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Plain Cigarette Packaging and the Law – Will it Work?

August 1st, 2011

The tobacco companies are launching legal challenges against the Australian government’s plain packaging legislation and an EU committee has raised trade issues though there seems little chance that the legislation will be derailed. But does what appears on cigarette packs make a difference to smoking prevalence? Euromonitor International airs the arguments.

Philip Morris International has launched a legal challenge to the Australian government’s plan to introduce plain packaging. Under the Australian constitution, parliament cannot make laws under which the government would acquire property without providing adequate compensation and the law defines trademarks as property. According to some legal opinion taxpayers could be exposed to potential compensation claims estimated to run as high as A$3billion. And the plain packaging issue in Australia has wider legal ramifications: PMI has stated that the legislation potentially violates a treaty with Hong Kong – a 1994 treaty with Australia prohibiting the forced removal of trademarks and has served the Australian government with a notice of claim stating its intention to pursue its case in international arbitration.

International intellectual property

In addition, the WTO Technical Barriers to Trade committee has reportedly raised concerns that plain packaging contravenes the international intellectual property legal framework by placing restrictions on the use of trademarks. And the EU has raised questions about the scientific data considered by the Australian government in preparing the policy, the impact assessment process and alternative means of stopping people smoking.

It is also understood the EU asked whether Australia had taken into consideration its obligations under other WTO treaties such as the Agreement on Trade Related Aspects of Intellectual Property Rights, or TRIPs, the cornerstone of the international intellectual property regime. In response, the Australian Health Minister stated that the government had taken legal advice before introducing the new laws and believed it was on ‘very strong’ legal ground in making plain packaging of cigarettes compulsory. This involves all cigarettes being sold in plain dark olive
packaging, carrying health warnings but no company logos and with brand names all in the same type size and style of printing. The legislation, if passed by parliament, will come into force on January 1st 2012.

The notice served by Philip Morris begins a mandatory period of negotiations to resolve the dispute. If an agreement is not reached within three months, the tobacco company plans to take the dispute to arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law.

Meanwhile, British American Tobacco has won a preliminary ruling in a separate case in the Australian state of Victoria over the covering up of labels with health warnings. BAT is also seeking access to the legal advice the Australian government has received. The tobacco company failed in forcing the government to release the documents through a Freedom of Information request but a federal appeals court has agreed to hear the case on August 3 in Melbourne.

More likely in Australia

While New Zealand, Canada and the UK are among countries considering similar tobacco packaging laws, Australia is the first major country to draft such a law. According to some commentators, plain packaging is more likely to be passed in Australia than Europe because, in Australia, the government has to pay compensation only for property it acquires rather than, as is the case in Europe, for property of which it deprives companies.

Will plain packaging reduce smoking? Some argue that plain packaging is not materially different from a health warning covering a major part of a pack. In some countries, such as Canada (80% coverage), the proportion is too high to see much branding. However, the big question is: does what is on the pack make any difference to the amount that people smoke? Research published so far does not offer much of a clue.

The craving spot

According to research by Dr Gemma Calvert, founder of Neurosense in Oxford and Professor Richard Silberstein, chief executive officer of Neuroinsight in Australia, warning labels have no effect on suppressing the cravings of smokers because the warnings actually stimulate an area of the smoker’s brain called the nucleus accumbens or ‘the craving spot’. This region of the brain ‘lights up’ when the body desires something – alcohol, drugs, tobacco, sex or gambling. According to reports, researchers found that health warnings on cigarette packages, and even banning
cigarette advertising, actually promotes their sale and only public smoking bans actually caused people to smoke less.

Pack warnings ignored in India and China

A survey in India in 2010 found that only 20.6% of cigarette smokers, 15% of bidi smokers and 13.2% of smokeless tobacco users either read or looked at the warning labels compared with 91% in Canada (based on a Canadian survey conducted in the year 2000). Around 68% of respondents were ‘very alarmed’ at the graphic image of surgeons operating on a heart with a text message “smoking clogs the arteries”. According to the Healis-Sekhsaria Institute for Public Health, which had the survey conducted, the survey showed that the current pictorial warnings in India
needed replacing. In China, a study by the Office of Tobacco Control found that 70% of consumers ignored the warnings on packs.

On the other hand, a year after the introduction of graphic health warnings, smoking prevalence in New Zealand has fallen from 25% to 20%. Although the warnings are not regarded as the only factor impacting sales they are regarded as significant and evidence that smokers are asking for packs with less disturbing warning pictures on them is taken as supporting this.

The Euromonitor International view is that plain packaging would be a massive blow to the tobacco companies and would also have an effect on prevalence (because tobacco brands are so iconic and traditional), albeit not a very significant one. Plain packaging could have a much greater effect on major cigarette brands and the inclination of smokers to buy them, thus its widespread adoption would probably mean we would see the proportion of international brands in the product mix, and thus the average price paid, falling, as well as, very probably, a rise in illicit trade.

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