NZ Cigarette Plain Packaging Law would see Imperial Tobacco Sue for Compensation

Source from:  Stuff 06/27/2016

If New Zealand brings in "plain packaging" for cigarettes, Imperial Tobacco will fight for compensation, its global spin doctor says.

But Dr Axel Gietz said he hadn't done the calculations on how much compensation the global tobacco giant would want.

This year could see New Zealand introduce plain packaging laws, reducing cigarette packs to unattractive uniform boxes with only the name of the brand in small, standard print, and horrifying pictorial health warnings on them.

New Zealand's aiming to go smoke-free by 2025 with the help of "plain packaging" for cigarettes, though with the graphic health warnings "horror packaging" might be a more accurate description. Anti-smoking campaigner Tariana Turia is shown here in 2013.

Imperial Tobacco had a roughly 22 per cent market share in New Zealand, and its brands like West and JPS were the way it fought to grow its share, Gietz said. If it was restricted from using its brands, it would fight.

"I hope it will not come to this point, but it has to be clear. If you take something away from somebody you can say the higher good is public health so you take away their property, but you have to compensate for the property."

He said: "The value of our brands is immense. I can't give you any figures here."

Gietz is in New Zealand to oppose the introduction of plain packaging, a measure designed to slow the uptake of smoking among the brand-conscious young.

But Gietz said plain packaging hadn't worked in Australia, the only country in the world to so far introduce it.

"You have two phenomena that are new. Illicit trade has gone up by 25-plus per cent, and almost in parallel under-aged smoking has gone up by 30 per cent. Unintended consequences.

"If the criminals found Australia, they will find New Zealand," he said.

Gietz also said plain packaging could prove to be the start of a "slippery slope" which sees the brands of the likes of alcohol-makers next come into the sights of public health advocates.

The Australian Government said in a report that plain packaging is working, but Gietz said: "If you read that closely, they will say, 'Shucks we are not really sure this is down to plain packaging or something else, because let's not forget that in parallel they introduced [draconian] tax hikes of 12.5 per cent per year."

Taking away the brands cigarette companies use to fight for market share would spark a price war, he said.

"That triggers a down-trading process because the consumer can't go by the brands that he knows and has loyalty to. He'll just go to the next cheaper product.

"New Zealand will go into this eyes wide open, because these will be predictable outcomes."

Stephanie Erick, director of Action on Smoking and Health (ASH), warned against believing big tobacco's claims on plain packaging.

"Big tobacco understands that it works. That's why they (Imperial Tobacco) sent the head of corporate affairs here to little, old New Zealand to talk to New Zealanders about it."

She pointed to the UK Chantler report, and the Irish Hammond report, both of which said  the evidence indicated standardised packaging would reduce the rate of children taking up smoking. Both the UK and Ireland are on track to bring in plain packaging on cigarettes.

Erick said: "Our MPs here in New Zealand need to pass this law as soon as possible. The delay tactics should not be working here in New Zealand. We need to take on the industry just as the Australians did."

She said cigarette branding works.

"Simple, bold, colourful packaging works with young people. We know through work with young people through the ASH Year Ten Survey that brand recognition is very strong."

The introduction of plain packaging could have an impact on the tax deductions that big tobacco companies pay in New Zealand.

That's because big tobacco companies pay royalties to related companies overseas to be able to use cigarette brands. If the value of the brands falls, so may the amount that can be written off against tax.

British American Tobacco, for example, paid tax deductable "royalties" of $9.5 million to related parties overseas in the year to the end of December.

Imperial Tobacco deducted an expense of $12.3m in the year to the end of September 2015 for "intellectual property expenses" paid to related parties.

Gietz said: "The value of a brand when you can no longer use it, of course it drops." Enditem