Tobacco industry’s smokescreen in packaging debate

Tobacco manufacturers generally have a hard time trying to seize the moral high ground. But that is what is happening in Australia, where the Senate, the upper house of parliament, will decide in the next couple of weeks whether to approve the world’s toughest anti-smoking legislation.

Under the Labor government’s proposals, all tobacco products would have to be sold in identical plain green packaging, without logos or design variations. Brand and product names would be in identical type, making it very hard to target specific market segments such as women or young adults.

This draconian plan, already approved by parliament’s lower house, has triggered a furious assault from British American Tobacco, the market leader with 46 per cent of sales, and the smaller players Philip Morris and Imperial Tobacco, which share most of the rest of the market. BAT says it will challenge the law immediately in Australia’s High Court if it passes in the upper house. This is a serious threat: only last week the court struck down a key plank of Australia’s foreign policy because it conflicted with elements of Australian and international law.

Superficially, the fuss is surprising. From the perspective of the big international tobacco companies, Australia is a tiny market, its $7.9bn of sales accounting for just 1.8 per cent of the global total in 2010, according to a study by Deloitte published in February.

But Big Tobacco has a broader view. Australia is not the only advanced economy thinking about plain packaging. Many have looked at it, and it is being actively considered in Canada, the UK and the European Union. Australian backing might give the idea fresh traction across the developed world.

The legislation has substantial support. The plain packaging bill was supported unanimously in the lower house, though the conservative opposition unsuccessfully opposed a separate, but linked, trademark bill. An opinion poll for The Australian in August showed 48 per cent public support for plain packaging.

Bowing to science, the tobacco companies no longer claim that their product is harmless. In evidence to a parliamentary inquiry in June, BAT Australia said there was “no question that smoking tobacco can cause serious and fatal disease”, adding that the only way to avoid the risks was not to smoke.

Yet the industry is not bereft of arguments. One is that the government’s proposal is not based on evidence. It cannot be, since no other country has tried such an approach. But there is some evidence that graphic warnings on packs have had little or no impact on people’s propensity to smoke.

A second is that the legislation is unnecessary. Australia has a range of measures limiting the marketing and sale of tobacco, and the incidence of smoking is already falling steadily. The government’s Institute of Health and Welfare reported in July that only 15.1 per cent of Australians over 14 smoked daily in 2010, down from 25 per cent in 1993.

The tobacco lobby says this trend could reverse because prices will fall as the constraints on marketing make it hard to charge more for premium cigarettes brands – one of the main drivers of profit.

Customers may also be more attracted to illegal unbranded cigarettes. BAT also says the legislation would conflict with various bilateral trade agreements, Australian law on trademark ownership and World Trade Organisation rules.

The most powerful argument, though, is that parliament is usurping the rights of adults to choose between competing legal products – deciding, in effect, that nanny knows best – while simultaneously breaching the tobacco companies’ constitutional rights by prohibiting the use of their intellectual property.

These are not empty arguments. But they are not conclusive either. Restricting choice may be illiberal but parliament is entitled to prioritise public health. If the policy is not well-founded, or fails to achieve its objective, the voters have the remedy. None of the peripheral legal challenges to plain packaging is insoluble, though some might require further changes to the law if challenges are upheld.

That leaves the constitutional issue, which is presented as a matter of principle but is really a matter of cost. Like most other advanced countries, Australia allows appropriation of property assets but requires “just terms”. That means there may have to be negotiations about compensation, which BAT suggests might be in the vicinity of A$3bn. But blocking the use of tobacco companies’ intellectual property is no different in principle from the acquisition of farming land for highways.

From the point of view of their shareholders, the tobacco companies are right to fight. If the Australian proposals are implemented, similar laws will emerge elsewhere, with damaging effects on profits. But that is an argument located in the wallet, not on the moral high ground. It is not a reason for the Senate to vote No.

By Kevin Brown
FT’s Asia Regional Correspondent

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