And it will doubtless have the support of the international tobacco industry because this planned legislation is a clear test case.
If Australia manages to overcome industry objections regarding intellectual property, anti-smoking governments would probably push plain packaging laws worldwide.
The country’s Labour Party government announced in April 2010 it would table legislation banning branding on tobacco product packs, but it is not likely to act before an oncoming general election, which political insiders told Tobacco Journal International was expected between August and October.
Then, assuming Labour won (the centre-right Liberal-National opposition has been quiet over the issue), a bill could be presented to the House of Representatives lower house of parliament in early 2011, with the aim of its rules coming into force in July 2012.
Major tobacco companies are not taking the news lightly. BAT Australia released a statement after the announcement, expressing its opposition to the plan.
“British American Tobacco Australia opposes plain packaging of tobacco products and believes any such proposals would not hold up to close scrutiny,” the communiqué said. BAT also made clear that it would not give in to the legislation without a fight – taking legal action if necessary. The company said one of its main concerns lay in the potential for greater counterfeiting of the plainer packages, which it said were easier to fake.
“Our industry is already losing over 12 per cent of market share to the criminal black market and the tax-payer AUD 600 million a year,” the company said. “And as everyone knows, the criminal black market does not pay taxes and does not ask kids for ID.”
There has been no legal action taken by BAT to date.
The government’s proposal follows a similar bill, proposed in 2009 to the Australian senate by the small Family First party, which was the subject of a community affairs legislation committee hearing in April 2010. There, Imperial Tobacco Australia (ITA, the country’s third-largest tobacco group after British American Tobacco Australia and Philip Morris Australia) made clear its total opposition to plain packaging.
Imperial tackles the main argument behind plain packaging, that branding attracts young people to tobacco products. “No credible research evidence exists to suggest that young people start smoking or that adult smokers continue to smoke because of seeing tobacco branding on packaging,” it said. The company also stressed that plain packaging would encourage sales of counterfeit products, with the law being a “counterfeiters’ charter”.
But the real Achilles heel of this legislation is likely to be intellectual property, with the tobacco industry expected to claim breaches of their rights under Australian law, the international commerce rules of the World Trade Organisation (WTO) and the country’s bilateral trade deals – for instance with the United States.
Imperial made this crystal clear to the committee: “Plain packaging raises significant legal questions concerning the expropriation of valuable legitimate corporate assets in which ITA and its shareholders have invested. It risks breaching Australian law and international legal and treaty obligations.”
It added: “The introduction of plain packaging would seriously damage Australia’s international reputation as a supporter of legitimate business and a defender of commercial rights and freedoms, particularly in relation to intellectual property.” Assuming the Australian government sticks to its guns, the resulting inevitable legal challenges within Australia’s courts and the WTO would create a test case with international importance. If Canberra prevailed then governments worldwide would be tempted to introduce their own plain packaging law.
The IP factor
That said, every country’s law is different. In Australia’s case legal action could centre on whether by banning the use of brands on packaging, the government could be accused of illegally expropriating intellectual property from the tobacco sector.
Tim Wilson, intellectual property and free trade director for Australia’s Institute of Public Affairs, thinks such arguments could be made, based on section 51 (xxxi) of the Australian constitution, which says the federal government can acquire property, but only “on just term”. Assuming the country’s High Court does not consider such an appropriation of IP as unjust (maybe overturning the law), the tobacco sector could still sue for compensation, citing this clause of the constitution.
Wilson told Tobacco Journal International: “Companies may have grounds to sue the Australian government. But there is no certainty. As this is the first case of its type, there remain legitimate legal questions over the capacity for the government to be sued.
The IPA has made rough calculations of the range of compensation of just terms which range from AUD 300 million (EUR 205 million) to AUD 3 billion (EUR 2.05 billion) per year for the entire industry. Only the courts will decide.”
Meanwhile, there could be similarly vigorous arguments at the WTO. Here, debates could have global significance. Another member government could launch a disputes procedure against Australia over plain packaging, claiming it breached Australia’s international commitments under WTO agreements, notably TRIPS, the agreement on Trade Related aspects of Intellectual Property Rights.
Here the key is article XX, which bans “unjustifiable encumbrances on trade marks,” noted Wilson. He explained: “We have not seen a copy of the [Australian Prime Minister Kevin] Rudd government’s plain packaging legislation, so we do not know what it will say and its specific legality.
There is a lively legal debate about whether such a bill can be TRIPS-consistent. The concern is whether plain packaging is justifiable…” Article XX includes provisions saying a trademark should enable a person to distinguish one good from another, which makes the legality of plain packaging questionable: “The whole purpose of plain packaging is to make all products look consistent,” noted Wilson.
Article VIII of TRIPS does allow governments to ignore the agreement’s article XX and others on public health grounds, but, stressed Wilson, “it also requires that it must be consistent with the rest of the agreement. So if there is an article XX violation, it is questionable that article VIII will provide an exception.”
So there is every chance that a challenge at the WTO might be successful. However, that might not deter a determined government, given that the sanctions available to a WTO disputes panel are retaliatory trade measures, such as tariffs designed to compensate a member country for losing trade because of legislation that breaches world trade rules.
For such measures to matter to a middle-sized economic power such as Australia, the complainant country at a WTO dispute would have to be big – probably America-sized big, or locally important, such as Indonesia. If it was Turkey, Switzerland or the Dominican Republic, Canberra could probably ignore a negative ruling without much economic damage.
Government is confident
And as it stands, the Labour government is looking pretty bullish on the issue. In a statement to Tobacco Journal International, the minister for health and ageing, Nicola Roxon, said: “The Rudd government is leading the world with its actions to cut tobacco addiction in Australia.
Removing plain packaging from the ever-shrinking marketing tool box of tobacco companies is a great step forward for the health of Australians. The more that tobacco companies and their representatives complain about our actions, the more they underline the effectiveness of those actions to cut tobacco addiction.”
So, not much compromise there. A spokesman for senator Steve Fielding, the leader of the Family First party, told Tobacco Journal International that their party would be prepared to support the government plan, “depending on what they came up with”, and let its senate bill wither on the vine.
As for the potential legal problems facing the legislation, the spokesman said: “The tobacco companies will fight tooth and nail on this one. But we have gone to our lawyers and the government has gone to its own lawyers and they are saying there is no case to answer on this one. We would expect them to launch something in court. I am sure it is something that will be hard fought.”
Certainly, the Australian government is being ambitious, given similar proposals have already foundered in Britain and Canada over legal concerns. Said Wilson: “The decision by the government should be treated with caution. The WHO (World Health Organisation) has been pushing for plain packaging for a number of years.
But there are also reasons why the UK, Canada and New Zealand rejected previous plain packaging proposals. And the government has not provided confidence that they have overcome the barriers faced by the UK, Canada and New Zealand.”
He added that there was also “a broader concern about the public policy precedent that plain packaging sets and how it could be applied to other products, like salty, fatty and sugary foods or alcohol products.”
But Canberra will have the backing of anti-smoking campaigners. “Generic plain packaging, with a clear graphic warning on the front and back of the pack, should be mandated to counter the allure of smoking and reduce the disease burden it causes,” said Australia’s National Heart Foundation’s tobacco control spokesperson Maurice Swanson.
TJI report | 
