Plain tobacco packaging

On Friday 20 May 2016 the Standardised Packaging of Tobacco Products Regulations 2015 came into force. This was confirmed when a last-minute judicial review action by some of the world’s biggest tobacco manufacturers failed.

The Regulations implement EU Directive 2014/40, which brought in a new legislative framework as regards tobacco sales. However, the Directive does not mandate plain packaging. This was added to the Regulations as part of the government’s policy commitment to reduce smoking. The Regulations require all cigarette packets to be a standard colour, with brand names shown in a standard font and size and no other branding on the packet.

Successive UK governments have taken an interventionist approach to health protection. We are used to restrictions on the use of certain products, for example the age restrictions on the use of alcohol and tobacco. We are also used to restrictions on advertising, such as on advertising alcohol and high salt, fat and sugar foods around children’s programming. It is now routine for each budget to increase duty on tobacco and alcohol products by above the rate of inflation.

However, this approach appears to be gathering pace. In this year’s budget the government announced a controversial sugar tax on fizzy drinks (for more information click here). There is also a greater focus on controls on advertising and marketing. Last week saw the announcement of a CAP consultation on advertising high fat salt and sugar foods to children in any context, not just in broadcasting (for more information click here). Similar measures have been seen around the world: Australia introduced a law mandating plain packaging for cigarettes in 2012, while Mexico has instituted a fizzy drink tax.

The UK’s plain packaging law represents a further ramping up of state intervention in the regulation of legal products. Ominously for consumer products companies, this new measure arguably has the effect of confiscating from tobacco brand owners their private property – the trade marks and goodwill under which they sell their products, developed over many years and at great expense – in the name of the public good.

Regulation 13 provides that “nothing in, or done in accordance with, these Regulations… gives rise to a ground for a declaration of invalidity”, and that non-use of a registered trade mark because of the Regulations will constitute a proper reason for non-use, which averts the risk of a mark being revoked for that reason. However, Mr Justice Green, who heard the application, acknowledged that the Regulations do have serious legal and commercial implications:

• Figurative trade marks such as logos now have extremely limited, “vestigial” uses.
• The only significant right these figurative trade marks will give tobacco manufacturers will be to prevent unauthorised use by third parties.
• Word trade marks will continue to be valid but their use will be strictly controlled.
• In practical terms it will be difficult to create new trade marks, especially if the trade mark relies on acquired distinctiveness. Obtaining a registration on this basis requires significant marketing and advertising efforts, which are now almost completely barred to tobacco manufacturers.

As Mr Justice Green himself acknowledged “the commercial value of the trade mark lay in its ability to forge links of recognition or identity and reputation in the minds of consumers” and the new Regulations are designed to prevent tobacco trade marks performing this function. The effect on the tobacco manufacturers will be that, although the trade marks will technically remain valid and in the hands of their owners, decades of investment in marketing and branding will be largely lost.

However, on the basis that (i) the Regulations only curtailed use of the marks and did not amount to expropriation, and (ii) they had been imposed for legitimate public interest reasons, Mr Justice Green firmly rejected the judicial review application. And he made strong criticisms of the industry, describing tobacco usage as a “health evil”, and trade marks for tobacco as “a property right which facilitates and furthers, quite deliberately, a health epidemic”.

Unsurprisingly, given the implications, tobacco manufacturers have been fighting the Regulations, including by way of a challenge to the legality of the EU Directive heard at the Court of Justice of the European Union and last week’s failed judicial review. The matter is of such importance to tobacco manufacturers that two of the four applicants for judicial review have already said that they will seek permission to appeal.

However, the principle behind the Regulations should be of concern to all owners of brands for unhealthy or socially undesirable products. For many years alcohol brand owners have worried that they could be the “next tobacco” but given the government’s focus on obesity, especially in children, soft drink and confectionery brand owners may be at risk. Other legal products over which might also be curtailed on the basis of “legitimate public interest reasons” include the gaming and betting industry, because of problem gambling; and the automotive industry, in light of increasing concern about the link between inactivity and obesity, and also about air quality, in connection with the recent emissions testing scandal. The precedent set by these Regulations, and the reasons given for rejecting this judicial review application, mean that it would be risky for brand owners to assume that the new Regulations are the end point of government intervention in the name of the public interest.