If Australia does pass a law introducing plain, brandless packaging for all cigarettes sold in Australia, Hong Kong-based Phillip Morris has stated it will sue, claiming it violates the Hong Kong-Australia investment treaty. Sentiment in the country for the proposed plain, brandless packaging law?
Australia has some of the world's highest taxes on cigarettes, and packs sold there include graphic photos of various maladies. Gillianne Tedder/Bloomberg News
By MATT SIEGEL Published: June 27, 2011
SYDNEY, Australia — Legislation that would ban logos from appearing on cigarette packages in Australia is drawing the ire of business lobbying groups and even members of the United States Congress, who warn that the Australian government could be in breach of its international trade obligations.
The legislation would require that tobacco products be sold in plain green packaging, limiting the brand recognition enjoyed by global tobacco names like Marlboro and Camel. The law is expected to pass with broad bipartisan support when it is formally introduced in July, and it would go into effect at the start of next year, with a six-month transition period.
The government hopes that the bill, along with some of the world’s highest taxes on tobacco, will continue to drive down smoking rates in Australia. The government also hopes that the law will serve as a template for other countries. The possibility of a domino effect is what tobacco companies are afraid of, said Andrew Hughes, a marketing expert at Australian National University in Canberra. “What’s to stop this same law being applied in other parts of the world?” he asked.
Philip Morris Asia, which is based in Hong Kong and makes Marlboro cigarettes, said Monday that it had initiated legal action against the Australian government, contending that the new rules would violate Australia’s bilateral investment treaty with Hong Kong.
The company’s legal action, called a notice of claim, starts a mandatory three-month period for negotiations. “We believe we have a very strong legal case and will be seeking significant financial compensation for the damage to our business,” Anne Edwards, a spokeswoman for Philip Morris, said in a statement.
The Australian plans are among the strictest in the world, but other countries are also pushing new initiatives to reduce smoking.
Last week, United States health officials released graphic warning labels that will cover the top half of cigarette packages beginning next year. The images will be the first major change to warning labels in more than 25 years; they include photographs of damaged teeth and lungs and a person exhaling smoke through a tracheotomy opening in his neck.
Other governments are closely watching Australian efforts to restrict tobacco packaging. The British government, for example, has begun a consultation on ways to reduce the promotional effect of cigarette packs.
Tobacco is severely taxed in Australia, where smokers spend about 16 Australian dollars, or $16.70, a pack. The packs come with pictures of maladies like mouth ulcers, cancerous lungs and gangrenous limbs.
The new packs would go one step further by trying something new: shrinking the logos down to the point at which it is difficult to distinguish one brand of cigarettes from another.
Under the law, 75 percent of the front of the packaging and 90 percent of the back would have to be covered by health warnings.
The experiment has generated a roar of protest from tobacco companies and business groups like the International Chamber of Commerce, which says cigarette makers are being singled out even though they sell legal products.
“What company would stand for having its brands, which are worth billions, taken away from them?” Scott McIntyre, a spokesman for British American Tobacco Australia, said in a statement. “A large brewing company or fast food chain certainly wouldn’t, and we’re no different.”
British American Tobacco Australia, also known as BATA, is Australia’s market leader and one of the world’s largest tobacco groups by revenue, with brands including Lucky Strike. It has threatened to cut prices to remain competitive.
The company has also promised a costly legal battle and has warned that the law could lead to an increase in counterfeit cigarettes.
Imperial Tobacco, a global company that produces brands like Davidoff and Gauloises, has created a large advertising campaign against the plain packaging law that features a stern, matronly figure who asks: “Do you really like living in a nanny state?”
Representative Donald A. Manzullo, a Republican from Illinois and a member of the House Foreign Affairs Committee, said he believed Australia’s new legislation would flout international trade laws.
“Several trade-related U.S. and international business associations have raised concerns that plain packaging cannot be implemented in a way consistent with Australia’s global trade obligations,” Mr. Manzullo said in a recent letter to an Australian government minister, a copy of which was obtained from a staff member who asked to remain anonymous because he was not authorized to distribute it. “I agree. Australia’s plain packaging proposal legally abrogates sanctioned trademark rights.”
Rich Carter, a spokesman for Mr. Manzullo, confirmed the contents of the letter but said that the congressman was “no supporter of tobacco” and was concerned only about trade.
With more legal challenges like the one from Philip Morris expected, Australia finds itself in a risky position: if it loses, it may have to pay billions of taxpayer dollars in damages to the tobacco companies.
A challenge with the Australian High Court is expected but George Williams, an expert in constitutional law at the University of New South Wales in Sydney, said it is unlikely to be successful because “it’s not clear that banning the use of a trademark” is unconstitutional.
Tobacco companies are expected to then argue that law violates Australia’s obligation as a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights, also known as Trips, an agreement that sets minimum standards for intellectual property rights for members of the World Trade Organization.
Tobacco-producing countries — including the Dominican Republic, Indonesia, Mexico and the Philippines — have already raised concerns about the Australian bill at the trade organization.
But challenges through the trade organization are unlikely to be successful, said Benn D. McGrady, a lawyer at the O’Neill Institute for National and Global Health Law at Georgetown University.
The trade law bans entities from illegally copying copyrighted material, he said, rather than creating “a positive right to use the trademark.”
The language used by Mr. Manzullo, the congressman, is “strikingly similar” to that used by the tobacco companies and is indicative of just how threatened tobacco companies feel, said the Australian health minister, Nicola Roxon. “I don’t think anyone would be surprised that the tobacco companies have a significant reach in political spheres across the world, as well as with other industry organizations,” she said.
Still, Ms. Roxon said that she was concerned neither by the legal challenge nor the foreign politicians. “We are very confident of our legal advice,” she said. “We’re very confident that we are complying with our international obligations and we’re very confident that Australians will be supportive of their representatives.”
MARK COLVIN: The full bench of the High Court has spent the day looking at cigarette packets and looking at the intricacies of trademark law, as it considers a challenge to the Federal Government's Plain Packaging Act.
Several tobacco companies are arguing that the laws leave them with no way to distinguish their products from their competitors.
They're also arguing for compensation from the Commonwealth for surrendering almost all their packaging space to health messages.
The Federal Government says it's confident that the laws will withstand the legal challenge.
Naomi Woodley was at the High Court for PM and filed this report.
NAOMI WOODLEY: The High Court challenge to the plain packaging laws is being brought by British American Tobacco and JT, or Japan Tobacco International, but Phillip Morris and Imperial Tobacco Australia are also represented.
The Attorney-General, and former Health Minister, Nicola Roxon says the legal action is not a surprise.
NICOLA ROXON: Today is not the first day that the tobacco companies have been in court. It won't be the last day that they're in court. But our government is determined to take this action because we think it can save lives.
We think it can reduce a lot of grief and misery in families and we think that it can have a positive impact on the budget by reducing some of the expenditure that is spent each and every year in treating tobacco related illness.
NAOMI WOODLEY: The laws to ensure all cigarette packets are the same shape, with the same drab colour and print are due to come into effect in December.
The tobacco companies are arguing that the changes would extinguish their trademark, leaving only the names in a generic font as their distinguishing mark.
Allan Myers QC for British American Tobacco put it this way…
ALLAN MYERS (voiceover): The effect of this legislation is to sterilise the trademark, and turn it into a husk.
NAOMI WOODLEY: Gavan Griffith QC for JT International likened the packaging to a billboard, and tobacco companies only means of advertising.
He invited the full bench of the court to compare before and after examples of packets, arguing that the difference was…
GAVAN GRIFFITH (voiceover): So stark one can say it effectively extinguishes the right to use all our trademarks, to promote our product.
NAOMI WOODLEY: Justice Susan Crennan then asked…
SUSAN CRENNAN (voiceover): Aren't you and all your competitors in the same boat?
NAOMI WOODLEY: To which Mr Griffith replied…
GAVAN GRIFFITH: Of course your honour but the boat has sunk. There is no boat above the water line when this is all that is left.
NAOMI WOODLEY: Mr Myers for BAT went further, inviting the justices to open packets of cigarettes to compare the full extent of the changes proposed to the design and feel of the products.
The tobacco companies are also calling for compensation, arguing that the Commonwealth is acquiring the valuable advertising space on the packaging for no payment. And they argue it’s irrelevant that it wants to use that space for public health warnings.
Mr Myers told the court that it is a benefit to the Commonwealth because it is…
ALLAN MYERS (voiceover): …relieved of the cost of acquiring that space to publish, what it publishes.
NAOMI WOODLEY: Alan Archibald QC, representing Philip Morris, argued that the changes crossed a line from regulation, like warnings on rat poison, to control. Or, in his words, the legislation…
ALAN ARCHIBALD: …conscripts the cardboard package to the Government's purpose.
NAOMI WOODLEY: The Solicitor-General will put the Government's defence tomorrow.
The Attorney-General, Nicola Roxon, says they believe it is lawful for the Parliament to regulate the way tobacco is sold.
NICOLA ROXON: Tobacco is the only legal product sold in Australia which if it is used as intended will kill you. No other product is in that category.
Over many decades we've taken steps to introduce tobacco control measures and this is the next step in a long line of measures that governments have taken to make smoking less attractive, for it not to be able to be marketed, for it not to be able to be advertised.
NAOMI WOODLEY: And the Government has the support of the Opposition.
TONY ABBOTT: This is an important health measure. It's important to get smoking rates down further. We didn't oppose the legislation in the Parliament and I hope it withstands the High Court's scrutiny.
NAOMI WOODLEY: Three days have been set down to hear the case, and the High Court is expected to reserve its judgement until a later date.
Tobacco companies to challenge Australia plain packaging legislation
Tobacco companies have begun a court challenge against Australia's plain packaging legislation in a test case that is being keenly watched in Britain and around the world.
Examples of the new plain cigarette packaging in Australia Photo: Rex Features
By Jonathan Pearlman, Sydney
10:00AM BST 17 Apr 2012
Under laws that come into effect this December, Australia .. http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/australia .. will become the world's first country to require cigarettes to be sold in drab olive packets with graphic health warnings and no logos. But the move has faced heavy resistance from giant tobacco companies which have flagged numerous challenges and are keen to avoid the adoption of similar measures in countries such as Britain, Canada and New Zealand.
In a High Court case that began today in Canberra before a full bench of seven judges, the world's largest tobacco companies are claiming the laws unlawfully extinguish the value of their trademarks without providing compensation.
Japan Tobacco International and British American Tobacco Australia argued they should be compensated for the loss of their trademarks. Philip Morris and Imperial Tobacco are likely to repeat the call.
Gavan Griffith QC, acting for Japan Tobacco, which sells Camel, said the measures meant the Government had acquired the company's "billboard" and could potentially use the packets to promote its own messages such as tax or road safety announcements.
"It's acquiring our billboard, in effect," he said. Related Articles
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But an expert in intellectual property law, Mark Davison, from Monash University said the tobacco companies would struggle to prove that the Government had taken ownership of their trademarks.
"The difficulty is for the tobacco companies is that the Commonwealth Government doesn't want to own the tobacco trademarks," he told ABC Radio.
"It simply is either prohibiting the trademarks in respect of those that are of a pictorial nature and restricting the use of word trademarks."
Australia's Attorney General, Nicola Roxon, said she believed the laws were "absolutely necessary" and the Government had merely restricted the use of the branding and trademarks without taking them over.
"We are very conscious that we are being watched around the world on this," she said.
"I think big tobacco are just throwing everything at it because they are scared it will be successful and they are scared it will be copied around the world".
A spokesman for British American Tobacco, Scott McIntyre, said the company would "obviously prefer not to be in a position where we are forced to take the federal government to court but unfortunately they have taken us down the legal path".
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