After months of litigation, Australia’s High Court finally rejected a challenge by several tobacco companies (Japan Tobacco Inc., British American Tobacco Plc, Philip Morris International Inc., and Imperial Tobacco), who argued that the government’s new plain packaging legislation constituted an illegal seizure of their intellectual property, since the value of their trademarks would be significantly reduced or even destroyed.  This decision  directs tobacco companies, starting December 1 of this year, to sell their products in plain olive packs with graphic health warnings such as pictures of cancer-riddled mouths, blinded eyeballs, and other smoking related illness.  Under the new law, tobacco companies will also no longer be allowed to display their distinctive colors, brand designs, and logos on packs of cigarettes. Graphic health warnings will now cover 90 percent of the back of the packaging and 70 percent of the front.  The Court also ordered the tobacco companies to pay the government’s legal fees. The reasons for such a decisions have not been released yet, but will be publically available later this year.

Many countries have legislation imposing the display of photos or texts describing the effects of smoking on health, and some also limit the size of the logo and prohibit certain slogans, but none of them go as far as Australia which now has the strictest legislation in the world.

The High Court’s decision represents a big victory for the Australian Government, faced with A$31.5 billion ($33 billion U.S. dollars) in annual health costs from smoking; a habit estimated to have killed 900,000 Australians in the past 60 years.  According to Attorney General Nicola Roxon, the ruling is a “watershed moment for tobacco control around the world”. She added that “the message to the rest of the world is that big tobacco can be taken on and beaten. Without brave governments willing to take the fight up to big tobacco, they’d still have us believing that tobacco is neither harmful nor addictive.”

Critics of the law however claim that the government would unfairly benefit from the law by using cigarette packs as a platform to promote its own message without compensating the tobacco companies.  In addition, they argue that the impact of the law will be diminished by the fact that it will cause an increase in the black market for cigarettes.  “Although the law passed the constitutional test, it is still a bad law that will only benefit organized crime groups which sell illegal tobacco on our streets . . . .  The illegal black market will grow further when all packs look the same and are easier to copy,” stated Scott McIntyre, British American Tobacco spokesman. Spokeswoman Sonia Stewart added that “[p]lain packaging will simply provide counterfeiters with a road map. The legislation will make the counterfeiter’s job both cheaper and easier by mandating exactly how a pack must look.”  According to Japan Tobacco and Imperial Tobacco, Australia’s government loses about A$1 billion in annual revenue because of the cigarette black market, which is equivalent to 13.4 percent of the legal industry.

But the claims by critics were dismissed by Australia’s Health Minister Tanya Plibersek, who argues that Australia has other measures to prevent counterfeiting such as the use of alphanumeric codes on legitimate cigarette packs.  Still, she concedes that even thought the report “substantially exaggerates” the size of the black market, it remains a concern given its potential to undermine government action to reduce smoking rates.

Australia now expects other countries, especially those with legal systems similar to Australia’s, to follow its lead and copy the packaging logo ban.  In an e-mailed statement, Margaret Chan, director general of the World Health Organization, said that “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. The lawsuits filed by big tobacco look like the death throes of a desperate industry.”

Chief executive of anti-smoking lobby group Action on Smoking and Health Deborah Arnott, considers the ruling to be “a major victory not just for Australia but for the world, and the first of many bloody noses for the tobacco industry on plain packaging. It should encourage the British Government to go ahead with legislation.”  Britain just finished a four-month consultation process on plain packaging a few weeks ago, and is expected to make a decision on whether to carry on with legislation later this year.  Britain Health Secretary Andrew Lansley wants tobacco companies to have “no business in the UK,” but no decision has been taken by the Department of Health yet.  New Zealand is also expected to be one of the next countries to adopt a plain packaging legislation.  According to New Zealand’s Associate Health Minister Tariana Turia, the decision gave New Zealand “more confidence to push ahead with similar measures,” and “sends a strong statement that governments do have the right to develop legislation within their own territories. It does give us a greater sense of security as we move through our consultation process.”  Similarly, Indonesia’s Health Minister Nafsiah Mboi stated “[t]hat’s (referring to Australia’s legislation) excellent . . . .  This is one way to protect the people.”  But Tulus Abadi, anti-tobacco campaigner and head of the national commission on tobacco control, said that no significant step had been taken by the government to draft a law on graphic warnings on cigarette packages.

Canada, on the other hand, seems to be more wary.  For now it has simply implemented graphic warning rules and is carefully watching developments in Australia. Olivia Caron, a spokeswoman for Health Canada, stated that “at this time, the Department (of Health) is not planning any regulatory action to require plain packaging for tobacco packages. Health Canada continues to review available research on plain packaging as a form of tobacco control and closely monitors plain packaging proposals put forward in other countries, such as Australia.”

The big tobacco companies have not given up yet.  They claim, as do some other countries, that Australia’s plain packaging legislation contravenes World Trade Organization obligations on intellectual property rights. Ukraine, Honduras, and the Dominican Republic claim the new legislation unfairly restricts trade and will have serious economic consequences to the central American countries that rely on tobacco exports.  But if we believe Ross McKenzie, a Macquarie University lecturer on health studies, Australia should not be too worried: “From everything I’ve read, the challenges won’t be particularly strong.  The trademarks aren’t being expropriated; they’re being restricted in their use, which is quite different.  There’re lots of trademarks that are restricted by lots of governments.”

In addition, Philip Morris is pursuing an action in international arbitration against Australia, claiming that the law violates a bilateral Australia-Hong Kong investment agreement and is liable for billions of dollars in damages.

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