Last week, British American Tobacco Australia (BAT)
spokesperson Scott McIntyre released a
statement declaring the world’s first tobacco
plain packaging law a failure. McIntyre said that the law
has had no effect on legal tobacco sales and is driving an
increase in demand for illegal products.
This argument comes from a
report by KPMG which was commissioned by BAT, Philip Morris
and Imperial Tobacco Australia about plain packaging. Defining
the illicit market as unbranded tobacco, contraband (otherwise
legal products where duties have not been paid) and
counterfeits, it found that there was an 8.2% increase in the
size of the illicit market in the 12 months up to June 2013
when compared to the whole of 2012. It also found that tobacco
consumption overall did not drop at an increased rate after the
plain packs law came into effect.
Easy to fake it?
The law’s opponents have seized upon this
report as evidence that plain packaging has not achieved its
goals of reducing smoking, and that the increased in illicit
tobacco has resulted in lost revenue for the government. The
proponents of the law, such as Cancer Council Victoria, have
challenged the KPMG report’s finding on both the
efficacy of plain packaging and the claim that the illegal
increased in size.
Of particular interest to trade mark practitioners is the
debate over the counterfeit market. Opponents of plain
long argued that plain packaging requirements make it
easier for counterfeiters to sneak fakes into the market.
The KPMG report is one of the first studies with data about
the counterfeit market in the plain packaging era, though the
admittedly new evidence doesn’t show much to
support the counterfeiting argument. Using a survey of empty
tobacco packs collected in public trashcans throughout
Australia, it found that the consumption of counterfeit
manufactured cigarettes increased 70% between 2012 and the 12
months leading up to June 2013, though it also notes that the
compound annual growth rate for counterfeit tobacco has dropped
4.4% from 2009 to June 2013. Furthermore, it shows several
similar increases and decreases during this time frame.
In short, this increase in counterfeits looks more like
statistical noise and less like an inflection point.
Seizure information from Australian Customs shows an
increase of seizures of manufactured cigarettes in sea cargo,
though again this increase is part of a five-year trend. In its
2012-2013 operation year,
Customs seized 200 million sticks of manufactured
cigarettes, a total that includes both counterfeits and
contraband. This is an increase over the 141 million seized in
2011-2012, and the 82 million in 2010-2011.
Data going back five years shows a drop each year, and is
thus similarly inconclusive about the effects of plain
A spokesperson from Customs also told Managing IP that plain
packaging doesn’t appear to have a big effect on
smuggling, though she also points out that
Customs’ priority is with the evasion of duty
rather than counterfeiting per se. She explains that since
plain packaging came into effect, there have been numerous
seizures, only one of which involved plain packs.
Worried about counterfeits?
Furthermore, tobacco companies themselves are not using
Customs to fight counterfeits. Though Australia has a Customs
recordal system for IP owners, the Customs spokesperson notes
that only one of the three major tobacco brands (
BAT, Philip Morris and Imperial) have lodged a notice of
objection. Customs can only seize
counterfeit goods when the brand owner has filed the notice of
Though debate about the effect of the law on brand owners
and smokers’ habits will rage on, the data does
not appear to support the claim that that plain packs have made
counterfeiters’ jobs easier.