Complaint filed against Philip Morris for under-reporting EU lobby expenses

The code of conduct for EU lobbyists, to which Philip Morris International (PMI) is a signatory, says that all lobbying organisations will “ensure that, to the best of their knowledge, information which they provide upon registration and subsequently in the framework of their activities within the scope of the register is complete, up-to-date and not misleading”.

In September leaked internal Philip Morris International (PMI) documents were covered in a large number of European media, including The Guardian, Spiegel, Le Parisien, European Voice and EUobserver. The documents outline the company's very comprehensive lobbying strategy to influence the revision of the EU's Tobacco Products Directive (TPD) and shows that PMI had, by 2012, met with more than 233 MEPs, with some MEPs meeting PMI lobbyists four or five times.

The leaked documents gave a stark insight into the intensity of PMI's lobbying, as well as its access and influence and added to worries that the tobacco industry might be succeeding in delaying and weakening the TDP. CEO’s analysis of the leaked documents has led us to conclude that PMI's registration violates the rules by strongly under-estimating both the costs of the company's lobbying and the number of lobbyists involved.

In PMI's entry in the Transparency Register for 2012, a figure of €1,000,000 to €1,250,000 is provided to cover its estimated lobbying costs. PMI declares nine people who are lobbying on its behalf. This number is based on an internal PMI document (seen by CEO) which also calculates the company's costs of lobbying on the TPD for 2012 to be €1,249,402. Included in this amount are 'travel' costs of PMI employees (€139,375); expenses for 'consultancy' (€561,100); and 'membership/events' (€548,927). The total number of hours spent lobbying the TPD in 2012 are said to be 1,876.

In a press release issued on 9 September, PMI reacted to media articles interpreting this specific leaked document and presented the company's explanation of its costs and hours spent on lobbying. The press release argues that “some PMI employees spend time meeting with EU officials to share the company's views and provide industry expertise not only on the TPD, but other complex policy issues as well, and we voluntarily reported this activity on the EU's Transparency Register. Using the EU’s recommended methodology, we surveyed a total of 161 employees who potentially spent a portion of their time, in addition to their other job responsibilities, with EU officials. We then calculated -- again, using the EU's methodology -- the figure, which is a fraction of the number of employees surveyed and that appears on the Transparency Register. This number includes those employees in the Brussels office who interact with EU officials and are listed by name.”

A closer look at the leaked documents show that PMI's estimation of lobbying costs and number of lobbyists is far too low, for at least five reasons:

1)     The list with names of 161 employees surveyed by PMI is not complete. The list does not include all employees in the Brussels office: four of the six employees who are listed by name in the Transparency Register as accredited lobbyists are missing in the document.

2)     The leaked documents seen by CEO also include a second list (titled "Guide to Initials") with names of PMI employees who contacted members of the European Parliament's ENVI committee. Of the 40 employees named in this second list, only 21 appear in the list mentioned by PMI in the press release (surveying 161 employees). This means that another 19 lobbyists appear to be missing from PMI's calculation.

3)     Out of the 161 employees that were surveyed by PMI, only 126 filled out the form that they were sent. This means that 35 employees who may have been involved in lobbying were not included in PMI's calculation. Taking into account these employees (27.7 per cent of the surveyed staff), estimated costs of PMI lobbying in 2012 might have been €350,000 higher than declared. 

4)     The PMI calculations include only three categories of costs: 'travel' costs', 'consultancy' and 'membership/events'. Judging from the leaked documents, the costs of office rent, secretariat and other expenditures of the Brussels office in the year 2012 appear not to be included in the €1,000,000 - 1,250,000 lobbying expenditure declared by PMI. There might even be a more general problem of 'in-house' lobbying costs missing from the calculation. One Philip Morris employee, for instance, declares having worked 75 hours on lobbying, but only mentions expenses of €2000 ('travel costs'). Salary and other costs related to these 75 hours of lobbying appear to have not been included in the calculation.

5)     Many of the 126 employees who participated in the PMI survey appear to have filled out the form in a way which is not compatible with the rules of the Transparency Register. There are cases in which an employee spent €2,500 for traveling, €210,000 for consultancy or €74,000 for events, but declares “0” hours of time spent on lobbying. For an employee responsible for lobbying expenses of this size, the working hours spent on preparations and other organising of these activities should also be included in the calculations. CEO concludes that the number of hours spent on lobbying by PMI employees is likely to be far higher than declared. 

More generally, there is reason to believe that PMI might have wrongly interpreted the rules of the EU's Transparency Register. The press release refers to PMI employees "spending a portion of their time with EU officials" as the basis of the calculations. This sounds like the focus has been on the number of hours employees have spent on direct lobbying contacts with EU officials. The EU register, however, has a much broader definition of lobbying activities that need to be included. Registrants are expected to provide an estimate of the costs associated with the activities falling under the scope of the register, which covers “all activities carried out with the objective of directly or indirectly influencing the formulation or implementation of European policies, irrespective of the channel or medium of communication used.” Also PMI's entry in the Transparency Register states that the figures refer to “direct lobbying of EU institutions” (as opposed to the far broader range of activities covered by the Transparency Register, including the time spent on preparing lobbying activities).

Finally, in its internal documents, PMI mentions expenses for 'consultancy' worth €561,100. In the Transparency Register however, the only lobby consultancy that reports lobbying for PMI is Europtimum Conseil, which reports this consultancy work cost between €150,000 and €200,000 in 2011. It also reports that it carried out €50,000 - €100,000 consultancy for Philip Morris France. Adding up both of these (upper) figures and assuming that similar sums were also spent in 2012, it means that lobbying consultancy services provided to PMI worth more than €260,000 could be missing from the register. This could either be due to registered consultancies not disclosing their lobbying for PMI or due to PMI hiring unregistered lobbying services. CEO considers that this is a loophole in the current rules of the EU lobby register that needs to be addressed in the ongoing review process.

For example, we already know that the law firm Clifford Chance counts PMI amongst its client base and that Clifford Chance lawyers, particularly Michel Petite, met with the Commission on behalf of PMI to discuss tobacco legislation in September 2012. Michel Petite does not appear in the PMI spreadsheet, so his work could be included in the missing €260,000 for lobbying consultancy services. Clifford Chance has so far refused to sign up to the lobby register. Michel Petite has other controversial connections to the tobacco industry and is currently the subject of a complaint to the European Ombudsman following the Commission’s decision to reappoint him to its ad hoc ethical committee.

All in all, it is clear to CEO that there are numerous discrepancies between PMI’s lobby register declaration and the leaked documents that we have seen and we have urged the secretariat at the lobby register to urgently investigate our complaint.

But in all the detail of numbers of lobbyists and the euros spent on peddling influence, we must not lose sight of the fact that PMI has mounted a massive attack on the TPD and too many MEPs and Commission officials have seen fit to receive the lobbyists and their pro-tobacco propaganda. The World Health Organisation’s tobacco control guidelines say decision-makers “should interact with the tobacco industry only when and to the extent strictly necessary to enable them to effectively regulate the tobacco industry and tobacco products … where interactions with the tobacco industry are necessary, Parties should ensure that such interactions are conducted transparently”.

It seems that MEPs and EU officials have a long way to go to break the tobacco lobby habit.     

Photo by Arjen Stilklik(CC BY-NC-SA 2.0)