Business is concerned about the proposed amendment regarding the placement of tobacco products

29/ 05/ 2023

On May 2, 2023, the Verkhovna Rada of Ukraine adopted in the first reading the draft Law of Ukraine On Amendments to the Law of Ukraine On Advertising regarding the implementation of European legislation into national legislation of Ukraine through the implementation of certain provisions of the EU acquis in the field of audiovisual advertising (European Convention on Transfrontier Television, Directive of the European Parliament and of the Council 2010/13/EU on audiovisual media services of March 10, 2010, as amended by Directive (EU) 2018/1808 of November 14, 2018) and in some other laws No. 9206. The European Business Association and the American Chamber of Commerce in Ukraine, on behalf of the business community, welcome the European integration aspirations of our country and fully support initiatives that align with European legislation and accelerate our approximation to the EU. At the same time, despite the crucial European integration component of Draft Law No. 9206, an amendment has been introduced in the text for the second reading, which proposes changes regarding the prohibition of the visible placement of tobacco products in retail locations. Indeed, this amendment could have harmful economic and social consequences for the country. There is a risk of accelerating the growth of the illicit tobacco market, which already exceeds 20% and deprives the budget of 22 billion UAH annually, due to the reduction of legal sales points (especially in small settlements where the level of supervisory authority involvement is significantly lower) and the facilitation of illegal product distribution (e.g., off the books) alongside legal sales. Since the shadow business has historically disregarded legally established rules of operation and tax payment, likely, it will not comply with the new regulations regarding product placement. However, implementing this initiative will increase expenses for transparent businesses, both large retail chains and small and medium-sized enterprises. According to business experts estimates, this will affect around 50 thousand enterprises, as they will need to invest in the re-equipment of retail outlets and reduced profitability due to a reduced product range. It is worth noting that the relevant legislation of the European Union (Directive 2014/40/EU of the European Parliament and the Council dated April 3, 2014, which Ukraine committed to implementing within the framework of the Association Agreement between Ukraine, on the one hand, and the European Union, the European Atomic Energy Community, and their Member States, on the other hand, dated June 27, 2014) does not include a prohibition on the visible display of tobacco products at point of sale. For example, according to company data, in the overwhelming majority of EU countries, as well as the United States, Japan, and Switzerland, despite existing restrictions on tobacco advertising, there is no prohibition on presenting such products at points of sale. Considering the arguments presented and the potential negative consequences for businesses and the state, the business community represented by the European Business Association and the American Chamber of Commerce in Ukraine urges the Verkhovna Rada of Ukraine to reject the mentioned amendment to draft Law No. 9206.

On May 2, 2023, the Verkhovna Rada of Ukraine adopted in the first reading the draft Law of Ukraine “On Amendments to the Law of Ukraine ‘On Advertising’ regarding the implementation of European legislation into national legislation of Ukraine through the implementation of certain provisions of the EU acquis in the field of audiovisual advertising (European Convention on Transfrontier Television, Directive of the European Parliament and of the Council 2010/13/EU on audiovisual media services of March 10, 2010, as amended by Directive (EU) 2018/1808 of November 14, 2018) and in some other laws” No. 9206.

The European Business Association and the American Chamber of Commerce in Ukraine, on behalf of the business community, welcome the European integration aspirations of our country and fully support initiatives that align with European legislation and accelerate our approximation to the EU. At the same time, despite the crucial European integration component of Draft Law No. 9206, an amendment has been introduced in the text for the second reading, which proposes changes regarding the prohibition of the visible placement of tobacco products in retail locations.

Indeed, this amendment could have harmful economic and social consequences for the country. There is a risk of accelerating the growth of the illicit tobacco market, which already exceeds 20% and deprives the budget of 22 billion UAH annually, due to the reduction of legal sales points (especially in small settlements where the level of supervisory authority involvement is significantly lower) and the facilitation of illegal product distribution (e.g., off the books) alongside legal sales. Since the shadow business has historically disregarded legally established rules of operation and tax payment, likely, it will not comply with the new regulations regarding product placement.

However, implementing this initiative will increase expenses for transparent businesses, both large retail chains and small and medium-sized enterprises. According to business experts’ estimates, this will affect around 50 thousand enterprises, as they will need to invest in the re-equipment of retail outlets and reduced profitability due to a reduced product range.

It is worth noting that the relevant legislation of the European Union (Directive 2014/40/EU of the European Parliament and the Council dated April 3, 2014, which Ukraine committed to implementing within the framework of the Association Agreement between Ukraine, on the one hand, and the European Union, the European Atomic Energy Community, and their Member States, on the other hand, dated June 27, 2014) does not include a prohibition on the visible display of tobacco products at point of sale. For example, according to company data, in the overwhelming majority of EU countries, as well as the United States, Japan, and Switzerland, despite existing restrictions on tobacco advertising, there is no prohibition on presenting such products at points of sale.

Considering the arguments presented and the potential negative consequences for businesses and the state, the business community represented by the European Business Association and the American Chamber of Commerce in Ukraine urges the Verkhovna Rada of Ukraine to reject the mentioned amendment to draft Law No. 9206.