Major tobacco company Philip Morris International (PMI) recently announced plans to develop a “public blockchain,” which the firm purports to intend to use to track tax stamps on cigarettes. By using blockchain traceability to automate tracking processes and crack down on fraud, PMI has announced that it expects savings of some $20 million straight off the bat.
PMI is not the first international corporate giant keen to ride on the coattails of blockchain’s meteoric rise, but the tobacco player’s latest efforts to appear innovative are little more than a ruse to disguise a much darker reality: PMI is set on hijacking government track-and-trace efforts in a bid to preserve the tobacco industry’s schemes to evade regulations and monitoring from London to Luanda.
Cracking down on parallel tobacco trade
The idea of tracking and tracing tobacco has been encouraged by governments and public health bodies alike, and is a key component of the Framework Convention on Tobacco Control (FCTC)’s Protocol to Eliminate Illicit Trade. Putting in place a comprehensive scheme to monitor the entire tobacco supply chain, from manufacturing to the distribution and sale of tobacco products, has become a major priority for global health authorities.
“The key element for maximizing the traceability of tobacco products is the generation of a unique code that will identify each tobacco product,” observed Dr. Filip Borkowski, Deputy Head of Unit at the European Commission’s Directorate General of the Health and Food Safety Unit, at a Geneva meeting late last year.
The reason for this latest push is simple: the parallel tobacco trade saps government revenues, while simultaneously undermining public health initiatives by providing people—including youth— with a cheap supply of the addictive products. Furthermore, the illicit trade of cigarettes has been accused of having close ties to international criminal and terrorist groups, making tackling the unlawful traffic a key element in global security efforts.
Adopted properly, track-and-trace schemes could significantly cut down on illicit trade, with the World Health Organization (WHO) chief Tedros Adhanom Ghebreyesus describing the FCTC Protocol as a “vital step towards a tobacco-free world”. It’s not surprising, then, that the tobacco industry is trying to turn this promising policy measure to its own ends.
Though the tobacco industry is vocal about wanting to crack down on the unauthorized trafficking of its products, a growing body of evidence is exposing just how dirty Big Tobacco’s hands are when it comes to illicit trade. Smuggled tobacco, after all, typically is not subject to excise duties, making it a cheaper and easier sell to price-sensitive smokers.
As a result, the illicit tobacco trade has come to form a central market entry strategy used extensively by major players in the tobacco industry, used to bypass tariff and non-tariff barriers to trade. Smuggling, as the large tobacco companies have found, is also an effective means of evading tobacco control measures via sale through non-traditional outlets, bypassing age controls and licensing efforts by health authorities.
Major manufacturers like British American Tobacco (BAT) have been fined as recently as 2014 for deliberately oversupplying certain markets, and all indications suggest that the industry hasn’t cleaned up its act since. “Ex-employees insist [tobacco firms] remained actively involved, describing ‘rampant smuggling’ throughout the Middle East, Russia, Moldova and the Balkans,” asserts a detailed study from the Tobacco Control Research Group, pointing also to the illegal import and export of goods throughout Africa.
Front groups and suspicious “solutions”
Worse still, the tobacco manufacturers have been relentless in their efforts to secure control over global track and trace efforts in a bid to manipulate them for the industry’s own ends. PMI previously developed its own “track and trace system”, Codentify, which it licensed for free to the other major tobacco companies. The FCTC’s Illicit Trade Protocol, however, is clear: methods of tracking and tracing tobacco products cannot be left in the hands of the industry.
Enter the Digital Coding and Tracking Association, just one of a “complex system of front groups and third parties” established by the tobacco industry as a means of aggressively promoting Codentify to authorities. In 2016, the Association sold Codentify to a new company, Inexto, for one swiss franc; a PMI spokesman soon after declared Codentify compliant with the WHO’s Framework Convention on Tobacco Control.
Regulatory pundits, fortunately, haven’t been so easily convinced. “This has to be one of the tobacco industry’s greatest scams,” commented Professor Anna Gilmore. “Not only is it still involved in tobacco smuggling, but big tobacco is positioning itself to control the very system governments around the world have designed to stop companies from smuggling.”
Can the EU’s system achieve its aims?
Big Tobacco’s relentless campaign has nonetheless borne some fruit. The EU Commission has itself opted for a so-called “mixed solution” for the track and trace system set to be implemented later this month, leaving key responsibilities in tobacco manufacturers’ hands. A secondary data repository, for example, will be operated by Dentsu Aegis, a firm already criticized for its ties to Big Tobacco. What’s more, a number of member states are relying on ID issuer Atos or its subsidiary Worldline—a problem given that Atos was involved in Codentify’s development and has promoted the industry-designed system in the past.
A “mixed solution” may seem pragmatic on the surface, but the reality is far more sinister. Not only does the continued involvement of Big Tobacco go against the spirit and the letter of the FCTC’s vision of an independent track and trace system, but the tobacco industry has shown time and time again that it simply can’t be trusted. PMI’s new blockchain project, then, threatens to just be more of the same smoke and mirrors the industry is known for.