The escalating violence linked to Victoria’s booming illicit tobacco trade has caught the state government off guard and belatedly scrambling for a response two years after it commissioned advice on reform.
Since May 2022, the government has sat on a report it commissioned two years ago that recommends an overhaul of tobacco regulation to tackle organised crime and reduce consumption of illicit tobacco and nicotine vapes.
Such has been the surge in the illicit trade and related violence – this year, especially – that the government has confirmed events have overtaken it. One senior insider who spoke on the condition of anonymity said the government was “starting again” on a policy response.
Responding to questions from The Age, a government spokesperson said it would develop a “robust” response early next year.
“Recent developments, including an increase in organised crime links to illegal tobacco, a rise in the sale of unlawful vapes and consideration of the Commonwealth’s new tobacco legislation, means we need to do further work to tighten our approach to the sale of tobacco.”
The Age has obtained a copy of the confidential report, which it has chosen to publish in full.
The black market is estimated to be worth tens of millions of dollars, with police intelligence indicating a notorious crime family based in Melbourne’s north is raking in up to $10 million a week in profit.
The illicit tobacco trade has now been linked to more than 30 arson attacks and police are investigating whether the turf war for control of the lucrative market could be connected to the public executions of two underworld figures, Mohammed Akbar Keshtiar – also known as Afghan Ali – and Robert Issa.
So brazen is the booming illicit trade that some sellers openly advertise the illegal product in shop windows in busy suburban streets. Others are known to letterbox homes with pamphlets promoting their contraband.
Victoria is now the only jurisdiction in Australia that does not require a licence to open a tobacco shop. Queensland will introduce a licensing scheme next September, one of a number of reforms aimed at curbing its burgeoning illicit trade.
A police officer inspects the burnt shopfront of a Hadfield tobacconist attacked on Wednesday morning.Credit: Jason South
This is despite a state review, completed last year by former Commissioner for Better Regulation Anna Cronin, which recommended sweeping changes to tobacco regulation to combat organised crime, including a licensing scheme similar to liquor licensing with beefed-up enforcement powers handed to a new authority within the justice department.
Cronin’s confidential report also recommends the introduction of a fit and proper person test for licence applicants, the immediate suspension of licences if holders sell illicit tobacco, and stronger penalties for illicit tobacco sales, including imprisonment.
Senior government sources confirmed that while the report had been circulated and discussed within the government, no proposal for action had come to cabinet.
The sources said the government’s response had been delayed by the state election, cabinet reshuffles, other policy priorities and the departure of former premier Daniel Andrews.
Enforcement of tobacco laws in Victoria is primarily left to local council environmental health officers. But councils say they are increasingly concerned about the risks to staff who lack the skills, training, and identity protection to investigate offences involving people and businesses with organised crime links.
Municipal Association of Victoria figures show tobacco retail inspections only resulted in eight prosecutions in the five years from mid-2017 – including zero in the last two financial years with data available.
One local council contractor, who has managed dozens of health officers, said he had long worried about risks to his workers and their lack of power when dealing with the organised crime-dominated tobacco trade.
He spoke to The Age on the condition of anonymity because of his fear for his safety.
“It’s beyond what we can do to control this,” the contractor said. “We’re not really geared to deal with this stuff.”
Under state tobacco laws, retailers and wholesalers are prohibited from the possession or control of “smuggled” or “prohibited” imports. However, there is no licensing requirement for the sale of tobacco products. Currently, anyone can open a tobacco or vape shop in Victoria. There is no fit and proper person test, no criminal background check, and no permit fee.
While the illicit tobacco boom is not peculiar to Victoria, retail and health groups and former police say both the trade and the violence are greater here – in part due to this state’s lax regulation.
“This is at a crisis point,” said Theo Foukkare, chief executive of the Australian Association of Convenience Stores, and a former executive at British American Tobacco. “We have been trying for the last 18 months to work collaboratively with the health department … and enforcement authorities – but to no avail.”
The illicit tobacco trade includes counterfeit cigarettes as well as legitimate cigarettes from overseas. The most common brands are Marlboro, Manchester and Double Happiness. They mostly come from China and Dubai via sea cargo but also air freight and hidden in the luggage of passengers. They retail for $13 to $24 a packet.
Tobacco shops selling vapes, smoking paraphernalia, trinkets and lollies now dot retail strips in Melbourne, sometimes in the dozens. While there is no official data on their number without a licensing scheme, police estimate more than half of Victoria’s estimated 800 to 1000 tobacconists sell illegal products. The Age’s experience suggests this is an underestimate.
This masthead visited multiple tobacconists in the CBD and the suburbs this week and was able to purchase illegal cigarettes with ease, including cartons of packs of ten.
At an outlet in Elsternwick, a shopkeeper responded with “which one?” when The Age asked for a packet of Marlboro. When the journalist said they wanted “the cheaper one” they were offered a red and white pack of Marlboro-branded cigarettes for $18.
Branded cigarettes purchased from Melbourne tobacconists by The Age as part of this story.Credit: Simon Schluter
At another tobacconist about 50 metres down the street, this masthead was able to buy a packet of illicit Manchester for $17. The Age then visited five tobacco shops on a street in Prahran – four sold illegal cigarettes, including Double Happiness from China, for just $13 for a pack of 20.
Retail groups and tobacco regulation advocates say the sale of illicit cigarettes and vapes has quietly exploded in the past two years, as cost of living pressures and higher excise taxes have bitten households nationwide.
Australia has among the most expensive cigarettes in the world. A packet of legitimate Marlboro 25s retails for as much as $60. Some brands have tripled in price in the last decade.
Cancer Council Victoria chief executive Todd Harper said that while the absence of a licensing scheme was a “significant gap” in tobacco regulation, the government appeared to have “limited bandwidth to take it on”; this, despite health groups repeatedly calling for action for more than two decades.
“We don’t know where the tobacco retailers are. There is no adequate enforcement training regime in place. That leaves a significant vulnerability,” Harper said.
Former Victorian upper house MP Tania Maxwell, whose advocacy in part led to then-minister for regulatory reform, Danny Pearson, commissioning the Cronin report in 2021, said she was frustrated by the government’s lack of action.
“For me, this is a really serious issue, particularly as we know that this is funding organised crime,” Maxwell said. “I don’t understand why they are resting on their laurels on this.”
The illicit tobacco trade has traditionally been considered a customs issue that falls under the umbrella of federal law enforcement agencies. But with a record number of illicit cigarette shipments arriving at the nation’s shores, Australian Border Force officers are overrun.
“There is appropriate legislation at the border, but that’s just the first hurdle and that’s easily overcome by smugglers who know how to get around it. Post-border, it’s open slather,” said Rohan Pike, an ex-federal police officer who helped set up ABF’s tobacco strike force.
After standing on the tobacco sidelines for most of its history, Victoria Police launched a dedicated illicit tobacco unit, the Lunar Taskforce, earlier this year amid fears the spate of violence could lead to innocent bystanders being injured or killed.
The taskforce has turned up the heat on tobacconists over the past two weeks, raiding 50 stores suspected of having links to organised crime in Melbourne and regional Victoria.
Officers have seized more than 92,000 vapes, 1.3 million cigarettes, 900 kilograms of loose tobacco, two kilograms of cannabis, and one kilogram of cocaine, as well as $43,000 in cash suspected of being the proceeds of crime.
Former federal police officer Rohan Pike, who was involved in setting up the tobacco strike force. Credit: Justin McManus
Pike said the federal and state government’s reluctance to roll out appropriate legislation and beef-up law enforcement agencies had allowed the black market to flourish.
He said a licensing scheme would be a first step to address the issue, but without concerted law enforcement, criminals would just get more creative.
“Consumers love just walking down the street and waltzing into stores that are everywhere and buying the half-price product that they want,” Pike said.
“That template that organised crime’s got has to be broken, and it’s got to be broken with a pretty strict, concentrated, dedicated and sustained effort by law enforcement. At the moment there’s been no indication that there’s a willingness to do that.”
Recently, Victoria Police has broken protocol to publicly advocate for tougher retail restrictions for the tobacco industry. But police are reluctant to take on the role enforcing a licensing scheme.
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