ALEC Opposes Australian Implementation of “Tobacco Plain Packaging Bill”

ALEC Opposes Australian Implementation of “Tobacco Plain Packaging Bill” 

Washington, D.C. (June 14, 2011) – The American Legislative Exchange Council (ALEC) opposes Australia’s passage of the “Tobacco Plain Packaging Bill 2011” and urges Australia to reconsider this ill-advised policy.

“If passed, this law threatens free market principles and amounts to a government seizure of what is often a company’s most valuable asset – its trademark,” said ALEC’s International Relations Task Force Director Karla Jones. “The law is alarming because it is inconsistent with Australia’s obligations in several international agreements to which Australia is a signatory.  ALEC fervently hopes that Australia will re-evaluate this misguided policy before it spreads.”

Australia recently closed its comment period regarding the plain packaging proposal.  As proposed, the law would require cigarettes to be sold in plain packs by July 2012.  The bill mandates dark olive brown boxes devoid of logos or any other design features either on the cigarettes themselves or on the packages. The brand name would be printed in a uniform font style and size, and graphic health warnings would cover 90 percent of the back surface of the box and 75 percent of the front.

This measure, as written, violates intellectual property rights (IPR) provisions in the Paris Convention for the Protection of Industrial Property (Paris Convention), the World Trade Organization (WTO) Agreement on Trade Related Aspects of Intellectual Property (TRIPS Agreement), the WTO Agreement on Technical Barriers to Trade (TBT Agreement) and the US-Australia Free Trade Agreement (AUSFTA).

There is no compelling evidence that the Plain Packaging proposal will achieve its stated objectives: to reduce the initiation of tobacco use and overall tobacco consumption and to remove the package’s ability to mislead and deceive consumers. Because these plain packaged products will be much easier to reproduce, they will be more vulnerable to counterfeiting. Current tobacco packaging is neither misleading nor deceptive – health warnings are on every pack – but the same cannot be said of contraband, plain packaged products, which are completely unregulated.

This draconian approach undercuts the competitive advantage of name brands, resulting in a proliferation of generic label cigarettes. Both counterfeit and generic products tend to be significantly cheaper, and while there is no established correlation between plain packaging and reduction in cigarette use, there is a correlation between low cigarette prices and increased consumption. Data from the U.S. Public Health Service supports the argument that the devaluing of brands due to the introduction of counterfeits and generics into the market drives prices down and consumption up, giving real-world confirmation to economists’ supply and demand model.

Further, studies have shown that increased availability of generic cigarettes drives up cigarette consumption. As would be expected from their price, generic cigarettes appeal most to the poor, elderly and most dependent smokers. This proposal, then, will exploit those who can least afford to smoke and those who suffer most from smoking.

Even organizations in the public health community recognize this legislation will undermine its stated health objectives. With stunning candor, Australia’s Department of Health Minister Nicola Roxon admits that there is little evidence to support the efficacy of the Plain Packaging proposal.  Further, Roxon acknowledges that the law might lead to property rights violations and as such contains provisions to compensate companies that successfully challenge the law on the grounds that IPR were violated.

Intellectual property (IP) is the engine driving the innovation economy. IP protections are vital to the functional, global economy and initiatives that counter them should be stopped.  Plain packaging sets a bad precedent and is counter to free market principles and consumer freedom.

Plain packaging policies contradict the international system of IPR protections and will result in ramifications that ultimately devitalize the free market system while exacerbating the very challenges it purports to address.

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The American Legislative Exchange Council (ALEC) is the nation’s largest nonpartisan individual membership association of state legislators, with nearly 2,000 state legislators across the nation and more than 100 alumni members in Congress. ALEC’s mission is to promote free markets, individual liberty, and federalism through its model legislation in the states.