The Tobacco Plain Packaging Controversy 2.0

Are you a smoker? Do you see the vomit inducing imagery to your left ? Do you think you’d feel like buying a cigarette box that looks like that ? No ?

Well that’s how you know plain packaging works.

(very long post follows)

With its 2011 passage of the Tobacco Plain Packaging Act(TPPA), Australia took a landmark step on the tobacco control front. It forced all tobacco companies to ensure their cigarettes are packaged in standard olive green boxes, with 90% of the back and 70% of the front to be plastered with graphic warnings, removing any indicator that differentiates between two brands save for the name of the brand itself. This is obviously not something the companies’ would willingly concede to without a fight, considering that in most countries, advertisements of any sort by tobacco companies remain strictly banned. The space to promote cigarettes is shrinking, making these cigarette boxes the site of a fierce Industry vs Government war.

In the dispute before the Australian High Court, the companies alleged that the government had seized their intellectual property by disallowing the display of their trademarks on the cigarette pack. The companies fought valiantly to protect their instruments of death, but unfortunately for them, the bench referred to their arguments as based on a “fatal flaw”. The Court upheld the tobacco plan packaging legislation, in a major victory for anti-tobacco groups and dying lungs across the world, dismissing the claims advanced by Japan Tobacco Inc, British American Tobacco, Imperial Tobacco and Philip Morris International.

‘Freedom, Authenticity, Master of Destiny’ – with Marlboro, Philip Morris International sure made the road to lung disease look rather fashionable. In countries like Germany, they fed us a pile of some fine looking porky pies on television and in print advertising – their “Don’t be a maybe, Be a Marlboro Man”(er, what?) campaign told us, in rejecting their goods, we’re apparently missing the essence of the cowboy and the coveted Marlboro values of ‘True, Bold and Forever Forward’ .

I bet you didn’t see THAT one coming.

What if cigarettes had never been invented, and a bold entrepreneur had presented his magnificent invention to the government in this day and age? The government would have done all its homework and come up with evidence reporting the deadly effects of smoking, offering nothing but an outright rejection of the toxic product. Reality, however, is that Mr. Philip Morris came up with his cigarettes in 1847, and government allowed it to thrive for the longest time (while raking a huge, HUGE amount of revenue in the mean time) before someone told the authorities to wake up and smell the medical evidence. Of course, tobacco companies tried (in vain) to counter that with some rather comical adverts (see left)

The legal validity of the legislation in the light of the TRIPS, GATT and Technical Barriers to Trade (TBT) is currently under intense deliberation at the WTO, the direct resultant of a complaint filed against Australia’s TPP by five cigarette exporting countries – Ukraine, Honduras, Dominican Republic, Cuba and Indonesia.

What’s even more interesting is that PHI and its tobacco allies, in their efforts to sustain the concerned governments’ support, have decided to cover some of legal costs of the Dominican Republic and Hondura. And not just that, its lobbying efforts, often working on a carefully planned strategy of intimidation, look like they’ve been paying off too. Take Ukraine, for instance – only hours before contesting Australia’s law, Ukraine itself passed a bill seeking to ban all forms of tobacco advertising (hypocritical much?), in what was seen as significant stepping stones for a cigarette exporting country. The catch, however, is that Ukraine has not exported ONE cigarette to Australia since the 2005, which really puts into question its whole rationale behind joining hands with countries engaging in cigarette exports with Australia  having legitimate concerns regarding the impact on their sales. Watch John Oliver’s brilliant episode on the tobacco industry’s bullying and lobbying tactics on Last Week Tonight here.

Certain important arguments surrounding primary provisions of the international agreements currently under dispute at the WTO have been discussed below, along with other important considerations central to the plain packaging deliberation – all stemming from my limited understanding of their implications, and there may very well be other elements to be considered beyond what has been mentioned in this post.

The IP Argument

The plain packaging controversy is hardly new. In the 1990s, British American Tobacco received legal advice that existing international treaties and agreements offered little protection to their anti-plain packaging argument. The issue has assumed renewed significance, and has taken centre stage at the WTO, with the legitimacy of giving health concerns precedence over trade forming the crux of the entire debate.

• TRIPS Agreement

In an earlier post, Thomas extensively analyzed how the plain packaging legislation may influences trademark rights as under Articles 15.4, 16.1 and 20, of the TRIPS agreement, in the light of Australia’s TPP. Here, exception clauses Section 7 and 8, although having no overriding authority over other provisions of the agreement , exert strong interpretative force that enable an understanding of the rationale behind the very provision for exceptions to obligations imposed upon signatories to the agreement.

When speaking of public health as an exception under Article 8, it becomes significant also to mention the 2001 Doha Ministerial Declaration on the TRIPS Agreement and public health. This Declaration lucidly laid down that fulfillment of TRIPS-imposed obligations must not be at the cost of public health, and the agreement therefore “can and should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health…”– which lends ample support to the argument that public health measures must assume precedence over trade-related obligations, and even so with regard to a product so toxic that multiple agreements have been signed and conventions established to deliberate on the subject of tobacco control.

• Technical Barriers to Trade (TBT) Agreement

Article 2.2 of the TBT Agreement reads, “Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products”.

When speaking of Australia’s Tobacco control legislation in the light of the abovementioned section, it becomes clear that three elements need to be analysed.

Firstly, Australia’s TPPA falls well within the ambit of Section 2.2 above by constituting a technical regulation within the meaning of Annex 1.1 of the TBT Agreement. Annex 1.1 holds that to constitute a technical regulation, a document must

• lay down requirements with regard to a) product characteristics or their related processes and production methods, b) terminology, symbols, packaging, marking and labeling requirements that may be associated with such products and processes
• demand mandatory compliance with its provisions

Secondly, that the classification of Australia’s TPPA public health measure as a legitimate objective is something of an indisputable fact. The TPPA states that its objects are to improve public health by discouraging the taking up of smoking and encouraging people to give up smoking by seeking to :

(a)  reduce the appeal of tobacco products to consumers; and

(b)  increase the effectiveness of health warnings on the retail packaging of tobacco products; and

(c)  reduce the ability of the retail packaging of tobacco products to mislead consumers about the        harmful effects of smoking or using tobacco products

Thirdly, it must be analysed whether the legislation as a technical regulation is more trade restrictive than necessary. That the Plain Packaging Act, in prohibiting the sale of products that do not comply with the stated requirements, is without doubt trade restrictive. Whether this trade restriction can be construed to be more than necessary, that is the point of debate.

The problem is, that any attempt to entirely ban cigarettes will entail several political and economic considerations (considering tobacco sale contribute a significant amount of revenue in a large number of countries ) and will simultaneously be faced with strong opposition – and I’m not talking about the tobacco industry, I’m talking about rights activists who may just about cry foul and claim their legitimate freedom and right to choice has been curtailed.

Isn’t stringent regulation the ONLY key then?

Somehow, it seems to me that when talking about whether product regulations hurt a very actively profiting and flourishing worldwide death trade more than necessary, I think ‘necessary’ is an ocean of limitless regulatory opportunities that stop at nothing short of bringing the industry down to its knees, and stripping it down to what it really is.

Do I sound too brutal there? Tell that to Mukesh.

While opposition groups suggest the existence of alternatives to plain packaging that are more pro-trade – such as increasing the tax on tobacco products, the essential argument remains that considering the world’s 967 million smokers (as of 2012), and the many more newly initiated,  the idea is not to glorify cigarettes by placing them on high pedestals and making them look like unattainable must-haves, but to show them for what they really are. And either way, for a significant number of smokers who are addicted to smoking, an increase in costs may very well not provide significant impetus to reduce or quit smoking.

The need of the hour is to tackle the problem at its very root, and strip the cigarette down to its bare essentials so people can see it in all its glory, as nothing but a toxic disease inducing device – and plain packaging has shown great prospects of doing just that. The argument is that the standardised packaging coupled with the repulsive graphic warnings will do far more than what any other measure has till date. This was only a theory until the introduction of the plain packaging law in Australia, after which it was recorded that smoking rates fell at their fastest pace in more than two decades. Further, scientific evidence confirming the positive impact of attractive designs and packaging by making the idea of smoking itself ‘hip’ and appealing adds to this reasoning.

Alternative approaches to the issue in an effort to make it less trade restrictive to protect the thriving tobacco industry may not make equivalent contributions in comparable spans of time towards affecting the prevalent rates of smoking as significantly as the TPPA does. In pursuance of the more relevant objective of public health measures, the imposition of certain trade regulations upon a very hazardous industry should not be construed as invalid and in violation of international trade agreements.

• The General Agreement on Tariffs and Trade (GATT)

Article III : 4 of the GATT agreement, classified under the title National Treatment on Internal Taxation and Regulation, holds :

The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.

In Korea — Various Measures on Beef, the Appellate Body explained that three elements must be present to establish the presence of a violation of Article III:4.

“For a violation of Article III:4 to be established, three elements must be satisfied: that the imported and domestic products at issue are ‘like products’; that the measure at issue is a ‘law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution, or use’; and that the imported products are accorded ‘less favourable’ treatment than that accorded to like domestic products”.

The element at issue here is the third. It seems to appear that the plain packaging regulations indiscriminately apply to all tobacco based products, without favouring one over another – completely line with the Framework Convention on Tobacco Control. However, here it becomes necessary to establish a distinction between de facto and de jure forms of discrimination. In Canada-Autos, the Appellate Board emphasized that Article III:4 of the GATT 1994 covers both de jure and de facto inconsistency

The TPP Act seems to incorporate no specific provision that accords national products treatment any more favourable than that accorded to imported tobacco products, amounting to no discrimination de jure. However, when deciding whether de facto discrimination occurs, it becomes pertinent to examine the effects of such a legislation. For instance, considering that Australia imports a number of cigarettes manufactured by foreign brands that may be far more well known and popular than its own local brands, the regulation may very well affect the former far more detrimentally than the latter, which may just amount to discrimination by resulting in unfavourable treatment towards imported cigarette brands.

Assuming that Article III :4 of the GATT has thus been breached, it seems that General Exception provision Article 20 (b) comes to the plain packaging legislation’s rescue by including the legislation within its necessary to protect human, animal or plant life or health ambit as in the case of the TBT Agreement.

I emphasize that the analysis pertaining to the international agreements discussed above is only based on my opinion, and I am sure that there are several other elements that remain to be considered and discussed – it seems quite difficult to definitively anticipate the outcome of this case.  It remains to be seen how WTO’s expert panel interprets the above issues.

What Next? : The Slippery Slope Argument

Imperial Tobacco played it smart in its anti-plain packaging campaign, effectively generating concerns as to whether the regulation spelled oncoming doom for other industries selling ‘disfavoured’ products like candy, chocolate and processed foods, raising what they called the slippery slope argument. The worry was that as in the case of cigarette boxes, where trademark related rights were sidelined to focus on public health measure and plain packaging was made a mandatory requirement, the government may use the opportunity to spread its recently rediscovered tentacles and bring other industries within the ambit of a similar legislation citing health concerns. These concerns, however, comprised part of a clever strategy to save its business. Australia banned cigarette advertising decades ago in the 1990s and has till date not been followed by similar bans on any other product – there is a rather plausible reason for this that Imperial

Philip Morris International and all its tobacco allies have always known – tobacco’s harmful implications and addictive tendencies necessitate a need to prevent its glorified marketing in a world where millions in the world die of smoking-related diseases every year – far more than any other comparable addictive products like alcohol. The very existence of a Framework Convention on Tobacco Control (FCTC) is indicative of the growing concerns associated with the ill effects of smoking – there exists no international agreement advocating abstinence from any other product, and it is really, truly, very unlikely that anything of the sort will ever crop up in the future either – unless of course, state governments suddenly decide that public dental health and physical fitness must become the subject of international debate and deliberation.

The Forbidden Fruit Theory

Adam and Eve were as happy as they could possibly have been, before an evil somebody brought to their notice something beautiful that exists that they were deliberately being kept away from. The evil somebody did what the tobacco companies are doing right now – he aggressively advertised the Forbidden Fruit, until Adam and Eve finally gave in.

Some fear that’s exactly the scenario that plain packaging in nations across the world will present – and this, I’m afraid, is a legitimate worry.

The mandatory placement of graphical warnings and packaging requirements on the boxes can easily increase its ‘attractive value’, stemming from the appeal often associated with experimenting with the illicit and the forbidden – inducing young adults to play daredevil and try their hand at that-which-must-not-be-touched.

Further, standardized packaging would leave behind only one distinguishable, competing factor – price. Brands would participate in a brutal price war, which could bring prices tumbling down to low numbers, making them much more cheap and affordable than before. This coupled with a jump in the sale of illicit tobacco, because standardized packaging makes it easier to counterfeit products would result in the complete backfire of the entire plain packaging program.

What this means for India

Since India intervened as a third party in the WTO  disputes filed by Cuba, Indonesia, and the Dominion Republic, the outcome of these disputes will have a major impact on how India views its current laws on cigarette packaging. India is essentially in favour of Australia’splain packaging legislation, and even made its position clear at the WTO Council on Trade-Related Aspects of Intellectual Property Rights (TRIPS Council) on 7 June 2011.

As Thomas elucidates here, the Indian government, inspired from Australia’s move, has amended the  Cigarettes and Other Tobacco Products (Packaging and Labelling Rules), 2008, mandating all cigarette boxes to have 60% of the surface area covered by graphic warnings and 25% covered with textual warnings on both sides of the package. Not long before the Act was amended, the Allahabad HC in a judgement reported here also suggested incorporating more stringent provisions with regard to cigarette packaging in a case reported here.

How the WTO actually decides on the legitimacy of the tobacco industry’s concerns in the light of Australia’s strong public health measure against tobacco usage will determine what the implications on Indian laws will be.