Electronic Cigarettes

They aren't such a strange sight anymore, those slim cylinders about the same size and shape as a cigarette -- only not made of tobacco and paper. E-cigarettes have gained in popularity since they were introduced to the U.S. market over the last seven years by companies that are now largely owned by Big Tobacco -- so much so that "vape" was named the Oxford English Dictionary's 2014 word of the year.

Market

The biggest company in the market is Lorillard, thanks to its 2013 acquisition of two makers of e-cigarettes and their solutions, which gave it a 49 percent share of the e-smoking market. Reynolds American has also been snapping up e-cigarette and e-liquid manufacturers -- and is trying to acquire Lorillard in a merger that's still pending. If the merger is approved, the combined company would be the second-largest tobacco product manufacturer -- and the largest seller of e-cigarettes.

The market for e-cigarettes was valued at between $1 billion and $1.7 billion in 2013, the last year for which data is available -- an impressive sum, though dwarfed by the total market for nicotine products, which stood at approximately $100 billion that year.

Regulatory picture

One key difference between traditional smokes and their electronic imitators? Federal regulation and taxation. Federal tobacco taxes were last raised by the 2009 Children's Health Insurance Program Reauthorization Act. Federal regulation of tobacco marketing has developed over years, especially since the Surgeon General's report on smoking in 1964. The most significant regulation of tobacco was spurred by the 1998 Tobacco Master Settlement Agreement, which led to current restrictions on advertising, lobbying and sponsorship.

But e-cigarettes? It's the wild West -- a state of affairs that is favored by Reynolds and Lorillard, which have spent a combined $8.4 million lobbying Congress since January 2013. Currently there is no oversight by the Food and Drug Administration over the hundreds of brands of e-cigarettes, nor are they necessarily taxed at the same rate as traditional cigarettes.

There is much debate in the public health community about whether the newish devices are a safer alternative to traditional cigarettes. E-cigarettes have two components -- the cylinder itself, which has a battery and a heating coil, and the e-liquid, which goes into a chamber in the machine and is vaporized by the heater, enabling the user to inhale the nicotine-containing gas.

The Food and Drug Administration (FDA) has raised concerns over certain ingredients in the e-liquid, which can be flavored with anything from apple to watermelon. But the agency has no jurisdiction over the composition of the solutions. Other elements in the devices that could draw a closer look are the amount of nicotine delivered per hit and the total nicotine in one e-cigarette. In addition, there are no apparent advertising restrictions on e-cigarettes, as they contain nicotine but not tobacco.

Reynolds American advertised its e-cigarette on television earlier this year, the first time in decades that a nicotine product had appeared on TV.

Bills before Congress

There are several bills before the 113th Congress that seek to regulate and tax e-cigarettes.

The pending Protecting Children from Electronic Cigarette Advertising Act (H.R. 4325, S. 2047) would prohibit electronic cigarette makers from advertising to kids and is similar to the restrictions on 'traditional' cigarettes. The Tobacco Tax Equity Act (S. 194), which is currently before the Senate Finance Committee, would tax cigars, pipe tobacco, and smokeless tobacco products (chewing tobacco and e-cigarettes) at the same level as cigarettes. The SMOKE, or Stop Selling and Marketing to Our Kids E-Cigarettes, Act (H.R. 5010) would give the FDA the authority to regulate e-cigarettes as tobacco products. This means that e-cigarettes would have the same warning labels and advertising restrictions as cigarettes. In addition, the bill would require the FDA to study the effects of additives in the flavored liquids. The study would look at whether the flavorings help adults stop smoking as well as whether they appeal to kids. The agency would also be able to regulate nicotine in the flavored liquids.

Lobbying and contributions

A number of companies and advocacy groups have mentioned one or more of the bills in their lobbying disclosure reports this year -- including big tobacco companies like Altria Group, Ballantyne Brands, Hay Island Holding, Lorillard Inc., Reynolds American and Swedish Match AB, which all have opposed legislation to regulate and tax e-cigarettes. Public health groups like the American Cancer Society, American Heart Association, American Lung Association, Americans for Nonsmokers' Rights and the Campaign for Tobacco Free Kids have all come out in support of legislation that would impose greater regulation and taxation on e-cigarettes.

Campaign contributions are among the tools the tobacco lobby uses to gain access on Capitol Hill. Reynolds and its employees gave $709,962 to federal candidates and committees in the 2014 cycle; $301,000 of that went from its PAC to congressional candidates, all but $19,500 to Republicans. Lorillard's contributions also favored the GOP, though slightly less starkly: Of the $183,645 given to House and Senate candidates by its PAC, Republicans got $131,910. Overall, Lorillard and its employees gave $349,990 to candidates and party and other committees.

Future

The tobacco industry's lobbying spending fell dramatically after 1998, when the Tobacco Master Settlement Agreement clamped down on its ability to lobby. Still, it might have reason to start spending more on K Street to keep e-cigarette sales up on Main Street. Bloomberg Industries has projected that e-cigarette sales might overtake those of the old tobacco-and-paper variety by 2024 -- giving both smaller companies and large legacy tobacco firms an incentive to weigh in on pending legislation or regulation. With 10 percent of young Americans saying they have used an e-cigarette in 2013, and 20 percent of adults, the call for regulation of e-cigarettes is certain to continue.

-- Gabriel Stuart-Sikowitz, November 2014