Take note – Further potential disruptions for tobacco retailers

Jeff Rogut

AACS has made representation to the ACCC and responsible government politicians regarding a regulation regarding graphic health warnings on tobacco packaging, which, unless addressed will cause further disruption for retailers of tobacco products.

I encourage you to similarly voice your concerns to your local political representatives as well as the Federal Government.

The essence of the issue that has significant potential ramifications on our members and tobacco retailers in general and as included in our representations is as follows:

“I refer to a change in the regulations governing the graphic health warnings on tobacco products, specifically the requirement to rotate the different warnings.

The previous regulations governing the rotation of graphic health warnings put the onus on manufacturers, which could much more easily update the printing of specific sets of warnings before supplying these to retailers. This system saw manufacturers update their stock with new warnings as required, which consequently flowed into the supply chain.

The Competition and Consumer (Tobacco) Information Standard 2011, which governs the rotation of new graphic health warnings on tobacco products, instead puts the onus on both the manufacturer and the retailer to rotate the warnings by using the word “supplied” in the regulations.

The new regulations state that, for an eight month period commencing on 1 December each year, only tobacco products printed with specific graphic health warnings may be supplied. The term “supplied” does not distinguish between supply at a wholesale or a retail level.

This means retailers could inadvertently breach the law if, after 1 December, they sell a product featuring the previous year’s warning. The fines are potentially as high as $1.1 million per offence.

The logistical and administrative burden created by requiring new warnings to be monitored and rotated at a retailer level would be of a similar scale to that faced during the introduction of the plain packaging regulations, which incurred substantial labour and administrative costs for retailers.

The AACS recently contributed to the first major research report into the actual impacts of plain packaging on retailers and we would be happy to share this research with you. It details the wide ranging negative impacts of the legislation on retailers and we are conscious that retailers may be inadvertently burdened by another regulatory change, this time relating to graphic health warnings.

If the new regulations are not modified the ramifications for retailers will mean that:

• Retailers will be forced to conduct an audit of their tobacco stock each year to ensure they no longer supply stock with the old or wrong graphic health warnings, with the obvious added complexity of not being able to distinguish between plain packaged stock;

• Retailers will be forced to review each and every pack to see which warning is featured, a much more difficult exercise than just swapping picture packs with plain ones as was the case leading up to the introduction of plain packaging;

• Transaction times, already affected by the introduction of plain packaging, would be further slowed, impacting the ability of retailers to serve non-tobacco customers; and

• Retailers would face the pressure of having to return products to the manufacturer which would be complicated by trading terms or contractual obligations that may or may not exist, and could incur financial losses if stock such as individual packs were unable to be returned;

• There is no obligation on manufacturers to accept back stock with ‘out of date’ images.

These are not trivial matters. They require retailers to re-train staff and implement new inventory control procedures, costs which will be incurred on an individual retailer basis with no form of subsidy. On the other hand, the fines applicable are very high.

In this environment of extremely challenging conditions for retailers, they need to be able to simply trade through the stock they have on hand and progressively replace this with new stock featuring new health warnings as old stock sells through. A clarification of the regulations would ensure this optimal outcome.

It is our understanding the ACCC is looking into this anomaly in the regulations and we wish to formally register our concern with the definition as it stands in its current form.

You may be aware that the previous graphic health warning standard (Trade Practices(Consumer Product Information Standards)(Tobacco) Regulations 2004 was amended by SLI No 229 of 2005 to clarify the respective responsibilities of manufacturers and importers of tobacco products as opposed to those who merely on-supply tobacco products. The intent of this amendment was to make it clear that retail suppliers would not be liable for selling stock which bears the labeling which was required to be printed on a retail package during a period other than that in which the products is being supplied. Based on this, we respectfully request that the current regulations be amended.”