Opinionista Ivo Vegter 19 March 2019

Plain packaging for cigarettes is a bad idea

Australia adopted plain packaging for tobacco products in 2012, but it has made hardly any difference to smoking rates. It does, however, destroy valuable brand equity, expose consumers to lower-quality products, and stimulate the black market in counterfeit and untaxed tobacco. It also sets a dangerous precedent for other supposedly unhealthy products.

Plain packaging for cigarettes, as pioneered by Australia and recommended by the World Health Organisation’s Framework Convention on Tobacco Control, is coming to South Africa.

In the shoddy socio-economic impact assessment on the new Tobacco Bill – which I critiqued in detail in 2018 – there is no actual assessment of the risks or benefits of enforcing plain packaging for tobacco products. The document employs circular reasoning from unsupported assumptions to conclude that plain packaging will somehow be beneficial to the campaign to reduce smoking.

None of the potential drawbacks of the measure – such as the potential for commercial revenue losses for producers or retailers, the destruction of brand assets, potential job losses, the distortion of market signals, unwittingly exposing consumers to lower quality products, providing easy cover for counterfeit or untaxed tobacco products, entrenching large incumbents and strangling competition, and the loss of consumer choice – were even noted, let alone assessed.

If one doesn’t care about intellectual property rights or freedom of choice, one might tolerate these drawbacks if one could be sure that plain packaging would actually make a substantial difference, and hence, save lives. But there is little reason to suppose it will.

There is some research support for the notion that plain packaging with graphic health warnings makes tobacco products less attractive to consumers. One hopes the researchers were handsomely paid for this stunning discovery.

There is no research, however, that actually links plain packaging to reduced smoking rates. Australia led the world by introducing plain packaging laws in 2012. Unfortunately, the empirical evidence from Australia suggests that this measure makes little difference to smoking rates, if any at all.

Recent data shows that despite having plain packaging and the highest cigarette price in the world, Australian “smoking rates have stalled and the national target levels have not been met”. In two states, smoking rates are actually rising.

Statistics vary depending on whether you use the National Health Survey for 2017/18 or the National Drug Strategy Household Survey 2016, but both agree that smoking prevalence, which halved since 1991, has not significantly decreased in the years since the introduction of plain packaging.

Not long after the introduction of plain packaging in 2012, the Australian government twice raised taxes on tobacco. The cost of tobacco is the most common motive people cite for wishing to quit smoking, ahead of their personal health and fitness. Considering that there was also a pre-existing downward trend in smoking prevalence, plain packaging appears to have had no effect, at best.

It is hard to separate the impact of different policies, all of which are intended to reduce smoking rates. They all correlate with the trend in smoking prevalence, and since there is no experimental laboratory where one can eliminate variables, it is impossible to say which measure or measures actually caused the trend.

Nevertheless, governments will defend their policies, even if it means manipulating the evidence. Take this supposed “proof” that plain packaging cut smoking rates, based on an Australian Department of Health study. It starts with the disclaimer that “it’s difficult to attribute concrete numbers given how many anti-tobacco measures are in place”, but then dives headlong into the claim that a staggeringly precise 0.55 percentage point reduction in smoking prevalence is attributable to plain packaging.

The chart on that page indicates when plain packaging was introduced, but omits the dates of two separate 12.5% tax increases on tobacco, in December 2013 and September 2014, which are significant confounding factors.

Note also that the actual numbers, a modest decline from 19.4% to 17.2% between 2012 and 2015, differ significantly from those reported in the National Health Survey – a much smaller decline from 16.1% in 2010/11 to 14.5% in 2014/15 – and the National Drug Strategy Household Survey, a very slight decline from 12.8% in 2013 to 12.2% in 2016. If the estimates of smoking rates are so wildly different, perhaps one shouldn’t put too much stock in claims that a half-point (sorry, 0.55 point) reduction can be attributed to specific policy intervention.

It is arguable, in fact, that plain packaging could have been detrimental to the anti-smoking cause. Once you remove overt branding from packages, people tend to make their buying decision on price. When they buy cheaper cigarettes, they pay less and smoke more. Different interventions can easily have opposite effects that roughly cancel each other out in the end, and the law of unintended consequences is never more apt than when it is applied to well-intended government regulation.

The idea that plain packaging could actually be counterproductive has some support from other countries that introduced it.

In the UK, the date for full compliance with new plain packaging laws was May 2017. However, year-on-year data from before and after this date shows that smoking rates actually increased by up to 1.8 percentage points. A study by Europe Economics found that the introduction of plain packaging in the UK had a statistically significant positive direct effect on tobacco consumption. That same study found no statistically significant effect in France, but the French Health Minister, Agnès Busyn, told the National Assembly in 2017 (translation): “Unfortunately, in 2016, official sales of cigarettes increased in France: the neutral package did not reduce the official sale of tobacco.”

In 2015, a study in Australia by the Institute for Policy Evaluation concluded:

In 2012, the Australian Government introduced plain packaging to ‘curb smoking’. Three years later, publicly available data reveal that plain packaging has not reduced smoking rates or tobacco consumption. Even though the data were collected by different organisations, in different states, and in different ways, they tell a consistent story that does not support claims of plain packaging as an effective public health measure.

There is a large body of literature on the evaluation of tobacco control measures in the fields of economics and of public health. According to this literature, certain measures are very effective. Plain packaging is not one of them. There are several possible reasons for the ineffectiveness of plain packaging. For example, smokers may have switched to cheaper or illicit products, or they simply do not care enough about whether a pack is branded or not.

Given the huge discrepancy between the initial expectations of what plain packaging can achieve and the actual results after three years of experience with the measure, further research on the reasons for the ineffectiveness of plain packaging is certainly needed.”

The failure of plain packaging in other countries not only indicates that South Africa should abandon the project to introduce the measure here. It also suggests that one cannot simply dismiss the arguments against plain packaging as being trumped by public health concerns.

Among these arguments is the destruction of brand assets. Intellectual property (IP) is well-recognised in law, and often constitutes a large share of a company’s value. Depriving companies of their brand assets is an extreme measure, which can only be justified by overwhelming evidence that doing so is in the public interest.

The global Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, under the auspices of the World Trade Organisation (WTO), explicitly guarantees the use of trademarks in Article 20:

The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings.”

In a recent challenge to Australian plain-packaging laws, the WTO ruled that they were not in violation of the TRIPS agreement, on the basis that the agreement also permits members to “adopt measures necessary to protect public health and nutrition”, and therefore the trademarks were justifiably “encumbered by special requirements”.

The International Trademark Association (INTA) is appealing the decision, however, on the very reasonable grounds that plain packaging does not actually protect public health. Several other court cases, in different countries, have upheld the right of governments to invalidate the branding rights of tobacco companies, but these could also be overturned on the basis that the policy has not achieved its intended purpose.

INTA also points to the correlation between plain packaging and counterfeiting. It says plain packaging laws “will facilitate the spread of counterfeit tobacco products by making them easier to produce and more difficult to detect”.

In Australia, the prevalence of illicit cigarettes rose from 11.5% when plain packaging was introduced in 2012 to over 14% three years later. The proportion of smokers admitting to buying unbranded illicit cigarettes soared from 14.2% in 2012 to 21.3% by the end of 2015.

In the UK, counterfeit plain packages have also been found, and they are of a quality that makes them very hard to spot. What’s worse, in the past, illicit cigarettes were sold cheaply. With plain packaging, however, counterfeit packets can be sold at the same price as legal packets, allowing counterfeiters to make “a small fortune”.

In South Africa, where illicit cigarettes priced at an average of R10 per pack are already the market leaders in the informal sector, the introduction of plain packaging would be catastrophic.

The risk is not only to the fiscus, which collects no excise tax on illicit tobacco products, but also to consumers, who cannot reliably tell what a given product contains. Brands are an important indicator of quality. A lack of branding, by contrast, provides cover for product adulteration and contamination.

Once plain packaging has set a precedent in the tobacco industry, which is an easy target for finger-wagging bureaucrats, the idea could easily be extended to a whole range of product categories that the health nannies consider to be bad for us.

Slippery slope fallacy!” I can already hear the nannies on social media shout. But it isn’t.

It is not unimaginable that bottles of Château Mouton Rothschild, which once bore the artwork of Salvador Dali and Pablo Picasso, might one day be required to have plain packaging and images of oesophageal cancer or a cirrhotic liver,” concluded an editorial in the respected medical journal Lancet in November 2017.

Selling high-calorie foods in plain packaging could help in the battle against obesity,” wrote the science editor of The Guardian, quoting Wolfram Schultz, one of the winners of the richest prize in neuroscience in 2017.

Junk food is also in the cross-hairs.

What it is necessary to do is to create a neutral environment for consumers, because at the moment we have an environment that is obesity-promoting,” Bebe Loff, director of the Michael Kirby Centre for Public Health and Human Rights at Monash University, told Charis Palmer, writing in The Conversation in 2012 (cached).

We don’t even give people a good sort of chance to combat the environment that’s encouraging them to buy more of these goods.”

Could financial plain packaging break Australia’s debt addiction?” asks business reporter Michael Janda for ABC News.

Cigarettes, alcohol, sugary food, fast food, financial services, all subject to plain packaging proposals from respected authority figures. If that isn’t a slippery slope, I don’t know what is.

Governments should not have the right to interfere in voluntary transactions for legal products between consenting adults. They should not have the right to violate a company’s economic rights and destroy its brand assets, simply because they say – without evidence – that such a measure will reduce the company’s sales, which might be good for the health of some consumers. All too often, such measures don’t work, have unintended negative consequences, or both.

It would benefit everyone if plain packaging laws were rejected from the outset, and that starts with plain packaging for tobacco. It does do harm, and it does no good. If that isn’t a reason to reject a public policy proposal, what is? DM

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