E-Cigarette industry woos and wins Europe

CBNC Business News Saturday, 9 Nov 2013

By: Andrew Higgins

Facing a decision on whether to impose tight restrictions on a booming market for electronic cigarettes, members of the European Parliament received a pleading letter in September that was signed by thousands of former smokers worried that ”the positive story of e-cigarettes may be about to come to an abrupt halt.”

The signatures had been collected via a website, saveecigs.com, which proclaimed itself the voice of the ”forgotten millions in this debate” — people who had taken up e-cigarettes to stop smoking, and their grateful families.

The website, however, was not quite the grass-roots effort it claimed to be. The text of the letter it asked people to sign was drafted by a London lobbyist hired by Totally Wicked, an e-cigarette company. The website had been set up by a British woman living in Iceland who had previously worked for the owners of Totally Wicked.

As the headquarters of the European Union, Brussels sets regulatory standards that resonate around the world. It rivals Washington as a focus for corporate lobbying, with an estimated 30,000 professional lobbyists with registered lobbying firms and thousands more who operate beneath the radar.

In this case, a determined lobbying campaign, marrying corporate interests in a fledgling but fast-growing industry with voices elicited from the general public, was aimed at a compelling public health issue: whether e-cigarettes, which deliver nicotine without burning tobacco, should be regulated as medicinal products, just as nicotine patches are.

The stakes were substantial. Although e-cigarettes have not been linked to any serious health issues, they have been in widespread use for such a short time that researchers have no basis yet for determining if there are long-term risks. The decision by the European Union would set the stage for a debate over the extent of regulation in the United States, where the Food and Drug Administration is soon expected to issue its own rules on nicotine-delivery devices. The outcome of the battle in Brussels could go a long way in shaping the competitive landscape of the business in Europe and beyond.

The odds seemed very much against the e-cigarette industry. Hostility toward corporate lobbying runs deep in the European Union bureaucracy and legislature. And lawmakers were seemingly on track to categorize e-cigarettes as medicinal.

Yet the outcome, driven in large part by the industry’s success in mobilizing a wave of support from consumers and using it to apply political pressure to lawmakers, amounted to a big victory for e-cigarette sellers, one in which they outgunned not just the tobacco companies but also pharmaceutical companies that make competing products for people trying to stop smoking.

To the delight of companies like Totally Wicked, the European Parliament voted Oct. 8 to scrap proposals by health officials to regulate e-cigarettes as a medicinal product, which would have restricted their sale to pharmacies in many countries of the 28-nation bloc and imposed costly certification procedures on producers. The Parliament’s decision did not end the argument, but it lifted a big, immediate cloud threatening a business that some Wall Street analysts predict could be bigger than tobacco within a decade.

When the European Commission initially proposed last December that e-cigarettes be treated like medicines, the industry immediately realized that ”we had a very big problem and a big fight ahead,” recalled Ray Story, the American president of United Tobacco Vapor Group, an e-cigarette company with offices in Atlanta and Amsterdam.

Determined to avoid a precedent that would most likely harden the regulation of e-cigarettes far beyond Europe, Mr. Story hired EPPA, an established Brussels lobbying company, and a prominent Belgian law firm, Van Bael & Bellis. They pressed the argument that ”e-cigarettes are not a drug” and that any decision to classify them as such would be vigorously challenged in court.

The effort quickly ran into strong opposition not only from antismoking groups, which worried that e-cigarettes lifted the stigma on nicotine addiction, but also from the pharmaceutical industry, which worried about losing customers for its own nicotine patches and other ”nicotine replacement therapies,” which are all regulated as medicines.

Among the companies arrayed against the e-cigarette industry were GlaxoSmithKline, the London-based pharmaceutical company, which sells Nicorette nicotine chewing gum in the United States, and Johnson & Johnson, the American consumer products company, which owns the manufacturer of Nicorette gum, patches and inhalers.

E-cigarette companies, however, discovered a powerful force that would propel them through all these obstacles — the determination of their consumers to keep consuming. Unlike cigarette smokers, who generally accept that smoking is hazardous and have lain low despite ever more stringent restrictions on their habit, e-cigarette users, commonly known as ”vapers,” have created a boisterous subculture vociferously opposed to any regulations that might limit availability of the wide range of battery-powered devices and flavored nicotine fluids on the market.

”Are these people all in the pay of e-cig companies?” said Linda McAvan, an influential member of Parliament’s environment and public health committee. ”No. But they have been told by these companies that Brussels wants to take away their product. They are genuinely angry. But their anger has been fed.”

This anger, whether spontaneous or stoked by companies, provided the industry with an army of volunteer lobbyists. ”They are almost evangelical about e-cigarettes,” said Rebecca Taylor, one of many members of the European Parliament swayed by the appeals of former smokers who switched to e-cigarettes.

Without such appeals, said Fraser Cropper, Totally Wicked’s managing director, the proposed regulations would have become law and ”our company would have to shut down.” But he said that the passions of vapers had not been manipulated. ”To label this as a slick corporate lobbying effort gives us more credit than we deserve,” he said.

As recently as midsummer, the e-cigarette industry’s hopes of derailing the regulations looked doomed. The European Union’s member states had overwhelmingly endorsed them, and in July, Ms. McAvan’s public health committee voted strongly in favor of them, too, opening the way for a vote by the full Parliament.

”We realized we had to get our act together,” recalled Charles Hamshaw-Thomas, legal and corporate affairs director for E-Lite, Britain’s largest e-cigarette company by sales.

The website saveecigs.com suddenly sprang to life. Mr. Hyslop, Totally Wicked’s London-based lobbyist, said he had come up with the idea for the website and had drafted the ”open letter” sent to parliamentarians.

Companies and trade associations presented the regulatory proposal as an effort to ban e-cigarettes in Europe. Such claims, said Ms. McAvan, the health committee member, ”are simply not true.” They nonetheless quickly ended up on Internet forums dedicated to ”vaping” and o on VapourTrails TV, an Internet video operation run by David Dorn, a retired magazine editor and passionate vaper who quit a five-pack-a-day smoking habit. Vapers bombarded Parliament with emails and letters demanding that Brussels not ban their devices.

Axel Singhofen, an adviser on health policy to Green Party members of Parliament, said the barrage became ”unusually aggressive.” He added that messages from supposedly different individuals and groups used similar phrases.

Individual vapers say their fury had nothing to do with commercial interests. ”Of course we are not just AstroTurfers,” said Luc Van Daele, a Belgian user who has been active in antiregulation protests, using a term that describes phony consumer groups set up by industry.

Chris Davies, a British member of the European Parliament and an outspoken opponent of proposed regulation, said he received hundreds of messages from e-cigarette users pleading against heavier regulation. His conclusion, he said, was that ”700,000 Europeans die each year from tobacco and nobody, as far as I know, has died from e-cigs.”

What had been a clear majority in favor of tight regulation melted away. In early October, Frédérique Ries, a Belgian member of the European Parliament and a political ally of Mr. Davies, drafted an amendment to scrap a clause requiring medicinal regulation for e-cigarettes. Ms. Ries said she had never met a lobbyist for the e-cigarette industry but had been swayed by the arguments of vapers. ”They are not fake,” she said.

On the eve of the Oct. 8 vote in Strasbourg, France, where Parliament meets for part of the year, e-cigarette users gathered outside the assembly for a boisterous protest, officially organized by a French group called the Independent Association of Electronic Cigarette Users, which presented a petition to Parliament signed by 39,000 users.

But another group quietly sponsoring the event was France’s main organization for e-cigarette businesses, the Collective of Electronic Cigarette Actors. The owner of France’s biggest nicotine fluid company hired a bus to take 50 of his employees to the protest. Shortly after noon the next day, Ms. Ries’s amendment deleting the demand for medicinal regulation passed easily. Totally Wicked, in a statement, called it ”a great outcome for the e-cigarette industry.”

E-Cigarette industry woos and wins Europe