Australia’s Top Court Backs Plain-Pack Tobacco Laws

An Australian law requiring tobacco companies to sell cigarettes in uniform packaging was upheld by the nation’s top court, a ruling that may set a precedent for other countries to follow.

Australia will become the first country to require cigarettes to be sold in uniform packages after its top court rejected a challenge from tobacco companies, setting a precedent for other nations to follow.

The High Court of Australia today dismissed claims by Japan Tobacco Inc. (2914), British American Tobacco Plc (BATS), Philip Morris International Inc. (PM) and Imperial Tobacco Group Plc that the government illegally seized their intellectual property by barring the display of trademarks on packs. The judges gave no reasons for the decision and said these will be published later.

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. New Zealand and the U.K. are among countries whose governments have indicated interest in implementing similar legislation, which takes effect in Australia Dec. 1.

“It’s now broken the wall,” Rob Moodie, professor of public health at the University of Melbourne, said in a telephone interview. “Governments with sufficient guts and resources can stare down the saber rattling of the tobacco companies.”

The Australian law requires cigarettes to be sold 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 packaging and 70 percent of the front.

‘Domino Effect’

“With so many countries lined up to ride on Australia’s coattails, 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. “The lawsuits filed by big tobacco look like the death throes of a desperate industry.”

Tobacco products kill almost 6 million people globally each year, a figure that may reach more than 8 million by 2030 unless governments take action to limit tobacco exposure, according to the Geneva-based WHO.

“This ruling sets a precedent for other countries in the region, particularly Asia, that are looking to pass evidence- based public health laws,” John Stewart, senior international organizer at the lobby group Corporate Accountability International, said in an e-mail.

Ongoing Challenges

Trademark laws vary in other countries, and the Australian decision isn’t necessarily precedent-setting, Japan Tobacco, the maker of the Camel brand, said in an e-mail.

Philip Morris plans to pursue claims against the Australian government for the loss of its ability to use trademarks, said Chris Argent, a spokesman for the maker of Marlboro cigarettes.

“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 in an e-mail.

Japan Tobacco fell 4.8 percent 2,439 yen at the close of trading in Tokyo, the biggest decline since March 15, 2011. BAT shares fell 0.5 percent at 3:02 p.m. in London while Imperial slipped 1.7 percent.

Once a country implements a tobacco-control measure, it becomes easier for other countries to do the same, Rob Cunningham, a senior policy analyst at the Canadian Cancer Society in Ottawa, said in an e-mail. Canada was the first to make pictorial health warnings mandatory in 2001 and about 50 nations followed, he said.

“The industry knows that plain packaging is a massive threat and that if Australia implements plain packaging, then other countries are sure to follow,” Cunningham said.

‘Huge Interest’

The government in New Zealand, where consultations are being held on plain packaging, has watched the Australian developments with “huge interest,” said Tariana Turia, Associate Minister of Health.

“This sends a strong statement that governments do have the right to develop legislation within their own territories,” Turia said. “It does give us a greater sense of security as we move through our consultation process.”

Consultations on a U.K. government plan to enforce standardized packaging for tobacco products ended last week, with the International Chamber of Commerce among bodies raising concerns. The plain-pack requirements would probably breach a number of the U.K.’s international obligations, including World Trade Organization intellectual property pacts, Andrew Wilson, the ICC’s director of policy, said Aug. 9 after the hearings.

First Amendment

In the U.S., cigarette makers have relied on the First Amendment of the Constitution, which protects the right to freedom of expression from government interference.

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

Campaign for Tobacco-Free Kids is a partner of the Bloomberg Initiative to Reduce Tobacco Use, funded by Bloomberg Philanthropies. Bloomberg Philanthropies, which is also a donor to the World Lung Foundation, was set up by New York Mayor Michael Bloomberg, founder and majority owner of Bloomberg News’ parent Bloomberg LP.

‘Misleading Messages’

“Australia is adding a policy tool that will help other countries reverse decades of misleading messages,” Jorge Alday, associate director of policy with World Lung Foundation in New York, said in an e-mail.

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

Cigarettes are unique because they are “the only legal consumer product that kills when used exactly as intended by the manufacturer,” she said.

The government estimates smoking led to the deaths of more than 900,000 Australians from 1950 to 2008. Almost one-sixth of the population aged 14 years and older smokes cigarettes daily, starting at age 16 on average, the government said.

The high court decision “does not mean that plain packaging is good government policy,” Imperial Tobacco, the maker of Gauloises cigarettes, said in a e-mailed statement.

The plain-pack law will be a boon to illicit cigarette trading in Australia, Imperial Tobacco and British American Tobacco said. Australia’s government loses about A$1 billion in annual revenue because of the cigarette black market, according to Japan Tobacco and Imperial Tobacco.

Illegal Sales

“The illegal cigarette market will grow further when all packs look the same and are easier to copy,” Scott McIntyre, a spokesman for BAT, said in a separate statement.

The size of the illicit tobacco market in Australia is equivalent to 13.4 percent of the legal industry, Deloitte LLP said in a report in May.

While the report “substantially exaggerates” the size of the black market, the illicit tobacco trade remains a concern given its potential to undermine government action to reduce smoking rates, Australia’s health department said.

Separately, Philip Morris has said the Australian law violates a treaty with Hong Kong and may cause billions of dollars in damages. The New York-based company is pursuing the case in international arbitration, it said.

In April, Honduras complained to the World Trade Organization about the Australian legislation, claiming it contravenes WTO obligations on intellectual property rights and will have serious economic consequences to the central American country that relies on tobacco exports.

Ukraine had filed a similar complaint in March and the Dominican Republic followed last month.

“Big tobacco threw everything they could to try and stop this reform,” Roxon and Australian Health Minister Tanya Plibersek said in a statement today. “The message to the rest of the world is that big tobacco can be taken on and beaten.”

The case is British American Tobacco Australia Ltd. v the Commonwealth of Australia. S389/2011. High Court of Australia (Canberra).

To contact the reporters on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net; Jason Scott in Canberra at jscott14@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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