Big tobacco a canary in the coal mine

UNLIKELY as it might seem, a tobacco multinational is about to play the role of canary-in-the-coalmine in a battle for commercial freedom. Philip Morris, a corporation that profits from the manufacture and sale of the cigarettes that bring a premature end to millions of lives, is fighting for its own business rights. If it loses, the consequences for other industries and the implications for the extent of government intrusion in our daily lives could be profound.

This morning the company's Asian arm will launch action under international law against the federal government's plain-packaging legislation. Many of us, understandably, want no truck with so-called big tobacco because we consider their product odious. But the habit is a choice made by smokers and the product is legal.

The issue turns on how far governments can go in curtailing a legal industry. It raises concerns about how government intrusion can deliberately devalue the assets of companies that sell a legal product, and begs questions about which industries will be next.

Since the mid 1970s, when television advertising for cigarettes was banned, growing health awareness has prompted ever-more stringent controls. Where once there were expensive advertisements and sports sponsorships, there are now confronting and prominent health warnings on packets that are hidden behind retailers' counters. And taxes have been ratcheted up to try to price the product out of reach.

Yet people smoke. They are either addicted or, presumably, trade off the risks against their enjoyment, just as a cave diver or motorcycle racer must do.

Huddling in their smokers' cabals outside office blocks is their choice, just as others drink, eat or speed their way to an early grave.

The tobacco industry has argued strongly against Canberra's plain-packaging move. Politically it is a classic "triangulation" tactic, the term used by president Bill Clinton's former strategist Dick Morris, to describe policies that lift the political gaze above the Left-Right battle zone to a target that can galvanise widespread support. Certainly, anyone arguing against plain packaging risks being seen to defend a nasty industry. So despite its concerns about the precedent for business freedom, the opposition has avoided the government's trap and pledged support for plain packaging.

The industry has no option but to take the hit, or take rearguard legal action. With the potential for trade restrictions in Australia to be replicated in other countries it is perhaps unsurprising Philip Morris has chosen to lawyer up and stand its ground. A multibillion dollar international business is at stake.

The legal move has the potential to either force the government to overturn its plain-packaging plans or pay compensation totalling "billions of dollars". The action is based on an international investment treaty designed to protect assets, including intellectual property. Philip Morris argues that its most valuable intellectual property is its marketing brands.

The company, which owns brands such as Marlboro and Peter Jackson, claims that with the stroke of a legislative pen, plain packaging will wipe away billions of dollars worth of brand value. It charges a premium for its products based on the established brands and claims that it will need to reduce prices because in the absence of recognised branding, price will be the only factor in the market. It says a competitive market between brands will be reduced to a commodity market.

Again, few tears will be shed for big tobacco. But think of the precedent. A legal business faces the elimination of its greatest commercial asset on the whim of government. And this, despite the government admitting there is no hard evidence the measure will reduce smoking. "I certainly have had a look at a lot of research around the world, and this is world-breaking, so you're right that there is some level of experiment," said Health Minister Nicola Roxon earlier this year. "But there certainly is a lot of research that shows us, particularly how young people would bond to plain packaging, and we think that this is a good opportunity to get rid of the last way that tobacco companies market their products."

We must fast be approaching the point where reasonable people would say the government should either prohibit cigarettes or leave smoking alone. Either the product is legal or it is not.

It is worth considering that Australian companies will be able to advertise cars and motorcycles designed to travel at speeds in excess of 250km/h, or market firearms and knives, or promote parachuting lessons and sell home-built gyrocopters but they will not be allowed to put a brand on a packet of cigarettes.

The lessons of nanny state intervention is that it is forever in progression. So once cigarettes are hidden in olive green packets under the counter, the health activists are likely to look for their next triumph. Already there have been recommendations and serious discussions about bans on fast-food advertising. Alcopops endured a taxation assault motivated by a health goal and now floor prices for alcohol are on the agenda. Alcohol packaging already carries mandatory health information, so we can only guess how long it will be before additional advertising and packaging restrictions apply. And in the gambling industry, the federal government, at the prodding of independent MPs, is looking to radically alter poker machine controls in a way that could cost the pubs and clubs billions of dollars.

Free-market think tank the Institute of Public Affairs has followed these developments closely. "Quite frankly it is a scary legal precedent," says the IPA's Tim Wilson. "What we are seeing is history repeat itself where the government is looking at the legislative and regulatory toolbox against smoking - such as taxes, floor prices and health warning labels - now being used against alcohol and salty, fatty and sugary foods the government doesn't like, and the trend is likely to continue."

Apart from the commercial risks at play, it is also time to discuss the broader social impacts. The one factor that is pushed aside is personal responsibility.

We cannot legislate away every risk, all potentially deleterious products and all temptations towards over-indulgence. Adults must be capable of making their own decisions and owning the consequences. So big tobacco's attempt to define the boundaries of the nanny state might just do more good for protecting commercial rights than it has ever done for anyone's lungs.