Tobacco Firms Lose EU Court Case Over Packaging Rules

Cigarette makers Philip Morris International Inc., Imperial Brands Plc and British American Tobacco Plc lost a fight against European Union curbs on their products in a ruling that may pave the way for governments to impose plain packaging.

The EU measures from 2014, which include a requirement that health warnings cover 65 percent of cigarette packs, don’t go “beyond the limits of what is appropriate and necessary,” the EU Court of Justice said Wednesday in Luxembourg.

British judges in 2014 sought the top EU tribunal’s view on whether the new European rules are valid. The U.K. has in the meantime approved legislation that would force tobacco companies to sell their cigarettes in austere brown packs, with corporate logos replaced by graphic images of diseases blamed on smoking. Philip Morris, BAT, Imperial Brands and Japan Tobacco Inc. went to court again, this time claiming the U.K. measures violate the companies’ intellectual property rights.

Cancer-Causing Substances

The contested EU rules replaced a 2001 EU tobacco law forcing cigarette makers to put health warnings at the top of packages. Nations must ensure firms apply the measures, which also include a message that tobacco smoke contains more than 70 cancer-causing substances.

“Clearly, we are disappointed with today’s judgment,” Imperial Brands said in an e-mailed statement. “At 65 pages however, the judgment is lengthy and we will take our time to carefully review the document over the coming days.”

The U.K. cigarette maker, which dropped the word ‘‘tobacco” from its name this year, on Wednesday reported first-half profit that beat analysts’ estimates as newly acquired brands in the U.S. gained market share.

BAT said the EU law “is a clear example of the EU overstepping the limits of its authority,” according to an e-mailed statement. “The reality is that many elements of the” law “are disproportionate, distort competition, and fail to respect the autonomy of” EU nations.

Japan Tobacco said the EU court ruling was a “regrettable” and “inexplicable decision which may lead member states to believe that they can infringe the principle of free movement of goods within the EU.”

The EU court “has not considered whether plain packaging is legal or is capable of reducing smoking rates,” Marc Firestone, general counsel of Philip Morris, said in a statement. “Those questions are currently under review by the English High Court and the World Trade Organization.”

Alcohol, Drugs

Tobacco kills as many as 695,000 people a year in the EU, or one person every 45 seconds, according to the European Commission, which says a third of European adults still smoke. Smoking is the largest avoidable health risk in Europe, causing more problems than alcohol, drugs, high blood pressure, high cholesterol or obesity, according to the EU’s executive body, which proposed tougher rules in December 2012.

The U.K. and Ireland together with France are the first European countries to back plain packaging, stamping out one of the last ways cigarette manufacturers can market their products to consumers.

“Governments who are considering plain packaging should ask themselves — can they really justify introducing a policy that has no hard data to prove that it actually works to reduce smoking,” BAT said in its statement.

‘Marginal Prospect’

“The ruling reinforces the idea” that providing “the highest possible level of health protection supersedes almost any rights the tobacco industry has,” said Shane MacGuill, a tobacco analyst at Euromonitor International, by phone. “It’s very difficult for the industry to persuade the court that legislation is unlawful or unconstitutional if there is even a marginal prospect that the legislation could be beneficial to public health.”

The court also backed an EU ban on menthol cigarettes, and the EU rules’ restrictions on e-cigarettes, on the premise that they can act as a “gateway” for users to begin smoking conventional cigarettes. This comes despite a report last week from The Royal College of Physicians, which asserted that e-cigarettes could lead to a significant prevention of smoking-related deaths in the U.K.

Sales of e-cigarettes and other vapor devices in western Europe will surpass $4 billion this year, according to forecasts from Euromonitor International.

The cases are: C-547/14 Philip Morris Brands and Others, C-477/14 Pillbox 38.

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