News Compass

Thursday, November 25, 2004

British-American Tobacco Company Used Tobacco Smuggling to Boost Profits

From The Times
25 Nov04

British-American Tobacco Company, one of the world's biggest tobacco producers deliberately encouraged cigarette smuggling in developing countries to offset its dwindling profits in Europe, according to research published yesterday in the journal Tobacco Control. Click here to read full text of the research study.

Studies by the London School of Hygiene and Tropical Medicine found British American Tobacco used smuggling as part of its corporate strategy to expand into lucrative markets in Asia.

Confidential documents from BAT's offices in Guildford, England, show the company used the illicit trade in cigarettes to lure new smokers, undermine health initiatives and help it capture key markets.

The research, published yesterday in the journal Tobacco Control, come in the wake of an official confidential inquiry by the British Government that cleared BAT of allegations it colluded in cigarette smuggling.

More than 8 million documents relating to BAT's affairs had to be made available to researchers for 10 years as part of the settlement of a US health lawsuit.

Public health experts and anti-smoking campaigners say BAT condoned tax evasion and colluded in smuggling billions of cigarettes in a global drive to increase sales.

The allegations do not suggest BAT employees carried out the smuggling, but it is alleged executives controlled the brands, marketing campaigns and timing, and sought to manage volumes and price levels of the smuggling markets.

Researchers said the findings raised serious questions about corporate conduct and how smuggling had become a business strategy rather than the business of rogue traders.

Examples of collusion in smuggling cited by the researchers include repeated reference to "general trade" -- a euphemism for contraband -- that was allegedly shipped to target countries by third parties linked to BAT.

One paper describes how BAT exploited contraband in China, where the Beijing Government maintains a firm grip over foreign investment and trade, to get around import quotas.

Cigarettes were taken into China illegally via Hong Kong, the study found.

A spokeswoman for BAT said suggestions the company was targeting Asia because of declining business due to health campaigns in Europe were untrue.

The British Department of Trade and Industry "concluded its investigation into similar allegations and stated there was no evidence to support claims we have been involved in illegal activity", she said.

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ABSTRACT from the Research Study

RESEARCH PAPER TITLE:

Complicity in contraband: British-American Tobacco and cigarette smuggling in Asia

BY

J Collin1, E LeGresley2, R MacKenzie1, S Lawrence1 and K Lee1

1 Centre on Global Change and Health, London School of Hygiene and Tropical Medicine, London, UK
2 Tobacco Control Consultant, Ottawa, Ontario, Canada

Objectives:
To examine the complicity of British American Tobacco (BAT) in cigarette smuggling in Asia, and to assess the centrality of illicit trade to regional corporate strategy.

Methods:
Analysis of previously confidential documents from BAT’s Guildford depository. An iterative strategy combined searches based on geography, organisational structure, and key personnel, while corporate euphemisms for contraband were identified by triangulation.

Results:
BAT documents demonstrate the strategic importance of smuggling across global, regional, national, and local levels. Particularly important in Asia, contraband enabled access to closed markets, created pressure for market opening, and was highly profitable.

Documents demonstrate BAT’s detailed oversight of illicit trade, seeking to reconcile the conflicting demands of control and deniability.

Conclusions:
BAT documents demonstrate that smuggling has been driven by corporate objectives, indicate national measures by which the problem can be addressed, and highlight the importance of a coordinated global response via WHO’s Framework Convention on Tobacco Control.