Key Issues

On Jan. 31st, 2000, the prestigious English daily The Guardian, in co-operation with the International Consortium of Investigative Journalists, published a major exposé on British American Tobacco (BAT) and cigarette smuggling in numerous countries. This exposé, the fruits of many months of work by a team of investigative journalists, is available on the Internet, along with a host of supporting documents. It shows detailed evidence relating to smuggling in Latin America and Asia

Since the publication of the original exposé, the British House of Commons Health Select Committee has unanimously adopted a report recommending an official investigation by the Department of Trade and Industry into allegations of BAT involvement in cigarette smuggling in different parts of the world. On Oct. 30th, 2000, British Secretary of State Stepen Byers accepted the committee’s advice and appointed investigators to look into BAT’s activities.

On July 31st, 2000, a new batch of Guildford documents relating to cigarette smuggling in Africa were also made public.

Meanwhile, lawsuits have been filed against BAT and other companies relating to smuggling in Latin America, and a lawsuit by the European Union is pending. [See “What do we know about cigarette smuggling in other parts of the world?” below.]

• BAT exposé [Guardian site]
• BAT exposé, part 1 [longer version, International Consortium of Investigative Journalists]
• BAT exposé, part 2 [longer version, about smuggling in Asia]
• Background information and original documents, on site of Action on Smoking and Health UK
• “Clarke admits BAT link to smuggling,” Guardian, Feb. 3rd, 2000. BAT deputy chairman and former cabinet minister Kenneth Clarke attempts to run damage control.
• “Dilemma of a cigarette exporter,” Guardian, Feb. 3rd, 2000. The text of Clarke’s statement. In summary: we can’t help it if governments force us to rely on the black market to make a profit.
• “MPs to question BAT bosses,” Guardian, Feb. 4th, 2000. Only in Britain, you say? Pity.
• “A dirty business,” editorial, Guardian, Feb. 4th, 2000.
• “The tobacco papers: The insider,” The Age (Melbourne, Australia), Feb. 6th, 2000. Journalist Duncan Campbell provides interesting information on how the BAT exposé came about.
• Tobacco giants ‘discussed pricing,’ Financial Times, Feb. 15th, 2000. More compromising information from Guildford, this time on the issue of whether Philip Morris and British American Tobacco colluded on pricing in Latin American markets. Discussions about pricing appeared to have included the “Duty Not Paid” portion of the market, which the Feb. 1st BAT exposé identified as a euphemism for the smuggling market. A few days before this story was published, two suits alleging tobacco industry price fixing were filed in the United States.
• BAT questioned about smuggling, Electronic Telegraph, Feb. 16th, 2000. The generally pro-tobacco Telegraph finally notices that British American Tobacco is in serious trouble on the smuggling issue. Despite the headline, this was published in advance of the British Commons’ hearing on smuggling.
• Tobacco Smuggling — ASH submission to British House of Commons Health Select Committee, Feb. 16th, 2000. A must-read discussing the level of BAT’s interest in the smuggling market. Parliamentary immunity makes it possible to present information much more directly.
• Tobacco company faces inquiry into smuggling, Guardian, March 7th, 2000. An official British inquiry into BAT’s record on the smuggling issue looks increasingly likely.
• Cigarette smugglers to lose assets, Guardian, March 13th, 2000. Britain is set to make penalties for cigarette smuggling as tough as for smuggling of illicit drugs. Now, will that provision apply to tobacco companies?
• Cigarettes to cost more than £4 as smuggling fears brushed aside, Guardian, March 22nd, 2000. Britain’s latest tobacco tax increase is equivalent to $5.76 Canadian per carton of 200 cigarettes, and brings the total price to more than $92 — roughly three times the present price levels in Ontario and Quebec!
• UK House of Commons Select Committee report on tobacco, June 5th, 2000, including an extensive section on smuggling.
• EU to sue tobacco firms over claims that they aided smugglers, Guardian, July 21st, 2000. Expect the European Union to file a suit in U.S. courts soon, numerous media report.
• BAT documents on cigarette smuggling in Africa, Action on Smoking and Health (UK), July 31st, 2000. See also: ASH press release.
• Pressure grows for tobacco firm inquiry, Guardian, July 31st, 2000.
• DTI to investigate BAT smuggling claims, Guardian, Oct. 30th, 2000.
• Tobacco giant in smuggling inquiry, BBC News, Oct. 30th, 2000.
• BAT under investigation by DTI: ASH says Imperial Tobacco should be next, ASH UK press release, Oct. 30th, 2000. (Note that Imperial Tobacco of the UK is not part of the BAT group and is not related to Imperial Tobacco of Canada.)

See also:

• Cigarette firm’s ‘smoking gun,’ South China Morning Post, Feb. 3rd, 2000. [no longer available]
• Tobacco giant ‘condoned smuggling into mainland,’ South China Morning Post, Feb. 3rd, 2000. [no longer available]
• Tobacco giants face curbs, Guardian, Feb. 1st, 2000. 

• “Tobacco giant ‘ran smuggling rackets’,” in the Australian daily The Age, Feb. 1st, 2000. 
• “Tobacco firms face quiz in cigarette smuggling inquiry”, in the English daily The Independent, Sept. 24th, 2000. Customs and Excise in the UK are investigating alleged involvement of various tobacco companies in the supply of British cigarettes to the contraband market. 
• “It Just Fell off the Back of a White Van”, an in-depth feature in The Independent, Sept. 24th, 2000, detailing the alleged involvement of some British firms in the smuggling business. 
• “UK Tobacco Companies Facilitate Smuggling” and “No Smoke Without Fire,” in The Big Issue, Oct. 2nd, 2000. (The Big Issue is a weekly magazine in Britain that focuses on social issues and is distributed by homeless people.) More details on how British tobacco companies “export” cigarettes to places where no market for British cigarettes exists. 
• Tobacco smuggling in the UK, report by journalist Andy Rowell with Clive Bates of ASH UK, Oct. 30th, 2000. 

London-based BAT has long been the dominant player in the Canadian tobacco market. In the early 1990s, when cigarette smuggling became a major political issue in Canada, BAT had a controlling share of Imasco, a holding company that in turn owned Canada’s biggest cigarette manufacturer, Imperial Tobacco. Imasco also owned Canada Trust, the Shoppers Drug Mart pharmacy chain, and a series of smaller companies.

On Feb. 1st, 2000, BAT completed a major re-structuring of its Canadian interests. This re-structuring involved selling off Canada Trust and all other non-tobacco companies, buying out all minority shareholders of Imasco, and taking Imasco private. That is, publicly traded Imasco has ceased to exist, and Imperial Tobacco of Canada now answers only to head office in London, England. The entire move is in line with BAT’s global strategy of selling off its non-tobacco interests and buying up other cigarette companies, with a view to eventually overtaking US-based Philip Morris as the world’s largest tobacco multinational.

BAT has also bought Rothmans International BV, which used to be the indirect majority shareholder of Canada’s Rothmans, Benson & Hedges (RBH), this country’s second-largest tobacco company. However, the federal Competition Bureau insisted that BAT sell off its controlling interest in RBH. BAT was unable to find a single buyer for its indirect stake in RBH. The stake was finally sold via a secondary share offering.