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London - Big Tobacco is no stranger to a fight. In a London courtroom this week, industry lawyers will battle to preserve the last vestige of branding for products that date back to Queen Victoria’s reign.
Imperial Tobacco Group and Philip Morris International are among cigarette producers set to argue at a six-day hearing starting on Thursday that the government will infringe their intellectual property rights through rules for so-called plain packaging.
The legislation is set to take effect in May, forcing them to sell their cigarettes in austere brown packs, with corporate logos replaced by graphic images of diseases blamed on smoking.
“Tobacco companies are really worried,” said Enrico Bonadio, a senior lecturer at City Law School. “They’re aware that they’re about to lose the last communication tool they have.”
The four companies that control almost all of the £18.7bn UK market, which also include Japan Tobacco and British American Tobacco, are trying to prevent the UK from eliminating the logos and images of historic brands such as Imperial’s Lambert & Butler, which is 181 years old.
Advertising bans mean that the packaging - which tobacco companies view as a “silent salesman” - is the only way their brands still see the light of day. If big tobacco loses, other countries may become more confident in stamping out logos.
“If the government wins, internationally the legal and political momentum behind plain packaging may be unstoppable,” Patrick Basham, director of The Democracy Institute think tank, said by phone.
About 20 countries are following the UK or are considering doing so, according to Bonnie Herzog, an analyst at Wells Fargo Securities. In France, which has the highest proportion of smokers of any country in western Europe, the senate is debating a plain-packaging proposal this month after the national assembly approved such legislation.
Canadian Prime Minister Justin Trudeau has put the policy near the top of his list of health priorities.
“Smoking is catastrophic for your health and kills over 100 000 people every year in the UK,” the country’s Department of Health said.
“Standardized packaging is an important public health measure aimed at discouraging children from smoking and helping smokers to quit.”
Big tobacco has been here before. The industry unsuccessfully sued Australia - the only country to have implemented plain packaging - over the policy in 2012.
In that case, the Australian High Court ruled plain packaging breached their intellectual property rights, though the legislation was upheld because the government was deemed not to have acquired the property, as it received no benefit from taking it.
A similar conclusion in the UK could help the tobacco companies win this time around, according to Erik Bloomquist, an analyst with Haitong Securities in London.
The core of the tobacco companies’ arguments will center around whether the legislation is a breach of either European intellectual property laws or community trademark regulations. Separately they’ll argue plain packaging is disproportionate and irrational. They only need to convince the judge on one of these points for the legislation to be struck down.
“The UK government made a serious error of judgment by failing to properly take into account the Australian government’s own data, which shows that plain packaging is not achieving its public-health objectives,” BAT said, saying the measures “deprive” the tobacco companies of property without payment. The other three cigarette makers declined to comment.
Tobacco logos are already hidden from view in shops in the UK as display bans started to take effect in 2012. The UK has progressively clamped down on tobacco ads, prohibiting newspaper and billboard ads in 2003.
While Australia’s smoking rate has dropped to 16.5% in 2014 from 18% in 2012, whether plain packaging is responsible, or whether it’s linked to other factors, like tax increases, is hotly debated. Both the government and the industry will be citing the impact of the legislation to support their case.
The industry will argue that as a result of undifferentiated packaging, more Australian smokers opt for cheaper brands, which is likely to have increased consumption among smokers. By quashing tobacco branding, the UK government believes children will be discouraged from taking up smoking and smokers will find it easier to quit.
If the government defeats the challenge from big tobacco, it will still be too early to celebrate.
Earlier this year, a larger group of tobacco companies took a case to the European court in Luxembourg challenging an article within the EU’s updated Tobacco Products Directive which allows member states to bring in their own, more stringent rules around the standardisation of packaging.
If they’re successful, it will render the UK regulations unlawful.
Juliane Kokott, an advocate general at the EU Court of Justice is due to give her non-binding opinion in the case December 23. The court normally follows with a ruling some four months later.
Plain packaging isn’t yet being considered in many developing nations, most of which aren’t seeing a decline in smoking rates and are key to the industry’s growth prospects.
“The industry hopes that by tying up government officials and the court system for as long as it can, it might put off governments in poorer countries than the UK from following our example,” said Deborah Arnott, chief executive of Action on Smoking and Health, a non-profit organisation known as ASH.
Still, some legal experts think the government will win out.
“The arguments in the hands of the government are stronger than those of the companies,” City Law School’s Bonadio said. “This challenge will be doomed to fail.”
