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Clearing the smokescreen: The deadly consequences of undue influence

Illustration showing a man smoking a cigar, euro signs with the smoke

You might have thought that back-room deals and secretive campaigns involving the tobacco industry were a thing of the past, consigned to the era of Mad Men, or at least before widespread indoor smoking bans and health warnings on cigarette packages.

Without a Trace, new investigations by the Organized Crime and Corruption Reporting Project (OCCRP) appear to show that this is far from being the case.

Investigative reporters have uncovered some of the covert ways the tobacco industry players have been undermining global efforts to curb cigarette smuggling:

  • In Italy, a Big Tobacco manufacturer is accused of bribing customs officials in exchange for confidential information;
  • In Pakistan, the tobacco industry is alleged to have manipulated the tender process to award a contract for tracing illicit cigarettes to their preferred company;
  • In the EU, the tobacco industry captured the regulatory process to their own advantage, effectively rendering the infrastructure meant to tackle the illicit trade in cigarettes unworkable.

Real cost of cheap cigarettes

Every year, smoking-related diseases kill 8 million people around the world.

The illicit trade in tobacco is a major part of the problem. Contraband cigarettes contribute to higher addiction rates, especially among lower-income populations, “fuelling the tobacco epidemic and undermining tobacco control policies,” according to the World Health Organization.

The tobacco black market deprives governments of an estimated US$40 billion in tax revenue each year. These are billions that should be flowing into healthcare funds to prevent fatalities caused by cigarette addiction.

While the problem is widely recognised, new investigations show there is a powerful private interest preventing effective measures against tobacco contraband.

Gaming the system

Back in the 1990s, Big Tobacco manufacturers were exposed for trading their own products on the black market.

Following EU investigations and legal proceedings, between 2004 and 2010, four Big Tobacco companies – Philip Morris International, British American Tobacco, Japan Tobacco International and Imperial Tobacco – settled with the EU.

Among them, as part of a US$1.25 billion settlement, Philip Morris agreed to develop and install a new anti-smuggling system to provide transparency in its supply chains.

The resulting software is now an industry standard and is reportedly used in over 100 countries. But it has been vehemently criticised by experts and national authorities as useless and ineffective and for lacking independence from the very industry it is meant to police.

Last year, the University of Bath researchers estimated that around 60-70 per cent of all illicit cigarettes are produced by the tobacco industry itself.

Secret lobbying & big money

The tobacco industry has a history of employing covert tactics to influence EU decisionmakers.

In 2012, the Commissioner for Health and Consumer Policy resigned following a high-profile investigation by OLAF, the EU's antifraud office, over dealings with the tobacco industry lobbyists.

In 2015, even after the EU lobbying transparency reform, the European Ombudsman’s investigation revealed that with the exception of the Directorate-General for Health and Food Safety, European Commission officials were not disclosing their interactions with tobacco industry lobbyists.

Disappointingly, the European Commission did not act on the Ombudsman’s recommendations.

The Integrity Watch platform by Transparency International EU shows that between 2014 and 2018, only 13 tobacco-related lobbying meetings with the European Commission representatives were disclosed in the Transparency Register. Ten were with the industry representatives or the consultants hired by them, the rest with advocates of stricter regulations on tobacco.

Full transparency in lobbying by industries such as tobacco is especially important. The vast sums spent on lobbyists give the industry unequal footing that other stakeholders calling for stricter controls for tobacco simply cannot match.

In 2013 alone, Philip Morris International reportedly spent almost US$7 million (EUR 5.25 million) to lobby Members of the European Parliament as they deliberated on the EU’s Tobacco Product Directive.

Information provided by lobby groups through the EU Transparency Register – and available on Integrity Watch – shows that, in 2018, pro-tobacco organisations had at least EUR 4 million available for their lobbying work with the Commission, including EUR 2.25-2.5 million that British American Tobacco had estimated for its costs that year.

This is a sharp contrast from the mere EUR 25,000-50,000 registered organisations lobbying for stricter tobacco controls said they had available for the same period.

The public should be able to trust the system works in their interest, especially when it comes to their health. What we see in this case is Big Tobacco essentially deregulating itself under the guise of regulation.

Global ramifications

The cost of undue influence by the tobacco industry in the EU cannot be overstated: smoking kills 700 thousand people in the EU every year. In monetary terms, EU taxpayers lose US$11 billion in tax revenues due to the illicit trade in cigarettes – money that should pay to mitigate devastating health impacts of smoking.

This has significant ramifications that go way beyond the EU’s own borders. As Vitor Teixeira, Policy Officer at Transparency International EU put it, the EU is a “high-value target for multinational corporations that want to set global regulation on a course that suits their interests.”

Tobacco industry is eying emerging markets as smoking rates fall in Europe. Governments in Asia and Africa are reportedly already planning to replicate the flawed EU system in their own countries, following lobbying from tobacco companies.

The new revelations should sound the alarm in all countries where the ineffective Track & Trace infrastructure is proposed. Major reforms are needed to ensure policy and regulatory processes are not tainted by undue influence by powerful private interest.

The European Commission needs to start with the mandatory lobbying register.

The Global Anti-Corruption Consortium

Transparency International and the Organized Crime and Corruption Reporting Project (OCCRP) have been partnering as part of the Global Anti-Corruption Consortium since 2016.

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