OFT investigation: Yet again British tobacco companies show contempt for their customers.

Friday 11 July 2008

Gallaher’s agreement to pay millions of pounds in penalties to the OFT, following its admission that it engaged in unlawful price fixing demonstrates yet again that the tobacco industry can’t be trusted.[1] This follows a recent study conducted for ASH showing that the tobacco industry has increased its prices way above inflation in recent years. [2] For example, in the years in question from financial year 2000-03 the Retail Price Index (on which the tobacco tax increase is based) increased by 6.46% while the retail price of cigarettes overall increased by 12.49%. Tax increases on tobacco over these years were only at the rate of inflation.

Deborah Arnott, Director of the health campaigning charity ASH, said:

“Yet again a British tobacco company has shown complete contempt for its customers. Price fixing is completely unacceptable, but while you might expect this from a tobacco company, what the supermarkets were doing colluding with tobacco companies like Gallaher is hard to fathom.

In recent years the manufacturers have been raising the price of cigarettes to fill their own coffers, hiding behind the smoke-screen of tax rises, which they blame for the increases. While we approve of tobacco prices being high, the profits should go to the Government for redistribution into the health service, not to the tobacco industry.”

Contrary to tobacco industry propaganda, there is widespread public support for raising tobacco taxes above the rate of inflation, though there is no evidence of support for the tobacco industry to benefit from price rises. According to a recent poll [3] 61% of respondents favoured a rise in tobacco tax above the rate of inflation. Furthermore, 66% of respondents said they would support a tax rise of 20p per pack if the money raised was used to prevent young people from taking up smoking and to help people stop smoking.
Notes and links:

[1] Six parties including Gallaher and five retailers have reached early resolution agreements with the OFT and have agreed to pay penalties amounting to nearly £200 million. The investigation against Imperial Tobacco, The Co-operative group, Morrisons, Safeway, Shell and Tesco continues.

[2] Research conducted by health economist Professor Joy Townsend on behalf of ASH. Unpublished. 2008.

[3] The Tobacco Manufacturers’ Association which represents the UK tobacco companies continues to argue for a freeze on tobacco duties. In a letter sent to MPs about this year’s Budget, the TMA said it was asking the Chancellor to freeze the level of tobacco duty.

[4] The survey, conducted by YouGov Plc for Action on Smoking and Health, was carried out between 20th and 22nd February 2008. Total sample size was 3,329 adults. The results have been weighted and are representative of all British adults (aged 18 ). The findings will be presented at a tobacco control conference to be held on Monday 28 April in Cardiff organised by ASH Wales.