Chapman comments that -
With the passage of the government's bill on plain packaging now assured by the support of the opposition, the Greens and all but one of the independents, an ever-desperate tobacco industry is now concentrating on the legal apocalypse that they say will descend on Australia through the courts.After noting that "Few of those megaphoning this legal Armageddon appear to have even read the draft Bill itself", Chapman critiques the much publicised claim that the restrictions will involve $3bn compensation by the national government to the poor cigarette companies.
These arguments are all a paper-thin house of cards, starting with the central problem that plain packaging will not extinguish brand identities. All brands will still carry brand names allowing smokers to clearly exercise their freedom of choice to select between the much-vaunted but mostly non-existent differences in brands. This is critical, because in the highly unlikely event of a ruling by the High Court in favour of the industry, all calculations of compensation will need to take account that branding differences have only been diminished, not extinguished.
Given that some 30-40 nations now have appropriated massive sections of packs with graphic warnings and that not a cent has been claimed or awarded in brand damage anywhere in the world for this egregious assault on brand identity, the prospects of any claim for huge compensation even in the unlikely event of a favourable ruling are vanishingly small. The companies would need to demonstrate with precision that sales losses arose from losing colours, logos and different pack shapes, not brand names.
Given that consumption is falling every year, this task would be like unraveling gossamer while wearing boxing gloves.
In discussing the submission to Senator Fielding's inquiry into plain packaging by Tim Wilson of the IPA (the advocacy body that is a bastion of free enterprise and coy recipient of money from the cancer sticks industry) Chapman comments that -
At page four in his executive summary he says plain packs would lead to a court order to award the tobacco industry between $378 million and $3027 million per year. Table 2 (page 13) in his submission shows two lines of numbers for the total value of tobacco sales in Australia in 2006: one for the value including excise tax (which goes to the government) and one for the sales value ex-tax (in other words the returns to manufacturers and retailers combined). By taking the trouble to differentiate the two, Wilson must know that no court would order the return of the tobacco tax component to the companies: it’s the ex-tax value that fuels such a pipe-dream.It's good to see academia talking truth to power.
Wilson then calculates the ex-tax value on two assumptions: a 10% and a 30% fall in sales each year that might follow the introduction of plain packs. He calculates these two figures at $378 million and $1.135 billion. So where does the $3 billion factoid come from? Are you ready for this? The tax-included sales value of a 30% fall is $3.027 billion.
So how reasonable are Wilson’s assumptions that plain packs will cause a fall of a minimum 10% through to 30% a year? Between 1999 and 2003 the average annual fall in total dutied cigarettes was just 2.6%. The most sales have ever fallen in one year was just shy of 10% in 1999 after the combined impact of a change in the way cigarettes were taxed (from weight to per stick) and a big boost to the national quit campaign by health minister Michael Wooldridge.
Most analysts of the likely impact of plain packaging believe that its main impact will be on children over the next generations. Just as no Australian aged under 19 today has ever seen a local tobacco ad or tobacco sponsored sporting event, no child growing up after 2010 will ever see carcinogenic tobacco products packaged in carefully market researched attractive boxes. Smoking rates by kids today are the lowest ever recorded. Plain packs are expected to continue that downward momentum, starving the industry of new generations of new smokers as older smokers quit and die early. Plain packs will probably not influence long-term, older smokers much.
Wilson’s $3 billion number is thus based on a projected decline, which is so far off the planet of declines ever recorded, that it is dreamland stuff. Worse, it appears to be a willful selection of the tax-included biggest number he could sight in his own table. To the delight of the industry, it has now become a virulent factoid with Google showing more than 7000 hits for “plain packs cigarettes” and “$3 billion”.
