Letter to Wall St. Journal on Industry smuggling

Monday 24 July 2000

Dear Editor

Re: “Up in smoke” editorial

Your editorial (Up in smoke,24th July) argues that it is “hard to believe that these multinational, publicly traded [tobacco] firms would do some smuggling on the side and partner with an unlikely gaggle of international gangsters.” In fact, the evidence from the companies’ internal papers is sharply to the contrary.

The reason the companies are involved is simple. The illegal trade is very profitable and an important marketing tactic for the companies. Cheap cigarettes keep smokers puffing and high levels of smuggling help the tobacco industry and sympathetic newspapers to argue for reductions in tobacco taxes,giving a knock-on benefit on demand in the legal market. A company that does not ensure its brands are smuggled risks losing market share to those that do. In no other industry would one-third of internationally traded products go ‘missing’ if this was not in the manufacturers’ interests.

The way the companies are involved is more subtle than driving trucks over borders or bribing customs officials. We have presented evidences showing that companies treat smuggling as just another distribution channel. The evidence suggests the illegal channels are managed by third parties and may be very convoluted, but the companies exert control over the price and availability of their products in the illegal markets. This means they know which wholesalers are selling to smugglers and which consignments will end up on the black market.

These allegations are not the work of pressure groups, but are taken seriously by the governments initiating legal action against the tobacco companies. Documentary evidence of the case against the tobacco companies is at the ASH smuggling website. Perhaps those that do not believe that big companies could ever act in this way should judge for themselves.

Yours sincerely,

Clive Bates