By Allen Liao
As e-commerce on the internet develops both in depth and scope, the number of online cigarette stores in China has kept growing rapidly while the volume of online cigarette transactions continues to incersase. Unfortunately, alongisde this the trade of illegal cigarette products in large quantities on the internet has also increased dramatically, casting a huge shadow over the lawful cigarette trade in the country.
Logging onto the internet and typing a keyword to search for an online cigarette trader, one can discover that there is a website or online cigarette store calling itself "The Best Specialized Wholesale Web Among All Cigarette Selling Networks on the Internet". It sells domestic high-grade cigarettes with a retail price of just one-tenth of the regular, official price.
One can also see that this website is also selling some finely-packaged cigarettes designed for VIPs, export-oriented cigarettes and many foreign cigarette brands.
A consumer who purchased cigarettes through this website has left a message of thanks posted on it, saying: "this owner shows a good attitude of attending to its customers. It is also swift in making deliveries. I will buy more from it the next time."
This message can be regarded as evidence of the brisk business the website is doing.
Mostly fake
However, what is more noteworthy is that the cigarettes sold by online stores are mostly fake goods. For example, on the e-Bay eachnet.com website, there are traders calling themselves dealers of a so-called Yunxiao brand of cigarettes, and they publicly peddle Yunxiao cigarettes online.
Obviously, these people never intended covering up the fact that they are selling fake cigarettes online. Consumers buying cigarettes over the internet are apparently knowingly buying counterfeit cigarettes and are therefore willing accomplices to the illlict online trading of fake smoking products.
In reality, the sale of cigarettes over the internet is nothing new in China. What is different is that online cigarette trading is turning out to be an increasingly serious problem with increasingly large negative impacts, and it is arousing growing public concern.
Results of a market survey conducted in October 2008 suggest that online cigarette stores are developing rapidly, and the volume of business they transact is increasingly sharply.
For example: on eachnet.com there are 110 stores with names bearing the word "cigarettes", including one established in 2005, one established in 2006 and 37 established in 2007. The number of such stores established in 2008 reached 71. Obviously, the sale of counterfeit cigarettes online is rampant in China.
Harming societyThe sale of cigarettes over the internet causes much harm to society.
Firstly, it enables counterfeit cigarettes to gain access to the market. Smoking counterfeit cigarettes causes greater harm to smokers. As there are serious defects on the part of the technologies, equipment and quality control system involved in the manufacturing of counterfeit cigarettes, they do not meet the lower tar and other harmful substances levels mandated by law. Therefore, the content of nicotine and other harmful substances in counterfeit cigarettes seriously exceeds the relevant technical standards.
Smoking these fake products in large quantities or for a long period of time will inevitably cause serious harm to the physical health of smokers. As the purchase of counterfeit cigarettes over the internet is convenient and the prices are cheap, consumers will are more likely to end up smoking counterfeit cigarettes. Therefore, the harm that the online trade of counterfeit cigarettes does can well be imagined.
Secondly, the sale of cigarettes online makes it easy for minors to buy them. Conventional bricks and mortar cigarette stores are required to put up an obvious sign prohibiting the sale of cigarettes to minors. But on the internet, cigarette traders don’t care who the consumers are, and the concept of "prohibiting the sale of cigarettes to minors" doesn’t apply.
Thirdly, the sale of cigarettes over the internet contributes to interrupting the normal order of the tobacco trade
Under the system of state tobacco monopoly in China, only qualified stores holding a valid cigarette retail license can sell cigarettes, and cigarette supplies are exclusively provided with product by authorized tobacco companies.
Moreover, cigarettes are sold within designated areas. But online cigarette dealers are never required to hold a license and can evade regulation by tobacco monopoly administrative authorities. As a result, they are rampantly selling illegally acquired cigarette products and counterfeit cigarettes and they are essentially free from any territorial restriction.
The online sale of counterfeit cigarettes certainly impacts negatively on efforts to stabilize the normal market order and sales volumes, maintain the stability of prices and stabilize and develop competitive brands.
Rampant salesWhy has the sale of counterfeit cigarettes over the internet become increasingly rampant? There are three causes:
Windfall profits. The business can make huge profits with minimal investment. Stores on the internet actually need no substantive investment and are free from tax payment. Moreover, what they are selling are mostly fake goods. Therefore, the operation of online stores incurs very little costs which prompts some people to take the risk of earning windfall profits through unlawful means.
Online environment. The internet is used by many households and online shopping has become fashionable. Such e-commerce platforms as taobao.com, paipai.com, e-Bay eachnet.com and youa.baidu.com have developed rapidly over recent years, and have provided great convenience for people trading goods online. Although a majority of websites have listed tobacco products as "commodities prohibited from sales", their regulation is insufficient to put an end to the online trading of cigarettes. Meanwhile, there are many online store programs available for free download. With such programs, one can easily establish an online business. Moreover, the use of real-time web communication tools, including QQ, is very prevalent, and the operation of online forums with the function of posting messages makes it very easy and quick to conduct online communication and realize EMS and other forms of effective distribution. Such an environment has played a pivotal role in providing convenient platforms for the trade of counterfeit cigarettes over the internet.
Market demand. The prices of cigarettes sold online are typically much lower than those of cigarettes sold from regular stores. In many cases, the prices of counterfeit cigarettes sold online are less than one-tenth of the prices of cigarettes sold from conventional outlets. Customers choose to buy commodities on the internet to save money. To some extent, cigarettes, particularly high-grade cigarettes, are a type of luxury consumer product. Therefore, many people, in an attempt to appear like a VIP, choose to buy cheap high-grade cigarettes online. With the connivance of such consumers, the sale of cigarettes over the internet has developed rapidly.
Clear cut positionIn the face of increasingly rampant sales of cigarettes online, the State Tobacco Monopoly Administration (STMA) – the regulator of China’s tobacco industry – has expressed its clear-cut position on the issue.
"According to the Tobacco Monopoly Law," it says, "the Measures for Management over the License of Tobacco Monopoly and other relevant laws and regulations, only enterprises holding a valid license for tobacco monopoly production enterprises, a valid license for tobacco monopoly wholesale enterprises or a valid license for special tobacco monopoly trading enterprises can trade cigarettes on the trading platform on the intranet operated by STMA, and any act of trading cigarettes on the internet in other forms will be illegal."
In an address to the 2009 annual tobacco work conference, STMA director-general Jiang Chengkang explicitly pointed out that: "In light of the situation that lawbreakers have chosen to secretly carry cigarettes by hiding them in other supplies or peddling cigarettes on the internet, it is essential to pay close attention to it, keep studying any newly occurred phenomenon, and work out new countermeasures to harshly crack down on the illegal acts of secretly carrying cigarettes by hiding them in other supplies, and resolutely outlaw the acts of selling counterfeit cigarettes on the internet."
Enforcement issuesOver the past few years, there have been frequent news media reports on government efforts to investigate and crack down on acts of selling counterfeit cigarettes over the internet.
However, it is difficult for the authorities to exercise regulation over the vast number of online cigarette stores. This is because crimes on the internet can be kept discreet, and dealers trading cigarettes online can easily hide themselves by frequently changing IPs or adopting other technical strategies which makes it very difficult for the authorities to exercise regulation. This enables online cigarettes traders to play the cat-and-mouse game with regulatory authorities and this seemingly allows online cigarettes stores to thrive and prosper with impunity.
Driven by the desire to earn windfall profits, lawbreakers continue committing the crime of trading counterfeit cigarettes over the internet. Meanwhile, it is difficult for the authorities to crack cases of selling counterfeit cigarettes online and the sale of fake product online remains increasingly rampant. Tobacco monopoly administrative authorities have a strong duty to crack down permanently on the trading of cigarette products over the internet.
