Regulators’ Misguided Crackdown on Nicotine Products and Their Makers
The FTC and FDA may think that they’re protecting public health, but their actions are likely to do more harm than good.
Federal agencies must really love black markets.
Last week, the Food and Drug Administration (FDA) announced a plan to limit nicotine in cigarettes and ban Juul e-cigarettes. A court quickly stayed the Juul decision, so Juul products will remain on shelves for now. But both measures, if they were to take effect, would create incentives for black markets.
E-cigarettes such as those made by Juul are a safer alternative to tobacco, and an effective quitting aid for smokers. Mandating that tobacco cigarettes have a lower nicotine content would encourage smokers to smoke more to get the same nicotine effect — or to go underground to look for higher-nicotine cigarettes.
And, as if the FDA hadn’t done enough harm, now the Federal Trade Commission (FTC) is getting in on the action.
The FTC brought antitrust charges against Altria in 2020, after the tobacco conglomerate acquired a 35 percent stake in Juul for $12.8 billion in 2018. The FTC argued that Altria had made a secret agreement to stop making its own competing vaping products in exchange for its investment in Juul. The FTC has just lost the case, which isn’t that remarkable in itself, particularly considering that competition in the e-cigarette market has increased since Altria’s deal with Juul. What is remarkable is that the FTC lost the case in its own in-house court.
Many agencies, including the FTC, have an internal administrative-law court that operates outside of the independent judicial system outlined in Article III of the Constitution. Agencies choose the judges and pay their salaries, set the rules for the procedure and evidence, and rarely lose. So it was a big deal when the FTC lost against Juul in its own court, and lost decisively: The judge — who, again, was chosen and is paid by the FTC — ruled against every one of the FTC’s claims. In complicated cases, judges often throw the losing party a bone or two in the decision. That wasn’t the case here.
Had this case been tried in the regular court system, that would be the end of the matter. But the FTC has one more trick up its sleeve: The commissioners themselves can rule on any appeals of their administrative court’s decisions. In other words, if they don’t win the cases that they decided to bring in their own in-house court, they give themselves a do-over.
In the last 25 years, FTC commissioners have never ruled against themselves in such an appeal, so in this case, it’s a safe bet that they will overturn the judge’s decision. That means the vaping market will almost certainly become less competitive, because Juul will have fewer resources to devote to making a safer alternative for smokers who can’t give up their habit entirely, or don’t want to.
At the end of the day, there is a good chance that the FDA’s nicotine limits and product bans, in combination with the FTC’s antitrust lawsuits, could end up causing more deaths than they prevent by keeping smokers on tobacco instead of vapes. As a quitting aid, vaping is more than twice as effective as nicotine patches or gum. And for those who don’t quit nicotine altogether, switching to vaping is far less harmful, since vapes do not contain tar or many of the other harmful chemicals in combustible tobacco.
Rather than trying to reduce harm, tobacco prohibitionists insist on a black-and-white “zero harm” approach that fails to account for the nuanced ways in which people behave in the real world. As Adam Smith pointed out, planners tend to move people around like pieces on a chess board, forgetting that human beings move on their own.
In the end, whatever regulations and court decisions may say, people will still find ways to get what they want, even if they have to rely on black markets to get it. The FTC and FDA may think that they’re protecting public health, but their actions are likely to do more harm than good.
Jessica Melugin is the director of the Center for Technology and Innovation at the Competitive Enterprise Institute (CEI). Ryan Young is a senior fellow at CEI.
