Bloomberg News

Australia Plain-Pack Law Challenged by Tobacco Companies

March 29, 2012

British American Tobacco Plc (BATS) said an Australian law prohibiting the display of tobacco companies’ logos, labels and trademarks “sterilizes” their intellectual property rights and must be declared unconstitutional.

“The Commonwealth has assumed control over a substantial aspect of the plaintiff’s property, business, goodwill and reputation,” the cigarette maker said in a March 26 filing to the High Court of Australia.

BAT, Philip Morris International Inc. (PM:US) and Imperial Tobacco Group Plc (IMT) are challenging the validity of the Australian law and will present their arguments against it in Canberra beginning April 17. Australia is the first country in the world to ban logos on cigarette packaging, with the law slated to go into effect in December.

The Australian Constitution, like its U.S. counterpart, was drafted recognizing the right of the state to acquire private property for public purposes only if “full indemnification” is provided to the former owner, rather than with the view based on the feudal notion that all property ultimately belonged to the sovereign, Imperial Tobacco’s Australian unit said in its submission to the court.

The tobacco companies have said they will seek billions of dollars of damages from the Australian government should they lose the right to their trademarks.

‘Aggressive Litigation’

The companies’ “aggressive litigation against Australia for implementing plain packaging is just another example of how big tobacco continues to try to intimidate countries,” John Stewart, a senior organizer with the lobby group Corporate Accountability International, said in an e-mail.

“Plain packaging is a cost-effective way to protect the health of children,” Stewart said.

BAT makes Dunhill, Pall Mall and Australia’s best-selling cigarette brand, Winfield. Philip Morris is the maker of Marlboro cigarettes.

At the hearing scheduled for April, the companies will ask the High Court to declare that the plain-packaging legislation results in acquisition of property without proper compensation and that the law is unconstitutional, according to the filing posted on the court’s website yesterday.

The Australian government announced the plan to ban branding on cigarette packs in April last year, along with a 25 percent increase in tobacco taxes and an A$85 million ($88 million) advertising campaign to combat smoking.

Brown Packs

Cigarettes will have to be sold in dark brown packages, with no company logos and the same font for all brands, according to a government statement.

The law passed through the Australian Senate on Nov. 10.

Smoking kills 15,000 Australians each year and costs the nation about A$31 billion annually in health and workplace expenses, according to the government. With 15.1 percent of the population at least 14 years old smoking daily, it is the country’s top drug and preventable illness issue, the government said.

“We won’t be bullied by tobacco companies threatening litigation and we are prepared to fight them if they do,” then- Health Minister Nicola Roxon said after the passage of the law.

Written Submissions

The government is to give its written submissions to the High Court by April 5.

Philip Morris is also pursuing the case in international arbitration. The Australian proposal violates a treaty with Hong Kong and may cause billions of dollars in damages, the maker of Marlboro cigarettes said.

Cigarette packs in Australia already contain graphic warnings including pictures of diseased lungs that cover half the back of a package.

The case is British American Tobacco Australia Ltd. v the Commonwealth of Australia. S389/2011. High Court of Australia (Canberra).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editors responsible for this story: Douglas Wong at dwong19@bloomberg.net


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Companies Mentioned

  • PM
    (Philip Morris International Inc)
    • $83.05 USD
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