32|Retail News|September 2014|www.retailnews.ie
Tobacco: Plain Packaging
Ireland Can’t Afford To Weaken Trademark Rights The Irish Government’s plan to introduce plain packaging for tobacco products risks Ireland’s rock-solid record on protecting the trademarks and intellectual property of businesses, writes Michael D. Thomas, PhD. PLAIN packaging plans have created a stir among other EU countries concerned about free movement of goods between member countries, but this is not the only reason to reject such a policy. Ireland’s strong intellectual property regime has been an important part of making the country a magnet for foreign investment, helping to fuel the ongoing economic recovery. One recent report by Grant Thornton predicted Ireland’s pro-business climate to attract €1.68 trillion in Foreign Direct Investment by 2015, but cautions that any restrictions on branding would make Ireland a far less attractive option for global investors. The Austrialian Experiment In this light, it’s extremely unfortunate that lawmakers in the Oireachtas might copy Australia’s first-of-itskind mandate, requiring all cigarettes to be sold in identical unbranded packs,
at least three-quarters of which must be covered in gruesome images of death and decay. Supporters of the Australian law point to a recent survey claiming a long-term decline in Australia’s smoking rate due to the new policy. But that decline, triggered in part by several record size cigarette tax hikes, began long before the plain packaging mandate went into effect. In fact, during the law’s first year in place, retailers reported a measured increase in cigarette sales. Researchers also found that the plain packaging did nothing to deter teenagers, the law’s targeted demographic, from purchasing cigarettes. Not only is Australia’s anti-smoking gamble failing, it’s coming at a much greater economic and societal cost. By selectively stripping cigarette makers of the right to brand their products, Australia set a legal precedent through which the government, and not private
enterprise, holds the power to determine how products may be marketed. This blatant disregard for intellectual property rights violates several global trade agreements and has spurred several nations to file formal complaints against Australia for violating World Trade Organisation and other international trade agreements, including among the EU member countries. Unintended Consequences A similar attack on branding rights by the Irish government would have many unintended consequences, including the elimination of one of the country’s greatest selling points to foreign investors: its rock-solid record on protecting the trademarks and intellectual property of businesses. Moreover, stripping cigarettes of branding would embolden the criminal black market that already controls about 20% of the Irish tobacco market, and would create a precedent under which industries critical to the Irish economy could fall under crippling regulation. Where does this change in legal status of branding end? Studies found that regulatory policies placed on tobacco tend to cascade down to alcohol and food, and already Indonesia is considering placing a plain packaging mandate on beverage companies. This should be of
particular concern to Ireland, where beer and whiskey make up a significant percentage of exports. Guinness, for example, is one of Ireland’s most valuable brands, but if stripped of the right to market its beer with its distinctive font and harp, it would lose much of the marketplace advantage it has earned through decades of consistency. New trade restraints will be justified by expanded arguments about the health effects of rival country’s imports. Likewise, without branding, it would become easier for counterfeiters to pass off knock-off stout as Guinness, and customers would have less confidence in their purchases. Cigarette companies are not as critical to Ireland’s economy as, say, Guinness and make a product that many, including myself, find distasteful. However, a selective attack on their branding rights weakens the entire intellectual property regime that helps sustain Ireland’s economy and emboldens the government to place further regulations on branding.
About The Author MICHAEL D. Thomas is Assistant Professor of Economics at the Heider College of Business at Creighton University in Omaha, Nebraska.