FDA's Low-Nicotine Cigarette Scheme Is an Invitation to Black Market Vendors

People will find sources for what they want no matter what presumptuous regulators say.


Imagine China/Newscom

Technically, the Food and Drug Administration's new proposal "to lower nicotine in cigarettes to minimally or non-addictive levels" isn't an exercise in prohibition. Cigarettes would still remain available—but they wouldn't be the product that smokers had in mind. Instead, they'd be a substitute foisted on them by their self-identified betters.

This sort of not-quite prohibition isn't new, and it's guaranteed to have very familiar consequences.

In a statement linked to the FDA's advanced notice of proposed rulemaking, Commissioner Scott Gottlieb asks "What unintended consequences—such as the potential for illicit trade or for addicted smokers to compensate for lower nicotine by smoking more—might occur as a result?"

I'm glad he asked.

Low-nicotine cigarettes sound an awful lot like the 3.2 percent beer that plagued much of the country after Prohibition. Nobody was happy with the diluted swill, and they tolerated it only if they couldn't smuggle in something better. Most places have since dumped it, indicating that a taste for the unadulterated product remained strong even after years of restrictions. "Colorado has already changed their liquor laws and will permit stronger beer to be sold in grocery stores beginning in 2019, leaving only three states (Utah, Kansas and Minnesota) with laws mandating these low alcohol 'baby beers' that even the majors have less interest in brewing for them," reports American Craft Beer.

There's no particular reason to think that smokers will be happier with denatured tobacco than drinkers have been with weak beer.

Gottlieb has said "the FDA has a science-based obligation that supersedes popular trends and relies on evidence." Such stiff-necked sincerity is swell, but it can't make people like having their choices constrained by professional scolds.

We've seen clear consequences of efforts to constrain choices in states where marijuana is newly legalized. It turns out that when you try to replace illegal markets with overtaxed and highly regulated legal ones, you throw a lifeline to underground dealers.

"Pot black market still thrives after Colorado legalization," PBS reported in 2014 after the state introduced a hobbled form of legalization. "An ounce of pot on the black market can cost as little as 180 dollars," according to correspondent Rick Karr. "At the store Andy Williams owns, you have to pay around 240 dollars for an ounce. That's partly because the price includes a 15 percent excise tax, a 10 percent marijuana tax, the state sales tax, and Denver's marijuana sales tax."

California officials are seeing similar results in their overregulated and overtaxed new non-medical marijuana market. Three months into a very tepid legalization, sales from legal vendors remain slow as "high taxes, complicated regulations and a thriving black market are having deleterious effects," according to the Sacramento Bee.

Federal policies making it dangerous for financial institutions to transact with newly legal (at the state level) marijuana dealers also work to keep black markets alive. "[S]tate marijuana commerce will stay as black a market as bootlegged rum during Prohibition until banks find ways to operate under restrictive financial laws stemming from the Controlled Substances Act," the Alaska Journal of Commerce noted.

Tobacco isn't all that different a product than alcohol or marijuana, and the burdensome taxes and regulations under which the stuff is sold have already created healthy opportunities for smugglers and bootleggers. "Excessive tax rates on cigarettes approach de facto prohibition in some states, inducing black and gray market movement of tobacco products into high-tax states from low-tax states or foreign sources," says Scott Drenkard of the Tax Foundation which, with the Mackinac Center for Public Policy, tracks cigarette smuggling on an ongoing basis.

Under existing rules, an estimated 56.8 percent of cigarettes consumed in New York come from illegal sources. Enforcement efforts are as brutal in this black market as any other—Eric Garner was choked to death by New York City police officers in a confrontation rooted in his status as a dealer of black market cigarettes.

So, what's the chance that the FDA's latest brainstorm in substituting regulators' preferences for those of consumers will end up any differently than previous experiences with alcohol, marijuana, and tobacco? Why would low-nicotine smokes find a less-resistant audience than 3.2 beer, or heavily regulated marijuana, or highly taxed cigarettes?

FDA Commissioner Gottlieb's proposal to mandate low-nicotine cigarettes looks an awful lot like other well-intentioned but presumptuous efforts to substitute the will of regulators for the desires of the public—it's Prohibition Lite. And like all such efforts, it's likely to get people turning up their noses and looking for something better.