Indiana is about to create a government-sanctioned monopoly in the growing vaping industry. In addition to destroying competition and innovation, Indiana policymakers are harming the people they represent by substantially limiting consumer choice.
Back in May 2015, Indiana Republican governor Mike Pence signed House Bill 1432. The main provisions in the bill, which goes into effect on July 1, stipulate that e-liquid companies must display warnings, list their ingredients, and use tamper-evident and child-proof packaging. These regulations seem reasonable, but the bill also requires e-liquid manufacturers to work with a security firm that must inspect their products before they can reach consumers. This is where big problems emerge.
Approved manufacturing facilities must have third-party surveillance of their facility and remote storage of the video footage. This is an expensive requirement more suited for the manufacturing of select deadly pharmaceuticals.
Approved security companies must also have an employee who holds all of the following: a rolling steel fire door technician certification, a locksmith certification, and an architectural hardware consultant certification. In addition, this employee must be working at the same security company for at least one year—which stops other security companies from hiring anyone in order to meet Indiana’s requirements.
The only security company that meets all of these hurdles is Mulhaupt’s, based in Lafayette, Indiana. What a coincidence! It is almost as if the law was specifically written so that only one local firm could comply.
All e-liquid companies that cannot reach an agreement with Mulhaupt’s will be banned from doing business in Indiana come July 1. The vapor industry is decentralized and is primarily comprised of small “mom-and-pop” producers that mix their own e-liquid. In Indiana alone there are about 200 e-liquid companies. In addition to the compliance costs of this law, Mulhaupt’s gets to charge a fee for its services that companies have no choice but to pay.
Jacopo D’Alessandris, president of the e-vapor company E-Alternative Solutions, told"We have been engaged in an aggressive search for a company other than Maulhaupt's...All our requests were rejected."
me, “Maulhaupt’s is not contracting with any new companies. They have rejected E-Alternative Solutions and our Liquid Soul brands in addition to most nationally recognized and reputable liquid companies. They have instead chosen to contract with only six liquid manufacturers.” Giving one company the government-granted power to determine which products can come to market is clearly an anti-competitive decision that will limit customer choice and the growth of small businesses.
D’Alessandris also told me, “We have been engaged in an aggressive search for a company other than Mulhaupt’s that meets the stated qualifications and certifications laid out by Indiana. This list includes both regional surveillance companies as well as national firms. But all our requests were rejected due to the odd and previously unheard of combination of requirements.”
The More the Merrier
Though policymakers cannot seem to understand it, more options and increased innovation are unquestionably desirable—especially for the e-liquid industry. The British Royal College of Physicians finds that using vapor products such as e-liquid or e-cigarettes is at least 95 percent safer than using combustible cigarettes. Yet policymakers continually try to regulate the industry as if e-liquid and combustible cigarettes pose the same public health threats. If anything, vaping has the potential to improve health outcomes by making it easier for people to quit smoking.
A few years ago, all that was available to smokers who wanted an effective alternative nicotine delivery system were nicotine patches, gum, and poorly designed e-cigarettes. Now, because the vapor industry was allowed to grow outside the heavy hand of government regulators, consumers can customize everything from their nicotine levels and wattage, to flavors and air flow. Quitting smoking is difficult, and every tool that innovators can provide should be welcomed as a harm reduction tool. The correct policy response is not to create artificial monopolies.
On June 2, a Marion County, Indiana Superior Court judge ruled that the bill’s implementation date can stand without any changes to the law. E-liquid companies are now left with less than two weeks to hope for a federal ruling or injunction on another ongoing lawsuit over Indiana’s requirements.
It is one matter to rule that regulations must ensure consumers know what is in e-liquid. It is another matter to use regulations to drive business to a favored company. That is the clear outcome of Indiana’s e-liquid bill. Consumers lose out, and the only winner is Mulhaupt’s.