3-11 Hunter Street, PO Box 1925, Wellington. Tel. +64 4 473 9223 Fax. +64 4 496 6550 Email. admin@fgc.org.nz www.fgc.org.nz Smoke free Environments (Controls and Enforcement) Amendment Bill 28 January 2011 The New Zealand Food and Grocery Council (the FGC ) welcomes the opportunity to comment on the Smoke free Environments (Controls and Enforcement) Amendment Bill (the Bill ), currently before the Health Select Committee (the Committee ). The FGC represents the major manufacturers and suppliers of food, beverage and grocery products in New Zealand. FGC member companies supply over 95% of the processed food and beverages supplied to the grocery retail industry and over 65% of supermarket packaged goods sales, of which tobacco products are a major category. While the FGC can support the Bill s provisions to increase penalties against retailers who sell tobacco to people aged under 18 years, the FGC and its members cannot support provisions that force significant costs burdens (by way of a retail display ban) onto smaller retailers and present a significant barrier to competition for manufacturers when there is not the evidence to justify such regulatory intervention. The FGC has to consider the long term implications of law changes that impact upon our membership. Our members are aware of how readily pressure groups seek more regulation by comparing apparent evils and generating demands for comparable restrictions on freedoms in new areas. We have to consider, for example, the sincere urging that could follow for similar restrictions on certain types of food. The same willingness to restrict freedom could be invoked to limit the availability (without outright banning) of other products. The FGC is therefore opposed to key elements of this Bill. The sale and use of tobacco in New Zealand is already the subject of substantial legislation and regulation. The legislation derives from the Smoke Free Environments Act 1990 which has been in operation in New Zealand for 20 years and which is still regarded as a world leading piece of tobacco control legislation.
This Bill falls well short of evidence based policy development particularly when the Ministry of Health s Regulatory Impact Analysis states:...the information and analysis summarised in the RIS cannot be considered to be totally complete and fully convincing. 1...It is unlikely that introducing this measure will result in a sudden or dramatic drop in smoking prevalence... 2 It is still too early to comprehensively assess the removal of retail displays in other countries... 3 These and other comments are not ringing endorsements for sound policy making, alongside elements of the Bill that raises questions about the consistency with the Government Statement on Regulation with the comment: The proposals...potentially impose additional costs on sellers of tobacco products. This could be considered to be inconsistent with the Government Statement on. 4 International precedent is one of the rationales underpinning the Ministry s proposal. The FGC does not believe that another jurisdiction s policy should be a driver for New Zealand policy without sufficient evidence of the policy s effectiveness. The FGC is concerned that a report by the UK Institute of Economic Affairs released in July 2010 found that, rather than acting as a harm reduction measure, display bans in overseas jurisdictions have had the opposite effect of causing harm by driving the illegal market and decimating the independent retail sector 5. The FGC is concerned the Ministry of Health seems to have ignored this report. It is for these reasons, plus deep concerns regarding supply chain logistics, staff safety, and resulting impracticality for the grocery sector that the FGC does not support the Bill. We urge the members of the Committee to have regard to a number of key considerations. These include: The regulatory environment for business in New Zealand; The retail environment for tobacco in New Zealand; 1 Cabinet Social Policy Committee Paper Better Controls on Tobacco Retailing, Office of the Associate Minister of Health (Hon Tariana Turia), Quality of Impact Analysis, para 70. 2 Ibid, para 4 3 Ibid, para 18 4 Ibid, para 71 5 Patrick Basham, Institute of Economic Affairs Canada s ruinous tobacco display ban: economic and public health lessons (IEA Discussion Paper No. 29, July 2010) 2. 2
Evidence based policy; Consumer education and enforcement required; Youth access; and Security concerns for staff. The Regulatory Environment for Business The Government has stated its commitment to ensuring a fair and transparent regulatory environment for New Zealand businesses. The sale of tobacco in New Zealand is the subject of an extensive regulatory regime by way of the Smoke free Environments Act. It is important that any additional Amendments to this Act be undertaken with cognisance to the Government s goal of ensuring a streamlined, fair, transparent and efficient regulatory environment for New Zealand businesses and overseas manufacturers. In the case of this Bill, this objective falls well short. The FGC does not believe that the additional compliance costs that would arise if the Bill became legislation are cost effective and justified. A Report by Deloitte Australia 6 highlights both the upfront costs of implementing a retail display ban, along with the ongoing costs associated with increased transaction costs to retailers. The FGC is concerned the Ministry of Health seems to have ignored this substantial report. The Retail Environment for Tobacco in New Zealand The FGC supports the current comprehensive regulatory regime for the sale of tobacco products at retail. For instance, the FGC believes that it is important that the sale of tobacco to minors is prohibited and that tobacco products carry health warnings. The Ministry of Health, as the Crown s representative, has obligations to ensure that strict penalties are imposed if this regime is compromised and that enforcement is carried out. It is worth noting that in 2010 Sweden and Denmark both rejected the introduction of a retail display ban, and instead focused its regulation on enhancing enforcement and penalties against retailers who sold tobacco products to youth. There are approximately 7,500 retailers in New Zealand selling tobacco products, with some 6,000 being small family run convenience stores or dairies. Unnecessary, unproven and overly restrictive regulation on the sale of tobacco risks detrimental effects for these small retailers, some of whom rely on tobacco sales as a significant component of their revenue. 6 http://aacs.org.au/aacs/documents/aacs_final_report.pdf 3
The FGC believe the Members of Parliament need to consider the economic costs if the Bill goes ahead which include one off renovation costs for retailers as well as the extra time taken to serve customers. There is a real risk that some retailers will be forced out of business if the sale of tobacco becomes subject to overly restrictive regulation. In addition, the effect of the Bill will be that consumers will only see the list of products available and prices, they will be unable to recognised logos, packages, and descriptions of products. Consumers will be unable to see health warnings on packages. Consumers may wonder why tobacco products are being hidden from view. Their understanding that tobacco is a legal, regulated product may be undermined. This undermines the whole strategy of controlling through channels subject to harm minimisation methods. If illegal markets grow, tobacco products will be sold by people who care nothing about age restrictions or harm reduction. Commencement Dates Clause 2 Our members are concerned that there are no specific regulations provided that outline how retailers are expected to comply with this Bill. This element makes the Bill demonstrably unfair and raises the prospect of a Bill passing with the threat of greater penalties against retailers but without telling retailers what or how they can comply despite a 2 year timeframe as indicated in Clause 2. This is not sensible policy making. Advertising of tobacco products Clause 6 The FGC submits that Clause 6, Section 22(1A), should be removed from the Bill as it prevents retailers from putting up notices which advertise health warnings or tobacco product purchase age information or warnings. This seems contrary to the intention of the Bill to reduce harm and the tobacco uptake among young people. If the concern is that the main purpose of these notices is to advertise the product, rules could specify the size and/or content of these notices (similar to what is currently in section 23(3)). Exemptions from advertising prohibition Clause 7 (s 23(1) (a) The FGC submits that Clause 7 Section 23(1) (a) should be removed from the Bill as there is little evidence that it will reduce tobacco uptake and it is an anti competitive measure. Adult consumers recognise brands, not just by the product name, but also by the logo, design, or similar devise that is associated with the tobacco product. The display of products, as allowed under the current section 23, is the only way in which 4
existing smokers are given the opportunity to change their brand preference, and maybe even try a new brand which reduces the health effects of smoking. Clause 7 will effectively remove consumers ability to recognise their brand and learn about new brands. The FGC is concerned that there is no evidence that the display will meet the objectives of the Bill. There is no evidence that product display in a retail context entices or attracts non smokers of any age to try tobacco products. The assertions in the Cabinet paper to this Bill Better Controls on Tobacco Retailing are not supported by information collected by the Ministry of Social Development and published in the Social Report 2010. This report shows a faster fall in prevalence among vulnerable groups (the young) in New Zealand than in those countries where display has been prohibited. The FGC believes these trends are longstanding and that the market for tobacco products will continue to fall in line with consumer sentiment and demand. Product display bans will only have a marginal impact on these trends. Our concern is that the benefits will outweigh the costs of over burdensome regulation. There is evidence that some retail outlets, particularly supermarkets, display significantly fewer tobacco products than their legal entitlement under the Smokefree Environments Act. The evidence suggests that, like with all consumer goods, over time retailers will not stock or display products that their customers do not want or do not like. For these reasons the FGC recommend clause 7 is removed as the current section 23 is sufficient. Exemptions from advertising prohibition Clause 7 (s 23(1) (b) The FGC submits that Clause 7 Section 23(1) (b) should be removed from the Bill as there is no justification for forcing retailers to change their name. Until there is real evidence that a number of retail outlets have changed their names in recent years to incorporate words or expressions related to tobacco products, there is no need for such a draconian provision. FGC do not believe there is a real problem. Trade Rebates Clause 8 The FGC submits that Clause 8 Section 28A should be removed from the Bill as it aims to restrict existing arrangements between retailers and manufacturers. There is insufficient evidence or justification for Clause 8 as it is based on a misconception that trade rebates and discounts provided by manufactures to 5
retailers are imposed on the retailers by the manufacturers. It is common practice in the sale and purchase of fast moving consumer goods to negotiate trade rebates and discounts. These are sought by the retailer from the manufacturer. To change this would be a backward step in the supply of grocery items in New Zealand. The FGC is aware the Ministry of Health was investigating this issue but is unaware of any outcome of this investigation. We would welcome the Ministry s comment on their investigation. Offences Clause 12 Clause 12 which amends Section 36 (1A) of the Bill will make it an offence to allow tobacco products to be visible without reasonable excuse and the maximum fine for this offence is $10,000. The FGC submits that this level of fine is unreasonable given the size of most retail businesses who sell tobacco and this heightens the risk that some retailers will be forced out of their businesses. This is an issue of real concern for the FGC as small to medium sized retailers have been an integral part of the New Zealand economic and social fabric for many generations. In effect the Bill adds further red tape to a struggling retail sector and is unwelcome. There is no estimate in the Regulatory Impact Statement of whether the potential benefits from the new infringement regime will outweigh the costs of implementing it. Evidence based Policy decisions required The FGC believes that evidence based policy decisions should form the basis for any new regulation and believes that there is no independently verifiable evidence from Canada, Iceland, Thailand, or Australia that demonstrates that a retail display ban significantly reduces the number of people who smoke. It can be argued that even the Ministry of Health acknowledges this in their RIS. Consumer Education and Ministry Enforcement Needed The FGC recognises and supports the Government s role in providing the public with clear and consistent messages about the health risks associated with smoking tobacco. It is also the Government s role to promote the strict enforcement of legislation designed to prevent minors from smoking tobacco. We believe that this is an area that is lacking and should be subject to a review. 6
Furthermore, the FGC believes that no person aged under 18 years should smoke tobacco without being fully informed as to the risks of doing so. The FGC recognises that in matters of public health, individuals may require support in their decision making. The best way to provide this support is by educating the public so that individuals are aware of the advantages and disadvantages of the choices they make. In this way, education leads to more informed decision making and recognises that responsible and well informed adults should be entitled to make decisions for themselves. Again this is an area within the Smoke free Environments Act that is lacking and should be subject to a review. Youth Access The FGC supports the restricting of tobacco to minors under the age of 18 years. Alongside these restrictions should be enforcement. In order to achieve this successfully, the government should ensure greater focus on compliance levels of retailers selling to minors. The FGC does not believe that removing the display of tobacco products will stop minors from purchasing or smoking tobacco, and believes that this Bill is lacking in direction in achieving this outcome. Parents are the first line of defence against youth access to tobacco in communicating the message to their children that tobacco is illegal for minors. The issue of peers and parents supplying tobacco to minors, a practise that is illegal, needs to be addressed. The FGC is of the opinion that the Ministry of Health holds a critical role in the effort to reduce youth smoking, by ensuring that tobacco sales laws are properly enforced. Just as there are deterrents for retailers illegally selling tobacco to minors, there must also be deterrents to parents and peers supplying tobacco to minors as well as deterrents for minors who attempt to purchase tobacco. The Alcohol Reform Bill currently before the Justice and Electoral Select Committee places considerable emphasis on parents and aims to encourage parental responsibility in the supply of alcohol to minors. The FGC submits that a similar approach should be taken with tobacco. Security The banning of the retail display of tobacco poses a real risk to retailers in terms of their security within the retail environment. Tobacco is a lucrative commodity and often a target for theft resulting in aggravated assaults on retailers. The New Zealand Police acknowledge that there are issues in security and safety for smaller retailers in New Zealand and have developed fact sheets in an attempt to 7
support dairy and convenience owners and staff to avoid a potentially life threatening situation through robbery. The additional service times that will be created through the implementation of a display ban, through offering pricelists and searching for products, will not allow retailers to serve their customers in an efficient and timely manner, particularly during busy periods. It also increases retailer/customer transaction times which increase customer frustration. Conclusion While there are certain clauses in the Bill around greater enforcement that the FGC could support, the Bill falls well short of being able to demonstrate sound evidence to justify a retail display ban. The FGC wishes to appear in person before the Committee. For further information, please contact: Katherine Rich, Chief Executive Officer New Zealand Food & Grocery Council 3 11 Hunter Street, Wellington 04 473 9223 8