Stop punishing retailers for selling cigarettes

On 11 October 2016, the Senate established the Select Committee on Red Tape with a wide ranging brief to inquire into and report on the effect of regulatory restrictions and prohibitions on the economy and community.

This included economic and employment impact, compliance costs and burden, the effect of previous efforts to reduce red tape and alternative approaches.

As chair of this Select Committee, I can advise the senate that our work to date has revealed the importance and scope of the task. It has also revealed very clearly the opportunity presented by reducing red tape to help facilitate employment and economic growth.

Pursuant to this, I wish to provide senators with an outline of the recent report of the committee on its inquiry into the effect of red tape on tobacco retailing.

The committee looked at tobacco regulation from all perspectives, including the impact of the National Drug Strategy, the National Tobacco Strategy and the World Health Organisation Framework Convention on Tobacco Control, to which Australia subscribes. All of these seek to control and minimize use of tobacco.

The committee heard about the serious adverse impacts of plain packaging laws and display bans on retailing.

  • It heard how plain packaging has created considerable difficulties for retailers, who must spend a lot of time finding particular brands and brand variations among the many available. This has the effect of consuming staff time and annoying customers for no tangible public health benefit.
  • The committee heard how retailers have had to invest in special lockable cabinets that comply with display bans and storage requirements, costing tens of thousands of dollars.
  • It heard how small retailers, which typically have a higher dependence on income from tobacco retailing, have been most adversely affected by these measures.
  • It heard how there has been a significant increase in error rates in supply, delivery and sales of cigarettes, because they look so similar. Retailers reported there has been increase in staff time to unpack, check, store and find products required by customers of up to 30%. Staff have had to be retrained so they know what the regulations are, and to ensure the store complies. And of course, all this costs time and money, for which there is no payoff in terms of additional sales, margins or public health benefit.
What the committee also heard was how efforts to discourage consumption by making tobacco less affordable are having limited effectiveness at minimizing use, but are resulting in increasing rates of tobacco theft and sales of illicit products.
This is hardly surprising considering tobacco is an addictive product and therefore, like illegal drugs which sell for exorbitant prices, tobacco sales are not as easily influenced by price signaling, as would be the case with a non-addictive product.

To enforce the Plain Packaging Act, the Health Department is empowered to employ punitive measures up to and including civil and criminal penalties. But these measures are directed at legal products and retailers. Those who sell illicit tobacco products have little to fear.

The committee recognised that the consumption and retail sale of tobacco products both remain lawful activities. Thousands of jobs continue to depend on the importation, distribution and retail sale of tobacco.

Those involved in the sale of lawful products are law abiding citizens who pay their taxes and are entitled to have their commercial efforts respected.

The National Retail Association and the MGA Independent Retailers expressed their concerns at the regulatory burden placed on their members who sold tobacco products, expressing the complaint that it was like they were in the business of compliance, with a little bit of retailing on the side.

The Australian Lottery and Newsagents Association also expressed concern that excessive regulations not only were unfairly burdensome to retailers, but exposed employees to risk through inadvertent non-compliance.

Retailers that operate in more than one state face differing regulations, affecting signage, storage, display, licensing and definition of products, each with very significant compliance costs.

The committee considered the massive regulatory burden generated by public health concerns, and found that it created a major impediment to lawful commerce and job creation, with questionable benefit in limiting tobacco consumption.

Rather, over-regulation was found to be damaging lawful businesses and causing a shift in sales from legal, tax generating retail to illegal importation and black market activity by organized crime in much the same way as prohibition of alcohol and drugs helped establish organized crime in the US.

In its conclusion, the inquiry report recommended that state and Commonwealth governments undertake a cost-benefit review of their tobacco control measures.

The report urged that this involve an emphasis on reducing unproductive and counter-productive regulatory measures that simply inhibit legal commerce but do little or nothing to reduce demand for tobacco or improve public health.

Instead of red tape, healthier nicotine deliver mechanisms such as e-cigarettes for those who choose to use tobacco were emphasised as a more effective approach to public health policy.

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