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WTO tobacco decision on Australia's plain packaging laws: Could these legal principles be extended to other products?

Published: 9 May 2017

By Joe Lederman (Managing Principal, FoodLegal)

© Lawmedia Pty Ltd, May 2017

To what extent can a national government impose restrictions on product packaging while still complying with its international obligations?  With media reports suggesting a favourable outcome for Australia in the World Trade Organisation dispute surrounding Australia’s introduction of “plain packaging” laws for tobacco products, it seems that even drastic restrictions can be justified in some circumstances.  This article explains the importance of packaging in the context of the “plain packaging” case, and analyses the potential impacts for the packaging of Australian food products.

The importance of product packaging

Many companies, including food companies, invest considerable resources into product packaging.  The packaging is an important way to convey the messages about their brand that will attract customers to the product, its attributes and to the reputation associated with the brand.

At the same time, the Australia New Zealand Food Standards Code requires mandatory labelling content (such as nutrition information, an ingredients statement and a lot identification) to be attached to the product.  Furthermore, the Australian Consumer Law broadly prohibits the making of misleading or deceptive representations, which can include, for example, imagery used on product packaging that misrepresents the geographical origin of the product.

However, any ruling by a government or regulator to restrict how packaging can be used or what can be included on packaging is significant for a number of reasons.  Any restrictions on branding or the proprietary uniqueness of the marketing message, is likely to reduce the scope for the marketers to convey their message.

Product brands usually also incorporate a number of proprietary features such as trade marks, brand names, product desctiptors, pictures, logos, and even the shape or colour of the package.  Packaging restrictions that limit the ability to use these trade marks can therefore significantly reduce the value of the trade mark.

Australia’s plain packaging laws and the WTO case

In 2012, the Australian Federal Government introduced “plain packaging” laws which drastically limited how companies are able to package tobacco products for sale in Australia. 

Under the law, a packet of cigarettes can use only a brown-green colour, and the majority of the face of the package must be comprised of written and graphic warnings on the health hazards associated with smoking.  The lower 25 percent of the face of the package is reserved for the brand and product names, which must appear in a prescribed typeface and size.

This 2012 legislation was challenged by several international tobacco companies, and became the subject of a dispute at the World Trade Organisation (WTO).  It was argued by those companies that the 2012 laws breached Article 20 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement because they “unjustifiably” restrict the use of a trade mark.  Article 20 provides, in part:

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.”

The use of trade marks on packaging is indeed encumbered by the plain packaging legislation.  The only trade marks permitted are word-based brand trade marks such as “Marlborough” or “Winfield”.  Reports of the likely outcome of the WTO decision (which is expected in July 2017) suggest that the Australian legislation will be regarded as justified on the basis of public health concerns.

Implications for food packaging

At first glance, vindication of Australia’s plain packaging laws would mean that governments may be able to impose restrictions on product packaging, even where they reduce the ability to use a trade mark.  If the tobacco industry, which holds well-established trade marks that have been registered for decades, was unsuccessful in this case, it may be easier to justify stricter packaging restrictions on new or emerging products for which there are no trade marks yet in use. 

On the other hand, there are a number of circumstances that also point against the justification of plain packaging or similar laws in other industries.

First of all, if the plain packaging laws are held by the WTO to be justified, it will be on the basis of the effect on public health.  There is a significant body of evidence spanning several decades to document the significant negative health effects of tobacco.  While the “healthiness” of some types of food might be open to debate, it is hard to see how a restriction as drastic as plain packaging could be justified without evidence that is of a similar calibre and magnitude to that regarding tobacco.

Secondly, the way tobacco packaging was used prior to the introduction of plain packaging legislation indicates that the tobacco industry would be less burdened by the introduction of plain packaging legislation than other industries.  Even before plain packaging laws, tobacco products were not permitted to be visible on store shelves and so their packaging was not used in the same way as many other products and was arguably not used “in trade” to the same extent.  This suggests that it may be even harder to justify similar packaging restrictions on other industries, such as the food industry.

Thirdly, Article 20 of TRIPS is concerned with undue restrictions upon the ability of a trade mark holder to use that trade mark.  However, nothing in TRIPS precludes a government from banning the sale of a product altogether, which would by extension ban the use of trade marks associated with the good.  In fact, when it comes to food regulation, it is far more common for regulators to simply ban the sale of a given product or ingredient when there are health or safety concerns.  Continued targeted bans may therefore be more appropriate than a broad packaging restriction.