Exclusive: India threatens Philip Morris with 'punitive action' over alleged violations

[August 18, 2017]  By Aditya Kalra

NEW DELHI (Reuters) - The Indian government has threatened Philip Morris International Inc with "punitive action" over the tobacco giant's alleged violation of the country's anti-smoking laws, according to a letter sent to the company by the federal health ministry.

The letter was prompted by a Reuters investigation last month that revealed how Philip Morris was deploying marketing tactics in India, some targeting young people, that officials said were illegal. (http://reut.rs/2uuye5Y)

The letter cites the Reuters story in the opening paragraph, listing Philip Morris' marketing methods as outlined in the article, including cigarette advertisements at kiosks, the free distribution of Marlboro smokes at nightclubs and bars, and the use of TV screens to promote the world's best-selling cigarette brand at these events.

These promotional activities are a violation of the country's tobacco control law and are subject to punishment under the act, says the letter, dated Aug. 10.

"You are requested to clarify your position and to show cause why appropriate punitive action be not initiated against the company and its directors," the letter continues.

Such infractions can carry a fine of up to 1,000 rupees (about $15) and a sentence of up to two years in prison for the first conviction, according to the Cigarettes and Other Tobacco Products Act.

The India unit of Philip Morris International did not respond to questions from Reuters.

The health ministry also sent a letter to ITC Ltd, India's leading cigarette maker, which Reuters also reported last month was using some of the same promotional methods as Philip Morris, such as point of sale displays. In its letter to ITC, the health ministry said the company's advertisements at kiosks were illegal.

"Advertisement other than listing type of tobacco products available, whether displayed inside or outside the shop is prohibited and attracts punishment," the ministry said. It also called on ITC to explain why "punitive action" should not be taken against the company.

ITC did not respond to questions.

TARGETING YOUNG INDIANS

Indian officials have repeatedly said that tobacco advertisements that use brand names, pack images or promotional messages are banned at kiosks - inside and outside. Philip Morris and ITC have said they are in compliance with tobacco control regulations and that the law allows advertising inside a kiosk.

Philip Morris' marketing strategy for India is laid out in hundreds of pages of internal documents that cover the period from 2009 to 2016. A key goal, according to the documents, is "winning the hearts and minds of LA-24" – people between legal age, 18, and 24. The documents can be viewed in a searchable repository, The Philip Morris Files, published by Reuters. (http://reut.rs/2sT51xF)

A man holds his mobile phone as he lights a cigarette next to a Marlboro advertisement pasted on a vendor's stall in a marketplace in Mumbai, India, July 14, 2017. Picture taken July 14, 2017. REUTERS/Danish Siddiqui

The tobacco shop displays and the distribution of cigarettes at events attended by young people have helped to more than quadruple Marlboro's market share in India, where Philip Morris is battling to win ground from ITC, which dominates the industry.

India, with a population of 1.3 billion, has about 100 million smokers. Tobacco use kills more than 900,000 people a year, according to government data.

Since October last year, the state government in India's capital New Delhi has sent at least four letters to Philip Morris and at least three to ITC telling them to remove their advertisements at kiosks. Indian officials say tobacco companies get away with violations of anti-smoking regulations because law enforcement is weak.

The health ministry also instructed state governments this month to move against cigarette advertising at kiosks, as well as the distribution of free cigarettes. The ministry requested that states submit a progress report on their actions.

Following the Reuters story, Delhi state tobacco control chief S. K. Arora said he quizzed Philip Morris about the distribution of free cigarettes. In internal documents, Philip Morris calls distribution of free cigarettes "sampling" and says it is allowed under the law in India. The company has spent millions of dollars promoting its Marlboro brand at social events, the documents show.

At several parties attended by Reuters reporters in Delhi over the past year, young women dressed in the colors of the latest Marlboro variant handed out free packs of cigarettes after asking people for their name, age and preferred brand.

In recent weeks, Arora said he had detected a decline in the number of cigarette ads at kiosks in Delhi. Since the Reuters article last month, some Philip Morris ads have disappeared from several tobacco shops in Mumbai.

($1 = 64.1100 Indian rupees)

(Additional reporting by Abhirup Roy in Mumbai; Editing by Peter Hirschberg)

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