Australia takes on tobacco giants over packaging

The government wants to replace the distinctive colors of various brands with a uniformly drab, olive green packet for all under legislation to be introduced to Parliament in July. Brand names would appear on the front in print dwarfed by health warnings and often gruesome, full-color images of the consequences of smoking, such as mouth cancer and gangrenous toes.
The government expects the so-called plain packaging law to make smoking less attractive to young Australians and further reduce the proportion of smokers within the population from the current 17 percent, compared with around 20 percent of American adults. But since no other country has tried it, there is no proof it will work.
The tobacco industry has warned of unintended consequences and says it will pursue expensive litigation for compensation if the plan proceeds.
Uniform packaging would be easy to counterfeit and lead to a flood of illegal Asian tobacco on the Australian market on which tax isn’t paid, the industry argues.
British American Tobacco Australia Ltd., the Australian market leader known by the acronym BATA, has warned it might slash prices to compete against the illegal product — a move that could encourage more Australians to smoke. With high taxes aimed at dissuading smokers, a pack of 25 cigarettes retails in Australia for about 16 Australian dollars ($17).
“If they keep pushing us down this path with this experimental piece of legislation, unfortunately it’s going to end up in court, and it’s likely to cost millions of dollars, and if they lose, that’s potentially billions of dollars paid by Australian taxpayers,” BATA spokesman Scott McIntire said Sunday.
Marketing experts agree that Australia’s tobacco giants — BATA, Philip Morris Ltd. and Imperial Tobacco Australia Ltd. — have a lot to lose from plain packaging.
The three have effectively been protected from competition for decades. Tobacco advertising was banned from Australian television and radio in 1976, leaving outside brands few means of making themselves known in the Australian market.
Restrictions on advertising have tightened over the years to include print ads, and the government now plans to extend them to the Internet.
Australian National University marketing expert Andrew Hughes said the plain packaging law would be more effective in driving tobacco giants offshore than in reducing demand for an addictive product.
“It’s removing a very important part of modern marketing, which is the brand itself, and these days, that’s worth billions of dollars,” Hughes said. “It’s like taking the Golden Arches away from McDonald’s — it removes equity from a company’s balance sheet overnight.” Opposition leader Tony Abbott will not say whether his conservative coalition will support the legislation until he sees the details. The government argues that this reluctance is explained by BATA’s donating $180,000 to the coalition last year.
Outspoken independent lawmaker Bob Katter dismissed plain packaging as unwarranted interference in a legal product.
“This is rapidly becoming the most restrictive society on Earth,” Katter told reporters last week.
Still, Prime Minister Julia Gillard appears to have enough support for the plain packaging concept for it to scrape through both parliamentary chambers and become law.
BATA said documents obtained under freedom of information laws revealed that the government was prepared to spend millions of dollars fighting big tobacco companies in the courts to mandate plain packaging yet had no credible proof that it would reduce smoking rates.
Health Minister Nicola Roxon argued that the lack of proof was normal because plain packaging has never been tried before. Other countries, including Britain and Canada, have considered plain packaging restrictions, but none has passed the measures.
“The sort of proof they are looking for doesn’t exist when this hasn’t been introduced around the world,” she said last week.
BATA has released a report that found illegal tobacco accounted for 16 percent of the Australian market last year and cost the nation AU$1.1 billion in lost tax revenue.
But Home Affairs Minister Brendan O’Connor accused the tobacco lobby of scaremongering. He said a 2007 survey found that only 0.2 percent of the population — about 33,000 people — used illegal tobacco products more than half the time they smoked.