• May 26, 2024

Australia’s plain packaging an “anomaly”

Morgan Stanley analysts believe the spread of plain packaging beyond Australia may be “very slow.”

Capital markets have been concerned that Australia’s plain tobacco packaging law–the world’s first–could spread to other nations, ultimately commoditizing the tobacco category by hurting brand equity and reducing manufacturers’ pricing power.

The analysts base their optimism on the facts that there is no evidence that the measure will reduce tobacco use or youth initiation and that such legislation appears both “extreme and disproportionate.”

They also point out that plain packaging will “almost certainly” fuel the black market, thus reducing tax revenues, and that the legislation arguably violates various international trade rules.

The analysts suggested that the nation’s geographic positioning may have led policy makers to believe that the country would be largely immune to contraband.

Although the Commonwealth still faces strong legal challenges under a Bilateral Investment Treaty with Hong Kong and the World Trade Organization, the failure of the industry’s constitutional challenge in the country’s High Court “reflects the unique nature of Australia’s ‘protection’ of trademarks and intellectual property,” the analysts said.