Big Tobacco Dealt Blow at European Court

The European Court of Justice on Wednesday blew away the fumes clouding tobacco and electronic cigarette packaging and advertising, smoking out the efforts of Big Tobacco to maintain sales but also overriding British medical advice.

In a judgment binding all 28 European Union governments, the Luxembourg court knocked back a Polish and Romanian demand to be allowed to continue sales of menthol cigarettes. It also upheld standardized plain packaging and health warning guidelines and restrictions on advertising and sponsorship for electronic cigarettes.

The announcement came as British tobacco company Imperial Brands (IMBBY) (ITYBF) produced a set of strong first-half figures, saying net revenue from tobacco was up 16.8% and the acquisition of a portfolio of brands, including Kool and Winston from Reynolds  (RAI) had boosted sales. It said the acquisition of the newly renamed ITG brands contributed net revenue of £468 million ($678 million) and 20.9% of total tobacco revenue.

Imperial's shares were down about 1.1% at 3,699.5 pence at midday, London time. British American Tobacco (BTI) (BTAFF) was down 0.8% at 4,122 pence.

The rulings relate to a 2014 EU directive on tobacco and related products, which demands that European nations bring their domestic laws in line with each other. Such directives are generally designed to allow free trade between member states, but in the case of tobacco products they are also designed to protect public health.

The directive says that from May 2020 packaging must include health warnings which cover 65% of any cigarette package. And it allows individual governments to go even further - and bring the rules in earlier - if they wish. The U.K., France and Ireland, for instance, want to introduce plain packaging on the rest of the box where branding and design features are also banned.

The packaging rules were challenged by Philip Morris (PM)  and British American Tobacco, with Japan Tobacco  (JAPAY) and Imperial Brands acting as interested parties. The case was against the U.K. government and was taken to the European Court of Justice as Europe's highest court. But the judges decided that any feature on the packaging or the cigarette itself that might encourage consumption - even if factually accurate - would run counter to the aim of protecting consumers. Prohibition was therefore "proportionate."

The directive also says that menthol cigarettes and other flavored tobaccos must also be phased out by 2020. Poland and Romania, where menthol cigarettes are popular, argued that stricter rules such as a higher minimum age for sales of flavored tobaccos would work instead of a total ban. Pro-menthol advocates also suggested a ban on cross-border trade provided domestic sales could continue.

However, the court ruled that banning cross-border sales would infringe European internal market rules, while raising the minimum age would not reduce the attractiveness of tobacco products to older smokers.

Finally, the court upheld the directive's more limited restrictions on advertising and promotion of e-cigarettes. That was despite findings from influential British medical group, the Royal College of Physicians, arguing that smokers should actually be encouraged to switch to e-cigarettes as "harm-reduction" products.

The court said e-cigarettes had different characteristics than tobacco products, so the milder regime applied to electronic products was not infringing any principle of equal treatment. Nevertheless, it felt that the restrictions that were applied were not excessive, since the directive had been drawn up on the basis of the "precautionary principle."

In other words it was better to be safe than sorry, when it came to consumer health, given the potential risks of e-cigarettes.

 

 

 

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