Case study 1: The tobacco industry and the Fair Trading Act 1986
The Fair Trading Act states that:
'No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, ... characteristics, [or] suitability for a purpose, of goods' [[31
The Commerce Commission has stated that its job is to enforce 'legislation that ... prohibits misleading and deceptive conduct by traders' [32
]. The Commission has suggested that, on the basis of court decisions, businesses must meet a fairly high standard to comply with the Fair Trading Act
. The standard of business behaviour expected under the Act includes protecting: 'the gullible, [those] of less than average intelligence or poorly educated.' Generally, the question of intent
is not relevant, 'rather the issue is whether their actions did or could deceive or mislead'. The Commission has suggested that the Act also applied to 'conduct likely
to mislead or deceive', (emphasis added) [33
Over the period 1989–2003, we found four episodes (in 1989, 2000, 2001 and 2002) where the Government had an opportunity to apply this law to the statements of tobacco companies and their allies about SHS. In 1989, the advocacy group ASH NZ wrote to the Commerce Commission about advertisements by the Tobacco Institute of New Zealand, which had stated that 'science has not established that other people's cigarette smoking causes diseases in non-smokers'. The Commission replied that it was 'extremely difficult to accurately gauge the effect of the Institute's advertising campaign and therefore whether the campaign has or is likely to have been misleading and deceptive.' The Commission also noted that 'the cost of any legal action would be considerable' [34
In 2000, a new Minister of Consumer Affairs asked her officials about the use of the Fair Trading Act
for legal action against the tobacco industry. She then reported that such 'action may not be possible under this Act' [35
]. A request to the Ministry of Consumer Affairs under the Official Information Act for the advice given to the Minister was declined (Manch K. [Letter from Ministry of Consumer Affairs to George Thomson]
. Wellington: August 23, 2001).
In July 2001, we sent information to the Commerce Commission about the public statements of British American Tobacco (BAT) New Zealand. The material included comments from 1998 and 1999 by BAT officials about the IARC (International Agency for Research on Cancer) SHS study, that:
'The study confirms a view that the industry had long held that while smoke in the air may annoy some non-smokers, passive smoke is not a lung cancer risk' [36
and more generally that:
'The overwhelming majority of [independent] studies found no overall meaningful increase in risk for those married to a smoker' [37
These statements misrepresented the IARC findings [38
]. Statements to the media in 2001 by HANZ were also given to the Commission, on the basis that the statements could be misleading and deceptive about the dangers of using HANZ members' premises where there was SHS. The statements included:
' A seven year study by the World Health Organisation found no links between passive smoking and health risks' [39
'... science has not established a link between passive smoking and cancer' [40
The statements by BAT and HANZ about SHS were forwarded because they appeared to meet four criteria that could help the Commission make a legal case – a pattern of activity, clear deception, sufficiently recent date, and large potential consequences to public health. The statements appeared to deny or obscure the harm caused by SHS, in a manner that could be described as misleading about tobacco products sold, or the safety of services provided by HANZ members.
The Commission replied that although the material 'appears to be a breach of the Fair Trading Act
, we will not be investigating it in more depth at this stage' and that the Commission targeted 'issues and trading practices that have the greatest potential detriment to consumers' (Gibson D. [Letter to George Thomson from the Commerce Commission (FTWN 49513)]
. Wellington: Commerce Commission; August 30, 2001). A spokesperson was reported as saying that the Commission 'had decided to refer the complaint to the Ministry of Health and would take no further action'. This was because 'it is dealt with better under their legislation and they have the staff with the knowledge and expertise' [41
In reply to the information about statements about SHS that appeared to contravene the Fair Trading Act, the Ministry of Health pointed out that the:
'Public Health Directorate lacks the staff and financial resources that would be needed to investigate the examples you presented in detail' but 'in general the Ministry supports the interpretations you present' (ie, that BAT and HANZ appeared to have contravened the Act's sections 9 and 13)
(Matheson D. Letter to George Thomson from the Deputy Director General, Public Health Directorate (PP70-15-2). Wellington: New Zealand Ministry of Health; July 30, 2002).
However, because the Ministry considered that the statements 'were not made in a trading context' and because of resource reasons, the Ministry decided that 'it would not be profitable' to pursue the matter under the Fair Trading Act (ibid).
In May 2002, a politician from a minor party outside the government provided information to the Commerce Commission about deceptive practices by the industry. The information included two reported statements from the media during 2001. One, by a BAT official was that 'we have gone through the international evidence on secondhand smoke and there is a pattern of research [indicating] that it is not a serious health issue. Nothing is risk-free in this world. There is a small risk to young people and babies ...' [41
]. The Director of the Commission's Fair Trading section wrote of this statement 'reasonable members of the public are unlikely to be misled into believing that this statement suggests that the death of adults is not a serious health risk, or that it denies that adults die from second hand smoke .... The statement represents an opinion and is unlikely to breach the Act' (Battell D. Memorandum to Fair Trading Committee: Tobacco companies – referral from Sue Kedgley MP
. Wellington: Commerce Commission; September 11, 2002).
The second reported statement sent to the Commission was that the science on SHS showed that 'if there was a risk, and there may be a risk, it's not a large one'. Commenting on this in September 2002, the Director of the Commission's Fair Trading section wrote that it was 'more an expression of opinion than fact. .... The people buying cigarettes are unlikely to be misled by comments on the harm or otherwise of passive smoking' [42
To put the actions and statements of the Commission into context, we examined the legal actions it did
initiate under the Fair Trading Act
during the year to August 2002. In that time the Commission prepared or undertook at least twenty legal actions under the Act about deceptive statements. The issues were all relatively minor in terms of health risks to consumers, and included the claim of a fish and chip shop that it used cholesterol-free oil, eg. [43
]. The Commission took at least eight other cases to court on competition matters, including two Court of Appeal and one Privy Council case [47
]. The Commission also decided that it was justified in investing considerable resources in the control of the competitive
aspects of the tobacco industry, by lengthily contesting a tobacco company merger [50
Over the period 1994–2004, the most serious breach of the Fair Trading Act
(in terms of mortality) where the Commission has
responded, was on children's cots. These were implicated in the deaths of 22 children between 1985 and 1994 [51
] (ie, around two deaths per year). In contrast, the total national death toll from SHS in year 2000 alone was estimated at 325 [15
In September 2005, the BAT New Zealand website continued to cast doubt on the conclusions of the IARC SHS study, and stated:
'... we don't believe that [SHS] has been shown to cause chronic disease, such as lung cancer, cardiovascular disease or chronic obstructive pulmonary disease, in adult non-smokers. ....' [52
Case study 2: The non-disclosure of tobacco additives by brand
In August 1990, the New Zealand Smoke-free Environments (SFE) Act was passed by Parliament. Section 35 of the Act required tobacco companies to submit an annual return showing the weight of all additives used in each tobacco product. In early October 1990 the SFE Regulations were passed by an Order in Council, just before an election changed the government. These regulations, amongst other things, set out the way that Section 35 was to be carried out. The regulation stipulated that companies give the weight of every additive for every product and then the quantity of 'each brand and each brand variant sold'. Thus, while 'product' could be considered to be a cigarette brand or brand variant, the regulations could also give the impression that a 'product' was a generic type, such as cigarettes, cigars, or roll-your-own tobacco.
From then to the present, tobacco companies operating in New Zealand have endeavoured to continue to both keep the additives used in New Zealand
secret from the public, and to not disclose to government the additives for particular brands
. In late 1990, a Philip Morris official in Australia reported to the USA on some tactics he might use to get the additives disclosure law changed, and concluded 'short of sinking N.Z. if you have any other ideas, could you let me know' [53
In 1991 the Government decided to insist on the disclosure of additives by 'each brand and brand variants' [54
]. Negotiations dragged on, and by December 1992, the Department of Health (DoH) was accepting a 'temporary' compromise position where they accepted information only for all brands, rather than for particular brands [56
]. This position was valued by the tobacco companies, and Philip Morris wrote to the Tobacco Institute of New Zealand in 1993 to emphasise that they thought the DoH:
'under the current regulations, could impose brand-by-brand disclosure .... The DoH could become irritated with the industry and simply impose a brand-by-brand disclosure' [57
A 1993 note by Tony Andrade of the tobacco industry law firm of Shook, Hardy & Bacon also stated that the:
'ingredients law in New Zealand would require complete disclosure of individual ingredients and amounts by brand if strictly enforced' [58
A Rothmans (NZ) official warned a RJ Reynolds official that for the 1994 return:
'there is a real possibility that the Department of Health will insist on a return in the correct form, that is, identifying the additives actually present rather than listing over 2000 possible additives. They may decide ... that we will be prosecuted if we file an incorrect return again. We will dispute this, but we would much prefer that it does not come to this. ... We have argued with them for over three years and their patience together with industry credibility must be close to breaking point' [59
The government had three options in relation to implementing the SFE regulations: to compromise in some way; to insist on information by each brand (and prosecute if necessary); or to make clearer regulations that put the industry's obligations beyond dispute. There was little will by the political party in power until 1996 to confront the tobacco industry [10
] and the compromise position was continued.
In March 1994, the New South Wales Cancer Council in Australia released the list of additives given to the New Zealand Government by the tobacco companies. This list had been obtained by a request by ASH New Zealand, under the New Zealand Official Information Act [60
]. This release, along with the ongoing risk of further New Zealand Government action on disclosures, appears to have resulted in at least two international level meetings of the tobacco companies involved [61
After the election in late 1996, the political balance was slightly altered. The new Associate Minister with responsibility for tobacco control, Neil Kirton, was a member of the new minority party (New Zealand First) in the ruling coalition. After the four-year period of the compromise which did not insist on disclosure by brand, in August 1997 the Ministry of Health wrote to the tobacco companies, requiring information on additives for each brand [63
]. However, that month Kirton was dismissed as Associate Minister, and successive Ministers responsible for tobacco control did not pursue the matter as a priority.
An official described the problem from the bureaucracy's point of view:
'It's basically an issue of resourcing. ... Any regulation of the tobacco industry is very confrontational. It requires a lot of servicing in terms of the kind of official information that is requested and the kind of expectations around consultation.'
Finally in 2003, the new amendments to the Smoke-free Environments Act required the testing and disclosure of each separate brands and brand variant, 'as the regulations may require'. In September 2005, these regulations were apparently being developed but their contents were unknown.