Aug 26, 2011

Australia is poised to become the first nation to require tobacco products to be sold in plain packages, a move that could see other countries follow suit and crimp earnings of companies like British American Tobacco Plc.

The laws, passed by the lower house yesterday and due in the Senate in September, will ban logos and color variations on cigarette packages. Packets will have to be olive green and carry health warnings within six months from Jan 1, 2012.

“Other countries will follow,” said Anne Jackson, chief executive of Ash Australia, a non-profit lobby group funded by Cancer Council Australia and the Heart Foundation. “This is a light shining the way for others to do the same and many countries are already considering it.”

Health Minister Nicola Roxon announced the move last April, along with a 25 percent tobacco tax increase and a A$85 million (A$89 million) advertising campaign to combat smoking, which the government says kills 15,000 Australians each year. Companies have since introduced their own advertising campaigns and legal actions against the move.

British American Tobacco Plc (BATS) this week lost an appeal for the release of Australian government documents the company said would help it fight the law. The company plans to ask the Australian High Court to review the ruling.

The company will next take its case to the Parliamentary Legal and Constitutional Affairs Committee, with a hearing scheduled for Sept. 13, Scott McIntyre, a spokesman for the tobacco company, said today in a phone interview. So far the focus has been on the health aspect of the legislation, he said.

Legal Implications

“There are a lot of issues outside of health that have to be looked at,” McIntyre said. “There are serious repercussions here. The tobacco company will pursue the case in courts, seeking billions of dollars in damages, if the law is enacted.”

Smoking costs Australia about A$31 billion per year in health and workplace costs, according to the government. With 15.1 percent of the population aged 14 or over smoking daily, it is the country’s top drug and preventable health issue, the government says.

“There isn’t any safe amount of tobacco you can smoke,” Roxon told Channel Ten television today. “It will kill you eventually and we obviously want to make sure the message is loud and clear.”

The tobacco companies say the bill is a breach of the Australian Constitution, as plain packaging exceeds the Commonwealth’s acquisition powers. They said they would seek damages for losing the right to use their trademarks, which they claim the government is seizing, illegally.

Brand Identification Questions

“This would clearly undermine the value of manufacturers’ trademarks and destroy the goodwill built up over many years in consumer brands,” British American Tobacco said in a June 6 submission to the government. “Plain packaging will frustrate brand identification and consumer choice, making smuggled branded product more acceptable to consumers.”

Australia’s top court has never addressed the question of whether banning the use of trademarks amounts to an acquisition by the government, George Williams, a constitutional law professor at the University of New South Wales in Sydney, said.

“The tobacco companies have a hard road ahead,” Williams said. “They’re quite likely to lose.”

Philip Morris International Inc. (PM), the world’s biggest publicly traded tobacco company, said the Australian law also violates a 1994 treaty with Hong Kong that prohibits the forced removal of trademarks.

Legal Strategies Considered

“It is disappointing that the House of Representatives has approved plain packaging even though the Government admits there is no evidence that the policy will be effective at reducing smoking,” Philip Morris said in a statement today in response to the passage in the lower house.

The tobacco companies plan to argue the law is a breach of the World Trade Organization’s Trade Related Aspects of Intellectual Property Rights, or TRIPS.

According to TRIPS, the use of a trade mark in the course of trade “shall not be unjustifiably encumbered by special requirements.” The tobacco companies say the Australian law breaches that article.

“As a result of the Government’s actions, Philip Morris has little option but to pursue our claim for substantial compensation through international arbitration against Australia and to also consider legal claims under domestic Australian law,” Philip Morris said.

Source: Bloomberg (August 24, 2011)

Aug 24, 2011

A U.S. judge on Tuesday set a September hearing on the tobacco industry’s request to block Food and Drug Administration requirements for new graphic labels and advertising that warn consumers about the risks of smoking.

Judge Richard Leon ordered a quick Sept. 21 hearing on the industry’s request for a preliminary injunction, despite objections by the Obama administration, which argued that the companies would not suffer irreparable harm without it.

With the September hearing, Leon said he hoped to have a decision sometime in October. He warned the parties that he had a full calendar of trials over the next several months, making it harder to fit the tobacco case into his schedule.

Any decision by Leon is likely to be appealed.

Reynolds American Inc’s (RAI.N) R.J. Reynolds unit, Lorillard Inc (LO.N), Liggett Group LLC and Commonwealth Brands Inc, owned by Britain’s Imperial Tobacco Group Plc (IMT.L), sued the FDA over the labels, saying they are unconstitutional.

The labels are part of a 2009 law passed by Congress that requires color warnings on the cigarette packages and on printed advertising. The industry says the warnings, due to go into effect by September 2012, force them to “engage in anti-smoking advocacy” on the government’s behalf.

They argued they need a quick ruling because they would have to start in November or December and spend millions of dollars to comply with the requirements. Justice Department attorneys said the money was a small fraction of the companies’ net sales.

The case is R.J. Reynolds Tobacco Co et al v. FDA, U.S. District Court, District of Columbia, No. 11-01482.

Source: Reuters (August 23, 2011) 

Aug 24, 2011

Cigarette giant British American Tobacco (BAT) plans to appeal an Australian court ruling that handed the tobacco industry a setback in its campaign against the world’s first ban on branded cigarette packaging.

The Australian government is legislating to enforce plain packaging for cigarettes in a bid to reduce smoking, angering the industry which has described the reform as a misguided attack on their brands and intellectual property rights.

After the plan was first announced, BAT asked the Federal Court to force the government to release its secret legal advice on the plan, suspecting Canberra’s own lawyers had warned it long ago that such a move would infringe on property rights.

The industry hopes such advice would strengthen its case for a legal challenge against the validity of the proposed law, which is expected to be approved by parliament this year.

“We are definitely looking to appeal and will try to get to the High Court as soon as possible,” Scott McIntyre, a spokesman for BAT’s Australian arm, told Reuters.

“We are thinking that if they are not prepared to release it, maybe it’s because it demonstrates that the plain packaging laws are flawed.”

Another tribunal last week rejected a similar request for government legal documents by U.S.-based Philip Morris.

Health Minister Nicola Roxon said on Wednesday the government was determined to implement the plain-packaging reform, which is due to take effect next year and give Australia the world’s most restrictive anti-smoking laws.

“I don’t really think it’s helping them but ultimately they’ve been clear that they will fight this tooth and nail and we’ve been just as clear that we won’t let them bully us into stopping this,” Roxon said.

The lower house of parliament, where the government has a one-seat majority with the backing of Green and independent MPs, began considering the laws on Wednesday.

The conservative opposition wants some changes to allow some very modest form of branding on cigarette packets, but it too is broadly in favor of the reform.

New Zealand, Canada, the European Union and Britain are considering similar laws and governments in those countries are closely watching to see if Australia succeeds.

Analysts say plain packaging could also spread to emerging markets such as Brazil, Russia and Indonesia.

Australia’s total tobacco market revenue grew to about $10 billion in 2009, though smoking generally has been in decline.

Smoking is the largest preventable cause of disease and death in the country.

Source: Reuters (August 24, 2011)

Aug 22, 2011

The tobacco industry’s latest legal challenge to increased government regulation may not hold up in court, but it could mean it will be years before cigarette packs carry pictures of a smoker’s corpse or other graphic images meant to convey the dangers of smoking.

Such a delay could save cigarette makers millions of dollars, both in lost sales and increased packaging costs, industry experts say.

Four of the five largest U.S. tobacco companies sued the federal government Tuesday in an attempt to ward off the new labels that are to cover half their packages with disturbing images of the effects of cigarette smoking. The companies said the requirement, set to take effect in 2012, violates their free speech rights.

Research firm IBISWorld has estimated the new labels would cause a decline of less than 1 percent in overall U.S. tobacco sales in 2013. But some marketing experts say the images could have a much stronger impact on consumers than the current written warnings on cigarette packs.

R.J. Reynolds Tobacco Co., Lorillard Tobacco Co. and the other companies also say the labels would cost millions of dollars to print. Altria Group Inc., parent company of the nation’s largest cigarette maker, Philip Morris USA, is not a part of the lawsuit.

Experts said that even if the tobacco industry loses its lawsuit, it could at least push back the launch date for the new labels by a few years.

“It probably will slow down the implementation process because they’ll ask for an injunction,” said John Banzhaf, a law professor at George Washington University and a former public interest attorney. “It’s not automatic, but since the court hasn’t had a chance to look at all the evidence they’ll likely put a hold on things and retain the status quo.”

A U.S. District Court judge in Kentucky rejected similar arguments last year in a lawsuit filed by the same companies. Banzhaf noted that the tobacco industry has filed similar lawsuits in Norway, Australia, Ecuador and other countries around the world.

Michael Cummings, chairman of the department of health behavior at Roswell Park Cancer Institute in Buffalo, N.Y., said the tobacco companies appear to be shopping for an amenable courtroom to take on the case.

“They are trying to find a friendly federal judge who will put a stay on the warning labels, let it spend years in court,” Cummings said. He noted he testified as an expert witness in a Louisiana class-action lawsuit against the tobacco industry a decade ago. The industry is just now paying the charges, he said.

The tobacco industry has been regulated for decades, but the government stepped up its oversight in 2009 with the Family Smoking Prevention and Tobacco Control Act. It allows the Food and Drug Administration to regulate a number of aspects of tobacco marketing and manufacturing, though the agency cannot ban nicotine. It can ban candy flavorings and marketing claims such as “low tar” and “light.” It can also regulate what goes into tobacco products and publicize those ingredients.

The new labels would carry graphic pictures meant to portray the effects of smoking, such as a picture of a corpse with its chest sewed up and the words: “Smoking can kill you.”

Professor Deborah Mitchell of the Wisconsin School of Business said that the new labels represent the government’s most drastic attempt to curb cigarette marketing, making the industry’s lawsuit an almost inevitable business decision.

“There is a massive amount of psychological evidence that people are more affected by pictures and visuals than words,” said Mitchell, who specializes in consumer psychology. “The question is: When the government leverages that information to have a negative impact on an entire category, is that fair?”

Analysts say that tobacco companies are increasingly relying on their cigarette packages to build brand loyalty and grab consumers. It’s one of their only advertising levers left to pull since the government has curbed their presence in magazines, billboards and TV.

“These health warnings are going to take up about half the size of a pack,” said Philip Gorham, an equity analyst at Morningstar. “It makes it harder for smokers to see the red of Marlboro or the green of Newport.”

Gorham said that the main marketing tool left to tobacco companies is their database of smokers, to whom they mail fliers and coupons. They can also compete by offering lower prices, although that hurts their profit margins.

The companies that filed the lawsuit said the warnings no longer simply convey facts allowing people to make a decision on whether to smoke. They instead force them to put government anti-smoking advocacy more prominently on their packs than their own brands, the companies say.

“Never before in the United States have producers of a lawful product been required to use their own packaging and advertising to convey an emotionally charged government message urging adult consumers to shun their products,” the companies wrote in the lawsuit filed in federal court in Washington, D.C.

The proportion of Americans who smoke has been steadily declining for decades, from about 42 percent in 1965 to about 20 percent now, according to Jim Royal at The Motley Fool. The cigarette companies have been hurt by high taxes, high-profile lawsuits, and an increasing number of cities that are banning smoking in public places — though there was an uptick in cigarette sales when the recession took hold in 2008, according to IBISWorld.

But the tobacco industry is not teetering. Companies are finding relief in the small but growing sector of smokeless-tobacco products, including dissolvable tobacco lozenges. They continue to enjoy high profit margins and have been able to raise prices even on top of the higher taxes, Royal said. They also have tremendous opportunity for growth in international markets.

Source: Chicago Tribune (August 17, 2011)

Aug 22, 2011

New “constituent” warnings have been announced by the Thai Ministry of Health. The new regulations will require tobacco companies to print information on both lesser surfaces (i.e., the “sides”) of cigarette packages, occupying 60% of each side surface area.

The 10 different labels are as follows:

1. Tobacco smoke contains poison: Hydrogen cyanide.
2. Nicotine is the addictive substance in tobacco smoke.
3. Tobacco smoke contains poison: Carbon Monoxide.
4. Tobacco smoke contains the carcinogen, Formaldehyde.
5. Tobacco smoke contains the carcinogen, Benzopyrene.
6. Tobacco smoke is the most important poison in the home.
7. Tobacco smoke contains a radioactive substance, Polonium 210.
8. Tobacco smoke contains the carcinogen, Nitrosamine.
9. Tobacco smoke contains more than 250 poisons.
10. Tobacco smoke is the most important human carcinogen.

Each label shall be rotated on every 5,000 cigarettes packages and on every 500 cigarette cartons.

The new regulation was published in the Royal Gazette on July 28, 2011 and will be effective on January 28, 2012.

Source: Action on Smoking and Health Foundation Thailand (August 22, 2011)

Aug 22, 2011

Irish tobacco manufacturers have claimed graphic images on cigarette packets will not force smokers to quit the habit.

The Irish Tobacco Manufacturers’ Advisory Committee (ITMAC) made the claim as it emerged five tobacco firms plan to sue the US Food and Drug administration (FDA) over a new law that will force them to place graphic health warnings on cigarette packets.

The firms in question, RJ Reynolds Tobacco, Lorillard Tobacco, Commonwealth Brands, Liggett Group and Santa Fe Natural Tobacco argue the plan violates their constitutional right to free speech, as it requires firms to promote the government’s anti-smoking views.

Similar legislation, which will force tobacco companies to print photographic warnings on cigarette packaging, was debated in the Dáil last month after being passed by the Seanad. The Department of Health and the Office of Tobacco Control has agreed a selection of 14 images for display on cigarette packaging.

The Irish Cancer Society claims graphic pictures on packaging are particularly effective as a health warning.

However, a spokesman for ITMAC said the move will not lead to changes in smokers’ behaviour.

“ITMAC believes that graphic warnings will not add anything further to adult smokers’ knowledge as the risks associated with smoking are well-known and graphic images do not lead to changes in smokers’ behaviours.

“A recent study commissioned by the British Department of Health on the effectiveness of graphic warnings have borne this out. ITMAC agree all tobacco products need to feature an appropriate health warning and recommend text health warnings for boldness and legibility and to ensure clarity of message,” he said.

The study carried out by the Public Health Consortium in Britain found adding graphic images to packets did not affect behavioural responses to smoking.

“Post-implementation of the pictures, no increases were observed in the range or depth of awareness of the health risks associated with smoking or secondhand exposure to smoke. Cigarette smoking prevalence and cigarette consumption did not vary and there were no increases in behavioural responses such as attempting to stop smoking, foregoing a cigarette when about to smoke one or stubbing a cigarette out,” said the report.

Source: Irish Examiner (August 18, 2011)

Aug 22, 2011

The Federal Government says it remains confident its plain packaging laws for cigarettes will pass the Parliament, despite the Opposition threatening to block elements of the legislation.

Legislation introduced in Parliament in July forces cigarettes to be sold in plain packs with a large, graphic health warning, while the second bill removes company trademarks from the packs.

The Opposition says associated changes to the trademark laws are not needed and it will not support them.

But Health Minister Nicola Roxon says intellectual property laws need to be changed and she is hopeful the legislation will be passed.

“I am very confident of the broad support that we have received, even if Mr Abbott doesn’t want to support it,” she said.

“We’ve had very enthusiastic support from most of the independents, but also from a number of Liberal backbenchers, so I would be surprised if this legislation is unable to pass.”

Ms Roxon says the legislation will mean Australia has the toughest tobacco promotion laws in the world.

The tobacco industry has previously warned of several legal challenges to the plain packaging legislation in a move it says could cost the Government billions of dollars.

In the United States, four tobacco companies have filed a lawsuit against the Food and Drug Administration (FDA) over what they say are unconstitutional requirements for warning labels on US cigarette packaging.

The third largest cigarette manufacturer in the US, Lorillard, says it is “challenging nine new cigarette warnings as an unconstitutional way of forcing tobacco manufacturers to disseminate the government’s anti-smoking message”.

Meanwhile, a key element of the Federal Government’s overhaul of the health system has passed the lower house of Parliament.

The National Health Performance Authority is being set up to report on hospital standards, and the legislation will now be considered by the Senate.

Source: ABC News (August 17, 2011)

Aug 17, 2011

Five tobacco companies filed a lawsuit in federal court in Washington late Tuesday challenging the constitutionality of regulations and graphic warning labels under the 2009 law that imposed federal regulation on tobacco.
The companies lost a similar complaint last year in the United States District Court in Kentucky when District Judge Joseph H. McKinley Jr., ruled they could be forced to put graphic images and warnings covering the top half of cigarette packages by the fall of 2012. That ruling is now pending before the Sixth Circuit Court of Appeals.
The new suit challenges specific regulations that led to the F.D.A. selection of nine graphic warning labels, said Floyd Abrams, a lawyer for Lorillard. He said it was not uncommon for such a 1-2 punch when controversial regulations follow a controversial law.
Mr. Abrams argues the labels and pictures violate the First Amendment protections for commercial speech. The graphic images include a corpse and a man blowing smoke out of a tracheotomy hole in his neck.
“The government can require warnings which are straightforward and essentially uncontroversial, but they can’t require a cigarette pack to serve as a mini-billboard for the government’s antismoking campaign,” Mr. Abrams said in an interview.
Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, a Washington group that supported the law, was unimpressed by the new complaint. He said the only new facts were the nine label pictures.
“Having raised the same issues before the court in Kentucky and lost, Lorillard is obviously forum shopping to try to find a judge somewhere who will rule in their favor,” Mr. Myers said in an interview.
The 41-page lawsuit was filed by Lorillard, the third-largest cigarette maker in the United States; R.J. Reynolds, the second-largest; and three smaller companies. Altria, parent company of Philip Morris, maker of the dominant Marlboro brand, supported the new law and has not joined these lawsuits.
Jeff Ventura, a spokesman for the F.D.A., said the agency did not comment on pending litigation.

Source: The New York Times (August 16, 2011)

Aug 12, 2011

Next year will bring a doubling in the size of the words that appear on cigarette packages to warn consumers of the dangers of smoking.

Starting in April 2012, cigarettes produced and sold in China will bear a new warning label containing letters that will be no less than 4 millimeters in height. That will be twice the size of the current minimum, which stipulates that the letters be at least 2 mm from bottom to top, according to a notice written by the China National Tobacco Corp and published on the State Tobacco Monopoly Administration’s website.

Despite the intentions, many tobacco-control experts said the step is “minor” and that it fails to deal with the chief issue.

“There is no use in making the font size even 100 times bigger if the warning is pointless,” said Wu Yiqun, deputy director of the ThinkTank Research Center for Health Development, a Beijing-based non-governmental organization that advocates for the adoption of stronger smoking-control measures.

Both Wu and Yang Gonghuan, director of the tobacco control office of the Chinese Center for Disease Control and Prevention, said the warning that now appears on cigarette packs is too weak. It says: “Smoking is harmful to your health. Quitting early is good for your health.”

“The package should inform consumers of the dangers of smoking in accordance with requirements adopted by the World Health Organization Framework Convention on Tobacco Control. (It should say that) smoking causes lung cancer, coronary disease and makes people grow old,” Yang said.

China decided in 2005 to ratify the convention, which also requires that tobacco warnings cover a third of the surface of cigarette packs.

“Even if the size of the words is doubled, it still doesn’t meet those standards,” Yang said. “The Chinese practice is to draw a line to demarcate a third of a cigarette package, where the warning should be, but the words put on it are still very small.”

Experts said graphic health warnings could be printed on cigarette packs and used as a “scientific, direct and shocking” deterrent to smoking.Throughout the world, more than 1 billion people in 19 countries live under laws that require the packaging of various types of tobacco products to bear large, graphic health warnings. They often show pictures of black lungs and festering mouth sores, according to the World Health Organization.

China, though, is excluded from those rules.

Both Wu and Yang said the fundamental barrier to better control of tobacco use in the country is the fact that the China National Tobacco Corp, the country’s largest cigarette-maker, is a subsidiary of the State Tobacco Monopoly Administration, China’s tobacco regulatory body.

Wu said the tobacco control office has conducted surveys in recent years in which 90 percent of the respondents said graphic warnings would help them come to the grips with the thought that they should quit smoking.”But the national tobacco administrator also sells cigarettes and wouldn’t do something that would harm its sales,” Wu said.

Both Wu and Yang said the Ministry of Health should take a lead in the campaign against smoking and the government should place more of a priority on protecting people’s health than on economic interests.

“On the cigarette packaging of more than 40 countries, there are government warning that say things like ’85 percent of lung cancer victims smoked’,” Wu said.

China, home to more than 300 million smokers, contains the largest population of smokers in the world. Official statistics show that 1.2 million Chinese residents die of smoking-related diseases every year.

Source: China Daily (August 11, 2011)

Aug 11, 2011

Imperial Tobacco has become the third major cigarette supplier to launch a brand targeted at women in just four months.

Richmond Superslims are the latest piece of NPD to hit the market ahead of the introduction of the ­tobacco display ban for larger stores next April.

The product, which is being heralded as the UK’s first superslim brand in the value-priced cigarette sector, rolled out to stores this week and is available in standard and menthol 20 packs priced £6.16 the same price as Richmond Superkings.

The standard pack is embossed with a stylish pink design that is replaced by a mint green version on the menthol variety.

As with similar recent launches from BAT and Philip Morris Vogue Perle and Virginia S by Raffles respectively the new packs are clearly designed to appeal to female smokers.

Richmond Superslims were a “positive innovation” for the value cigarette sector as a whole, claimed Imperial Tobacco consumer marketing manager Sue Tranter.

“The superslim and menthol segments of the tobacco category have been in significant and consistent growth,” she said. “Growth in recent years and our ongoing market monitoring told us the time was right to launch this new elegant superslim brand at a great value price.”

Tranter added that more than one in 10 cigarette purchases in the UK were from the Richmond range.

BAT’s launch o f Vogue Perle in April was criticised by health charities, who ­accused it of overplaying the “trappings of style, supermodels and staying slim”.

Source: The Grocer (August 6, 2011)