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Top 3 Predictions on New Tobacco Products and E-Cigs

By Francesca Romana Ferrucci

Since their first placing on the market, electronic cigarettes – better known as “e-cigs” – and novel tobacco products (“NTPs“) have been a controversial topic of discussion.

Due to the proximity of e-cigs and NTPs with traditional smoking products, lawmakers have had to deal with great issues involving not only authorization requirements and procedures but also issues concerning boundaries in advertisement, taxation and how to address problems such as underage smoking.

Directive 2014/40/EU sets out the general legal framework for NTPs, e-cigs and e-liquids (nicotine and nicotine-free liquids meant to be vaped) in the European Union. In Italy, the latter has been implemented by means of Legislative Decree 6/2016, which has already seen a number of amendments in roughly three years of life.

The latest amendment, introduced by Law 136/2018 in December 2018, leads to interesting scenarios in this sector in Italy for 2019. Here are some thoughts on what we might be looking at in the year to come.

1. Shrinking taxes and growing numbers

One of the hottest features of the new amendments is definitely the drastic reduction of the consumption tax on e-liquids, which has been lowered to 10% and 5% (respectively for e-liquids with and without nicotine) of the applicable excise on the equivalent quantity for traditional cigarettes.  This new fiscal approach should definitely boost the interest in investing in this sector. While, according to some, this reduction means less money in the State’s pockets in the immediate future, for many we will most likely be witnessing a real revolution that will bring a consistent slice of traditional smokers from “smoking” to “vaping”. This new direction is also likely to enhance the interest of big tobacco companies in this sector.

2. Online sale of e-liquids

One of the previous hurdles to overcome for vaping companies was the fact that Legislative Decree 6/2016 prohibited the online sale of e-liquids tout court. Obviously, in a world where consumers are more and more prone to shop from their laptops and smartphones, this represented a great disadvantage for vaping companies. These companies were stuck with only being able to redirect online consumers to brick and mortar shops to purchase e-liquids to be vaped with their devices.

With 2019 we are saying goodbye to the above prohibition and entering a new phase of the e-liquid market. But just to make things clear, keep in mind that companies wishing to sell e-liquids online must be duly authorized to manage a fiscal warehouse and cannot simply set up the sale of e-liquids on their e-commerce websites. Setting up and managing a fiscal warehouse requires a certain degree of supervision by the competent authorities and, if on one side this means more paperwork, on the other side it should contribute to further regulate the market for the e-commerce of these goods and avoid (or at least strongly reduce) the presence of non-compliant goods on the Internet.

3. E-cigs, e-liquids and advertising: a never ending story

One of the most crucial aspects of e-cigs has always been “how do we deal with them when it comes to advertising?”

As products that many perceive as members of the “traditional smoke” family, e-cigs and e-liquids are often under the magnifying glasses of consumer associations, which strongly question the legitimate nature of many marketing and advertising activities concerning these goods. As a fact, these products are not cigarettes and, as such, are not subject to the same boundaries – overall prohibition on promotion, marketing and advertising – that stand for cigarettes. But many consumer associations tend to file complaints against advertisements of these products affirming that they are anyhow indirectly promoting traditional smoke, hence, should not be permitted. As of today, the competent authorities are still having trouble addressing these complaints given that the legal background is not crystal clear and leaves space to imagination and interpretation. Against this uncertain context, it is easy to imagine that the growing number of complaints we witnessed in 2018 will necessary bring the competent authorities to tackle these outstanding issues and better define what is and what is not permitted when it comes to promoting NTPs, e-cigs and e-liquids.

If you would like to know more about this topic, please contact francesca.ferrucci@dlapiper.com.