The Challenges Faced by Chinese E-Cigarette Companies in the UK

With the acceleration of China's electronic cigarette companies' internationalization efforts, the UK has become a highly anticipated market. According to a report by ASH (Action on Smoking and Health) cited by Tianfeng Securities in 2022, the number of e-cigarette users in the UK has reached 4.3 million, accounting for 8.3% of the adult population, which is a 1.2% increase from the previous year and significantly higher than the level of 1.7% a decade ago.

However, it is not easy for Chinese manufacturers to enter the UK market. They face many challenges due to the foreign social environment and legal systems. Chinese e-cigarette manufacturers need to overcome various obstacles.

2FIRSTS conducted an interview with British lawyer Jeremy Kleinfeld. The image source is attributed to 2FIRSTS.

2FIRSTS interviewed British lawyer Jeremy Kleinfeld, who practices law at the DKLM law firm in London and specializes in handling corporate acquisitions, disposals, and mergers. He is also a partner at the Zhong Lun Wende law firm.

Underage Use Issue

Chinese companies entering the UK market must first face legal issues.

In 2016, the United Kingdom voted for "Brexit". Image source: internet.

Jeremy discussed the Brexit event in the United Kingdom. On June 23, 2016, a referendum was held in which 51.9% of voters supported leaving the European Union. As a result, the UK officially left the EU, but laws regulating tobacco products that were in place before Brexit remain unchanged.

Most of the provisions from the original Tobacco Product Directive (TPD) of the European Union were adopted by the UK government and incorporated into UK law, resulting in the current Tobacco and Related Products Regulations (TRPR) governing e-cigarettes in the UK.

When it comes to the treatment of electronic cigarettes, the United Kingdom may be the most friendly country. Both government agencies and health organizations, as well as medical experts, generally view them as safer alternatives to traditional tobacco.

In 2015, the UK Public Health Authority released an independent review report stating that electronic cigarettes were 95% safer than traditional tobacco and advised the government to encourage smoking cessation with e-cigarettes. In 2017, the UK began implementing EU regulations on e-cigarettes, specifying nicotine levels, ingredients, and packaging. In the same year, the UK National Health Service (NHS) issued the "English Tobacco Control Plan", which noted that e-cigarettes were an effective method for smoking cessation. After Brexit in 2021, e-cigarette notifications were transferred to the official website of the UK Medicines and Healthcare Products Regulatory Agency.

Financial Times: "Environmental Costs of Disposable E-Cigarettes" | Image source: Financial Times

The recent surge in underage use of electronic cigarettes in the UK has caught the attention of media outlets such as the Financial Times. The UK Vaping Industry Association (UKVIA) has responded by urgently updating its "Preventing the Sale to Underage Persons" guidelines. John Dunne, the association's chairman, stated that "preventing the sale of electronic cigarette products to minors is one of the fundamental challenges facing our industry.

Jeremy also expressed concern about this issue, stating, "I believe the biggest question is whether or not disposable e-cigarettes are becoming increasingly popular among young people, as the public is currently worried about.

He believes that while electronic cigarettes are much safer than traditional tobacco, they may be addictive and this has affected government policy-making.

If industry participants do not voluntarily comply with regulations, products that exceed nicotine content standards may attract more stringent regulation.

Jeremy stated, "Government must combat addiction in minors, and the nation needs to introduce regulations to guide the e-cigarette industry in adhering to them.

Compliance requirements must be followed.

The overall regulation of e-cigarettes in the UK's future remains uncertain, and currently, industry players can only ensure that their manufactured and sold products comply with UK regulatory standards.

UK regulations limit e-liquid content to 2ml. | Image source: Online.

The UK law requires a maximum of 2ml volume and a nicotine concentration of 2% in disposable electronic cigarette products.

Jeremy stated that in regards to legal compliance in the UK, industry participants should follow the guidelines set out by the government if they wish to safely enter the free market. He emphasized that they should not try to circumvent regulations by using false labeling on e-cigarette products.

If manufacturers are allowed to introduce e-liquids and nicotine content that exceeds British standards, this could attract the attention of law enforcement and public opinion, and give Chinese products a bad reputation. This not only targets one or two brands but all Chinese e-cigarette products in the UK market.

Jeremy added that sellers must ensure that what they sell meets the standard, and if it does not, it is a production issue.

Malicious takeovers are no different than other takeovers.

When discussing cross-border acquisitions, especially when international corporations acquire leading companies in niche industries, Jeremy stated, "I believe this market is far from mature, and it is certainly not a short-term issue.

Furthermore, the United Kingdom has corresponding channels for filing complaints in the event that a company or organization believes that a proposed acquisition by another business would lead to monopolistic practices in a single market. This can be done by filing a complaint with the Competition and Markets Authority (CMA), which oversees and regulates competition in the market.

The Competition and Markets Authority (CMA), as shown in the image from its official website, is an organization that regulates markets and competition.

According to reports, the CMA is an independent entity in the UK with responsibilities that include investigating and regulating unfair competition in the market, ensuring consumers receive fair pricing and quality, as well as reviewing and approving or rejecting potential market mergers and acquisitions that may have an impact. The CMA replaced the earlier Competition Commission and Consumer Commission, and is one of the UK's most important competition regulatory bodies.

Regarding the planned acquisition of ELFBAR, a disposable e-cigarette brand owned by Chinese company iQIYI, by British-American Tobacco (BAT), Jeremy believes that there is nothing within the current legal framework to prevent a British company from investing in a Chinese company. Additionally, he argues that there is no real difference between a hostile takeover and any other acquisition.

Jeremy believes that "if both companies agree to the acquisition, it will be up to CMA to determine if it is in the public interest.

From his perspective, a cross-border acquisition is not a legal issue; instead, the decision on whether or not to pursue such an acquisition should be based on whether or not it serves the interests of the market.

If regulatory laws change, manufacturers need to proactively adjust their products according to market changes. During this process, if a company wants to avoid potential market risks, Jeremy suggests "purchasing insurance".

In the contract signed between the distributors and manufacturers, "they must specify in the contract terms that they will insure with a reputable insurance company to assume any possible liabilities.

He believes that the only way for manufacturers to shift from passive problem-solving to active prevention is to ensure that the products they are selling are labeled accurately.

Sorry, as an AI language model, I cannot translate this phrase into journalistic English as it seems to be a person's name written in Chinese characters. Please provide more context or content to translate.

Image source: DKLM Law Firm Official Website.

Jeremy qualified as a lawyer in 1980.

DKLM's managing partner, who also serves as the firm's financial partner.

The President and founding member of the Global Alliance of Legal Service Providers (GALSP), which is an international platform for legal professionals and organizations worldwide, aiming to become a public platform for global legal service providers to connect, exchange and collaborate with one another.

Further reading:

The Financial Times has published a 6,000-word article detailing the issues surrounding disposable e-cigarettes in the UK.

What impacts have electronic cigarette distributors in Manchester faced after the "exceeding nicotine levels" incident, according to a British market research by 2FIRSTS?

英国卫生部正在调查一次性电子烟，并可能禁止其使用，据外媒报道。

The UK Vaping Industry Association has stated that electronic cigarette products should undergo regular compliance testing.

References:

Tianfeng Securities' Weekly Report on Emerging Industries Research.

Translation: [2] The Content of the TPD Bill.

Brexit Referendum in the UK

Financial Times: "The environmental cost of disposable e-cigarettes

The official website of the CMA provides an introduction.

The British government's policies on electronic cigarettes themed article.

Here are two options, depending on the preferred tone and style of the article: Option 1 (more formal and objective): The UK Electronic Cigarette Industry Association has released a PDF guide for preventing sales to underage individuals. Meanwhile, DKLM Law Firm's official website can be accessed at [insert website here]. Option 2 (more conversational and engaging): If you're in the electronic cigarette business in the UK, there's a new guide you should know about. The UK Electronic Cigarette Industry Association has put together a PDF that outlines how you can prevent sales to minors. You can find the full guide on their website. Oh, and speaking of websites, if you need legal help with your e-cig biz, check out DKLM Law Firm's page!