Tax hikes: Tobacco industry misinforms about parallel markets

A study by the consulting firm Ernst & Young, commissioned by Philip Morris International and Japan Tobacco International, estimates that tobacco purchases made outside the tobacconist network will represent 38% of the French market in 2023, compared to 23% in 2019. While an increase in the price of tobacco could be implemented by the public authorities, this umpteenth study on parallel markets, financed by tobacco manufacturers, is similar to a disinformation and lobbying operation to block public health policies.[1].

Although its conclusions were revealed exclusively on the JDD, the study is not available online, neither on the Ernst & Young website nor on that of Philip Morris. It is therefore not possible to know precisely the methodology used by the firm to reach its conclusions. Methodological opacity is a constant in tobacco industry studies, particularly on the evaluation of parallel markets, thereby penalizing the reliability and credibility of the results presented.

Biased and unbelievable results

Only a few elements and results from the study are mentioned in the JDD article. First, Ernst & Young claims to have questioned a representative sample of consumers, a third of whom indicated that they had not bought a packet of tobacco from a tobacconist in the last twelve months. Then, according to Ernst & Young, 38% of cigarettes would be " counterfeit or from cross-border contraband ". On this point, there is no indication whether the firm arrived at this figure from consumer statements, nor how the authors of the study (or consumers) establish the difference between a counterfeit pack of cigarettes and a contraband pack. Nothing in the articles devoted to this study mentions an independent study of the packs to determine whether they come from the manufacturers' factories or from clandestine factories, unrelated to the legal actors. Furthermore, the notion of " border smuggling ", referring to the lexical field of illegality, constitutes in itself a voluntary bias, since cross-border purchases, up to a certain limit, are authorized by law.

The scale of parallel markets deliberately exaggerated

The figures presented by the study are unrelated to public data. As Corinne Cléostrate, Deputy Director of Legal Affairs and the Fight against Fraud, points out: " There is no objective and independent data or observation from the tobacco industry based on a methodology to corroborate the estimates concerning the share of the parallel market. ". The study conducted by Santé publique France among more than 24,000 people reports, unlike Ernst & Young, a stability in the supply methods of French smokers between 2014 and 2022, despite the tax policies implemented during this period. The JDD article, relayed by Le Monde du Tabac, reports 530 tonnes of contraband tobacco seized in 2023, compared to only 250 tonnes in 2019, revealing in the background the increase in illicit trade. While the reasoning is appealing, it is nevertheless invalid: in 2015, Customs seizures amounted to 630 tonnes, or 25% for the year 2023. This data does not mean that illicit trade has decreased between 2015 and 2023, but that the volumes seized by Customs are not sufficient data to assess the scale of illicit trade. The volumes seized are first determined by the resources allocated to Customs, and, moreover, two-thirds of them are intended for abroad.

A lobbying operation within the framework of the PLFSS

The publication of this study comes a few months after the communication of the annual KPMG survey on parallel markets, also financed by the cigarette manufacturer Philip Morris, and reporting similar levels of parallel markets. The regular publication of studies on illicit trade, the validity of the results of which has been criticized for several years by the scientific literature, testifies above all to the desire of the tobacco industry to saturate the media space with disinformation on the real scale of parallel markets, to prevent the implementation of increases in tobacco taxes, the effectiveness of which in reducing consumption is the subject of a scientific consensus.

Ernst & Young, a historic ally of the tobacco industry

Ernst & Young has been a long-time ally of the tobacco industry. According to Tobacco Tactics, the firm has advised British American Tobacco (BAT) on how to increase the effectiveness of its lobbying efforts. In 2010, Ernst & Young published a report for the same manufacturer, indicating that levels of parallel markets were three times higher than what was then commonly believed. However, the New Zealand Institute of Economic Research refuted the data and conclusions presented by the audit firm, saying the report “ fundamentally wrong " And " worthless in informing the debate on smoking reduction measures »[2]. In France, the expense statements relating to activities of influence or representation of interests of tobacco manufacturers in 2023 showed that British American Tobacco and Philip Morris France called upon Ernst and Young Conseil.

[1] Sunday Journal, Tobacco: the parallel market breaks records, 01/12/2024, (accessed 02/12/2024)

[2] Tobacco Tactics, EY, 09/22/2022, (accessed 12/02/2024)