Big Tobacco Faces Fight In U.K.
11 December 2015 - 7:02PM
Dow Jones News
(FROM THE WALL STREET JOURNAL 12/11/15)
By Saabira Chaudhuri
LONDON -- Big Tobacco's legal challenge against the U.K.'s
plain-packaging laws kicked off Thursday in a hearing that involves
arguments about trademark protection and property deprivation.
British American Tobacco PLC, Imperial Tobacco Group PLC, Japan
Tobacco International and Philip Morris International Inc. are
presenting legal challenges against plain packaging in London's
High Court in a high-stakes six-day hearing that could set a
precedent for other countries in Europe to strip branding from
cigarette packs.
The U.K. Parliament in March voted to ban branding on cigarette
packs as of May 2016. Cigarettes would be sold in uniform packs
stripped of distinctive logos and colors -- and adorned with
graphic health warnings.
Similar moves are afoot elsewhere, with France recently passing
legislation to require plain packaging starting in May. Australia,
Ireland and Hungary have also passed plain-packaging laws; a BAT
lawsuit against Australia in 2012 was unsuccessful. A total of 20
countries are looking at plain-packaging regulation, according to
Wells Fargo analyst Bonnie Herzog. U.S. free-speech laws make
plain-packaging legislation all but impossible there.
BAT, Philip Morris, Imperial and Japan Tobacco all filed suits
with the High Court in London this summer, alleging that plain
packaging violates U.K. and European law.
Tobacco companies' ability to advertise to consumers in the U.K.
has been squeezed for years, first by a ban on newspaper and
billboard ads in the early 2000s and later by laws that banned
tobacco products from being displayed in stores.
Global tobacco consumption has been steadily declining, leaving
companies reliant on persuading smokers to buy pricier brands, with
quality and brand image at least partly communicated through
packaging.
"Removing or significantly weakening branding turns a
differentiated marketplace built on innovation and reputation, with
products at a range of price points, into very much a commodity
marketplace where the primary decision is made on price," said John
Noble, director of the British Brands Group, a trade
organization.
Imperial's director of group corporate affairs, Axel Gietz,
earlier this year described plain-packaging legislation as "a big
mistake," noting that "no one starts or continues to smoke because
of the color of the pack."
The six-day hearing will include arguments about how plain
packaging breaches the trademark and intellectual-property rights
enshrined in European Union law. Tobacco companies are also
reaching back to a British legal precedent that has its roots in
1765 that says the government can't deprive people of their
property without appropriate compensation.
Exane BNP Paribas analyst James Bushnell who attended the
Thursday hearing, said the tobacco companies also argued that there
is no conclusive evidence that plain packaging is an effective tool
in reducing smoking. A verdict is due in early January.
"The judge in the case appeared to be very reasonable,
understanding of the arguments and open to all possible outcomes,"
said Mr. Bushnell.
But Enrico Bonadio, a professor at City Law School who has spent
years researching legislation around tobacco, said the tobacco
companies are facing an uphill battle.
"The arguments used by the U.K. government are stronger than
those used by tobacco companies," he said.
Trademark registrations give owners the right to prevent others
from exploiting the trademark but don't offer a positive right to
use the brand, leaving open the possibility that how the brand is
used can be restricted by the government, Mr. Bonadio said.
He also questioned the tobacco industry's allegation that the
government is depriving companies of property without compensation,
noting that the government isn't expropriating brands, just
limiting their use. Further, he said, any compensation paid would
be used to boost the sale of harmful products, contrary to the
public interest.
Later this month, an advocate general at the European Court of
Justice will give a nonbinding opinion on the EU's revised Tobacco
Products Directive, an article of which allows member states to
implement packaging rules that go beyond the directive's mandate
that 65% of a pack be covered by a health warning. A binding
decision will follow the advocate general's. If the article is
struck down, the U.K.'s plain-packaging ruling won't be legal.
At the hearing that started Thursday, tobacco companies are also
expected to argue that bringing in plain packaging at same time as
the directive is unnecessary and doesn't allow time for the revised
directive's implications to become apparent.
(END) Dow Jones Newswires
December 11, 2015 02:47 ET (07:47 GMT)
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