H.R. 1108 Can and Must Be Improved
H.R. 1108, introduced by Reps. Henry Waxman and Tom Davis, would give authority to the Food and Drug Administration to regulate the retailing and manufacturing of tobacco products. Representing an industry that sells over 60% of domestic tobacco products at retail, the National Association of Convenience Stores (NACS) believes there are significant problems in the retailing portions of this bill that require modification before this legislation can be considered. These problems are described below, but there are three basic principles underlying these issues:
1. The FDA is ill-equipped to regulate, enforce and adjudicate the nation’s 300,000 tobacco retailers;
2. Retailers should be liable only for those things they can actually control;
3. Tobacco should be treated and regulated equally no matter who sells it.; and,
4. Convenience stores should be authorized to sell smoking cessation products.
Addressing the issues laid out below would help move the bill toward these guiding principles.
· The Scope and Costs of the Retail Provisions of the Legislation Are Huge
o There are 300,000 retail outlets selling tobacco in the United States.
§ Will the Food and Drug Administration (FDA) now license all these outlets?
§ How much additional staffing will they need at FDA?
§ How much will that cost?
o How will retail violations be processed?
§ We assume they will be adjudicated so that retailers have their constitutional due process rights.
§ How many Administrative Law Judges will FDA need to hire to hear every case about a potential under-age sale or noncompliant cigarette display at any outlet in the United States?
o State implementation of federal standards will avoid creating a sinkhole for taxpayer dollars.
§ States already regulate retail outlets so they can be given standards to follow without adding huge costs. That is not the case if FDA regulates retail sales directly.
§ In fact, state regulation is working – youth smoking rates have declined for several years. It would be a blow to states rights/federalism to create a federal bureaucracy to replace effective state programs.
retailers, it would incentivize others to go the extra mile to assure compliance. Fines and civil penalties could always be assessed for violations; however license revocation and higher fines should be reserved for scofflaws.
· Internet Retailers Should not be Favored by this Legislation. Internet sales were projected to have been 14% of the cigarette market in 2005. These sales should not be exempted from coverage by the bill especially given the internet proficiency of many children. The bill should:
o Explicitly require internet sellers to verify the age of purchasers (delivery services do this for a fee on alcohol sales);
o Require internet sellers to obey federal and state tobacco tax laws;
o Require internet sellers to follow all of the requirements in the bill (such as advertising restrictions); and,
o Not allow Tribal immunity to be used to shield illegal conduct.
· Native American Retailers Should not be Favored by this Legislation. The bill should include language ensuring that the laws against underage sales and state and federal tobacco tax laws are enforced equally against all retailers – even if they are Native American – and that a Tribe’s immunity cannot be used to shield illegal conduct.
· Adult Facilities Should not be Favored by this Legislation. The current draft of the bill gives adult facilities rights that other tobacco retailers do not have. Adult facilities can:
o Sell tobacco using color advertising;
o Sell tobacco using self-service displays; and,
o Sell tobacco using vending machines.
There is no justification for giving adult facilities advantages to help them draw consumers into their establishments rather than other retailers’ stores.
· Retailers Should be Treated Equally in Sales of Tobacco-related Products. At present, convenience stores are disadvantaged in the marketplace due to regulatory action which prevents them from selling smoking cessation products such as gum with nicotine. All responsible retailers should have the equal ability to sell such products.
· Advertising Inside Convenience Stores Should not be Prohibited. The current draft of the bill prohibits outdoor advertising within 1,000 feet of a school or playground. The problem is that this also covers advertising inside a convenience store that can be seen from the outside. Because convenience stores keep the inside of their stores as visible as possible from the street in order to enhance security, the bill’s advertising limitation leaves convenience stores at a distinct disadvantage vis-à-vis other types of retailers in trying to inform their customers about tobacco products.
· Retailers Should not be Liable for Warnings on Packages and in Advertising that They Receive from Others. The current bill makes retailers liable if cigarettes or smokeless tobacco packages or advertisements do not have warning labels in accordance with the bill’s requirements. In most cases, however, retailers do not label the products or advertisements – they just receive them from manufacturers, distributors or wholesalers. Retailers should not be liable for these warnings unless they are directly involved in labeling these items and directing how it is done.
· Enforcement of the Law Should be Fair. The current bill does not protect against FDA trying to collect violations and dump them on a retailer in a ‘gotcha’ game. This was a problem when FDA implemented its 1996 regulations. The goal of any enforcement at the retail level should be to correct problems not to collect fines. FDA should, therefore, inform retailers within two weeks if they find a violation so that the retailers can correct the problem. Other ways to make enforcement fair include:
o Preventing duplicative enforcement from federal, state and local governments – not only can duplicative enforcement be difficult for retailers, but it can lead to confusion and inconsistency in the application of the law.
o Allowing for administrative hearings on alleged violations in locations convenient to retailers and in a timely manner after the violation has occurred.
· Creating Penalties for Individual Violations. Individual clerks should face penalties if they break the law. That is one way to make sure there is some form of deterrence against knowing violations. Clerks should also have an affirmative defense, however, if they checked an ID which appeared to be valid.
· Deterring Minors from Purchasing Tobacco. Minors should also be deterred from attempting to purchase tobacco before they are of legal age. Without some type of penalty on minors, there will be no incentive for them to stop searching for a retailer or clerk who will sell them tobacco. A penalty will make them weigh the consequences of such illegal behavior.
· This Legislation Should Assist Retailers in Complying with the Law. Many retailers have made large investments in technology to electronically read customers’ driver’s licenses to help ensure that clerks do not mistakenly sell to minors. Underage sales often result from simple arithmetic errors. These machines are, however, often rendered useless because some state driver’s licenses are not machine-readable. The bill should include provisions for a uniform standard for machine-readable licenses so that retailers can use this technology for every sale.
· Small Businesses Should not be Overburdened. Many retailers are small businesses and have very limited space to store records. To avoid overburdening these retailers the bill should:
o Limit the time period for which retailers can be required to maintain records to six months; and,
o Allow retailers to keep records electronically.
For additional information, contact Lyle Beckwith, Sr. Vice President, Government Relations at NACS: (703) 518-4220 or lbeckwith@nacsonline.com
· This amendment would make the states (or, where applicable, Indian tribes) the regulators of retail tobacco sales within their jurisdictions, but set a federal standard to which states must adhere. If states do not meet that standard they risk losing SAMHSA grants funds (consistent with the way the Synar amendment is structured) and FDA would have the ability to take over the regulation of tobacco sales in such a state.
· Page 135, line 3: Insert the following:
SEC. 104. STATE REGULATION OF RETAIL TOBACCO SALES.
Section 1926 of the Public Health Act (42 U.S.C. 300x‑26) is amended to read as follows:
"SEC. 1926. STATE LAWS REGARDING SALE OF TOBACCO PRODUCTS TO INDIVIDUALS UNDER THE AGE OF 18.
"(a) STATE AS PRIMARY REGULATOR OF RETAIL TOBACCO SALES.—The states and Indian tribes shall act as the primary regulators of retail tobacco sales in accordance with paragraph (b). If, and only if, any state or tribe fails to be regulated in accordance with paragraph (b), then the Secretary shall regulate retail tobacco sales in those states or tribal lands.
(b) STATE LAW.‑‑
"(1) IN GENERAL.–Subject to paragraph (2), for fiscal year 2009 and each subsequent fiscal year, the Secretary shall reduce, as provided in subsection (d), the amount of any grant under section 1921 to any state that does not have in effect a law that does the following, except that nothing herein prevents a state from having more restrictive provisions and continuing to receive the full amount of its grants under section 1921:
"(A) Prohibits the sale or distribution of tobacco products to any individual under the age of 18;
"(B) Provides for the state or Indian tribe to inspect businesses that sell tobacco products and enforce the prohibition against sales to individuals under the age of 18;
"(C) Imposes fines that increase when multiple violations are committed on any individual who sells or distributes tobacco products to any individual under the age of 18;
"(D) Provides individuals with a defense against the imposition of a fine if the individual relied in good faith upon what appeared to be a valid proof of age;
"(E) Allows for the revocation of the ability of a business to sell tobacco products if that business has violated a prohibition on selling to underage individuals more than a specified number of times within a specified time frame;
"(F) Provides businesses with a defense against the revocation of the ability to sell tobacco products if that business implements and enforces a tobacco sales compliance program that includes training all employees regarding the legal prohibition against sales to persons under 18 years of age;
"(G) Requires businesses that sell tobacco products to post signage regarding the legal prohibition against selling tobacco products to persons under 18 years of age;
"(H) Prohibits any person from distributing tobacco products other than in an unopened package originating with the manufacturer that bears a health warning required by Federal law;
"(I) Prohibits displays of tobacco products that allow consumers direct access to such products without the intervention of an employee of the retail establishment;
"(2) DELAYED APPLICABILITY FOR CERTAIN STATES.–In the case of a State or Indian tribe whose legislature does not convene a regular session in fiscal year 2009, the requirement described in paragraph (1) as a condition of avoiding a reduction in a grant under section 1921 shall apply only for fiscal year 2010 and subsequent fiscal years.
"(b) ENFORCEMENT.‑‑
"(1) IN GENERAL.–For the first applicable fiscal year and for each subsequent fiscal year, a funding agreement for a grant under section 1921 of the Public Health Service Act is a funding agreement under which the State or Indian tribe involved will–
"(A) enforce the law described in subsection (a)(1) systematically and conscientiously and in a manner that can reasonably be expected to reduce the extent to which tobacco products are available to individuals under the age of 18; and
"(B) certify that it requires such enforcement of such law to be treated as a priority by State and local or tribal law enforcement authorities.
"(2) ACTIVITIES AND REPORTS REGARDING ENFORCEMENT.–For the first applicable fiscal year and for each subsequent fiscal year, a funding agreement for a grant under section 1921 is a funding agreement under which the State or Indian tribe involved will–
"(A) conduct random, unannounced inspections to ensure compliance with the law described in subsection (a)(1); and
"(B) annually submit to the Secretary a report describing–
"(i) the activities carried out by the State or Indian tribe to enforce such law during the fiscal year preceding the fiscal year for which the State or Indian tribe is seeking the grant;
"(ii) the steps taken by the State or Indian tribe to ensure that enforcement of such law was treated as a priority by State and local law enforcement authorities;
"(iii) the extent of success the State or Indian tribe has achieved in reducing the availability of tobacco products to individuals under the age of 18, including the results of the inspections conducted under subparagraph (A); and
"(iv) the strategies to be utilized by the State or Indian tribe for enforcing such law during the fiscal year for which the grant is sought.
"(c) FUNDING.–The law specified in subsection (a)(1) may be administered and enforced by a State or Indian tribe using–
"(1) any amounts made available to the State or Indian tribe through a grant under section 1921;
"(2) any amounts made available to the State or Indian tribe under section 1901 (42 U.S.C. 300w):
"(3) any fees collected for licenses issued pursuant to the law described in subsection (a)(1);
"(4) any fines or penalties assessed for violations of the law specified in subsection (a)(1); or
"(5) any other funding source that the State or Indian tribe may prescribe by law.
"(d) NONCOMPLIANCE OF STATE.–Before making a grant under section 1921 to a State or Indian tribe for the first applicable fiscal year or any subsequent fiscal year, the Secretary shall make a determination whether the State or Indian tribe has maintained compliance with subsections (a) and (b). If, after notice to the State or Indian tribe and an opportunity for a hearing, the Secretary determines that the State or Indian tribe is not in compliance with such subsections, the Secretary shall reduce the amount of the allotment under such section for the State or Indian tribe for the fiscal year involved by an amount equal to–
"(1) in the case of the first applicable fiscal year, 10 percent of the amount determined under section 1933 for the State or Indian tribe for the fiscal year;
"(2) in the case of the first fiscal year following such applicable fiscal year, 20 percent of the amount determined under section 1933 for the State or Indian tribe for the fiscal year;
"(3) in the case of the second such fiscal year, 30 percent of the amount determined under section 1933 for the State or Indian tribe for the fiscal year; and
"(4) in the case of the third such fiscal year or any subsequent fiscal year, 40 percent of the amount determined under section 1933 for the State or Indian tribe for the fiscal year.
"(e) DEFINITION.–For purposes of this section, the term 'first applicable fiscal year' means–
"(1) fiscal year 2010, in the case of any State or Indian tribe described in subsection (a)(2); and
'(2) fiscal year 2009, in the case of any other State or Indian tribe.
"(f) APPLICATION.–For purposes of this section, references to section 1921 shall include any successor grant programs."
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