Bloomberg News

Australia Said to Face WTO Complaint Over Tobacco Packaging, Ban on Logos

March 05, 2012

Proposed cigarette packaging, to be introduced under Australia's cigarette plain-packaging law. Photographer: Carla Gottgens/Bloomberg

Proposed cigarette packaging, to be introduced under Australia's cigarette plain-packaging law. Photographer: Carla Gottgens/Bloomberg

Australia may face a complaint at the World Trade Organization over its decision to ban trademarks and logos on tobacco products, according to two people with direct knowledge of the matter.

The complaint, which says the plain-packaging law violates global intellectual-property rules, will probably be lodged with the Geneva-based trade arbiter this month, as soon as this week, said one person. At least three governments including Ukraine will be involved, said the other person. They declined to be identified because the complaint isn’t public.

Australia is the first country to require identical cigarette packaging. As of Dec. 1, 2012, cigarettes there will have to be sold in dark brown packets, with no company logos or images and the same font for all brands. Imperial Tobacco Group Plc (IMP), British American Tobacco Plc (BATS) and Japan Tobacco Inc. (2914) are among companies that have challenged the law, which Australia is extending to include cigars and loose-leaf tobacco products.

The law violates “several provisions” of agreements protecting intellectual-property rights, Ukraine said at a Feb. 28 WTO meeting on the matter. “Serious concerns about the lack of consistency of the act and its regulations with fundamental international rules on the protection of intellectual property have been echoed by a number of other member governments and leading international intellectual property and business organizations throughout the world.”

Evidence Falls Short

Countries including Chile, Colombia, Cuba, the Dominican Republic, El Salvador, Honduras, Indonesia, Jordan, Mexico, Nicaragua, Nigeria, Turkey, Zambia and Zimbabwe also say the Australian ban breaks trade rules. They have challenged Australia’s scientific evidence and said the law will unnecessarily restrict commerce because the country’s public- health goal can be met by other means.

The missions of Ukraine, Zimbabwe, Mexico, Indonesia and Nigeria in Geneva didn’t return calls or declined to comment.

Australia said at the Feb. 28 WTO meeting that it had “comprehensively responded to all the claims made by the Dominican Republic and others.”

The rule is ‘not anti-trade, it’s anti-cancer,’’ Australian Trade Minister Craig Emerson said in an e-mailed statement today in Canberra. “It’s in the public-health interests of the Australian people and the Gillard government will never give up on Australia’s sovereign right to look after the health of its people.”

Luis Manuel Piantini, the Dominican Republic’s ambassador to the WTO, dismissed Australia’s contention that it had addressed governments’ concerns about the law. “To date, Australia has not responded adequately to these concerns, but has given only incomplete answers that do not demonstrate the existence of any solid evidence that might support these measures,” he said in a statement to the February meeting. Piantini wasn’t available to comment on the WTO complaint.

Tobacco Treaty

The World Health Organization’s Framework Convention on Tobacco Control, the first international treaty aimed at cutting tobacco use, includes provisions on non-pricing measures to lower demand, including regulations on packaging and labeling.

While the treaty doesn’t specifically address the use of trademarked brands or logos, it requires signatories to ensure that packaging and labeling don’t promote a tobacco product by “any means that are false, misleading, deceptive or likely to create an erroneous impression about its characteristics, health effects, hazards or emissions.”

WHO Director-General Margaret Chan said on Nov. 23 that major tobacco companies were harassing governments including Australia, Norway and Uruguay in a bid to overturn cigarette package-labeling rules.

Company Lawsuits

New York-based Philip Morris International Inc. (PM) sued Uruguay in 2010 over a law mandating that health warnings cover 80 percent all cigarettes packages, saying the rule undermined its intellectual-property rights and violated provisions under a bilateral investment treaty.

Philip Morris, the world’s largest publicly traded tobacco company, served an arbitration notice against the Australian government on Nov. 21 to claim “billions of dollars” in damages due to the plain-packaging law. Its Philip Morris Asia Ltd. division said the legislation violates Australia’s Bilateral Investment Treaty with Hong Kong.

Two weeks later, Imperial Tobacco Australia began a challenge in the country’s top court against the law, arguing it is unconstitutional because the government would acquire its property improperly. Japan Tobacco followed suit on Dec. 14, saying the legislation “will stop JTI from using its brands, which are its most valuable property, and is unconstitutional.” BAT, Europe’s largest cigarette maker, has also taken legal action against the Australian law.

Smoking Deaths

Smoking kills 15,000 Australians each year and costs about A$31 billion ($33 billion) in annual health and workplace expenses, the government says. With 15 percent of the population aged 14 or over smoking daily, it’s the country’s top drug and preventable health issue, officials there say.

A U.S. federal district court issued a preliminary injunction on Nov. 7 delaying implementation of a Food and Drug Administration rule requiring graphic images and textual warnings on the top half of the front and back of cigarette packages.

Lorillard Tobacco Co., R.J. Reynolds Tobacco Co. (RAI), Commonwealth Brands Inc., Liggett Group LLC and Santa Fe Natural Tobacco Co. sued the FDA, saying its mandates for cigarette packages, cartons and advertising violate the First Amendment.

Once the WTO complaint is filed, talks must be held for at least two months among that parties to resolve the dispute. After that, the complaining governments can ask for a WTO panel of judges to rule. Judges typically rule within six months, after which either party can appeal.

The European Union is also considering plain packaging for tobacco products.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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