The Letters Editor

Wall Street Journal Europe

By fax: 020 7842 9201

Dear Editor

Re: "Up in smoke" editorial

Your editorial (Up in smoke,24^th July) argues that it is "hard to believe that thesemultinational, publicly traded [tobacco] firms would do some smuggling on theside and partner with an unlikely gaggle of international gangsters."  In fact, the evidence from the companies'internal papers is sharply to the contrary.

The reason the companies areinvolved is simple.  The illegal trade isvery profitable and an important marketing tactic for the companies. Cheapcigarettes keep smokers puffing and high levels of smuggling help the tobaccoindustry and sympathetic newspapers to argue for reductions in tobacco taxes,giving a knock-on benefit on demand in the legal market.  A company that does not ensure its brandsare smuggled risks losing market share to those that do.  In no other industry would one-third of internationallytraded products go 'missing' if this was not in the manufacturers' interests.

The way the companies areinvolved is more subtle than driving trucks over borders or bribing customsofficials.  We have presented evidenceshowing that companies treat smuggling as just another distribution channel.  The evidence suggests the illegal channelsare managed by third parties and may be very convoluted, but the companiesexert control over the price and availability of their products in the illegalmarkets.  This means they know which wholesalersare selling to smugglers and which consignments will end up on the blackmarket. 

These allegations are not the work of pressure groups, but are taken seriously by the governments initiating legal action against the tobacco companies.   Documentary evidence of the case against the tobacco companies is at the ASH smuggling website.   Perhaps those that do not believe that big companies could ever act in this way should judge for themselves.

Yours sincerely,

Clive Bates

Director