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Electronic cigarettes pose a competitive threat to the makers of cigarettes and other tobacco products, as well as to nicotine replacement therapies such as nicotine gum and patches. A common response to such a threat is support for government regulation to suppress competition. Predictably, cigarette manufacturers and other threatened producers, as well as the governments that earn revenue from tobacco taxes, are supporting greater regulation of electronic cigarettes that would replicate the cartel-supporting rules of the Master Settlement Agreement. These efforts are aided by anti-smoking organizations that would like to prevent the growth of demand for electronic cigarettes. This episode allows application of the Bootlegger and Baptist theory of regulation. Groups with divergent interests have aligned in support of cartelizing regulation of electronic cigarettes. As with other episodes of Bootlegger and Baptist coalitions, it is unclear whether the resulting policies will serve the public interest. There is evidence that electronic cigarettes pose substantially lower health risks than traditional cigarettes and may help smokers quit or reduce their tobacco consumption. Therefore, insofar as regulation restricts electronic cigarettes, it may undermine public health.
Introduction...............................................................................................314
I. Interest Groups and the Demand for Regulation..................................316
A. Traditional Theories of Regulation.................................................317
B. Bootleggers and Baptists.................................................................319
II. Tobacco Regulation and the Master Settlement Agreement................323
A. Pre-Master Settlement Agreement Regulation................................324
B. The Master Settlement Agreement...................................................326
C. Federal Tobacco Legislation..........................................................330
III. The Emergence of Electronic Cigarettes.............................................333
A. A Disruptive Technology.................................................................334
B. E-Cigarettes and Public Health......................................................339
C. Regulating E-Cigarettes..................................................................342
IV. Baptists, Bootleggers & E-Cigarettes.................................................344
A. Baptists: Those Who Want E-cigarettes Regulated or Banned.......344
B. Bootleggers: Those Who Profit from Restrictions on ECigarettes.......................................................................................348
C. Bootleggers & Politicians...............................................................351
D. E-Cigarettes & Excise Tax Revenues.............................................356
Conclusion.................................................................................................359
Introduction
In May 2016, the United States Food & Drug Administration (FDA) finalized regulations subjecting electronic cigarettes (also known as "ecigarettes") to federal regulation.1 Utilizing authority provided by federal tobacco legislation enacted in 2009, the FDA "deemed" e-cigarettes and other vaping products (collectively known as "electronic nicotine delivery systems" or ENDS) as "tobacco products" subject to federal regulation. This rule subjects e-cigarettes to a wide range of federal regulatory requirements, including restrictions on advertising and promotion, as well as various reporting and disclosure requirements. Perhaps most significantly, deeming ecigarettes to be regulated as tobacco products subjects all such products to a...