Black market tobacco and the criminal activity that surrounds it is something that all retailers, including fuel retailers are very alive to. This week saw the shocking footage of how brazen the criminals are in seeking to control retailers, including demanding the full and unconditional handover of the keys to a tobacconist location. While thankfully fuel retailers are not reporting such activity in their sites, many are reporting being offered ‘wholesale’ black market tobacco that could be confused for legitimate product, and this activity has led to a clear warning to all operators to beware a deal that is ‘too good to be true’ as it may cost you your business and even your freedom.
Deal too good to be true? You are likely dealing with criminals
The reality is that retailers everywhere are pushing suppliers of all products, from fuel to snacks, to give them the best deal possible in order to be able to deliver value to customers in the midst of the cost of living crisis. When it comes to tobacco and associated smoking products, when the deal on offer is too good to be true it is likely that it is being offered by those participating in the black market.
When considering stocking a product that is ‘a great deal’ retailers should consider the real cost of those criminal savings.
Caught selling black market tobacco
If a retail business is caught selling black market tobacco they face more than damage to reputation and business interruption, they also face ALL of the following overlapping penalties and repercussions;
- Breach of national illicit tobacco laws – 5 years in prison or a fine of up to $330,000 for selling illicit tobacco AND 5 years in prison or a fine of up to $330,000 for buying illicit tobacco AND $33,000 for less than 5kg of illicit tobacco (rising to 5 years in prison or a fine of up to $330,000 for larger quantities), and
- Breach of national plain packaging laws – $660,000 for individuals and $6.6 million for businesses, and
- Breach of State based Heath laws – $22,000 for individuals and $110,000 for businesses, and
- Loss of tobacco retailer licence, and
- For franchise and dealer sites it is possible that such a breach of the law will trigger loss of franchise or brand deals.
The real cost of ‘good deal’ can be catastrophic to a business and its directors.
These catastrophic outcomes can apply to the business even if they did not KNOW that the product was not legitimate, but that they SHOULD HAVE known.
So how good of a deal is TOO good to be real?
This all leads to the understandable question that has been posed by small operators; How do I know that the deal I am looking at is TOO good to be true?
One place to look is to the price, within the broader context of the bare minimum a product should cost at wholesale when the tobacco excise is taken into account.
Every tobacco product retailed in Australia is subject to the tobacco excise duty. The current excise duty rates are $1.36623 per stick (or $2,101.89 per kg for loose product) which amounts to $27.3246 in excise per 20 stick packet. This is the tax that gets paid on the packet and does not include any costs of the product or profit for the wholesaler.
So if the “deal” on offer is very close to (or under) this then you are likely being offered black market tobacco and you are risking, not only the escalating demands, criminal activity and contact that often follows the ‘seemingly harmless’ first purchase, but you are also risking massive fines, loss of licence and even loss of franchise or brand deals.
Learnings for all retailers
Businesses are under pressure to control costs and are looking for the best deal from their suppliers, but when it comes to tobacco products retailers must take a moment and assess the ‘deal’ that looks too good to be true, or they face more than just a loss of revenue, they face jail time, crippling fines, loss of licence and even loss of business or major partners.
ACAPMA
