This has naturally induced squeals of delight from antipodean crusaders and "Simple" Simon Chapman was quick off the block to celebrate Australia's lurch towards the black market. In his excitement, he even told the truth about what will happen when plain packaging comes in...
First, we will see dramatic price falls in the retail price of tobacco. Many will think “these [famous name brand] cigarettes are costing me $3 to $4 a pack more than cheap unknown brands in exactly the same packaging except for the small brand name. They taste pretty much the same as cheap brands, so why should I pay out all the extra?”
Er, yes. I told you that would happen back in January when I wrote the following...
Plain packaging will result in people paying less for their cigarettes for other reasons. The first is that manufacturers operating in a completely “dark market”—ie. one in which they have no communication with their customers—are only able to compete on price. The second is that many consumers will drift towards cheaper brands when the premium brands lose their identity.
The bug-eyed sociologist continues...
Tobacco companies today chase the “value market” because they know that total sales volume is steady and the margins on high-end brands is where they profit most.
That's right. Again, I said all this in my paper for the Adam Smith Institute...
Knowing the power of packaging to imply quality, companies often produce two barely distinguishable versions of the same product and give the budget brand a consciously inexpensive-looking package, even though it would cost no more to make it look glitzier. The same is true of cigarettes which are branded and packaged according to the price point. One in two smokers cannot distinguish between similar cigarettes in blind trials and it is reasonable to expect many of them to downgrade to cheaper brands under a regime of plain packaging. This is the main reason the tobacco industry is so vehemently opposed to plain packaging: its top brands are worth billions of pounds and any government which misappropriates them can expect to be sued, as is already happening in Australia.
... It is the profitability of premium brands which is at stake in the plain packaging issue, not cigarette consumption per se.
This is all quite obvious stuff to anyone who has ever dabbled in logic, but throughout the whole campaign for this ridiculous policy, Chapman has continually claimed that Big Bad Tobacco objects to plain packaging not because it values its trademarks (as any industry would) nor because it wants to protect its more profitable premium brands, but because it's going to reduce the number of smokers. To take just a handful of his many tweets on the subject:
But now the truth can be told. The money is in the premium brands. The premium brands are about to lose much of their appeal and so people are going to turn to cheaper cigarettes. Pushing people onto cheaper cigarettes is not generally considered to be best practice in public health. But fear not, because Chapman has the solution...
But the Australian government can simply raise tobacco tax overnight as often as it needs to effectively maintain a floor price for cigarettes that will deter smokers from buying more than they could have afforded previously.
The man's a genius! Make cigarettes more expensive and fewer people will buy them. Why has no one thought of this before?!
Since this is such a cunning plan, why not double the price of cigarettes? In fact, why not triple it?
Oh, that's right. Because higher prices give massive incentives for people to buy cigarettes on the black market and it gives black marketeers further incentives to increase supply. That would explain why Ireland—the home of Europe's most expensive cigarettes—has an illicit tobacco market which is off the frickin' scale. Add plain packaging into the mix and you have cigarettes that are easier to counterfeit, combined with bigger profit margins from escalating tobacco duty. And, of course, organised criminals don't care how old their customers are. Jeez, what could possibly go wrong?
None of this will worry our Simon because he has what can most charitably be described as a simplistic view of how the black market can be policed. You may recall this gem from last year, a classic example of why people who have no sense of irony should not attempt sarcasm:
So while one in six smokers apparently know where they can repeatedly buy illegal tobacco, strangely, with more than a billion dollars supposedly being lost, the gormless Federal Police with all their intelligence and resources and impressive history of major smuggling busts cannot find any of these same retail outlets and prosecute.
I can only repeat what I said at the time about this stupefyingly dim-witted comment:
It's a measure of Chapman's immense talent that he can solve the centuries old problem of smuggling in one throwaway sentence, but this is a true Eureka moment, is it not? If the public can get hold of illicit substances, so can the authorities. Like all the best ideas, the beauty lies in its simplicity. All the police have to do is go undercover, find out where people are getting illicit goods and then find out who supplied them to them, and so on until you get to the top of the chain. Then make a few arrests and—ta-da!—the problem is solved. If only the DEA and the FBI had thought of this 100 years ago, we could have made a success of Prohibition and the War on Drugs. I look forward to reading this guy's next webitorial when he will solve the Palestinian problem and the common cold.
When this policy comes in it will be open season between the tobacco industry and the anti-smoking crusaders, with the black marketeers waiting in the wings. BAT's press release shows that they expect the government to jack up prices to bring about a reduction in smoking prevalence which it can then attribute to plain packaging:
As there’s no proof that plain packaging will actually work we expect the Federal Government to impose [on] the industry a large excise increase alongside plain packs to try and get more people to quit so it can say ‘look green packs worked’.
Chapman, meanwhile, expects the tobacco industry to reduce prices to maintain smoking prevalence for the same reason:
Australia is a tiny market for Big Tobacco, and it may well be willing to treat us in the way as when supermarkets place drastically reduced “loss leader” items on special to get customers into the store. The industry will be so desperate to demonstrate to watching nations that plain packs “don’t work” that it might even be prepared to wear local losses for a year or so.
Time to get out the popcorn. It's war!
