Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Tobacco Advertising Prohibition Amendment Bill 2010

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

 

 

 

 

 

2010

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

TOBACCO ADVERTISING PROHIBITION AMENDMENT BILL 2010

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health and Ageing

the Hon Nicola Roxon, MP)





TOBACCO ADVERTISING PROHIBITION AMENDMENT BILL 2010

 

OUTLINE

 

Tobacco smoking remains one of the leading causes of preventable death and disease among Australians, killing over 15,000 Australians every year The social costs of smoking (including health costs) are estimated at $31.5 billion each year .  Although the number of daily smokers in Australia has fallen by more than half a million in the last decade, approximately 3 million Australians still smoke.

 

The Government is committed to reaching the performance benchmarks set under the COAG National Healthcare Agreement of reducing the national smoking rate to 10 percent of the population by 2018 and halving the Aboriginal and Torres Strait Islander smoking rate.

 

This Bill is the next step in the Government’s anti-smoking action which includes the 25 per cent excise increase announced in April 2010, record investment in anti-smoking social marketing campaigns, and legislation to mandate plain packaging of tobacco products.

 

Messages and images promoting the use of tobacco products can “normalise” tobacco use, increase uptake of smoking by youth and act as disincentives to quit.  Since 1992, most forms of tobacco advertising have been banned under the Tobacco Advertising Prohibition Act 1992 (the TAP Act) .   The object of the TAP Act is to improve public health by limiting the broadcasting and publication of messages and images promoting the use of tobacco products.

 

Since the 1990s there has been a rapid expansion of activity on the internet including in the area of tobacco advertising and promotion.

 

Currently, ambiguity exists as to how the provisions of the TAP Act may be applied to the advertising of tobacco products on the internet and whether or not advertising of tobacco products over the internet is permitted.

 

This Bill will make it an offence to advertise tobacco products on the internet and in other electronic media such as mobile phones or computers, unless the advertising complies with State/Territory legislation or Commonwealth regulations. The offence provisions contained in section 15A of the proposed amendments will apply to any person who publishes in Australia a tobacco advertisement on the internet or via any electronic means. The meaning of ‘published in Australia’ has been extended in the Tobacco Advertising Prohibition Amendment Act 2010 (the Amendment Act) to apply to circumstances where the advertisement did not originate in Australia, or its origin cannot be determined, and the advertiser has a significant Australian connection.  Such a connection would be where a publisher, who may or may not be the defendant publisher, is:

·          an Australian citizen;

·          a permanent resident;

·          an entity that was incorporated or formed in Australia;

·          a foreign person in Australia; or

·          a foreign entity or unincorporated body with its central management and control in Australia.

 

The offence provision would therefore have, to some extent, extra-territorial

operation. This is justified because the internet and other electronic media are

potential means of publishing material that is accessible to the public in Australia

that would be prohibited under the Amendment Act if other means of publication were used.  This extra-territorial operation of the provisions is restricted by the fact that there must be an Australian connection as explained above.

 

The maximum penalty for each offence under these amendments is 120 penalty units, which is $13,200. This is consistent with the penalty units for other offences under the TAP Act and with penalties for internet-related offences in other Acts, for example the Interactive Gambling Act 2001 .

 

Section 34 of the TAP Act allows the Governor-General to make regulations prescribing matters required or permitted by this Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to this Act.  The Amendment Act provides for regulations to be made to prescribe specific requirements for advertising of tobacco products over the internet or by other electronic means.  The regulations may prescribe requirements as to:

·            the size, content, format and location of tobacco advertisements;

·            the inclusion of health warnings, warnings about age restrictions on the sale of tobacco products, information about any fees, taxes and charges payable in relation to tobacco products; and

·            age restricted access systems for access to tobacco advertisements.

 

This will bring restrictions on tobacco advertising and promotion on the internet into line with restrictions in other media and at other retail points of sale.

 

Financial Impact Statement

It is not expected that this will place any further financial burden on the Australian Government over and above the current costs associated with administration of the TAP Act.

 



Regulation Impact Statement

The Office of Best Practice Regulation has been consulted and approved the Regulatory Impact Statement below. Detailed impact analysis and consultation with affected stakeholders has been undertaken.



Introduction

Purpose of the report

The Department of Health and Ageing (DoHA) is exploring several options for addressing tobacco product advertising on the Internet. It has commissioned the Centre for International Economics (CIE) to prepare a regulation impact statement (RIS) that analyses the anticipated impacts associated with a range of options.

This report serves as the first stage of the RIS development process. (Box 1.1 outlines the stages.) It acts as the consultation RIS, documenting the options under consideration and detailing their expected costs and benefits. The options span from ‘do nothing’ (that is, maintain the current arrangements) to completely banning advertising on the Internet (which would effectively inhibit the sale of tobacco on the Internet).

 

1. 1    Stages of a regulation impact statement development

A regulation impact statement (RIS) under goes three consultative phases.

§   The first step requires preparing a consultation RIS to be circulated to key industry, government and public stakeholders for comment. Before release, this draft must be approved by the Office of Best Practice Regulation (OBPR).

§   The second step involves consultation with key stakeholders.

§   The third step involves preparing a final RIS based on the consultation RIS and comments received during the consultation process. The final RIS must be approved by the OBPR.

 

A RIS is mandatory where regulatory action will significantly impact on businesses and competition. It is considered an important element of good regulatory governance. This assessment is aimed at ensuring that the action is ‘warranted’ and ‘justified’ (OBPR 2007). As such, a RIS should present any available evidence on benefits and costs. The process of developing a RIS is intended to enhance the transparency of the regulatory process (and thereby promote public scrutiny and debate) by providing comprehensive treatment of the anticipated consequences of the proposed change.

In developing a RIS, Commonwealth Departments must comply with adequacy criteria as set out by the Office of Best Practice Regulation (OBPR). These requirements include outlining:

·          the nature and size of the problem being addressed;

·          the objectives, the proposed changes and any alternative options;

·          the impacts on stakeholders and the costs and benefits to each;

·          how the proposal will be implemented; and

·          preliminary conclusions and recommendations.

CIE has prepared this RIS based on the direction and requirements of the Department. As such, this report aims to provide a concise discussion of each point listed above. Although the discussion around the findings is largely qualitative, this report is based upon a detailed and quantitative evaluation conducted by the CIE.

Background

Tobacco Advertising Prohibition Act 1992

A national ban on tobacco advertising — that is, direct cigarette advertising on radio or television — first came into effect in 1973. At that time, Australia also introduced mandatory health warnings on cigarette packs. Over a decade later, the Smoking and Tobacco Products Advertisements (Prohibition) Act 1989 nationally banned tobacco advertising in newspaper and magazines. In 1992, the Commonwealth introduced a more rigid ban with the passage of the Tobacco Advertising Prohibition Act 1992 (the Act).

The Act serves as the primary vehicle governing advertising of tobacco products in Australia. It makes it an offence to give publicity to or promote tobacco advertising. Box 1.2 provides an overview of the Act’s stated objectives and definition of tobacco products. While much of the emphasis is on cigarettes, the Act applies to all tobacco products including cigars, pipes and pipe tobacco, loose tobacco, cigarette papers, etc.

 

1. 2    Objective of the Tobacco Advertising Prohibition Act 1992

The Tobacco Advertising Prohibition Act 1992 (the Act) took effect on 1 July 1993. It repealed the Smoking and Tobacco Products Advertisements (Prohibition) Act 1989 .

The Act’s stated objectives are (Section 3):

(1)        This Act is intended to limit the exposure of the public to messages and images that may persuade them:

(a)        to start smoking, or to continue smoking; or

(b)        to use, or to continue using, tobacco products.

(2)        The object is to improve public health.

Section 8 of the Act defines tobacco and tobacco products as:

(a)        tobacco (in any form); or

(b)        any product (for example, a cigar or cigarette):

(i)         that contains tobacco as its main or a substantial ingredient;

(ii)        that is designed or intended for human consumption or use; and

(iii)       that is not included in the Australian Register of Therapeutic Goods maintained under the Therapeutic Goods Act 1989; or

(c)        a cigarette paper, cigarette roller or pipe.

 

 

As such, the definition of advertising captures a wide range of activities that could be interpreted as promoting and/or giving publicity to smoking and other tobacco-based activities (box 1.3). Under the Act, advertisements include all writing, still or moving pictures, signs, symbols, or other images or audible messages that ‘promote smoking’ — section 9(1). It effectively bans advertisements via a number of platforms — including print (newspapers and magazines) and electronic (for example, film, video, television, radio and email).

Enforcement of the Act is largely reliant upon self-regulation. Complaints and enquiries from the general public — as well as, State and Territory governments, and nongovernmental organisations — tend to be the primary impetus for conducting investigations into potential breaches. Most investigations (of potential breaches) are resolved without prosecution. DoHA notes that in most instances people are not aware that they have acted in a manner that may be in breach of the Act. When informed (generally via a letter), they take action on their own accord to rectify the situation. Where continued non-compliance has a strong likelihood of successful prosecution, DoHA may refer cases to the Australian Federal Police for investigation and then to the Department of Public Prosecutions. A breach of the Act attracts a fine. The penalty units for individuals and corporations are 120 and 600, respectively. As at January 2007, one penalty unit is $110, making fines for a breach of the Act $13 200 for individuals and $660 000 for corporations.

The volume of complaints or queries handled in the past provides a reasonable gauge for assessing the potential increase in administration and enforcement costs. Since 2000, DoHA has handled 238 complaints or queries regarding the Act. The actual number on an annual basis has varied substantially over this period. In 2000, DoHA handled 95 complaints or queries. Since then, the volume of complaints has fallen, averaging just under 20 complaints per year. Moreover, since the Act’s operation, there has been only one successful prosecution, as a result of continued non compliance.

 

 

1. 3    Definitions of advertisement and publishing

Meaning of tobacco advertisement

The Tobacco Advertising Prohibition Act 1992 provides a basic definition of a tobacco advertisement. Section 9 states:

(1)        Subject to this section, for the purposes of this Act, a tobacco advertisement is any writing, still or moving picture, sign, symbol or other visual image, or any audible message, or any combination of 2 or more of those things, that gives publicity to, or otherwise promotes or is intended to promote:

(a)        smoking; or

(b)        the purchase or use of tobacco product or a range of tobacco products; or

(c)        the whole or a part of a trade mark that is registered under the Trade Marks Act 1955 in respect of goods that are or include tobacco products; or

(d)        the whole or a part of a design that is registered under the Designs Act 2003 in relation to products that are or include tobacco products; or

(e)        the whole or part of the name of a person:

(i)         who is a manufacturer of tobacco products; and

(ii)        whose name appears on, or on the packaging of, some or all of those products; or

(f)        any other words (for example the whole or part of a brand name) or designs, or combination of words and designs, that are closely associated with a tobacco product or a range of tobacco products (whether also closely associated with other kinds of products).

It allows a number of exceptions, such as for political discourse and appearance on products, packaging and business documents. (See the Act for more detail.)

 

Meaning of publishing a tobacco advertisement

Publishing a tobacco advertisement includes (Section 10):

§    the advertisement in: (a) a document (including, for example, a newspaper, magazine, program, leaflet or ticket) that is available, or distributed, to the public or a section of the public; or (b) a film, video, television program or radio program that is, or intended to be, seen or heard by the public or a section of the public;

§    a person who: (a) sells, hires or supplies the advertisement, or something containing the advertisement, to the public or a section of the public; or (b) displays, screens or plays the advertisement or something that contains the advertisement, so that it can be seen or heard in or from a public space or transport or a workplace.

 

State and Territory legislation

Each of the States and Territories has legislation that addresses various aspects of tobacco and tobacco products. In addition to addressing advertising, promotion and sales of tobacco and tobacco products, they also often address public health issues, such as smoking in public spaces (that is, environmental smoke).

Each jurisdiction has unique features relevant to the local context. All jurisdictions prohibit sales of tobacco to minors, but penalties vary as does the effort going into enforcement. The regulatory regimes around the presentation and sale of tobacco products differ. Licensing of tobacco retailers is not required in all states (for example, New South Wales). Where licences are issued, the condition of sales varies. The Australian Capital Territory, for example, allows only one point of sale outlet per licence (which effectively precludes a retailer from selling online and at a physical shop front under one licence).

The standards and conditions governing tobacco product Point of Sale (POS) tend to be quite prescriptive. These include specifying the distance to a window, the number of products on display, how those products are displayed, the size of permissible sales area (in square metres), the distance to confectionary products, ticketing and lighting. Recent changes in Tasmania signal increasing stringency of restrictions. Tasmania now bans the display of tobacco products in stores (that is, they must be placed under the counter).

The states and territories are also beginning to respond to the challenges of Internet based sales and advertising. South Australia’s response has been to ban Internet sales. Rather than banning Internet sales, Western Australia requires all tobacco products that are shipped to be clearly labelled and with age verification upon delivery. Other jurisdictions (such as the ACT and Tasmania) have not passed specific amendments banning Internet sales, instead opting to work within their licensing regimes (that is, approval of retail licence applications for Internet based sales is required).

The essence of the problem: need for clarification in the Act

Since the passage of the Act in 1992, the use of the Internet as an advertising medium has become an increasingly widespread. This trend has presented a number of challenges about how to regulate and apply legislation which has been designed for more conventional media channels.

In particular, the advertising on the Internet:

§   blurs the distinction between advertising and retailing;

§   presents virtual sites that are able to be more easily and readily accessed by a wider audience relative to physical sites (eg shop fronts);

§   a single site or advertisement can potentially saturate the ‘market’ and/or effectively target specific audiences; and

§   is more easily and frequently viewed by youths.

Importantly, these features of Internet advertising undermine the effectiveness of the Act. The promotion and advertising of tobacco on the Internet fosters the false perception that smoking is the norm. It can undermine pricing policies aimed at deterring smoking. Lastly, the Internet is increasingly accessed and used by youths — the subpopulation most responsive to strategies given effect by the Act.

Moreover, retailers (and to a lesser extent manufacturers) suggest that the same degree of guidance provided to advertising via more conventional mediums is needed with respect to the internet. This has led to a situation where:

§   some advertising practices are undermining the intentions of the Act through:

§   the inappropriate use of website graphics;

§   the use of enticing/inducing language in product descriptions;

§   failing to display correct/appropriate health warnings; and

§   the use of inter-site or network solicitation.

§   there exists an increased risk for the sales of tobacco products to minors (under 18 year olds); and

§   there exists an increased opportunity to avoid payment of taxes and duties levied on tobacco products.

Currently the magnitude of the problem of online advertising of tobacco products is relatively unknown. However, trends overseas and indicators domestically suggest that the magnitude of the problem is highly likely to grow over time.

National and international efforts signal the level of concern surrounding Internet tobacco advertising. Australia is a signatory to the World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC). Article 13 of the WHO FCTC has specifically mentioned the Internet, as a medium for tobacco advertising, which should be subject to a complete ban by its signatories (see box 1.4). Guidelines for Article 13 were adopted by the Conference of the Parties (COP) to the FCTC in November 2008. The Guidelines recommend that, where a ban on Internet sales is not appropriate, restrictions should be imposed, allowing only textual listing of products with prices, with no pictures or promotion features.

In Australia, the Ministerial Council on Drug Strategy agreed to work collaboratively to restrict both advertising and sale of tobacco products on the Internet (see box 1.5). This focus is also echoed by the National Preventative Health Taskforce in its recent discussion paper. Announced by the Minister for Health and Ageing, the Hon Nicola Roxon MP, on 9 April 2008, the Preventative Health Taskforce will develop the National Preventative Health Strategy as a blueprint for tackling the burden of chronic disease currently caused by obesity, tobacco and excessive consumption of alcohol. The Taskforce released its discussion paper, Australia : the healthiest country by 2020 , on 10 October 2008 which is the first step in the development of the Strategy. The discussion paper proposes that sales and promotion of tobacco products on the Internet be banned. 

 

1. 4    The WHO Framework Convention on Tobacco Control

The WHO Framework Convention on Tobacco Control (WHO FCTC) is the first treaty negotiated under the auspices of the World Health Organization. The WHO FCTC represents a paradigm shift in developing a regulatory strategy to address addictive substances; in contrast to previous drug control treaties, the WHO FCTC asserts the importance of demand reduction strategies as well as supply issues (WHO 2008b).

The WHO FCTC was developed in response to the globalization of the tobacco epidemic. The spread of the tobacco epidemic is facilitated through a variety of complex factors with cross-border effects, including trade liberalization and direct foreign investment. Other factors such as global marketing, transnational tobacco advertising, promotion and sponsorship, and the international movement of contraband and counterfeit cigarettes have also contributed to the explosive increase in tobacco use (WHO 2008b).

The WHO FCTC recognises the role of the Internet as a vehicle to promote the consumption of tobacco products. Article 13, Section 4e states, that as a minimum, and in accordance with its constitution or constitutional principles, each signatory shall:

(e) undertake a comprehensive ban or, in the case of a Party that is not in a position to undertake a comprehensive ban due to its constitution or constitutional principles, restrict tobacco advertising, promotion and sponsorship on radio, television, print media and, as appropriate, other media, such as the internet, within a period of five years.

 

 

1. 5    Ministerial Council on Drug Strategy on tobacco advertising and sales over the Internet

The Ministerial Council on Drug Strategy (MCDS) is the peak national policy and decision making body for licit and illicit drugs. The Council comprises the Australian Government and State and Territory Health and Law Enforcement Ministers, including Justice and Police Ministers and the Australian Government Minister for Education. The New Zealand Government is also represented on the MCDS.

The MCDS Joint Communique (16 May 2007) addresses the issue of Internet tobacco advertising and sales. The Communique states:

§    Council members again discussed the complex issues involved in stopping the advertising and sale of tobacco products over the Internet and supported a move by the Australian Government to seek to amend the Tobacco Advertising Prohibition Act 1992 to broaden the current definition of ‘to publish an advertisement’ to include ‘transmitting’ the advertisement in electronic form.

The MCDS agreed to work collaboratively towards restricting the sale and advertising of tobacco products over the Internet in the longer term.

 



Scope and scale of the problem

Trends in smoking prevalence and tobacco consumption

 

Smoking prevalence

The most recent national figures on tobacco prevalence from the Australian Institute of Health and Welfare 2007 National Drug Strategy Household Survey Detailed Findings (AIHW, 2007) show that daily smoking rates for smokers aged 14 years or older have fallen from 17.4 per cent in 2004 to 16.6 per cent in 2007. A further 25.1 per cent reported being ex-smokers, while 55.4 per cent reported never having smoked.

The decline in smoking among both males and females reflects the longer term trend. Quit Victoria compiled data on the prevalence of smoking from 1945 to 1995 from a number of sources. The share of adult male smokers has fallen from 72 per cent to 27 per cent over this period. The trend among the female population is more complex. Among female adults, the share of smokers has fallen slightly from 26 per cent in 1945 to 23 per cent in 1995. During this period, smoking rates among women also rose, peaking at around 30 per cent in the 1970s and early 1980s.

Cigarette consumption among adults

The multi-year survey conducted by the Social Research Centre (2006) found that the average number of cigarettes smoked daily fell from 16.7 to 14.3 for regular smokers. Reflecting this trend, the percentage of heavy smokers (that is, more than 24 cigarettes per day) fell from 26 to 15 from 1997 to 2005. During the same period, the share of light smokers (less than 15 cigarettes per day) increased from 42 per cent to 52 per cent. Moderate smokers remained constant, comprising around 33 per cent of daily smokers.

Youth trends

Achieving declines in youth smoking rates is an important public health objective. Early uptake of smoking is associated with heavier smoking and greater difficulty quitting.

A key source of data on the smoking behaviour of youth is the nationally conducted study Smoking Behaviours of Australian Secondary Students in 2005 , led by The Cancer Council Victoria’s Centre for Behavioural Research in Cancer (CBRC). This study found that in 2005, just over 140 000 Australian school students (ages 12 to 17) are current smokers. This equates to around 7 per cent of 12 to 15 year olds and 17 per cent of 16 to 17 year olds.

Australian tobacco industry

Wholesalers and retailers

Retail outlets selling tobacco products include: supermarkets and grocers; tobacconists; petrol stations; mixed business and convenience stores; news agents; hotels and clubs; and liquor stores. Chart 2.1 shows the relative shares of tobacco sales by retail outlet. It is important to note that some major supermarkets also have online shopping facilities.

2. 1    Tobacco sales by retail outlet

a Based on relative share of total sales revenue.

PwC (2005) estimates that approximately 35 per cent of retail outlets (35 000 stores) carry cigarettes or other tobacco products. [1] This share has been in decline since 1999. Supermarkets and grocery stores now account for over half of all tobacco product sales. This share is up several percentage points from 1999 estimates.

Retailers on the Internet

The extent to which retailers use the Internet to promote and sell their products is not fully known. The two major supermarkets, Woolworths and Coles, both offer Internet based shopping where cigarettes and other tobacco products are available for purchase (along with liquor and the full spectrum of goods stocked within their stores). A handful of Australian-based tobacconists also operate on the Internet.

Issues of concern

Presence and possible growth of online tobacco retailers

The Internet poses particular challenges given its ability to provide retailers with a global or ‘borderless’ market. Studies from the US show rapid growth of online tobacco retailers in a relatively short period of time. Research by Ribisl et al. (2001) identified 88 ‘unique’ US Internet cigarette sellers in 2000. By 2005, 266 US Internet sites were identified (Ribisl et al. 2007).

In Australia, online retail of tobacco products is in its infancy. Only a handful of retailers can be identified. They can be organised around three broad categories:

§   grocery stores offering home delivery of orders placed online;

§   specialty tobacconists; and

§   discount cigarette retailers.

Grocery stores

Grocery store retailers report that they have tried to comply with what seems good practice. They list tobacco products generally in plain text or use only a small graphic. Descriptions of the tobacco products are factual, containing minimal descriptions (for example, brand, size of pack and price). Upon accessing the webpage listing the tobacco products, they include health warnings. Age verification is obtained upon delivery of the product. They emphasise the need for clear guidance and clarity regarding the standards that they should apply to online advertising at POS.

Specialty tobacconists

Specialty tobacconists are distinguished from discounted cigarette retailers by the nature of the tobacco products that they sell. This category is largely comprised of premium cigar sellers which represents a segment of the retail tobacco market that is not viewed as a ‘gateway’ to tobacco use among youth. The high prices of their stock coupled with minimum price orders tend to be effective deterrents to youth.

Discount cigarette retailers

Preliminary consultations with stakeholders (state agencies and interest groups) point to only two known Australian based retailers that fall into the category of discount cigarette retailers. Their websites contain emotive promotion of ‘cheap’ and discounted products. Presentation of products typically involves graphics which do not depict labels that are compliant with Australian requirements. This category of online retailers is the most likely to attract youth.

Increased risk of sales to minors

The risk presented by the Internet is based on three premises:

§   it is easier for minors to access tobacco products through online purchases;

§   the Internet poses greater exposure to advertising on retail sites and other content; and

§   prices may be cheaper on the Internet, affecting the uptake and extent of smoking.

These last two points apply to adults as well as minors.

The absence of clarity of advertising standards coupled with potentially easier purchase by minors and cheaper prices suggest that, as the number of online retailers grow, the effectiveness of antismoking campaigns is likely to be weakened.

Tax evasion

DoHA , as well as State and Territory governments, suggest that the Internet sale of tobacco products is more prone to tax evasion. Overseas and domestic online retailers are able to sell tobacco products at discounted rates (relative to retailers with physical shop fronts in Australia) because they can provide products that have not been subject to duties and domestic taxes.

The importance of using price as a strategy to deter smoking is well accepted. Empirical studies find that a 10 per cent increase in tobacco prices can lead to a 5 per cent decrease in adult usage rates and a 7 per cent decrease in consumption among youth under the age of 18 (Banthin et al. 2004).



Options under consideration

The options to be considered should be clearly defined (to limit their potential to create unintended outcomes) while also ensuring that the options fundamentally promote the Act’s objectives to limit exposure to tobacco product advertising — in all its forms — in an effort to reduce uptake and prevalence and to improve public health.

This study considers four options. Presented in order of increasing stringency, they are:

§   Option 1: do nothing;

§   Option 2: adopt a code of conduct;

§   Option 3: an amendment to the Act clarifying online tobacco advertising; and

§   Option 4: ban advertising of tobacco on the Internet.

The Act currently considers a broad range of tobacco products, including rolled cigarettes, loose tobacco, cigars, pipes and hookahs. Under each of the options above, allowances for different tobacco products could be made. That is, the option could apply uniformly to all tobacco and tobacco products. Alternatively, the option could differentiate in a manner similar to the Trade Practices (Consumer Product Information Standards) (Tobacco) Regulations 2004. The regulations distinguish between cigarettes, cigars and loose or pipe tobacco.

Following on the Trade Practices (Consumer Product Information Standards) (Tobacco) Regulations 2004, the options in this analysis differentiate across tobacco products. Specifically, Option 2 and Option 3 allow for more specific and restrictive standards to apply to cigarettes and loose tobacco (as opposed to other tobacco products such as pipes, cigars, etc.). Options 1 and 4 consider application consistently across all tobacco products.

The rationale for differentiating among tobacco products is based on the following:

§   cigarettes represent the lion’s share of the instances where perceived and actual noncompliance with the spirit of the Act currently exists;

§   cigars and other tobacco products are not seen as ‘gateway’ products to addiction, especially among established adult smokers; and

§   the cost of cigars is a disincentive to minors.

Option 1: do nothing

One option is to take no action and allow the status quo to continue. With no change to legislation, regulation or business conduct, this option serves as baseline option for which the anticipated costs and benefits of other options can be compared.

Under the ‘do nothing’ scenario, advertising at point of sale on the Internet could be significantly out of line with standards applied to physical shop fronts. For example, a web site might — and some currently do — use any or all of the following:

§   suggestive phrasing such as ‘cheap’, ‘discount’ and ‘bargain;

§   emotive and suggestive product presentation and description;

§   graphics of products outside of packaging, including images of lit products;

§   graphics of product packaging without correct health warnings;

§   facsimiles of product packaging with warning labels pasted on;

§   nil, out of date or non-prominent health warnings on the website; and

§   promotion of smoking and general tobacco consumption.

§   The growth of sales and advertising using an Internet platform is expected to have public health impacts by increasing consumption of tobacco products among adults and possibly increasing the rate of uptake among minors.

§   In the status quo situation, this suggests that individuals could increasingly be able to obtain tobacco products (particularly cigarettes) that did not involve:

§   formal age verification at time of purchase (and/or delivery);

§   payment of all appropriate and relevant duties or taxes; and

§   health warnings on product packaging that complies with Australian requirements.

§   All of these points are key elements of Australian regulation aimed at limiting tobacco advertisements and sales.

Option 2: code of conduct

Without amending the legislation, a second option would see the introduction of an industry-led code of conduct. A code of conduct represents a form of quasi-regulation that sits between self-regulation and formal legislation (PC 1998). It involves a less formal approach to regulation.

Effective codes can deliver increased consumer protection and reduce the regulatory burden facing businesses. Caution must be used, however, as ineffective (mandatory) codes may place compliance burdens on business without necessarily achieving any realisable benefits (ACCC 2005).

This option seeks to draft a Code of Conduct (the Code) to govern advertising of tobacco products on the Internet as well as practices around age verification for subsequent sales. The code of conduct could be voluntary or mandatory under this option. As a voluntary code of conduct, Internet retailers would choose to agree to a set of principles regarding Internet advertising. As a mandatory code of conduct, the agreement would need to be ‘underwritten’ by legislation that made compliance obligatory.

An advantage of this option is that the Code can be tailored to meet the goals of both government and industry as it is a negotiated process reliant on industry-led compliance. The Code could be written to any degree of restriction or liberty that recognises the differing market dynamics and consumer profiles. The Code would be drafted in consultation with industry and State, Territory and Commonwealth health agencies.

To be relevant, it would develop standards that are specific to broad categories of tobacco products. This breadth would most likely require allowing for product differentiation — that is, treating cigarettes and loose tobacco as different from cigars, pipes and other smoking accessories (such as hookah). In doing so, this option would most likely adopt definitions as employed in the Trade Practices (Consumer Product Information Standards) (Tobacco) Regulation 2004 , where:

§   cigarette means a roll of cut tobacco for smoking, enclosed in paper; and

§   cigar means a roll of cut tobacco for smoking, enclosed in tobacco leaf or the leaf of another plant.

§   As a starting point, the Code could be modelled on an international voluntary agreement that exists among the three largest tobacco manufacturers. (See box 3.1 for details.) Indicatively, the Code may require any or all of the following to cigarettes and loose tobacco:

§   text only product listings;

§   health warnings — specifying how, which and where warnings are displayed (for example, use of frames);

§   restrictions on use of text — size, colour, fonts, presentation;

§   product descriptions to describe physical contents only;

§   restrictions on use of inducing language such as ‘cheap’, ‘bulk savings’ and ‘discount’;

§   a ban on inter-site promotion and solicitation;

§   a ban on network solicitation — for example, providing options such as ‘email this site to a friend’;

§   providing a blank ‘home’ page that, on first contact with the site, provides:

§   relevant health warnings;

§   a deterrence for minors attempting to access the page; and

§   site registration and/or membership and age verification via a credit card.

§   products to be couriered to their destination (or sent via registered post) with age verification required on delivery; and

§   all appropriate taxes and duties to be incurred during the transaction.



 

3. 1        International Voluntary Marketing Standards for tobacco manufacturers

At the production level, the world’s three largest tobacco companies agreed to a code of marketing principles that came into effect by the end of 2002. The International Voluntary Marketing Standards (the Standards) set clear guidelines for how tobacco products would be marketed around the globe.

This included: a ban on advertising aimed at or appealing to youths; limiting radio, television and print advertising to where an adult audience was either likely or guaranteed; packaging restrictions; and a general ban on Internet advertising (such as cross product promotions).

The Standards’ ban on Internet advertising is certainly ahead of the legislation (at least in Australia). Specifically, the Standards require that:

§      no advertising be placed by or on behalf of any of the signatories (that is, British American Tobacco, Philip Morris and Imperial Tobacco) on any website unless:

-                      access to that advertising is restricted to verified adults; and/or

-                      access is restricted in countries where such advertising is prohibited by law.

§      logins and passwords are to be used to enable access beyond the initial home or login page of a website containing advertising;

§      logins and passwords may only be issued to verified adults; and

§      access to a web site containing advertising is to be enabled by clicking on a box stating ‘click here to confirm you are an adult’ or similar.

 

 

 

 

Notably, however, the Standards have drawn some criticism (see Saloojee and Hammond 2001) and in many cases they have just indicated a willingness to comply with legislation already in place . More recently, evidence suggests that the effectiveness of the Standards is unravelling. Philip Morris has withdrawn from the Standards as opportunities emerge in less regulated markets.

In Australia, the Department of Health and Ageing negotiated a Voluntary Agreement for the Disclosure of the Ingredients of Cigarettes with the three tobacco companies, Philip Morris Limited, British American Tobacco Australia Limited and Imperial Tobacco Australia Limited. The Voluntary Agreement was signed by the tobacco companies and the former Minister for Health and Aged Care, Dr Michael Wooldridge, in 2000.

Under the Agreement the companies provide annual reports to the Government regarding the ingredients of cigarettes. The data are posted unmodified on the Departmental website, with current data replacing the previous annual cigarette ingredient report.  Seven rounds of public disclosure of cigarette ingredients have now occurred.

 

 

Cigars, pipes and other tobacco accessories would be given alternatives for some of these requirements. For example, ‘text only product listing’ is not likely to be practical for some tobacco products or accessories. This requirement would be modified to allow graphics (that is, images of the product), but with strict limits, such as restrictions regarding size of image, content (such as packaging only, no sticks on display, no lit products) and number of images per page.

Effective codes of conduct tend to involve firms that are motivated by a common interest to reduce the problem. Alternatively, an independent, self-regulatory authority (with widespread support by industry) or the real threat of government action provide incentive for compliance.

A code of conduct (be it voluntary or mandatory) for online tobacco retailers is unlikely to encounter any of these conditions. Identifying and promoting the code to industry participants will be difficult.  Online retailers —unlike retailers with a physical shop front — face little (if any) barriers to entry. This feature enables online retailers to be ‘transient’ — that is, able to close down and start up new web addresses easily and with negligible cost. Identifying all the players in this market is a difficult task. It also suggests that collective action or a sense of shared common interest within this industry is limited.

The enforcement will also be challenging. ‘Sticks’ for voluntary compliance are likely to be weak. Codes of conduct are often used by industry to avoid rigid legislative regulation or to signal information about a firm’s reputation. Unfortunately, in the Internet tobacco market neither of these ‘sticks’ poses much of a threat. This is especially true for smaller retailers, for whom moving a website internationally is near costless and reputation plays a significantly smaller role than price in commanding market share.

The Code would seek to formalise the preferred marketing practices of the existing online cigarists and the major supermarkets, as a template for other potential Internet retailers to follow. As such, it would provide certainty for online retailers wishing to comply with regulatory obligations. For less well-established retailers, it could enhance customer perceptions regarding the legitimacy and quality of products sold.

Option 3: amendments to the Act

A third option would build upon Option 2 and legislate what would have been the Code of Practice. Amendments to the Act would be required. 

The amendments would include minimum standards for advertising of tobacco products on the Internet. Essentially, this option would legislate the requirements outlined in Option 2. Similar to Option 2, it would differentiate between cigarettes (and loose tobacco) and other tobacco products such as cigars, hookahs and pipes. The differentiation would involve a text only requirement for cigarettes and loose tobacco, while all other tobacco products would face strict specifications regarding permissible graphic presentation of products. Other elements of the guidance on Internet advertising that would be provided under this option include:

§   conveyance of health warnings — specifying how, which and where warnings are displayed;

§   restrictions on use of text — size, colour, fonts and presentation as well as product descriptions to describe physical contents only;

§   restrictions on use of inducing language such as ‘cheap’, ‘bulk savings’ and ‘discount’;

§   a ban on inter-site promotion and solicitation and network solicitation (for example, providing options such as ‘email this site to a friend’); and

§   providing a blank ‘home’ page that on first contact with the site provides:

§   relevant health warnings;

§   a deterrence for minors attempting to access the page; and

§   site registration and/or membership and age verification via a credit card.

§   Option 2 also touched on two notable, but peripheral, issues involved in Internet advertising of tobacco products. They are:

§   putting in place greater safeguards against the sale or delivery of tobacco products to minors; and

§   the requirement that all appropriate taxes and duties be incurred and reported during the transaction.

This option would look to include these requirements.

As outlined in Option 2, the industry is characterised by low barriers to entry and exit. Should amendments be too stringent, many retailers could shift their Australian sites offshore beyond the reach of Australian regulation. Consequently, this option does not propose developing a blanket set of requirements applying to all tobacco products, nor does this option seek to ban Internet advertising of tobacco products.

Option 4: ban on tobacco advertising on the Internet

Under this option, DoHA would explicitly prohibit any Internet advertising of tobacco on the Internet. This ban would effectively inhibit Internet tobacco sales. Under the current language of the Act, legislating the Internet as an advertising medium is akin to a ban on Internet tobacco sales. The Internet serves a dual purpose. On the one hand, the Internet serves as a forum to advertise and promote tobacco products. On the other, it serves as an avenue for exchange. This makes the Internet quite distinct from other forms of media that cannot facilitate the latter function.

Similar to Option 3, were it to develop blanket, text only, requirements, this option has considerable risks with regard to enforceability. It is nearly costless for Internet retailers to move their websites offshore. This option would see some sites close down while others move offshore. Most likely, supermarkets and some online tobacconists would close down their online tobacco sale operations. Specialty tobacconists, however, would most likely move offshore. It is unknown how the sites that relocate will conduct their business offshore. Once offshore, there is limited reason for them to comply with Australian requirements. This may produce unintended and adverse consequences by magnifying the current limitations of effectively regulating online tobacco product advertising. 

            Summary of the options

Table 3.2 provides a summary of the options under consideration.



3. 2        Summary of options

 

Option 1

Do nothing

Option 2

Code of practice

Option 3

Amendments to the Act

Option 4

Ban Internet advertising

Regulatory responsibility

States and territories

Industry and Commonwealth

Commonwealth

Commonwealth

Prohibition of Internet tobacco sales?

Yes, in some states

No

No

Not explicitly, but effectively blocked

Is compliance voluntary?

Jurisdictionally dependent

Depends upon voluntary or mandatory approach adopted for the code of conduct

No

No

How is compliance enforced?

Commonwealth, State and Territory responsibility

Industry self-regulates

Commonwealth legislation

Commonwealth legislation

Guards against under age purchases

Industry self-regulates by default:

§ some retailers courier all deliveries (or register post)

§ some retailers require purchase with credit card only

§ some retailers place warnings on website

Industry self-regulates:

§ register post or courier for all deliveries

§ all websites to inform customers that under age purchases is illegal — this is to be done upon entry to the website

§ may require age verification (for example, credit card) or website membership

Regulations require:

§ register post or courier for all deliveries

§ all websites to inform that under age purchases is illegal — this is to be done upon entry to the website

§ may require age verification (for example, credit card) or website membership

N/A: Sales permitted over the Internet effectively prohibited

However, could apply same requirements as option 2 or 3 should it be necessary

Measures to limit exposure

§ Merchandise must be sold with appropriate health warnings on packaging

§ Some industry self regulation:

-      some sites use text listings only

-      some sites display health warnings on website

§ Merchandise must be sold with appropriate health warnings on packaging

§ All websites required to display health warnings — including upon entry to site

§ Text only for cigarettes, and limits on display, use and content of graphics and text for other tobacco products

Same as Option 2

N/A Advertising and POS advertising banned

Ensuring payment of customs duties and taxes

Legal obligation exists, but is circumvented by some operators

Industry self-regulates:

§ all websites required to clearly outline a consumer’s tax and customs obligations

Regulations require:

§ all websites required to clearly outline tax and customs obligations

N/A: No sales permitted over the Internet

Impact of options

The options under consideration all aspire to address the problems arising from ambiguity over whether the Act governs Internet sales advertising of tobacco products. They all are expected to impact on the following stakeholders:

§   government — at national and State and/or Territory levels;

§   tobacco retailers, especially those online;

§   tobacco consumers; and

§   the public, largely due to public health implications.

Each option will impose varying degrees of costs and benefits across these stakeholders. This chapter provides a qualitative discussion of how the options could generate costs and benefits across the stakeholders. The anticipated impacts reported in this chapter are based upon a quantitative analysis of the affected industry’s size and reported costs that would be associated with meeting each option’s requirements.

Costs

The options will impose a number of costs across the stakeholders. These include:

§   administration and enforcement costs for the Commonwealth Government; and

§   compliance costs for Australian-based online tobacco retailers.

Each of these cost categories are detailed below. The magnitude of these costs is dependent upon the level of stringency and prescription adopted when implementing any of the options. Given the ‘virtual’ and global nature of the Internet, the effectiveness of any option is also a factor that can substantially impact on the scope and magnitude of the costs (as well as benefits). In other words, when assessing the options, consideration must be given to the risk of unintended consequences.

Administration and enforcement

Under Option 1, changes in the level of administration and enforcement activities are anticipated to be minor. It is likely that the number of referrals and complaints received by DoHA will increase with the number of online tobacco retailers. With this increase, DoHA (and other relevant Commonwealth departments, such as the Australian Federal Police, the Australian Customs Service) could anticipate additional resource requirements to address Internet advertising of tobacco products on the Internet.

The volume of inquiries handled by DoHA and the ACCC suggest that, even with an increase in the number of retailers, any additional amount should not necessarily require substantial resources.

DoHA would continue to rely upon current enforcement strategies — that is, self-regulation with investigation of complaints and enquiries from the general public, States and Territories or NGOs.

The costs of designing and implementing option 2, a code of conduct, are often underestimated. Certainly, industry-based voluntary codes are not costless. Experience with recent codes of conduct in other industries suggests high upfront costs attributed to its development — several years and at least one dedicated personnel. In-kind costs contributions by industry are often not reflected in cost estimates. Subsequent monitoring, administration and enforcement costs vary depending upon the nature of the code, its regulatory backing and penalties for non-compliance.

Some costs could be recovered through a registration fee paid by industry participants (online tobacco retailers) subject to the code of conduct under Option 2. However, such fees represent a cost to industry participants. The subsequent section on compliance costs to online retailers discusses these costs further.

We can still anticipate that the increase in administration costs of Option 2 would be greater than Option 1. Table 4.1 summarises the government costs of Option 2.

4. 1        Government costs of Option 2 voluntary code of conduct

Item

Estimated cost

(per annum)

Period

Code of conduct development (one FTE over two years) a

$70 429

2 years

Administration and monitoring b

$26 000

Ongoing

a Full time equivalent (FTE) estimate based on APS6 annual salary. b Cost estimates based on the current number of online retailers.

Under Option 3, which would introduce minor amendments to the Act, key features of government costs are as follows:

§   We estimate that providing this role would require resources equivalent of 0.2 full-time employee for administration and enforcement at the APS 6 level. This additional resource equates to an estimated annual, ongoing cost of $14 086.

§   The increased costs do not include enforcement costs incurred by associated Commonwealth Departments, such as the AFP, ACCC and DPP. These costs are discussed later.

The estimates serve as an upper bound calculation that captures the possible growth that online tobacco retail is anticipated to experience over time.

Table 4.2 provides a comparison of the likely aggregate impact of the administration and enforcement costs across the four options. While the table summarises the relative magnitude of these costs imposts based on calculations of estimated resourcing requirements. 



4. 2        Comparison of administration and enforcement costs

Option 1

Option 2

Option 3

Option 4

Administration costs

Low

§ Increased complaints and inquiries as number of online retailers grow

Medium

§ Significant upfront costs in developing code of conduct

§ Some monitoring costs, but likely to be recovered through registration fees

Low-medium

§ DoHA would require additional resources to administer its expanded role

 

Low

§ Fewer Australian-based online retailers affected by the Act as they shift to overseas Internet domains

Enforcement costs

Medium

§ Increased likelihood of ‘rogue’ players

§ Greater complexity in determining relevant jurisdiction responsible for enforcement

§ Increased need for coordination across jurisdictions

Low

§ Clarity of obligations and industry self-policing likely to improve industry behaviour, leading to fewer inquiries and complaints

§ A body would need to be nominated to adopt enforcement responsibilities (could be DoHA or NGO)

Low

§ Clarity of obligations likely to improve industry behaviour, leading to fewer inquiries and complaints

 

Low

§ Increased likelihood of ‘rogue’ players moving websites offshore limiting enforcement

 

Additional Commonwealth agency costs

In addition to the cost incurred by the DoHA under all options (except Option 1), a host of other agencies may be required to devote resources to this issue. Depending on the level of enforcement applied, the commitment of auxiliary agencies will vary. Additional resources may be required in the following agencies:

§   Australian Customs Service.

§   the Australian Federal Police.

§   the Australian Competition and Consumer Commission.

§   the Director of Public Prosecutions.

§   the Office of Small Business.

§   Australia Post.

§   the Australian Tax Office.

Compliance costs for online tobacco retailers

Compliance costs are expected to increase with the stringency of each option. To varying degrees, each option requires online retailers to change their current practices with regard to Internet advertising of tobacco products. These compliance costs reflect:

§   one-off cosmetic alterations to their website’s design to meet a number of requirements;

§   loss of sales; and

§   possible registration fees.

The magnitude of these costs will relate to the nature of the retailed tobacco products as well as the type of retail outlet. These compliance costs are detailed below. Understanding the relative magnitude of compliance costs has been drawn from figures and data provided by some industry participants.

Cosmetic website changes

Currently, all of the online retailers would have to make some cosmetic changes to their websites in order to comply with options 2 and 3. These changes would take the form of any or all of the following:

§   removing graphics of cigarette products from a website and converting to a largely text-based;

§   presenting tobacco products prices in a manner that does not feature the discount or price markdown;

§   the inclusion and updating of banners with health warnings;

§   providing a ‘clean’ entry page that requires acknowledgement of being at least 18 years of age;

§   ensuring customers are aware of all duties and taxes associated with their purchase;

§   providing substantial and effective barriers to the purchase of their merchandise by minors; and

§   ceasing any solicitation to promote traffic to their site (currently all online retailers appear to comply with this point).

Some of these changes would require one-off costs, while most of them would be easily implemented within their current website maintenance activities. 

Unintended costs

Options 2 and 3 are not likely to greatly affect the majority of business practices because they present the ways in which current ‘good’ practices can be formalised. The one notable exception is for discount retailers. They currently promote discounts based on avoidance of relevant taxes and duties.

Option 1 requires no change at all.

Option 4, however, has the effect of prohibiting online sales through its ban on Internet advertising. Such an approach has the inherent risk of losing industry cooperation. Many tobacco retailers would simply move their website offshore rather than comply with the ban on tobacco advertising on the Internet. Of note, both options 2 and 3 would also have a similar effect should Internet advertising requirements become too restrictive (for example, text only for cigars and tobacco accessories).

A total ban on tobacco advertising, or even the legislation of online restrictions, will not necessarily produce full compliance. Numerous international Internet sites already facilitate tobacco sales to Australians — without complying with existing Australian laws and regulations. Pursuing an option that is too restrictive and does not have the support of tobacco retailers will most likely prove ineffective as sites relocate.

Forcing sites offshore may produce two foreseeable consequences:

§   At present most Australian based sites are presenting their content in a responsible, or near responsible, manner. Without this cooperation, sites could begin to solicit traffic and promote their products in an undesirable way.

§   Shifting firms offshore may see a loss of custom and taxation revenues.

§   Firstly, Government and non-government organisations have signalled that the greatest concerns relate to the manner in which tobacco products (especially cigarettes) are presented at the point of sale on the Internet. Because of the Internet’s fluidity, it is relatively difficult to enforce options 2 through 4. Losing industry cooperation increases the degree of enforcement difficulty. In fact, measures that too stringently attempt to prevent the sale of tobacco products on the Internet may have the adverse effect of losing cooperation in:

§   adopting safeguards against underage purchases;

§   presenting Australian health warnings; and

§   restraining from activities and actions that promote smoking.

Secondly, firms have identified the magnitude of Australian taxes and customs as their biggest hurdle for being competitive with international firms. The obligation to pay customs duties falls on the consumer and little penalty is imposed if this obligation is not met. Again, losing industry cooperation has the risk of pushing tax-compliant online retailers offshore. This foregone tax revenue can be significant. Online specialty tobacconists indicate that taxes (duties plus GST) account for nearly 40 per cent of the sale price. This figure suggests that tax revenue from their sales is around $5 million per annum (the majority of which is duties).

Finally, reducing the presence of firms that use ‘good practices’ from this industry will reduce competition to those firms that do not. Without this competition, incentives for rogue operators to access this market will strengthen.

Benefits

All of the options, with the exception of ‘do nothing’, should address the current and future problems stemming from a lack of clarity over regulations governing advertising on the Internet.

Public health benefits — real and potential

The anticipated public health benefits stem from strengthening existing strategies aimed at discouraging tobacco usage. Options 2 through 4 seek to assist in protecting the initial intent of the Act. That is, their goal is reduce exposure to tobacco advertising in order to reduce the incidence of smoking and generate the subsequent economic and health benefits. All the options (other than the status quo) should contribute to public health benefits. Each option differs in its effectiveness and enforceability. The less effective the option, the weaker its potential ability to contribute to desired public health outcomes.

While options 2 and 3 — that is, a voluntary or mandatory specification of online tobacco sales advertising — would not substantially alter current retailer behaviour, they would achieve the following:

§   tightened controls around compliance with minimum age requirements for the purchase of tobacco products;

§   reduced promotion (and possibly the availability) of ‘cheap’ and ‘discounted’ cigarettes that advertise being tax free;

§   improved promotion and disclosure of health warnings that comply with Australian labelling requirements;

§   unambiguous enforcement mechanisms, namely application of the penalties in the Act; and

§   a vehicle for more effective and efficient responses to the challenges of regulating tobacco advertising on the Internet.

All of these would contribute to better public health outcomes. However, estimating the magnitude of the contribution these outcomes would make to reduced rates of smoking and tobacco consumption among Australians is difficult.

Achieving public heath benefits under any of the options depends on the degree to which it achieves the cooperation of current and future online retailers. To this end then, Option 2 and Option 3 appear to pose the best opportunities to encourage this cooperation. In doing so, the risks of losing industry participation and self-regulation are minimised and effective changes can occur. This is clearly not the case under Option 4.

Reduced exposure of minors to online tobacco sales advertising

The media platforms accessed by youth are evolving. If these trends continue, the Internet will become a major vehicle by which youth can be exposed to tobacco advertising. Moreover, youth purchasing cigarettes on the Internet are using a source that provides greater volume relative to a shopfront. (Minimum purchases online tend to be at least a carton, while the minimum in a shopfront is a pack.)

Options 2 through 4 respond to the shifting importance of various media platforms.

Options 2 and 3 recognise the limitations of effectively implementing age restricted access regimes on the Internet. Consequently, these options outline strategies that:

§   minimise the possible promotion and attractiveness of tobacco products online through text only presentation of cigarettes and limited graphics for other tobacco products;

§   strengthen the use of Australian-compliant health warnings by inclusion of Australian health warning labels and other information; and

§   concentrate on reducing the likelihood of the Internet becoming a viable supply of direct sales to minors (for example, requiring age verification upon delivery).

Importantly, these features of options 2 and 3 are likely to gain high levels of cooperation among current and future online tobacco retailers in Australia. Option 4 would most likely receive the cooperation of only the large supermarkets. The majority of current and future online tobacco retailers are more likely to move their website to an offshore host than comply with the regulation. The results would be an erosion of current standards applied to tobacco advertising online rather than reinforcement or enhancement.

Moreover, with the relocation of online retailers to offshore website hosts, the use of taxes as a price signal to deter consumption would be ineffective. These ‘rogue’ retailers would respond to competitive pressures and most likely advertise prices that did not reflect all the duties and taxes that the product would attract in Australia.

Deterring consumption among Australian adults

Online tobacco advertising has the potential to partially counteract the effectiveness of anti-tobacco campaigns.

Little is known about the profile of tobacco (that is, cigarette) consumers who purchase online. It may be reasonable to assume that individuals purchasing online are more likely to reside in remote areas. However, it is also probably reasonable to assume that online purchasers are ‘regular’ smokers.

In addition, individuals purchasing online are probably less likely to modify consumption in response to changes in price (rather, they look to minimise expenses associated with maintaining a certain level of consumption).

It is possible that, as the Internet becomes a stronger substitute for physical retail shops (for goods and services more broadly), the segment of adult smokers using the Internet for online purchases will change. Online retailers may increasingly attract the interest of the more ‘marginal’ smokers, (that is, smokers who have a greater likelihood of quitting), the erosion of pricing and/or tax strategies could materially impact on rates of smoking or consumption.

Other considerations

Supermarkets

Supermarkets are the dominant sellers of tobacco products. Through their new web-based shopping facilities, they have also become online retailers of tobacco products. Largely, the options (with the exception of Option 4) will not change a supermarket’s operations as they relate to tobacco sales. We further anticipate that any loss of business that does arise as a result of these regulatory measures will be offset as customers substitute towards conventional outlets.

Impact on trade

We may see trade affected for three reasons. First, these regulations cannot stop foreign sites from supplying (or attempting to supply) Australians with foreign tobacco products. This already occurs to a certain degree, and we can expect it to be amplified should Australian sites become too restrictive or prohibited.

Second, the discount tobacco sites are mostly providing imported products. If these regulations can be successfully enforced, then any decrease in the sales made by the discount sellers will most likely equate to a decrease in imports.

Finally, Australia’s specialty cigar stores are also exporters. One firm we consulted with indicated that upwards of 80 per cent of his clientele base were international (R Ayala, Cigar Czar, Queensland, personal communication, 21 November 2007). If the viability of these firms is reduced, we may see a decline in our exports of connoisseur tobacco products.

Net impact

The critically defining feature of the options is whether each option helps to strengthen the premise and strategies currently used to deter tobacco consumption or, instead, has perverse outcomes — that is, to discourage the existing (and possibly future) online retailers from complying with ‘good’ practice regarding tobacco sales advertising.

Table 4.3 summarises the anticipated impact of each option. As indicated in the chapter, the summary draws upon data and information available about the affected industry as well as figures provided through stakeholder consultations. While the summary is qualitative, indicating relative magnitudes, it is based on estimated resource requirements and cost imposts.



4. 3        Net impact assessment

Option

Costs

Benefits

1: Do nothing

Low

Neutral

 

§ No change to compliance costs

§ As the online retail industry grows:

-      enforcement costs are likely to increase given difficulty of providing clear guidance on the Act’s application to Internet advertising on the Internet

-      Public health objectives undermined as a result of non-compliance with labelling requirements, tax obligations and potentially greater risk of sales to minors

 

2: Code of conduct

Medium

Low-medium

§   Clarity — section 16 exception does not apply to Internet advertising sales

§ Extent of compliance costs depend upon standards applied to Internet retailers

§ Some of the compliance costs would be partially offset by gains from one national standard (that is, cross-jurisdictional consistency)

§ Low administration costs and higher compliance costs as reliant on industry self-regulation

§ Significant upfront costs in developing code of conduct

§ Greater risk that competitive pressures could result in retailers withdrawing from the agreement

§ Clarity allows enforcement mechanisms to be more effectively utilised

§ Provides certainty to online retailers that they are complying

§ Prevents weakening of public health protection provided by the Act — for example, health warnings, taxes, age restrictions for sale

§   Age restriction, verification and notices

§ Minimal compliance costs for retailers (web changes absorbed in routine maintenance)

§ Possible increased costs for consumers as result of more expensive shipping option

§ Reduces potential for online retail as avenue for purchase of tobacco products by minors

3: Amend the Act

Low-medium

Medium

§   Clarity — section 16 exception does not apply to Internet advertising sales

§ Compliance costs — same as Option 2

§ Relative to Option 2, greater efficiency gains as a result of consistency and removing duplication in oversight of online retailers by states and territories

§ Benefits generally same as Option 2, but:

-      stronger enforcement mechanisms

-      less risk than Option 2 because compliance is mandatory rather than voluntary — counteracts ‘competitive market pressures’

-      greater jurisdictional consistency

§   Age restriction, verification and notices

§    

§ Same as Option 2

§ Same as Option 2

4: BAN Internet sales

High   x

Low

 

§ Increased non-compliance as Australian retailers move websites offshore

§ Weakens public health protection provided by the Act. Offshore retailers likely to sell products:

-      without Australian health warnings

-      tax avoidance weakening price signal to reduce consumption

-      limited compliance with age restrictions for sale

§ Eliminates avenue for supply to ‘home bound’ and remote communities

Compliance low as website may shift to offshore

Recommended approach

Option 3 is the most preferable because:

§   it is the option most likely to effectively achieve the goals of government health agencies while maintaining industry cooperation;

§   it requires the least resources to effectively address the problem at hand; and

§   it can be enforced by government agencies without unfavourably restricting competition.

§   Option 3 requires an amendment to the Tobacco Advertising Prohibition Act 1992.  This amendment will require online retailers of tobacco products to ensure their websites include the following:

§   conveyance of relevant and up to date health warnings;

§   a text only format — no pictures;

§   restrictions on use of inducing language such as ‘cheap’, ‘bulk savings’ and ‘discount’;

§   a ban on inter-site promotion and solicitation and network solicitation (for example, providing options such as ‘email this site to a friend’);

§   putting in place greater safeguards against the sale or delivery of tobacco products to minors - such as a deterrence for minors attempting to access the page and site registration and/or membership and age verification via a credit card; and

§   the requirement that all appropriate taxes and duties be incurred and reported during the transaction.

The amendments will result in clear and consistent restrictions that will remove the current ambiguity and inconsistencies between States and Territories.  Monitoring and enforcement will be achieved by the existing processes in place for the Tobacco Advertising Prohibition Act 1992 .  It is intended that it will be the responsibility of online retailers to ensure compliance with the amendments.

The language used in new legislation must also not be too broad such that ambiguity remains or, worse, web based sales are banned altogether. Prohibiting online advertising is considered to be anti-competitive and also has the potential to disproportionately impact the disabled (for example, homebound) and remote communities who rely on online services to secure goods. A careful balance must be struck to ensure that the advantages of this option are fully realised.

Consultation

The CIE conducted consultation with relevant stakeholders.  The consultation process began in mid November 2007. Each agency/organisation contacted by the CIE received a copy of the issues paper via email. Two days later, CIE followed up with phone calls in an attempt to schedule a time to speak. Interviews were held between the CIE and stakeholders either in phone or in person, and interviews typically lasted between 30 mins and an hour. The consultation process was completed by mid December 2007.

The results of the consultations are set out below:

States and Territories:

In general, the following themes emerged:

§   States and Territories have been increasingly addressing internet sales.

§   uncertainties of where point of sale originates;

§   limited resources to monitor for compliance (relative to other priorities, such as smoking ban enforcement);

§   view that enforcement is not feasible; and

§   difficulty with translating ‘shop front’ POS requirements to internet retail sites.

Additionally, the Northern Territory raised an issue about the sale of tobacco products to those in very remote communities. For some residents in of the Northern Territory’s remote communities, the internet offers the only practical option to purchase regular grocery items which includes tobacco products.

Retailers:

§   Supermarkets - Both Coles and Woolworth’s were keen to see implemented a common set of national guidelines. Largely they did not feel that the current legislative environment was overly burdensome or confusing - especially when compared to conventional POS. Both supermarkets appeared largely unaware of state based changes to legislation. They stressed the desire to see this “grey area” cleared up, even if that means an outright ban. At the time of the consultations, they were already attempting to market products responsibly - that is, text only.

§   Cigar specialty stores - (Cigar Czar and Cigar World) Argued they are trying to comply with good practices - despite having no guidelines to work towards. These stores: (i) do not solicit traffic to their websites; (ii) take steps to ensure minors cannot purchase from them; and (iii) make efforts to ensure that all duties are paid. They sell a connoisseur product and generally have an informed customer base. A large part of their business is based on internet sales (up to 70 per cent). They face extensive competition from overseas sites, where customers can generally avoid customs and taxes. If regulatory requirements were too stringent, it would likely lead to perverse outcomes such as relocating the website offshore or closing down businesses.

Tobacco Industry:

Australia ’s three major manufactures of tobacco products (British American Tobacco, Philip Morris and Imperial Tobacco) were all contacted during the consultation phase.  Their concerns are outlined below:

British American Tobacco

§   Where does this fit in with what the FCTC is attempting to do?

§   How will this affect intra business sales? Much of this in done electronically.

§   Approve of the effort to ensure all pay appropriate taxes.

§   Approve of measures that help to fight counterfeit products.

§   Believe they have taken the right steps in this space already.

Philip Morris

§   Enforcement will be an issue.

Imperial Tobacco

§   No significant comments, does not disapprove or have any major concerns about the policy.

Internet Service Providers:

CIE contacted the Internet Industry Association and the Australia Information Industry Association.  Key messages were:

§   enforceability is limited;

§   responsibility for compliance is with the retailers; and

§   merit in clarifying that standards of shop front consistent for internet.

Peak Organisations:

The National Heart Foundation, the Cancer Council Victoria and Action on Smoking and Health were contacted during the consultation. These organisations stressed their strong support behind tighter regulations and especially any effort made to limit the sale of tobacco products to minors.

Cooperation by all parties involved — that is, State and Territory governments and industry — is likely to improve the success of the approach. Our consultation process indicated that State and Territory health agencies would find this line of action appropriate. Similarly, industry bodies representing supermarkets and specialty tobacco and cigar stores have indicated a general willingness to comply with any Commonwealth Government guidelines. The position of discount online sellers is not known. It would be expected that their compliance would be limited given that many of their actions partially motivate regulation intervention.

A cooperative approach

Cooperation from industry is vital to the effectiveness, efficiency and enforcement of the regulation. Our consultations with industry and government draw attention to the transient nature of the online tobacco market. Online retailers are able to relocate away from the reach of Australian jurisdictions at very little cost and, once out of reach, retailers remain free to market their products without constraint. Because of this, it is important that the option employed remains sensitive to industry goals while pursuing the government’s own objectives.

It is clear to see why Option 4 largely fails on this front. A ban on Internet advertising for tobacco products will effectively translate as a ban on the Internet retail sale of tobacco products. For reasons already discussed, such an approach is unlikely to be met with any compliance by all retailers.

Option 3 builds on Option 2 by providing the legal consequences to those who act outside acceptable practices, which overcomes a significant shortcoming of Option 2. This option can have the same scope as Option 2, but with appropriate controls and enforcement mechanisms. Under option 3, it will remain legal for retailers to still sell their products online, while at the same time the Commonwealth can restrict advertising from tobacco websites.

Impact on competition

Importantly, it is not the intention of the Act to restrict tobacco sales or reduce the overall tobacco market. Rather, the Act’s goals are to ‘limit exposure of the public to message and images that may persuade them’ to start or continue using tobacco products.

The example of the cigar market highlights this point precisely. The market for cigars is a niche market, with a small customer base of well informed connoisseurs. Cigar retailers typically have physical shopfronts, but conduct a high proportion of their trade through Internet sales. Through the Internet, these stores are able to service customers Australia-wide and overseas. Consultations indicated that restricting their ability to trade via the Internet would severely harm their operations, forcing them to move to an offshore domain. This extends beyond the objectives of the Act.

Implementation and review

The preferred option would require an amendment be made to the Tobacco Advertising Prohibition Act . It is proposed that the Act be amended such that detailed, yet flexible, provisions are described to act as guidelines for current and future Internet retailers.

As per Section 34A of the Act, the Minister will be required to present an annual report to the Parliament on:

§   the number and nature of any contraventions of the Act occurring in the preceding 12 months; and

§   action taken by the Minister or a Commonwealth agency in response to each contravention.

In addition to this annual reporting, the Department could also consider a review three years after implementation. This review should focus on whether the recommended option is effective, achieving sufficient compliance and leading to little, if any, perverse or unintended outcomes.



 

TOBACCO ADVERTISING PROHIBITION AMENDMENT BILL 2010  

 

NOTES ON CLAUSES

 

Clause 1 - Short Title

This clause provides that the Act may be cited as the Tobacco Advertising Prohibition Amendment Act 2010 .

 

Clause 2 - Commencement

This clause provides that sections 1-3 of the Act will commence the day the Act receives Royal Assent. This clause also provides that Schedule 1 to the Act commences on the earlier of a single day to be fixed by proclamation or, the day after the end of a period of six months beginning of the day the Act receives the Royal Assent.  This ensures that the latest possible commencement date for the Act will be six months after Royal Assent

 

Clause 3 - Schedule(s)

This clause provides that each Act that is specified in a Schedule to the Act is amended or repealed as set out in the applicable Schedule. Any other item in a Schedule has effect according to its terms. 

 

The effect of this provision is that amendments to the TAP Act are set out in Part 1 of Schedule 1 of the Bill and the application provision in Part 2 of Schedule 1 will operate according to its terms.

 

Schedule 1 Tobacco Advertising Prohibition Act 1992

 

Part 1 - Amendments

Item 1

This item inserts a cross reference in subparagraph 6(3)(a)(i) to new sections 16A and 16B. The effect of this amendment is to include the two new exceptions established by sections 16A and 16B in the list of conduct that, though permitted under the Act, may still be prosecuted under a tobacco advertising law of a State or Territory if the conduct constitutes an offence under the relevant State or Territory law.

 

Item 2

This item inserts a cross reference in section 7 to new sections 16A and 16B. Section 7 provides that certain provisions in the Act that permit tobacco advertising in limited circumstances only have effect for the purposes of the Act. This amendment has the effect that the two new exceptions established by new sections 16A and 16B are included in the list of provisions covered by section 7.

 

Item 3

This item inserts a definition of electronically into the interpretation provision of the Bill (section 8) to define that term by referring to the meaning given to it in the new paragraph 10(1)(da) to be inserted by item 5.

 



Item 4

This item substitutes ‘ publishes ’ for ‘publishes’ in subsection 10(1). This is a technical change which aligns this provision with current conventions for drafting definitions and does not alter the meaning of the provision.

 

This item also notes that the heading to section 10 is altered by substituting ‘ a tobacco advertisement ’ for ‘ a tobacco advertisement ’.

 

Item 5

This item inserts a new paragraph (da) into subsection 10(1).

 

Subsection 10(1) lists the conduct that constitutes publishing a tobacco advertisement for the purposes of the Act. There has been previously been some confusion over whether online tobacco advertisements fall within the scope of the Act. This amendment ensures that the conduct of a person who brings a tobacco advertisement to the notice of the public by electronic means, including via the internet, or makes the advertisement remotely accessible by a computer, mobile phone or any other electronic device will satisfy the definition of publishing a tobacco advertisement, unless it falls within one of the limited exceptions in subsections 10(3)-(5).

 

Item 6

This item inserts a note to existing subsection 13(1).

 

Subsection 13(1) makes it an offence for a person to broadcast a tobacco advertisement in Australia or Norfolk Island, otherwise than as permitted by section 14. Section 14 provides an exception to the offence in subsection 13(1) for a person who broadcasts a tobacco advertisement if that advertisement is accidental or incidental to the broadcasting of other matter and the person does not receive any direct or indirect benefit for broadcasting the tobacco advertisement.

 

The new note merely clarifies the burden of proof for this exception by stating that a defendant has an evidential burden in relation to the matters in section 14.  The note explains that subsection 13.3(3) of the Criminal Code would apply so as to impose the evidential burden on the defendant.  This means that the person who broadcasts the tobacco advertisement must adduce evidence to suggest that there is a reasonable possibility that the exception in section 14 applies. This is because the matters in section 14 involve facts and circumstances which would be peculiarly in the knowledge of the defendant and particularly costly and difficult for the prosecution to prove beyond reasonable doubt.

 

Once the defendant has adduced evidence showing that there is a reasonable possibility that the exception in section 14 applies, the exception must be negated by the prosecution beyond reasonable doubt.

 

Item 7

This item inserts a reference in paragraph 15(1)(a) to the new section 16B. Subsection 15(1) is an offence provision which has the effect that a regulated corporation must not publish a tobacco advertisement, or cause or authorise a tobacco advertisement to be published, unless one or more of the exceptions listed in paragraph 15(1)(a) applies.

 

This amendment adds the new exception regarding conduct by certain carriers, carriage service providers, internet service providers and internet content hosts (created by the new section 16B) to the list of exceptions to the offence in subsection 15(1).   

 

Item 8

This item inserts a note to amended subsection 15(1).

 

Subsection 15(1) (as amended) makes it an offence for a regulated corporation to publish, or cause or authorise to be published, a tobacco advertisement in Australia, otherwise than as permitted by section 16, 16B, 17, 18, 19 or 20. Sections 16, 16B, 17, 18, 19 and 20 provide exceptions to the offence in subsection 15(1) where:

·          the tobacco advertisement is published where the tobacco product is sold (section 16);

·          the person who published the tobacco advertisement is a carrier, carriage service provider, internet service provider or internet content host and was acting solely in the person’s capacity as a carrier, carriage service provider, internet service provider or internet content host (new section 16B);

·          where the tobacco advertisement is published in a periodical printed outside Australia that is not principally intended for distribution or use in Australia (section 17);

·          where the tobacco advertisement is published in connection with specified sporting or cultural events held in Australia (section 18);

·          where the tobacco advertisement is published as an accidental or incidental accompaniment to the publication of other matter (section 19); or

·          where the tobacco advertisement is published by an individual otherwise than in the course of the manufacture, distribution or sale of tobacco products and the individual does not receive any direct or indirect benefit for publishing the advertisement (section 20).

 

The new note merely clarifies the burden of proof for this exception by stating that a defendant has an evidential burden in relation to the matters in sections 16, 16B, 17, 18, 19 and 20.  The note explains that subsection 13.3(3) of the Criminal Code would apply so as to impose the evidential burden on the defendant.  This means that the person who publishes the tobacco advertisement must adduce evidence to suggest that there is a reasonable possibility that one of these exceptions applies. This is because the matters in section 16, 16B, 17, 18, 19 and 20 involve facts and circumstances which would be peculiarly in the knowledge of the defendant and particularly costly and difficult for the prosecution to prove beyond reasonable doubt. Once the defendant has adduced evidence showing that there is a reasonable possibility that at least one of the exceptions in sections 16, 16B, 17, 18, 19 or 20 applies, the exception must be negated by the prosecution beyond reasonable doubt.

 

Item 9

This item inserts a reference in subsection 15(2) to the new section 16B. Subsection 15(2) is an offence provision which has the effect that a person must not publish a tobacco advertisement in the course of, or for the purposes of, regulated trade or commerce, unless one or more of the listed exceptions applies.

 

This amendment adds the new exception regarding conduct by certain carriers, carriage service providers, internet service providers and internet content hosts (created by the new section 16B) to the list of exceptions to the offence in subsection 15(2).

 

Item 10

Subsection 15(2) (as amended) makes it an offence for a person to publish a tobacco advertisement in Australia in the course of, or for the purposes of, regulated trade or commerce, otherwise than as permitted by section 16, 16B, 17, 18, 19 or 20. Sections 16, 16B, 17, 17, 19 and 20 provide exceptions to the offence in subsection 15(2). The explanation for item 8 includes a list of these exceptions.

 

The new note merely clarifies the burden of proof for this exception by stating that a defendant has an evidential burden in relation to the matters in sections 16, 16B, 17, 18, 19 and 20.  The note explains that subsection 13.3(3) of the Criminal Code would apply so as to impose the evidential burden on the defendant.  This means that the person who publishes the tobacco advertisement must adduce evidence to suggest that there is a reasonable possibility that one of these exceptions applies. This is because the matters in section 16, 16B, 17, 18, 19 and 20 involve facts and circumstances which would be peculiarly in the knowledge of the defendant and particularly costly and difficult for the prosecution to prove beyond reasonable doubt. Once the defendant has adduced evidence showing that there is a reasonable possibility that at least one of the exceptions in sections 16, 16B, 17, 18, 19 or 20 applies, the exception must be negated by the prosecution beyond reasonable doubt.

 

Item 11

This item inserts a reference in subsection 15(3) to the new section 16B. Subsection 15(3) is an offence provision which has the effect that a person must not publish a tobacco advertisement in a Territory, other than the Australian Capital Territory, the Northern Territory or Norfolk Island, unless one or more of the listed exceptions applies.

 

This amendment adds the new exception regarding conduct by certain carriers, carriage service providers, internet service providers and internet content hosts (created by the new section 16B) to the list of exceptions to the offence in subsection 15(3).

 

Item 12

This item inserts a note to amended subsection 15(3).

 

Subsection 15(3) (as amended) makes it an offence for a person to publish a tobacco advertisement in a Territory, other than the Australian Capital Territory, the Northern Territory or Norfolk Island, otherwise than as permitted by section 16, 16B, 17, 18, 19 or 20. Sections 16, 16B, 17, 19 and 20 provide exceptions to the offence in subsection 15(2).  The explanation for item 8 includes a list of these exceptions.

 

The new note merely clarifies the burden of proof for this exception by stating that a defendant has an evidential burden in relation to the matters in sections 16, 16B, 17, 18, 19 and 20.  The note explains that subsection 13.3(3) of the Criminal Code would apply so as to impose the evidential burden on the defendant.  This means that the person who publishes the tobacco advertisement must adduce evidence to suggest that there is a reasonable possibility that one of these exceptions applies. This is because the matters in section 16, 16B, 17, 18, 19 and 20 involve facts and circumstances which would be peculiarly in the knowledge of the defendant and particularly costly and difficult for the prosecution to prove beyond reasonable doubt. Once the defendant has adduced evidence showing that there is a reasonable possibility that at least one of the exceptions in sections 16, 16B, 17, 18, 19 or 20 applies, the exception must be negated by the prosecution beyond reasonable doubt.

 

Item 13

This item inserts a new section 15A which is a new offence provision.

 

Subsection 15A(1) makes it an offence for a person to publish electronically in Australia anything that meets the definition of a tobacco advertisement. It is also an offence under subsection 15A(1) for a person to cause or authorise such a thing to be published electronically in Australia. It is possible to have more than one publisher in relation to an electronic tobacco advertisement.  The advertisement may have an “Australian link” within the meaning of subsection 15A(5) even if the defendant publisher (who is being prosecuted) is not the basis for that link, as long as there is another publisher who provides the Australian link. However, the defendant publisher, or the act of publication that constitutes the offence, must have the connection with Australia that is provided by the geographical jurisdiction (category B) under section 15.2 of the Criminal Code.

 

Consequently, if the publication constituting the offence (such as the uploading of the advertisement onto the internet) occurs outside Australia, the defendant publisher must be an Australian citizen or resident, or a body corporate incorporated in Australia.  However, if the publication occurs within Australia, such a requirement does not apply to the defendant publisher.  This is intended to ensure that the offence in section 15A covers the maximum number of persons advertising tobacco products electronically to the Australian public.

 

Subsection 15A(2) provides that the offence under subsection 15A(1) does not apply if any of sections 16A to 20 apply. Section 16A provides an exception for tobacco advertisements published on the internet where the tobacco product is sold, provided that the publishing of the tobacco advertisement is not an offence under the relevant State or Territory law. Sections 16B, 17, 19 and 20 provide further exceptions. The explanation for item 15 provides a list of these exceptions.

 

The note to subsection 15A(2) clarifies that the defendant has an evidential burden of proof in relation to the exceptions specified in sections 16A - 20.  This burden is imposed by operation of subsection 13.3(3) of the Criminal Code.  This is the same evidential burden that a defendant has in relation to exceptions to the offences in sections 13 and 15. A person who publishes a tobacco advertisement electronically in Australia or causes or authorises a tobacco advertisement to be published electronically in Australia must adduce evidence to suggest that there is a reasonable possibility that one of the exceptions in sections 16A - 20 applies. This is because the matters in sections 16A - 20 involve facts and circumstances which would be peculiarly in the knowledge of the defendant and particularly costly and difficult for the prosecution to prove beyond reasonable doubt. Once the defendant has adduced evidence showing that there is a reasonable possibility that at least one of the exceptions in sections 16A - 20 applies, the exception must be negated by the prosecution beyond reasonable doubt.

 

Subsection 15A(3) provides that section 15.2 of the Criminal Code applies to an offence committed under subsection 15A(1). Section 15.2 of the Criminal code extends the geographical jurisdiction of the offence.  This is necessary because some of the conduct or the circumstances in relation to an alleged offence may not occur, or exist, in Australia in such a way as to make it appropriate for the standard geographical jurisdiction of Division 14 of the Criminal Code to apply.

 

Subsection 15A(4) defines what published in Australia means for the purposes of section 15A. A tobacco advertisement published electronically is published in Australia if the advertisement originates in Australia, or, if the advertisement has an Australian link and is, or is intended to be, accessible by the Australian public or a section of the Australian public.

 

Section 15A(5) defines the term Australian link . A tobacco advertisement has an Australian link if, at the time that it is published, the entity (including an individual) who published the advertisement satisfies certain preconditions, as set out in the subsection, that link the entity to Australia.

 

It is possible to have more than one publisher in relation to a particular tobacco advertisement. Only one of these publishers needs to have an Australian link for the tobacco advertisement to be covered by section 15A and for one or all of the publishers to be prosecuted in relation to that particular tobacco advertisement. This could mean that a person could be liable even if they have no link to Australia at all, subject the geographic jurisdiction that applies by operation of the Criminal Code. This result was intended to ensure that the offence in subsection 15A covers the maximum number of persons who are advertising tobacco products electronically to the Australian public. 

 

Item 14

This item inserts the term ‘format’ after ‘content’ in paragraph 16(2)(b). Section 16 provides an exception to the prohibition of tobacco advertising for advertisements that are displayed at or on a place where tobacco products are sold to the public (i.e. at the point of sale).  It was considered that it would be more relevant to an internet context to provide for the prescription of requirements in relation to the ‘format’ of a tobacco advertisement on a website through which tobacco products may be purchased.

 

Existing paragraph 16(2)(b) requires such advertisements to comply with all applicable requirements that are set out in the regulations regarding the size, content and location of the advertisement. This amendment adds an additional requirement that such advertisements also comply with all applicable requirements in the regulations regarding the format of the advertisement.

 

Item 15

This item inserts new sections 16A and 16B.

 

Section 16A

New section 16A creates an additional exception to the new offence established by section 15A. Section 15A makes it an offence to publish, or cause or authorise to be published, a tobacco advertisement electronically in Australia.

 

Subsection 16A(1) provides an exception for online point of sale advertisements, similar to the exception provided by section 16 for non-online point of sale advertisements. The effect is that a person may publish a tobacco advertisement on the internet so that it is publicly accessible in a State or Territory only if the advertisement provides a facility for a person accessing the advertisement to purchase a tobacco product (i.e. if it is displayed at an online point of sale), and provided that the publishing of such an advertisement is not an offence under the relevant State or Territory law.

 

Subsection 16A(2) has the effect that if there is no relevant State or Territory law that regulates the advertising of tobacco products on the internet, the advertisement must also comply with all applicable requirements set out in the regulations made for the purposes of subsection 16A(2).

 

Subsection 16A(3) provides that, for the purposes of section 16A, a tobacco advertisement provides a facility for a person who accesses the advertisement to purchase a tobacco product if it is published in conjunction with the facility or otherwise includes or provides the facility.

 

Subsection 16A(4) sets out the relevant requirements that regulations made for the purposes of subsection 16A(2) may prescribe.

 

Section 16B

New section 16B creates a new exception to the offence provisions in sections 13,15 and new 15A for publishing a tobacco advertisement in circumstances where the person who publishes the advertisement is a carrier, a carriage service provider, an internet service provider or an internet content host and, in publishing the tobacco advertisement the person is acting solely within their capacity as a carrier, carriage service provider, internet service provider or internet content host respectively.  It was considered inappropriate to subject persons in these categories to potential liability in relation to the publication of internet content over which they may have no practical means of control.

 

Subsection 16B(2) provides definitions for the terms carrier, carriage service provider, internet service provider and internet content host. These definitions are cross referenced to the Telecommunications Act 1997 (carrier and carriage service provider) and the Broadcasting Services Act 1992 (internet service provider and internet content host).

 

Part 2 - Transitional

 

Item 16

 

This item is an application provision.

 

Subitem (1) provides that this item applies to tobacco advertisements that were published electronically before the commencement of Part 1 of this Act.

 

Subitem (2) provides that the amendments made by Part 1 of this Act apply in relation to the publication of a tobacco advertisement if that tobacco advertisement is accessible by the public, or a section of the public, at or after the commencement of Part 1 of this Act. This means that if a tobacco advertisement is published prior to commencement of Part 1 of this Act, but is still accessible to the public, or a section of the public, at or after the time that the amendments in Part 1 commence, the publication of that advertisement will be subject to these amendments.

 

This application provision reflects the fact that at or after the time that Part 1 of this Act commences, online tobacco advertisements that are accessible to the Australian public, or a section of the public, may have already been published. The new offence in section 15A will be applied retrospectively to the publication of such tobacco advertisements.

 

The retrospective application of new section 15A is necessary to avoid the objects of the offence provision being undermined by permitting the continued display on the internet of tobacco advertisements that were published prior to the commencement of the Bill.

 

However, the practical effect of this retrospective application on a potential defendant is substantially diminished by the fact that the period between enactment of the Bill and its date of commencement will provide an opportunity for previously published tobacco advertisements to be removed from websites.  It is intended that the Bill will commence automatically after Royal Assent, rather than by early proclamation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




[1]    This estimate is largely in line with other studies. Allens Consulting Group (2002) estimates around 39 000 outlets nationally retail tobacco products.