The Truth About Vaping: Reasons Behind The Anti-Vaping Campaign
Although electronic cigarette technology has been available since 1963 when Herbert A. Gilbert introduced the “smokeless non-tobacco cigarette,” they were not widely available and used until recently. Electronic cigarettes and vaporizers first started gaining momentum in 2011, when brands, such as Joyetech, intially released rechargeable and refillable e-cigs. At that time, the entire electronic cigarette industry produced a meager $195 million in annual sales. Due to the low relative sales figures, the vaping industry posed no threat and was therefore overlooked for the most part. However, as usage and sales have ballooned to the $3.5 billion industry it is today, there has been a relentless and unjust nationwide attack on vaping, particularly in certain jurisdictions.
Who is Behind the Anti-Vaping Campaign?
The first thought that comes to mind when attempting to identify the source of this recent anti-vaping campaign, is that it is being funded and advocated by the tobacco industry. It sounds very logical—more and more people are quitting traditional cigarettes and turning to electronic cigarettes instead. This results in lower tobacco sales, which hurts Big Tobacco. However, this couldn’t be further from the truth. In fact, quite the opposite is occurring, as the heftiest lobbying and support of electronic cigarettes comes from the big tobacco companies. The largest tobacco companies own the leading electronic cigarette brands. Blu E-Cigs is owned by Lorillard, which produces popular cigarettes, such as Kent and Newport. The parent company of Marlboro Cigarettes, Altria, owns another large electronic cigarette brand—Mark Ten.
Electronic cigarettes have given new life to the tobacco industry, which has seen a steady decline in usage and sales in first-world countries, especially the United States. Ecigs are advertised on television and widely accepted as a healthier alternative to traditional cigarettes, allowing for an entirely new customer base for tobacco companies—particularly with the younger generation who have long turned their backs on cigarettes, and those who wish to quit smoking.
This, then, begs the question, who is behind this sudden massive anti-vaping campaign that we have seen over the past few months? The answer to this question is very logical once understood, but very surprising when you first learn about it. As it turns out, the strength and intensity behind this crusade comes directly from various state governments. Although masked as a pro-health campaign, making false claims about the negative health consequences of vaping, the sole motivation behind this war is money.
The story begins in 1998, when the tobacco industry was getting beaten down with an array of class action lawsuits due to death and illness caused by tobacco usage. From the late 1960s, the tobacco industry had been hit with one blow after the other, due to a broadening awareness surrounding the health risks of cigarette smoking. The lawsuits were so vast and widespread that the ultimate result was a massive settlement agreement between various states and Big Tobacco, called the 1998 Master Settlement Agreement (MSA). This mammoth agreement was between 48 states and the biggest tobacco companies, and called for annual payments by the tobacco industry to the states through 2025 in exchange for them dropping their respective lawsuits.
One of the most important variables with respect to the Master Settlement Agreement is that the amount paid each year to the states is directly related to the amount of revenue the tobacco industry generates. In other words, the more cigarettes that are sold, the more money the states earn annually. This inherently places the governments in a highly compromised and conflicting position, as the government’s role is to protect their citizens, while simultaneously profiting from these same citizens smoking cigarettes.
What came after the MSA was signed is not only extremely important in understanding the anti-vaping campaign, but is also nothing short of preposterous. Anxious to get the money due to them over the course of years up-front, many of the participating states sold bonds on Wall Street based on expected tobacco sales projecting far out into the future. As the bond revenues flowed in, the respective states began eagerly spending these funds quicker than they got it. So long as the sales met forecasts, the states would be in a safe position to pay the bonds back. For a couple of years, the bonds were paid as expected and all was well. However, by 2005, cigarette sales dropped by over 3% annually due in large part to anti-smoking campaigns nationwide.
The declining sales were difficult on the states, but manageable, as the decline was not very sharp or sudden. However, by 2010, the re-emergence and popularity of electronic cigarettes began to pose a real threat to tobacco sales. The states were not initially too concerned about electronic cigarettes because their sales were minute compared to the multi-billion dollar tobacco industry. Not even the biggest optimist could have anticipated the unprecedented growth explosion the electronic cigarette and vaping industry has seen over the past five years. In fact, it has been the single fastest growing industry in the United States, with total sales projected to top $3.5 billion in 2015. This reality sounded alarms and sent shockwaves through the state’s treasuries, which was now responsible for paying the difference out of pocket.
By 2013, Big Tobacco experienced one of their largest sales declines of all time. The primary reason for this decrease was the growing popularity of electronic cigarettes. The statistics highlight the inverse relationship between ecigs and analog cigarettes. In 2012, 200,000 packs of disposable electronic cigarettes were purchased in the United States, while 14 billion packs of traditional cigarettes were sold. Two years later, the total sales of electronic cigarettes doubled to 400,000 packs, while tobacco cigarette sales decreased by 1 billion packs over the same period. These electronic cigarette numbers do not even include sales of reusable vaporizers that have gained an equal amount of popularity. Top market analysts now forecast tobacco sales to continue to decline by more than 68% over the next 10 years, while ecig sales will increase 10 fold over the same period. These figures have sent bond-selling states panicking, as they do not have enough reserved to service the bond debt they have incurred. Due to population density, larger states, such as New York and California, have been the most affected by this trend.
In response to this loss in revenue, states such as California have embarked on a fierce and relentless campaign against the vaping industry. Led by the Department of Public Health, there has been a massive advertising push on virtually all media platforms, including television, radio, print, and online forms of advertisement. The two primary claims are that electronic cigarettes pose serious health risks, and that the target population is children and minors—both of which are completely false and unfounded. The real reason behind this battle is to gear consumers away from electronic cigarettes and back onto analog cigarettes so that sales go back up, thereby increasing the revenues earned by the state treasuries.
More Reasons for the Attack on Electronic Cigarettes:
Further contributing to the loss of money the states experience due to falling cigarette sales is the loss of tax revenue. Depending on the state, on average 40% of the cost of a pack of cigarettes are taxes. In New York, for example, total taxes earned by governments for each pack of cigarettes sold is $4.35. However, these tax revenues are decreasing at an astonishing rate. In 2012, total tax collected on tobacco sales was over $17.6 billion in the United States. By 2014, this figure declined substantially to $15.5 billion dollars—a decrease of $2.1 billion. This further incentivizes the states to demonize electronic cigarettes in hopes of people returning to tobacco cigarettes in an effort to increase tax revenues. Although the states generally have not sold bonds based on projected tax revenues from tobacco sales, they have certainly built it into their budgets. Without the expected revenues flowing in, the states are forced to deal with hefty shortfalls and deficits, adding a tremendous amount of pressure on them to make up for the difference. The result of all these losses has been the outright war that has been waged against the electronic cigarette industry, thereby damaging one of the only growing sectors of the U.S. economy.
What Does the Future Hold for the Electronic Cigarette Industry?
Although the anti-vaping campaign that has been unleashed recently has undoubtedly slowed the growth of electronic cigarettes, it has certainly not halted it altogether. The vaping industry continues to expand exponentially, with no end in sight. Therefore, there are only two likely outcomes for the fate of the ecig industry: they will either be banned entirely or will be deemed as tobacco products, thereby adding their sales revenue to the Master Settlement Agreement and taxed as tobacco products. However, both of these scenarios pose risks and are riddled with potential unintended consequences.
In the first scenario, where electronic cigarettes are banned or outlawed altogether, the intended goal of people switching back to cigarettes will be successful. However, there are several other unintended consequences that will result from such a prohibition. First, making electronic cigarettes illegal will serve to make users, particularly younger ones, want them more. University of California, San Francisco professor, Stanton Glantz, who specializes in tobacco control, states that casting cigarettes as an adult activity makes their appeal much greater, as it is seen “as one of the few initiations into the adult world.” The same holds true with alcohol, and the same will hold true for electronic cigarettes. The notion of “you want what you can’t have,” is a natural human psychological response that has been demonstrated time and again through the course of history. To contemplate this would not also be the case with electronic cigarettes would be ludicrous.
Moreover, a complete ban on vaping would simply open the door to a widespread black market, thereby completely eliminating any form of control or oversight by any government agency. Similar to alcohol prohibition of the 1920s where alcohol sales were left in the hands of organized criminals and bootleggers, electronic cigarettes would simply be pushed into an underground market left in the hands of those willing to risk the penalties associated with it. Turning the electronic cigarette industry into a black market activity will result in much poorer quality devices, and will eliminate the tax revenues generated from their sales altogether as well. The vaping industry has been the single fastest-growing segment of the economy for the past several years. Outlawing them or even overregulating them will drive this thriving industry away from the United States, as has been witnessed with virtually all industries since the 1970s.
The second likely scenario regarding the future of electronic cigarettes is that they will be regarded as tobacco products, thereby allowing them to be taxed as such. As a tobacco product, electronic cigarette sales will also be included in the MSA, thereby increasing the amount of money paid to the states by big tobacco companies. This is the most likely outcome, which although is unfair to vapers, is still better than banning them altogether. Reusable vaping hardware, such as batteries, MODs, clearomizers, and coils will likely not be included; however, disposable ecigs and e-liquid will most certainly be taxed as tobacco products. Treating electronic cigarettes as tobacco products would bring them under the rule of the Food and Drug Administration (FDA). Although, while the official message will be that FDA oversight will equate to higher quality control and safer products, this is not at all what the actual outcome will be. Meeting FDA standards will be so expensive that the vast majority of independent e-liquid producers will be priced out of the market. The companies that will be left will be the large tobacco companies, such as Lorillard and Altria, who have the resources necessary to meet stringent FDA regulations. This will essentially kill the innovation, growth, and ingenuity the vaping industry has enjoyed thus far. The same would hold true if electronic cigarettes were to be declared smoking cessation devices. The requirements that need to be met for FDA approval of smoking cessation devices are extraordinarily expensive and time-consuming, making it virtually impossible for anyone other than corporations with deep pockets to participate in the market.
Regardless of the ultimate fate of the electronic cigarettes industry, there is no doubt that the opponents of vaping are not taking their position based on their care for public health. Their intentions are solely monetary, and are in a position where their role as lawmakers to protect their citizens conflict with their financial interests. This struggle has led to misinformation and an overreach of their powers in an effort to reduce the likelihood of having to answer for their monetary missteps. It is up to all citizens, vapers or not, to speak up. Even those who do not engage in the act of vaping should take action, as it is only a matter of time until another industry is destroyed due to the interests of our self-serving government officials.