Philip Morris Braces For Ireland’s Tobacco Plain Packaging Legislation

Earlier this year, the Philip Morris (NYSE: PM) CEO had commented that his company would engage in a dialogue with regulators in Ireland over their proposed tobacco plain packaging legislation. ^[1] The Irish attempt at such regulation is following close on the heels of Australia’s landmark bill passed in 2012, on which we have written before (See Impact Of Strong Regulations On Philip Morris In Australia). Experts have suggested that the Irish legislation can influence other countries in Europe to follow suit. ^[2] We have written earlier on Philip Morris’ lobbying efforts to thwart the passing of a similar regulation by the European Union (See Philip Morris Lobbying The E.U.). In this article we take a closer look at the plain packaging regulation in Ireland.

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What Are Plain Packaging Laws

The idea behind plain packaging is simple – to make cigarette packs ugly in order to turn off youngsters from smoking. The removal of attractive packaging is primarily aimed at preventing young people, especially children, from picking up the habit of smoking. It is not so much intended for old smokers, who are already addicted to it. Proponents of the idea suggest that if they can prevent youngsters from smoking, they can potentially reduce the number of casualties arising from the dangerous habit in the long run. ^[3]

Why Is Ireland Implementing Such A Law

It is estimated that on an average, children in Ireland start smoking at the age of 16.4 years. This is younger than the equivalent age for any other country in Europe. Seventy-eight percent of smokers start smoking before the age of 18. Smoking claims 5200 lives a year in Ireland. It is estimated that to replace those who die or quit smoking, fifty non-smokers will have to take up smoking. Most people start smoking before they are eighteen, when they are still vulnerable to attractive packaging and light colors that give cigarettes an aura of being cool or causing less harm. This legislation aims to reduce the number of young people who take up smoking on account of the glamorous cigarette pack covers. ^[4]

Public Health (Standardized Packaging of Tobacco) Bill 2014

The tobacco plain packaging regulation in Ireland goes under the name Public Health (Standardized Packaging of Tobacco) Bill 2014. It is aimed at reducing the appeal of cigarettes, increasing the effectiveness of health warnings and preventing the misleading of consumers about health effects of tobacco. Under its provisions, graphic warnings have been mandated on all cigarette packs. This law prohibits use of coloring, decorations and embossing on cigarette packs. A cigarette pack can also not contain information or statements that suggest it is less harmful than other tobacco products. For instance, a cigarette cannot be labelled low-tar. Manufacturers will, however, be permitted to print the brand name and variant name of the cigarettes on three sides of the pack. ^[5]

The Bill was put forward by Ireland’s health minister James Reilly. Reilly has since been removed from cabinet. This is expected to cause delays in passing the bill, which Reilly had hoped to see passed by 2016. September 18 was the last date for objections to the bill to be submitted. ^[6] Nine countries representing 40% of the total E.U. population objected to this law on the basis that it violated their right to free trade. These countries are Italy, Bulgaria, the Czech Republic,Greece, Poland, Portugal, Romania, Slovakia and Spain. ^[7]

Objections Galore

Ireland is also facing pressure from across the Atlantic to withdraw the bill. The Governor of North Carolina has written to Ireland’s Ambassador in the U.S. objecting the introduction of plain packaging of tobacco. He has claimed that the proposed legislation threatened the livelihood of farmers and cigarette company workers. North Carolina is a major tobacco growing and cigarette making state in the U.S. Big tobacco companies such as RJ Reynolds (NYSE: RAI) and Lorillard (NYSE: LO) are among the largest employers in the state. ^[8]

A European anti-tax group called The Taxpayers Association of Europe has suggested that the plain packaging law will lead to commoditization of cigarettes. This, it is claimed, will lead to price war among tobacco companies, thereby reducing their profits and the taxes they pay. This reduction in taxes, the group claims, poses a threat to the Irish economy. They have further suggested that it will also encourage illicit tobacco goods, which similarly threatens the economy, in addition to the health hazards it poses. ^[9]

The tobacco companies themselves are considering suing the Irish Government over this law. French Bank BNP Paribas backed research firm, Exane BNP Paribas opined that the tobacco companies had a robust case against such legislation. It said the tobacco companies stand to gain billions of dollars in compensation if such laws are implemented across Europe. This, they suggest, could deter other countries from following Ireland’s lead. ^[10]

The tobacco companies concern for the market size of cigarettes in the European Union has led them to use chambers of commerce, retail groups and farming organizations to lobby the Irish government to hold back on this legislation. ^[11] The number of cigarettes sold in the European union is expected to decrease from 450 billion currently to 375 billion in 2021. If the adoption of smoking among the younger segments of the population is thwarted by more effective regulations, it could mean the market size could shrink further.

Following Australia’s Lead

Ireland’s effort at plain packaging legislation has received vociferous support from Prof Mike Daube, a key figure in Australia’s similar effort. Australia’s cigarette plain packaging law, which came into effect in December 2013, is supposed to be the most restrictive in the world. The committee that recommended it was chaired by Daube. He claims this law has had a role to play in  reducing the smoking rate in Australia from 15.1% to 12.8% in three years. He also said the impact on young people was important, since plain packaging takes the glamour out of cigarette packs and reduces their usefulness as fashion accessories. Urging Ireland to ignore the objections of the tobacco industry, Daube said that its legislation could have huge international implications. ^[2]

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1. Plain Packaging And Philip Morris [↩]
2. Irish Plain Packaging Tobacco Law [↩] [↩]
3. Minimal Impact Of Plain Packaging Laws [↩]
4. Plain Packaging FAQs [↩]
5. Public Health (Standardized Packaging of Tobacco) Bill 2014 [↩]
6. Plain Packaging Of Tobacco Products [↩]
7. E.U. States Objecting to Irish Plan [↩]
8. U.S. Governor Urges Not To Use Plain Packaging [↩]
9. Plain Cigarette Packaging [↩]
10. E.U. States Lodge Concerns [↩]
11. Must Fight Tobacco Lobbyists [↩]