In a years-long campaign to eradicate smoking, Australia’s tobacco control establishment has lost all control of the nicotine market. Former law enforcement officer Rohan Pike says 70–80% of the tobacco market is now illicit, while roughly 95% of vaping has been pushed into criminal hands. The founder of Australia’s first Tobacco Strike Team explains how excessive taxes, vape prohibition, and policy denial empowered organized crime.
Featuring:
ROHAN PIKE
Illicit Trade Advisor,
Sr. Australian Federal Police Officer,
Founder, Tobacco Strike Team
pikeconsulting.com.au
Transcription:
00:02 - 01:19
[Brent Stafford]
Thank you. Hi, I'm Brent Stafford, and welcome to another edition of Rugwatch on GFN.TV. For years, we've argued that so-called tobacco control isn't really about controlling tobacco. It's about controlling behavior. Because in practice, tobacco control is all about controlling choice, controlling access, and ultimately, controlling the people who use it. But in Australia, that control has gone too far, pushing the entire tobacco and vape market into the hands of organized crime. Joining us today is someone with deep operational understanding of the illicit tobacco market in Australia, Rohan Pike. Over a 26-year career in law enforcement, he served as a senior officer with the Australian Federal Police and with the Australian Border Force, where he founded and led the Tobacco Strike Team, Australia's first dedicated unit targeting the illicit tobacco market. Rohan, thanks for joining us today on RegWatch. Hi, Brent. Good to be with you. So the Strike Team, it was established in the mid 2010s. What was the trigger for that?
01:21 - 02:26
[Rohan Pike]
The Australian Customs Service became the Australian Border Force in mid-2015. At that time I was still in the Federal Police but then asked to come across as the Border Force wanted to expand their investigative remit and start an organised crime branch and given my background at the Federal Police for 24 or 5 years they thought I was a good fit for that so I went over there My boss asked me what commodity I would like to focus on and I said tobacco because I'd done a tobacco investigation previously in the AFP and kept an eye on the illicit tobacco market while I was there. that it was underreported. I knew that it was underinvestigated and that the ABF really should have had a responsibility to try to stop it coming through the borders. So I started a team. That team quickly expanded to a nationwide group. And then the commissioner gave it the name of a strike team.
02:27 - 02:32
[Brent Stafford]
So at that time, how big was the problem of illicit tobacco?
02:32 - 04:50
[Rohan Pike]
It was probably in the order of 20% of the market then. That was the calculation I did with access to all of the public and private data that there was at the time. And we quickly realised that we weren't able to arrest our way out of the problem, that the best way that we could attack it was understand the vulnerabilities in the border regime and try to, that were being exploited by these criminal groups and try to plug those. So some of those were duty-free sales, which were in the hundreds of millions of sticks in Australia and supposedly being sent overseas, but actually being diverted to the domestic market. We stopped duty-free sales in Australia. there was customs bonded warehouses where importers would allegedly store their goods in these warehouses and then transship them overseas. It turned out that they were not doing that. And in fact, the containers that were said to be full of cigarettes going overseas were checked and were not full at all. And those cigarettes were again diverted into the domestic Market and we shut down bonded warehouses Entirely and then there was also other things like air freight which made no sense that importers would import their goods via air freight which was several times more expensive than sea freight and We had a close look at that and realized that cigarettes were coming in via air freight simply because they weren't being checked. In a nutshell, we determined that the customs revenue regime was running on an honesty system. and that these declarations that were being made to them were not being verified. And I just came across with my suspicious mind from the police with a bit of common sense. And then I had access to Intel analysts and data analysts with the customs data. And we quickly realized that there was some glaring vulnerabilities in the system.
04:51 - 04:59
[Brent Stafford]
So let's take a look at today, Roland. How much of a problem is Australia's tobacco and vape market in terms of it being illicit?
05:00 - 06:30
[Rohan Pike]
In percentage terms, the tobacco market is in the vicinity of 70% to 80% illicit, and the vape market is probably around 95% illicit. So in nicotine terms, we're probably looking at 85% of the nicotine market in Australia is illicit. So why is it so high for vaping? Vaping is because of over-regulation. So Australia's come up with a scheme whereby we don't really support vaping per se at all. And the government's done their best to discourage it through a system where consumers have to go to a pharmacy if they can find one. Only 10% of the pharmacists actually sell vapes. But that is the only place for legal vapes or regulated vapes to be sold. Then the customer will have to have an argument with the chemist as to the need for them to have a vape. And then the flavors that are so have been minimized to not encourage customers. And also there's puff counts and nicotine levels that the customers might not want. As opposed to that, they could walk across the road and find an illicit store which are freely selling whatever they like at a cheaper price. So that's what they've done. So it's the over-regulation of that market that has caused the high illicit rates there.
06:30 - 06:46
[Brent Stafford]
Now, we've seen a lot. We've covered this on RegWatch, the fire bombings and the attacks and so forth going on in Australia. As somebody from law enforcement, you know, paint a picture for us here. Is this a real serious thing? I mean, are people getting hurt? Are people getting killed?
06:47 - 07:35
[Rohan Pike]
People are getting hurt and killed. There's been a handful of murders, there's extortion going on in the shops around the country. There's a lady who was the victim of a mistaken firebombing in her house and she died during that. There are robberies, there are all sorts of things and this is the inevitable. conclusion from a widespread criminal market. So with the illicit rates being so high, criminals are attracted to it. They're competing for market share. When that competition inevitably becomes violent, that's what we're seeing with these firebombings around the world. And that's an Australia-wide problem now.
07:35 - 07:48
[Brent Stafford]
If you are a smoker in Australia, it's highly likely that you're smoking illicit product. If you're a vapor in Australia, it's definitely likely that you're vaping something that's illicit.
07:49 - 08:13
[Rohan Pike]
Yeah, that's correct. So the highest, the most popular cigarette in Australia is the Manchester cigarettes that are produced in Dubai. They're all illicit. That would be by far the most smoked product. And second would probably be double happiness out of China and Hong Kong. And as for the illicit market, yeah, there's very few regulated products being consumed.
08:14 - 08:19
[Brent Stafford]
So, I mean, how much money are the groups that are behind this making?
08:20 - 08:48
[Rohan Pike]
It's in the billions of dollars. So it's hard to precisely define what profit is being made because they obviously undercut the legal market significantly. But if you're talking $4 billion or $6 billion or $8 billion, it's multi-billion and it's just a huge market. And it's now entrenched. It's been going for years and very difficult to reverse now.
08:48 - 08:55
[Brent Stafford]
So how organized is it? Are we talking about just some small operators or structured criminal networks?
08:55 - 09:40
[Rohan Pike]
These are criminal networks that have been ongoing. Some family businesses have been going for decades, obviously at a lower level 20, 30 years ago. But they've now expanded their remit as our excise rates have increased, has given them more opportunity to make more profits. Some of the criminal gangs are so structured and so sophisticated that they own shares the factories overseas and so that they can direct that product to their stores all the way down to the retail level where they own tranches of stores on the high street. So it's a vertically integrated system, very sophisticated.
09:41 - 09:46
[Brent Stafford]
But isn't Australia just a big island? Shouldn't it be easy to keep out the black market product?
09:47 - 10:30
[Rohan Pike]
It is a big island, but however, the Customs Service or the Border Force is not really designed to stop and search every item that comes across the border. In fact, quite the opposite, their primary objective is to facilitate the effective and efficient movement of goods and services across the goods and people across the border so to stop everything is against what they're really designed to do and as we've seen with other illicit drugs if there's a market for that product then the criminals will be able to disguise the product in other goods coming across the border
10:31 - 10:37
[Brent Stafford]
Rohan, what are government and public health authorities saying about this violence and this illicit trade?
10:37 - 11:35
[Rohan Pike]
Well, the good thing about the violence is that it's actually backed the government and public health officials into a corner where they can no longer deny the existence of a massive black market, which was their stance until the last three years when this all started. So the violence, though, they have now put down to a failure from law enforcement to stop it. and that they are directing more resources to law enforcement as we speak and there's a budget coming out just next month where there'll be further hundreds of millions of dollars put towards that towards that problem and to law enforcement in the states and territories. Of course, they've not taken a look at their own policies and perhaps made a decision on what the cause of this problem has been.
11:36 - 11:42
[Brent Stafford]
So they have not made a connection between their policies and the growth of the criminal market.
11:43 - 12:44
[Rohan Pike]
No, they're really casting, well, assigning blame to law enforcement for having not stopped it. And of course, there's nothing wrong with our policy according to the government and that they're not for changing. In fact, they're doubling down on that. As an example, the government started an illicit tobacco and e-cigarette commissioner's office, which was designed to guide and coordinate the law enforcement efforts around the country. And you would think that someone steeped in law enforcement would be an appropriate person to head that agency, but they pulled someone from the health department with absolutely zero experience in law enforcement. to do that. And not surprisingly, there's been no coordination of law enforcement as a result around Australia and every state and territory is really experimenting with their own legislation now. That's only just come up in the last couple of years.
12:46 - 12:54
[Brent Stafford]
So you mentioned excise taxes on tobacco. How much does a pack of cigarettes cost in Australia and how much of that is tax?
12:54 - 14:06
[Rohan Pike]
Well, cigarette companies are promoting very cheap cigarettes, which I'm sure they don't gain very much profit at all. Probably the cheapest are around the 42 or 43 Australian dollar mark. And the most expensive are around 65 to 70 dollars. So that would be Marlborough packets are around 70 dollars per packet. And then there are other packets like brands like Winfield for around $55 Australian. And the excise is $1.53 per cigarette, which adds up to about $30.60. per packet of 20. Added to that, you've got a GST of 10%. So in all, there's about $34 worth of tax on each packet of cigarettes. And that's comfortably the highest in the world. And that is the cause, according to 99% of Australians, of this illicit market.
14:07 - 14:12
[Brent Stafford]
So is there room for them to continue to tax or have they really kind of hit the limit here?
14:14 - 14:43
[Rohan Pike]
I don't think they think about the tax in terms of limiting. They are beholden to the policy whereby the higher they tax, the less people will smoke. But they only have two options. One is to quit or the other is to pay the high tax to the government. They refuse to acknowledge that there's a third and easily accessible alternative, which is illicit tobacco.
14:45 - 14:46
[Brent Stafford]
And what does that say about demand?
14:49 - 15:37
[Rohan Pike]
Well, the demand is still strong and becoming stronger. So Australian cigarette smokers haven't seen this type of pricing since the 1990s. And it actually reversely encourages people to smoke cigarettes because it's so cheap. The other thing that's encouraging Australians to smoke is alcohol. is the misinformation and the lack of education around safer nicotine products like vapes and pouches, which are also considered to be very dangerous here in Australia. And anyone listening to that sort of rhetoric would be discouraged from moving over to the safer products and stick with cigarettes. So as a result, it's highly likely that our cigarette smoking rates are on the rise.
15:37 - 15:41
[Brent Stafford]
Do we have any actual real numbers on the smoking rates in Australia?
15:41 - 16:58
[Rohan Pike]
The last official figures that we had were based on 2022-23 figures with data collected in 2022. So at that time, there was about 8.5% smokers in Australia. And it's extraordinary that we haven't had any official surveys conducted since then, given the centrality of smoking rates to our whole tobacco control policy. Some might be suspicious about the reasons why we're not measuring it on a regular basis, because to do so would show the rising smoking rates and undermine the benefits of the government policy. But we've certainly had Roy Morgan Research do a poll which showed 20% jump in youth smoking. We've had the Western Australian Government do a survey showing smoking rates jumped just last year from 10% to 12%. And of course, anecdotally, even from medical associations, they're saying that they've seen a rise in smokers in their jurisdiction. So it's certainly happening, but the official figures are yet to be tallied up.
16:58 - 17:06
[Brent Stafford]
So when it comes to vaping, there's a ban, or is it a near ban? Is it prohibition, is what's going on in Australia?
17:07 - 17:36
[Rohan Pike]
Well, it's a pseudo prohibition. So we're discouraging them through education. We're discouraging them through a lack of access to them. And you have to jump a number of hurdles to actually find and buy a regulated vape. And as I say, it's much easier to buy the illicit product. And that's why that market has taken off.
17:36 - 17:50
[Brent Stafford]
You mentioned three years ago things started to get noticeably worse with the illicit market. Did the treatment of vapes, pushing them into the illicit market, did that supercharge the illicit market?
17:51 - 20:20
[Rohan Pike]
It certainly added to it. And the criminals that were selling cigarettes realized that they could double or add to their profits by selling illicit vapes as well. So the same criminals have diversified from cigarettes to vapes and are selling those products at meeting the market demand in the same shops. Are nicotine vapes treated as worse than cigarettes? it's very hard to pin down a public health expert to get them to admit that they are safer. In fact, it's like getting blood out of a stone for them to admit that. And you would have seen a terrible survey poorly created last week that came out that linked cancer to vaping. And of course, Australia's so biased in the public rhetoric that everyone's just immediately believed that to be true and has moved on and said yes with the thought that, well, we've been told that vapes are really bad for us. And that just adds to that mix where we don't have a strong voice opposing that and trying to bring some balance to the debate. Is tobacco control out of control? It certainly is. The criminals control the market now. The government's given up control of tobacco, certainly for cigarettes and shisha products, for example. It's almost entirely a criminal market and same with vapes. We could look across the Tasman to our friends in New Zealand who have regulated the vape market and do something similar like that and that would destroy the illicit vape market overnight but we don't seem inclined to do that just yet. But certainly the criminals are controlling the rhetoric and all of the regulations that Australia has brought in such as plain packaging, such as places where you can consume these products. They're all null and void now because the criminals just simply ignore them and, in fact, promote their products by doing the exact opposite.
20:20 - 20:27
[Brent Stafford]
And what about the people who buy these products? I mean, doesn't something like this turn everybody into a criminal?
20:27 - 21:19
[Rohan Pike]
Australia's a generally law-abiding society. We do like following the law. However, when the government produces such an unbalanced and unfair tax such as this, then people don't feel the need to follow that policy anymore. People do have a... loyalty to the brands that they like and they have a loyalty to following the law. So there was a point where we were still paying perhaps twice the amount of an illicit packet and people were happy to do that. But when it became three, four, five times the illicit price, then people said, no, that's enough. And they now have no qualms about buying their cigarettes from criminals.
21:19 - 21:34
[Brent Stafford]
You would think, though, the government would see billions less coming in every year in excise tax. And just for the sheer economics of it all, that they would try to do something to alleviate that and push people back to the legal market.
21:36 - 22:26
[Rohan Pike]
You would think that. In fact, most sensible people in Australia do think that, including premiers of states have called on the federal government to change their policy. The tax take went from 16.5 billion Australian dollars about six years ago to now we're expecting 5 billion. So less than a third of the revenue has been lost with no discernible decline in smoking rates. In fact, probably an increase. So you would think that the treasurer of the country who's struggling to balance the financial books would be asking what's going on here and perhaps we can bring some balance back into the market. But that argument has been outweighed again by the health authorities.
22:26 - 22:32
[Brent Stafford]
So is there something ideological going on here with this, you know, hear no evil, see no evil?
22:33 - 23:24
[Rohan Pike]
Yes, it's a totally ideological policy. The objectives are unrealistic from the health department, and they certainly don't align with law enforcement policy. realities. So what they think can be banned and can be regulated just simply can't be. And we've learned that lesson for 100 years ago in the US with the prohibition of alcohol. We've got the similar situation here in Australia now with Al Capones running around causing mayhem uh shooting up their opponents um and law enforcement trying to play catch up but um as we realized back then 100 years ago that law enforcement alone is not the answer and they had to change the policy then to um
23:24 - 23:33
[Brent Stafford]
to calm the situation. So they're blaming law enforcement, as you said. So is it possible for law enforcement to fix it?
23:34 - 26:43
[Rohan Pike]
No, it's not. The health authorities simply have no expertise or no experience or no understanding of how law enforcement works and certainly how prevention of crime works. Interestingly, the FCTC that everyone signed in Australia strongly promoted back in 2003 It does have a clause in it in Article 15 which says that if you consider doing all these other bits of regulation, then you also need to ramp up your enforcement efforts because they could foresee that it would encourage illicit players. Australia ignored that. to our peril for the best part of 20 years, despite government inquiries recommending enforcement increases, despite my own team and sending memos to the government about what's going on. And as I say, it wasn't until the violence started three years ago that people actually accepted that the illicit market was a huge thing and needed to be done. And by that stage, as I say, we're so entrenched so widespread that law enforcement are playing catch up and are now unable to fill that void. So the criminals are just going to diversify their activities if law enforcement spend the time and effort and resources to crack down on the easy means of distribution at the moment, then the criminal gangs will find another way to get their product to their market. So what could be done then to fix these issues? There's a variety of things. Obviously, the key driver for the tobacco market is the price. The price simply has to be dropped to take the drive out of the illicit market and allow the government cigarettes or the industry cigarettes to compete. The enforcement is important, but does need to be coordinated and consistent and rigorous. I don't think Australians quite understand how stringent enforcement has to be in order to make a dent in these criminal gangs. And thirdly, obviously, harm reduction. is needs to be embraced in australia which seems a long way from happening and i've taken an interest in tobacco home reduction um not because of the health benefits, which are obvious, but I'm not a health expert. I'll leave that to some of my other colleagues to talk about. But I'm interested in just reducing the cadre of smokers. Moving them off cigarettes to cheaper products just simply reduces the illicit market by just having less smokers out there. So Australia, other countries have done this. New Zealand being an obvious one, Sweden, the UK. And Australia, if it embraced harm reduction, would immediately and automatically reduce that smoking rate.
26:45 - 27:11
[Brent Stafford]
Rohan, as you know, the 13th edition of the Global Forum on Nicotine, the annual conference on safer nicotine products and tobacco harm reduction, takes place again this year in Warsaw, Poland from June 3 to 5, 2026. The conference theme is Prohibition and Public Health. In your mind, what are some solutions to address how prohibitionist thinking has come to dominate public health policy around nicotine?
27:12 - 30:01
[Rohan Pike]
yes i'm looking forward to the gfn conference i'm hoping that i can get there depending on um what the americans do in the gulf which is uh in between my home and and the conference but it'd be good i think um If I was to get there, I'd like to highlight that the policy failures in Australia and other countries around the world and try to expand the distribution of that message through not just health professionals, but criminologists and economists and other law enforcement officials to let people know of some of the criminal consequences, which I think are still not widely known and certainly not highlighted enough. Certainly here in Australia, our sensible voices, and you've had some of them on your program before, are drowned out by other health professionals. We need a better organization. and I guess funding to bring a group together so that they can speak as one voice and be able to push back on some of these policies. I know there's the ASH organisation in New Zealand. We have no real similar group here in Australia. I think there's not quite enough examples provided to the public through the media and other agencies about the examples of the positive medical outcomes of safer nicotine products. I think some of the lower cancer rates and other lower disease rates in places like Sweden should be more widely promoted. That's not really known and doesn't come into the rhetoric here in Australia. Consumer advocacy groups are very light on the ground in Australia. We virtually have none. I think they can tell a positive story about their transition over to these products. And I think we just need some help from overseas. In Australia, we're very insular. The science that we create here is terribly biased. It starts with an agenda that they're going to support the policies that are already in existence. Whereas the science is clear from overseas. So we need that message to come over to Australia and be injected into the debate. because we just seem that we're incapable of generating unbiased commentary or properly based scientific studies here in Australia ourselves. So I'm hoping that I can work on some of those things during GFN.