Do state minimum markup/price laws work? Evidence from retail scanner data and TUS-CPS

Abstract

BackgroundMinimum markup/price laws (MPLs) have been proposed as an alternative non-tax pricing strategy to reduce tobacco use and access. However, the empirical evidence on the effectiveness of MPLs in increasing cigarette prices is very limited. This study aims to fill this critical gap by examining the association between MPLs and cigarette prices.MethodsState MPLs were compiled from primary legal research databases and were linked to cigarette prices constructed from the Nielsen retail scanner data and the self-reported cigarette prices from the Tobacco Use Supplement to the Current Population Survey. Multivariate regression analyses were conducted to examine the association between MPLs and the major components of MPLs and cigarette prices.ResultsThe presence of MPLs was associated with higher cigarette prices. In addition, cigarette prices were higher, above and beyond the higher prices resulting from MPLs, in states that prohibit below-cost combination sales; do not allow any distributing party to use trade discounts to reduce the base cost of cigarettes; prohibit distributing parties from meeting the price of a competitor, and prohibit distributing below-cost coupons to the consumer. Moreover, states that had total markup rates >24% were associated with significantly higher cigarette prices.ConclusionsMPLs are an effective way to increase cigarette prices. The impact of MPLs can be further strengthened by imposing greater markup rates and by prohibiting coupon distribution, competitor price matching, and use of below-cost combination sales and trade discounts.

Tobacco Marketing at SNAP- and WIC-Authorized Retail Food Stores in the United States

“…Licensing can be used to cap the number of tobacco retailers in an area, restrict tobacco sales near schools and youth-oriented locations, restrict the types of outlets that can sell tobacco, or restrict price promotions (Ackerman, Etow, Bartel, & Ribisl, 2017; Myers, Hall, Isgett, & Ribisl, 2015). Tobacco retailer licensing would also allow the implementation of and enhance the enforcement of state or local minimum pricing laws (McLaughlin, Pearson, Laird-Metke, & Ribisl, 2014) and bans on the redemption of cigarette coupons, such as the policies that exist in New York City (Huang et al, 2016).…”

Neighborhood Variation in the Price of Cheap Tobacco Products in California: Results From Healthy Stores for a Healthy Community

“…35,36 State and local governments also have legal authority to establish minimum price and pack size for cigarillos and little cigars. 17,[37][38][39] In addition, more than 50 cities or counties adopted sales restrictions on flavored tobacco that withstood legal challenges. 40 In Boston, Massachusetts, for example, a city-wide regulation significantly reduced neighborhood disparities in the retail availability of single, flavored cigars per 100 youth.…”

Analysis of tobacco industry pricing strategies in 23 European Union countries using commercial pricing data

“…As called for by other researchers, there is a need for more sophisticated measures to support price increases and to reduce price gaps, and to understand and address TI strategies designed to undermine tax increases. Such measures may include adoption of a larger specific excise tax element,56 delivering larger and unannounced tax increases, and increasing taxation of RYO tobacco 5 8 31. Furthermore, non-tax pricing strategies, such as the adoption of minimum mark-up/price laws, an effective method of increasing prices of the cheapest cigarettes, should be considered and may serve to complement tax-based policies 57–59…”