Evidence of large retailers taking advantage of loopholes in Australia’s tobacco control laws

Why we studied this topic

The tobacco industry in the UK has been shown to minimise the impact of increases in tobacco tax by gradually increasing prices of tobacco products over several months. This practice is known as ‘cushioning’.

The effect of ‘cushioning’ is that fewer consumers are deterred from quitting or cutting down on their consumption of tobacco products. This dilutes the impact and effectiveness of measures such as tobacco taxation and price increases.

No previous studies had demonstrated the presence of cushioning in Australia.

What this paper adds

Over a three-year period, we conducted monthly checks of the advertised prices of tobacco products across two stores of Australia’s largest supermarket chains.

Published in the international journal Tobacco Control, our research found evidence of Australia’s largest supermarkets engaging in practices that ‘cushioned’ the impact of tobacco tax increases for consumers.

Although large tax increases came into force on 1st September of each year, the supermarket prices of many factory-made cigarettes and roll-your-own tobacco products increased in October as well as in September, spreading the impact of the tax increases over two months.

What was surprising?

Even the much smaller increases resulting from indexation of tobacco taxes on the 1st March each year for many products similarly were passed on gradually over the following two months. This practice is likely to greatly reduce the effectiveness of six-monthly indexation increases over the next few years in triggering more smokers to quit.

What it means for policy

Practices such as ‘cushioning’ are undermining Australia’s robust tobacco control policies.

Federal, state and territory governments need to take swift, decisive action to prevent this practice. Such action would reduce smoking and reduce the significant health burden and economic costs of tobacco-induced deaths and diseases.

Policy recommendations

Australian Government

Amend legislation to require:

• Wholesalers to limit sales from January to February and July to August so they do not exceed sales in earlier months, preventing retailers from stockpiling products purchased before the tax increase
• Retailers to increase prices of tobacco products only twice annually, within a time-limited period immediately after the bi-annual excise increase between March and September each year
• Wholesalers to provide government with detailed information on products, prices and retail sales.

State and territory governments

• Make adherence to each of these laws a condition of acquiring and keeping a license for wholesale or retail tobacco.