Lawmakers Raise Concerns Over Proposed Menthol Ban's Impact on Small Business

Members of the U.S. House Committee on Small Business point to potential revenue loss and black market sales.
Melissa Kress
Executive Editor
Menthol cigarettes

WASHINGTON, D.C. — Two federal legislators are showing support for small businesses as a proposal to ban menthol cigarettes undergoes review. 

U.S. Rep. Roger Williams (R-Texas), chairman of the House Committee on Small Business, along with U.S. Rep. Dan Meuser (R-Pa.), sent a letter to Shalanda Young, director of the White House Office of Management and Budget (OMB), and Richard Revesz, administrator of the White House Office of Information and Regulatory Affairs (OIRA), raising concerns over the impact the proposal would have on small businesses. 

The U.S. Food and Drug Administration (FDA) submitted two proposed product standards to the OMB for final review in mid-October. One proposal would prohibit menthol as a characterizing flavor in cigarettes and the other would prohibit all characterizing flavors (other than tobacco) in cigars. 

OMB reviews potential regulations to assess their economic impact — a necessary step before the FDA's rule can be implemented.

[Read more: Industry Associations Urge Retailers to Speak Against Menthol Ban]

"Unfortunately, the Biden Administration has proposed another rule that would disproportionally harm our nation's small businesses," Williams said. "Banning menthol cigarettes would result in an estimated loss of $2 billion in sales at convenience stores across the country and would simply create a black market for these products. It is my hope that Director Young and Administrator Revesz reject this rule and allow small business to operate without government interference."

In the letter, the congressmen urge the OMB and OIRA to consider the significant economic impacts on small entities and the fueling of illicit markets that would result if the proposal is implemented.

"The Regulatory Flexibility Act (RFA) requires agencies to analyze proposed rules to determine if they will have a significant economic impact on a substantial number of small businesses. The FDA found that this Rule would have such an impact on small manufacturers, wholesale and retail firms — triggering compliance costs dwarfed by losses in revenue," the letter stated. 

"[NACS], which represents more than 150,000 convenience stores in the U.S., reports that tobacco products are a vital source of revenue for the convenience store industry, 60 percent of which are single-store operators. If implemented, this rule would cause a single convenience store to lose $72,285 a year in nontobacco sundry sales (nearly 4 percent of inside sales) on top of the $160,107 lost due to the reduction in sales of tobacco products. Small operators in the convenience industry would collectively lose $2.16 billion in sales, representing $232,392 in lost sales per store."

The lawmakers also noted that even if consumers switch to nonmenthol cigarettes purchases at c-stores, small tobacco companies would still see lost revenue from menthol cigarettes. 

Another concern is the rise of the illicit market for menthol cigarettes, they wrote. 

"Menthols make up 37 percent of all retail cigarette sales in this country. Disallowing the legal sale of menthol cigarettes will only incentivize the illicit tobacco market. A coalition of approximately 700,000 law enforcement officers commented on the proposed rule saying that the ban 'will increase multiple categories of crimes in our communities. The data is clear that illicit tobacco attracts gangs and organized crime,'" Williams and Meuser wrote. 

"Rather than continuing to have oversight of the production and sale of menthol cigarettes while generating tax revenue, the government will instead leave the production and sale to unregulated criminal enterprises and foreign producers," they added.

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