How Government Regulations are Fueling the Black Market for Ecigarettes

Like it or not, ecigarettes are here to stay.

More than nine million US adults vaped regularly in 2014, and since then, that number has continued to grow. Even despite a flurry of new taxes and regulations on ecigarettes from state governments and the FDA, analysts predict the worldwide market for vapor products to soar to $47 billion by 2025.

While anti-vaping legislation might result in fewer vapor products sold legally, it’s certain to also increase the numbers of vapor products sold illegally on the black market.

While state and local governments continue campaigns to raise panic about vaping as a “gateway” to smoking, actual smoking rates continue to fall all across the US, including in the youngest age groups. But still, anti-vaping fear-mongers insist that very existence of e-cigarettes will lead to the “re-normalization” of smoking.

To prevent this imagined calamity, anti-tobacco activists are lobbying lawmakers to implement heavy taxes and sweeping bans on certain devices and flavors. But by trying to curb the growth and spread of ecigarettes, they are hurting the very people they want to protect by playing right into the hands of smugglers and Big Tobacco.

On the other side, those who support vaping are defending ecigarettes from an onslaught of misplaced hatred. Pro-vaping politicians, health workers, and citizens are banding together in solidarity to manage misinformation and ensure the continued existence of what one study in the journal Harm Reduction called “the most promising product for tobacco harm reduction to date.”

What pro-vapers want to prevent is a situation seen all too often when regulators enact extreme taxes and regulations on products; an increase in smuggling and risky behavior. While anti-vaping legislation might result in fewer vapor products sold legally on store shelves, it is certain to also increase the numbers of vapor products sold illegally on the black market.

Regulations Can’t Stamp Out Demand

In the US, FDA regulations threaten to knock nearly all the independent e-cigarette producers out of business, and anti-tobacco activists are now pushing even further. In the name of “the children,” they want to see all sweet, fruity, and candy ecigarette flavors banned, despite evidence that doing so could be a disaster for public health.

Anti-vaping activists could learn a lot about the consequences of their policies by studying the basic supply and demand curve.

In a study conducted by the Consumer Advocated for Smoke-free Alternatives Association, more than ninety percent of vapers admitted that, if flavored eliquids were banned, they would simply bypass the legal retailers and turn to the black market or DIY ejuice mixing instead. Even worse, 21% of former smokers said they would simply go back to smoking cigarettes.

Even if anti-tobacco activists succeeded in banning every form of ecigarette and vaping, it would be impossible to enforce. Consumer demand for cigarettes would continue on regardless, and where there’s a demand, there’s always a supplier to meet it.

We know this is true is because even in prisons, where inmates are stripped of their rights and freedoms and everything is tightly controlled, prisoners can still get their hands on all sorts of banned products—drugs, cigarettes, and even ecigarettes.

Research shows that when prisons ban cigarettes, they create a black market with all the hallmarks of organized crime, including “kingpins, smugglers, middlemen, and dealers,” and “is not too different from illegal street-level markets.”

They also found that “cigarettes sold on the black market are often more harmful than those sold legally and are combined with less healthy smoking practices.”

Is that really the kind of environment we want to create for ecigarettes in the US?

No one who cares about public health wants a black market for ecigarettes.

Product Bans and High Taxes Encourage Smuggling

Those who see vaping as a threat celebrated when the FDA passed the first federal regulations on ecigarettes, cheering on the legislation that will likely wipe 99% of current vapor products off the market. Since then, the vapor industry has done its best to continue business as usual, putting their hope in legislation like the Tom Cole amendment that would save the bulk of ecigarette sellers from ruin.

But what would happen if the anti-vapers did get their way? What if they succeeded in convincing New York or Illinois to ban all flavored ecigarettes and ejuice, or successfully passed a $0.20 per mL tax on eliquids in Kansas?

First of all, it’s safe to say that a large of portion of vapers will continue to use their preferred products and flavors, but they won’t get them legally from licensed retailers in their state. Instead, they would simply evade the regulations by purchasing their ecigarettes and eliquid in a different state (completely defeating the purpose of the regulations), or get their products from smugglers and illicit online retailers.

If anti-vaping activists have their way, they can expect ecigarette smuggling to become a problem just as cigarette smuggling has.

We know this will happen because it’s happened in the past with traditional combustible cigarettes. It’s no coincidence that the state with the highest cigarette taxes in the nation also has the biggest issue with cigarette smuggling and related crime.

The incentive is clear: cigarette smugglers can buy a single pack in a neighboring state and sell it in New York for $7 profit. In fact, more than 50% of cigarettes in New York were smuggled in from other states, causing the state to lose an estimated $525 million a year in taxes.

This isn’t a small or hypothetical scenario, either. Even worse than state taxes and bans, the FDA’s federal ecigarette regulations are essentially, as Capital Research puts it, “a ban on ecigarettes except for products from large corporations that can afford to deal with the FDA bureaucracy,” a sure bet that a major black market is inevitable.

If nothing is done to amend the FDA’s rules, thousands of products that have been legal for more than a decade will be banned overnight. That leaves an enormous gap for the black market to fill, and represents an enormous opportunity for organized crime to profit.

If Americans are forced to buy their ecigarettes and ejuice off the black market or make them by DIY means, they will face risks that don’t exist in the legal, regulated market right now. If certain categories of ecigarettes and eliquids were banned, the ecigarette black market would be full of cheap knock-offs that don’t adhere to the same safety and quality standards required for the legal US vapor market.

There is already an issue with counterfeit chinese-made ecigarettes and ejuice—which are often low quality and potentially dangerous—making it into the legal markets in the US. With an unregulated black market you can expect to see many more battery explosions from counterfeit devices, mislabeled nicotine concentrations that could be dangerous, and potentially tainted or adulturated eliquid.

Heavy Taxes and Regulations on Ecigarettes Will Backfire

The way the anti-tobacco lobby sees it, if you can’t stamp out the demand, then get rid of the supply. But that method is bound to backfire, leading to more crime, smuggling, and risky vaping behaviors.

But overburdensome taxes and regulations (such as the FDA’s e-cigarette deeming regulations) that would cause small producers and manufacturers to close would have the added drawback of giving a huge boost to Big Tobacco.

Big Tobacco and independent ecigarette producers are direct competitors, and many tobacco companies would be delighted to see the vapor industry fail. Basically, any law that restricts e-cigarettes—such as high taxes on vapor products, public vaping bans, or banning certain products or flavors—means more potential vapers buying cigarettes instead.

Likewise, government rhetoric and public campaigns that make people believe e-cigarettes are less safe increase the chance that smokers will stay smokers, and give their money to the tobacco companies instead of their local vapor shop. That’s why the strict laws and heavy taxes pushed by anti-tobacco lobbyists are doomed to be detrimental for tobacco control.

Flavored eliquids aren’t luring teens into nicotine addiction and ecigarettes aren’t renormalizing tobacco use. But banning and restricting ecigarettes might do just that.

Politicians and health workers in the US are beginning to see the potential benefits of ecigarettes for society, but the anti-tobacco lobby is determined to create an atmosphere of fear so they can push their aggressive anti-vape policies. They don’t realize that they are setting the stage for a huge illicit market for vapor products and pushing people back into the arms of the tobacco companies.

“The standard ANTZ [anti-tobacco lobby] lie is that the market for tobacco products is created by the suppliers, and not by demand,” says Carl Phillips on the Anti-THR Blog. “The reality is that the products that exist now will continue to exist, and will result in a market that is far less regulated and safe than the current situation.”

Let’s hope US lawmakers realize this error and take action to intervene.

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