Tobacco traceability in the EU: is big tobacco in the driver’s seat?
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Tobacco traceability in the EU: is big tobacco in the driver’s seat?

Friday, 29 May 2020
This is an opinion article by an external contributor. The views belong to the writer.

In the runup to World No Tobacco Day (May 31st), the World Health Organization published three groundbreaking reports on the dangers posed by e-cigarettes.

Painstakingly researched and using the latest available evidence, the reports spell out clearly that, while much is not yet known about the long term effects of these novel tobacco products, the science is clear on one point: regardless of their nicotine content, e-cigarettes and their other technological cousins deliver substances that are known carcinogens.

As the WHO states, the conclusions from these reports make it clear that such products need to be better regulated by the public health community to protect the youth from “industry manipulation” marketing e-cigarettes as safe and fun. It’s no surprise that the theme of this year’s No Tobacco Day is youth protection.

But while the WHO’s latest jab at the tobacco industry undoubtedly hurts the prospects for e-cigarettes to evade the stringent regulations levied on ‘old-fashioned’ cigarettes, Big Tobacco is far from feeling cornered. In fact, a series of carefully researched investigative reports published by the OCCRP show the extent to which cigarette manufacturers have infiltrated public health circles. And Exhibit A are the EU’s ongoing efforts to restrict the parallel tobacco trade.

The never-ending story of tobacco contraband

Contraband cigarettes are an old story, going back to the early 2000s, when the European Union accused three tobacco companies in New York District Court proceedings of “an ongoing global scheme to smuggle cigarettes, launder the proceeds of narcotics trafficking, obstruct government oversight of the tobacco industry, fix prices, bribe foreign public officials, and conduct illegal trade with terrorist groups and state sponsors of terrorism.”

The reason for this is that the parallel trade has been the main avenue Big Tobacco has used to bypass rising cigarette prices and make sure the ranks of its customers keep growing year after year. Eventually, the case was concluded, and the four majors  signed cooperation agreements with the EU, pledging to do their utmost to clamp down hard on the parallel cigarette trade.

A key plank of that agreement was the implementation of a track and trace (T&T) solution by Philip Morris called Codentify, whose stated aim was identifying loopholes in the supply chain. The company went on to license the technology for free to its competitors – a gesture of corporate generosity that raised many eyebrows at a time. However, after years of implementation, approximately two-thirds of the illicit tobacco trade still comes from plants operated by the majors (it’s worth noting that the World Customs Organization claims the figure is closer to 98%).

WHO’s bold stance

Faced with this seemingly Sisyphean challenge, the WHO stepped in and adopted the Protocol to Eliminate Illicit Trade in Tobacco Products, which set forth obligations for states to impose due diligence processes and know-your customer policies to the tobacco industry, as well as calling for increased criminal cooperation and traceability obligations between states to identify and prosecute the sources of the parallel trade.

Skeptical of Big Tobacco’s tactics, Article 8 of the Protocol, on the T&T system for tobacco products, contains no less than three different references to the independence of the system from the industry: “Due to the “irreconcilable conflict” between tobacco industry interests and public health interests”, parties are barred from delegating any part of the tracking and tracing system to industry actors. This obligation calls on public authorities to limit their relationship with representatives of the tobacco industry in implementing T&T systems “to the extent strictly necessary”. The Protocol came into force in September 2018 and counts on 59 Parties from all over the world, and is set to bind the 182 Parties of the Framework Convention for Tobacco Control.

The European trap

Right about the same time that the WHO was busy building momentum for its Protocol, the European Union passed the Tobacco Products Directive, which contains starkly different  language regarding the independence of the bloc’s own track and trace system. The system has been plagued by delays and its shortcomings in keeping Big Tobacco out has sparked controversy among public health groups, academics and NGOs in general.

The main bone of contention comes from the fact that the TPD contains much weaker language regarding the exclusion of Big Tobacco and its traditional partners from the T&T system, and the choice of system providers has brought its incompatibility with both the letter and spirit of the Protocol to the fore. Indeed, most of the companies chosen conceived, promoted or implemented Codentify on behalf of the tobacco industry, which means that the very actors that were supposed to be kept out track and trace are now effectively in charge of the EU system.

Dentsu Tracking, the company that was appointed by the European Commission to manage the EU central data storage repository, has a controversial past as it was formed after it bought Blue Infinity, the Geneva-based implementer of Codentify. Its CEO, Philippe Castella, who is a former Philip Morris employee, has been promoting the system as compliant to the WHO Protocol. Similarly, the EU data storage and anti-tampering devices have been outsourced to Atos and Worldline (which hyped its past experience with Codentify for a failed tender in Chile). Both companies maintain their traceability solutions are completely independent of the tobacco industry.

While it is disheartening to see former Codentify partners in charge of the EU T&T system, an even bigger source of concern is that the EU system is being promoted at WHO level. Some MEPs have tried to raise red flags in questions to the EU Commission, expressing frustration that a system that was widely rejected by the public health community is now promoted by the European Commission as compatible with the WHO Protocol, and more specifically, its Article 8. The Framework Convention Alliance (FCA), an international NGO in charge of tracking the adoption of anti-tobacco measures, has also been critical of the EU system and the possibility of its extension to other markets.

WHO to the rescue?

It’s difficult to predict whether the WHO, whose Director Dr Tedros Adhanom Ghebreyesus pushed strongly for the Protocol’s entry into force, will rebuke the EU system and adopt a genuinely stringent approach to the illicit tobacco trade, but the latest promotional campaign for the EU system sparks additional fears that Big Tobacco might end up being indirectly in charge of the worldwide anti-illicit trade system.

Look no further than Pakistan, where a company associated with the country’s military was recently awarded the track and trace system, only to lose the contract after it emerged that the real winner of the tender was Inexto, a tobacco industry proxy. Created by Big Tobacco to appear as an independent track and tracing actor that complies with the WHO rules, Inexto has come under fire from public health advocates, no least of all the WHO. The company is also in charge of serialization and aggregation hardware and software in the EU. The company has rejected accusations of representing the interests of the tobacco industry.

In South Africa, Uganda, and all around Africa, tenders have equally been canceled because of the numerous tasks entrusted to Big Tobacco and its partners. In these countries, the tobacco industry was pushing for the European system to be adopted as a WHO Protocol compliant one. Sadly, other countries have proven less scrupulous: in 2017, Burkina Faso adopted Codentify as “a Protocol compliant system”.

This worrying state of play led Vera Luiza da Costa, the head of the WHO’s tobacco control work to lambast the European Commission in 2016 for risking “put[ting] a fox in charge of a henhouse.” Four years on from her warnings, it seems that the fox is no longer guarding the henhouse – it’s already inside.