Philip Morris International Prepares to Fight…

May 10, 2010

Based on the 10-Q that Philip Morris International, Inc. (PM) filed last Friday, we’re betting that its lawyers have been working some long hours lately.

The 75-page Q discloses lots of information about current litigation, initiatives to ban and/or limit ingredients that make cigarettes palatable to consumers, and health warning requirements. But the issue that caught our attention was the section of the filing that relates to what we—ll call —The Shot Heard from the Eastern Hemisphere.

We’re referring, of course, to the April 29 announcement by the Australian prime minister, Kevin Rudd, that, starting July 1, 2012, tobacco products must be sold in plain packaging. Rudd said the law —will make cigarettes less appealing, particularly to young people because packages devoid of color and logos don—t have much pizzazz. (Rudd also announced a few other measures, including an immediate increase of 25 percent in tobacco excise taxes. He said the changes are expected to cut the number of Australian smokers by about 6 percent and raise money for health education programs.)

As one might expect, some lauded Australia’s efforts to reduce smoking, such as the World Health Organization and several anti-smoking groups in Canada, where plain packaging has been a hot topic for many years. In fact, several countries have considered plain packaging laws from time to time, but Australia is the first to enact such a law.

Those denouncing the plain packaging law include tobacco companies. Philip Morris created an entire website (which appears to have been around for a while) to share the message —Plain packaging will create serious problems— It won—t solve them. Besides featuring video clips from retailers and smokers, Philip Morris argues that plain packaging will increase the counterfeit cigarette trade, violate trademark rights, and —will not reduce smoking rates.

In the company’s Quarterly report, after noting that 167 countries and the European Community are parties to The World Health Organization’s (WHO) Framework Convention for Tobacco Control (FCTC), the filing states on page 46:

—As noted above, the Conference of the Parties adopted Guidelines to the FCTC recommending plain packaging. We strongly oppose the imposition of plain packaging. Such a measure would not only constitute an expropriation of our valuable trademarks, but would be a pure and simple confiscation of the core of our business. Transforming the industry into a low price commodity business will not reduce consumption, smoking incidence or initiation. Plain packaging is a misguided measure that will undermine the public health objectives of its proponents. Worse it will impair free competition, jeopardize freedom of trade, stifle product innovation and spur illicit trade and counterfeit activity to the detriment of the legitimate industry, its entire supply chain and government revenues. Further, the imposition of plain packaging would violate the terms of international treaties governing the protection of industrial property and the trade-related aspects of intellectual property rights. PMI will take all steps necessary to ensure that all constituencies understand the consequences of such a measure, and to obtain all protection and relief to which it is entitled under the law….

Thus, it appears that litigation challenging the Australian law is inevitable. But we—ll watch to see whether the next shot comes from a tobacco company like Philip Morris, or from another country that enacts a similar law.

Image source: Muffet via Flickr

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