August 24th, 2011:

http://www.bloomberg.com/news/2011-08-24/australia-s-lower-house-passes-plai
n-tobacco-packaging-laws.html
Australia Poised to Ban Tobacco Package Logos
By Gemma Daley and Joe Schneider – Aug 25, 2011 10:54 AM GMT+0800 .
…Australia is poised to become the first nation to require tobacco
products to be sold in plain packages, a move that could see other countries
follow suit and crimp earnings of companies like British American Tobacco
Plc.

The laws, passed by the lower house yesterday and due in the Senate in
September, will ban logos and color variations on cigarette packages.
Packets will have to be olive green and carry health warnings within six
months from Jan 1, 2012.

“Other countries will follow,” said Anne Jackson, chief executive of Ash
Australia, a non-profit lobby group funded by Cancer Council Australia and
the Heart Foundation. “This is a light shining the way for others to do the
same and many countries are already considering it.”

Health Minister Nicola Roxon announced the move last April, along with a 25
percent tobacco tax increase and a A$85 million (A$89 million) advertising
campaign to combat smoking, which the government says kills 15,000
Australians each year. Companies have since introduced their own advertising
campaigns and legal actions against the move.

British American Tobacco Plc (BATS) this week lost an appeal for the release
of Australian government documents the company said would help it fight the
law. The company plans to ask the Australian High Court to review the
ruling.

The company will next take its case to the Parliamentary Legal and
Constitutional Affairs Committee, with a hearing scheduled for Sept. 13,
Scott McIntyre, a spokesman for the tobacco company, said today in a phone
interview. So far the focus has been on the health aspect of the
legislation, he said.

Legal Implications
“There are a lot of issues outside of health that have to be looked at,”
McIntyre said. “There are serious repercussions here. The tobacco company
will pursue the case in courts, seeking billions of dollars in damages, if
the law is enacted.”

Smoking costs Australia about A$31 billion per year in health and workplace
costs, according to the government. With 15.1 percent of the population aged
14 or over smoking daily, it is the country’s top drug and preventable
health issue, the government says.

“There isn’t any safe amount of tobacco you can smoke,” Roxon told Channel
Ten television today. “It will kill you eventually and we obviously want to
make sure the message is loud and clear.”

The tobacco companies say the bill is a breach of the Australian
Constitution, as plain packaging exceeds the Commonwealth’s acquisition
powers. They said they would seek damages for losing the right to use their
trademarks, which they claim the government is seizing, illegally.

Brand Identification Questions
“This would clearly undermine the value of manufacturers’ trademarks and
destroy the goodwill built up over many years in consumer brands,” British
American Tobacco said in a June 6 submission to the government. “Plain
packaging will frustrate brand identification and consumer choice, making
smuggled branded product more acceptable to consumers.”

Australia’s top court has never addressed the question of whether banning
the use of trademarks amounts to an acquisition by the government, George
Williams, a constitutional law professor at the University of New South
Wales in Sydney, said.

“The tobacco companies have a hard road ahead,” Williams said. “They’re
quite likely to lose.”

Philip Morris International Inc. (PM), the world’s biggest publicly traded
tobacco company, said the Australian law also violates a 1994 treaty with
Hong Kong that prohibits the forced removal of trademarks.

Legal Strategies Considered
“It is disappointing that the House of Representatives has approved plain
packaging even though the Government admits there is no evidence that the
policy will be effective at reducing smoking,” Philip Morris said in a
statement today in response to the passage in the lower house.

The tobacco companies plan to argue the law is a breach of the World Trade
Organization’s Trade Related Aspects of Intellectual Property Rights, or
TRIPS.

According to TRIPS, the use of a trade mark in the course of trade “shall
not be unjustifiably encumbered by special requirements.” The tobacco
companies say the Australian law breaches that article.

“As a result of the Government’s actions, Philip Morris has little option
but to pursue our claim for substantial compensation through international
arbitration against Australia and to also consider legal claims under
domestic Australian law,” Philip Morris said.

To contact the reporter on this story: Gemma Daley in Canberra at
gdaley@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at
phirschberg@bloomberg.net