Cigarettes may be too hot to handle

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Federal Health Minister Nicola Roxon announces the plain packaging policy in April. Picture: Alan Pryke Source: The Australian

The Australian | May 28, 2011

Cigarettes may be too hot to handle

Christian Kerr

The laws are tough and the stakes are high.

If the proposals succeed, they will spark a series of similar strikes against smoking across the globe.

But if the tobacco companies, as they have warned, challenge laws they say will rob them of their intellectual property — brands and trademarks — in violation of the Constitution and international trade treaties and succeed, taxpayers could be left with a compensation bill in the billions.

The government says it has robust legal advice backing its plans, but refuses to release it "in line with longstanding protocols".

But documents obtained through Freedom of Information requests show government bureaucrats — and even one cabinet minister — have concerns about plain packaging.

Roxon herself admitted this week there is no proof the move will cut smoking rates because no government has done it before, yet proof is the key.

Under the government’s plans, all cigarette packets will be a muddy brown-green.

The legislation will virtually banish logos, brand images, colours and promotional text from packs. Instead, brand and product names will appear in a standard colour, standard position and a standard font size and style. The existing health warnings will be updated and increased from 30 per cent of the front of the pack to 75 per cent and 90 per cent of the back.

"The international tobacco industry is desperate to prevent plain packaging here," says Mike Daube, professor of health policy at Curtin University and Australian Council on Smoking and Health president.

He points to the full-scale press conference British American Tobacco Australia head David Crow held last week to attack the measure. "This has passed the scream test," Daube says. "They’ve demonstrated to us more clearly than anyone could have expected how worried they are."

Daube talks of a domino effect. He says if Australia introduces plain packaging, "other developed and possibly developing countries will follow".

Action on Smoking and Health Australia chief executive Anne Jones agrees. "A lot of countries are watching," she says.

But Britain, France, Canada and Lithuania have backed away from plain packaging or put their plans on hold pending further review.

Just last month Nora Berra, the Secretary of State to the French Minister of Labour, Employment and Health, indicated her government was opposed to the measure, citing counterfeiting concerns.

But Tim Wilson, head of the intellectual property and free trade unit at the Institute of Public Affairs think tank, says the real stumbling block is intellectual property. Under the Constitution and international trade agreements, he says, the government cannot strip or devalue property without risking compensation on "just terms". This includes intellectual property rights such as trademarks.

Wilson highlights how the High Court previously has stated acquisition can occur when "far-reaching" laws effectively destroy the value of property. The High Court will have to decide whether plain packaging meets this definition if the tobacco companies challenge, he says.

Wilson has used aUniversity of Oxford study on the value of trademarks to calculate the worth of tobacco brands in Australia and the compensation bill that could be payable should a legal challenge succeed. He says it could be as high as $3 billion.

Wilson admits the figure sounds large, but points to a study of the 10 most valuable international brands released earlier this month that put the global value of just one cigarette brand, Marlboro, at $US67.5bn.

Wilson believes the policy will have serious legal implications. "The idea that you can be the first in the world to introduce such a measure and not face any risk is fanciful," he says.

A 2009 email between two senior members of the commonwealth authority that administers Australia’s trademarks and intellectual property regime, IP Australia, warns the move may fall foul of key articles in the World Trade Organisation’s international intellectual property agreement, Trade-Related Aspects of Intellectual Property Rights.

"I’m not surprised that (was it Health?) are arguing that Article 20 is ambiguous — it suits their purposes," Michael Arblaster, deputy registrar, Trade Marks Hearings and Legislation, wrote to his colleague Karen Tipler, assistant director, Trademarks and Designs. He went on to warn the department’s argument was "a long bow".

IP Australia meeting notes prepared for then parliamentary secretary of health Richard Marles warn: "Requiring plain packaging would be regarded as encumbering the ability of an entity to distinguish its goods through its trademarks from those of other entities."

An attached IP Australia policy statement cautions restrictions on trademarks "should only be introduced if there is a clear public interest to be served. Notably, analysis of the public interest need should be based on strong empirical evidence."

It goes on to say: "This is not the first time government has considered the issue of plain packaging. A Senate report in 1995 concluded that there was insufficient evidence to demonstrate the efficacy of generic packaging in achieving health policy objectives and recommended further investigation. IP Australia is unaware of any subsequent evidence that establishes that the public interest would be better served by plain packaging."

Then trade minister Simon Crean was sufficiently concerned to write a note on a ministerial submission on plain packaging dated April last year asking: "Have we got the supporting evidence that plain packaging reduces the health risk? This seems to be the problem the UK government confronted when they considered the issue and decided against it because the supporting evidence was not strong enough."

A departmental email sent in response to Crean’s query says: "The UK government apparently made an assessment of the evidence available to it in 2008 and decided it was not sufficient. We do not know whether that assessment was made strictly in terms of the UK’s WTO obligations or whether there may also have been other international obligations . . . [for example], with the EU context."

An email from one of Roxon’s staff two days ahead of the April 29 announcement of the plain packaging policy last year says: "We are going to need actual figures from the research [on the effect of the measure on smoking levels] — not just the claims." Six months later a Department of Health and Ageing official told Senate estimatesit was unable to quantify the reduction in smoking from the measure.

And on Tuesday the Health Minister confessed when asked for the proof of the efficacy of the measure the opposition is demanding: "The sort of proof they’re looking for doesn’t exist when this hasn’t been introduced around the world."

The legislation makes an implicit admission that it may indeed lead to property rights violations and contains provisions to compensate companies that successfully challenge the law, a step Wilson brands as bizarre.

"It’s quite weird for the government to prepare in case they lose," he says.

Alan Bennett, adjunct professor of law at the University of Sydney and a specialist and practitioner in international trade laws, warns plain packaging may violate the TRIPS agreement, the US-Australia free trade agreement and the Paris Convention for the Protection of Industrial Property, the foundation stone of the international intellectual property regime for more than a century. He says overseas companies could petition their governments to take action against Australia.

The International Chamber of Commerce, representing peak bodies and individual companies from 120 countries, has told Trade Minister Craig Emerson plain packaging will have intellectual property fallout "far beyond the aims of the policy".

A high-powered delegation of US business groups including the US Chamber of Commerce, the National Association of Manufacturers, the US Council for International Business, the National Foreign Trade Council and the Emergency Committee for American Trade has warned Australia’s ambassador in Washington Kim Beazley that it believes plain packaging violates TRIPs.

This week a US think tank, the American Legislative Exchange Council, published a paper claiming the move "threatens to dismantle over a century of international intellectual property rights protections". It raises the spectre of counterfeiting and piracy.

"Although this ill-considered legislation targets tobacco packaging, the alarm over the policy relates to the effects it will have on international intellectual property rights and protections," the paper reads. "Australia’s plain packaging policy will send the wrong message to the developing world where IP co-operation is already difficult to obtain."

Locally, the Australian Industry Group has not only raised intellectual property and trademark concerns of its own. It has added: "There are also issues of whether the precedent of plain packaging could then be forced on to other legal products in areas such as food and beverages, deemed to be controversial by some sections of the community."

Bennett is convinced the plain packaging bid will end in a tangle of actions in Australian courts and international forums. "There’s a lot more to intellectual property rights than registering trademarks," he says. "You’ve got to be able to exploit your intellectual property. A law to prevent such use would affect the right of the intellectual property holders."

source: The Australian