ITSA v. European Commission: the court case that could?

ITSA v. European Commission: the court case that could?

One year ago, the European Commission (EC) made headlines and attracted considerable controversy by effectively opening the gates for its World Health Organisation (WHO)-mandated track and trace (T&T) system for tobacco to organisations with links to the tobacco industry. More precisely, the EC’s final proposal on a cigarette T&T system favoured an approach that integrated a third-party, industry-controlled system based on the Inexto (formerly known as Codentify) system originally devised by Philip Morris International (PMI) in the mid-2000s.

In addition to the not-unreasonable risk that a T&T solution developed by the tobacco industry could serve the industry’s profit margins rather than the public interest, a wide array of critics also point out that the EC decision violates the terms of the WHO’s Framework Convention on Tobacco Control (FCTC) directives. The FCTC stipulates that its signatories’ traceability solutions must be independent and free from tobacco industry influence.

Stepping up to the plate

In the months the Commission announced its decision, one group – the International Tax Stamp Association (ITSA), whose members produce tax stamps and traceability systems for products including tobacco – has turned to the European Union’s General Court (formerly known as the Court of First Instance) and Court of Justice (ECJ) to force the EC to live up to its obligations under the FCTC. ITSA argues that the FCTC stipulates that any T&T system employed must be under the EC’s control and can be neither “performed by or delegated to the tobacco industry”.

It may seem like a modest intervention, but it’s an important one. As tobacco use declines in Western societies, the industry is finding creative new ways to promote its products – often under the guise of helping to reduce smoking-related deaths. For instance, the newly-established Foundation for a Smoke-Free World (FSFW) has the stated aim of “reducing harm and deaths from smoking worldwide,” but also has an annual US$80 million budget from PMI for the next twelve years.

An article in the Lancet last year excoriated the organisation, arguing that by funding research foundations such as FSFW, the tobacco industry was able to “work with, recruit, and set agendas for scientists.” There’s a similar pattern of industry interference in public health matters in developing economies, where tobacco companies use their substantial financial clout to undermine legislation they don’t like.

The fight against the illicit tobacco trade has seen tobacco industry double-dealing on just as large of a scale. The black market for tobacco makes up around a tenth of the global cigarette trade, costing governments more than €27bn in lost tax revenues. Research from the Tobacco Control Research Group at Bath University indicates that an estimated two-thirds of all illegal cigarettes can be traced back to the industry itself. By taking control of the European T&T system, tobacco manufacturers can ensure their continued sway over an issue of vital importance to their bottom lines.

Giving the fox the keys to the henhouse?

While the ITSA action may seem like a niche case, the matter at hand ultimately comes down to the Commission’s willingness to hand over a major component of regulation to the very industry being regulated. Anti-tobacco activists and the WHO itself have also been vocal about the dangers of trusting the tobacco industry in the fight against illicit trade. By accepting the solutions of industry groups instead of exercising independent oversight, the Commission is failing to live up to its obligations to both European citizens and the member states that lose tens of billions of Euros per year in tax revenue as a result of the illicit and parallel tobacco trades.

The issues with the Inexto system itself are hardly limited to the theoretical. From a security perspective, Inexto employs relatively unsecured and commercially-available equipment, which offers counterfeiters the opportunity to clone valid codes with a view to using them more than once. Codes produced using inkjet printers could also be vulnerable to alteration, in violation of the FCTC directive that they be “securely affixed”. And then, of course, there is the fact that a look at Inexto’s top management is enough to show its supposed break with PMI does not stand up to scrutiny. Several of Inexto’s senior figures spent years, and in some cases decades, in senior positions at PMI.

If the EC is truly committed to combatting the illicit tobacco trade, it should not take a legal complaint from ITSA or a decision from the ECJ to see Brussels reject any solution supplied by organisations with conflicting interests.

The FCTC protocol warns of the need to “be alert to any efforts by the tobacco industry” to subvert its aims, underlining the importance of transparency in the implementation of new counter-smuggling measures. The tobacco industry’s attempts to promote its system to governments as independent do nothing to change the fundamental realities at play. To comply with its commitments and responsibilities, the EC has no option but to exclude Inexto from Europe’s T&T solutions – and remain on its guard against any other system that could prove to be a front for tobacco industry interests.

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