Canada - Market Insights

Counterfeit and contraband: at the intersection of public safety and public health

Canada is already facing a strong multi-billion-dollar contraband cigarette market, at the same time regulators are trying to figure out the best way to control the vaping market at the federal level, especially regarding flavored vapes. While the federal government is slow to move on vaping regulations, other provinces began implementing what they thought was best for them, leaving us with a national patchwork of sometimes ineffective regulations with little to no enforcement mechanism or appetite from authorities when it comes to vaping products. This is exactly what organized crime needs to thrive.

Nicotine pouches, a new product available in markets around the world, is growing at a fast pace. Approximately a dozen different brands of nicotine pouch products are readily available to the consumers in the Canadian market. The issue: Out of a dozen, only two brands have been cleared by Health Canada and authorized for sale and only one is marketed and available to consumers. It can only be sold in pharmacies, “behind the counter”.

If those novelty products have difficulty fitting into the existing Canadian patchwork of regulations, on the other hand they do not have any difficulty fitting into our Canadian complex contraband and counterfeit landscape. New nicotine consumable products like nicotine pouches are a perfect example of a new market moving too fast for regulators to adapt to the constantly changing criminal landscape.

Our own inability to enforce regulations or implement effective regulations in a timely fashion is our worst adversary.

As if this was not bad enough, counterfeit versions of one of the most popular nicotine pouch products on the market, called Zyn, only exacerbates the issue. Zyn is not authorized for sale in Canada and its counterfeit versions not only pause important safety and health risks to consumers, they risk damaging our corporate reputation and most importantly they represent a huge opportunity for organized crime as this commodity falls in their preferred equation: High demand, inefficient enforcement, mis-adapted regulations = fertile ground for organized crime to thrive.

While Canada is still trying to figure out the flavored vaping market, we are flooded by counterfeit Zyn products that come mostly from China. This leaves consumers and retailers in confusion as these products are readily available at physical retail or online. To consumers, their widespread presence almost gives them an air of legitimacy.

At the corporate level we have an effective mitigating tool to tackle online criminality, as referred to in a 2024 Global Legal Post publication: “Occupy the space: a way for brands to fight unauthorized consumer sales” (www.globallegalpost.com/news/occupy-the-space-a-way-for-brands-to-fight-unauthorized-consumer-sales-404563052). Adding counterfeit Zyn nicotine products to our existing monitoring program was relatively easy in the context of our actions being based on upstream interdiction, not enforcement. Interdiction here is the key as we believe the sheer volume of counterfeits available online cannot effectively be targeted with any of our existing enforcement models. While enforcement actions are a critical element of any solution, they cannot serve as the primary driver. We cannot enforce our way out of bans or poorly designed policy frameworks.

From a corporate perspective, we can say that meaningful progress has been made. Over the past two years alone, our online monitoring program has successfully identified and removed more than 27,000 illegal Zyn advertisements or offers with a clear nexus to the Canadian market. While this is a positive outcome, it is unlikely to be sufficient on its own. Without a coordinated and sustained approach involving governments, enforcement agencies, and the private sector, I believe these efforts will remain limited in their overall impact.

The challenge for law enforcement

When allocating scarce law enforcement resources, it is neither practical nor efficient to prioritize investigations into crimes involving consumer goods. The reality is that violent crime rightly commands the attention of law enforcement agencies operating under significant resource constraints. As a result, consumer products — such as nicotine pouches — do not rank among the top enforcement priorities for most agencies. At the importation stage, the Canada Border Services Agency is taking meaningful action to intercept counterfeit Zyn products and disrupt their entry into the Canadian market. However, while border controls are essential, they are not equipped to address the online dimensions of this criminal activity, which continue largely unchecked.

Engaging public health

Governments across the world take diverse approaches to address the complex health and societal challenges associated with the use of nicotine products. Over the past 60 years, Canada has made tremendous progress in significantly reducing the smoking rate in the general population and this needs to be recognized. But this success is now overshadowed by two harsh realities: contraband and counterfeit of nicotine products has taken a strong ground across the nation, and many groups of people are left behind and threatened by these products.

From a public health systems perspective, the fast proliferation of illicit nicotine products may reflect a governance failure more than a population behaviour anomaly. When organized crime thrives, people are harmed. Illicit nicotine products trap individuals in cycles of smoking, facilitate access to potentially dangerous products to people of all ages, including young people, and contribute to violence in communities, with enduring consequences for mental health and well-being.

In its most recent progress report, Health Canada, the federal regulator for these products, acknowledges that nicotine consumption, and specifically cigarette smoking, is now unevenly distributed across the country, with certain demographic groups disproportionately affected by high levels of use. Notably, many of these groups also experience heightened exposure to crime and violence. When looking at national outcomes, the trade of contraband and counterfeit nicotine products has direct and measurable impacts on population health and may very well impede further equitable successes in tobacco control.

Yet public health advisories to control nicotine products frequently default to highly restrictive, stigmatizing, or prohibitive policy measures, often without sufficient consideration of how consumers adapt within constrained regulatory environments. As an example, a recent evaluation of Quebec’s ban on flavoured vaping products found no measurable short-term reductions in adolescent vaping initiation, frequency or cessation when compared with a neighboring province without such a ban. These findings suggest that, despite strong legislative intent, the policy did not meaningfully alter youth vaping behaviors in its early stage of implementation.

In many cases, restrictive approaches are commonly deployed as a behavioral lever to discourage smoking and usage of other nicotine products. However, this framing implicitly treats illicit trade as a secondary compliance and enforcement challenge, obscuring its more fundamental nature as an entrepreneurial response created by fragmented policies across fiscal, safety and health domains. Interestingly, we are beginning to see new and innovative multidisciplinary partnerships emerge — bringing together law enforcement, compliance specialists, public health law, and policy experts — to effectively address illicit trade as a complex, cross-cutting societal issue.

What lies ahead

What if our enforcement-led approach is misaligned with the nature of the problem? What if enforcement alone is neither sufficient nor sustainable as a long-term solution? While enforcement has an important role, it does little to address the underlying drivers of demand. To achieve sustainable impact, we must begin to understand consumer behavior and reduce demand itself. This requires exploring new approaches that go beyond traditional enforcement models and involve broader intersectoral collaboration. By engaging in public health, education, digital policy, and consumer protection partners, we can develop solutions that are preventive rather than reactive, ensuring responsibility does not rest solely with an enforcement component.