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May 22nd, 2015:

FHB “Sneak Attack” on tobacco meets backlash from Legco, industry

The Food and Health Bureau (FHB) faces backlash from legislators and the tobacco industry after proposing additional tobacco control measures, that could practically become law as soon as this week, without consultation with the industry. (Photo credit: COSH Hong Kong)

The Food and Health Bureau (FHB) faces backlash from legislators and the tobacco industry after proposing additional tobacco control measures, that could practically become law as soon as this week, without consultation with the industry.
(Photo credit: COSH Hong Kong)

The FHB proposed three new tobacco control measures to LegCo two weeks earlier, including the enlargement of graphic health warnings on tobacco products from 50% to 85%, the designation of eight tunnel businterchange facilities (BIs) as non-smoking areas (NSAs), and a complete ban on e-cigarettes.

Enlarged health warning has been scheduled for gazetting this week in the form of subsidiary legislation under the negative vetting process. The designation of BIs as NSAs will not be submitted until the fourth quarter this year, and the timetable for the e-cigarette ban is yet to be drawn.

The amendments were discussed at the Panel on Health Services in LegCo on May 18th (Monday). While the latter two proposed legislations were touched on during the discussions, many legislators focused on the rushed nature of the proposal on larger health warnings without public consultation. Professor Sophia Chan Siu-chee, Under Secretary for Food and Health has stated she is open to a public hearing with the industry.

Negative Vetting

So far, the Government has yet to confirm whether the legislation will be delayed, as members demand the Government consult the tobacco industry; but even if it goes as planned, members will have 28 days to discuss the subsidiary legislation and Chairman of the Subcommittee can ask for a 21-day extension at the Council.

During the vetting period, any member can move a proposed resolution to amend the legislation if it abides to Rule31 of the LegCo’s Rules of Procedures – the restriction that keeps members’ hands off the “public moneys” – and is approved by the President of LegCo.

Liberal Party Leader Vincent Fang has not indicated an interest in moving a proposed resolution but urges the Government to talk to the industry players. His demand for a public hearing was supported by many legislators on the panel.

DAB lawmaker Wong Ting-kwong said he met with industry players and claimed the tobacco industry is supportive of the proposed legislation to ban smoking at BIs and to regulate e-cigarettes. He suggested that the Government should enlarge the warning graphics progressively and extend the ‘grace period’ for the new package design from 6 months to 18 months, which was the case in 2005.

Democratic Party’s Helena Wong Bik-wun questioned whether the regulation was necessary, given only a handful of countries in the world have implemented such strict policies.

The Under Secretary admitted the bureau did not consult with the industry before making the proposal. When met with suspicion whether an increase in the size of the warning label would effectively deter smokers, the Under Secretary used WHO guidelines to justify the move. She also said the bureau was open to a public hearing with the tobacco industry.

Surprise, Surprise

The tobacco industry was surprised by the Government’s quick fire move. Bacon Liu Sair-ching, chairperson of the Coalition of Hong Kong Newspaper and Magazine Merchants, met with legislators on the Panel after news broke out on the proposed new measures. “We are against how the Government has handled the issue,” says Mr Liu. “If we don’t voice our demands, it will simply be gazetted and passed by next week.”

Mr Liu believes the entire tobacco ecosystem could be greatly impacted if the policy on larger health warning labels is passed in LegCo. He cites the example of Australia, where he claims smoking did not decline, but instead allowed illicit cigarettes to flood the market. “Without differentiation in packaging, it will become easier to manufacture illicit cigarettes, and more difficult for consumers to tell the difference.”

“You’re forcing business owners like us into a corner by making it easier for illicit cigarettes to sell their products,” says Mr Liu.

The large tobacco firms did not fare any better. Cecilia So, Manager of Corporate Affairs at the Hong Kong office of tobacco industry giant Philip Morris, told HT they were just as surprised, “The six months proposed just isn’t enough for designing and producing new packaging that must be customised in accordance to Hong Kong regulations. We can’t just repurpose designs from other markets.”

“Not evidence-based”

Patrick Muttart, Regional Director of Government Affairs and Corporate Communication of Philip Morris Asia, suggests the amendment is merely driven by ideology, and not evidence, “There’s no consistent and credible evidence that these ultra large graphic health warnings reduce smoking.” Mr. Muttart cites the example of Canada and United States, despite that the two neighbouring countries each have very different policies with regards to health warnings, both have been comparable in tobacco control results.

Canada currently requires health warnings to take up 75% of cigarette packages. The US has struggled to implement regulations due to challenges from tobacco firms in court. Warnings in the US are mostly limited to small texts on the sides of the pack. “Despite [having more lenient regulations than Canada], you have smoking rates that are a little bit lower in the US, and a smoking decline rate in the US which is a little bit faster,“ explains Mr Muttart.

Mr Muttart believes forcing tobacco firms to concede 85% of their packaging for the Government to promote health risks is an infringement of their intellectual property rights. “This is not driven by evidence or public health, instead what we are seeing is a sneaky back door attempt to launch what I would call an ideological attack on the intellectual property rights of the major tobacco companies.”

“They are dramatically diminishing the ability of companies such as Philip Morris to utilise the brand’s trademarks we have invested so much into building over the years.” says Mr Muttart.

Further actions

When asked what actions the industry might take if the proposals pass in LegCo, Mr Liu says, “We can’t stop what the Government does, but if the government’s actions are irrational, we will organise high-profile actions. They know our demands through the legislators on the panel.”

The proposed public hearing has not been scheduled as of the deadline of this issue.

Tobacco Firms Get Partial Win Over Claims on Smoking Effects

America’s largest tobacco companies must inform consumers that cigarettes were designed to increase addiction, but not that they lied to the public about the dangers of smoking, a federal appeals court ruled on Friday.

The ruling from the U.S. Court of Appeals for the District of Columbia Circuit is a partial win for cigarette makers in the long-running legal fight that began in the Clinton administration in 1999. In this latest round, the companies objected to running court-ordered advertisements that would have branded themselves as liars.

The ads would have begun with a preamble statement that the companies “deliberately deceived the American public.” The ads stem from a 2006 court ruling ordering the companies to admit they had lied for decades about the dangers of smoking.

The companies called that statement overbroad and misleading. But government lawyers argued that the language was meant to provide context for the public.

The appeals court ruled that the language must focus on preventing future violations, not past misconduct. Writing for the three-judge panel, Judge David Tatel said the preamble language in the ads about past deception went beyond the remedies allowed under federal racketeering laws.

But Tatel said other language in the ads that stated the companies intentionally designed cigarettes with enough nicotine “to create and sustain addiction” was within the bounds of the law. The appeals court also approved statements that said the companies “intentionally designed cigarettes to make them more addictive.”

The companies in the case include Richmond, Virginia-based Altria Group Inc., owner of the biggest U.S. tobacco company, Philip Morris USA; No. 2 cigarette maker, R.J. Reynolds Tobacco Co., owned by Winston-Salem, North Carolina-based Reynolds American Inc.; and No. 3 cigarette maker Lorillard Inc., based in Greensboro, North Carolina.

In 1999, the Justice Department filed a lawsuit that alleged the tobacco companies violated racketeering laws by conspiring to deceive the public about the health consequences and addictiveness of smoking cigarettes. After hearing testimony from 162 witnesses over nine months, U.S. District Judge Gladys Kessler found in 2006 that the companies had engaged in a massive fraud campaign.

The judge ordered the companies to take out ads addressing the negative health effects of smoking, nicotine manipulation, the health impact of secondhand smoke and the truth about “light” and “low-tar” brands. The ads would appear in newspapers, on TV, websites and cigarette pack inserts.

While the appeals court struck down the preamble to the ads, it left the remaining content largely intact.

The case now goes back to the district court for further proceedings.

Matthew Myers, president of the advocacy group Campaign for Tobacco-Free Kids, called the ruling “a resounding victory for public health,” though he said he was disappointed the companies would not be required to admit they deceived the public.

“This decision provides a path for forcing the companies to finally tell the truth about their product,” said Myers, whose group was a party in the case. “It should not take long to translate this decision into a workable order, assuming the tobacco industry does not try to further delay.”

Altria spokesman Brian May said the company was pleased that the court struck down the preamble language, which he called “the critical part of the appeal.”

Proposed Ban on Cigarette TV Ads Hits Stocks of Indonesian Media Firms

Jakarta. Shares of Indonesian television operators have fallen over the past week due to a proposed ban on cigarette advertising on television that puts at risk a market estimated to be worth nearly $300 million last year.

Local media last week cited Mahfudz Siddiq, a parliament commission head, as saying the commission hoped to finish discussing by August an amended broadcasting law that would enforce the ban. Government officials could not be contacted by Reuters.

Over the past six sessions, shares of Surya Citra Media, Media Nusantara Citra and Visi Media Asia have posted an average drop of 2.9 percent. The broader Jakarta stock exchange rose 1.3 percent over that period.

The cigarette industry spent an estimated Rp 3.6 trillion ($274 million) on television advertising last year, according to research firm Nielsen.

The big Indonesian cigarette makers include Hanjaya Mandala Sampoerna, Gudang Garam, Wismilak Inti Makmur and Djarum Group.

“The ban is expected to be implemented and once it is implemented it will have an adverse impact on ad spending. The government has been very negative on the cigarette sector [because of the health risks],” said Harry Su, head of research at Bahana Securities.

Other consumer companies have been cutting back marketing expenses due to the slowing economy, so it may be difficult for the broadcasters to find a substitute for any lost advertising revenue from the cigarette makers, Su said.

Cigarette advertisements contribute 6 percent to 7 percent to Surya Citra’s total advertisement sales, Corporate Secretary Hardijanto Saroso told Reuters.

Cigarette companies also sponsor several popular but expensive television programmes such as soccer tournaments on Surya Citra’s television channel SCTV, Saroso said.

Visi Media Asia is waiting for clarity on the regulation, but the operator of TVOne and ANTV channels has been stepping up efforts to get advertising dollars from companies that sell sports products or motorbikes, Director David Burke told Reuters.

Philip Morris International Files Suit Against Standardized Packaging Regulations in the UK

Philip Morris International (PMI) today filed suit in the English High Court to contest the UK government’s recently introduced standardized packaging regulations for tobacco products. PMI is seeking a decision that the regulations — which impose a wholesale ban on logos and visual trademark elements and require all cigarette packaging to look the same — violate English and European Union law.

“We respect the government’s authority to regulate in the public interest, but wiping out trademarks simply goes too far,” said Marc Firestone, PMI Senior Vice President and General Counsel. “Countries around the world have shown that effective tobacco control can co-exist with respect for consumer freedoms and private property.”

In April 2015, all tobacco products in the UK were banned from display at retail, and as early as 2016, EU law will require that health warnings for cigarettes cover up to 65% of the pack.
PMI’s filing asserts that:

The regulations unlawfully deprive PMI of its trademarks. A core doctrine of English and EU law is that there must be fair compensation for deprivations of property, a remedy that the regulations do not provide.

The regulations violate the EU law that says Community trademarks can be used by identical means throughout the EU, which would be impossible if the UK government bans their use in the UK.

The regulations obstruct the free movement of goods through means that are neither necessary nor proportionate to achieving the UK government’s public health objectives.

A case from the English High Court is already before the European Union’s Court of Justice to decide whether standardized packaging is permissible under the EU’s recently enacted tobacco product directive. If not, then the UK regulations would be invalid. It would have been far sounder to hear from the Court of Justice before issuing the regulations.

Trademarks convey a product’s quality and other attributes and help consumers select from competing brands in a crowded marketplace. In this and other ways, trademarks are key to a market economy.

In 2014, Marlboro ranked as the ninth most valuable global brand with an estimated value of $67 billion.

Firestone continued, “The UK government rushed out the regulations, with many serious questions left unanswered. The law protects trademarks because of their essential functions for consumers and in driving competition. By contrast, a wholesale ban on branding distorts the market and treats consumers as if they’re not capable of making their own decisions.”

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Tobacco companies file lawsuits against UK government over plain packaging laws

The measures have been opposed by Big Tobacco from day one

Two of the world’s biggest tobacco companies have filed lawsuits against the UK government over its plan to introduce plain packaging for tobacco products.

Philip Morris International (PMI) and British American Tobacco (BAT) both argue the measures deprive them of property in the form of trademarks, and are seeking compensation that could extend to billions of pounds if they succeed.

In legal objections filed to the High Court, they also claim the measures violate European intellectual property laws. The Department of Health said it would not let policy “be held to ransom by the tobacco industry”.

The legal challenges had been anticipated, following the introduction of standardised packaging legislation in March this year.

The measures, which are planned for a 2016 introduction, and full roll-out by 2017, have been opposed by Big Tobacco from day one. Similar legislation in Australia, where the introduction of plain packs has coincided with falls in smoking, has already been subject to an unsuccessful lawsuit.

Lawyers for the Government are understood to be confident that all legal aspects of the new measures have been taken into account. But even if unsuccessful, tobacco companies may be hoping legal action will delay implementation or discourage other countries from taking similar action.

“We respect the government’s authority to regulate in the public interest, but wiping out trademarks simply goes too far,” said Marc Firestone, PMI’s senior vice president and general counsel. “Countries around the world have shown that effective tobacco control can co-exist with respect for consumer freedoms and private property.”

A spokesperson for BAT maintained that the company had “no other choice” to launch legal action adding: “Any business that has property taken away from it by the state would inevitably want to challenge and seek compensation.”

Other tobacco giants, including Japanese Tobacco International and Imperial Tobacco, are also understood to be considering lawsuits.

A Department of Health spokesperson said: “We will not allow public health policy to be held to ransom by the tobacco industry.

“Smoking is the biggest preventable cause of death in England – killing 80,000 people every year. We would not have gone ahead with standardised packaging unless we had considered it to be defensible in the courts.”

Health charity Action on Smoking and Health (ASH), said it had commissioned legal advice that indicates the legislation is compatible with European law. The group’s chief executive Deborah Arnott said: “The tobacco industry knows it has little or no chance of winning but by threatening legal action it is trying to stop the infection spreading to other countries.

“Standardised plain packaging threatens the profitability of the industry and they are desperate to prevent other countries from following the example set by Australia, the UK and Ireland.”

MPs voted to back plain packaging by 367 to 113 in March. The vote came one year after the publication of an independent review of evidence by Sir Cyril Chantler, which concluded it was “highly likely that standardised packaging would serve to reduce the rate of children taking up smoking and implausible that it would increase the consumption of tobacco.”

In Australia, where the measure was introduced in 2012, smoking rates fell by more than 12 per cent between December 2013 and 2014.

The power of the tobacco industry to market their products has been slowly eroded, to varying extents, by legislation in countries around the world. In the UK, advertising was phased out between 2003 and 2005, and in 2012, tobacco products were banned from display in supermarkets and large shops – a measure that was extended to small shops last month.

The TTIP deal hands British sovereignty to multinationals

This privileging of corporate interests over democracy is only going to get worse. The Transatlantic Trade and Investment Partnership – a treaty being hammered out between the EU and the US with woefully little scrutiny – could grant companies the same legal rights as nation states, enabling them to sue elected governments in secret courts to block policies that dent future profits. And sure enough – using a similar treaty – Philip Morris sued the Australian government for the same policy. It used the same tactic against Uruguay’s government for enlarging health warnings on cigarette packages.

This legal action should be treated as a test. Do we allow major corporations – not least those profiting from human misery – to have more rights in law than people? And indeed, this could be overreach. If Big Tobacco succeeds in wrenching £11bn worth of taxpayers’ money from schools and hospitals, they may find public anger – and demands for retribution – rather hard to ignore.

If the law favours Big Tobacco over taxpayers, then the law is a disgrace

Thanks to this upcoming £11bn lawsuit, we are about to find out whether the law values corporations over individuals

Do property rights trump the health, wellbeing and lives of millions of people? Around 100,000 Britons die of smoking-related illnesses every year: from cancer to heart disease. Worldwide, the figure is a startling 6 million annually. It’s doubtful that history will be particularly kind to those who profited from the tobacco industry. Our descendants will also undoubtedly find it astonishing that cigarettes were freely available, while possessing far less harmful and addictive substances could end in prison sentences.

With TTIP looming, this privileging of corporate interests over democracy is only about to get worse

Nonetheless, it is a matter of free will whether people choose to part with their money and buy cigarettes; but there’s rightly consensus that we should discourage people from taking up the habit, and inform consumers of the dire health implications. One such measure is the introduction of plain cigarette packaging – a policy that David Cameron’s successful spinmeister and tobacco lobbyist, Lynton Crosby, thankfully failed to block. But now the tobacco companies are fighting back, suing the government for up to £11bn on the basis that it would constitute “deprivation of a highly valuable intellectual property”.

This is an absurd example of how the law values property over people. Our government is democratically elected. Yes, that rightly means there have to be checks and balances, and policies must abide by the existing framework of the law. But if the law enables tobacco companies to extort £11bn from the government – money, ironically enough, that could be used to treat people suffering from tobacco-related illnesses – then the law is wrong. If the law does not value people’s lives and wellbeing over the rights of tobacco companies to make profit from cancer sticks, then the law is morally bankrupt.

Mr Heinz Zourek: Your participation in the Eurasia Tax Forum

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Does the tobacco industry have a tracking and tracing system that governments can use?

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Is the illicit cigarette market really growing? The tobacco industry’s misleading math trick

The tobacco industry regularly uses the threat of increased illicit cigarette trade to dissuade governments from implementing prohealth policies. Illicit trade is the number one argument used by the tobacco lobby to oppose tobacco tax increases,1 and is also being used against implementation of other major tobacco control measures such as plain packaging, display bans and pack size restrictions.2

Studies funded and presented by cigarette manufacturers and their business associations are generally not peer-reviewed or replicable and therefore, do not meet standards of academic research.3 A growing body of evidence suggests that estimates of the illicit cigarette trade levels presented in the industry-commissioned reports are often inflated.4–10

Another tactic used by the tobacco industry to exaggerate the scope of the illicit cigarette trade problem is to use illicit cigarette market share rather than the absolute number