; Kyriss et al. makers (Saloojee and Dagli, 2000),
have) a shared interest in tobacco 2008) but which was not highlighted proposing alternative (weaker)
taxes (particularly on the basis of in the included studies is that higher legislation (Neuman et al., 2002),
the perceived regressive nature tax rates will lead to a decline in and using friendly “experts” (Grüning
of tobacco tax increases), and consumption and thereby contribute et al., 2006).
establishing industry “ front groups” to to job losses in the tobacco sector, There was also no evidence
lobby against tobacco tax increases. reducing the industry’s contribution of tobacco industry support for
From the limited available to the economy. It is possible that this incremental tax increases (other than
evidence concerning tobacco argument was used by the industry in relation to support for alternative,
industry efforts to influence tobacco in some of the policy developments weaker proposals than those on
excise structures (seven papers in covered by this review but did not offer). However, as studies of
seven different countries/regions), feature in the studies. Alternatively, tobacco company pricing strategies
we observe that different companies it may not have been employed suggest that tobacco companies may
favour different tax structures, either because: (i) it undermined use tax increases as opportunities
with Philip Morris tending to prefer another argument which was used, to increase their own profit margins
100% specific structures and BAT that tax increases would not reduce (Van Walbeek, 2000), it should not
tending to prefer mixed structures consumption;; or (ii) the industry be assumed that the industry will
(predominantly specific but also deemed it less persuasive in the always lobby against tax increases,
including a substantial ad valorem context of growing evidence that in only that it is likely to do so where
element). As far as it is possible to all but the most tobacco dependent such increases are significant and/or
discern any patterns from this limited economies, the tobacco industry earmarked.
data, tobacco companies appear does not make a net positive
to promote their preferred structure economic contribution (Jha and Policies to limit industry price
by claiming that it will increase Chaloupka, 1999;; Gruber & Koszegi, manipulation
government revenue and reduce 2008) (for further discussion see
illicit trade. Chapter 9). Article 6 of the WHO Framework
As highlighted earlier, there is a Most of the tactics the industry Convention on Tobacco Control
significant geographical bias in the used in its efforts both to counter (FCTC) calls on Parties to adopt
studies that met the inclusion criteria (planned and actual) tobacco tax and maintain tax and price policies
for this review, with far more evidence increases and to try to influence tax that will contribute to the health
being available in relation to North structures mirror those reported by objectives. To achieve this, this
America than anywhere else. Given studies of tobacco industry efforts chapter illustrates that governments
that North America is one of the to influence policy more generally. need to understand and address
world’s most economically developed For example, the industry’s use of industry pricing and price-related
and wealthiest regions, and that front groups (Apollonio and Bero, marketing strategies. The example
tobacco excise rates are lower there 2007;; Smith et al., 2010) and third- of the USA indicates that collecting
than in other high-income countries party allies (Ong and Glantz, 2001;; data (ideally monthly to track industry
(World Health Organization, 2010), Neuman et al., 2002;; Smith et al., responses to policy interventions) on
it should not be assumed that the 2010) have both been widely reported, industry marketing expenditure by
industry has (or will) necessarily take as have more traditional lobbying category (thus including price-based
the same approaches elsewhere. It is approaches focusing on targeting promotions) would be a useful first
clear, therefore, that further research officials (Barnoya and Glantz, 2002), step and one that would be in line with
82
Article 5.3 of the FCTC (see Figure Figure 3.5. Extract from the Guidelines for implementation of Article 5.3,
3.5). Furthermore, governments WHO-FCTC
also require detailed brand or price-
category specific data on tobacco “Parties should require the tobacco industry and those working to further its interests
pricing to determine effective to periodically submit information on tobacco production, manufacture, market share,
market expenditure and any other activity, including lobbying, philanthropy, political
policies, and such data should be contributions and all other activities not prohibited or not yet prohibited under Article 13 of
made available to researchers to the convention” (Recommendation 5.2). “Parties should require rules for the disclosure or
identify the empirical research deficit registration of the tobacco industry activities, affiliated organizations and individual acting
on their behalf including lobbyists” (Recommendation 5.3).
identified in this chapter.
Beyond data collection and
research, the chapter illustrates related promotion—price-reducing Price regulation and minimum
the need to develop and implement promotions (e.g. voucher schemes), pricing
effective strategies to prevent price- price-based promotions (e.g. price-
related marketing and industry marked packaging) and retailer The broader economic literature
pricing schemes from undermining incentive schemes. details two reasons for using
tax and other tobacco control efforts. In this respect it is worth noting that minimum prices: to facilitate
Potential actions fall into two broad while bans on all in-store promotions, collusion (price fixing) between firms
categories: (1) bans or restrictions including placing cigarettes below the by preventing price wars and to help
on price-related promotions and (2) counter, would limit the opportunity maintain profit margins thus providing
regulation of tobacco prices including for price-based promotions to be sufficient funds for marketing. In line
the setting of minimum retail prices communicated to the consumer (and with this, most minimum pricing rules
on tobacco products. This section thus likely limit the effectiveness of on tobacco have been implemented
reviews the (very limited) available retailer incentive schemes), as long to protect businesses rather than
literature exploring each of these as packaging remains unregulated, health. Yet minimum prices may also
policy approaches. Then in light of prices could be communicated to be used for public health purposes—
the evidence presented above on consumers in this way as recently to prevent low-cost selling from
industry efforts to influence and documented (Moodie & Hastings, existing firms and to prevent new
undermine taxation policies, it turns 2009). In other words, preventing all firms coming into the market with
to explore interventions to reduce price-based marketing would require lower-priced offers—and several
industry influence on policy in the form bans on point-of-sale marketing countries have now implemented
of Article 5.3 of the WHO Framework and standardised packaging in line such rules for this purpose. Yet, as
Convention on Tobacco Control. with Article 13 of the WHO FCTC we explore below using a recent
guidelines. example from the EU, such rules
Restrict or ban price-related Although, as outlined in section may find themselves in contravention
promotional activities (b), a large number of countries of trade treaty rules (including the EU
have now implemented some form Treaty) on non-discrimination (see
Comprehensive bans on price-related of control on price-related marketing also Chapter 2).
and price-reducing promotions and we only found one (US-based) Minimum pricing rules on
retailer incentive schemes would, study that specifically evaluated tobacco now exist in a variety of
if enforced, inevitably help prevent the impact of restrictions on price- jurisdictions. These include half of
these forms industry promotion. The based marketing, and this was limited US states (where they originated
evidence presented in this chapter enough in its focus and design to between the 1940s and 1960s and
would suggest, in line with broader preclude inclusion (Feighery et al., were meant to protect businesses
evidence that the industry simply 2009). It is important to note, however, and not public health) (Michael,
shifts its marketing expenditure from that there is good evidence for the 2000), a small number of EU Member
one area to another when faced effectiveness of comprehensive States1 (where the rationale again
with marketing restrictions (Saffer, marketing restrictions on reducing was largely to protect retailers),
2000), that such schemes would consumption (Blecher, 2008). and Malaysia where they were
need to cover every type of price- implemented in January 2010 (for
1
However, following a recent ECJ ruling, these minimum pricing rules are now or have already been ended
83
public health purposes, to reduce In the USA advocates of minimum price-discounts (F. Van Driessche,
cigarette purchases by children prices argue that minimum prices personal communication).
and low-income smokers) along are based on percentage mark ups Where an EU Member State
with prohibition of words that mean on wholesale prices (in the EU, most chooses to introduce minimum
discount or cheap sale. The US minimum prices are a percentage (e.g. prices, it must comply with its
minimum pricing rules are limited, 95%) of the weighted average price) obligations under the EU Treaties,
however, as most allow cigarette and, therefore minimum prices will more particularly with the rules on
company promotional incentives rise as the manufacturer’s price rise the free movement of goods (Articles
offered to retailers, such as buy- over time (thereby, keeping up with 34 and 36 of the Treaty on the
downs and Retail Leaders Programs, inflation). In contrast, excise taxes, Functioning of the European Union),
to be added into the formula that sets when wholly specific (e.g. cigarette the rules on competition (Articles
the minimum price. excises in the USA) lose their value 101 TFEU in conjunction with Article
To evaluate the effect of minimum as inflation occurs. However, this is 4, paragraph 3 of the Treaty of the
pricing on tobacco control, two not a problem when specific taxes European Union) and relevant case-
questions must be answered: (i) do are inflation-adjusted on a regular law of the Courts of the European
minimum price laws raise cigarette basis or when ad valorem taxes are Union. However, national rules
prices and prevent cut-price offers and imposed in addition (as is required fixing retail prices may be justified
(ii) are they effective in the presence in the EU). Opponents of minimum on grounds of, inter alia, protection
of promotional incentives? The first pricing argue that excise taxes of human health, provided that they
question looks at the effectiveness generate government revenues while do not constitute means of arbitrary
of minimum pricing in general, but prices raised through minimum price discrimination or a disguised
we found no studies addressing laws benefit the wholesaler and/or restriction on trade between Member
this topic. The second examines the retailer. That is, minimum prices States (Article 36 TFEU) and that
effectiveness when minimum price benefit tobacco sellers rather than they are proportionate to the aim
laws allow promotional incentives governments and publicly-funded pursued. Proportionality requires a
to be deducted from formulas for programmes. This is an issue that measure to be necessary to achieve
establishing the minimum cigarette deserves more attention, as minimum the objective, and that the objective
price (as is the case in most US pricing policies may leave the cannot be achieved by any less
states). The only study on this topic industry with more money to invest trade-restrictive means, for example,
(Feighery et al., 2005) suggests that in marketing research and innovative whether the same public health aim
when such incentives are included, ways to attract more customers. could not be equally ensured by
minimum pricing is not effective;; In the EU Member States that increasing excise duties. The EU
net cigarette prices did not differ implemented minimum prices directive that covers the structure
between stores in eight states with on cigarettes (Austria, France, of tobacco taxation (95/59/EC) also
minimum price laws and seven states Italy, Belgium and Ireland), their stipulates that manufacturers or
without, a finding likely explained by implementation had been advocated importers of tobacco “shall be free to
the fact that nearly all the minimum by the Ministries of Finance (because determine the maximum retail selling
price laws in the study allowed of their high ad valorem excise duties price” for their products.
promotional incentives. Separate which create greater price ranges) It is perhaps unsurprising
comparisons with New York, the as well as by the manufacturers of therefore that the European Court
one state which did not allow these premium brands (e.g. PMI). Moreover, of Justice found that the setting
incentives, showed that cigarette the retail sector supported the of a minimum retail selling price
prices were significantly higher in measures as their margin is, in most for tobacco in Austria, France and
New York than in the 24 other states, Member States, a fixed percentage of Ireland was illegal under the EU
although the number of New York the maximum retail price determined Treaties2 as it limited the freedom
stores participating in the study was by the manufacturer or importer. of producers and importers to
small, and the study did not control Only in Ireland were minimum prices determine their maximum retail
for differences in cost of living across an initiative of the Ministry of Health selling prices, distorted competition
states. to prevent the industry offering and simply benefited cigarette
2
Judgment of the Court (Third Chamber), 4 March, 2010, in cases C-197/08 Commission v France, C-198/08 Commission v Austria and C- 221/08 Commission v Ireland.
84
manufacturers by safeguarding their A key concern the European Tobacco Control agreed upon Article
profit margins. However, the Court Commission had with minimum 5.3, which requires that “in setting
stated that the Member States could pricing was that it distorted and implementing their public health
prohibit the sale of manufactured competition and benefitted tobacco policies with respect to tobacco
tobacco products at a price below the manufacturers by further increasing control, Parties shall act to protect
sum of the cost price and all taxes their profits. Yet other forms of price- those policies from commercial and
(i.e. they could prevent producers or regulation are allowed under the EU other vested interests of the tobacco
importers from selling them at a loss treaty and widely used, for example, industry in accordance with national
by absorbing, even temporarily, the in the utilities sector. A proposal for law.” If properly implemented, Article
impact of taxes on the retail selling price regulation in the tobacco sector 5.3 has the potential to reduce
price of manufactured tobacco (Gilmore et al., 2010) has recently industry influence on policy and thus
products). Belgium has removed its been made that would be compatible to prevent the inappropriate influence
minimum pricing rule and a further with EU treaty rules and would, in on excise policy documented above.
case is pending against Italy. theory at least, address many of the However, implementation and
The above-mentioned cases key problems outlined in this chapter. enforcement will be difficult and
were based on the application of An alternative might be a windfall tax require considerable political will.
Article 9 of EU Directive 95/59/EC on profits with a provision to prevent The industry has already been using
which relates to the price determined this being passed onto consumers. complex arguments to justify its
by the manufacturer or the importer. A surcharge on tobacco industry inclusion in the policy process (Smith
In other judgments (on minimum profits was implemented in Canada et al., 2009) and it is particularly likely
prices for alcohol), the court has in 1994 to recoup losses from to do so in relation to taxation policy
ruled that national rules fixing retail industry involvement in smuggling. on the basis that can be considered
prices could constitute measures Although this surcharge was passed primarily an economic rather than
having an equivalent effect to onto customers, its implementation health policy. It is therefore also
quantitative restrictions on imports illustrates that such interventions are essential that policymakers and the
(Article 34). This would be the case feasible. The problems with industry public are made aware of the flawed
if imported products were placed at a pricing outlined in this chapter nature of the arguments the tobacco
disadvantage in relation to domestic suggest that such proposals should industry uses against excise policies
products, for example, because be given serious consideration. (as outlined in this chapter). Finally,
competitive advantage conferred by ensuring that earmarked taxes, once
lower cost prices were eliminated. Preventing industry lobbying passed, are properly implemented
However this implies that minimum (i.e. that money is not diverted from
prices are not per definition against In light of overwhelming evidence the proposed policy areas) will
the Treaty. of the tobacco industry’s efforts to eliminate one argument from the
undermine public policy, the parties to industry’s armament.
the WHO Framework Convention on
85
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Appendix
Literature Search strategy and results ECLAS (European Commission Web of Knowledge
(searches undertaken between Library Catalogue) Searched on Medline and BIOSIS
October 2009 and March 2010) Searched for: ‘(tobacco OR cigar* for: ‘(tobacco OR cigar* OR snus
OR snus OR «Philip Morris» OR JTI OR «Philip Morris» OR JTI OR
Electronic databases OR «R.J. Reynolds» OR Gallaher) «R.J. Reynolds» OR Gallaher) AND
Academic Search Premier, ECLAS AND (taxation OR tax OR excise OR (taxation OR tax OR excise OR
(European Commission Library price OR pricing) AND (polic* OR price OR pricing) AND (polic* OR
Catalogue), ESRC Society Today, intervention OR lobb* OR influence)’ intervention OR lobb* OR influence)’
Intute, Web of Knowledge, Ovid in ‘All Fields’ in ‘Title’ or ‘Topic’
(Embase, Econlit, Social Policy &
Practice), Index to Theses, IBSS, Results: 36 references Results: 480 references
Business Source Premier, European
Sources Online, JSTOR, National ESRC Society Today Searched in all other Web of
Library for Health, Periodicals Searched for: ‘(tobacco OR cigar* Knowledge databases for: ‘(tobacco
Archive Online OR snus OR «Philip Morris» OR JTI OR cigar* OR snus OR «Philip
OR «R.J. Reynolds» OR Gallaher) Morris» OR JTI OR «R.J. Reynolds»
Websites AND (taxation OR tax OR excise OR OR Gallaher) AND (taxation OR tax
GLOBALink, http://www.escholarship. price OR pricing) AND (polic* OR OR excise OR price OR pricing) AND
org/uc/ctcre_tcpmus, intervention OR lobb* OR influence)’ (polic* OR intervention OR lobb* OR
http://escholarship.org/uc/ctcre_tcpmi in ‘ESRC Awards & Outputs’ influence)’ in ‘Title’ or ‘Topic’
Search Strategies Results: 16 references Results: 563 references

Academic Search Premier
Searched for: ‘(tobacco OR cigar* Intute Ovid (Embase, Econlit, Social Policy
OR snus OR «Philip Morris» OR JTI Searched for: ‘(tobacco OR cigar* & Practice)
OR «R.J. Reynolds» OR Gallaher) OR snus OR «Philip Morris» OR JTI Searched for: ‘(tobacco OR cigar*
AND (taxation OR tax OR excise OR OR «R.J. Reynolds» OR Gallaher) OR snus OR «Philip Morris» OR JTI
price OR pricing) AND (polic* OR AND (taxation OR tax OR excise OR OR «R.J. Reynolds» OR Gallaher)
intervention OR lobb* OR influence)’ price OR pricing) AND (polic* OR in ‘Abstract’ AND ‘(taxation OR tax
in ‘Title, abstract or keywords’. intervention OR lobb* OR influence)’ OR excise OR price OR pricing)’ in
in ‘All Fields’ Abstract AND ‘(polic* OR intervention
Results: 407 references OR lobb* OR influence)’ in Abstract
Results: 3 references
89
Searched for: ‘(tobacco OR cigar* Business Source Premier National Library for Health
OR snus OR «Philip Morris» OR JTI Searched for: ‘(tobacco OR cigar* Searched for: ‘(tobacco OR cigar*
OR «R.J. Reynolds» OR Gallaher)’ OR snus OR «Philip Morris» OR JTI OR snus OR «Philip Morris» OR JTI
in Title AND ‘(taxation OR tax OR OR «R.J. Reynolds» OR Gallaher) OR «R.J. Reynolds» OR Gallaher)
excise OR price OR pricing)’ in Title AND (taxation OR tax OR excise OR AND (taxation OR tax OR excise OR
AND ‘(polic* OR intervention OR price OR pricing) AND (polic* OR price OR pricing) AND (polic* OR
lobb* OR influence)’ in Title intervention OR lobb* OR influence)’ intervention OR lobb* OR influence)’
in Title, Abstract & Keywords in Evidence Based Reviews,
Results: 420 Specialist Collections and Books and
Results: 398 Journals
Index to Theses
Searched for: ‘(tobacco OR cigar* European Sources Online Results: 15
OR snus OR «Philip Morris» OR JTI Searched for ‘tobacco tax’ and
OR «R.J. Reynolds» OR Gallaher) ‘tobacco excise’ in ‘keywords’ and in Periodicals Archive Online
AND (taxation OR tax OR excise OR ‘title’ Searched for: ‘(tobacco OR cigar*
price OR pricing) AND (polic* OR OR snus OR «Philip Morris» OR JTI
intervention OR lobb* OR influence)’ Results: 9 OR «R.J. Reynolds» OR Gallaher)
in ‘All Fields’ AND (taxation OR tax OR excise OR
JSTOR price OR pricing) AND (polic* OR
Results: 21 (tobacco OR cigar* OR snus OR intervention OR lobb* OR influence)’
«Philip Morris» OR JTI OR «R.J. in Article, Title & Keyword(s)
IBSS Reynolds» OR Gallaher) AND
Searched for: ‘(tobacco OR cigar* (taxation OR tax OR excise OR Results: 9
OR snus OR «Philip Morris» OR JTI price OR pricing) AND (polic* OR
OR «R.J. Reynolds» OR Gallaher) intervention OR lobb* OR influence)
AND (taxation OR tax OR excise OR in Abstract & Title
price OR pricing) AND (polic* OR
intervention OR lobb* OR influence)’ Results: 89
in ‘All Fields’
Results: 172
90

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Imperial Tobacco Group Plc 25.6 2.9 9.2 43.9 4.0

China National Tobacco Corp (CNTC) 98

ITC Group* 58.3

Golden Tobacco Ltd 10.9

VST Industries Ltd 9.2

Godfrey Phillips India Ltd** 0.4

Gudang Garam Tbk Ltd** 28.3

Djarum PT 13.8

Bentoel Internasional investama Tbk PT 5.9

Nojorono Tobacco Indonesia PT 5.5

Philip Morris USA Inc 48.4

Reynolds American Inc* 26.5

Lorillard Inc 10.1

Liggett Vector Brands Inc 1.8

Societé industrielle des Tabacs du Cameroun 1.4

Company 2004 2005 2006 2007 2008* 2009* 2010* 2011*

Cadbury 15.6 15.9 14.4 13.5 12.0 13.0 13.8 14.9

Danone 12.7 13.1 13.3 12.1 14.4 16.9 15.7 15.9

Nestle 12.7 12.9 13.5 14.0 14.3 14.4 13.0 13.2

Consumer products companies

Henkel 9.4 9.7 10.2 10.5 10.3 9.0 10.6 11.6

L’Oreal 15.3 15.6 16.4 16.6 15.5 14.3 14.9 15.5

SABMiller 18.1 20.2 16.9 16.8 16.6 16.8 17.3 18.5

Carlsberg 8.8 8.7 9.6 11.5 13.2 16.0 16.3 17.1

Diageo 28.7 29.0 28.2 28.3 28.5 28.9 31.5 31.8

Table reproduced with permission from Gilmore et al., 2010

Study Methods CA criteria met* Key findings

Study Methods CA criteria met* Key findings

Moon et al., (1993) -­ Multiple mailings were

subsidize those people

Study Methods CA criteria met* Key findings

undercover police officer

Study Methods CA criteria met* Key findings

Goldman and Glantz, 39 and against Measure -­ Philip Morris concluded

Study Methods CA criteria met* Key findings

Californians for Smoker’s in 1996

Givel and Glantz, (2001) -­ Forming relationships

Study Methods CA criteria met* Key findings

Morley et al., (2002) smoking restrictions than

Study Methods CA criteria met* Key findings

-­ The LMC lobbied and Hence, “While regularly

Balbach and Campbell, (iii) building support

Study Methods CA criteria met* Key findings

Balbach and Campbell, push for higher taxes on

examination of ‘‘corporate

Study Methods CA criteria met* Key findings

Givel, (2006) (contd) indoor air ordinances);;

including the National

Study Methods CA criteria met* Key findings

been dissolved in 1993. commissioned to measure

Study Methods CA criteria met* Key findings

the LMC was used to “controversy continues

Study Methods CA criteria met* Key findings

Lum et al., (2009) (contd) campaigns it opposed

was likely to encourage

Study Methods CA criteria met* Key findings

Raebeck et al., (2009) study claimed “An African-­

share of its income on

Study Methods CA criteria met* Key findings

Study Methods CA criteria met* Key findings

Gilmore et al., (2007)** and which also involved

-­ an ad valorem domestic

Moon et al., (1993) - Multiple mailings were

Goldman and Glantz, 39 and against Measure - Philip Morris concluded

Givel and Glantz, (2001) - Forming relationships

- The LMC lobbied and Hence, “While regularly

Raebeck et al., (2009) study claimed “An African-

- an ad valorem domestic

One study found the industry framed 7REDFFR,QVWLWXWH¶V/DERU0DQDJHPHQW&RPPLWWHHPDGHXSRIXQLRQJURXSV

smokers to pay for services for others, (QRXJKLV(QRXJK%LDORXVDQG*ODQW]