Dr Matthew Thomas, Social Policy Section

The Government plans to introduce plain packaging for all cigarettes sold in Australia by 1 July 2012. The legislation would restrict or prohibit:

• tobacco industry logos
• brand imagery
• colours, and
• promotional text other than brand and product names in a standard colour, position, font style and size.

In addition, the existing graphic health warnings displayed on cigarette packaging would be updated and expanded. Beyond these broad parameters, there is no further detail on the proposal at this stage. This is at least partly because the Government has yet to develop and test package designs that will make cigarettes less appealing, especially to young people. However, it is likely that the measure will closely resemble the plain packaging recommendation of the National Preventative Health Taskforce.

The tobacco industry is strongly opposed to the proposal, with a number of companies having indicated that they are prepared to fight it on legal grounds.

Legal arguments against the proposal

Government imposition of mandatory plain packaging for tobacco products has been objected to on the claimed grounds that the measure breaches trademark law, international trade agreements and intellectual property rights.

The tobacco industry uses trademarks as a means to enable consumers to make judgments about particular brands of cigarettes and to differentiate between them. As such, the industry argues that trademarks are of significant value to their owners and the wider economy and must be protected at both domestic and international levels.

Currently, trademarks and related intellectual property rights are protected under a range of international trade agreements, including the Agreement on Trade-Related Aspects of International Property Rights 1994 (TRIPS). The tobacco industry maintains that the introduction of plain packaging regulations would violate minimum obligations for the protection of intellectual property rights under trade agreements in general, and under Article 20 of TRIPS, in particular. Essentially, the relevant section of Article 20 specifies that the use of a trademark should not be restricted in such a manner as to limit its ability to differentiate a given good or service from other goods and services.

As the tobacco industry sees it, the demand for plain packaging represents an illegitimate restriction in breach of the system of international trademark protection with which governments are obliged to comply. The industry is also likely to argue that the introduction of plain packaging regulations in Australia would constrain the free movement of tobacco products between Australia and other countries, and thereby constitute an unlawful barrier to international trade.

In response to such claims it has been argued by some legal and public health commentators that the purpose of trademark law is not limited to the protection of private property rights. Trademark law is also concerned with ensuring the provision of accurate information to consumers. For example, Articles 8(1) and 17 of TRIPS both provide for member states to adopt measures necessary to protect public health and the public interest, so long as these measures take account of the legitimate interests of trademark owners. As a number of public health advocates see it, plain packaging of tobacco (along with mandatory health warnings) is entirely consistent with the goal of promoting consumer welfare and the obligations of multilateral and regional trade agreements. Further, they argue that trademark protection is not an inviolable right; rather, it is a privilege that can be withdrawn or modified, especially in the interests of public health.

Unsurprisingly, the tobacco industry does not agree with such assessments. It is likely to first fight the proposal on the grounds that it violates the right of property ownership. Should it fail in this approach, it is likely to demand significant compensation for what it sees as the deprivation of its property rights. For example, in its submission to the Senate Committee inquiring into the Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009, Philip Morris argued that the plain packaging requirement would be in breach of its property rights as guaranteed under section 51 (xxxi) of the Constitution. Section 51(xxxi) guarantees just terms compensation where property is acquired compulsorily from any state or person. Philip Morris has indicated that, in its view, if the Government were to require plain packaging, then it would need to acquire the relevant Philip Morris property and/or pay reasonable compensation. In response to such claims it may be argued that the Government has no interest in acquiring tobacco industry-owned trademarks; it simply does not want them appearing on tobacco products for reasons of public health. Given that the Government would not stand to gain any benefit from the acquisition, it could be argued that the proposal would not amount to an acquisition of property as specified at section 51(xxxi) of the Constitution.

Other arguments against the proposal

The tobacco industry is also likely to contest the proposal on the grounds of evidence and unintended consequences.

Because no jurisdiction has yet introduced plain packaging requirements, the research evidence supporting the measure is speculative. That said, a significant number of market testing studies indicate that tobacco packaging acts as a promotional tool, and threatened legal challenges to plain packaging from the industry provide some support for this finding. Put simply, if the plain packaging proposal did not threaten to reduce the industry’s profitability, then it would be unlikely to mount a legal challenge against it.

The industry is also liable to argue that plain packaging could actually lead to an increase in smoking uptake. This is because, with the introduction of plain packaging, price would become the sole identifiable product feature, resulting in price competition among tobacco companies. This, in turn, would result in cigarettes being more affordable to vulnerable smokers, and particularly young people. One logical response to such claims is that, were tobacco companies to reduce their prices in response to the measure, then an increase in excise could be used to counter this effect.

The industry has also argued that plain packaging would make it easier to counterfeit and smuggle tobacco products. The resulting distribution of tobacco products through unregulated, untaxed criminal networks would both enhance their accessibility to vulnerable and underage smokers and make policing of illicit trade more difficult. The National Preventative Health Taskforce has argued that this need not be the case. For example, one strategy for reducing the potential for illicit trade would be the mandating of some form of tax markings that would make cigarette packages difficult to counterfeit.

It is difficult to determine the likely fate of the plain packaging proposal given that the position of the Coalition and the independent members is unknown.

Library publications and key documents

Australian Government, Australia: the healthiest country by 2020. National Preventative Health Strategy – the roadmap for action, Department of Health and Ageing/The Taskforce, Canberra, 2009, http://www.health.gov.au/internet/preventativehealth/publishing.nsf/Content/nphs-roadmap