The online investigation of tobacco sales provides better protection for consumers and honest businesses

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1 Central England Trading Standards Authorities: Internet Tobacco Inspections and Test Purchases The online investigation of tobacco sales provides better protection for consumers and honest businesses In tackling tobacco smoking the Trading Standards Service focuses on two main areas: the impact on the health service stemming from tobacco-related illness and the impact on HM Revenue and Customs through the sale of illicit tobacco, both counterfeit and non-duty paid. The Choosing Health: Making Healthy Choices Easier report 1 (Department of Health 2004) highlighted the importance of reducing smoking prevalence and exposure to cigarette smoke because of their negative health consequences. Overall, smoking is the greatest single preventable cause of illness and death. In England alone, deaths estimated to be caused by smoking were around 83,700 in (18% of all deaths of adults aged 35 and over), and costs to the NHS of treating illness and disease associated with smoking were estimated at 5.2 billion a year in approximately 5.5% of the total health care costs (Statistics on Smoking England, ). Smoking not only has an impact on health and healthcare systems, but on the economy too. In Tackling Tobacco Smuggling 4, the Government described the law and order problems caused by the increase in smuggling of alcohol and tobacco through the Channel ports and the Channel Tunnel. The growing availability of cheap smuggled cigarettes means that the effect of duty increases in discouraging cigarette consumption is considerably less than it would otherwise be. In fact during there was an estimated 4200 million detriment from non-duty tax paid tobacco ( 1700 million detriment in 1998 and 2500 million in 1999) 5. It is clear that reducing the levels of smoking is undermined by the provision of an unregulated supply of cheap tobacco. The Department of Health s (DoH) wider strategy on tobacco control made funding available to regional trading standards partnerships including Wales and Scotland. Each region would deal with a certain aspect of tobacco-related problems. Central England Trading Standards Authorities (CEnTSA), a partnership of 14 local authority Trading Standards Services in the West Midlands 6, is committed to achieving measurable improvements in trading standards for all those who may benefit. CEnTSA encourages and builds on the strengths of each authority, sharing best practice and improving service delivery region wide Office for National Statistics, Birmingham, Coventry, Dudley, Herefordshire, Sandwell, Shropshire, Solihull, Staffordshire, Stoke on Trent, Telford and Wrekin, Walsall, Warwickshire, Wolverhampton and Worcestershire 1

2 A joint approach to investigating on-line sales of tobacco CEnTSA suggested to the DoH that an investigation into the availability of tobacco products online would be an effective way forward as this area of investigation appeared to have not been tackled before. It was considered that this work would also provide intelligence on businesses using backdoor approaches for selling tobacco to the public and not paying duty. It was noted that it was unlikely that there would be consumer complaints in this area as they would be receiving cheaper products taking into account the non duty paid. CEnTSA agreed to manage, coordinate and direct a national programme across England and Wales of inspections and test purchases of internet websites that supply tobacco products online. The aim was to assess the levels of compliance in relation to all relevant legislation including advertising, underage sales, unfair contract terms, distance selling, health warnings and customs and excise duties, and to identify areas of concern. Funding of 43,250 was secured from the DoH and 10,000 for the South East Regional Group to look at the discrete area of auction internet sites and TV channels for compliance with the 1965 ban on cigarette advertising on television 7. A CEnTSA Project Steering Group was set up at the outset. It comprised the CEnTSA Chair, who is also a Head of Service; the Head of Service of the local authority hosting Scambusters; the Lead Officers for Tobacco projects and Underage sales, both of whom are Trading Standards Managers; and the Regional Coordinator. CEnTSA then coordinated a workshop for briefing representatives from each regional group participating in this project. The aim was to consider the relevant legislation; to agree the approach and timeframe, to develop the necessary protocols, and to develop a standard inspection and referral pro forma. An initial internet search of the worldwide web undertaken using simple search criteria identified 204 sites that required investigation. These were selected on the basis that they appeared to offer tobacco products to UK customers. All planned work was completed including the development and production of a comprehensive database to help collect and analyse data obtained from the website inspections and test purchases. This was supported by the development of standard inspection and referral proformas as well as guidance and advice documents. These form the basis of an online compliance and inspection toolkit. This included checks on whether business had any processes in place to ensure that purchases were not made by underage children. The main objective was to provide Trading Standards Officers with the necessary information to undertake inspections in such a way that there would be consistency throughout across local authorities both for this project and for further internet tobacco compliance work. It was also thought that this could be adapted for other goods purchased online. Participating regions were each allocated a pre-determined number of websites, and equipped with a sub-copy of the database within which to record their findings. Each region carried out its allocated website inspections and / or test purchases and sent its findings to the coordination team. The resulting master database comprised data from all 204 websites, 30 of which had gone off-line by the time investigations began. A further 63 did not supply to the UK, leaving a total of 111 sites to investigate, of which 43 were UK-based sites. The South East region was allocated internet auction sites and TV shopping channels to monitor and inspect. In addition to compliance checks mentioned above, compliance checks for the 1965 ban on cigarette advertising on television were included. 7 Television advertising of tobacco products was banned in the UK in 1965 under the Television Act

3 Joint initiative identifies high levels of non-compliance High levels of non-compliance across a number of legislative areas including distance selling, advertising regulations and unfair contract terms were identified. Few sites displayed any kind of health warning. Imported tobacco products not controlled by UK legislation are readily available to UK consumers including illicit tobacco 8. Consumers may not be aware of the country of origin of the tobacco products they are buying on the Internet and therefore unaware that UK law does not apply to the sales. In relation to some smokeless and novel tobacco products, consumers may not be aware that they are buying tobacco products at all. Imported tobacco products and auction site sales appear to have no duty paid on them, representing a significant loss in revenue for the Government. Of the 54 test purchases, seven were not delivered (13%). These were mainly cigarettes but cigars and hand rolling/pipe tobacco were also included. Of the 47 test purchases delivered, none appeared to have had customs duty paid on them and only three were intercepted by HMRC. Many purchases were disguised by means such as the reshaping of the package or the use of oversized containers. Some containers were labelled with incorrect customs declarations, e.g., gift, toy, book, personal gift and regular international customer and some gave the value of the package content as well below its true value. Issues were also flagged regarding the ease of under 18 year olds purchasing tobacco. No sites visited attempted to restrict access by requiring any form of registration. Ten of the 43 UK-based sites had no age restricted warning, only one of the total of 111 sites gave an age statement this was a UK-based site but it gave the age as 16 and not 18 as required, and 90 (out of 111) asked customers to confirm age this includes 30 (of 43) UK based sites. Other areas of regulatory law were found to be lacking in compliance. The overall compliance in relation to the Consumer Protection (Distance Selling) (Amendment) Regulations was low, although only 43 of the 111 sites supplying to UK customers were actually based in the UK. Out of 43, 18 did not give cancellation rights, 16 had unfair cancellation terms and 4 did not show their identity, although this may be due to lack of training/understanding of those carrying out the inspections as the typical non-compliance level online in the UK is 50%. 8 Illicit tobacco can be either smuggled, bootlegged or counterfeit: Smuggled: these are generally legitimately manufactured tobacco products which have evaded payment of tax by being illegally transported, distributed and sold. Bootlegged: these are tobacco products which are purchased in a Country with a low level of taxation and illegally brought into the UK, evading payment of tax. Counterfeit: these are illegally manufactured tobacco products which are often made abroad, but sometimes in the UK. They are sold cheaply and tax free. Counterfeit products are produced from inferior materials and vast profits are made throughout the supply chain. 9 er=&legtype=all+legislation 3

4 The overall compliance in relation to Tobacco Advertising and Promotion Act 2002 was low with more than 70% of sites having brand images on their home page and more than 90% of sites making no attempt to control access to tobacco information. Only 9 sites out of 111 sites supplying to UK customers complied with tobacco advertising regulations 92% of sites were not compliant. Only 33% of websites supplying to UK customers carried any health warnings. One with no such warnings even claimed that snuff is less harmful method of tobacco usage and may be a viable alternative for cigarette smokers to switch to. Although smokeless tobacco chewing tobacco, snuff and paan (a mixture of tobacco and betel nut, which is placed in the side of the mouth and sucked) is less harmful than smoked tobacco, it is still a cause of diseases such as oral cancer. 10 The majority of sites allowed payment by credit card but 26 of them offered unsecure payment methods such as cheque, postal order, bank or wire transfer and even cash. Five provided only unsecure methods, which underage purchasers are more likely to use. A number of sites claimed to be in a particular location whereas in fact the test purchase originated from a different country, for example, sites based in Geneva and in Israel claimed to be based in the UK. Cigarettes were on average half the usual retail price. This is likely to be due to no customs duty being paid and is the reason why online purchasing is attractive to smokers. Twenty auction sites were monitored and only one was found to be offering tobacco products. As consumers need to search to find these products, the internet pages do not fall within the definition of tobacco advertisements, so there is no offence but there is failure to comply with labelling requirements. It is also likely that no duty is being paid. Seven test purchases were undertaken. Due to information supplied by trading standards, HMRC visited a London-based trader advertising cigarettes on CQout and seized cigarettes worth 3,150. The packs appear to have come from Malaysia without correct UK health warnings or a fiscal duty mark. Nine television shopping channels were monitored over a period of time and no sales of tobacco products were found. Therefore the compliance with the ban on tobacco advertising on television was high. This project has helped produce guidance for trading standards, guidance for businesses and increased home authority referrals. The database for the on-line inspection work is accessible to all authorities. Regional coordination provides cost benefits and value for money for delivering local and national priorities The development of the database, the associated templates and proformas took approximately ten officer days to develop and test. Although it is difficult to give an exact cost of the toolkit, it was estimated at approximately 2,500. Taking into account that one lead authority undertook this work on behalf of a region, the other local authorities benefited from work done which could have cost up to 32,500, had each authority worked separately. Furthermore, as CEnTSA coordinated this project across England and Wales, the potential savings are much more significant pdf 4

5 Lessons learnt This was the first nationally coordinated exercise of this kind. Regional coordination ensured a consistent and coherent approach to establishing compliance of a number of legislative requirements relating to tobacco control. This also enabled efficiency gains and economies of scale taking into account individual authorities developing the toolkit and comparing it to one regional group developing it and making it available to Wales and the nine English regions. There were a number of lessons learnt arising from the project and these include: The planning of a national project is undoubtedly resource intensive as this was an entirely new piece of work. The project was not only breaking new ground but it involved working inclusively with quite disparate local authorities that all had differing levels of internet and IT expertise. Scoping the project required initial discussions, the development of a timeline, initiation and update meetings, and the direction of regional participants, together with all associated communications. Longer lead times to determine the project plan may well have avoided some of the challenges faced within the completion of this project as highlighted below. It is important that the same officer representatives attend both the planning and review workshops in order to provide continuity and ensure delivery of the required objectives. Some regions changed project officers mid-way through which led to the misunderstanding of processes and procedures agreed at the start of the project. This in turn led to errors in their work and inconsistencies which CEnTSA had to spend time correcting. Regional representatives must have the authority to agree resource(s) from their respective regions. The outcomes of the project found that IT and IT software differed within some regions. For example, some regions did not have the facility of a stand alone computer or Microsoft Access. Project Officers require knowledge of Microsoft Access and its application. The learning from the project around how websites are set up, internet selling in general and online compliance work in particular, should be shared with other Local Authorities. Inspections, test purchases and interventions should be conducted in a timely fashion as the Internet is a fast changing market place. The websites were selected on the basis that they appeared to supply to UK customers. This was usually determined by checking a website s shipping or delivery information pages, if they existed. Many sites made overt claims that they shipped to the UK, or worldwide but more detailed scrutiny (e.g. by attempting a purchase) revealed that they did not supply to the UK. The coordinated approach and joint workshops organised by CEnTSA worked very well and could be used as a model for future projects conducted nationally, particularly those relating to the internet. The database proved to be a useful way to collect and record consistent information and to avoid duplication. 5

6 An unexpected benefit of this project has been that it has provided training and increased competency for a number of local authorities that had done little or no online inspection work prior to this project. Furthermore one of the outcomes of this project has been the toolkit which can be adapted to other online compliance work. Recommendations for further tobacco control work The project has indicated that there is a need for further work to address non-compliance in relation to Consumer Protection Distance Selling Regulations and Tobacco Advertising and Promotion and the identification of illicit tobacco (both counterfeit and non-duty paid). It is recommended that internet auction sites are revisited using the same approach with a regional group coordinating the results. This would ensure consistency of approach and economies of scale. Further partnership working with DoH on the absence of health warnings is recommended. There should be additional work to raise awareness of the nature of smokeless and novelty tobacco products and their potential for harm in partnership with DoH and others, including independent research that has already been carried out. Further monitoring of internet auction sites, in particular CQout is recommended following the result outlined above. Whilst this national project has on this occasion been coordinated successfully by one region, further work would be more efficiently delivered if a single region took responsibility for it, particularly now that the learning and knowledge has already been shared. Taking into account the lessons learnt from above there is the potential to adopt this approach in relation to other strategic priorities which matter for consumers, businesses and their communities. Through regional coordination support, a small investment in a region this project has provided essential baseline data and evidence of the problems relating to tobacco control which will help influence policy development and improve targeting to combat illicit tobacco sales and overall contribute to the government s target of a reduction in smoking. 6