Menthol Ban Could Fuel Black Market

The FDA is considering a ban on menthol cigarettes in the U.S., a move some fear could have unintended consequences, such as a skyrocketing black market for the products.

“What we’re currently facing in the U.S. is the (potential) banning of a currently legal product. We’re very concerned that would create an immediate black market for menthol products and all the problems associated with a contraband market,” noted Lyle Beckwith, senior vice president of government relations for NACS. “The entire concept of fanning the flames on a black market economy is something we’re very concerned about.”

Menthol cigarettes currently account for 30% of the tobacco market. If the product were banned some fear it could lead much of that 30% of consumers to seek out alternate venues for buying the products.

NACS sent a letter to the Tobacco Products Scientific Advisory Committee in July outlining its concerns. The panel appointed by the FDA’s Center for Tobacco Products is meeting next week to discuss the public health impacts of menthol cigarettes and how to regulate them. It is required to make recommendations to the federal agency by March.

This morning, NACS and the Canadian Convenience Store Association held a conference call to discuss what the future could hold if a ban on menthol went into effect in the U.S.

Canada is the leader in the sale of contraband tobacco throughout the world with more than 48% of cigarettes in some provinces being sold illegally, providing youth with easy access to cigarettes. Canada’s black market plight could teach the FDA and the Tobacco Products Scientific Advisory Committee what might happen if the U.S. follows the same path.

Dave Bryans, president, Canadian Convenience Stores Association attributed the rise in contraband cigarettes in Canada to the rise in tax increases on cigarettes that Canada has seen over the past four years, as well as a ban on flavored cigars.

While the taxes were intended to discourage people from smoking, customers just found different avenues to obtain their tobacco products. “One in every two smokers in the province of Quebec has this product delivered by the underground economy,” Bryans said.  “We’ve lost 10% of our (convenience) stores over the last two years because we rely heavily on the tobacco category for traffic which sells other products such as milk, impulse items, lottery.”

The federal government in Canada has lost over $2 billion a year just in tax collection due to the black market, and high school kids are easily gaining access to cigarettes.

While convenience stores are often blamed for youth access to cigarettes, NACS noted, “Convenience stores are the first line of defense against underage smoking because we card our customers to ensure minors do not have access to tobacco products.”  Criminals selling black market cigarettes are not going to card teenagers looking for smokes, adding to the public health problem.

Menthol cigarettes are not banned in Canada. “When they did flavor bans they excluded menthol knowing this would fuel the contraband market bigger than it has ever been,” Bryans said.

“Although the Canadian government created this black market unknowingly by raising the taxes, even they saw a potential problem in banning menthol and decided not to do that. The obvious black market that would occur from banning menthol in Canada kept even them from taking that step,” Beckwith said.

NACS hopes the FDA will look to the problems in Canada when deciding whether or not to ban menthol. The big concern is that banning menthol in the U.S. could mimic what happened in the era of prohibition in the U.S. where the alcohol industry was just pushed underground and customers continued to purchase alcohol from underground channels.

“It’s that environment we are concerned about and why we are submitting comments to the Tobacco Products Scientific Advisory Committee and urging them to be very thoughtful as they deal with the menthol issue and consider what consequences could arise from a hasty decision,” Beckwith noted.

 

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