British American Tobacco (South Africa) Proprietary Limited (‘BATSA’) has been working hard to raise awareness about the sale of illicit cigarettes, recently running a communications campaign named Keep It 100, highlighting the threat posed by illicit products.

This effort to educate the public has also been supported by attempts to prevent misleading information from being issued in the public space, especially as it relates to the pricing of cigarettes as an indicator that all duties and taxes have been paid, the sub-minimum being R16.50.

As a result of these initiatives, BATSA filed two complaints in July 2017 with the Advertising Standards Authority of South Africa (‘ASA’), one against CK Tobacco Distributors Proprietary Limited and CK Tobacco Trading Proprietary Limited (collectively referred to as CK), and the second against the Cigarette Institute of South Africa (‘CISA’).

BATSA is pleased to report that the ASA supported the company’s complaints in both matters and ordered both CK and CISA to withdraw their respective advertisements.

On the complaint against CK, the ASA ordered CK to withdraw a claim that as of March 2017, “…a price less than R16.50 per pack does not necessarily indicate that excise and/or VAT has not been paid on that pack.”

At the core of BATSA’s arguments was the fact that the customs and excise duty on 10 cigarettes is R7.15 and that the duty on a standard pack of 20 cigarettes is R14.30 plus 14% VAT, or R16.30 in total.

The ruling vindicates BATSA’s media campaign – called “Keep It 100” – that a pack of 20 cigarettes should not be sold for less than R16.50.

CK’s, claim was made through an “information booklet” distributed to retailers, which stated, “We do not agree with the notion that a product sold under R16.50 is illegal as we can prove that after manufacturing costs (after paying all duties) are not only well below this figure but are also able to supply our products to our customers below such amount…”.

CK failed to “prove” its manufacturing costs plus all duties came to less than R16.30, arguing instead that it was possible to sell a packet of 10 cigarettes for which excise duties and VAT would amount to R8.15.

The ASA ruled that a reasonable consumer would assume that the CK booklet was making a comparison between packs of 20 cigarettes and the fact that it also sold packs of 10 was “…largely irrelevant, because no mention is made of the fact that is actually referring to such packs…” in its information booklet.

The ASA also ruled that CK had failed to provide evidence to show it was selling packs of 20 cigarettes – as consumers were likely to interpret the claim – for less than R16.50, despite having paid R16.30 in duties and VAT alone.

The ASA instructed CK to immediately withdraw its claims pertaining to its ability to price its products at prices, “…well below this figure,” and to, “…supply our products to our customers below such an amount.”

It also instructed CK to refrain “…from making such ambiguous or unqualified references or claims again in future.” BATSA is delighted by this victory.

The ASA ruling makes it clear that anyone claiming to be able to legally sell a pack of 20 cigarettes for less than R16.50 after having paid all taxes must be able to prove the claim.

As regards the CISA complaint, BATSA’s main contention was that it was not possible for anyone to claim that they can verify that certain brands of cigarettes are legal and that all duties have been paid.

At the heart of BATSA’s complaint was that even cigarettes that have been legally manufactured and which comply with all packaging standards might still be illegal because the relevant duties and taxes have not been paid or because the cigarettes were illegally imported. This means that brand names can still be used illegally without the knowledge or authority of the owner, and as such CISA’s claims that it can verify brands as to authenticity and legality is misleading.

CISA however failed to submit any evidence to support its assertion and which would negate our complaint. In the absence of rebutting evidence, the ASA upheld our complaint as valid. The ASA therefore found that CISA’s advertising is likely to mislead people in a manner which contravened the advertising code. CISA was ordered to:

  • Withdraw the disputed advertising claims;
  • Ensure that the process of withdrawing their advertising is undertaken with immediate effect on receipt of the Ruling;
  • Ensure that the process of withdrawal of their advertising is completed within the timelines stipulated by clause 15.3 of the procedural guide (this means two weeks of the Ruling); and
  • Refrain from using the disputed advertising again in its current format.

Both rulings will help prevent tobacco traders from misleading consumers by claiming they are able to offer legal products at prices below the minimum collectable tax. They will also protect consumers from unscrupulous traders making misleading claims that certain cigarettes are legal and verified as such when in fact they are not.

This is an important step towards eradicating the public as to the scale and hallmarks of the illicit trade in tobacco.

The fight against illicit trade requires active participation by legitimate industry players and institutions such as SAPS and SARS.

ENDS

www.batsa.co.za

Issued by Corporate Image on behalf of British American Tobacco South Africa