NCRDS STERLING INSTITUTE OF MANAGEMENT STUDIES

SUBJECT: Business Ethics and corporate governances

A Case study

SUBMITTED BY: 1. Tilakraj Borkar (B 65) 2. Pratik Nakat (B 75)

Case Study on Ban of Tobacco Ads by the Government of India

Introduction
On Feb 6, 2001 Government of India (GOI) dropped a bombshell on the tobacco Industry when it announced that it would shortly table a bill banning Tobacco Companies from advertising their products and sponsoring sports and cultural events. The objective of such a ban was to discourage adolescents from consuming tobacco products and also arm the Government with powers to launch an anti-Tobacco Program. This decision seemed to have sparked an intense debate, not just over the ethical aspects of Government's moral policing but also over the achievability of the objective itself. Reacting strongly against the proposed ban, Suhel Seth, CEO, Equus Advertising said, "The ban does not have teeth. It is a typical knee-jerk reaction by any Government to create some kind of popularity for itself. The Legislation has not been thought thorough". In its reaction to the GOI's decision, ITC Ltd1. announced that it would voluntarily withdraw from all of the sponsorship events, irrespective of the legal position on the subject.

The Ayes' The ban was not unusual keeping in view the international precedents. Countries like France, Finland, and Norway had already imposed similar bans. Advocates of free choice opposed to these bans, saying these amounted to unwarranted intrusion by the state in the private lives of its citizens. But, others pointed out that the state had the right to intervene in the overall interest of the citizens. They cited the example of drugs like cocaine, which was, banned the world over.

In 1981, the Supreme Court (of Appeal) in Belgium gave its ruling that a ban on tobacco advertising was not unconstitutional. In 1991 the French Constitutional Council declared that the French ban on advertising tobacco products was not unconstitutional as it was based on the need to protect public health and did not curtail the freedom of trade. There were many precedents of restrictions being imposed on the advertising of dangerous or potentially dangerous products even if these products remained in the market (e.g. firearms, pharmaceutical Products). According to the World Health Organisation (WHO), tobacco accounted for over 3 million deaths in 1990, the figure rising to 4.023 million deaths in 1998. It was estimated that tobacco related deaths would rise to 8.4 million in 2020 and to 10 million in about 2030. There was an increasing fear that tobacco companies were inducing children and young people to begin experimenting with tobacco products, and in this way initiate regular smoking, as this held the key for the industry to flourish. Internal industry documents2 released in the United States, described 14-24 year olds as 'tomorrow's cigarette business.' In a case which started in 1991 and ended in 1997, RJ Reynolds Tobacco company, marketer of Camel cigarettes, was forced to withdraw its mascot, Joe Carmel, an animated camel, from all its advertisements, after the California Supreme Court (USA) ruled that the company could be prosecuted for exploiting minors. The accusation was that the slick, colourful advertisements (using an animated camel) appealed to the children and encouraged them to

smoke. In India, analysts estimated that cigarettes contributed only 0.14% of the G.D.P and the health costs roughly translated to 0.21% of the G.D.P.So the revenue logic of huge contribution in the form of excise to the Exchequer did not seem to be valid. Also, given the state's significant contribution to health care, smokers, by damaging their health were in fact enhancing the State's expenditure. Questions were also raised about the economic impact of such a ban, given the fact that the tobacco industry provided direct and indirect employment to 26 million people. However, a study on tobacco consumption and employment 3, showed that effective policies to reduce smoking were likely to increase, and not decrease employment. The reason for this was that when people stopped smoking, the money did not disappear from the economy. It was spent on other goods and services, which the study showed, were more labour intensive. This, in turn produced more jobs. The impact of cigarette advertising on consumers was another contentious issue. A World Bank report4, had pointed out that policymakers who wanted to control tobacco should be aware of the fact that bans on advertising and promotion would prove effective, only if they were comprehensive-covering all media and all uses of brand names and logos. The report also published the details of a comprehensive study of over 100 countries, comparing the consumption trends over time in those countries where were relatively complete bans on advertising and promotion and where were no such bans5. In the countries with nearly complete bans, the downward trend in consumption was much steeper

In 1992, the Department of Health (DOH), UK reviewed various forms of evidence to assess whether tobacco advertising affected the aggregate demand for tobacco products.6 Four countries (Norway, Finland, Canada and New Zealand) were chosen, as these countries had already imposed an advertising ban and enforced it effectively. The main conclusion of the DOH was that the evidence available on these four countries indicated a significant effect. In each case, the banning of advertising was followed by a fall in smoking. In 1997, in a similar study for the International Union against Cancer, the available data in the same four countries was examined 7. It was found that per capita consumption of cigarettes (15 years +) had dropped between 14 and 37 % after the implementation of the ban. (Refer Table I). In three out of the four countries, smoking among young people had decreased, while in one it remained stable. The conclusion was that advertising bans worked if they were properly implemented as part of a comprehensive tobacco control policy8... The Nays' Those who opposed the ban contended that by putting a ban on advertisements and sponsorships by tobacco companies, the state was effectively stepping in to tell smokers that they were incapable of deciding by themselves what was good or bad for their health and that, therefore it had to play the role of a responsible nanny. Said Amit Sarkar, Editor, Tobacco News9, "Adults who consume tobacco do so of their own free choice. The risk falls entirely on them and is fully explained to them. If we lose sight of this principle, then we lose sight of the truth on which all the free societies depend, namely that freedom and risks are inextricable, and whomsoever assumes the right to save us from risks, is also assuming right to limit our freedom".

The Supreme Court in Canada, held, "The State seeks to control the thought, beliefs and behavior of its citizens along the line it considers acceptable. This form of paternalism is unacceptable in a free and democratic society". Also, if it were legal to manufacture and sell tobacco products, it should be legal to advertise it as well. Tobacco companies around the world have been vehemently denying that they sell the concept of smoking. They insist that the role of marketing, was merely to assist adults in making an informed brand choice and that advertising merely enhanced the market share of a particular brand. The companies claimed that advertising for a particular brand was most relevant to consumers who already smoked that brand... The Haze Tobacco consumption was growing in the developing countries while it was falling in the developed countries. Concerned over the welfare of its citizens, who were fast becoming a prey, the Indian government decided to ban advertising by tobacco companies as a first step towards its goal of discouraging smokers. But the advocates of free choice and the cigarette companies (the worst hit in the tobacco industry when the ban was imposed) insisted that ban was no solution to the problem. Said Shunu Sen, CEO, Quadra Advisory, "Excess of anything is bad.Excess of coffee, teawhatever. Where do we draw the line?" They argued that that the ban was unjustified, as advertisements didn't promote smoking, and that the ban was not the right solution to the problem. The Cigarette companies expressed concern that the ban would denythemlevel-playingfield. The issues discussed above at best gave an idea of how complex the problem was. This was the crux of the problem.The problem itself seemed so intricate as it questioned the very domain of propriety; both

ethical and commercial and the 'ifs and buts' were too hazy and one too many.