The adverse impact of counterfeit and smuggled goods affects not only the tobacco industry, but invades all sectors of consumer goods. The easy and pervasive availability of counterfeit products cheats consumers and undermines the investment in building brand image.
Counterfeiting is a cause of major concern due to serious damage caused to the brand image. Customer dissatisfaction has a knock-on effect on company market share and profitability. Apart from the detrimental effect on the industry and loss to the national exchequer, this also deters new foreign investment particularly in view of continuous and unchecked infringements of intellectual property rights
Counterfeiting by its very nature harms consumers. The illegality not only cheats the customer but the product itself is of a substandard quality as the counterfeiters do not conform to the rigorous quality and regulatory standards which the organised sector is expected to follow.
Smuggling is another form of illicit trade which grievously impacts the tax paying segment of the industry. Smuggling of cigarettes was initially restricted to the premium segment, but now cheaper brands are also flowing into the Pakistani market, adversely affecting the legitimate industry.
Under the prevalent law selling cigarettes packets without the Government stipulated health warning (in Urdu & English) is a punishable offense. However, smuggled cigarettes are commonly available at retail and wholesale outlets across the country. This blatant violation of the law continues unabated, and in clear sight of enforcement agencies who take no action. While the industry loses large volumes to the inflow of smuggled products, the Government also loses millions of rupees annually in the form of tax and duty evasion.