Earlier this week the FDA released a new rule proposal about advertising cigars… the latest in series of moves this year designed to keep you from smoking them.
The proposal, which indicates that even premium cigars will now have to come with warning labels, is not even the worst of them… or the sneakiest.
The Tax Foundation’s Scott Drenkard notes that a rule passed in May to crush the vaping market will also impact domestic cigar manufacturers.
The regulation imposes incredibly expensive testing requirements on each and every individual tobacco product produced by a manufacturer.
Larger companies will likely be able to absorb the cost, but smaller manufacturers are expected to either end several brands or get wiped out completely.
Premium cigar manufacturers and merchants had tried to entirely exempt themselves from the FDA’s review process. They were unsuccessful, and the FDA has chosen to subject them to the most rigorous of regulatory options presented in their 2014 document. FDA estimated in 2014 that there are 11,169 cigar formulations. By their own appraisal, their new regulations would wipe out somewhere between 10 and 50 percent of these products as it will not be cost effective to put many of the products through review.
Cigar manufacturers are beside themselves, according to The Washington Free Beacon.
Gary Liotta, the owner of Santiago Cigars, incorporated his business in 2009 and has more than 40 brands. The FDA’s review is estimated to cost $100,000 per brand to undergo the premarket review, which would cost Liotta an estimated $4 million if he were to submit his 40 cigar brands to the administration. “If [the act] is left to stand untouched, it will put us out of business,” Liotta said.
It’s pretty clear that the FDA wants to start treating even high-end cigars the same way it does cigarettes… by taxing, labeling, fining and regulating them into non-existence.
Nice of the FDA to intervene and crush variety in a market where people are getting products they want at a reasonable price.
So what are cigar lovers to do? Get to enjoy the wonderful variety of Dominican, Nicaraguan and now Cuban cigars out there and order your cigars online or grab them when you travel abroad.
These are strange times we live in… Cuban cigars are ok again after 56 years even though Cuba has made no real reforms… but American-made cigar manufacturers are being throttled out of business despite no evidence cigars are somehow less healthy than they’ve been for the last 150 years.
Almost seems like government authority is completely arbitrary and subject to the whims of elites.
We’ll leave you today with an essay on a closely-related topic: the slow-motion ban of e-cigarettes by the FDA. Just another example of government overreach in a market where small entrepreneurs have worked hard to solve a huge health problem the government has been unable to stop–cigarette smoking, while ironically helping cigarette manufacturers.
Just more evidence the government has no idea what it’s doing.
Why Big Tobacco Loves the New FDA E-Cig Regulations
By Trevor Burrus on May 5, 2016
Today the FDA issued new rules regarding the sale and production of e-cigarettes and e-cigarette “juice” (the nicotine solution that e-cigs vaporize). The regulations will severely hamper a thriving and highly competitive market, and “big tobacco” is jumping for joy.
It is often difficult to explain to non-free-market types how and why big business loves big government. The song is always the same: we need big government to stop and control big business. Today’s rule offers a great lesson in why that isn’t always the case.
Like most big companies, big tobacco is stuck in a rut–namely, traditional tobacco. When billions of dollars are invested in infrastructure to produce a single product, it is very difficult to shift that behemoth to a new line of production when the product becomes obsolete or unpopular. Thus, small businesses are often, if not usually, the first movers when it comes to innovation.
Blockbuster Video, with a costly commitment to brick and mortar video stores, could hardly have been expected to change its entire business model to rental-by-mail or streaming. By the time the threat of Netflix became existential, it was too late. Many times, when big businesses are in such a situation, one of their last ditch efforts will be to use government to prohibit or hamstring their competitors.
Big tobacco has had a similar problem for some time now. They’ve seen smoking rates fall precipitously, and all future projections show smoking rates continuing to fall. Imagine running a business where the demand to “grow, grow, grow” is belied by an inevitable and irresistible decline. So what do you do? Well, you try to expand into new products such as snus and e-cigarettes.
Yet big tobacco had the same problem that Blockbuster had with Netflix. They weren’t the first movers on e-cigarettes. As they continued to try to plow a field that had grown barren, small companies began to produce e-cigarettes, and people began to use them.
Full disclosure: I’m one of those e-cigarette smokers. What some have pejoratively called a “wild west” situation in desperate need of top-down regulation is actually a thriving market concerned with safety, innovation, and satisfying rapidly changing consumer preferences. There are sub-ohm vapes (huge clouds of smoke), vaporizers that look like lightsabers, vaporizers with variable voltages, and many others, not to mention the proliferation of juice flavors. My preferred vaporizer company, Halo Cigs, is constantly altering its products for better consumer satisfaction and safety.
There are more companies than I can even name. “Vapers” compare their gear, discuss battery life, trade flavors, mix flavors, and generally engage in a highly informed and oddly passionate consumer market.
With today’s rule, that will almost assuredly stop. We will be telling our kids stories about how people used to be “allowed” to just vaporize “anything.” They will look at us quizzically and laugh, unable to comprehend such a silly thing because the FDA–starting today–will begin building up an apparatus of control and prohibition that will make it nearly impossible for future generations to imagine what it was like. “Doctors used to make house calls,” my grandma once told me, and I didn’t believe her.
But big tobacco is jumping for joy. Like many big businesses, they were slow to see the wave of change that was coming. But once they saw it, they jumped on it. Altria (Philip Morris) only recently purchased a prominent e-cig manufacturer, and they’ve long supported the FDA’s regulation of “tobacco products” because “an increasing number of scientists and public health officials are advocating for more clear communications about the relative risks of tobacco products so adult tobacco consumers can make informed choices about them.”
Language like that is just an anti-competitive catechism. They say “consumer choice and confidence,” but it is really about putting competitors out of business through onerous regulations and requirements that only big tobacco has the resources to satisfy. According to the American Vaping Association, under the new rules “submitting an application to get a product approved would take more than 1,700 hours and cost more than $1 million.” With the stroke of a pen, the FDA will eventually put hundreds of e-cigarette producers out of business.
What we’ve seen is a traditional bootleggers and Baptist coalition: anti-smoking crusaders team up with big tobacco to heavily regulate an emerging market. As Jonathan H. Adler, Roger E. Meiners, Andrew P. Morriss, and Bruce Yandle recently wrote in Regulation magazine:
A Bootleggers and Baptists coalition favors the regulation of e-cigs. The coalition is composed of the tobacco companies (Bootleggers) that see their market threatened by a new product, health advocates (Baptists) who oppose e-cigs and wish to see them strictly regulated or prohibited, and state governments (Bootleggers) that have sold bonds backed by tobacco tax revenue that are threatened by the decline in cigarette sales.
In addition, as Jacob Sullum at Reason writes, e-cigarettes are harm-reducers, and making them harder to get could likely result in more cigarette smokers. Personally, I’ve reduced my traditional smoking by about 90 percent with e-cigarettes. I’ve crafted a flavor and become fond of a vaporizer that meets my needs. Yet my preferred company, and hundreds others, are unlikely to weather this storm.
Welcome back, big tobacco.
P.S: This essay originally appeared at the Cato Institute.