Australia Plain-Pack Tobacco Law May Spread to U.K., N.Z.

The U.K. and New Zealand are among countries more likely to ban logos from cigarette packages after Australia approved the world’s first uniform-packaging law, officials and health researchers said.

The Australian ruling gives New Zealand “a greater sense of security” during its consultation process on plain-packaging legislation, Tariana Turia, New Zealand’s associate minister of health, said yesterday after the ruling in Canberra. “This is more than just a victory for the Australian government, I think it is a global victory.”

Australia’s high court ruled against claims by cigarette makers opposed to the restrictions, including Japan Tobacco Inc. (2914) and British American Tobacco Plc. (BATS) The legislation takes effect Dec. 1 and the ruling is a victory for a government faced with A$31.5 billion ($33 billion) in annual health costs from smoking, a habit it estimates killed 900,000 Australians over six decades.

“This ruling is likely to trigger similar restrictions in many other countries, including especially Great Britain and New Zealand,” John Banzhaf, a law professor at George Washington University Law School, said by e-mail.

The Australian law says cigarettes can only be sold in packaging with no company logos and with the same font for all brands on a dark brown background. Graphic health warnings will cover 90 percent of the back of the package and 70 percent of the front.

India Reaction

ITC Ltd. (ITC), India’s largest maker of cigarettes, fell 3.6 percent to 258.35 rupees at the close in Mumbai, the most since May 8. The stock market in India was shut yesterday for a public holiday.

Investors are “fearing that if the same thing happens in India that would mean significant brand-equity loss for ITC,” Nitin Mathur, an analyst with Espirito Santo Securities, said in an e-mail.

India’s government has yet to consider a law on plain packaging, and the Australian ruling will add to pressure from citizens to do so, Prakash Gupta, director of Healis, a non- profit organization that works on tobacco control, said in a phone interview from Mumbai.

“There is already a talk about the feasibility and implementation” of such a rule in India, said Gupta. “Probably it is still far away. But there may be more media attention, more conversation, more discussion within the government, and if they start talking about it, it will be a big achievement.”

Legal Challenges

The Australian decision isn’t necessarily precedent-setting because trademark rules vary from country to country, Japan Tobacco said in an e-mailed statement yesterday.

Philip Morris (PM) plans to pursue compensation claims against the Australian government for the loss of its ability to use trademarks, Chris Argent, a company spokesman, said in an e- mailed statement yesterday.

“The legality of plain packaging, including whether Australia will have to pay substantial compensation to Philip Morris Asia, remains at issue and will be considered in other ongoing legal challenges,” Argent said.

Health policy makers in the U.K. will “look carefully at today’s judgment on Australia’s plain packaging laws,” Public Health Minister Anne Milton said in a statement sent by e-mail. “We are considering whether plain packaging of tobacco could bring public health benefits.”

‘Domino Effect’

William Hill Plc. (WMH) is offering 5-1 odds the U.K. will pass a similar law before the next general election, meaning a successful 1 pound ($1.60) wager would win five pounds profit. The odds against passage are 1-9, Graham Sharpe, a spokesman for the U.K.-based bookmaker, said by e-mail.

Governments in Europe, Canada and New Zealand have indicated an interest in implementing similar legislation.

“What we hope to see is a domino effect for the good of public health,” Margaret Chan, director general of the World Health Organization, said in an e-mailed statement late yesterday. “The evidence on the positive health impact of plain packaging compiled by Australia’s High Court will benefit other countries in their efforts to develop and implement strong tobacco control measures.”

Consultations on a British government plan to enforce standardized packaging for tobacco products ended last week, with the International Chamber of Commerce in the U.K. among those raising concerns. The plain-packaging requirements would probably breach some of the U.K.’s international obligations, including World Trade Organization intellectual property agreements, said Andrew Wilson, director of policy at ICC.

Eyes on Australia

Similar plans may be more difficult to implement in the U.S., where cigarette manufacturers have relied on the First Amendment of the U.S. Constitution, which protects the right to freedom of expression.

“There is First Amendment protection, but it’s not absolute,” Matthew Myers, president of Campaign for Tobacco- Free Kids in Washington, said in a phone interview yesterday. With enough evidence to show restrictions are needed to protect public health, the First Amendment hurdle can be overcome, Myers said.

The Cancer Society of New Zealand estimated health-care costs related to smoking come to about NZ$250 million a year as of 2004 in the country, where the government said in May it will raise cigarette taxes 10 percent a year in each of the next four years to discourage consumption.

Smoking caused about 81,700 deaths of adults aged 35 and over in 2010 in the U.K., where spending on tobacco more than tripled from 1980 to 17.7 billion pounds ($27.7 billion) that year, the National Health Service estimates.

Australia has no plans to expand the restrictions to alcohol or fast foods, Attorney General Nicola Roxon told reporters in Canberra yesterday.

Tobacco is a “special case,” Roxon said. Cigarettes are “the only legal consumer product that kills when used exactly as intended by the manufacturer.”

To contact the reporter on this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Douglas Wong at dwong19@bloomberg.net

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