The Journal Gazette
Wednesday, March 16, 2016 11:19 am

Ill-advised vaping proposal smacks of 'crony capitalism'

Gregory Conley

In the debate over e-cigarettes and vapor products, the Indiana Legislature is allowing fear to trump science. These disruptive and innovative technology products have risen in popularity among smokers looking for an effective way to quit. Significant gains to public health and small businesses in Indiana are being threatened by a devious proposal that exudes the worst elements of crony capitalism and protectionism.

Senate Bill 539, sponsored by Sen. Carlin Yoder, R-Middlebury, would essentially prohibit out-of-state manufacturers of e-liquid – the liquid used for refillable “open system” vapor products – from selling their products in Indiana. Meanwhile, the bill would make manufacturing e-liquid in Indiana virtually impossible by imposing a number of onerous regulations on producers.

Among these regulations is a requirement that a state-of-the-art and highly expensive security system – similar to those used in casinos – be installed. Companies that produce tobacco products aren’t even subjected by the federal government to restrictions such as these.

Another problem presented by SB 539 is the creation of a state-specific regulatory framework for e-liquid packaging and labeling.

If every state in the U.S. creates its own set of “good manufacturing practices,” interstate commerce and compliance will be a nightmare for companies that sell products in multiple states. For that reason, national vapor companies will either stop selling their products in Indiana or they will simply sell them online, where the state has little control over commerce.

The Indiana Alcohol and Tobacco Commission would be responsible for enforcement of the e-liquid regulations, including complex scientific testing. However, the sponsor has not offered any evidence that the agency is well suited or staffed to perform these duties. Will state regulators travel around the country inspecting the facilities of out-of-state manufacturers? Will state alcohol and tobacco bureaucrats know what they’re testing for? After all, these products contain neither alcohol nor tobacco.

This year, the Food and Drug Administration  is set to release federal rules to address packaging, labeling and ingredient guidelines. Indiana should defer to the FDA as the final arbiter on these issues, just as other states have done.

Those who think that this bill targets “the tobacco industry” are in for a rude awakening. SB 539 would exempt from all regulation the e-cigarette products sold by Big Tobacco companies such as Reynolds American and Altria (formerly Philip Morris).

These companies sell their e-liquid only in sealed cartridges, which prevents the state from monitoring the manufacturing or proper use of ingredients.

Absurdly, the bill even redefines “tobacco product” to include tobacco-free and often nicotine-free e-liquid, while at the same time specifically exempting sealed cartridges from that categorization.

Given these regulatory issues, why then is this legislation being pushed? Centaur Gaming may know the answer. Centaur owns and operates Hoosier Park Racing and Casino, as well as Indiana Grand Racing and Casino. The same highly paid lobbyists who work for Centaur are pushing SB 539 on behalf of a company no one had heard of before late last year: the Indiana Vapor Company. Before Ohio began opening casinos on the other side of the border, Ohio residents had to commute to Indiana to gamble.

This boosted Indiana casino profits.

Centaur still has what is very close to a monopoly on gaming in the state’s largest metropolitan area. Like any other business, Centaur understands the financial value in a monopoly.

If Centaur’s aim is to help the Indiana Vapor Company establish a monopoly on the e-liquid market in Indiana, Yoder’s SB 539 would do just that. The legislation would force a number of small businesses to close up shop and move to Illinois, Ohio, Kentucky or Michigan.

With repeated studies showing that e-liquid and “open system” vapor products are far more effective than sealed cartridge e-cigarettes at helping smokers quit, Indiana should tread carefully when considering legislation that would restrict adult smokers’ access to these products.

If SB 539 reaches Gov. Mike Pence’s desk, he should reject this crony capitalism with the bold stroke of his veto pen. Indiana jobs and the long-term public health of the state are on the line.


Gregory Conley is the president of the American Vaping Association, which advocates for small and medium-sized
businesses in the vapor product and electronic cigarette markets. He wrote this for The Journal Gazette.

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