The Australian Competition and Consumer Commission is denying authorisation for British American Tobacco Australia (BATA), Imperial Tobacco Australia (ITA) and Philip Morris Ltd (PML) jointly to cease supplying retailers or wholesalers they consider to be supplying illicit tobacco.
The companies had submitted that the proposed conduct would reduce retail sales of illicit tobacco in Australia. They argued there would be public benefits from increasing the collection of excise from legal tobacco, reducing sales of tobacco without the required health warnings, and, by reducing competition from sales of illicit products, benefiting retailers that stock legal tobacco.
The ACCC does not, however, consider there would be a net public benefit in giving the three dominant tobacco companies immunity for information sharing and joint boycotts of retailers.
“This kind of interaction between all of the major competitors raises competition concerns, especially in such a highly concentrated market,” ACCC Chair Rod Sims said.
Between them, BATA, ITA and PML supply more than 90 per cent of the market for legal tobacco products in Australia, including all the major brands.
The three companies released a joint statement expressing disappointment at the ACCC decision.
“BATA, ITA and PML sought this application in order to try to reduce the sale of illegal tobacco in Australia, which at 13.9 per cent of all tobacco sold, costs the government $1.6 billion in excise revenue each year,” the companies said. “Australian tobacco control laws are entirely undermined by allowing criminals to operate in this space.”
While the ACCC said it rejected the industry’s proposed action, it acknowledged that illicit tobacco was a problem that undermined public health policies and diverted revenue from legitimate retailers and government, and commented on the desirability of additional government action to address it.
“We hereby encourage the government to actively pursue such action by adopting a national anti-illegal-tobacco strategy to stiffen penalties, make it easier to prove violations, and clarify the roles and responsibilities of government agencies such as ATO, ABF, police forces and others who deal with this crime,” Mr Sims said.
The tobacco companies acknowledged those retailers that supported their application.
“Legitimate retailers should not be forced to compete with those operating outside the law,” the companies said.