The World Trade Organisation upheld Australia’s right to impose plain-package label restrictions on the sale of tobacco products, dealing a blow to the cigarette industry, according to two people close to the situation.
A WTO dispute-settlement panel backed Australia’s argument that the rules it set in 2011 don’t violate trade law because they qualify as a legitimate public health measure, the people said, asking not to be identified because the decision isn’t yet public. The initial notification of the ruling was circulated to the parties of the dispute on May 2, according to a spokesman for the WTO who declined to comment on its content.
Plain packaging may hurt smaller cigarette makers the most if smokers increasingly adopt the best-known options such as Marlboro or Camel given the absence of marketing. Photo: Daniel Acker
The decision could usher in a new wave of global tobacco restrictions from other countries that have sought to deter smoking among their citizens through the use of plain packaging rules. Australia was the first country to prohibit tobacco logos, and many countries have hesitated to implement such measures after four tobacco-producing countries filed complaints in 2012 and 2013. Philip Morris International and Japan Tobacco have argued that such rules could set a precedent for other countries to implement new labelling rules for tobacco, alcohol and junk food.
Imperial Brands, which sells cigarettes under the Kool and Gauloises brands, led declines among tobacco stocks, dropping as much as 2.8 per cent. Plain packaging may hurt smaller cigarette makers the most if smokers increasingly adopt the best-known options such as Marlboro or Camel given the absence of marketing. Imperial said this week it’s testing caffeine energy products and planning to expand more in e-cigarettes as more countries enact plain packaging rules.
“This is not good news for the cigarettes industry in the long-term,” Eamonn Ferry, an analyst at Exane BNP Paribas, said by email. “If plain packaging talks hold in emerging markets, the opportunity to trade-up consumers to higher priced brands may be hindered.”
The full WTO ruling will be released in July, the people said. The parties to the ruling – including Cuba, the Dominican Republic, Honduras and Indonesia – will then be permitted to appeal the decision, according to WTO rules.
Australian trade officials in Canberra and Geneva did not respond to requests for comment. Philip Morris didn’t respond to requests for comment and a spokeswoman for Japan Tobacco said the company had not seen a copy of the ruling.
The cases were launched in 2012 and 2013. The countries that complained argued that Australia’s plain packaging law imposed unfair restrictions on the use of trademarks, geographical indications and other markings in violation of several WTO agreements.
Legislators in France, Hungary, Ireland, New Zealand, Norway, Slovenia and the U.K., have already adopted their own plain packaging rules and similar laws are under consideration in Canada, Turkey, Singapore and South Africa.