11.2 Tobacco industry expenditure on advertising

It is difficult to assess how much money the Australian tobacco industry invests in advertising and promoting its products. In the US, all tobacco companies must annually report the total amount that is spent on advertising and promotion to the Federal Trade Commission. Unlike their American counterparts, Australian tobacco companies are not legally required to disclose equivalent information. It is not easy to compare expenditure in the US with Australia as very few forms of tobacco advertising are actually banned in the US. It is useful, however, to note that in 2006 (the most recent data available at the time of publication) the majority of the reported advertising spend in the US, at 81% of the total spending, was on promotional allowances to retailers and wholesalers.1 This includes price discounts paid to cigarette retailers or wholesalers in order to reduce the price of cigarettes to consumers, allowances paid to cigarette retailers in order to facilitate the sale or placement of cigarettes (e.g. payments for stocking, shelving, displaying and merchandising brands; volume rebates; and incentive payments), and promotional allowances paid to cigarette wholesalers (e.g. payments for volume rebates, incentive payments, value-added services and promotional executions). These types of retailer promotional allowances are also permitted in Australia. For example, in 2009, ASH Australia reported that twin packs of cigarettes were being sold at prices discounted by as much as $5 per twin pack and that retailers were being offered prizes for displaying and promoting certain brands. As part of the promotion, British American Tobacco sales representatives delivered sleeves (Figure 11.2.1) to shopkeepers to create the twin packs. Any kind of promotion or display of such products would however be prohibited in most states in Australia under laws requiring products to be stored out of sight—see Section 11.6.3.


Figure 11.2.1

Figure 11.2.1
Sleeves used to create a twin pack of cigarettes offered at a price discount

The WHO Framework Convention on Tobacco Control (WHO FCTC) requires: 'if (a party) does not have a comprehensive ban on advertising and sponsorship, the disclosure {should occur} to relevant governmental authorities of expenditures by the tobacco industry on advertising, promotion and sponsorship not yet prohibited' (p12).2

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1. Federal Trade Commission. Federal Trade Commission cigarette report for 2006. 2009; Available from: http://www.ftc.gov/os/2009/08/090812cigarettereport.pdf.

2. World Health Organization, Framework Convention on Tobacco Control. adopted 16 June 2003, entered into force 27 February 2005, World Health Organization: Geneva.