The e-cigarette industry has emerged from the haze to become big business in recent years, especially in the U.S. and Europe. Thanks to a mess of regulations in various phases of enforcement, vapor product retailers are going to need all the help they can get while manufacturers, distributors, and government agencies sort it all out. Traditional tobacco, alcohol and now legalized marijuana businesses face similar compliance challenges as online sales of age-restricted substances increase.
In 2015, the global vapor product market was estimated at $8 billion (representing 30 million regular users), with the U.S. making up approximately $3.5 billion of the total. Various projections peg the annual growth between 15-20% in U.S. and European markets over the next few years. Growth projections are complicated by the concomitant rise in regulations, which are more firmly established in Europe (Tobacco Products Directive) than in the U.S., but still only a year from initial implementation.
In the U.S., oversight of the e-cigarette and vaping industry falls under the purview of the FDA. In 2009, the Tobacco Control Act, known informally as the “deeming” rule, gave the FDA jurisdiction over all tobacco products. In May 2016, the FDA issued a final rule extending its jurisdiction to cigars, hookah and pipe tobacco, nicotine gels and dissolvables, including electronic nicotine delivery systems (ENDS) like e-cigs and vape pens (when sold with liquid nicotine).
Along with the extension of their authority, the final rule outlined requirements for age and photo ID restrictions (in effect August 8, 2016) and public health measures. Under the Trump administration’s push to rollback regulations, the FDA announced in early May that upcoming deadlines for labeling requirements and related rules are suspended until further notice.
The age and photo identification requirements (Title 21, Part 1140, Subpart B) are not included in the suspension of regulatory deadlines, and remain in effect. Every retailer of the covered products must “verify by means of photographic identification containing the bearer's date of birth that no person purchasing the product is younger than 18 years of age” and must do so for any customer under the age of 27. This includes online retailers, a popular point of purchase for many e-cigarette users. Similar requirements apply to online sales of traditional tobacco products and alcoholic beverages.
Age verification restrictions are unlikely to ease up. The CDC reports that e-cigarettes’ reputation for being “less toxic” and the popularity of candy- and fruit-flavored vape liquids has led to a dramatic increase in use among middle and high school students. From 2011 to 2015, use among U.S. high school students increased from 1.5 percent to 16 percent. As we learn more about the health effects, public advocacy for stronger rules and enforcement will most likely increase. The same is true for non-compliant online sales of cigarettes and alcohol.
If in-store and online retailers of tobacco and alcohol products want to perpetuate the current trend toward deregulation, they need avoid government and public attention by adhering scrupulously to the age and identity verification rules. This is not as easy as it sounds: various federal and state agencies regulate tobacco and alcohol sales, with significant differences among states. Some laws require delivery drivers to verify that package recipients are of legal age. Non-compliance in online cigarette sales is garnering attention as a growing risk to underage consumers; online alcohol sales have been under scrutiny for several years.
The same can be said for other industries of controlled substances such as the marijuana industry. Seven states and the District of Columbia have adopted the most expansive laws legalizing marijuana for recreational use. Most recently, California, Massachusetts, Maine and Nevada all passed measures in November of 2016 legalizing recreational marijuana.
With the states legalizing recreational use, the challenge becomes how to monitor if they are adhering to the state laws on verifying that the person buying the marijuana is of age. It was recently reported that a Phoenix-based cannabis technology firm called American Green has developed a vending machine prototype that may make this task a bit easier. The machine would be able to check a customer's ID using biometric verification and sell pot or other age-restricted items to anyone legally allowed to buy.
Failure to verify customer ages can lead to sizable fines and other enforcement actions. For online retailers and shipping companies, this means they need a fraud-proof way to check that the identity document being presented is valid and matches the individual currently making a purchase. Of course, many customers are buying age-restricted substances via their mobile device, so the registration and verification process must be quick, seamless, and smartphone-friendly.
Comprehensive data capture and authentication solutions that include biometric capabilities (e.g., facial recognition) make this process as easy as taking a selfie. Customers take and submit photos of their face and their ID. The biometric data (facial details, structures, patterns, etc.) from the two photos is compared. “Liveness detection” technology ensures that there is a live person in front of the camera, not a fraudulent static image. The remaining data necessary for account set-up can be captured from the image or scan of the ID card, cross-checked against third-party databases (e.g., DMV) and used to auto-populate form fields for name, birth date, address, license number, etc. This eliminates the bulk of manual data entry, which is especially convenient for mobile users and reduces errors. The data capture and facial recognition capabilities are also useful for streamlining in-store purchase and verification processes.
Everything from smoking to transportation to hospitality is being transformed by digital technology and mobile-first business models. It follows that mobile identity verification is critical to mitigating the cost and risk of fraudulent transactions and securing the online and sharing economies. Many types of businesses are realizing they need stronger authentication methods for logins, payments, healthcare devices, and more. Juniper predicts that more than 600 million mobile devices will include voice and facial recognition features within the next five years, up from 190 million in 2016. As we move beyond insecure and inconvenient password protection, easy-to-use mobile biometrics will create more fluid and more secure online experiences for both consumer and business.
The e-cig industry may be enjoying a temporary reprieve from the FDA’s burdensome labeling regulations, but it seems unlikely they will escape it altogether. Regulations and enforcement notoriously lag behind market trends, but government agencies, public health leaders, educators, and parents are paying attention. Age verification requirements for online retailers of age-restricted substances, including traditional tobacco and alcohol, could become more specific or complex if the FDA and other agencies determine that pervasive violations are leading to an increase in harmful underage substance use.
To protect their businesses, manufacturers, distributors, importers, and retailers of age-restricted substances should push for widespread implementation of biometric verification technology for online purchases and deliveries as well as in-store transactions.
